New transfer pricing rules. Features of transfer pricing What situation are the transfer pricing rules trying to catch?

Controlled transactions are transactions between related parties, as well as those equivalent to them (). Tax authorities have the right to check the prices used in controlled transactions for compliance with market prices (), and if the parties have not set market prices, assess additional taxes. Let's consider how, using the opportunities provided by law, a taxpayer can reduce the risks associated with the application of transfer pricing rules.

For taxpayers, the application of transfer pricing rules provided for in this section (hereinafter referred to as the Code) is quite burdensome. After all, companies that carry out transactions between related parties are required to submit a notification of controlled transactions, as well as prepare documentation for tax control purposes. And this requires considerable labor and financial resources from these companies. It is not surprising that some of them are trying to avoid the use of controlled transactions, for example, through “escape” from the interdependence of individuals.

For this purpose, a group of companies - taxpayers actually connected with each other - creates the appearance of a lack of interdependence (the concept of interdependent persons and the criteria for interdependence are defined in). For example, by avoiding the participation of business owners and managers in the management and ownership of other companies in the group, they are trying to formally avoid interdependence and, accordingly, from the application of the rules on controlled transactions.

However, such actions carry significant risks.

Which transactions are controlled?

Currently, tax inspectorates have good opportunities to identify the real interdependence of persons in the absence of formal signs of such a connection. An example of this are court decisions made in favor of inspectors (post. AS SZO dated June 17, 2015 No. F07-3426/15 in case A56-55281/2014, AS MO dated October 31, 2014 No. F05-12000/14 in case No. A40- 28598/2013).

Another way to avoid controlled transactions, which is widely used in practice, is to monitor threshold values of income amounts for such transactions.

In many cases, transactions are considered controlled only if their amount for a calendar year exceeds the established values. Types of transactions and the amount of income on them for a calendar year (determined taking into account the procedure for recognizing income established), above which such transactions are considered controlled, are listed in. For example, for transactions between Russian taxpayers, the threshold value of income from transactions with one person (related parties) is generally 1 billion rubles per year. Accordingly, if you ensure that the amount of transactions between such taxpayers during a calendar year does not exceed 1 billion rubles, then you can ensure that the transactions will be uncontrollable.

In principle, this is a completely applicable approach, but only until the taxpayer begins to split transactions.

EXAMPLE

(fragmentation of transactions) It is planned that transactions between companies of group “A” (supplier) and “B” (buyer) in the calendar year will amount to 1800 million rubles. In order to avoid controllability of transactions, it was decided to include another company of group “B” in mutual settlements under the following conditions: – “A” supplies “B” with goods worth 900 million rubles, and “B” resells it to “B” for 905 million . rub.; – “A” supplies company “B” with goods worth 900 million rubles. As a result, formally the transactions between “A” and “B” amounted to 900 million rubles, i.e. less than the established amount threshold of 1 billion rubles.

This provision gives the tax authorities the right to go to court with a demand to sum up the prices of transactions between persons in the above case. The possibility of such summation is also indicated by a letter from the Russian Ministry of Finance ().

It should also be noted that the Code establishes cases () when transactions between related parties (and equivalent to them) are not recognized as controlled (regardless of whether the transactions satisfy the conditions provided for in). In particular, if transactions were made between related parties and their amount exceeded the threshold established by the Code, but they are indicated in, then such transactions are not considered controlled and do not need to be included in the notification of controlled transactions. They also do not require preparation of documentation for tax control purposes.

they are registered in one subject of the Russian Federation;
do not have separate divisions in the territories of other constituent entities of the Russian Federation, as well as beyond its borders;
do not pay corporate income tax to the budgets of other constituent entities of the Russian Federation;
do not have losses (including losses from previous periods carried forward to future tax periods) accepted when calculating corporate income tax;
they do not have the circumstances to recognize transactions carried out by such persons as controlled in accordance with (the list of special cases, for example, if one of the companies is a resident of a free economic zone).

Thus, if two interdependent companies of a group meet the above criteria, then transactions between them will not be controlled, regardless of the amount of income on them.

The above conditions are feasible for many taxpayers. Thus, it is important that there are no separate divisions in other regions. If they exist, then you can think about the fact that it might be more profitable if these divisions are registered as independent legal entities, and then the company will meet the conditions for recognizing transactions as uncontrolled.

Controlled trades can be made less risky

If, after all, you have controlled transactions, then let’s ask ourselves about approaches to choosing a transfer pricing method in practice, allowing us to reduce the risks associated with tax price control.

Conducting controlled transactions on market conditions. This is exactly what the Tax Code requires. Typically, the market price is a price range. If you set the price within this range, there will be no additional tax consequences.

Within the market range, the taxpayer has the right to choose the price that is more profitable for him. So, if an unprofitable company sells goods to a profitable company, then the highest price may be more profitable in order to transfer costs (losses) to another company in the group. Accordingly, in this case it is reasonable to set the price near the upper limit of the interval. If the situation for companies is the opposite, then it is more profitable to set the price closer to the low limit of the interval.

When choosing a price within the range of market prices, you should remember that the tax authority has the right to check and disagree with the price you have determined.

Domestic comparable transactions. In accordance with the provisions of the Code, the priority method is the method of comparable market prices (,).

