I OVERVIEW

i General

Transfer pricing rules were introduced in Russia in 2000 and were substantially revised with effect from 1 January 2012 (now contained in the Tax Code, Part One, Chapter V.1).2

The rules do not refer to the OECD Transfer Pricing Guidelines, but broadly follow these principles (though not all of them). The Ministry of Finance3 is of the view that the OECD Guidelines can be applied to the extent no contradiction with the domestic rules arises.4

The Russian transfer pricing rules are based on the arm's-length principle, which is stated in Article 105.3(1) of the Tax Code (reproducing this principle as defined in Article 9 of the OECD Model Tax Convention and in Article 9 of the Russian Tax Treaty Model).

The transfer pricing rules focus on legal entities, private entrepreneurs and professionals in private practice (notaries, attorneys and a few others), with regard to the following taxes:

  • a corporate profits tax (for legal entities) and personal income tax (for individuals);
  • b value added tax (VAT) - in transactions with non-VATable (or VAT-exempt) persons; and
  • c mineral extraction tax (MET) - in transactions with producers of minerals that are taxed at ad valorem (per cent) MET rate (i.e., currently excluding producers of oil, natural gas, gas condensate, anthracite and coal, as well as multi-component complex ore).
ii Related persons

Persons are deemed to be related (or interdependent) if the peculiarities of their relationship may influence terms or results of their transactions or economic results of their activities (in this regard, ‘influence' means the ability of one person to determine the other person's decisions (directly or indirectly, on its own or jointly with third persons), by virtue of participation in capital, contractual arrangement or otherwise. Along with this general definition, the Tax Code describes 11 cases whereby persons are deemed to be related:

  • a by reference to participation: direct or indirect participation of more than 25 per cent; and a direct chain of participations each exceeding 50 per cent;
  • b by reference to management: company and person(s) entitled to appoint the company's sole executive body or at least 50 per cent of the company's collective executive body; and company and its sole executive body;
  • c by reference to common control or management: companies under common control, by reason of participation of more than 25 per cent, or entitlement to appoint the respective companies' sole executive body or at least 50 per cent of collective executive body; and companies under common management, by reason of the same person acting as the sole executive bodies or at least of 50 per cent of the same persons being on the collective executive bodies;
  • d by reference to subordination: employment and organisational structure; and
  • e family members: spouses, parents, children, siblings.

On other grounds where the critical ‘influence' is present, the respective persons may recognise the interdependence on their own; otherwise, the court may do so (with sufficient evidence brought by the Federal Tax Service).5 Participation by the state or a dominant market position (in the absence of other groups) is insufficient to recognise the interdependence.

Recent court practice shows that in order to prove the interdependence between parties to a transaction, the Russian tax authorities may request the competent authorities of foreign states to exchange information on ultimate beneficial owners of legal entities.6

iii Controlled transactions

The scope of controlled transactions encompasses, in addition to transactions between related parties, the following three types of transactions:

  • a complex transaction through an unrelated intermediary that undertakes merely resale without using its own assets or assuming risks (such transaction is deemed to be made between related parties to whose benefit it is concluded, ignoring the intermediary);
  • b cross-border commodity transaction (with oil and oil-based products, ferrous and non-ferrous metals, mineral fertilisers, precious metals and stones); and
  • c transaction with a person registered or resident in a blacklisted country or territory.7

Upon the Federal Tax Service's claim, a court may recognise a transaction as ‘controlled' if it is one of a group of similar transactions all of which are structured with the aim of circumventing transfer pricing control.

Safeguarding from the transfer pricing rules (and exclusion from the scope of controlled transactions) is provided for:

  • a with reference to the value threshold: domestic transactions with an annual total value of less than 1 billion roubles;8 and transactions with blacklisted countries or cross-border commodity transactions with an annual value of less than 60 million roubles;
  • b with reference to the parties: transactions within the Russian consolidated taxpayers' group (except for sales of extracted commodities taxed at ad valorem MET rate); and transactions between related parties that are registered and operate within the same region and are not loss-making; and
  • c with reference to the type of transaction: suretyships (guarantees) and interest-free loans between Russian non-banking entities; up to seven-day interbank credits or deposits; loans between related parties insofar as the interest rate is within the minimum-maximum range;9 certain transactions with regard to hydrocarbons extraction on offshore deposits; and cross-border transactions in the sphere of military and technical international cooperation.

