Transfer pricing

Elimination of transfer pricing risks:

  • Identify related parties and controlled transactions;
  • Perform comparative analysis of transfer prices, including market analysis and calculation of company performance;
  • Prepare transfer pricing documentation;
  • Update transfer pricing documentation;
  • Prepare notifications on controlled transactions;
  • Prepare 3-tier documentation.
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Transfer pricing requirements in Russia

Taxpayers entering into transactions with interdependent parties must:

  • test prices to see if they are in line with market levels,
  • pay additional taxes if prices deviate from the market,
  • file documents with the tax authority to verify prices in such transactions.

Transactions with interdependent entities are equated to:

  • Transactions with related parties involving independent intermediaries with limited functionality and risks,
  • Transactions with offshore parties,
  • Foreign trade transactions with goods on the list of the Ministry of Industry and Trade (oil, ferrous and non-ferrous metals, mineral fertilizers, precious metals and stones).

Domestic transactions in Russia are subject to control if

Their annual income exceeds RUB 1,000,000,000,000 in the presence of one of the following conditions:

  • the parties to a transaction apply different rates of profits tax,
  • one of the parties to the transaction pays mineral extraction tax set in % and the subject of the transaction is a minerals extracted
  • one party to the transaction pays the unified agricultural tax
  • one of the parties to the transaction is exempt from paying income tax
  • one of the parties to the transaction is a corporate research center in Skolkovo or a project participant in accordance with Law 216-FZ applying VAT exemption
  • one of the parties to the transaction applies an investment tax deduction for profits tax, etc.

Transactions with non-residents are controlled if

Annual income on them exceeds 120,000,000 RUB

A transfer price mismatch with the market level may indicate a deliberate understatement of tax liabilities.

Where the transfer price does not correspond to the market level, taxpayers must independently adjust tax liabilities, declare such adjustments and pay additional taxes.

Starting from 2024, the amount of taxable base adjustment on transactions with foreign related parties is equated to dividends and is subject to withholding tax at the rate of 15% (secondary tax adjustment).

A tax authority may conduct an audit of transfer prices, impose additional taxes and penalties for non-payment of taxes.

Transfer pricing risk groups

  • International trade of commodities
  • Offshore transactions
  • Companies with large turnovers on transactions with related parties

Transfer pricing deadlines

  • March 28 – deadline for submission of profit tax return. Tax adjustments rectifying any discrepancy between transfer prices and market level should be specified in such tax return;
  • May 20 – deadline for submission of reports on controlled transactions;
  • June 1 – the beginning of tax audits of controlled transactions. Transfer pricing documentation justifying the prices applied in controlled transactions should be prepared and ready by that time. Companies must submit to tax authorities transfer pricing documentation within 30 days of receipt of request from tax authorities.

Penalties for failure to report

Penalty for unlawful failure to submit a Notice of Controlled Transactions or inaccurate information therein – 100,000 RUB

Penalty for failure to provide Documentation in respect of a transaction or a group of similar transactions – 500,000 RUB

The tax authorities have the right to request the Documentation both as part of a price audit and without assigning an audit. For example, Documentation may be requested in the course of a pre-audit analysis.

Penalties for understated tax

If it is found during a tax audit that the tax base was understated because transfer prices were not in line with market prices, tax authorities will then be entitled to collect unpaid taxes, as well as impose a penalty

Penalty equal to 100% of the amount of unpaid tax, but not less than RUB 500,000 – for transactions with interdependent foreign entities

Penalty equal to 40% of the amount of unpaid tax, but not less than RUB 30,000 – for domestic transactions

Preparation of 3-tiered transfer pricing documentation

Companies that are members of international companies with a total turnover of more than €750 million must provide reporting:

  • Notification of participation in an international group of companies.
  • 3 levels of reporting on transfer pricing:
    • Country report;
    • Global documentation;
    • National documentation.

More detailed information for companies that need to provide 3-level documentation.

Elimination of transfer pricing risks

Companies are not subject to fines related to domestic transactions if they submit transfer pricing documentation.

The presence of documentation substantiating the market price level in transactions with interdependent foreign companies does not protect against a fine from 2024.
We offer full support for preparation of transfer pricing documentation and for tax audit preparation.

Our transfer pricing services

  • Identification of related entities and controlled transactions;
  • Business overview and selection of appropriate transfer pricing method;
  • Comparative analysis of transfer prices, including market analysis and calculation of corporate indicators;
  • Preparation and updating of transfer pricing documentation;
  • Preparation of report on controlled transactions.

Our experts in transfer pricing

All our specialists have extensive experience in tax consultation for companies in relation to transactions with interdependent foreign companies, offshore companies, transfer pricing analysis and preparation of documentation according to international standards developed by the OECD and according to Russian tax law.

Leading positions

Konsu is one of the leading consulting companies in Russia. We have been included in the following ratings of the rating agency Expert RA:

  • Top-10 in accounting outsourcing
  • Top-10 in payroll outsourcing
  • Top-15 in financial consulting
  • Top-15 in legal consulting