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Russia: Russia’s APAs for cross-border transactions offer new possibilities


Alexander Grinko

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 rules:

  • 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 FTS.

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 process.

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 authority's participation.

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 Tax Code.

Alexander Grinko (, Moscow

KPMG in Russia and the CIS

Tel: +7 (495) 937 44 77


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