Particular attention should be paid to the so-called internal comparable transactions, that is, transactions comparable to controlled transactions, but completed by the company with an independent party under comparable commercial and financial conditions.

If the taxpayer has transactions with counterparties who are not interdependent persons, then the prices for such transactions are recognized as a guideline for tax purposes as a matter of priority.

Accordingly, the presence of such comparable transactions with “unrelated” taxpayers can be managed to reduce the risk of price revision by the tax authority through the use of other sources of information.

The use of internal comparable prices is also beneficial because this source of information does not require the cost of purchasing databases.

Choosing a method for determining the market price. The Tax Code provides for five methods for determining the market price ():

method of comparable market prices;
subsequent sale price method;
cost method;
comparable profitability method;
profit distribution method.

A combination of two or more of these methods may be used.

Restrictions have been established on the use of price determination methods by the tax authority: it will be able to challenge the method used only if it proves that the method is clearly not applicable in the situation under consideration, which is quite difficult (). Accordingly, the taxpayer can, when justifying market prices, lead the tax authority in its own way - choose the method that gives the most desired result.

Let us recall that the Code provides for a certain priority of methods.

Thus, the subsequent sales price method is a priority in a situation where the goods are purchased as part of the analyzed transaction and are resold without processing within the framework of a transaction whose parties are persons who are not recognized as interdependent ().

In all other cases, the comparable market prices method () takes precedence. The use of other methods is permitted if the use of the method of comparable market prices is impossible or if its use does not allow one to reasonably draw a conclusion about the conformity or non-compliance of the prices used in transactions with market prices for tax purposes.

But the method of comparable market prices is applicable only if there are sufficient sources of information on prices, which is not always possible. Therefore, by correctly justifying the methods used to determine the price, the taxpayer can reduce the risks of challenging the transaction price.

Independent assessment. This method of justifying the market price is acceptable in rare cases (). One such case is the involvement of an appraiser for a one-time transaction.

In this case, a one-time transaction is understood as a transaction, the economic essence of which differs from the main activity of the organization and which is carried out on a one-time basis. Accordingly, for a one-time transaction, the price can be determined based on the report of an independent appraiser.

EXAMPLE

The production organization decided to sell one of the workshops. Selling real estate is not the main activity of the organization. In this case, the market price can be determined by involving an appraiser.

The Code establishes a range of interest rates for all types of currencies, and if the interest rate on a specific loan is within such a range, then the lender’s income and the borrower’s expenses are recognized as market ones. In this case, there is no need to calculate the market level of interest and prepare documentation for tax control purposes.

At the same time, it is not prohibited to set an interest rate in an amount greater than the maximum (less than the minimum) value of the established interval of limit values. But in this case, the general rules of the section will apply. This means that the tax authority will have the right to challenge the transaction price for tax purposes.

EXAMPLE

Organization "A" issued a loan to organization "B". The transaction is controlled. The safe interest rate range, calculated according to the rules, is from 5 to 7% per annum in rubles. If the terms of the agreement provide for a rate of 10% per annum, then taxpayers must determine income (expenses) based on the market level of interest according to the rules of the section, and the tax authority can challenge this amount. If the terms of the agreement provide for a rate of 6% per annum, then the amount of income and expenses based on 6% per annum is recognized for income tax and the tax authority does not have the right to challenge these amounts.

The use of established intervals does not cancel the obligation to include data about the transaction in the notification of controlled transactions. At the same time, there is no need to prepare documentation for tax control purposes if a 6 percent rate is applied in the above example, since income and expenses for income tax are determined according to special rules. Thus, it indicates that in the event “if the chapters of part two of the Tax Code of the Russian Federation, regulating the issues of calculation and payment of certain taxes, define other rules for determining the price of goods (work, services) for tax purposes, then the rules of part two of the Tax Code of the Russian Federation are applied.” This is exactly the case when the second part of the Code establishes special rules for determining prices.

Choosing a method for determining prices for marketable securities. establishes special rules for calculating the tax base for income tax for transactions with securities. Moreover, in some cases it is allowed to use the price determination methods discussed above, provided for ().

Thus, when establishing the financial result of transactions (including those not recognized as controlled transactions) with marketable securities, the taxpayer has the right to accept for tax purposes the estimated transaction price, determined using the methods established. At the same time, he may not apply the rules for determining the price of a security for tax purposes established by , provided that at least one of the following conditions is met:

the buyer of securities (together with affiliates) becomes the owner of more than 5 percent of the corresponding issue of securities;
the number of securities exceeds 1 percent of the corresponding issue of securities;
the price of securities is set by decision of state authorities or local governments;
the buyer (seller) of securities is the issuer of these securities, including under an offer.

Accordingly, in the case discussed above, the taxpayer can choose what is more profitable for him - to apply the rules or transfer pricing rules.

Stanislav Dzhaarbekov, Deputy Director of ANO "IRSOT", lawyer, certified auditor

The concept of transfer pricing appeared at the beginning of the twentieth century in the conditions of the formation of market relations.

History of origin

With the development of capitalism, general approaches to determining the final value of a transaction were gradually developed. At a time when the general growth of companies and their entry into international markets was reflected in the active formation of corporations and holdings, certain rules were developed, and such a concept as transfer pricing appeared.

