Doing Business in Russia
General Comments
on Transfer Pricing
Doing Business in Russia 35
A transfer price is a price subject to
monitoring by the tax authorities. The
Russian tax authorities can monitor
prices to ensure that they reflect market
realities and have not been fixed to
reduce the burden of taxes in Russia.
Current Russian transfer pricing
(hereinafter, "TP") rules have been
effective since 2012, and are based on
OECD TP Guidelines, but have certain
differences.
Transactions between related parties
are subject to TP control (hereinafter,
"Controlled Transactions").
Companies are considered related
if one of them may influence the
decisions made by the other. TP
legislation also provides a list of the
formal criteria against which parties
are assessed when considering
them related or not (e.g. do they
have direct/indirect participation in
the capital of 25% or more, etc).
Please note that, in addition to cross-
border transactions between related
parties, the Russian tax authorities
also control prices in domestic
transactions if the amount between
the two counterparties exceeds certain
thresholds (generally, that threshold is
RUB 1 billion). In addition, Controlled
transactions include certain cross-
border transactions between unrelated
parties: (i) transactions with offshore
parties, or (ii) transactions with certain
commodities like oil products, precious
metals, etc (if the amount is more than
RUB 60 million).
There are five TP methods (similar to
those in the OECD), from which the
resale minus and CUP method have
priority over other methods. Russian
TP legislation also allows for the use
of appraisal reports to support prices
in one-off transactions when no other
methods can be applied.
There are specific requirements
regarding the selection of comparables
for benchmarking studies, such as
ensuring comparable activities, positive
net assets, positive operating profits
and the absence of a parent company/
subsidiary with ownership of more than
25%. A local study is required if the
tested party is the Russian company.
Foreign comparables are acceptable
if the foreign party is the tested one.
As a general rule, the study should be
based on the financial statements of
comparables for the three preceding
years.
Before the 20th of May of the year
following the reporting year, all Russian
taxpayers are obliged to inform the
tax authorities of any transactions
they performed which were subject
to transfer pricing control under
Russian tax law. The notification on
a controlled transaction must include
disclosure of detailed information about
each operation within that controlled
transaction. For instance, in regard to a
buy-sell transaction, the price, quantity,
place of dispatch, and place of delivery
for every item must be specified.
Understandably, the volume of data
in the notification can be significant. It
should be filed in XML-format with the
Russian tax authorities.
Russia also has TP documentation
requirements. The Russian tax
authorities are able to request TP
documentation during TP audits,
and taxpayers must provide the
documentation within 30 working
days. The TP documentation for Russia
should meet certain local requirements
and be prepared annually.
Rostov-on-Don
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