For transactions with securities and derivatives between related parties, the special transfer pricing rules (and the safe harbour pricing ranges) are detailed in Article 280 of Chapter 25 of the Tax Code. There is no exclusion for capital transactions.

In addition, the Tax Code requires that for certain types of transactions (such as for no consideration or for in-kind consideration, and exchange/barter transactions) the tax base is calculated based on the arm's-length principle. The Supreme Court explained that in such instances, the tax base should be determined in accordance with transfer pricing methods.10

iv Transfer pricing and the domestic anti-abuse doctrine (‘unjustified tax benefit')

The judicial doctrine of ‘unjustified tax benefit'11 presumes the taxpayer's good faith, but supports the deprival of tax benefits in the circumstances where the taxpayer's activities are artificial or aimed mainly at achieving tax benefits or where the form of transaction (and the way it is reflected in tax returns) does not correspond to its substance. In the context of this doctrine, the following principle has been developed by courts: the deviation of the transaction price from the arm's-length price is, as such, not sufficient to indicate that unjustified tax benefit is derived, but if it is significant, then the non-arm's length price, taken together with other circumstances, may serve as evidence of the receipt of unjustified tax benefit.12 When proceeding based on the ‘unjustified tax benefit' concept, the local tax authorities are not restricted by the transfer pricing control rules and are able to enforce tax assessments through ordinary tax audits and may deviate from the transfer pricing methods.

v Transfer pricing and the director's corporate law liability

Directors (i.e., members of the sole and collective executive body and the supervisory body) and controlling persons (i.e., persons who may determine the company's activities through giving instructions) are required to act in the company's interest reasonably and in good faith, and may be held liable for the company's losses caused by wrongful actions or by failure to act.13 As explained by the Supreme Commercial Court, this principle applies, in particular, with regard to transactions ‘at unbeneficial terms' such as where the price or other terms are substantially worse than those in analogical transactions in comparable circumstances.14

vi Transfer pricing and Russian accounting rules

Russian accounting rules generally provide for the historical cost method. The market value method is applicable in explicitly defined circumstances, namely: with regard to purchases for no consideration, inventories remaining upon liquidation of fixed assets, and quantity excess revealed through inventory control; with regard to reflection (in financial reporting) of investments in publicly traded securities and, if so elected, fixed assets and groups of homogeneous intangibles; for preparation of the liquidation balance sheet; and, if so elected, for transfer of assets upon the company's reorganisation.15

Notes to financial reporting must disclose information on dependent parties16 and transactions with such parties.17

II FILING REQUIREMENTS

Taxpayers must file annual notifications with regard to a controlled transaction or a group of homogeneous transactions (by disclosing the subject matter and the parties to the respective transaction(s), and the amount of income generated and/or expenses (losses) incurred). Filing (digitally or on paper) must be made by 20 May of the following year through the local tax authority, which forwards all notifications to the Federal Tax Service.

In addition, if so requested by the Federal Tax Service, the taxpayer must file the transfer pricing documentation. The transfer pricing documentation should be prepared with regard to a particular transaction or a group of homogeneous transactions, and should, at the minimum, contain information on the parties, subject matter and commercial terms; the functions performed by the parties, assets used and risks assumed; the pricing methods applied (justifying the selected method and providing further details on sources of information, comparables, calculation of the price and ranges of the profitability indicators); the amount of income (profit) and/or amount of expenses (losses), profitability; the economic benefits resulting from receipt of information and various intellectual property rights; other factors impacting the pricing (profitability), for example, pricing strategy; and voluntary (compensating) adjustments in tax returns. As a general rule, the complexity of the transfer pricing documentation should be appropriate for the complexity and the value of the respective transaction. The transfer pricing documentation may be requested after 1 June and is then to be filed within 30 calendar days; such short filing deadline implies the necessity to annually prepare or update the transfer pricing documentation (in advance of 1 June).