The first country that, back in the middle of the last century, managed to consolidate the main provisions of this process at the legislative level was the United States. Many states, including Russia, much later consolidated their transfer pricing standards, based on the experience of the United States. In our country, this concept received its development after the collapse of the USSR, namely with the advent of market relations in the economy in the nineties of the twentieth century.

What does transfer pricing mean?

This concept represents the most optimal system for minimizing the tax burden. Moreover, it is used not only by large taxpayers, but also by representatives of medium and small businesses.

In conditions of market relations between counterparties, payment for goods, works and services is carried out within the framework of contracts at market prices. But this doesn't always happen. To optimize taxation, some counterparties set their own internal (transfer) prices, which helps to significantly save on taxes.

Any type of economic activity is aimed at making a profit, that is, at enrichment. By acting within the law, companies strive to gain even greater profits by reducing the tax burden.

The concept of transfer price

This is a price formed according to subjective characteristics, which allows you to manage and redistribute both income and expenses of “connected” counterparties. It can be used within dependent companies, such as holdings and corporations, as well as between branches and structural divisions within a company.

Features of transfer pricing in the Russian Federation

Various “transfer” pricing schemes, of course, do not suit the state, whose main function is to collect taxes for the budget. Therefore, in order to implement proper control, a Federal Law was adopted (No. 227-FZ dated July 18, 2011), regulating this process, which came into force on January 1, 2012 (as amended on April 5, 2013), and Section V.1 of the Tax Code of the Russian Federation. They reveal the basic concept within the framework of controlled transfer pricing transactions in the Russian Federation.

The market price comparability method is traditional and is based on gross profit. Due to the fact that a unified position of tax authorities and taxpayers has not yet been developed on what prices should be taken into account, constant disputes arise. Judicial practice on this issue is also heterogeneous. Before you start using it, you need to analyze the prices within the company with similar prices among unrelated parties.
The cost method of pricing is carried out taking into account costs. The profitability value must be within a certain interval, then the price will be recognized as market price by the regulatory authorities. If the value is set beyond the minimum, then the price will be calculated based on actual costs, subject to the profitability of costs at the lowest value of the interval.
The resale method is based on a comparison of gross margins within the market interval resulting from resale.
The comparable profitability method means comparing operating profitability taking into account the market interval.
Profit distribution method. The profit received is compared and distributed among all participants in the transaction in proportion to: contribution to the total profit, distribution of profitability and distribution between the parties. Combining methods is allowed.

Types of companies covered by Federal Law No. 227

Within the framework of current legislation, the following types of companies can be distinguished:

Organizations that have a direct connection, that is, interdependent, which can affect not only the result, but also the process of activity itself.
Organizations carrying out transactions that are considered interdependent. This includes formal intermediaries, transactions on exchanges and transactions with non-residents.

Purposes of using transfer prices

The main goals of transfer pricing are to move the taxable base with the help of affiliates to companies registered in areas with the most favorable tax regime. This procedure can be carried out by changing the transaction price.

With the development of production, the emergence of large taxpayers and their access to the international level, transfer pricing has become relevant.

From the point of view of the regulatory authority, the objectives are aimed at the following:

preventing the use of transfer prices for tax evasion;
countering their use for the purpose of transferring money outside the country.

Objectives of transfer pricing

The peculiarity of the development of such prices lies in the unified approach of the management team and is somewhat different from the usual price formation.

The following tasks are performed:

These transactions do not apply to property rights, intellectual activity and information. The object of control is goods, works, services. Such operations exist in order to optimize taxation from the point of view of replenishment of the budget.

Features of taxation

Transfer pricing taxation has certain properties. If the actual price in a transaction does not correspond to the market parameters, then, in accordance with the legislation of the Russian Federation, the taxpayer has the right to independently determine its size. The main thing is that such calculations do not entail underestimation of taxes or increased costs. This will naturally arouse interest from the inspection authorities. If an error is discovered, the taxpayer must make the necessary adjustments, submit a clarifying tax return with the obligatory attachment of an explanation, on the basis of which a specific transaction can be identified.

Transfer pricing and tax control

Every year, before May 20, organizations are required to report to the tax office by submitting a corresponding notification, which must contain detailed information about all transactions that have controlled status. All parties to the transaction are required to submit this notification. Thus, double control is carried out. Inspection authorities can independently verify the existence of such transactions.

To exercise control on the part of tax authorities, the very fact of a transaction that falls under the controlled status is sufficient. The main purpose of this check is to identify compliance or non-compliance with the level of market prices when carrying out a transaction.

Entering the international market

International transfer pricing received active development in the 60s of the last century. Some of the largest companies with transnational status have developed a more subtle and civilized way of “robbing” the former colonial states, which by this period had gained their independence. Prices for purchasing raw materials in these countries were deliberately low.

In the global economy, generally accepted international principles, documents, and manuals have been developed. They are advisory in nature and help resolve many issues in the field of transfer pricing.

Each country has the right to independently determine the control and adjustment of transfer prices. Moreover, the fact becomes quite obvious when the process of adjusting the above prices of the inspected company is carried out by the regulatory authorities of two countries (based on the submitted reports). If such procedures are not followed, the controlled organization finds itself in a situation of double taxation. According to the legislation of the Russian Federation, the competent authorities can do the following:

In this situation, it is important to provide assistance in the procedure for adjusting the transfer price between regulatory authorities of different countries. For any state in the international arena, the priority is the profitability of its own budget. Therefore, the question arises: how ready are countries to cooperate in the process of forming transfer pricing?

