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New Belarussian transfer pricing rules take effect

New Belarussian transfer pricing rules take effect

New version of the Tax Code introduces material amendments to transfer pricing rules.

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The amendments covered by Law 159.З on transfer pricing

From 1 January 2019, and pursuant to paragraph two of Article 6 of the Law of the Republic of Belarus dated 30.12.2018 No. 159-З (hereinafter, “Law 159-З”), a new version of the Belarusian Tax Code (hereinafter, “TC”) – introducing material amendments to transfer pricing (hereinafter, “TP”) rules in Belarus – took effect.

The last significant changes were made in 2016, but these did not result in extensive usage of TC  controls and failed to cover a number of practical issues related to the wording of the previous text of the TC. The 2016 changes moved Belarusian TC rules considerably closer to international approaches, but preserved the 20% acceptable deviation from market prices, control over the foreign trade transactions of non-related parties, the low thresholds for controlled deals, and other peculiarities.

The new version of the TC constitutes an almost entirely new document that – in terms of TP oversight – is supplemented by Chapter 11 Principles of determining prices for goods, work (services) for taxation purposes . Article 30.1, permitting a 20% deviation from market prices, has been abolished.

The amendments covered by Law 159.З on TP oversight also affect: 

  • the composition of and procedure for determining related parties;
  • the composition of controlled transactions;
  • the thresholds (limits) on transaction amounts; and 
  • special aspects of how to apply different methods to determine market prices.

In addition, the new TC introduces new TP oversight provisions taking effect from 2019, such as: 

  • the duty of the tax authorities to apply the market price determination method set forth by a taxpayer in its TP documentation until application of this method has been proved inappropriate; 
  • the duty of major taxpayers to submit to the tax authorities their TP documentation so long as it is requested no earlier than 1 June of the year following the year in which the relevant controlled transaction took place; 
  • the duty to provide the TP documentation / economic rationale in accordance with the forms and processes established by the Ministry of Taxes and Levies of the Republic of Belarus (hereinafter, “MTL”); and 
  • the option of entering into pricing agreements with the tax authorities regarding the taxation of major deals.

It is important to note that a government order on the forms on which TP documentation is to be filed from 2019 onwards in Belarus is still pending approval. A draft of it is on the MTL website. More details can be found in a summary previously prepared by our team.

According to the 2019 TC, the limits for treating deals as controlled have increased for all types of controlled transactions (compared to the previous version):

Transfer pricing

Consequences of enacting the new TP rules

  • Major taxpayers1 now have a duty to prepare and submit TP documentation to the tax authorities to confirm the economic rationale of the price applied in the controlled transaction in question. This documentation must be submitted before 1 June of the year following the year in which the transaction took place, and completed using the established forms.
  • For controlled transactions in which a taxpayer has no duty to submit TP documentation, the tax authorities may request the economic rationale of the price applied. The submission deadline ranges from 2 or more days for field audits to 10 or more days for other requests. Again, documents must be on the established forms. 
  • Fines for failing to submit the above documentation, and for submitting an economic rationale for containing inaccurate information, currently range from 49 up to 735 Belarusian roubles. 
  • Fines for the non-payment of Belarusian taxes, including as a result of taking TP oversight measures, constitute 40% of the outstanding tax amount.

1Major payers include organisations having annual revenue (income) of at least 180 million Belarusian roubles and an aggregate estimated amount of tax (VAT to be refunded from the budget) exceeding 14 million Belarusian roubles.

How KPMG can help you

We will be delighted to assist you with any issue related to making amendments in response to Belarusian TP laws, including: 

  • comprehensive TP analysis, including the identification of controlled transactions, functional analysis and benchmarking studies; 
  • support in drawing up and implementing policies / regulations that establish transfer prices for intergroup transactions at market levels; 
  • assistance in preparing TP documentation forms and the economic rationale to be submitted to the tax authorities; 
  • advice for you at all stages of communication with the tax authorities (right from submission of TP documentation / the economic rationale); and 
  • assessing the effect of the group’s structure / operational structure in terms of TP risks, and providing recommendations on how to mitigate these risks.

Our KPMG team has wide practical experience of applying TP rules in various jurisdictions all over the world, including Russia, Ukraine, Kazakhstan and in other CIS states.

We will be pleased to provide detailed answers to all your questions and give you all the necessary support you need regarding your TP issues in Belarus.

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