Furthermore, when making adjustments (compensating (voluntary), corresponding or reversed) in the tax return, the taxpayer must provide explanatory details on respective controlled transactions.

III PRESENTING THE CASE

i Pricing methods

Parties to a transaction are free to agree on the transaction price, and this price is deemed to be at arm's length unless the Federal Tax Service proves otherwise or the taxpayer makes compensating (voluntary) adjustments in the tax return.

In line with the OECD principles, the Tax Code provides for the following five transfer pricing methods (to be used in isolation or in combination, for controlling the transaction price and making the adjustments):

  • a comparable uncontrolled price method (in Russian terminology: ‘comparable market price' method): this is a priority method, unless the resale price method applies. It is applicable if there is at least one comparable transaction (including internal comparable);
  • b resale price method: this is a priority method where goods purchased from a related party are resold to unrelated party with no processing, and as explained by the court, if the ultimate unrelated buyers are known.18 This method focuses on the resale price margin;
  • c cost plus method (in Russian terminology: ‘cost' method): this method is recommended with regard to works or services (including management services), sale of raw materials and semi-manufactured products, and long-term contracts. It focuses on the seller or supplier's cost mark-up;
  • d transactional net margin method (in Russian terminology: ‘comparable profitability' method): this method is applicable if there are no comparable transactions (or if the comparability cannot be construed through reasonable adjustments on contractual terms or functional analysis) and therefore none of the first three methods can be applied. This method focuses on the tested party that performs the fewest functions (and undertakes the least risk and does not possess any materially important intangible assets) and that party's net profit margin (related to an appropriate indicator such as sales, costs, selling and administrative costs, or assets); and
  • e transactional profit split method (in Russian terminology: ‘profit split' method): this method is recommended where neither of the four other methods can be applied, and where there is a tight interdependence between the parties' activities, or where the parties possess intangible assets of material impact on their profitability.

The methods are not binding on the taxpayers (in their commercial pricing). When the taxpayer, however, selects a method (or combination of methods) for justifying and adjusting the transaction price, then the Federal Tax Service has to follow this method in transfer pricing audit unless it can prove that this method does not provide for appropriate comparability or justification.

In accordance with the Tax Code, the court is expected to take into account ‘other circumstances important for comparability analysis' of the transaction price.19 The Supreme Court clarified this point such that while it does not permit deviation from the methods (and other principles as defined by the transfer pricing rules), it is meant to avoid situations where the formally correct application of the methods does not allow for a proper result to be achieved (i.e., a price that is not influenced by the parties' interdependence). As an illustrative example, this provision permits the taxpayer to bring evidence to the fact that the understated profits were not a result of parties' interdependence but rather had proper economic justification (e.g., understated profits were embedded into results of other transactions).20

With regard to one-off transactions outside of the taxpayer's main line of business, an independent appraisal may be used, but as clarified by the Supreme Court, provided that it follows the transfer pricing principles (i.e., follows the arm's-length principle).21

Each of the methods implies the use of comparables. Certain comparability aspects have already been considered by the courts (though so far only in disputes resolved under the ‘unjustified tax benefit' doctrine):

  • a loans: deposit and credit rates on the banking market may not serve as comparables for loans between non-banking entities;22 rates in interest-bearing loans may not serve as comparables for interest-free loans;23
  • b lease of real estate: the comparability factors include functionality, size, location, conditions and technical characteristics of premises/buildings and lease term;24
  • c sale of real estate: the comparability analysis should take into account the market trends and demand (i.e., pricing in the growing market is not comparable to pricing in the decreasing market);25
  • d commodity transactions: the comparability factors include the type and technical characteristics of the commodity, sales volume, risks undertaken, and the seller's market strategies;26
  • e supply of goods: the delivery terms such as ‘ex-works', on the one hand, and the supplier's responsibility for transportation, on the other hand, are not comparable; new and second-hand goods are not comparable.27
ii Authority scrutiny and evidence gathering