Recently, there has been a tendency for inspection bodies to intervene in the transfer process. Such actions by tax authorities provoke transfer pricing risks, which:

increase the costs associated with carrying out the counter-controlling functions of the authorities;
may provoke the risk of double taxation;
embroiled in litigation and costs;
will suffer financial losses if adjustments are made at the initiative of another state.

In general, the emerging trends of attention from fiscal authorities have developed certain regulatory mechanisms, thanks to which it is possible not only to increase budget revenues, but also to strengthen the tax system in the country.

Interdependent companies have an excellent opportunity to manipulate prices, thereby lowering the tax base by adjusting the amount of income, expenses or losses for tax purposes. When redistributing income and expenses, structures in low-tax jurisdictions are successfully used.

CONTROLLED TRANSACTIONS AND ANNUAL TURNOVER LIMITS

Transfer prices are controlled at the international level and at the level of national legislation.

Since 2010, the Organization for Economic Co-operation and Development (OECD) Transfer Pricing guidelines for multinational corporations and tax authorities (OECD Transfer Pricing guidelines, 2010) have been in force. In 2013, at the request of the G20, the Declaration on BEPS (Base Erosion and Profit Shifting). The Declaration represents the OECD's action plan to combat base erosion and profit shifting. As part of the BEPS plan, it is planned to develop transfer pricing rules that will increase the transparency of transactions between companies by collecting additional information, as well as reduce costs for business.

In the Russian Federation, on January 1, 2012, Federal Law No. 227-FZ of July 18, 2011 (Law 227-FZ) came into force. Law 227-FZ, which supplemented the Tax Code of the Russian Federation with section V.1 “Interdependent persons. General provisions on prices and taxation. Tax control in connection with transactions between related parties. Pricing agreement." Its provisions are aimed, inter alia, at preventing the transfer of tax profits outside the Russian Federation, eliminating the possibility of price manipulation in transactions between interdependent taxpayers and taxpayers applying different tax regimes within the country. The rules replaced Art. 40 “Principles for determining the price of goods, works or services for tax purposes” and Art. 20 “Interdependent persons” of the Tax Code of the Russian Federation.

Law 227-FZ enshrined the main “global” principle of transfer pricing regulation - the “arm's length principle”.

According to the “arm's length” principle, for tax purposes, the value of prices (payments) for transactions between interdependent and equivalent persons is recalculated in relation to market values, as if the companies were independent.

Prices are not checked for all transactions in a row, but only for controlled ones.

For tax purposes, controlled transactions are recognized as:

transactions between interdependent persons (taking into account the features that are enshrined in Article 105.14 of the Tax Code of the Russian Federation);
transactions (a set of transactions) acquiring the status of controlled transactions as a result of equating them with transactions of related parties (clause 1 of Article 105.14 of the Tax Code of the Russian Federation);
transactions recognized as judicially controlled (Clause 10, Article 105.14 of the Tax Code of the Russian Federation).

We have combined controlled transactions for tax purposes in the table:

CONTROLLED TRANSACTIONS		ANNUAL TURNOVER LIMIT
External economic transactions		No limit set
	With stock trading goods	60 million rub.
	With offshore residents according to the list of the Ministry of Finance of the Russian Federation	60 million rub.
Domestic transactions	Between related parties	1 billion rub. (since 2016)
	Between related parties, if one of the parties:
	- exempt from income tax or applies a 0% rate	60 million rub.
	- resident of a SEZ that provides income tax benefits	60 million rub.
	- payer of mineral extraction tax, calculated at a rate established as a percentage	59 million rub.
	- applies special tax regime (UTII, Unified Agricultural Tax)	100 million rubles.

EXAMPLE OF CALCULATING THE SUM CRITERIA

Company “A” (RF) provides marketing services to Company “B” (RF) for a total amount of 300 million rubles. Company "B" produces and sells products of Company "A" worth 750 million rubles. Company "A" participates in the capital of Company "B", the share of this participation is more than 25%.

QUESTION: Is the transaction controlled for Company A?

ANSWER. Yes it is.

To determine the amount criterion for a controlled transaction between related parties, we must add up 300 million rubles. (marketing) and 750 rub. (products). Result = 1,050 million rubles. (more than 1 billion rubles).

Taxpayers should remember that not all transactions are considered controlled.

Regardless of whether the transactions satisfy the conditions provided for in paragraphs 1 - 3 of Art. 105.14 Tax Code of the Russian Federation, transactions are not recognized as controlled transactions:

The parties to which are participants of the same consolidated group of taxpayers (with the exception of transactions the subject of which is an extracted mineral resource recognized as subject to mineral extraction tax, the extraction of which is taxed at a rate established as a percentage);

the parties to which are persons who simultaneously satisfy the following requirements:

Registered in one subject of the Russian Federation, do not have separate divisions in the territories of other subjects of the Russian Federation, as well as outside the Russian Federation, do not pay income tax to the budgets of other subjects of the Russian Federation;

Do not have losses (including losses from previous periods carried forward to future periods) accepted when calculating income tax;

There are no circumstances for recognizing their transactions as controlled in accordance with paragraphs. 2 - 7 p. 2 tbsp. 105.14 Tax Code of the Russian Federation;

and some others.

