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Russia: Controlled transactions involving intangibles; profit-split method; mutual agreement procedures

Russia: Controlled transactions involving intangibles

Draft legislation (No. 720839-7) pending before the Duma includes the following transfer pricing-related proposals:


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  • Amendments with regard to transfer pricing and controlled transactions involving intangibles
    • The draft legislation provides that specialized functional analysis would take into account: (1) “DEMPE functions” (development, enhancement, maintenance, protection, and exploitation of intangibles); (2) risks related to DEMPE; and (3) additional comparability criteria for intangibles (e.g., their exclusivity, duration of legal protection, etc.) This would be effective 1 January 2020.
  • Modification to the profit-split method
    • Under the draft legislation, control over intangibles would be considered when analyzing whether the profit-split method could apply. This would be effective 1 January 2020.
  • Proposals for the development of a mutual agreement procedure (MAP) process
    • This would include rules with regard to requests from the tax authorities for transfer pricing documentation; provisions for the Ministry of Finance to initiate the MAP process within 90 days after receiving the taxpayer’s application; and measures allowing the tax authorities to request additional documentation from the taxpayer (with the taxpayer being allowed one month to comply).
    • The MAP process could be initiated by the taxpayer or by a competent foreign authority of a country that has entered into an income tax treaty with Russia.
    • The taxpayer could apply for the MAP process within three years from the time of the first notification with regard to the actions that resulted in the double taxation (that is, from the date of the tax audit protocol delivery).
    • If enacted, these measures would be effective 1 January 2020.

The draft legislation does not refer to previously proposed amendments relating to transfer pricing and control on commodity transactions.

For more information, contact the Global Leader of KPMG’s Global Transfer Pricing Services:

Komal Dhall | +1 212 872 3089 |

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