Many years of experience in defending our clients' business interests in disputes with the tax authorities, dozens of court cases won involving transfer pricing, tried and tested procedural and trial techniques for proving compliance with the market price level.
Understanding the approach of Russia's regulatory authorities to the interpretation of tax legislation norms, the discovery of documents and the rationale for the prices applied.
Making recommendations which take into account the legal reasoning of Russia's Constitutional Court and Supreme Arbitration Court, with the greatest likelihood of retaining their validity primarily on issues not directly regulated by new legislation on transfer pricing.
Positive experience in implementing projects under new rules on transfer pricing for leading Russian companies (a major chemical holding; 3 key production units, a refinery and an offshore division of a major player in the fuel and energy sector and many others), including additional procedures such as:
We bring together experts with different specializations in one practice: FBK Legal's trial lawyers, the FBK Group's economists and consultants on automation.
How we ensure compliance with the laws on transfer pricing:
Diagnosis: How do the new price control rules affect your business?
Questions that must be answered by every taxpayer:
1. Are they are in accordance with the applicable pricing policy?
2. What is the size of the potential tax risks? How is it possible to change the effective tax rate?
3. How will the new rules affect the redistribution of profit centers within the company?
4. How will the new rules affect the company’s reporting?
5. Is it necessary to change the structure of economic relations and conditions of contracts?
6. Is there a need to change the management and tax accounting?
7. Is the transfer pricing policy in accordance with the customs and anti-trust laws?
8. Does the company have sufficient human resources?
Measures implemented at this stage
- Inventory transactions (for the previous fiscal period, as well as for those planned in the future), the identification of potentially controlled transactions.
- Analysing the current pricing system.
- Determining the market prices of transactions for tax purposes.
- Identifying tax risks and the evaluation of possible changes in the effective tax rate.
- Identifying gaps in the structuring of economic relations and contract formation.
- Conducting a functional analysis.
- Evaluating management and tax accounting to ensure compliance with the law on transfer pricing.
- Examining the possibility / feasibility of a pricing agreement.
- Examining the possibility / feasibility of combining interdependent companies with direct or indirect participation of at least 90% in the consolidated group of at taxpayers.
- Evaluating the adequacy of the company’s internal resources and business processes in order to meet legal requirements.
Regulation: What documents does the company need to develop to make sure tax risks are minimal and to protect itself?
1. Methods of determining the inter-dependent parties and monitoring changes in the list.
2. Methods of identifying and organising the account of controlled transactions.
3. Calculating transfer prices using various methods, including:
- algorithms of financial settlements;
- adjustment of the tax base when there are differences between actual and market prices.
- graphic depictions of economic relations;
- instructions for the registration, collection and systematisation of supporting documentation;
- submission of tax authority notices and documentation proving use of applied rates;
- orders, job descriptions, regulations;
- standard forms (draft pricing agreements, contracts, etc.).
Implementation and automation of business processes
1. Implementation of documentation developed as a result of Step number 2.
2. Further development of the current ERP system.
3. Creation of a unified knowledge base on transfer pricing for employees.
4. Implementation of a system for monitoring market prices.
5. Organisation of internal controls.
Current work, internal controls: what to do during the year?
1. Identify and keep records of controlled and potentially controlled transactions.
2. Formulate contract terms taking into account the transfer pricing policy.
3. Monitor changes in legislation and clarify who the relevant authorities are.
4. Assess tax risks and the effectiveness of the transfer pricing policy.
5. Ensure the timely introduction of changes and amendments to the governing documents.
Special audit of prices at the end of the calendar year
1. Elicitation of controlled transactions based on actually existing relations (in fact).
2. Verification of compliance of the actual prices applied with the selected pricing methodology.
3. Verification of appropriate documentation concerning choice of methodology for determining market prices.
4. Verification of appropriate documented confirmation of compliance of the prices of controlled transactions with market prices.
5. Deciding if it is necessary to adjust the tax basis.
“Declaration” of controlled transactions
1. Preparation and submission of information regarding controlled transactions to the tax authorities.
Tax control. Protection in tax disputes
1. Representing the interests of the taxpayer in the course of control measures.
2. Providing explanations and additional documents at the request of the tax authorities.
3. Protection of the company’s interests in disputes with tax authorities via legal appeals.
- Many years of experience in protecting business interests in disputes with tax authorities, winning dozens of cases on transfer pricing by proving compliance with market rates.
- Understanding how the Russian regulatory authorities interpret tax legislation and how they determine market prices. Submission of documents.
- Providing recommendations on matters not directly regulated by the new transfer pricing law based on the legal position of the Constitutional Court and the Supreme Arbitration Court of the Russian Federation.
- Positive experience in implementing projects under the new rules for leading companies I the Russian economy (a major chemical holding company, three key upstream divisions and one refining and one offshore division of the largest player in the energy industry, etc.), including, in addition, the following:
- calculating the economic benefits due to modifying the supply of material and technical resources;
- making recommendations for the transition to a new organisational structure;
- provision of advice on the formulation of tax accounting.
- we unite specialists with different areas of expertise under one practice: trial lawyers from FBK Law and economists and consultants on automation from the FBK Group.