Review of the Federal law on amendments to the Tax code of the Russian Federation concerning transfer pricing
From 01 January 2012 came into force the Federal law from July 18, 2011 No. 227-FZ "On amendments to certain legislative acts of the Russian Federation in connection with improving the principles for determining prices for tax purposes".
This law defines transfer pricing rules, i.e. rules that oblige to apply market prices to transactions with related parties for tax purposes. The purpose of these rules is to prevent tax losses in connection with the redistribution of income and expenses between the parties to the transaction, which are interdependent persons, in order to optimize taxation.
Which transactions are subject to control:
1) transactions between related parties:
all foreign trade transactions without any restrictions;
transactions between persons registered (residents who are tax residents) in the Russian Federation in the presence of at least one of the following circumstances:
the amount of income from transactions (the amount of transaction prices) between these persons for the corresponding calendar year exceeds 1 billion rubles.;
the amount of income for the corresponding calendar year exceeds 100 million rubles, if at least one of the parties to the transaction is a taxpayer applying a single agricultural tax or a single tax on imputed income;
the amount of income for the respective calendar year exceeds RUB 60 million in the following transactions:
- one of the parties to the transaction is the payer of the mineral extraction tax (met), and the subject of the transaction is the goods taxed by the met at an ad valorem rate;
- at least one of the parties to the transaction is exempt from income tax or applies a tax rate of 0%;
- at least one of the parties to the transaction is a resident of the special economic zone, the tax regime in which provides special benefits for income tax (applicable from 1 January 2014).);
2) transactions equal to transactions between related parties:
foreign trade transactions in respect of oil and goods produced from oil, ferrous metals, non-ferrous metals, mineral fertilizers, precious metals and stones, provided that the amount of income from such transactions made with one person for the corresponding calendar year exceeds 60 million rubles.;
transactions with residents of jurisdictions included by the Ministry of Finance in the List of States and territories that are offshore zones, provided that the amount of income from such transactions made with one person for the corresponding calendar year exceeds 60 million rubles.;
a set of transactions for the sale (resale) of goods (performance of works, provision of services), if there are independent "intermediate" companies in the chain of transactions that do not perform any additional functions in this chain, except for the organization of the sale (resale) of goods (performance of works, provision of services), which do not assume any risks and do not use any assets.
The following transactions are not recognized as controlled:
1) the parties of which are members of the same consolidated group of taxpayers formed in accordance with the law;
2) the parties of which are persons who simultaneously meet the following requirements::
the specified persons are registered in one subject of the Russian Federation;
these persons do not have separate divisions in the territories of other subjects of the Russian Federation, as well as outside the Russian Federation;
these persons do not pay corporate income tax to the budgets of other subjects of the Russian Federation;
these persons do not have losses (including losses of previous periods carried over to future tax periods) taken in the calculation of corporate income tax.
The list of related parties has been expanded:
Interdependent are recognized:
1) organizations if one organization directly and (or) indirectly participates in another organization and the share of such participation is more than 25 percent;
2) an individual and an organization if such a natural person directly and (or) indirectly participates in such an organization and the share of such participation is more than 25 percent;
3) organizations if the same person directly and (or) indirectly participates in these organizations and the share of such participation in each organization is more than 25 percent;
4) the organization and the person (including the natural person together with its interdependent persons specified in subparagraph 11) having powers on appointment (election) of sole Executive body of this organization or on appointment (election) not less than 50 percent of structure of collective Executive body or Board of Directors (Supervisory Board) of this organization;
5) organizations, whose sole Executive bodies or at least 50 percent of the composition of the collegial Executive body or the Board of Directors (Supervisory Board) are appointed or elected by the decision of the same person (an individual together with its related persons specified in sub-paragraph 11 of this paragraph);
6) organizations in which more than 50 percent of the composition of the collegial Executive body or the Board of Directors (Supervisory Board) are the same individuals together with related persons specified in sub-paragraph 11 of this paragraph;
7) the organization and the person exercising the powers of its sole Executive body;
8) organizations in which the powers of the sole Executive body are exercised by the same person;
9) organizations and (or) individuals if the share of direct participation of each previous person in each subsequent organization is more than 50 percent;
10) natural persons if one natural person is subject to another natural person by official position;
11) an individual, his spouse, parents (including adoptive parents), children (including adopted), full and half brothers and sisters, guardian (Trustee) and ward.
The list of methods for determining the correspondence of the transaction price to the market price for tax purposes has been expanded:
comparable market price method;
price method of subsequent sale;
the comparable profit method;
the profit split method.
Under the new rules, the burden of proving the validity of the transaction prices applied by the parties for tax purposes is shifted from the tax authority to the taxpayer.
Taxpayers are obliged to notify the tax authorities of controlled transactions made by them in the calendar year not later than may 20 of the year following the calendar year in which the controlled transactions are made to the tax authority at the place of their location.
In order to monitor compliance with this law, a separate structure has been established in the Central office of the Federal tax service - the transfer pricing and international cooperation Department (hereinafter - the transfer pricing Department).
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