New Transfer Pricing Reporting in 2018
As we wrote earlier, after Russia's accession to the international automatic exchange of information, new requirements for the provision of documents on Multinational Enterprise's Groups (MNE Groups) have appeared in the Tax Code since 2018.
These new requirements apply to periods starting in 2017, so many Russian companies will have to report to tax authorities already before the end of summer 2018.
To whom is this relevant?
The new rules apply to Russian taxpayers that are part of MNE Groups with consolidated revenues for the year* preceding the reporting year exceeding the following thresholds:
- RUB 50 billion for MNE Groups with Russian parent entities;
- A limit set by the relevant country for MNE Groups with a foreign parent entity (presumably EUR 750 million).
In other words, companies that are part of MNE Groups with consolidated revenues for 2016 exceeding the above limits will have to report for 2017.
*Financial year. To simplify, we have assumed that the financial year in MNE is the same as the calendar year.
What reports should be submitted by Russian taxpayers?
1. Notification of participation in MNE Group
The format of the Notification has been approved by order of the Federal Tax Service of Russia No. ММV-7-17/124@ dated March 06, 2018. Notification includes information about the reporting organization, parent entity of the MNE Group, Reporting entity of the MNE Group and the end date of Group’s financial year.
Notification has to be filed to Russian tax authorities before August 31.
There is no need to file the Notification, if it is submitted by a Russian parent entity or a Russian Reporting entity. It is also possible to submit a single Notification for several Russian companies from the same MNE Group.
2. Country-by-country report (CbC)
The format of CbC has been approved by order of the Federal Tax Service of Russia No. ММВ-7-17/123@ dated March 06, 2018.
This report includes:
- Revenues of MNE Group by country;
- Amounts of taxes paid;
- Amount of capital;
- Accumulated earnings;
- Number of employees;
- Tangible asset value;
- Identification details for each company in MNE;
Financial information is provided based on the data of Group’s consolidated financial statements. Parent entities or Reporting entities who are Russian organizations or foreign organizations that have recognized themselves as tax residents of Russia has to file CbC to Russian tax authorities before 31.12.
Other Russian taxpayers that are part of MNE Groups are to submit CbC at the request of tax authorities. Such request may be sent to Russian companies, if the parent company or the reporting company of the Group is recognized as a tax resident of a country in which CbC reporting legal framework is not in effect. Tax authorities may also request CbC from Russian taxpayers, if there is no Tax information exchange agreement between Russia and the country in which the Group reports, or an agreement has been signed, but this particular country allows systematic default of the obligations under the agreement.
Russian taxpayers must file CbC within 3 months of receipt of the request from tax authorities to do so.
How may we help?
We would be pleased to:
- Review your particular situation and provide recommendations about the new requirements of the law;
- Assist with the preparation of new reporting forms as well as liaise with group companies on matters related to these new reports.