Proposals for a new format for transfer pricing reporting by multinational corporate groups are still pending final legislative action in Russia.
In September 2016, proposed draft legislation that would introduce a new format for transfer pricing reporting by multinational corporate groups was released for public discussion. At that time, it was anticipated that the new rules would be effective beginning 1 January 2017. However, the Russian Ministry of Finance in March 2017 published amendments that would add new provisions to the Russian tax law regarding the international automatic exchange of financial account information, and that would provide new standards for transfer pricing documentation for multinational corporations. At present, the measures have not been finalized, and most likely the draft legislation will be considered by the parliament in the autumn of 2017.
Some of the changes in the draft legislation concern:
The requirements for the Master file’s contents are described in more detail in the amended draft legislation, and are better aligned with the OECD recommendations as published as part of the base erosion and profit shifting (BEPS) Action 13. Another change that would bring additional concerns to the Russian-based subsidiaries that are members of the MNE is that the 2017 version of the draft legislation would allow the Russian tax authorities to directly request the Master file from Russian taxpayers that are members of an MNE, rather than requesting it from the ultimate parent entity.
A failure to submit a Master file when required, or if incorrect information is submitted, there would not be a penalty (the 2016 version of the draft law prescribed a penalty of RUB 100,000).
The requirement to prepare a Local file arises for Russian taxpayers that:
The 2017 amendments provide that the Local file must contain the same structure and content as the national transfer pricing documentation with respect to controlled transactions that taxpayers must prepare under current Russian transfer pricing rules for taxation purposes. A difference arises in the part concerning the additional information that must be included to complete the document with content in line with OECD recommendations published as part of BEPS Action 13. The 2017 amendments to the draft legislation do not expressly state that national transfer pricing documentation is fully replaced by the Local file, and neither is it specified whether the Local file is to be prepared for one particular transaction (as it would be for national transfer pricing documentation) or for all transactions.
A Russian taxpayer that is part of an MNE must provide the Local file upon request from the tax authorities within the same time period as stipulated for the local transfer pricing documentation on controlled transactions (that is, not earlier than 1 June of the year following the calendar year in which the controlled transactions took place, and within 30 business days from date of request by the tax authorities). The failure to submit the Local file when required or for submitting incorrect information would not result in a penalty (the 2016 draft law prescribed a penalty of RUB 100,000).
Country information—that is, the CbC report, Master file, Local file—would have to be presented in Russian, and all amounts would be reported in Russian rubles. However, there is nothing to prevent taxpayers additionally presenting country information in a foreign language. There is an exception granted only to MNEs that have an ultimate parent entity that was not a Russian tax resident in the reporting year. In such instances, the CbC report could be provided in a foreign language.
New definitions or updated definitions are provided in the 2017 draft legislation, that are in line with the OECD guidelines published as part of BEPS Action 13, for the following terms:
For more information, contact a tax professional with KPMG’s Global Transfer Pricing Services practice in Russia:
Natalia Valkovskaya | +7 495 514 13 05 | firstname.lastname@example.org
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