New Law to Simplify the Exchange of International Tax Information

The Russian Ministry of Finance has drafted a bill intended to build a legal base for international automatic exchange of tax information and information on financial statements. Tax authorities will oversee this new system.

The text of this bill has been published on the Federal Internet portal for draft laws and regulations and amends Part One of the Russian Tax Code setting out a procedure for exchanging international financial data.

What is the Bill Purpose?

The purpose of the bill is to fulfill the international obligations to automatically exchange information on financial statements and ensure that international groups apply transfer pricing rules.

The Ministry of Finance explained that the bill had been drafted with a view to to combat tax evasion through offshore and other aggressive tax planning schemes.

How Will the New Law Work?

According to the proposed amendments, the Federal Tax Service of Russia (FTS) will oversee the collection of information from Russian taxpayers about their participation in any international group of companies, and tax authorities will compare the data received with the information from tax authorities in other countries. Russian taxpayers will, in turn, be required to submit to tax authorities an electronic notice of participation in an international group of companies together with the financial statements of such group. The FTS will approve a list of documents required for such notification and instructions for their completion at a later date.

What Information about Taxpayers Will Be Collected by the FTS?

  1. Document confirming a taxpayer’s status as a tax resident of Russia;
  2. Notice issued by a foreign state to confirm the tax audits of Russian taxpayers;
  3. A list of foreign countries and territories with which tax information is automatically exchanged;
  4. Country report (a document confirming participation in an international group);
  5. Information on share capital, staff headcount, etc.;
  6. A list of foreign countries and territories that systematically fail to fulfill the obligation to exchange country reports automatically;
  7. A list of foreign states to which country reports will be sent;
  8. The procedure for sending and receiving country reports, as well as technical requirements for protection of information transmitted.

The form, format and procedure for submitting the above documents will be approved by regulations issued by the FTS. The FTS will most probably begin receiving information from foreign countries as per the new rules from 2018 onwards.

The bill is currently at the stage of public debate which should end by October 06, 2016. An independent anti-corruption expert examination will then be conducted to assess the regulatory impact of the bill. 

Konsu expert opinion

Pavel Antonov, Head of Legal:

“The new law will definitely simplify the exchange of tax information among Russian and foreign tax authorities, especially those who have not yet signed any double taxation treaties. If the bill is passed into a law, Russian tax offices will also be able to set up automatic exchange of information with those jurisdictions to which they had no access before, and tax audits could be conducted in two or more countries at once. This should also result in closer cooperation among tax lawyers based in different jurisdictions.”