- Updated
- July 2021
- Sections
- 13
- Questions
- 33
Key Facts
Core Framework
Point 1 article 105.3 of the Russian Tax Code (RTC) (in Russian only)
The OECD Transfer Pricing Guidelines (TPG) are not a source of law under domestic legislation. The TPG along with the UN TP Manual are admissible as supplementary guidance.
Article 105.5 of the RTC
Comparability analysis largely follows the same principles as in the TPG.
Second paragraph of sub point 2 point 2 article 105.6 of the RTC
Foreign comparables for TNMM may be used only if domestic comparables are not available.
Point 3 Article 105.6 of the RTC
Point 4 article 105.8, points 3-6 article 105.9 of the RTC
The legislation prescribes to use an interquartile range except for quoted and exchange prices for which a min-max range should be used.
Documentation
In cases allowed by the appropriate double tax treaties.
In cases allowed by the appropriate double tax treaties.
In cases allowed by the appropriate double tax treaties.
TP Methods
- CUP
- Resale Price
- Cost Plus
- TNMM
- Profit Split
- Other
Selection: Hierarchy of methods
Dispute Resolution
Federal Law № 6-ФЗ dated 17.02.2021
New APA legislation in force.
Federal Law № 6-ФЗ dated 17.02.2021
New APA legislation in force.
Simplifications
Special Topics
In case of intangibles, the general transfer pricing provisions (e.g. the five methods) are applicable. The OECD TPG and the UN Manual may be used to supplement the provisions in the law (e.g. DEMPE analysis).
Article 129.3 and Articles 129.9 - 129.11 of the RTC
1. Transfer pricing documentation – no penalties for non-submission, but documentation provides protection from penalties for non-payment of additional tax. 2. Local File – penalties of RUB 100 000 for non-submission. 3. Master File – penalties of RUB 100 000 for non-submission. 4. CbCR – penalties of RUB 100 000 for non-submission or inaccurate information. 5. Notification – penalties of RUB 50 000 for non-submission.
Article 269 of the RTC
Controlled loan rates safe harbours (please see answer to question 19).
Full OECD Questionnaire
Legal ReferencePoint 1 article 105.3 of the Russian Tax Code (RTC) (in Russian only)
The OECD Transfer Pricing Guidelines (TPG) are not a source of law under domestic legislation. The TPG along with the UN TP Manual are admissible as supplementary guidance.
Legal ReferenceDefinition in point 1 article 105.1 of the RTC; Specific instances in point 2 article 105.1 of the RTC
If the peculiarities of relations between parties may influence the conditions and/or the results of transactions between these parties and/or economic results from activities of these parties or activities of the persons represented by these parties, such parties can be considered related parties for the purpose of taxation. For determination of related party status the influence of one party upon another shall be considered, such influence may come from participation in capital, be incurred by a contract or exist due to other ability of a party to determine the decisions made by other parties. Such influence shall be considered irrespective of the fact that it is exercised by a party directly and independently or jointly with its related parties, the status of which was determined according to article 105.1 of the RTC. Ownership threshold is considered in sub points 1 – 3 of point 2 article 105.1 and set at more than 25% of direct and (or) indirect ownership (shares with voting rights). Influence incurred by a contract may take place when a party is the only (or the dominant) counteragent and when the terms of a contract strongly suggest deviation from arm’s length principle.
Legal ReferenceArticles 105.7 – 105.13 and Point 9 article 105.7 of the RTC
If none of the five methods is applicable to a one-off transaction (a single transaction not typical for the ordinary activities of a taxpayer) valuation can be used.
- CUP (provided)
- Resale Price (provided)
- Cost Plus (provided)
- TNMM (provided)
- Profit Split (provided)
- Other (provided)
Legal ReferenceArticles 105.7 – 105.13 of the RTC
The CUP is the primary method except for resale transactions for which the Resale Price Method (RPM) takes priority over the CUP. The usual hierarchy is as follows: CUP > RPM or Cost Plus > TNMM > Profit split. For resale transactions RPM > CUP >Cost Plus> TNMM > Profit split.
- Hierarchy of methods (selected)
- Most appropriate method (not selected)
Legal ReferenceArticle 105.9 of the RTC
There is no specific guidance on commodity transactions. However, the legislation allows an approach similar to paragraphs 2.18-2.22 of the TPG. For example, the price in a commodity transaction can be determined with reference to an exchange market price or a quoted price.
- Other (selected)
Legal ReferenceArticle 105.5 of the RTC
Comparability analysis largely follows the same principles as in the TPG.
Legal ReferenceSecond paragraph of sub point 2 point 2 article 105.6 of the RTC
Foreign comparables for TNMM may be used only if domestic comparables are not available.
Legal ReferencePoint 3 Article 105.6 of the RTC
Legal ReferencePoint 4 article 105.8, points 3-6 article 105.9 of the RTC
The legislation prescribes to use an interquartile range except for quoted and exchange prices for which a min-max range should be used.
Legal ReferenceArticle 105.5 of the RTC
Adjustments can be made based on the results of comparability analysis.
