Dentons' Tax practice would like to remind you that, for
transactions completed in 2015, the notice of controlled
transactions must be filed with the tax authority at the
taxpayer's location (place of residence, registration) on or
before May 20, 2016, and taxpayers may be asked to provide
supporting documentation on transfer pricing ("Transfer
Pricing") starting June 1, 2016. The supporting documentation
must be submitted within 30 business days of when the Federal Tax
Service of Russia notice is received.
It should also be borne in mind that, although the Russian
Ministry of Finance has in effect admitted that its previous
clarifications, which allowed tax audit of pricing in arm's
length transactions (transactions which by law shall not be treated
as controlled) were in error (see Letter No. 03-01-18/35527 of June
19, 2015), the tax authorities continue to actively monitor prices
in such transactions.
In most cases the courts state that transfer pricing audits by
the local tax authorities are unlawful in principle; however, this
is usually preceded by examination on the merits of whether a price
is a market price.
Moreover, as an RF Supreme Court judge said in the Oriflame
case, a lack of substantiation that the amount of expenses is
consistent with the market, inter alia, can evidence that license
fees were improperly deducted, although the tax authority was not
even disputing that circumstance.
In this regard we recommend that the following
should be done in advance:
To prepare a notice on controlled transactions made in
To prepare transfer pricing documentation for 2015 and
update the documentation for previous periods that may yet be
audited, considering the developing court practice on transfer
pricing, in particular, having to do with debt obligations, lease,
the sale of goods, and transactions involving participatory
interests in limited liability companies;
Assess the risks of pricing claims being brought with regard
to arm's length transactions made by your company and, if
necessary, work out and implement ways of eliminating or minimizing
Based on considerable experience in transfer pricing acquired
through advising, including on preparing transfer pricing
documentation and structuring deals, and also handling court
disputes on matters of how transfer pricing in transactions affects
their tax consequences, the Dentons' Tax practice is ready to
assist you in preparing and updating transfer pricing
documentation, including for transactions involving shares
(participatory interests); intellectual property; loan transactions
and other transactions to raise financing with the use of debt
instruments; for contracts for the supply of goods; performance of
work; provision of services; for nonstandard and mixed
transactions; in building a sound position on transfer pricing with
due account for the specifics of your situation, and in preparing
the notice on controlled transactions.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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