New Russian tranfer rules - AllIURIS

INTRODUCTION
Starting from the January 01, 2012 after a long period of debates new
transfer pricing rules shall finally come into force in Russia. Thus, a step
forward will be taken to adjust the Russian tax legislation to the OECD
Transfer Pricing Guidelines and international transfer pricing principles.
Generally, Russian and foreign businesses are expected to gain more
transparency and clarity.
The key changes include a new definition of related parties which has
been precised as well as new regulations on controlled transactions and
pricing control by the Russian tax authorities based on comparison with
the market level and profitability of related parties’ transactions.
RELATED PARTIES
The parties are deemed to be related:
if one party directly or indirectly participates at least 25% in
another (previously – 20%), or
if one party to transaction is entitled to appoint more than 50% of
the board of directors of another party, etc.
The notion of related parties shall apply not only to the enterprises
incorporated in accordance with the Corporate Law, though. Such relation
may result, as earlier, from other circumstances i.e. family ties or kinship
connections. From now on there will be eleven criteria for that instead of
only three as previously. Such relation may also be established by court
based on other grounds. Of novelty is that in the cases not specified by
law enterprises may declare themselves as related under certain
circumstances.
CONTROLLED TRANSACTIONS
According to the new transfer pricing rules the tax authorities’ control
shall apply to the controlled transactions which are the transactions
between the related parties and specific transactions between entities
which are not considered as related. Specifically enumerated are the
following transactions:
cross-border transactions between related parties;
cross-border transactions dealing with the exchange-traded goods
on the condition that the transaction revenue with one entity
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