For the application of the transfer pricing methods and control, only publicly available sources of information may be used (i.e., use of information that is protected by the ‘tax secrecy' regime or is of limited access is prohibited).28 The Tax Code lists in particular the following sources of information:

  • a main sources: quoted prices of Russian and international exchanges; Russian customs statistics; prices (price ranges) and quoted prices obtained from Russian or foreign official databases or publicly available publications or databases; prices (price ranges) and quoted prices obtained from price reporting agencies; and internal comparables (i.e., information about the taxpayer's transactions); and
  • b secondary sources: data derived from accounting/financial and statistical reporting (including reporting contained in Russian or foreign publicly available publications or databases or on corporate websites); and independent appraisals.29

Recent court practice shows that the price ranges for oil obtained from the price reporting agencies such as S&P Global Platts and Argus Media (both focused on physical energy markets) qualify as comparables in particular, since these agencies publish the minimum-maximum transaction price ranges (rather than the average prices).30 On the contrary, the average bank deposit rates published by the Interfax-SPARK database as well as the credit rates published by the Central Bank of Russia do not qualify as comparable.31 Local databases with no visible track record are not viewed as a reliable source of information.32 Furthermore, the mere reference to price ranges obtained from a publicly available source is not sufficient for adjustments; instead the price information should be used within a particular method.33

In January 2017, Russia joined the Multilateral Competent Authority Agreement on the Exchange of the Country-by-Country Reporting (CbC MCAA). The implementation of CbC reporting into the Tax Code is under way; the respective draft law (generally in line with the OECD recommendations in BEPS Action 13) is in discussion.

IV INTANGIBLE ASSETS

The transfer pricing rules are not yet detailed with regard to transactions with intangible assets; and the available court practice is not yet sufficiently developed to provide respective guidelines. Therefore, the implementation of the recent OECD recommendations (including in BEPS Actions 8-10, with regard to the DEMPE principles) in the Russian practice is yet to be seen.

The current transfer pricing rules contain only limited references to intangible assets, as follows:

  • a with regard to functional analysis: the intangible assets (including intellectual property rights) possessed by the parties are to be taken into account when analysing the parties' functions;
  • b with regard to transfer pricing documentation: the information on economic benefits derived from acquisition of intellectual property, rights to the firm name, trademarks, service marks and other intellectual property rights is to be provided along with the information on economic benefits from the controlled transaction; and
  • c with regard to selection of the transfer pricing method: if the tested party possesses materially important intangibles, neither of the resale price method, the cost plus method, or the transactional net margin method may be used; instead, the transactional profit split method is recommended in such circumstances.

V SETTLEMENTS

Generally, settlements with the tax authority are possible in court proceedings (at any stage of proceedings). The settlements are not permitted to deviate from the Tax Code rules (i.e., they are not meant to reduce tax assessments or penalties, but rather to address certain additional information or evidence).34 Settlements in tax disputes were made in 2012 for the first time; and so far only a few of such cases have taken place (though none of those concerned transfer pricing matters).

The possibility of entering into a transfer pricing agreement with the Federal Tax Service is available only for major Russian corporate taxpayers that meet certain substantial economic thresholds (i.e., only for a few Russian corporates). The content of the transfer pricing agreement is regulated by the Tax Code. It is meant to define controlled transactions, pricing methods and information sources as well as evidence for confirming the compliance with terms of the agreement. Settlements on pricing through such agreement are unlikely to be permitted.

VI INVESTIGATIONS

The Tax Code regulates transfer pricing control as a special tax audit procedure that is conducted by the Federal Tax Service (the top-level authority within the tax administration) and that is separate from the ordinary tax audits conducted by the local tax authorities (desk tax audits, field tax audits or tax monitoring).

