Russian Transfer Pricing
2014 Update
Anton Kabakov
Partner
Hellevig, Klein & Usov Llc
20.05.2014
• Tax authorities rely on TP Rules to fight capital
outflow
• 4,600 notifications in 2012. Much or too little?
• Head of T...
• All related-party cross-border transactions are
now subject to transfer pricing rules. NO
EXCEPTIONS.
• More administrat...
Reporting
• To be filed by May 20 of the year following the
reporting year
• Requires a lot of efforts to collect the requ...
Reporting. Content
AS PER TAX CODE ADDITIONAL TAX SERVICE
REQUIREMENTS
• Year of transactions
• Subject of transactions
• ...
Price control
• Controlled transactions? Of course!
• If a transaction is not subject to TP rules
(uncontrolled), is there...
Intragroup financing
• NOW: 3 sets of regulations
• Transfer pricing rules plus
• Thin capitalization rule plus
• General ...
Intragroup financing
• Are interest free loans now
allowed? Not really, but they are no
longer absolutely prohibited.
• TP...
How can companies protect
themselves?
If tax authorities contest
the price and charge
additional taxes
• Late payment inte...
Thank you
Anton Kabakov
Partner at Hellevig, Klein & Usov Llc
anton.kabakov@awaragroup.com
+7 921 39 711 93
The content of...
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Transfer pricing in Russia, 2014

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Transfer pricing in Russia, 2014

  1. 1. Russian Transfer Pricing 2014 Update Anton Kabakov Partner Hellevig, Klein & Usov Llc 20.05.2014
  2. 2. • Tax authorities rely on TP Rules to fight capital outflow • 4,600 notifications in 2012. Much or too little? • Head of Tax Service: approx. 300 reported transactions raised suspicion • Filling in gaps in TP regulations? TP First results
  3. 3. • All related-party cross-border transactions are now subject to transfer pricing rules. NO EXCEPTIONS. • More administrative burden: documentation and reporting obligations. • Transfer pricing audits. Deadline for initiating audits for 2012 is June 30, 2014. First audits are expected shortly More control
  4. 4. Reporting • To be filed by May 20 of the year following the reporting year • Requires a lot of efforts to collect the required information. The content of TP report is under Supreme Commercial Court consideration with a view to decrease the volume of information to be reported
  5. 5. Reporting. Content AS PER TAX CODE ADDITIONAL TAX SERVICE REQUIREMENTS • Year of transactions • Subject of transactions • Basic information about the parties to transactions • Revenue derived from or losses incurred under such transactions • Grounds for qualifying transactions controlled transactions • Delivery terms and measurement units • Country of origin of goods • Place of transaction and shipment of goods • Product unit price and quantity • Additional information about the parties to transactions • Transfer pricing methods (Optional) • Information sources used for benchmarking (Optional)
  6. 6. Price control • Controlled transactions? Of course! • If a transaction is not subject to TP rules (uncontrolled), is there any price control? Ministry of Finance: Yes, under general tax anti-avoidance rule.
  7. 7. Intragroup financing • NOW: 3 sets of regulations • Transfer pricing rules plus • Thin capitalization rule plus • General deductibility rate rule • PLANNED: Thin capitalization rule plus transfer pricing if interest rates are above set safe harbors only • FROM 2015: Thin capitalization rule plus transfer pricing (TP safe harbors are set for financing transactions with banks)
  8. 8. Intragroup financing • Are interest free loans now allowed? Not really, but they are no longer absolutely prohibited. • TP reporting and documentation requirements are waived for loans, credits, sureties, bank guarantees concluded before 2012, unless revised after 2012
  9. 9. How can companies protect themselves? If tax authorities contest the price and charge additional taxes • Late payment interest (1/300 of refinancing rate (8.25%)) • Penalty 20% of unpaid taxes in 2014-2017 • Penalty 40% of unpaid taxes from 2017 onwards What can be done? • Transfer pricing self- adjustment + payment additional tax prior to TP audit • Provide tax authorities with transfer pricing documentation
  10. 10. Thank you Anton Kabakov Partner at Hellevig, Klein & Usov Llc anton.kabakov@awaragroup.com +7 921 39 711 93 The content of this presentation cannot substitute legal counseling, which, to be duly rendered, always requires actual and specific knowledge of the client’s particular situation.

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