Russia

  1. In your jurisdiction, what are the legal bases for eliminating double taxation further to a transfer pricing reassessment (European Arbitration Convention, mutual agreement procedures provided for by tax treaties)? In addition to the procedures set forth by such tax treaties, is there any other (formal or informal) domestic procedure in your jurisdiction?
  2. In addition – as the case may be – to the European Arbitration Convention, did your jurisdiction sign tax treaties with other States including an arbitration procedure? If yes, can you give the list of such States?
  3. In your experience, in your jurisdiction, how long does it take generally to eliminate the double taxation under the European Arbitration Convention and/or mutual agreement procedures set forth by tax treaties (and/or the domestic procedure if it exists)?
  4. In your jurisdiction, what are the starting point and time limit to initiate a procedure to eliminate double taxation resulting from a transfer pricing reassessment?
  5. If a reassessment is issued by your tax authorities, which State must receive the application for the international procedure to eliminate double taxation 1 The terms "international procedure to eliminate double taxation" mean the European Arbitration Convention or a mutual agreement procedure set forth by a tax treaty.  (your State? the other State concerned? both States?)
  6. What are the formal conditions to initiate an international procedure to eliminate double taxation? Is there a list of documents to provide? To which department of the tax authorities (name, address) must the request be sent?
  7. In which cases would the competent authority of your jurisdiction refuse to engage/participate to the international procedure to eliminate double taxation?
  8. Is tax collection suspended during the procedure?
  9. Assuming the procedure results in an agreement on a way to cancel double taxation, how is generally such agreement implemented in your jurisdiction?
  10. In your jurisdiction, is it possible to engage concomitantly an international procedure to eliminate double taxation and litigation in front of courts? If yes, is it necessary at some stage to abandon the litigation in order to conclude/finalize the international procedure?

Russian Transfer Pricing (hereinafter “TP”) legislation contains restrictions regarding implementation of TP adjustments in Russia. More specifically, TP adjustments leading to decrease of tax liabilities in Russia are prohibited under the Russian law.

Implementation of symmetrical TP adjustments following to the related counterparty’s taxable base reassessment is allowed solely in case when both of the parties to the transaction are Russian companies (i.e. for the domestic intragroup transactions).

This being said, Russian domestic TP legislation does not provide for the mechanisms allowing to adjust Russian taxpayers’ taxable base following to the transfer pricing reassessment performed abroad in relation to their foreign counterparties.

The general mechanism of double taxation elimination is provided in the Double Tax Treaties (hereinafter “DTTs”) entered into by Russian Federation (e.g. in Articles 9, 23 and 25 of Russia-France DTT). However, the mechanism of mutual agreement procedures prescribed by the DTTs is used in Russia on a very exceptional basis. To the best of our knowledge, no such cases concerning the transfer pricing reassessment exist to date.

In addition, implementation of such mutual agreement procedures is to a very little extent regulated by Russian legislation in force, thus the issues regarding the term and course of such procedures are decided on a case-by-case basis.

2. In addition – as the case may be – to the European Arbitration Convention, did your jurisdiction sign tax treaties with other States including an arbitration procedure? If yes, can you give the list of such States?

Russia is not a party to any DTT including arbitration provisions.

3. In your experience, in your jurisdiction, how long does it take generally to eliminate the double taxation under the European Arbitration Convention and/or mutual agreement procedures set forth by tax treaties (and/or the domestic procedure if it exists)?

Russian tax legislation does not provide for any prescribed terms of the mutual agreement procedure. Since, as indicated above, such procedures are rarely entered into by Russian tax authorities, it is difficult to define the term of such procedure in practice.

4. In your jurisdiction, what are the starting point and time limit to initiate a procedure to eliminate double taxation resulting from a transfer pricing reassessment?

These issues are regulated by the relevant DTTs with the states concerned. For example, in accordance with Russia-France DTT the application is to be filed within three years from the first notification of the action resulting in the double taxation.

Russian legislation does not provide for any specific regulations concerning the moment when the procedure should be initiated, apart from the terms prescribed by the relevant DTTs.

5. If a reassessment is issued by your tax authorities, which State must receive the application for the international procedure to eliminate double taxation 1 The terms "international procedure to eliminate double taxation" mean the European Arbitration Convention or a mutual agreement procedure set forth by a tax treaty.  (your State? the other State concerned? both States?)

The application is received by the state of residency of the affected party. In practice, the mutual agreement procedures initiated within the foreign tax authorities are usually more successful in Russia.

6. What are the formal conditions to initiate an international procedure to eliminate double taxation? Is there a list of documents to provide? To which department of the tax authorities (name, address) must the request be sent?

Russian tax legislation does not provide for strict requirements concerning the implementation of the mutual agreement procedure.

The competent authority which is responsible for the mutual agreement procedure cases is the Ministry of Finance of the Russian Federation.

Persons who may present their cases to the competent authority for initiating the mutual agreement procedure are:

  • Russian tax residents;
  • Russian citizens.

The application is presented as a personal written request in a free form.

The terms of application are provided in the respective DTTs.

There are no particular formal requirements concerning the documentation that need to be presented by the party concerned to justify of its position. However, Russian tax authorities would expect the appropriate relevant documentation to be provided (copies of contracts and other documents related to the issue being object of the mutual assistance procedure, correspondence with the Russian tax authorities and tax authorities of other states concerned, etc.).

7. In which cases would the competent authority of your jurisdiction refuse to engage/participate to the international procedure to eliminate double taxation?

Russian tax legislation contains neither provisions binding Russian tax authorities to engage the mutual assistance procedure, nor any clear guidance on grounds at which Russian tax authorities may refuse to initiate such procedure. Thus the issue in question is a grey area from Russian law perspective, which leaves to the discretion of the tax authorities whether or not to initiate the mutual agreement procedure.

Keeping in mind that mutual agreement procedure is usually initiated upon written application of the taxpayer, we may reasonably suppose it is unlikely that the competent authority would accept to initiate such a procedure should the taxpayer fail to provide necessary evidence and (or) documents justifying its position.

In practice Russian tax authorities usually get involved in the mutual procedures initiated by other contracting states.

8. Is tax collection suspended during the procedure?

Tax collection is not suspended.

9. Assuming the procedure results in an agreement on a way to cancel double taxation, how is generally such agreement implemented in your jurisdiction?

Russian tax legislation remains silent on the way the results of the mutual agreement procedure should be formalized in Russia, which leaves much to the discretion of Russian tax authorities involved in such procedure. In practice Russian Ministry of Finance usually issues the letter formalizing the results of the mutual agreement procedure which becomes binding for the tax authorities.

In case Russian tax authorities would refuse to implement the results of the mutual agreement procedure, the taxpayer concerned should theoretically seek remedy in court. However, we are unaware of such cases in practice.

10. In your jurisdiction, is it possible to engage concomitantly an international procedure to eliminate double taxation and litigation in front of courts? If yes, is it necessary at some stage to abandon the litigation in order to conclude/finalize the international procedure?

No specific regulations regarding this issue exist in Russia.

Authors

Tissot Dominique
Dominique Tissot
Head of Tax | Head of Energy Efficiency & Renewables