The transfer pricing audit can be initiated either on the basis of the taxpayer's annual notification on controlled transactions (see Section II, supra) or upon an alert by the local tax authority when it revealed controlled transactions in the course of an ordinary tax audit. Generally, the audit may be initiated within two years after the receipt of such notification or alert. The scope of the transfer pricing audit is limited to controlled transactions performed during three calendar years preceding the year when the audit is initiated. Generally, controlled transaction performed in a particular year may be audited only once and only with regard to one party.

The transfer pricing audit is expected to be completed within six months, unless it is extended to 12 months. An additional extension for up to nine months is possible for obtaining information from foreign competent authorities, additional examinations or translation of documents. The Federal Tax Service may involve an expert or specialist as well as a translator. Information and documents related to the audited transactions may be requested from the respective counterparties.

In the event the deviations from the arm's-length price and the tax base understatements are revealed, the tax audit results are documented with a tax audit report (to be presented to the taxpayer within two months after the audit is completed). The taxpayer may then file, with the Federal Tax Service, written objections to the tax audit report (within 20 days). Following the consideration of the tax audit report and the objections, the Federal Tax Service issues the tax audit decision. (For court proceedings with regard to the tax audit decision, see Section VII, infra.)

While the Tax Code defines explicitly that the transfer pricing audit may be conducted by the Federal Tax Service only, both the state authorities (the Ministry of Finance and the Federal Tax Service) and courts share the view that it is permissible for the local tax authority to review transfer pricing in the context of the ‘unjustified tax benefit' doctrine during an ordinary tax audit (see Section I, supra).35

VII LITIGATION

i Procedure

With regard to the results of an ordinary tax audit, the tax audit decision is issued by the local tax authority and may be brought for appeal in court only if the respective decision has undergone the appeal with the superior tax authority (through the administrative or general appeal procedure).

On the contrary, the transfer pricing audit is conducted by the Federal Tax Service, and the decision issued as a result of the transfer pricing audit can be appealed in court directly (without going through the administrative or general appeal procedures). Furthermore, the enforcement of tax claims resulting from transfer pricing control, including from recognition of parties as related parties or recognition of transactions as ‘controlled transactions', is possible only through court proceedings. Therefore, unless the audited taxpayer voluntarily discharges the tax assessments, the Federal Tax Service would be required to initiate court proceedings in order to enforce the tax claims.

Generally, the procedure for tax matters in commercial courts takes approximately a year, including the following instances: in the commercial court of first instance - examination of a case on its merits; in the appellate commercial court - consideration of an appeal; in the cassation commercial court - consideration of a cassation appeal; in the Supreme Court - review of court decisions in case of contradictions with the court practice, breach of human rights or representation of public interests; and in any commercial court that adopted the latest decision - review of a case due to newly discovered circumstances.

In the court proceedings, an expert or a specialist may be appointed by court. However, their involvement should be limited to either resolving doubts on the credibility of evidence (where there are discrepancies in such evidence brought by the taxpayer or the Federal Tax Service), or providing an expert opinion on specific questions that require professional knowledge (e.g., specific questions raised by the court in an attempt to resolve discrepancies in views on the appropriate method to be selected (such as questions related to profitability indicators)).36

ii Recent cases

Although the current transfer pricing rules have been in effect since 2012 and there have been several transfer pricing audits conducted by the Federal Tax Service under these rules, only two known cases37 have reached the court.

The remaining (significant) number of transfer pricing cases concern tax claims assessed by the local tax authorities as a result of ordinary tax audits, based on the domestic anti-abuse concept (the ‘unjustified tax benefit' concept), with the transfer pricing rules having played rather a secondary role. Still, several such cases offered a substantive discussion on certain elements of the transfer pricing rules (mainly on sources of information and comparability criteria, as discussed in Sections I to III, supra).

VIII SECONDARY ADJUSTMENT AND PENALTIES

i Adjustments

If the contractual price in a controlled transaction is not at arm's length, resulting in an understatement of the tax base, the taxpayer is allowed to make year-end compensating adjustments (in the annual corporate tax return and by refiling quarterly VAT and MET returns).38

Furthermore, the Tax Code regulates the corresponding adjustments for primary adjustments made by the tax authority or for compensating (voluntary) adjustments made by the counterparty in its tax return.