WHAT TAXES ARE UNDER THE CONTROL OF THE TP?

Very often, listeners ask the question: “Can all taxes fall under the control of tax authorities based on transfer pricing?”

The Tax Code contains a limited list of taxes, the completeness of calculation of which is controlled. Namely:

corporate income tax;
Personal income tax, which is paid in relation to income from business activities and private practice (Article 227 of the Tax Code of the Russian Federation);
MET - if one of the parties to the transaction is a MET payer, the subject of the transaction is minerals, the extraction of which is taxed at a tax rate set as a percentage;
VAT - if one of the parties to the transaction (organization or individual entrepreneur) is not a VAT payer or is exempt from fulfilling VAT obligations as a taxpayer.

METHODS FOR DETERMINING MARKET PRICE

The most important and difficult question is how to apply the arm's length principle and in practice determine the market price of the transaction for tax purposes. There are several methods for such assessment developed within the OECD that create a conceptual basis for determining prices (Transfer pricing methods (methodologies)). None of them can be considered universal (suitable for every situation), and as a general rule it is necessary to choose the method that provides the most accurate assessment.

The method of comparable market prices (has priority over other methods and can be applied if there is at least one comparable transaction on the relevant market), as well as if the required amount of information about such a transaction is available;
Subsequent sales price method (is a priority when purchasing goods from a related party and its subsequent resale without processing to an independent party);
Cost method (is a priority in transactions for the provision of services);
The comparable profitability method (can be used in the absence or insufficiency of information on the basis of which one can reasonably conclude that there is a necessary degree of comparability of the commercial and (or) financial conditions of the compared transactions and use the subsequent sales method and the cost method);
Profit distribution method (used when it is impossible to use other methods or when the parties to the analyzed transaction have rights to intangible assets in their ownership (use).

The starting point when choosing a method is an understanding of the controlled transaction based on functional analysis. The components of such an analysis are a study of the functions of the parties to the transaction, the assets they use and the risks they assume. Comparability of commercial and (or) financial terms of transactions and functional analysis are carried out taking into account the provisions of Art. 105.5 of the Tax Code of the Russian Federation, which define the characteristics of transactions necessary for analysis, the conditions, factors and other parameters taken into account, and using the information provided for in Art. 105.6 Tax Code of the Russian Federation.

The next stage of our research is to compare the terms of transactions between interdependent persons with the terms of transactions between persons who are not interdependent. The Tax Code of the Russian Federation allows the use of exclusively publicly available sources of information, as well as information about the taxpayer.

The Tax Code of the Russian Federation does not contain a specific list, which gives taxpayers some advantage when preparing documentation. The taxpayer chooses the sources of information himself! And then, if a dispute arises, the tax authorities must prove the legality of the choice.

WHO CONTROLS THE PRICES?

It would seem that everything is clear here. Price control is carried out by the federal executive body authorized for control and supervision in the field of taxes and fees. The Tax Code of the Russian Federation establishes a ban on monitoring the compliance of prices used in controlled transactions with market prices during on-site and desk inspections (clause 1 of Article 105.17 of the Tax Code of the Russian Federation).

And, nevertheless, arbitration practice has already accumulated on this issue, which is closely intertwined with the topic of unjustified tax benefits. We will present a selection of arbitration courts and conclusions on this topic in the next article by tax lawyers.

RESPONSIBILITY FOR TP

Let's end this review with a reminder of taxpayer responsibility. For non-compliance with the requirements of the Tax Code of the Russian Federation for controlled transactions, the following fines are provided:

in case of non-payment or incomplete payment of tax amounts as a result of the use of “non-market” prices, a fine is levied in the amount of 20% of the unpaid tax amount from 2014, and from 2017 - in the amount of 40% of the unpaid tax amount, but not less than 30,000 rubles . (Article 129.3 of the Tax Code of the Russian Federation);
For failure to submit notification of a controlled transaction within the prescribed period, the taxpayer will be fined 5,000 rubles. (Article 129.4 of the Tax Code of the Russian Federation) for each transaction.

We also remind you of the responsibility of the taxpayer.

The deadline for filing the Notification of controlled transactions is May 20 of the year following the reporting year. Those. for 2016 - until May 20, 2017.

If the updated notification is submitted before the tax authority has identified the error, the taxpayer is exempt from the fine for inaccurate information in the notification. It's never too late to check yourself.

Documentation on controlled transactions may be requested by the tax authorities no earlier than June 1 of the year following the calendar year in which the controlled transactions were carried out. At the same time, as part of a tax audit, a request for documentation on controlled transactions may take 3 years.

Exemption from penalties is possible if the taxpayer submits to the tax authority documentation justifying the market price level.

Taxpayers are given 30 days to provide requested transaction documentation.

Transfer prices are formed under the influence of non-market factors and are inherent in transactions between related parties.
When assessing the reasons for the use of transfer prices by holdings, regulatory authorities proceed from the fact that variation of the contract price in such transactions allows you to redistribute total profits in favor of a less taxed jurisdiction.
For these reasons, transfer prices are the subject of close monitoring by the fiscal authorities of most developed countries.
In the explanatory note to the draft federal law, the main goal of changes in Russian tax legislation is to ensure counteraction to the use of transfer prices; accordingly, the priority task of the tax authorities is to prevent losses to the budget of any state or group of states from the use of these prices.

