New Russian tranfer rules - AllIURIS

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applied in controlled transactions, whereby the tax authorities in case of doubt must prove if they think it otherwise. This determination has been extended by the right of the taxpayer to correct the tax base in the contract independently if the contract price appears below the market level. TRANSFER PRICING DOCUMENTATION Now the enterprises are under obligation to notify the tax authorities and submit to them the documentation related to the controlled transactions. But this applies only subject to the total amount from the controlled transactions between the two entities exceeding RUB 100 million annually. This threshold value will be reduced down to RUB 80 million in 2013, with no restrictions applied as from 2014. The tax authorities may request the documents to be submitted. The taxpayer is obliged to provide them within 30 days. The taxpayer may also submit other documents and additional information beyond the required by virtue of law to prove that transactional pricing is at the market level. Moreover, the major taxpayers may enter into advance pricing agreements with the tax authorities prior to intended transactions which might mitigate tax risks in advance. However, the above obligations in relation to the documentation do not apply to: taxpayer’s transactions with parties which are treated as nonrelated to such taxpayer; transactions which pricing set forth by the Russian Anti-Monopoly Service; securities and futures trading on the organized equity market; transactions with regard to which the advance pricing agreements with the tax authorities are concluded. TAX CONTROL, LIABILITY AND SYMMETRIC CORRECTIONS Starting from January 01, 2012, the tax authorities may conduct in relation to the controlled transactions a new form of tax audit, which may be performed independently from the currently existing on-site and field tax audits. New transfer pricing rules make also the “symmetric” correction of tax obligations of one of the contracting parties possible if another party has been subject to tax charge by results of TP tax audit. If the tax authorities discover that prices have been determined incorrectly 4
significant penalties may be imposed. This penalty, however, shall apply starting from 2014 and shall amount 20% of the underpaid tax. The fines and penalties will be increased up to 40% of the underpaid tax as of 2017. PRACTICAL ISSUES Given the new transfer pricing rules, the businesses are currently challenged with the responsibility of clarifying the issue to what extent they will get affected by these new transfer pricing regulations. It will consequently mean that the businesses will have to review the pricing methods used by them, introducing appropriate corrections if required. Moreover, the businesses will have to take all precautions and use their best efforts to make their transfer pricing documentation comply with the statutory requirements. 5
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Page 3: exceeds RUB 60 million annually; t

New Russian tranfer rules - AllIURIS

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