Important news for Russian taxpayers preparing notifications on their controlled transactions, as well as first transfer pricing country-files: the applicable transfer pricing deadlines are likely to be prolonged. The relevant draft law has passed third and final reading with the Russian State Duma on 22 March 2013.
As a reminder, Russian transfer pricing regulations, effective as of 1 January 2012, impose two main types of obligations on taxpayers (and, primarily, on companies entering into cross-border transactions with related parties, as all such transactions are treated as controlled for transfer pricing purposes, whereas substantial limits are applicable to intra-group domestic operations):
- a reporting (notification) requirement, under which companies have to annually notify their ordinary tax inspectorates of all controlled transactions between related parties concluded during the previous calendar year; and
- a documentation requirement, under which tax authorities are entitled to request more detailed information on all controlled transactions between related parties on the basis of the aforementioned notification requirement, or as a result of a tax audit.
The deadlines for complying with the above requirements are currently fixed as 20 May 2013 for submitting transfer pricing notifications on transactions in which the expenses or profit were recognised in 2012 and that fall within the scope of transfer pricing regulations, and 1 June 2013 for the tax authorities to start demanding documentation on the relevant controlled transactions.
Given that documenting transactions falling within the scope of the rules on prices control is a new experience for Russian taxpayers, recent times have been marked by significant efforts on the part of Russian companies in this sphere. The Russian Ministry of Finance, aware of possible complications and the tight timetable, has decided to extend the applicable deadlines and has initiated the adoption of a relevant draft law.
The draft law in question No. 79859-6 “On Amending Part II of the Tax Code of the Russian Federation and Article 4 of the Federal Law “On Amending Certain Legislative Acts of the Russian Federation Relating to the Improvement of the Prices Definition Principles for Taxation Purposes” (the “Draft”) has been adopted in third reading on 22 March 2013. Provided it is approved by the Federation Council and signed by the Russian President, it shall apply retroactively to legal relations having arisen as from 1 January 2012.
The following transfer pricing deadlines are set by the Draft:
- 20 November 2013 as the deadline for submitting notifications on controlled transactions falling within the scope of transfer pricing requirements;
- 1 December 2013 as the date when the tax authorities will be entitled to start demanding transfer pricing documentation on the controlled transactions (the relevant documentation to be submitted within 30 days as from such request date); and
- 30 June 2014 as the deadline for tax authorities to initiate transfer pricing audits in relation to those transactions in which the expenses or profit were recognised in 2012.
Please note that the above new deadlines are treated as transitional rules applicable solely to 2012 controlled transactions falling within the scope of transfer pricing regulations. May and June statutory deadlines, as described above, will continue to be applicable to transactions entered into in 2013 and further.
In addition, please note that the Draft also provides for the exclusion from the scope of controlled transactions subject to transfer pricing requirements those loan agreements entered into prior to 1 January 2012, unless their conditions have been subject to modification after the said date.