Since 2012, clause 2 of Article 105.20 of the Tax Code of
the Russian Federation (the RF Tax Code) has allowed taxpayers
to conclude advance pricing agreements (APAs) on cross-border
transactions with related parties.
It stipulated that cross-border APAs can be signed with the
Russian Federal Tax Service (Russian FTS) with the
participation of the appropriate competent authority of the
relevant foreign state, providing that there is double tax
treaty in place between the Russian Federation and the state in
which the counterparty of the transaction is resident.
However, to date there has been no by-law that determined
the procedure for implementing the law.
At the beginning of March 2017, the Russian Ministry of
Finance proposed a draft decree establishing the procedure for
how cross-border APAs can be signed.
The draft decree establishes the recommended application
form to be used and lists the documents needed to start the
procedure to obtain a cross-border APA.
The draft mentions that the documents should include
evidence of the results from the procedures used to determine
prices and/or apply pricing methods calculated based on the
last three years' data.
In addition, the draft decree stipulates the following
- The procedure will start only after both
parties to the transaction have filed their applications with
the Russian FTS and the relevant foreign competent authority,
and after the Russian company has provided the Russian FTS
with all the documents submitted by the counterparty to the
foreign competent authority;
- The Russian FTS will not only assess the
procedure used to determine prices and/or the transfer
pricing methods applied by the Russian taxpayer, but will
also check to see whether unjustified tax benefits would be
gained by the taxpayer; and
- While the application is under
consideration, the taxpayer will have the right to discuss
issues relating to its cross-border APA with the Russian
The procedures established by the draft decree also covers
the conclusion of cross-border APAs on foreign trade
transactions that require agreement between the competent
authorities of several foreign jurisdictions.
The draft decree contains a detailed chart with the
procedural stages on concluding cross-border APAs. The chart
visually demonstrates all of the various possible options to be
considered and helps the taxpayer navigate the negotiation
The period of time provided is six months, with the option
for the Russian FTS to prolong it to nine months. If consent
between the Russian FTS and the relevant competent foreign
authority cannot be obtained, the cross-border APA may be
signed only with the Russian FTS, without the foreign
The current version of the draft decree will probably be
subject to revisions and changes before entering into law. The
decree will provide a guide for taxpayers wishing to conclude
cross-border APAs, being a substantial step forward from when
the option to conclude these agreements was first set in the RF
Alexander Grinko (email@example.com),
KPMG in Russia and the CIS
Tel: +7 (495) 937 44 77