Doing Business in Russia
36 Doing Business in Russia
Penalties for non-submission or
omissions/mistakes in Controlled
Transaction notifications aren't
significant (RUB 5000). The penalty
for not applying arm's length prices
is 40% (20% during the 2014-2016
transition period) of the tax underpaid
in Russia. However, this penalty does
not apply if the taxpayer provides TP
documentation supporting the arm's
length level of its prices. In addition to
these penalties, late payment interest is
also assessed on TP adjustments.
Both unilateral and bilateral Advanced
Pricing Agreements (hereinafter -
"APA") are possible under the law, but
use of APAs so far is not extensive.
Currently, the Russian tax authorities
have tended to try and reduce the
number of new APAs. However, this
practice may change in future.
In 2012, TP audits mainly covered
export transactions with oil products,
non-ferrous metals and fertilizers. The
number of TP audits was limited (up
to 20), but in certain cases the amount
of tax adjustments was material. It
is expected that over the next few
years the Federal Tax Service will start
to more actively audit the operations
of multinational companies doing
business in Russia.
In addition, local Russian tax authority
teams are also reviewing the prices
in intra-group transactions. They may
assess additional taxes if they see
taxpayers receiving unjustified tax
benefits. In practice, the likelihood
of being questioned by the local tax
authorities about intra-group pricing is
quite high.
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