Requirements of BEPS 13 applicable in Russia - KPMG Russia
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Relevant information for MNE Groups on the requirements of BEPS 13 applicable in the Russian Federation

Requirements of BEPS 13 applicable in Russia

Federal Law No.125-FZ “On Amendments to Parts One and Two of the Tax Code of the Russian Federation” (to Article 105.16 of the Tax Code of the Russian Federation) was adopted on 6 June 2019. The amendments expand the list of entities entitled to give prior consent to the provision of information about the participants of a MNE Group to foreign tax authorities.

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The Tax Code of the Russian Federation (RF Tax Code) establishes that if a country report contains information regarding the participants of a MNE Group included in the list of strategic enterprises, then the information on the activities of such participants is only transferred abroad with the prior consent of the federal executive authority.

According to the Law, such prior consent may be given not only by the federal authorities, but also by state corporations representing the owner of the participants of the MNE Group included in the list of strategic enterprises.

In connection with this fact, we would like to point that the deadline for the submission of the Notification on Participation in a MNE Group in accordance with the RF Tax Code is drawing near.  If the financial year of the parent company of the MNE Group corresponds with the calendar year, the Notification on Participation in a MNE Group must be submitted to the tax authorities of the Russian Federation no later than 31 August 2019. If the financial year of the parent company does not correspond to the calendar year, then Russian companies that are participants in MNE Group must submit the Notification within eight months of the end of the financial year.

The following are recognized as participants of MNE Group:

  1. Companies included in the consolidated financial statements or companies that would be included in the consolidated financial statements if the shares of such a company were traded on the securities market;
  2. Companies excluded from the consolidated financial statements solely based on size or materiality grounds;
  3. The permanent establishments of companies indicated in sub-points 1 and 2.

In addition, please note that on 4 February 2019, the Ministry of Finance of the Russian Federation published Letter No. 03-12-11/4/6073, which draws the attention of Russian taxpayers to the fact that in order to recognize a group of entities and/or foreign structures with no corporate status as a MNE Group in instances when the parent company of this group of entities and/or foreign structures with no corporate status is not a tax resident of the Russian Federation, they should adhere to the legislation of a foreign state (territory).

Consequently, if a non-public Group does not prepare statutory consolidated reporting, but its parent company is a tax resident of a foreign state, then the Group is recognized as an MNE group in accordance with the foreign legislation of its parent company, and this fact is also valid in the Russian Federation. Accordingly, the Russian participants of the MNE Group must comply with the relevant requirements of the RF Tax Code, including the filing of a notification on MNE Group, preparing a Master File and Local File, and an assessment as to whether the repeat filing of the Country Report in Russia is required).

Format

Contrary to the requirements of other jurisdictions, the notification is filed electronically in the Russian Federation, but in a specially designed form in XML format in Russian, in accordance with Order No. MMP-7-17/124@ of the Federal Tax Service of Russia dated 6 March 2018.

Fine

RUB 50,000 (for failure to file the notification by the established deadline or the filing of the notification containing inaccurate information)  from 2020.

Conclusions

What does it mean for you?

  1. We recommend determining whether a Group, which includes a Russian company, is a MNE Group;
  2. We recommend verifying if the company is included in the list of strategic enterprises in accordance with the legislation of the Russian Federation and obtaining consent to submit data if necessary
  3. We recommend preparing and filing the Notification on Participation in a MNE Group in accordance with the requirements of the RF Tax Code.

For MNE groups with a Russian parent company

 — We recommended preparing and filing the Country Report with the tax authorities;

 — We recommended preparing the Master file and Local file.

For MNE groups with Russian UPE

 — We recommend clarifying the status of the automatic exchange between the jurisdiction of the filing of the Country Report and the Russian Federation;

 — If there is no automatic exchange, we recommend requesting a Country Report from the parent company of the MNE Group and adapting it in accordance with the requirements of Russian law;

 — We recommend requesting the Master file from the parent company of the MNE Group and adapting it to the requirements of Russian law;

 — We recommended requesting the Local file from the parent company of the MNE Group (if it is prepared globally) and adapting it to the requirements of Russian law, or preparing it independently.

KPMG specialists would be delighted to answer any questions that you may have in detail, and also assist with the preparation of notifications for filing with the tax authorities of the Russian Federation, including the conversion of the Notification to XML format.

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