In April 2016, the Russian Federal Tax Service published its first set of transfer pricing audit results in relation to the fiscal year 2012.
By virtue of the Russian transfer pricing audit report, the average of tax assessments was around RUB140million (USD2million). The local tax authorities are allowed to adjust prices within intra-group transactions when non-justifiable tax benefit is revealed, and this ruling has resulted into RUB1.2billion (USD19million) of tax assessments. Moreover, the tax authority have already successfully built up tax information exchange networks with foreign tax authorities. Given this trend, more and more taxpayers were carrying out voluntary transfer pricing adjustments accumulating to a total of nearly RUB30billion (USD460million).
Essentially, the Russian tax authorities are combating the following couple of matters:-
- More focused on export transactions which are the most important element of the Russian Budget;
- Special attention has been paid to the transactions with purchasers situated in low-tax jurisdictions (including BVI, Cyprus, Jersey, Switzerland, etc.); and
- Mostly covered natural resource industries including oil & gas and metals & mining.
In view of the above, it is obvious that the Russian tax authority is becoming more active in the transfer pricing arena and endeavouring to widen the scope of their transfer pricing audits in view to let more taxpayers get caught. According to the latest news from the Ministry of Finance, Russia has already commenced their transfer pricing audits for the fiscal year 2013.
It is advisable to foreign investors that special caution should be taken when dealing with their intra-group transactions to and from Russia in order to control their transfer pricing risk exposures.
For enquiry, please feel free to contact us. We are always there to help solve your international tax issues.