Among numerous measures taken by companies to ensure an effective management system, a special role belongs to the inter-production, inter-company, the so-called transfer prices.
Transfer price is a price set in the business transactions among different subdivisions of a single company, or among members of a single group of companies (“affiliated persons”). Pricing activities among such companies constitute the concept of the transfer pricing
Basic risks associated with violations of transfer pricing
- In the event of mismatch of prices applied in controlled transactions with market prices, tax authorities are entitled to include income of the taxpayer that he would have received if market prices were applicable in taxable income.
- From 2014, taxpayers who do not apply market prices are charged a penalty in the amount of 20% of the unpaid tax. Starting from 2017 this amount will make as much as 40%.
Matters of control of whether taxes have been paid in full where transfer pricing is applied, and matters of interdependence of individuals for the purposes of taxation are regulated by Section V.1 of the Tax Code of the Russian Federation.
Transfer pricing reporting
According to Part 2, Art. 105.16 of the Tax Code of the Russian Federation, every year not later than May 20 taxpayers are required to provide information on controlled transactions over the preceding calendar year to a tax authority.
Information about controlled transactions must contain information about the subject of the transaction, transaction parties, amount of income (expenses) received (incurred) as a result of the controlled transaction.
The form of notification of controlled transactions, procedure for its filling out, and the format and procedure for notification have been approved by the Order of the Ministry of Finance of the Russian Federation No.MMV-7-13 / 524 dated 27 July 2012.
Why do you need specialists?
According to the tax legislation, taxpayers are required to prepare documentation in any format containing substantiation of pricing methodology used in controlled transactions. There is no form of such documentation established by law.
The Sterngoff Audit’s specialists involved in economy, audit and law have developed such form designed to meet the requirements of applicable legislation and guidelines of the Federal Tax Service of the Ministry of Finance.