The relationship between Russian and international standards

The main advisory and methodological international document in the field of tax regulation of transfer pricing is the 1995 Organization for Economic Cooperation and Development (OECD) Guidelines “On Transfer Pricing for Transnational Corporations and Tax Authorities.”
The draft Russian law is also largely based on the Recommendations, but at the same time has a number of national characteristics: new provisions of Russian legislation do not always clearly correlate with the corresponding OECD rules. Does the discrepancy (even partial) of Russian law with international standards meet the interests of Russian companies? I think the answer is obvious - no. The effect of tax acts in the field of regulation of transfer pricing is focused on a special entity - a transnational corporation, which includes companies registered in various tax jurisdictions. The lack of uniform transfer pricing rules and control over the use of prices for corporations creates multiple tax risks, complicates the procedures for current internal financial control, narrows the prospects for free presence in various markets, and inevitably leads to the risk of double taxation in transactions.
The adoption of national laws that differ from international acts does not meet the interests of the state as a whole, since it reduces the attractiveness of the domestic market for investors, reduces the efficiency of the tax authorities and, ultimately, negatively affects the budgetary interests of the country.
Therefore, changes in the legislation of most states were focused on the content of international norms.

What changes in legislation should we expect?

1. Related Persons: minor changes. The draft law proposes to invalidate the provisions of Art. Art. 20 and 40 of the Tax Code of the Russian Federation. At the same time, the Tax Code will be supplemented with a corresponding section that will significantly expand the limits, methods and methods of tax control.
The draft preserves the principle of recognizing as interdependent persons for tax purposes persons, one of whom, independently, jointly with other persons or through other persons, can influence the conditions and (or) results of transactions carried out by another person, and (or) the economic results of its activities (or activities of the persons he represents) due to participation in the capital of this person, an agreement concluded between them, or another opportunity to influence decisions made by another person.
The legislator expands the definition of the list of interdependent persons, also indicating the possibility of recognizing them as such if there are other grounds in court.
When adjusting existing pricing rules, companies should take into account that the bill also considers transactions to sell to a related party through an independent party to be controlled transactions.
2. Controlled transactions and information about them. The draft law provides for expanding the list of transactions subject to control. These are not only previously controlled transactions with goods, works, services - transactions the subject of which are objects of intellectual property, information, property rights, as well as financial transactions (interest on loans and credits, guarantee obligations) will be subject to control.
It is assumed that any transactions with interdependent persons will be controlled, as well as transactions with independent persons registered in offshore zones, the list of which is approved by the Ministry of Finance, or if the subject of the transaction is specific (relates to goods of global exchange trade).
In relation to controlled transactions, taxpayers will be required to submit relevant information on controlled transactions to the tax authorities no later than May 20. The list of information that a taxpayer must provide includes:
- data on the subject and parties of the transaction;
- applied prices;
- the method used to determine the market price of the product;
- income and expenses incurred under the transaction.
The author of the bill defines the total value for controlled transactions at a level of over 100 million rubles. This amount will consist of income and expenses from all controlled transactions completed during the calendar year with one person (several of the same persons who are parties to the controlled transaction). This threshold will be reduced in the future.
3. Determining the market price of a product. The legislator significantly changes the approach to determining the market price and introduces the concept of an interval of market prices, determined in the manner established by the Code for transactions with identical (and in their absence, homogeneous) goods (works, services) made in comparable economic (commercial) conditions by persons other than being interdependent.
It is proposed to recognize the market price for tax purposes as a price within the established interval. Thus, the legislator determines not just a separately existing market price, but a certain, safe from the point of view of tax control, price range within which price variations are allowed. The tax authority may decide to assess additional tax if the actual transaction price does not correspond to the calculated interval. However, deviation from interval values does not mean an absolute violation of the rules and can, if there are sufficient grounds, be justified by the taxpayer without additional tax assessment. This design is more in line with the interests of taxpayers and adds more clarity to the work of tax officials.
4. Transfer pricing methods. The bill significantly expands the list of transfer pricing methods used in determining (for tax purposes) the conformity of prices used in transactions with market prices, such as:
1) method of comparable market prices;
2) subsequent sale price method;
3) method of selling price of the processed product (secondary product);
4) cost method;
5) comparable profitability method;
6) profit distribution method.
The differences between the listed methods, the possibility of their use by taxpayers for the purpose of justifying prices in controlled transactions, the specifics of the use of these methods by tax authorities for the purpose of price control is a serious topic that requires separate analysis. At this stage, when the bill has not yet been adopted, it is enough to say that the listed methods are largely consistent with global practice and international standards.

