The State Duma of the Russian Federation in the third reading approved significant changes to the RF Tax Code (Draft Law No. 448566-8) which will affect the regulation of transfer pricing (TP) rules in Russia. As a result of such changes, starting from 2024 the RF Tax Code will change significantly in a number of TP aspects, especially in terms of higher possible additional charges and the administrative burden on businesses to facilitate TP compliance. Kept presents an overview of the TP amendments based on the approved draft law of 17 November 2023.
The main reason for changes is the Russian tax authorities’ concern with the problem of tax base withdrawal from Russia through applying related-party transaction prices and involving formally independent intermediaries in foreign trade operations. The proposed amendments are aimed at preventing such actions of taxpayers, in particular, by using the median value of the arm’s length range of prices/profitability to charge additional taxes based on the results of the price audit, increasing penalties and withholding tax on the amounts of adjustments to the tax base due to the application of non-arm’s length prices.
In addition, due to difficulties in exchanging information with the tax authorities of foreign countries in 2022-2023, the access of the Russian tax authorities to information on counterparties of Russian taxpayers is significantly limited. As a result, the proposed amendments to a certain extent "shift" the function of collecting information on counterparties’ performance to Russian taxpayers.
The new TP rules come into effect in relation to transactions, income (expenses) on which are recognized starting from 1 January 2024, unless otherwise stipulated by a regulatory legal act of the President of Russia.
Please read the detailed overview here.
