Why Transfer Pricing is so important
- Wide coverage: The tax authorities control the prices of transactions between related parties, both for transactions within the Russian Federation (for example, if one of the parties applies preferential tax rates) and foreign trade transactions. In addition, transactions with non-related parties may be subject to tax control in some cases.
- Local specifics: Transfer pricing (“TP”) rules in Russia differ from the OECD model, and also give priority to local benchmarking studies over Pan-European/Pan-Asian ones. BEPS requirements related to CbC reporting also apply.
- Non-compliance can be costly: fines can be up to 53% of the tax base on foreign trade and 40% of the unpaid amount of tax on domestic transactions.
The figure below shows the dynamics of TP audits in the Russia.
Communicating with the Tax Authorities: when and why
- Before the tax authorities identify non-compliance: agree in advance the approaches to pricing (in APA format).
- After a request from the tax authorities: avoid or minimise any additional tax charges.
- The main format of interaction with the tax authorities when resolving TP issues is the tax mediation of disputes.
- Pre-audit analysis is of the main focus of the Russian tax authorities.
- TP documentation, master files, and numerous other documents can be requested at the pre-audit analysis stage.
Kept – your reliable partner in resolving TP issues
| Extensive TP experience | Focus on Chinese clients | Understanding the needs of international companies |
|---|---|---|
| We have a successful track record in liaising with the Russian Federal Tax Service, both during approvals of APAs, TP audits and during disputes. | We have an extensive experience of working with Chinese companies. | We know how to adapt global methodologies to Russian requirements. |
| We have repeatedly been recognised by International Tax Review as the best TP practice in Russia. | We maintain a Chinese desk and can appoint a Chinese native speaker as team leader for your project. | We have experience in international compliance for transnational groups (in over 25 jurisdictions). |
| We have assisted clients in concluding the first bilateral APA in Russia. | We work with the TP practice of ShineWing CPA (top 10 Chinese firm). We perform joint projects, hence we can align with Chinese rules so as to be compliant on both sides. | We have been actively working with international TP companies for more than 15 years. |
Our main TP services
- Elaborating / revising current transfer pricing models and methods, structuring inter-company arrangements and consulting on TP adjustments.
- Identifying risk areas for the Russian companies of Chinese groups and assessing various options to justify the arm’s length level of prices in transactions.
- Identifying and performing a TP analysis of transactions potentially subject to control as a result of the list of related parties being expanded.
- Preparing TP notifications, TP reporting documentation, and TP local files for controlled transactions, in order to be compliant with the Russian Tax Code (“RTC”).
- Reviewing, adapting, and translating Master Files in order to be compliant with Russian TP rules.
- Preparing a defence file in line with Russian TP requirements, including clearly setting out the respective rationale behind the selected approach.
- Assistance in resolving TP disputes, including obtaining advance pricing agreements with the Russian Federal Tax Service.
Want to know more?
Download our overview to get more information.