Secondary adjustments are not yet considered in Russian tax practice.

For cross-border matters, several (but by far not all) Russian double tax treaties regulate the corresponding adjustments; however, there are very few practical cases on such cross-border adjustments.

ii Liability for transfer pricing violations

Where the tax authority discovers a tax base understatement in a controlled transaction, the following penalties may be imposed:

  • a a fine of 40 per cent (assessed on the underpaid tax amount; in the amount of at least 30,000 roubles). In accordance with the transition provisions of the transfer pricing rules (in effect from 2012), no fines are assessed for violations in the years 2012-2013, and a reduced fine of 20 per cent is assessed for violations in the years 2014-2016; and
  • b late-payment interest (under general rules).39

Neither fines nor late-payment interest may, however, be imposed in the circumstances of primary adjustments on a voluntary basis.

A fine of 5,000 roubles is imposed for failure to submit or for submission of a false notification on controlled transactions.

IX BROADER TAXATION ISSUES

i Diverted profits tax or similar tax rules

While Russian tax laws do not have an equivalent to diverted profits tax, several other tax rules and concepts (in addition to the judicial doctrine of ‘unjustified tax benefit', see Section I, supra) have been used by the tax authorities to combat profit shifting.

Historically, the tax authorities have focused on intra-group services and administrative cost sharing agreements that require the domestic subsidiaries of MNEs to pay compensation for various central administrative functions. In an attempt to deny deductions for intra-group service fees, the tax authorities usually refer to various technical deficiencies in documenting the services' or functions' deliverables (rather than to pricing); most of these cases were resolved in the taxpayer's favour.40 Where the intra-group agreements referred to the cost split in accordance with the OECD Transfer Pricing Guidelines, the courts decided in the tax authorities' favour, explaining that the Russian tax laws do not permit deductions for cost allocation within the MNE group (indeed such cost allocation is permissible only with regard to permanent establishments).41 In fact, all such known cases concerned the tax years prior to the enactment of the new transfer pricing rules (and in all of these cases, the court explicitly stated that ‘in the respective tax periods' the cost allocation was not permitted), therefore it is hard to foresee how the similar cases related to the recent tax periods will be resolved.

With the development of the beneficial ownership concept in the Russian tax practice, recently the tax authorities have increasingly focused on cross-border intra-group loans and IP licences in attempt to deny deductions or tax treaty relief for withholding tax (or both). In reasoning the tax claims, usually the tax authorities refer to the back-to-back nature of arrangements, the insufficiency of functions performed and the risks assumed by the respective income recipient, the conduit nature of the recipient and its missing ‘beneficial owner' status (rather than to pricing).42 In the majority of such cases, the Russian tax authorities utilise exchange of information mechanisms in order to collect evidence on the income recipient's substance and its ultimate beneficial owners.

With regard to permanent establishments (PEs), the Tax Code permits the allocation of the income and cost to be made based on functions performed by the Russian PE, assets used and economic (commercial) risks assumed. The principle of determining the PE income by applying the fiction of an independent enterprise (as usually provided in the Russian double tax treaties) is generally acknowledged, but is not yet consistently applied by the tax authorities and courts (often restricting the deductions to costs incurred by the PE itself).43

ii Impact on VAT and customs duties

As mentioned above (see Section I, supra), transfer pricing adjustments for VAT purposes are allowed in a rather limited number of circumstances, such as performance of works or services, or sale of goods to non-resident persons or to domestic persons who are VAT-exempt.

With regard to customs duties and import VAT, the ‘customs value' rules are defined in the customs legislation of the Russian Federation and the Eurasian Economic Union.44 The transfer pricing rules and the customs value rules are the two separate sets of rules.

