Russia: Bilateral APAs offer new opportunities

International Tax Review is part of Legal Benchmarking Limited, 1-2 Paris Garden, London, SE1 8ND

Copyright © Legal Benchmarking Limited and its affiliated companies 2025

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Russia: Bilateral APAs offer new opportunities

intl-updates-small.jpg

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.

lemetyuynen.jpg
iyudin.jpg

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 (http://regulation.gov.ru/projects#npa=38776) (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 (ilemetyuynen@kpmg.ru) and Alexander Iyudin (aiyudin@kpmg.ru)

KPMG in Russia and the CIS

Tel: +7 (495) 937 44 44

Website: www.kpmg.ru

more across site & shared bottom lb ros

More from across our site

It should be easy for advisers to be transparent about costs, Brown Rudnick partner Matthew Sharp said in response to exclusive ITR in-house data
The sprawling legislation phases out Joe Biden-era green tax incentives for businesses; in other news, the UK will reportedly maintain its DST despite US pressure
New French legislation should create a more consistent legal environment for taxing gains from management packages, say Bruno Knadjian and Sylvain Piémont of Herbert Smith Freehills Kramer
The South Africa vs SC ruling may embolden the tax authority to take a more aggressive approach to TP assessments, an adviser tells ITR
Indirect tax professionals now rate compliance as a bigger obstacle than technology and automation; in other news, Italy approved a VAT cut on art sales
AI-powered tax agents are likely to be the next big development in tax technology, says Russell Gammon of Tax Systems
FTI Consulting’s EMEA head of employment tax and reward tells ITR about celebrating diversity in the profession, his love of musicals, and what makes tax cool
Canadian Prime Minister Mark Carney and US President Donald Trump have agreed that the countries will look to conclude a deal by July 21, 2025
The firm’s lack of transparency regarding its tax leaks scandal should see the ban extended beyond June 30, senators Deborah O’Neill and Barbara Pocock tell ITR
Despite posing significant administrative hurdles, digital services taxes remain ‘the best way forward’ for emerging economies, says Neil Kelley, COO of Ascoria
Gift this article