Preparation of documentation on controlled transactions in accordance with the requirements of the Russian Tax Code
Who has to prepare documentation for tax control purposes/Local file?
According to the provisions of Article 105.15 of the RTC taxpayers (companies registered in Russia, representative offices of foreign companies) have to provide documentation for tax control purposes concerning their controlled transactions upon request of the tax authorities.
Also, according to the provisions of Article 105.16-3 of the RTC, participants of multinational enterprises (MNE) being taxpayers in accordance with the RTC, falling under the requirements of Federal Law No. 340-FZ dated 27.11.2017 and having controlled transactions with foreign related parties must be ready to provide Local file on transactions (for periods from 2018) upon request of the tax authorities.
Thus, in respect of a controlled transaction the tax authority may request either Local file or documentation for tax control purposes, depending on the applicability to the taxpayer of the requirements of Federal Law No. 340-FZ dated 27.11.2017.
The tax authority has the right to request documentation starting from June 1 of the year following the reporting year. The taxpayer must provide the requested documents within 30 days from the date of receipt of the request.
For Local file a transition period is provided with respect to the earliest date of its request regarding income and/or expenses for 2019-2020. - December 31, 2019-2020. (according to clause 4 of Article 2 of the Federal Law No. 340-FZ dated 27.11.2017).
- For failure to provide documentation for tax control purposes no penalties are stipulated;
- For failure to provide Local file there is a penalty in the amount of 100,000 rubles (for each document);
- In case of non-payment or incomplete payment of tax due to the application of prices that do not correspond to the arm’s length level, there is a penalty in the amount of 40% of the unpaid amount of tax (not less than 30,000 rubles).
The taxpayer is exempt from the penalty if supporting documentation is provided.
The contents of documentation for tax control purposes are regulated by the provisions of Article 105.15 of the RTC and Letter of the Federal Tax Service dated 30.08.2012 No. OA-4-13/14433@ “On the preparation and submission of documentation for the purposes of tax control”. The list of additional information for Local file is stipulated in paragraph 3 of clause 1 of Art. 105.15 of the RTC.
- Preparation of documentation for tax control purposes / Local file on a turnkey basis.
- Updating the documentation for tax control purposes / Local file or separate sections of documentation (description, functional analysis, benchmarking, etc.) prepared by the taxpayer for the previous year.
- Verification of correctness of documentation for tax control purposes / Local file prepared by the taxpayer (including engagement of other service providers).
KPMG specialists have extensive experience and expertise in transfer pricing, accounting and tax accounting, and international taxation. In the course of projects, KPMG specialists prepare documentation, provide assistance in resolving disputes regarding its preparation, and advise on current issues.
Since 2012, the KPMG team has been successfully working with clients on transfer pricing issues in respect of various types of transactions (provision of services, sale and purchase of goods, lending, royalties, etc.), obtaining exceptionally positive feedback from clients on the quality of their projects related to transfer pricing documentation.
Our team has been providing services related to preparing transfer pricing documentation since 2012, and consists of about 100 professionals from Moscow, St. Petersburg, Nizhny Novgorod, Yekaterinburg, Voronezh, Novosibirsk and Minsk, who have extensive knowledge and experience in transfer pricing, accounting and tax accounting (RAS and IFRS).
We will be glad to help you in preparing documentation for tax control purposes / Local file, compliant with the requirements of the RTC.