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Changes in Russian transfer pricing rules

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  • Tax planning and consultancy


From 2018, a significant change in transfer pricing regulations in Russia is effective. New rules are, to a large extent, based on the OECD Guidelines and set three-level documentation requirement according to BEPS Action 13. This article is to briefly inform you of the latest developments that may affect your business.

By 1 September 2018, any Russian company that is a part of a multinational enterprise (i.e. any group with consolidated reporting including more than two companies in different jurisdictions) must file a notification to Russian tax authorities on participation in such a multinational enterprise (the “MNE”). The state bodies will approve the form of notification. Such companies will also have to prepare country documentation after making the said notification. The country documentation includes the following:

  1. Local file. This is a transfer pricing document on particular controlled transactions, an explanation to tax authorities of the prices set in the transactions. Must be prepared in advance and filed in free form within 30 days of tax authorities’ request.

  2. Global file. This is a general document on the group’s ownership structure, business activity, financial activity, intangible assets, etc. The requirements correspond with the Master file requirements of BEPS Action 13. The global file may be requested from the group’s headquarter if it has already prepared one. It must be filed in free form with the tax authorities upon their request within 3 months.

  3. Country-by-Country Report (the “CbCR”). This is a document describing overall group’s income and revenue of transactions, share capital amount, corporate income taxes paid, and number of employees, etc. It must be filed by the group’s parent company or assigned representative company which is a Russian taxpayer. Information in CbCR is provided for each tax jurisdiction where the group operates with no division between the participants in the tax jurisdiction concerned. The application of CbCR is mandatory and must be done within 12 months of the end of fiscal year.

There is an exception to the mandatory filing of CbCR for the entities in the following types of MNEs:

  • MNE with Russian parent company having total consolidated group revenue of less than 50 billion rubles

  • MNE with foreign parent company having total consolidated group revenue of less that the amount set in the country of residency

There are many pitfalls in the implemented changes regarding transfer pricing rules that can complicate your business in Russia. By learning them, you will be able to take reasonable precautions and be ready for any potential tax inquires on your intra-group transfer pricing principles.

If you have any questions or concerns with this regard or if the described changes may directly affect your business, please contact us at any convenient time. Our global transfer pricing team is capable of providing you with qualified assistance involving cross-border rules and regulations.