Submission of a country-by-country report by a Russian organization to the Federal Tax Service of the Russian Federation

The country-by-country report is a part of the three-tiered transfer pricing documentation of an international group of companies (MNE Group).

Recall that an MNE Group is a collection of organizations and/or foreign structures without legal entity formation, connected through capital participation and/or control, for which consolidated financial statements are prepared, and which includes at least one organization – a resident of the Russian Federation or a non-resident of the Russian Federation subject to taxation in Russia through a permanent establishment, as well as at least one organization – a non-resident of the Russian Federation or a resident of the Russian Federation subject to taxation in a foreign state through a permanent establishment.

Participants of the MNE Group must provide transfer pricing documentation if the income (revenue) of the MNE Group, according to consolidated financial statements for the preceding financial year, amounted to:

• Over 50 billion rubles if the parent company of the group is a tax resident of Russia;
• At least the amount established by the legislation of the foreign state or territory to trigger the obligation to provide a country-by-country report, if the parent company of the group is a tax resident of that foreign state or territory.

The country-by-country report is to be submitted in the prescribed electronic format only.

The country-by-country report is to be submitted by the parent company or an authorized member of the MNE Group, being either a Russian organization or a foreign organization (a foreign structure without legal entity formation) voluntarily recognizing itself as a tax resident of the Russian Federation, no later than twelve months from the end of the reporting period.

Other participants of the MNE Group, recognized as taxpayers according to the Tax Code of the Russian Federation, submit the country-by-country report upon the request of the tax authority within the period specified in the request, but not less than three months from the day of receiving the request for report submission. Participants of the MNE Group – foreign organizations receiving only the income specified in Article 309 of the Tax Code of the Russian Federation – are not required to submit a country-by-country report.

The tax authority sends a request for the submission of the country-by-country report to a participant of the MNE Group in cases of:

• Receipt of information from competent authorities of foreign states (territories) about the non-compliance of the parent company or an authorized member of the MNE Group with the obligation to provide a country-by-country report;
• Inclusion of a foreign state (territory) in the list of states (territories) systematically failing to fulfill obligations regarding the exchange of country-by-country reports.

The list of states (territories) systematically failing to fulfill obligations regarding the exchange of country-by-country reports is not approved by the Federal Tax Service of Russia. By the order of the Federal Tax Service of Russia dated 20.12.2022 No. ED-7-17/1226@, the list of foreign states (territories) with competent authorities for automatic exchange of country-by-country reports has been approved. This list does not include, among others, Canada, the United States, Ukraine, the Swiss Confederation, the United Kingdom of Great Britain and Northern Ireland. Russian participants of the MNE Group, whose parent company or authorized member is a resident of states not included in the mentioned list, are obliged to submit a country-by-country report upon the request of the Federal Tax Service of Russia.

For the violation of the deadline for submitting the report or for providing inaccurate information in it, a fine of 100,000 rubles is established.

We recommend that Russian organizations participating in the MNE Group obtain confirmation from the group that the parent company or authorized member of the MNE Group has fulfilled the obligation to submit a country-by-country report and also monitor changes in the list of foreign states (territories) with competent authorities that the Federal Tax Service of Russia conducts automatic exchange of country-by-country reports with. This will allow for proactive preparation in case of receiving a request from the tax authority for submitting the country-by-country report.