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Controlled Transactions: More Information Required
The Russian Federation Federal Tax Service has approved documents which taxpayers will need in order to submit notifications of transactions. These documents are subject to a special control under the transfer pricing laws. Taxand Russia discusses these changes and the impact they may have on multinationals.
In line with article 105.16(2) of the Russian Tax Code, taxpayers that perform controlled transactions under transfer pricing laws must submit to the tax authorities the data concerning those 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 no later than 20/05/2013.
In connection with the above, the Federal Tax Service issued Order No. ??V-7-13/524@, dated 27/07/2012, where it approved the form for the notification of controlled transactions, the procedure for the taxpayer to fill in the notification and the electronic format and filing procedure for notifying controlled transactions in electronic form.
Implications for the taxpayers
The scope of data that taxpayers are required to disclose under the above Order, regarding controlled transactions, has been significantly extended, 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 to not only give a full description of the subject matter of the transaction (eg 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 required is for transactions with goods, whereby -the taxpayer is required in addition to inform the tax authority in the country of origin, shipping (loading) point, delivery (discharging) point, and the terms of delivery, if delivered under Incoterms.
Submitting a notification of controlled transactions is, in fact, a preliminary stage of price control. To benefit, businesses should be prepared to provide additional detailed information as required in the controlled transaction notification form. The information provided 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.
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