The clarification is provided in Letter №OA-4-13/85 (12 January 2012).
Under Russia’s Federal Law №227-FZ (18 July 2011), a Russian company—if defined as a “major taxpayer” under Russian law—has a right to apply to the Russian federal tax service for the purpose of concluding an APA with respect to “controlled transactions.”
According to the clarification provided in Letter №OA-4-13/85 (12 January 2012), the Russian federal tax services will follow generally accepted international transfer pricing principles concerning APAs—in particular the measures contained in OECD’s Transfer Pricing Guidelines for Multinational Enterprises and Tax Administration.
Preliminary discussion
For purposes of determining the reasonability of whether an APA may be concluded, taxpayers have a right to seek from the Russian federal tax service a preliminary discussion of the main provisions of the pending APA request. As a result of this preliminary discussion, the federal tax service can inform taxpayers about its position regarding the reasonability of conclusion of an APA as well as about the tax authority’s estimated timeframe for the APA procedure.
Additionally, the January 2012 letter includes contact details and detailed procedures that are to be followed when organizing the preliminary discussion.
Forms for use in APAs
The Russian federal tax service has official forms to be used for the APA application and for an application to revise a draft APA (i.e., to be used in instances when the analysis and documents initially provided by the taxpayer are to be revised at the request of the tax authorities). These forms are contained in Appendix 2 and Appendix 3 of Letter №OA-4-13/85.
Moreover, Appendix 3 contains the suggested structure of an APA, as follows:
- Parties to the APA
- Term of its validity
- Transactions which are subject to the APA
- Methodology for the calculation of prices for tax / transfer pricing purposes
- Additional provisions and important assumptions
- Monitoring of the APA’s conditions (for fulfillment of the APA)
- Mechanism to determine compliance with APA’s conditions
- Conditions for renewal of the APA
- Termination of the APA
- Confidentiality of the APA’s provisions
- Contact information
Concerning bilateral APAs, the Russian federal tax service recommends that the foreign party (to the controlled transactions) simultaneously initiate APA request procedures with the respective foreign tax authorities.
The Russian APA rules also recommend that taxpayers attach to their application the following additional information:
- A description of the main features of the taxpayer’s activity, to allow the tax authorities an understanding of the taxpayer’s pricing method
- A description of main characteristics of the companies involved in the controlled transactions
- A functional analysis
- A choice of transfer pricing pricing method and related sources of information
For more information, contact a tax professional with KPMG’s Global Transfer Pricing Services group in Russia:
Konstantin Karpushin
+7 495 937 4444
Elena Ivannikova
+7 495 937 4477