By May 20, 2024, taxpayers must submit a notification to the tax authority regarding controlled transactions (Clause 2 Article 105.16 of the Russian Tax Code). The key points regarding filing such a notification are described below.

i. Who needs to file?

Individuals and legal entities that performed controlled transactions in 2023 need to file a notification. Such transactions include transactions with interdependent entities and/or offshore residents if the Russian taxpayer has recognized income and/or expenditures in aggregate exceeding:

• RUB 120 mln – for transactions with foreign entities, including those from offshore jurisdictions;
• RUB 1 bln – for transactions with Russian entities (subject to provisions of Clause 2 Article 105.14 of the Russian Tax Code).

ii. Do the sweeping changes in transfer pricing apply when filing a notice for 2023?

Please note that the Russian Tax Code underwent major changes as regards transfer pricing (we wrote about them in our review) under which the list of related parties and the list of offshore entities have been significantly expanded, and significant changes have been made to the content of the notification of controlled transactions, transfer pricing documentation and the rules for applying secondary adjustments. These changes will apply to filings for 2024, which will be due only in 2025.

Thus, the notice for 2023 should be filed using the current form. The set of documents and the deadlines for submitting reports to the tax authority are same as before.

In addition, taking into account the comments of the Russian Ministry of Finance,[1] the expanded list of offshore jurisdictions is effective starting from 01.01.2024. When assessing transactions made in 2023, however, you need to refer to the version of the list effective as of 30.06.2023 (Order No.108n of the Russian Ministry of Finance dated 13.11.2007).

We should note additionally that the Special List of Offshore Jurisdictions approved by Order No.35n of the Ministry of Finance of the Russian Federation dated 28.03.2024 and effective from 01.01.2024 applies when assessing the possibility of using other benefits,[2] but is not related to controlled transactions.

iii. What happens after the notification is filed?

Once the notification is filed, the Federal Tax Service may send the taxpayer a request to submit transfer pricing documentation in respect to a transaction (or set of transactions), which must be submitted within 30 business days from the date the request is received (Clause 6 Article 6.1, Clause 3 Article 105.15, Clause 6 Article 105.17 of the Russian Tax Code). The request may be sent no earlier than June 1 of the current year.

Given the short timeframe for submitting documentation on the transaction being audited (or a group of homogeneous transactions), we recommend that you prepare in advance and collect the necessary documents justifying the prices in such transactions.

iv. What if you don't file?

The penalty for failure to submit a notification for 2023 on time or if it contains unreliable information is still 5,000 rubles (Article 129.4 of the Russian Tax Code). The fine will increase to 100,000 rubles only in respect to the notification for 2024. Regardless of the amount of the penalty, such a violation may result in increased scrutiny from the tax authorities in respect to a taxpayer's transactions.

When confronted with complex and conflicting issues in preparing transfer pricing documentation, we recommend engaging professional consultants. Our team keeps up to date with changes to the transfer pricing rules and is ready to assist your company at various stages of dealing with controlled transactions.