Russia: Changes to APA process and measures related to controlled transactions

Russia: Changes to APA process

Pending tax legislation would, among other measures, amend the process for entering into advance pricing agreements (APAs). Other measures in the legislation would aim to improve tax control over prices and clarify certain provisions related to the definition of controlled transactions.


The legislation was passed by the State Duma in November 2020. This was followed by a 30-day period during which the Budget and Tax Committee of the State Duma could adopt amendments to the draft legislation (that deadline ends today, 16 December 2020).


Among the measures in the draft legislation are provisions that would:

  • Allow taxpayers the option to apply the price control method stipulated by the law or rules of another country if a bilateral APA is being concluded
  • Allow taxpayers the option to conclude a unilateral APA if the Russian tax authorities and foreign tax authorities fail to reach a mutual agreement
  • Substantially expand the list of reasons for rejecting the conclusion of an APA
  • Impose limits on the ability to conduct transfer pricing audits of transactions in instances when taxpayers have applied for an APA but there has either been no decision regarding or a refusal to conclude the APA
  • Establish clear deadlines for agreeing to the terms of an APA

Controlled transactions

The draft legislation also includes proposals to:

  • Consider the practical consequences of including on the list of controlled transactions, certain foreign trade transactions with unrelated parties involving goods that constitute the main exports of Russia (e.g., oil, ferrous and non-ferrous metals, mineral fertilizers, precious stones, and metals). This could in turn make it impossible to apply transfer pricing methods based on price analysis, since foreign trade transactions with no stock exchange indicators would be controlled.
  • Allow the tax authority to receive information about the transaction parameters from participants to the transaction under review as well as information from other parties. There is, however, no indication as to which “other parties” are intended.
  • Clarify the term “a material effect on the tax base and the amounts of taxes” as used in the proposed Clause 2, Article 105.7 of the Russian tax law for the avoidance of doubt. The pending version of the draft legislation states that when concluding a bilateral APA, application of the methods stipulated by the law of another country would be allowed if the differences between the results from applying these methods and the results from applying the methods stipulated by Clause 1, Article 105.7 are either the same or have no material effect on the tax base and the amount of taxes.
  • Include temporary regulations to take account of the economic situation from the coronavirus (COVID-19) pandemic when taxpayers justify prices under controlled transactions in 2020-2021.

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

Komal Dhall | +1 212 872 3089 |

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