Note. Controlling transfer prices today
The current transfer pricing rules in Russia are enshrined in Art. Art. 20 and 40 of the Tax Code of the Russian Federation.
They determine the list of interdependent persons, and also establish the principles for determining the price of goods, works or services for tax purposes. They do not imply control by tax authorities in relation to transactions with intellectual property or financial transactions (for example, in relation to established interest on loans and loan agreements, the volume of guarantee obligations on transactions).
The list of controlled transactions is also limited and concerns transactions with related parties, barter exchange transactions, foreign trade transactions (including transactions between unrelated companies). Controlled transactions also include transactions in which there is a price deviation of more than 20 percent within a short period of time.
The list of transfer pricing methods that are used by the tax authority to determine the deviation of the price from the market price is limited. This circumstance does not allow tax authorities to take into account all the factors that objectively influence the pricing process in a transaction, and also significantly narrows the ability of companies to justify the prices applied.
The current tax rules also have a number of other shortcomings that limit the completeness and adequacy of control over transfer pricing in Russia. As such, it should be noted that there are no requirements for taxpayer documentation submitted in connection with pricing control, the absence of the possibility of concluding preliminary agreements with tax authorities on pricing in companies and a number of others.

5. List of information used by regulatory authorities. The draft law significantly expands the list of information used in determining whether prices used in transactions correspond to market or regulated prices for tax purposes. The list of information sources is not limited to those listed in the law, and priorities in the use of a particular source by the regulatory authority have not been established. Sources of information include:
1) information on prices and quotations of world exchanges - for goods that are the subject of world exchange trade;
2) customs statistics of foreign trade of the Russian Federation, published or provided upon request by the federal executive body authorized in the field of customs affairs;
3) information on prices (on the limits of price fluctuations) and stock quotes contained in official sources of information of authorized state authorities and local governments in accordance with the legislation of the Russian Federation, the legislation of the constituent entities of the Russian Federation and municipal legal acts (in particular, in the field of regulation pricing and statistics), official sources of information of foreign states or international organizations or in other published and (or) publicly available publications and information systems;
4) information obtained from the accounting and statistical reporting of organizations;
5) information on the market value of valuation objects, determined in accordance with the legislation regulating valuation activities in the Russian Federation or in foreign countries; other information.
6. Introduction of a preliminary form of tax control. An innovation will be the possibility of concluding preliminary agreements on pricing for tax purposes between major taxpayers and tax authorities.
The subject of the agreements will not be the agreed transfer price itself, but the overall methodology for calculating transfer prices for similar transactions. It is assumed that if the taxpayer fulfills the terms of such an agreement, further checks by the tax authority of the results of the transaction, as well as additional taxes, are not carried out. The preliminary agreement is valid for three years with the possibility of extension for another two years.

Changes: will they be for the better?

The expected changes will be significant for both tax authorities and business entities.
The bill establishes new principles for distributing the burden of proof of the justification for applied transfer prices and shifts the main burden of responsibility onto the shoulders of market participants. The priority for analysis purposes is not the legal form of the transaction, but its actual content (economic essence).
The legislator expects that the planned changes will streamline and improve the efficiency of tax control over the correctness of calculation and complete payment of taxes when applying transfer pricing, and will serve to improve the basis for determining the compliance of prices used in controlled transactions with regulated or market prices for tax purposes.
It should be noted that the implementation of the law on transfer pricing is planned with the simultaneous adoption of the law on consolidated tax reporting. The latter allows companies, together with all their subsidiaries, to act as a consolidated taxpayer, which allows companies to aggregate the profits and losses of individual members of the consolidated group. There will be no control over transfer pricing in transactions between members of the consolidated group.

Note. The first milestone has been passed
At the time of publication, the bill was adopted in the State Duma in the first reading. Please note that the review of the document did not go smoothly. Thus, Sergei Shtogrin, Deputy Chairman of the State Duma Committee on Budget and Taxes, spoke out against the government initiative. At the same time, Deputy Minister of Finance Sergei Shatalov said that the Russian Ministry of Finance intends to prepare methodological recommendations on the application of the bill by the second reading, despite the fact that, according to established practice, such clarifications are issued after the adoption of regulations. According to the Ministry of Finance, the document is necessary so that participants in tax legal relations (companies, inspectors and judges) come to a common understanding of the provisions of the law.

Controlled transactions and annual turnover limits

Tax control over transfer pricing is carried out at the international level and at the level of national legislation. Since 2010, the Organization for Economic Co-operation and Development (OECD) Transfer Pricing guidelines for multinational corporations and tax authorities (OECD Transfer Pricing guidelines, 2010) have been in force. In 2013, at the request of the G20, the Declaration on BEPS (Base Erosion and Profit Shifting).

The Declaration represents the OECD's action plan to combat base erosion and profit shifting. As part of the BEPS plan, it is planned to develop transfer pricing (TP) rules that will increase the transparency of transactions between companies by collecting additional information, as well as reduce costs for business.

Its provisions are aimed, inter alia, at preventing the transfer of tax profits outside the Russian Federation, eliminating the possibility of price manipulation in transactions between interdependent taxpayers and taxpayers applying different tax regimes within the country. The rules replaced Art. 40 “Principles for determining the price of goods, works or services for tax purposes” and Art. 20 “Interdependent persons” of the Tax Code of the Russian Federation.

Law 227-FZ enshrined the main “global” principle of transfer pricing regulation - the “arm's length principle”.

The arm's length principle in transfer pricing

What are controlled transactions?

