Who has to prepare notifications?
Under Article 105.16 of the Russian Tax Code, taxpayers have to notify the tax authorities about all controlled transactions performed by them within the calendar year.
Russian companies, as well as branches of foreign-related companies operating in Russia that have taxable income, should make a notification about controlled transactions performed in the CY2023 to the Russian tax authorities by 20 May 2024. The notification must be submitted by each party to a controlled transaction that is registered as a Russian taxpayer.
If the notification is made after the deadline, or errors/mistakes are found by the Russian tax authorities in the notification, the taxpayer could face the following negative consequences:
- a penalty of RUB 5,000, paid by the company, as a consequence of incorrect information found in the notification (Article 129.4 of the Russian Tax Code)
- a penalty of RUB 300-500, paid by either the company’s CEO or Chief Accountant, for non-compliance with tax legislation (Article 15.6 of the Russian Administrative Code)
- failure to make a notification could motivate the tax authorities to include the company on their list of companies in which transfer pricing audits should be conducted in future
- penalties could harm the reputation of the director / responsible person and the company as a whole
- penalties could cause registration or visa-extension difficulties if the director / responsible person is a citizen of a foreign state
Kept services
- preparing a “ready-to-send” notification in XML format that is Russian Tax Code compliant (based on data exported from the company’s accounting system)
- a software solution to prepare notifications
- finalising notifications prepared by clients from any type of automated accounting system
- methodological support for companies that prepare the notification on their own
Changes regarding the preparation of notifications for 2024
On 27 November 2023, Law 539-FZ was adopted, and introduced significant changes to the Russian Tax Code (formerly Draft Law No. 448566-8) affecting the regulation of transfer pricing rules in Russia for transactions starting from 01 Jan 2024. The main changes relating to the preparation of notifications on controlled transactions relate to:
- the terms of the transaction (itemisation is stipulated for commodity transactions only)
- the TP methods and sources of information used (not mandatory for disclosure for transactions carried out prior to CY2024)
- the value chain for transactions related to foreign trade transactions in commodities (according to the list approved by the Russian Ministry of Industry and Trade, Clauses 5–6 of Article 105.14 of the Russian Tax Code)
A significant RUB 100,000 increase in the fine for failure to provide notifications on controlled transactions by the set deadline or for providing notifications containing inaccurate information. For comparison: up until 2024 the size of the fine was RUB 5,000.
In addition, an expanded list of offshore companies was published (including jurisdictions that are “unfriendly” for Russia) according to Russian Ministry of Finance Order No. 86n "On Approving the List of States and Territories Providing a Preferential Tax Regime and/or Not Stipulating the Disclosure and Provision of Information when Performing Financial Operations (Offshore Zones)". Many developed countries are to be added to the list of offshore jurisdictions to include EU member states (Cyprus, Germany, the Netherlands, France, etc.), Switzerland, the UK, the US, Singapore, South Korea, Japan, etc. In total the list contains 91 jurisdictions. Thus, according to Ministry of Finance Letter N 03-12-11/1/126454 dated 27 December 2023, starting from 01 Jan 2024 transactions with independent companies from the extended list of offshore companies (upon reaching a turnover of RUB 120 million per year with a counterparty) are subject to control, and information on such transactions will have to be reflected in the notification on controlled transactions for CY2024.
Thus, despite the fact that the reporting period for filing a notice is CY2023 and the old rules apply, Russian taxpayers should now think about setting up accounting systems in such a way as to automate the collection of additional data for CY2024.
Our experience
Kept professionals have extensive experience and knowledge of transfer pricing, accounting, tax accounting, and international taxation. On notification preparation projects we provide clients with expert consulting on all current and relevant issues, thereby helping them avoid or resolve contentious notification situations.
The Kept approach is based on years of good practice and fruitful cooperation with our clients. We have received without exception only favourable client feedback on the quality of our work during the notification preparation process.
Since 2013 Kept has worked on over 500 notification projects. Within these we have prepared notifications for all 32 transaction types (buy-sell, provision of services, loan issues, etc.), including notifications consisting of over 1 million lines. Our clients have submitted each and every notification to the tax authorities within respective deadlines.
The Kept team
Our team consists of over 20 specialists from Moscow, St Petersburg, Nizhniy Novgorod, and Novosibirsk, who are all highly experienced in transfer pricing, accounting, and tax accounting (both Russian Accounting Standards and IFRS).
Our Kept specialists are proficient at working with various automated accounting systems and preparing notifications using both 1C and SAP.
We also have IT specialists who provide technical support during the notification preparation process and can fine-tune the XML-format files produced by the company’s accounting system.
Our Kept team will help you prepare your notification on controlled transactions in full compliance with the Russian Tax Code and submit it to the tax authorities on time.
