Transfer Pricing

Since 2014 all transactions with related foreign entities have been deemed controlled transactions which, as such, are subject to statutory tax control.

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Transfer pricing rules

The Russian Tax Code provides that if transfer pricing results in an understatement of taxes, market prices should be applied instead for taxation purposes. Taxpayers are required to verify the level of their transfer prices themselves and adjust taxes, if necessary.

Taxpayers are also required to send a report on controlled transactions to tax authorities every year, as well as provide transfer pricing documentation within 30 days of a request to do so by tax authorities.

Our tax calendar shows the main dates of transfer pricing control.

Transfer pricing calendar

Penalties for understated tax

If a tax check reveals an understatement of taxes due to the application of transfer prices not in line with market level, tax authorities may use market prices for taxation purposes and impose additional tax liabilities and penalties as follows:

For transactions completed in 2014-2016: the penalty is 20% of unpaid tax.
From 2017: the penalty will be 40% of unpaid tax.

Actions to be performed by taxpayers to prepare for transfer pricing checks

We recommend the following steps to set an internal system for transfer pricing control which will reduce tax risks and ensure that taxpayers are ready for possible tax checks:

Transfer pricing actions

It is important to note that since the implementation of the abovementioned procedures takes time and requires the assistance of experts, we recommend starting as early as is practically possible as this will help minimizing possible tax risks. 

Our experts are ready to provide all the support required to prepare transfer pricing reporting and for tax control.

Our transfer pricing services in Russia include:

  • Identification of related entities and controlled transactions;
  • Business overview and analysis of commercial and financial conditions of controlled transactions;
  • Selection of applicable TP-method;
  • Comparative analysis of transfer prices;
  • Preparation of transfer pricing documentation;
  • Updating of transfer pricing documentation;
  • Preparation of controlled transactions report.

Contact us today to find out more about our company and our transfer pricing services!

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