Transfer Pricing (TP)
Transfer Pricing is a mechanism for establishment of prices different from the market ones in the transactions between interdependent parties.
If the transactions are controlled, FNS of Russia may check correspondence of the prices applied in such transactions to the market ones.
Interdependent parties (IP) transactions shall be subject to control in the following cases:
Independent parties transactions shall be subject to control in the following cases:
- transactions between the IP with participation of formal intermediaries,
- transactions in foreign trading with goods of world exchange trading,
- transactions with offshore companies.
In case of controlled transactions the following documents shall be submitted to the tax authorities:
- notification of the controlled transactions (by May 20 of the year following the year of the transactions execution),
- documents on transfer pricing (within 30 days from the day of receipt of the respective request from FNS).
In case, as a result of the audit, the tax authority concludes on deviation in prices under the controlled transactions from the market level, it shall be entitled to additionally accrue the taxes based on the market prices and impose a fine in the amount of 40% of the additionally accrued tax amount. However, submission by the taxpayer, at request of the FNS, of documents on transfer pricing justifying the market level of the prices under the controlled transactions shall be the basis for release from the fine.
ICLC services with regard to Transfer Pricing:
- determination whether the organization is interdependent with the counterparties, with regard to the criteria established by the Tax Code of the Russian Federation;
- detection of the controlled transactions;
- preparation of the notification of the controlled transactions;
- preparation of the documents on transfer pricing justifying the controlled transaction prices;
- verification of the correctness of preparation of reporting on transfer pricing (in case the organization independently prepares the documents);
- consulting support on the matters of transfer pricing;
- calculation of profitability indicators in the planned transactions;
- determination and analysis of possible tax risks.