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Transfer Pricing - Notifications of Controlled Transactions
September 2012 - Law firm Pepeliaev Group reports that the Federal Tax Service of the Russian Federation has approved the documents which taxpayers will need in order to submit notifications of transactions that are subject to special control under the transfer pricing laws.
In line with article 105.16(2) of the Russian Tax Code, taxpayers who perform transactions controlled under transfer pricing laws must submit to the tax authorities data concerning such transactions no later than 20 May of the year following the calendar year in which the controlled transactions were completed. Such notifications must be sent for the first time no later than 20 May 2013 (applicable to transactions in the year 2012).
In connection with the above, the Federal Tax Service issued Order No. ММV-7-13/524@, dated 27 July 2012 (registered with the Russian Ministry of Justice on 30 August 2012), where it approved the following:
1) the form for the notification of controlled transactions;
2) the procedure for the taxpayer to fill in the notification;
3) the electronic format and filing procedure for notifying controlled transactions in electronic form.
Implications for the taxpayers
The scope of the data about controlled transactions that the taxpayers are to disclose under the above Order has been significantly extended as compared with the data set out in article 105.16(3) of the Tax Code. For instance, taxpayers are requested to provide the following information:
· grounds for classifying the transactions as controlled;
· grounds for considering the prices to correspond to the market level, in cases directly stipulated by the Tax Code;
· pricing methods used by the taxpayers;
· information sources used by the taxpayers.
It is optional to fill in some indicators in the form notifying controlled transactions.
When providing information on the subject matter of the transaction, it will be necessary not only to give a full description of the subject matter of the transaction (e.g. goods, works, services, or property rights), but also to submit more detailed data, including the code for the subject matter of the transaction in accordance with one of three classifications: TN VED (Foreign Economic Activity Commodity Nomenclature) or OKP (Russian Classification of Products) (for goods), OKVED (Russian Classification of Economic Activities) (for works, services, or property rights). The most detailed information is required for transactions with goods: the taxpayer will have to inform the tax authority additionally of the country of origin, shipping (loading) point, delivery (discharging) point, as well as the terms of delivery, if delivered under Incoterms.
PG comment. It would make sense to suppose that such detailed information as required by the approved form of the notification of controlled transactions will be used to select taxpayers whose tax calculation and payment will be audited because they have entered into transactions which are subject to price control.
Taking into account that submitting a notification of controlled transactions is, in fact, a preliminary stage of price control, the tax specialists of Pepeliaev Group are ready to give advice on whether or not it is necessary to include information about a certain transaction in a notification of controlled transaction (making an allowance for the transitory regulations for the years 2012 to 2013), as well as advising the taxpayer on filling in the notification correctly.
For more information please visit www.pgplaw.ru