The Ministry of Finance confirmed that the recognition of a transaction price as at arm's length by the customs authorities may not serve as evidence for recognition of the transaction price for taxation purposes.45 On the other hand, the court practice indicates that the tax authorities may disallow the offset of the input VAT paid upon goods' import on the basis that the customs value exceeds the resale price. In two such known cases, the court sided with the taxpayer, mostly for the reason that the customs value does not justify questioning the resale price for transfer pricing purposes.46

Transfer pricing control is conducted by the Federal Tax Service and customs clearance and customs value control are conducted by the Federal Customs Service; these two bodies are both subordinate to the Ministry of Finance. However, the Federal Tax Service has been making significant progress in automatisation of the tax-relevant information flows and tax control as well as in integration of its electronic databases and IT systems with those used by the Federal Customs Service. It is possible that over time these processes will make the convergence of these two sets of pricing rules more apparent and critical.

X OUTLOOK AND CONCLUSIONS

The transfer pricing practice in Russia is in the early stages of development. It seems that other anti-abuse concepts such as beneficial ownership as well as the domestic ‘unjustified tax savings' concept offer easier instruments for preventing cross-border profit shifting (including to related parties' ‘cash boxes' and ‘IP boxes'). The implementation of CbC reporting is likely to enhance this trend.

1 Irina Dmitrieva is a partner at White & Case LLC.

2 The old transfer pricing rules as defined in Article 40 of the Tax Code are outside of the scope of this chapter.

3 The Russian Ministry of Finance is responsible for forming the tax policy and interpretation of the tax laws.

4 Letter of the Ministry of Finance dated 16 June 2013 No. 03-01-18/22698.

5 Section 4 of the Overview of Transfer Pricing Disputes, approved by the Presidium of the Supreme Court on 16 February 2017 (the Overview of Transfer Pricing Disputes).

6 Cases A56-55281/2014; A56-55287/2014; A56-55290/2014 (Avtotor entities).

7 In accordance with the list of countries and territories, approved by the Order of the Ministry of Finance No. 108n dated 13 November 2007 (as amended). This list includes, among others, Crown dependencies and several British overseas territories, the Cayman Islands, Lichtenstein, Monaco and the United Arab Emirates. Cyprus and Malta were removed from this list in 2013 and 2015 respectively. Hong Kong is expected to be removed from this list shortly.

8 Special value thresholds are established for domestic transactions entered into by the following taxpayer categories: (1) the threshold of 60 million roubles - for ad valorem MET taxpayers, and residents of Skolkovo or corporate R&D centres that operate under the Law ‘On the Skolkovo Innovative Center' and are eligible to Skolkovo-related tax incentives; (2) the threshold of 100 million roubles - for taxpayers that opted for the special taxation regimes providing for the unified agricultural tax and the unified imputed tax; and (3) no value threshold - for residents of special economic zones, participants of regional investment projects (RIP), and taxpayers involved in hydrocarbon extraction on offshore deposits.

9 For foreign currency loans - within the range of the applicable interbank rate for the respective currency (such as LIBOR, EURIBOR, SHIBOR) plus 4 per cent up to 7 per cent (for loans in Swiss francs or Japanese yen - 2 per cent up to 5 per cent). For rouble loans - between 0.75 and 1.25 per cent of the Russian Central Bank key rate (which, as of 19 June 2017, is set at 9 per cent). Article 269(1) of the Tax Code.

10 Section 2 of the Overview of Transfer Pricing Disputes. Articles 154(1.2), 250(8) and 274(4-6) of the Tax Code.

11 This doctrine was formulated by the Supreme Commercial Court in Resolution No. 53 dated 12 October 2006.

12 Ruling of the Supreme Court dated 22 July 2016 No. 305-KG16-4920, Case No. A40-63374/2015, Minaevskiy; Section 3 of the Overview of Transfer Pricing Disputes.

13 Article 71 of the Joint Stock Company Law, Article 44 of the Limited Liability Company Law, Article 53.1 of the Civil Code.

