Transfer Pricing in Russia
Correctly map controllable transactions
If a foreign company enters the Russian market, for example through its own subsidiary, it will sooner or later have to deal with the subject of transfer pricing and the subsequent preparation and documentation of transfer pricing reports.
Cross-border transactions and related transactions must be conducted in accordance with international guidelines and local Russian requirements. Transfer pricing guidelines set in at this point and order these transactions sustainably.
Legal regulations and requirements with regard to the calculation, amount, reporting and documentation of these transfer prices provide a certain framework to ensure that profits are taxed pro rata in the country in which they were generated.
Who is affected by transfer pricing?
Transfer pricing applies in particular to so-called controlled transactions. Controlled transactions are those transactions involving the sale of goods or the provision of services between related parties.
Such transactions are usually either:
Transactions with foreign affiliated persons or companies, such as parent or sister companies - irrespective of turnover
Transactions between related persons in the Russian domestic market - from a turnover of more than 1 billion rubles
Transactions between related parties or companies which are carried out indirectly by means of a third, intermediary company.
When are two companies considered to be affiliated?
According to the law, there are a total of eleven different constellations according to which two companies are classified as affiliated companies. There is usually talk of affiliated companies when:
A more than 25% direct or indirect investment between two companies exists
A natural person directly or indirectly holds more than 25% of the shares in two companies
Two companies have the same executive body, i. e. the same general director
More than 50% of the Supervisory Board (Council of Directors) consists of the same natural persons or more than 50% of the respective Supervisory Board of two companies has been appointed or elected by the same person.
The Russian tax authorities check both the degree of ties between two companies and the prices estimated for the provision of services. These prices must be market-compliant, meaning that transfer prices of controllable transactions must be within a certain price corridor and may only exceed market prices by a certain percentage determined individually by the Russian authorities. A so-called market price is based on the amount of the sum that would be required from other providers in a market for the provision of a comparable service. Internal or external transfer pricing can be calculated internally or externally using five different calculation methods.
Price comparison method
Profit distribution method
Resale price method
Controlled transactions must not only be reported separately in Russian accounting, but also require appropriate reporting and documentation. The relevant reports must be submitted annually to the responsible Russian tax authorities not later than 20 May of each year for the previous year.
Our services in the area of reporting and documentation of transfer pricing in Russia:
We would be pleased to support you with our expertise and knowledge in the preparation of transfer pricing reports and related documentation in Russia.
Do you have any questions regarding transfer pricing reports and their documentation in Russia? Do not hesitate and contact us. Please feel free to send us an e-mail, give us a call or make an appointment at one of our offices in Moscow, St. Petersburg or Vienna.
Further information on transfer pricing reporting in Russia as well as on numerous other topics relating to the Russian economy can be found in the publications or on our Russia Economy blog.
Business Set-Up, accounting and reporting in Russia
Ausserer & Consultants is an international tax and accounting company based in Moscow, St. Petersburg and Vienna. Since our foundation in 2012, we have made it our mission to support small and medium-sized companies in local accounting including tax returns, reporting, business Set-Up and expansion in Russia. We also advise on individual questions regarding the Russian market and support our clients at all times.