Do the new TP rules affect my business?
When forming and substantiating intra-group prices, KPMG professionals apply a comprehensive approach on transfer pricing issues, considering the provisions of effective Russian tax legislation, planned amendments, law enforcement practice and international transfer pricing principles. In this way we can help clients attain their goals.
Yes, if you have any cross-border transactions between related parties and one of them is a Russian resident (is registered in the Russian Federation). Russian companies’ transactions involving commodities quoted on exchanges and transactions with legal entities residing in “black-listed” offshore jurisdictions are also subject to TP audits.
In addition, the tax authorities can audit domestic Russian transactions between related parties.
Whether or not these transactions are subject to TP audit depends on various thresholds and exemptions. Therefore, the applicability of the TP rules must be determined case-by-case.
What should a company with controlled transactions do to comply?
Companies with controlled transactions must:
- Notify the Russian tax authorities of controlled transactions by 20 May of the year after the year when the transactions occurred;
- Provide TP documentation (based on the new requirements) within 30 days after a request by the tax authorities. The TP documentation may be requested by the tax authorities not earlier than 1 June of the year after the year when the transactions occurred.
How can KPMG help affected companies reduce the cost of complying with the new TP rules?
To reduce the potential cost of the new TP rules (including expenses for preparing or amending TP documentation and for transfer pricing specialists; and assessments for additional taxes and penalties), companies should:
- Perform TP diagnostics timely (identify and evaluate TP risks, assess whether transfer prices are at an arm’s length level);
- Develop/adjust a transfer pricing policy consistent with the new TP rules;
- Mitigate identified TP risks (e.g. change the structure of operations, discuss issues with relevant parties and amend agreements);
- Prepare/adapt TP documentation to support the chosen TP method and prices used; conduct benchmark studies to determine the arm’s length level of prices/ profitability for controlled transactions; develop a system for setting and monitoring intra-group prices that reduces TP risks and automates future data collection and reporting;
- Consider concluding an advance pricing agreement with the tax authorities.
KPMG can assist your company with each of these steps.
Why choose KPMG?
KPMG has the largest TP practice in Russia. To perform TP projects, transfer pricing specialists from KPMG’s Moscow office are involved as well as specialists from KPMG’s offices in St. Petersburg, Nizhny Novgorod and Ekaterinburg. Involving these offices allows us to reduce the overall cost of KPMG’s TP services.
KPMG professionals apply a comprehensive approach to TP projects: our TP professionals work closely with other KPMG professionals providing corporate tax, VAT, customs, business advisory and legal services.
KPMG offers its clients various services ranging from methodological support for TP issues to preparation of relevant TP documentation for filing with the tax authorities and implementation of a system that monitors internal transfer prices.
KPMG also helps negotiate advance transfer pricing agreements with the tax authorities and understands the most recent trends in transfer pricing as well as the approaches used by the tax authorities.