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Russia: Country-by-country reporting requirements, transfer pricing documentation

Russia: Country-by-country reporting requirements

Proposed draft legislation that would introduce a new format for transfer pricing reporting by multinational corporate groups has been released for public discussion. The consultation period closes 6 October 2016.


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The bill, if enacted in its current state, would modify the transfer pricing rules, contained in section V.I of the Russian tax law, by implementing a three-tiered approach to the preparation of transfer pricing documentation for “large” multinational company groups. The proposed legislation would require Russian taxpayers that are part of multinational groups to provide the following information or reports beginning from 1 January 2017.

  • A notification that the Russian taxpayer is part of the multinational groups (by a date that is no later than three months from the date when the financial year ends)
  • New transfer pricing reporting requirements for the multinational group including: (1) Master file; (2) Local file; and (3) country-by-country report in relation to jurisdictions where participants of the multinational group of companies are tax residents

The draft bill defines a multinational or international group of companies as a group of organizations that are consolidated for the purposes of financial reporting, provided that the group includes at least one company that is a Russian tax resident.

The requirements apply to taxpayers in Russia only if they belong to multinational corporate groups with total revenue (according to the consolidated financial statements for the previous year) of at least 50 billion roubles (approximately €650 million).

Master file requirements

As proposed, the Master file and Local file must be provided if required by the tax authorities, and turned over within three months from the date of the tax authorities’ request, but not earlier than 15 months from the date on which the financial year ends. 

The Master file is to be provided by the parent company or by the taxpayer that is an authorized member of the multinational group. Although the bill (draft legislation) does not specify any standardized form for preparation of Master file, there are requirements concerning the information that the Master file is to disclose in detail including information about:

  • The structure of the multinational group of companies
  • Activities of the multinational group (including functional analysis and business restructuring data)
  • Intangible assets of the group (including a description of their development strategy and pricing methodology in related intercompany transactions)
  • Intragroup financing
  • Other documents including financial statements, a list of tax rulings and advance pricing agreements (APAs), and description of their terms

Local file requirements

The Local file is to be provided by a Russian company or a foreign company that is a Russian tax resident. The Local file is to cover all intragroup transactions with foreign entities and to include detailed description of these transactions and the results of the respective transfer pricing analysis for the transactions. 

Considering the existing requirements for preparation of transfer pricing documentation for controlled transactions (that is, groups of homogeneous controlled transactions), there is actually a “four-tiered” approach to the transfer pricing reporting that will be required if the legislation is enacted in its current form. 

Country-by-country report

Country-by-country (CbC) reports are to be provided by the parent company or by the taxpayer that is an authorized member of the multinational group, and such CbC reports are to be provided no later than 12 months from the date when the financial year ends. The contents of the CbC report are described in the draft legislation as being in line with the requirements of those of the OECD’s base erosion and profit shifting (BEPS) Action 13. 

CbC reports are to be automatically submitted to the tax authorities after the end of the financial year.

The bill authorizes the Russian tax administration to engage in the automatic exchange of CbC reports with the jurisdictions where other foreign companies of the group operate. It is specified that information obtained from the CbC report may be used for the purposes of tax audits, but that the CbC report itself cannot be considered as an evidence of the underpayment of taxes (which is in line with the provisions of BEPS Action 13).

In addition to evaluating the taxpayer’s transfer pricing compliance, the Russian tax authorities can use the information contained in the CbC report about foreign companies of the group (e.g., the number of employees, structure of assets, types of activities, amount of profit received and taxes accrued/paid) to assess:

  • Compliance with the Russian controlled foreign corporation (CFC) rules
  • Shifting of the tax residency of foreign companies to Russia
  • Beneficial owner status for the recipient of Russia-source income
  • Existence of permanent establishments of foreign companies in Russia

Effective date

The law is expected to be effective from 1 January 2017 and apply to financial years after 2017. 

KPMG observation

It is anticipated that certain changes could be made to the draft version of the bill before it is submitted to the Russian parliament for consideration. Still, it may be useful to evaluate the possible implications and difficulties that the bill could produce, and consider relevant steps to take in advance. For instance, among examples of situations that may require special attention are when:

  • The multinational group adopts different transfer pricing approaches for similar controlled transactions
  • The group does not have a clear understanding of transfer pricing approaches applied by the group member companies in different jurisdictions
  • The group implements operating structures that could potentially be considered by the Russian and foreign tax authorities as aggressive tax planning


For more information, contact a tax professional with KPMG’s Global Transfer Pricing Services group in Russia:

Vera Evdokimova |

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