New Rules on Controling Prices for Tax Purposes

Lawyers at the Tax Advice Practice at FBK Legal prepared a review of statutory changes entitled “On Amendments to the Tax Code of the Russian Federation: New Rules on Controling Prices for Tax Purposes” (in Russian).

The review analyzed the most important amendments to Federal Law No. 227-FZ passed on 18.07.2011, “On Amendments to Certain Legislative Acts of the Russian Federation To Improve the Principles of Determining Prices for Tax Purposes.”

As our lawyers noted, the new Law results in significant changes to the rules on controling prices for tax purposes.

In particular, the Law expands the list of directly established grounds, as laid down by legislation, for recognizing mutually dependent persons.

At the same time, the rule is retained according to which the courts may declare persons mutually dependent on other grounds provided that the particular relationship between the parties could have an impact on the conditions and the results of the transactions carried out by these persons.

The Law also establishes a list of controled transactions, introduces the obligation of taxpayers to notify the Federal Tax Service of Russia about the completion of transactions controled by them, and provides for the obligation of taxpayers to submit upon request of the Federal Tax Service of Russia documentation regarding the controled transactions mentioned in the request.

In addition, the Act expanded the list of methods used when carrying out the controls.

FBK’s lawyers noted that the positive amendments from the standpoint of the taxpayer included a judicial procedure for collecting tax from companies and individual entrepreneurs which has accrued as a result of controling prices, the possibility of symmetrical adjustments, and the possibility of concluding an agreement on pricing.

In general, however, in the opinion of the review’s authors, the new Law is rather negative for taxpayers. “The presence in the Law of many ambiguous provisions gives tax authorities much scope for abuse,” according to our lawyers.

The law came into effect on January 1 2012 (except for certain provisions governed by a special procedure).

FBK is a partner of the Transfer Pricing Associates Group, one of the leading international expert associations on transfer pricing, taxation and customs.

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