a) Which transactions must be documented (all transactions with associated enterprises, or only those which exceed a particular threshold)?
As a general rule, all controlled transactions are subject to the transfer pricing documentation requirement. However, special transitional rules apply to the financial years 2012 and 2013. In respect of 2012, the requirement applies only to controlled transactions entered into between given related parties where the total amount of income / expense derived by the Russian taxpayer under those transactions exceeds RUB 100 million (EUR 2.5 million). In 2013, the threshold will be decreased to RUB 80 million (EUR 2 million). As from 2014, turnover limits will cease to apply, and, therefore, all controlled transactions will need to be documented.
b) What is the definition of “associated enterprises” for the purposes of this requirement?
In Russian law there is a relatively extensive list of “related parties”. The general definition is that parties are related where the particular features of their relationship are such that they may influence the terms and / or effects of the transactions they enter into, and / or the economic outcome of their activities or those of persons they represent. The term “influence” includes, in this respect, the ability to influence through the participation of one party in the charter capital of the other, or by virtue of an agreement concluded between the parties, or any other circumstances.
2012 threshold; will be reduced to RUB 2 billion (EUR 50 million) in 2013 and RUB 1 billion (EUR 25 million) from 2014.
More particularly, the list of related parties includes:
- Two companies, where one directly or indirectly holds more than 25% of the charter capital of the other;
- A company and an individual who directly or indirectly holds more than 25% of its charter capital;
- Two companies with the same parent company, where the parent has more than a 25% shareholding (direct or indirect) in the charter capitals of each one;
- A company and its CEO or director, or companies with the same CEO;
- Successive chains of individuals / companies with more than 50% participation in the capital of the subsidiary, etc.
c) For EU countries, is the content of the documentation similar to that described in the EU Code of Conduct on transfer pricing documentation for associated enterprises (“EU TPD”)? If not, are taxpayers entitled to choose between the local requirements and the EU TPD?
d) Do taxpayers which are not established in your jurisdiction need to undertake to provide any specific information upon request? Can your tax authorities require the taxpayer in your jurisdiction to provide information which is located in another state?
According to the law, foreign companies are not liable to provide any information to Russian tax authorities with respect to transfer pricing matters. However, tax authorities can request information held by foreign companies from the Russian taxpayer and / or from the foreign tax authorities, pursuant to an official procedure.
e) If comparable studies are to be provided, do the tax authorities generally accept regional benchmark studies (e.g. pan-European benchmark studies)?
For the purposes of benchmark analysis, Russian legislation recognises primary and secondary sources of information. Primary sources include “official” data (information on prices and quotations from world trade exchanges for goods traded on such exchanges, customs statistics, etc.), and accounting and statistical data reported by Russian companies. Data reported by foreign companies is treated as a secondary information source, however, and may be used for the purposes of benchmarking analysis only where no information on Russian companies is available, or such information is insufficient.
The effect of the above is that the Russian tax authorities will not accept regional benchmark studies unless the taxpayer proves that no information is available from “official” sources or Russian companies, or that such information is irrelevant.
f) What language(s) are to be used by taxpayers in submitting the transfer pricing documentation?
The documents provided to the Russian tax authorities should normally be in Russian. Accordingly, if the original documents are in another language, the tax authorities can request a translation.