Experience in transfer pricing audits in Russia. Focus on pre-audit analysis

KPMG Review. 5 July 2021.

KPMG Review. 5 July 2021.

Despite transfer pricing (TP) legislation being introduced in Russia almost 10 years ago (in 2012), judicial practice in this area remains very limited. Indeed, there aren’t many actual TP audits, as in recent years the Russian Tax Authorities (RTA) have focused more on pre-audit analysis (PAA). In 2020, 54% of the state’s budget revenues came from this pre-audit analytical work by the Federal Tax Service of Russia, with the remaining 46% from the use of classic control measures.

PAA provides the RTA with a flexible negotiation tool that allows them to significantly economise the performance of TP audits. The idea of the PAA is to gain information about a controlled transaction without opening a full TP audit and, if required, to induce the taxpayer to voluntarily adjust its tax obligations without the cumbersome framework of a TP audit. The procedure for a PAA is not directly set out in the Tax Code of the Russian Federation, but when making PAA requests, the RTA are referring to Articles 93 and 93.1 of the Tax Code of the Russian Federation.