In case of intangibles, the general transfer pricing provisions (e.g. the five methods) are applicable. The OECD TPG and the UN Manual may be used to supplement the provisions in the law (e.g. DEMPE analysis).
Legal ReferenceLetters of the Federal Tax Service ШЮ-4-13/12599@ dated 06.08.2020 and ШЮ-4-13/1749@ dated 12.02.2021
The guidance on deductibility of expenses for intra-group services is applicable. In this sense, the analysis for intra-group services is as follows: first, it should be determined that the amount paid for the services qualifies as an expense for the purpose of the corporate income tax and is able to ‘path through’ the general anti avoidance rules; if not, the amount is not deductible and no transfer pricing analysis shall take place; if so, then the general transfer pricing provisions would apply and the mark up can be tested using the transfer pricing methods.
Legal ReferenceArticles 252 and 54.1 of the RTC.
General deductibility and anti-avoidance rules contained in Articles 252 and 54.1 of the RTC and the Letter of the Federal Tax Service БВ-4-7/3060@ applies.
General transfer pricing provisions would apply.
Legal ReferenceArticle 269 of the RTC
Controlled loans rates safe harbours and thin capitalization rules apply. Under the controlled loans rate safe harbour, a taxpayer may recognize income (expense) according to the actual interest rate if such a rate is above (below) the minimum (maximum) point of the safe harbour range. For the purpose of the thin capitalizations rule debt to equity ratio is 3 and 12,5 for banks.
Cost contribution agreements are not recognized under domestic legislation.
Legal ReferenceArticle 105.15 and Chapter 14.4-1 of the RTC
- Master file consistent with Annex I to Chapter V of the TPG (selected)
- Local file consistent with Annex II to Chapter V of the TPG (selected)
- Country-by-country report consistent with Annex III to Chapter V of the TPG (selected)
Legal ReferenceChapter 14.4-1 of the RTC
1. Transfer pricing documentation: Prepared in Russian, requested no earlier than 1st June of the following year, provided within 30 days of request during audit. 2. Local file: Prepared in Russian, requested no earlier than 1st June of the following year, provided within 30 days of request. 3. Master file: Prepared in Russian, requested no earlier than 12 months and no later than 36 months from end of reporting period, provided within 3 months of request. 4. CbCR: Submitted no later than 12 months from end of reporting period, can be in Russian or foreign language (if parent is outside Russia). 5. Notification: Submitted no later than 8 months from end of reporting period of parent company. Threshold for CbCR is RUB 50 billion if parent is a tax resident of Russia.
Legal ReferenceArticle 129.3 and Articles 129.9 - 129.11 of the RTC
1. Transfer pricing documentation – no penalties for non-submission, but documentation provides protection from penalties for non-payment of additional tax. 2. Local File – penalties of RUB 100 000 for non-submission. 3. Master File – penalties of RUB 100 000 for non-submission. 4. CbCR – penalties of RUB 100 000 for non-submission or inaccurate information. 5. Notification – penalties of RUB 50 000 for non-submission.
Legal ReferenceArticle 105.14 and Point 4 article 105.15 of the RTC
Cross-border transactions between related parties are deemed controlled from a threshold of RUB 60 million. Exemptions include: (1) prices set by antitrust order or government authorities; (2) transactions with unrelated parties; (3) transactions with publicly traded securities and derivatives; (4) transactions with an advance pricing agreement.
Legal ReferenceChapters 14.6 of the RTC (APA); Order of the Ministry of Finance № 60н dated 29.03.2018 (BAPA, MAPA); Chapter 20.3 of the RTC (MAP); Order of the Ministry of Finance № 102н dated 11.06.2020 (MAP); Russia’s MAP Profile
According to domestic legislation, unilateral, bilateral and multilateral APAs can be concluded. The term of an APA is 1-3 years with a possible extension of maximum of 2 years. Rollback is not possible. MAP regulations are in place. Specific information can be found in the MAP profile. ICAP is also available.
- Rulings (not selected)
- Enhanced engagement programs (not selected)
- Advance Pricing Agreements (APA) (selected)
- Unilateral APAs (selected)
- Bilateral APAs (selected)
- Multilateral APAs (selected)
- Mutual Agreement Procedures (selected)
- Other (please specify): ICAP (selected)
Legal ReferenceArticle 269 of the RTC
Controlled loan rates safe harbours (please see answer to question 19).
Year-end adjustments are possible. For cross-border transactions the taxpayers are allowed to make upward tax base adjustments (to pay additional tax), a downward adjustment is possible via MAP or a bilateral or multilateral APA.
In cases allowed by the appropriate double tax treaties.
In accordance with textual analysis of our double tax treaties, most of them (50) do not contain an explicit permission on indirect methods of profit allocation. This may lead to the conclusion that only the direct method is available, which meets the requirements of AOA. In practice, we did not encounter the need to resolve such uncertainties in the absence of such cases.
The legislation is based on a transactional approach, i.e. the financial results for the purpose of transfer pricing adjustments are determined for each transaction or for a group of uniform transactions. Portfolio approach for non-uniform transactions is not allowed.
Legal ReferenceFederal Law № 6-ФЗ dated 17.02.2021
New APA legislation in force.
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