For tax purposes, controlled transactions are recognized as:

Transactions between interdependent persons (taking into account the features that are enshrined in Article 105.14 of the Tax Code of the Russian Federation).
Transactions (a set of transactions) acquiring the status of controlled transactions as a result of equating them with transactions of interdependent persons (clause 1 of Article 105.14 of the Tax Code of the Russian Federation).
Transactions recognized as judicially controlled (Clause 10, Article 105.14 of the Tax Code of the Russian Federation)

We have combined the 2017 controlled transactions criteria for tax purposes in the table:

Controlled transactions		Annual turnover limit
Foreign economic transactions		No limit set
	With stock trading goods	60 million rub.
	With offshore residents according to the list of the Ministry of Finance of the Russian Federation	60 million rub.
Domestic transactions	Between related parties	1 billion rub. (since 2016)
	Between related parties, if one of the parties: Exempt from income tax or applies a 0% rate	60 million rub.
	Resident of a SEZ that provides income tax benefits	60 million rub.
	Payer of mineral extraction tax, calculated at a rate established as a percentage	59 million rub.
	Uses special tax regime (UTII, Unified Agricultural Tax)	100 million rubles.

Example of calculating the sum criterion

Question:
Is the transaction controlled for Company A?

Answer:
Yes it is. To determine the amount criterion for a controlled transaction between related parties, we must add up 300 million rubles. (marketing) and 750 rub. (products). Result = 1,050 million rubles. (more than 1 billion rubles).

Taxpayers should remember that not all transactions are considered controlled.

the parties to which are participants of the same consolidated group of taxpayers (except for transactions the subject of which is an extracted mineral resource recognized as subject to mineral extraction tax, the extraction of which is taxed at a rate established as a percentage);
the parties to which are persons who simultaneously satisfy the following requirements:
- registered in one subject of the Russian Federation, do not have separate divisions in the territories of other subjects of the Russian Federation, as well as outside the Russian Federation, do not pay income tax to the budgets of other subjects of the Russian Federation;
- do not have losses (including losses of previous periods carried forward to future periods) accepted when calculating income tax;
- there are no circumstances for recognizing their transactions as controlled in accordance with paragraphs. 2 - 7 p. 2 tbsp. 105.14 Tax Code of the Russian Federation;
and some others.

What taxes are covered by transfer pricing?

Very often, listeners ask the question: “Can all taxes fall under the control of tax authorities based on transfer pricing?” The Tax Code contains a limited list of taxes, the completeness of calculation of which is controlled, namely:

Corporate income tax.
Personal income tax, which is paid in relation to income from business activities and private practice (Article 227 of the Tax Code of the Russian Federation).
MET - if one of the parties to the transaction is a MET payer, the subject of the transaction is minerals, the extraction of which is taxed at a tax rate set as a percentage.
VAT - if one of the parties to the transaction (organization or individual entrepreneur) is not a VAT payer or is exempt from fulfilling VAT obligations as a taxpayer.

Methods for determining market price

None of them can be considered universal (suitable for every situation), and as a general rule it is necessary to choose the method that provides the most accurate assessment. The Tax Code of the Russian Federation recommends using 5 methods (Article 105.7 of the Tax Code of the Russian Federation):

The method of comparable market prices (has priority over other methods and can be used if there is at least one comparable transaction in the relevant market), as well as if the required amount of information about such a transaction is available.
The subsequent sales price method (is a priority when purchasing goods from a related party and its subsequent resale without processing to an independent party).
Cost method (is a priority in transactions for the provision of services).
The comparable profitability method (can be used in the absence or insufficiency of information on the basis of which one can reasonably conclude that there is a necessary degree of comparability of the commercial and (or) financial conditions of the compared transactions and use the subsequent sales method and the cost method).
Profit distribution method (used if it is impossible to use other transfer pricing methods or if the parties to the analyzed transaction have rights to intangible assets in their ownership (use).

Comparability of commercial and (or) financial terms of transactions and functional analysis are carried out taking into account the provisions of Art. 105.5 of the Tax Code of the Russian Federation, which define the characteristics of transactions necessary for analysis, the conditions, factors and other parameters taken into account, and using the information provided for in Art. 105.6 Tax Code of the Russian Federation.

You can get services from us:

- preparation of notifications on controlled transactions for the Federal Tax Service of the Russian Federation;
- preparation of a package of transfer pricing documentation to justify the market price level and avoid fines;
- identify controlled transactions.

Who controls prices?

Responsibility for transfer pricing

in case of non-payment or incomplete payment of tax amounts as a result of the use of “non-market” prices, a fine is levied in the amount of 20% of the unpaid tax amount from 2014, and from 2017 - in the amount of 40% of the unpaid tax amount, but not less than 30,000 rubles . (Article 129.3 of the Tax Code of the Russian Federation);
The fine for failure to provide notification of controlled transactions to the tax office will be 5,000 rubles. (Article 129.4 of the Tax Code of the Russian Federation) for each transaction.

Report on controlled transactions:

Notification of controlled transactions is submitted before May 20 of the year following the reporting year. Those. The deadline for submitting a notification of controlled transactions for 2016 is until May 20, 2017, and for 2017 - until May 20, 2018.

Exemption from penalties is possible if the taxpayer submits to the tax authority documentation justifying the market price level.

Taxpayers are given 30 days to provide requested transaction documentation.

In this article, we have only briefly outlined the main aspects of the application of transfer pricing for controlled transactions. In our further reviews, we will talk in detail about the advantages of each price research method, symmetrical adjustments, arbitration practice and many other features of transfer pricing in Russia.