14 Section 2 of the Resolution of the Supreme Commercial Court Plenary Session, dated 30 July 2013 No. 62.

15 Russian Accounting and Reporting Order No. 34n; Russian Accounting Standards: RAS 5/01; RAS 6/01; RAS 9/99; RAS 14/2007; RAS 19/02; RAS 16/02; Recommendations on Accounting and Reporting upon Reorganisation.

16 The scope of ‘dependent parties' is defined in corporate laws and may differ from the scope of ‘related parties' as defined in the Tax Code.

17 RAS 4/99; RAS 11/2008.

18 Case A40-123426/2016, Dulisma.

19 Article 105.7(11) of the Tax Code.

20 Section 6 of the Overview of Transfer Pricing Disputes. For instances, in Case A40-7536/2015, Lexmark, the court paid attention to the fact that the taxpayer had been operating in its first few years after entering the quite price-competitive market in Russia and has applied a pricing strategy with gradual (year-by-year) price increases.

21 Section 7 of the Overview of Transfer Pricing Disputes.

22 Cases A29-195/2014, KTK; A55-6976/2015, Tarkett; A55-27937/2014, StalExpress; A55-25768/2014, Viktor&Co.

23 Cases A05-4564/2015, Titan.

24 Cases A62-3086/2014, Beton Art; A41-32826/2014, MobService; A03-3786/2015, GorPo; A72-4131/2015, PisheTorg.

25 Case A12-3349/2015, Prestizh AM.

26 Cases A10-2463/2014, Gornaya Kompania; A26-7861/2014, Granit DomDorStroy.

27 Cases A53-14016/2015, Stanchenko; A55-10734/2015, SpheraS.

28 This principle has been acknowledged by the Federal Tax Service and the court in the recent case A40-123426/2016, Dulisma.

29 Notably, the Tax Code referred to an independent appraisal as a method and as a source of information.

30 Case A40-123426/2016, Dulisma. The price indicators published by Argus Media are also for determining the export customs duties for crude oil.

31 Cases A29-195/2014, KTK; A81-165/2015, Muravlenkovskoye; A40-204810/2014, Itera.

32 Case A53-32459/2015, Kamensk Volokno.

33 Case A81-165/2015, Muravlenkovskoye.

34 Letter of the Federal Tax Service dated 2 October 2013 No. SA-4-7/17648.

35 E.g., letter of the Ministry of Finance, dated 26 October 2012 No. 03-01-18/8-149, letter of the Federal Tax Service dated 16 September 2014 No. ED-4-2/18674; Section 3 of the Overview of Transfer Pricing Disputes.

36 Section 8 of the Overview of Transfer Pricing Disputes.

37 A40-123426/2016, Dulisma (the important positions from this case are discussed above); A40-29025/2017, Uralkaliy.

38 The Tax Code defines the annual tax period for corporate profit tax, the quarterly tax period for VAT and the monthly tax period for MET.

39 Currently, the late-payment interest is payable at a rate of 1/300th of the Russian Central Bank key rate for each day of delay in making the tax payment. As of October 2017, from the 31st day of delay in tax payment, the rate of late-payment interest will be doubled (i.e., 1/150th instead of 1/300th of the Russian Central Bank key rate per day (however, this rule will be applicable only to companies)).

40 Cases A56-94331/2009, RBS; A56-50454/2010, Deutsche Bank; A40-132387/2013, Commerzbank.

41 Cases A40-62131/2012, MUMT/BAT; A40-60626/2012, BAT-STF; A40-28065/2013, Equant.

42 Cases A40-28065/2013, Equant; A40-241361/2015, Intesa; A40-12815/2015, Petelino.

43 Cases A40-138835/2010, CMS.

44 The Eurasian Economic Union is an international organisation aimed at regional economic integration of its Member States that currently include Russia, Belarus and Kazakhstan (the founding members) as well as Armenia and Kyrgyzstan (which joined recently).

45 Letter of the Ministry of Finance dated 6 June 2012 No. 03-01-18/4-72.

46 Cases A40-152870/2013, Russian Towers; A40-17536/2015, Lexmark.