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Russia: Bilateral APAs offer new opportunities

30 May 2017

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The Russian transfer pricing rules (TP rules) enacted in 2012 provide the opportunity for taxpayers to conclude both unilateral and bilateral advance pricing agreements (APAs). However, no bilateral APAs have been concluded until now.

Ilarion Lemetyuynen Alexander Iyudin

The stumbling block is the lack of formal procedure from the Federal Tax Service (FTS) as to how taxpayers should form bilateral APAs, and how taxpayers should correctly negotiate them with foreign tax authorities.

In March 2017, the Russian Ministry of Finance published a draft procedure for concluding bilateral APAs ( (the draft procedure). It is now at the stage of public discussion.

The key features of the bilateral APA draft procedure are as follows:

  • Conclusion of bilateral APAs is allowed only with countries that have signed double tax treaties with Russia;
  • The FTS is empowered to be the competent authority to rule on mutual agreement procedures and to exchange tax information; and
  • The bilateral APA application template, and the list of information/documents to be submitted, inter alia includes:
  • evidence to show that the TP methodology was applied as proposed in the bilateral APA (for the past three years available); and
  • provision of the critical assumptions upon which the methodology is based.

The draft procedure sets forth the following stages for concluding a bilateral APA. These are in line with international practice:

  • The pre-filing meeting (optional), which grants the opportunity to discuss with the FTS the feasibility of a bilateral APA and the TP methodology;
  • The actual filing of the bilateral APA application: a formal procedure for requesting a bilateral APA. The taxpayer should submit both the draft bilateral APA and all supporting documents as required in the procedure, as well as pay a stamp duty;
  • Processing of the bilateral APA application by the FTS, after which one of the following decisions is made:
  • conclusion of the bilateral APA is rejected;
  • the taxpayer must amend the draft bilateral APA/provide additional documents; or
  • Negotiations proceed with the competent foreign authority.
  • Negotiations with the competent foreign authority: after these, the FTS decides whether to:
  • conclude; or
  • to send back the bilateral APA for further amendments.
  • Decision granted on conclusion of the bilateral APA: At this stage, the taxpayer has the right to agree and sign the bilateral APA, or withdraw its application.

It is expected that the procedure will be finalised within several months. The Russian Ministry of Finance supports the procedure for bilateral APAs and wants to see it adopted. It also supports development of mutual agreement procedures (MAP) for transfer pricing cases.

There is currently an opportunity to meet with the FTS and discuss the feasibility of concluding a bilateral APA. This may potentially quicken the process for concluding a bilateral APA once the procedure is finalised.

Hopefully the bilateral APA and MAP mechanisms will soon be available in Russia. As a result, companies will gain an instrument to avoid time-consuming transfer pricing audits, possible heavy adjustments, and in the worst case scenario, double taxation.

Ilarion Lemetyuynen ( and Alexander Iyudin (
KPMG in Russia and the CIS
Tel: +7 (495) 937 44 44

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