Russian government has approved Russia’s accession to the international agreement on the automatic exchange of country reports. The order of Prime Minister Dmitry Medvedev to sign the agreement was published on Monday December 12th 2016.
Date of signing will be announced after consultations with the OECD. The agreement will be signed in the first half of 2017 as per Director of the Department of Finance Alexey Sazanov annoucement through the press service.
Most of European countries will disclose information about the internal operations of multinational groups and transnational corporations, but only at the end of 2017. According to the OECD on 7 December, the agreement was signed by 50 countries, including Cyprus, Switzerland, Luxembourg, the Netherlands and the UK. British tax authorities are already warning that the “daughters” of Russian companies are obliged to disclose information even before the country’s accession to the rules, consultants say.
In practice, the exchange will begin in 2018, because its mechanisms will still need to be adjusted. Amendments to the Tax Code obliging the company to disclose information about the internal operations were prepared by Finance Ministry in September but not yet accepted by the State Duma. Work is now being completed on the final version of the text. The plan to submit the draft to the government in the first half of 2017.
Obligation to report comes if the group’s revenue exceedes 50 billion roubles. Reports must be made on revenues of each of its businesses, losses , taxes on profit, number of employees, retained earnings and assets. But the holdings will have the choice to report in Russia or abroad. Any of a group structures may choose to disclose information in the country where it’s based, as long as that country is a member of OECD. Other companies of a group, including holding companies will not have to do this because the data is still going tshared with other States through the channels of the automatic exchange of tax information.
Companies will have to provide two main types of reporting – national and global. The first relates to transactions with transfer prices. Global report will cover the whole group: the markets where the companies operate, all transactions bringing more than 5% of revenue, the conditions of intragroup contracts, financing system, etc. The data sumission will only be needed upon request of the tax authorities.
The FTS will analyze how fair is the division of profit between countries. Not in all cases the new mechanisms will work in favor of the Russian budget. The number of disputes may grow, although the information from the reports by itself is not the reason for the additional taxation.