Country-by-country reporting may be introduced in Russia

Ministry of Finance of the Russian Federation published a draft law that if adopted will oblige Russian companies being members of international groups of companies (“International Groups”) to file country-by-country reports in the Russian Federation.

It is planned that the changes will concern only International Groups with overall revenue exceeding 50 billion rubles.

According to the draft law, Russian residents being members of International Groups will be obliged to file with the Russian tax authorities a notification on membership in an International Group, as well as country data on the International Group, which will contain:

• a country report,
• global documentation,
• national documentation.

Russian companies being members of International Groups will file with the tax authorities notifications on membership in an International Group. The notification will contain general information on Russian residents of the International Group. The draft law provides a possibility for only one Russian company of the group to file such notification containing data on all Russian members of the International Group.

In addition to the notifications on membership in an International Group, Russian companies of the group will be obliged to provide upon request of the tax authorities national documentation containing information on controlled transactions with non-residents.

The parent company of the group, if it is deemed a Russian tax resident, will be obliged to file with the tax authorities a country report after the financial year ends, as well as global documentation upon request of the tax authorities. It should be noted that the draft law allows for the country report and global documentation to be submitted by an authorized company of the group and not by the parent company.

It is planned that the global documentation will contain information on the structure, activities, intangible assets and intra-group financial activities of the International Group.

The country report will contain the following information:

• total revenues from transactions for the financial year;
• profit for the financial year;
• profit tax paid in the financial year;
• accumulated profit as of the end of the financial year;
• average number of employees for the financial year, etc.

The draft law provides for liability in the amount of 50,000 rubles for failure to submit a notification on membership in an International Group, and in the amount of 100,000 rubles for failure to submit country data for each documentation type (country report, global documentation, national documentation).

Time to act

If your company is a tax resident of the Russian Federation and a member of an International Group, we recommend that you carry out an analysis of the structure of the International Group in order to determine whether you will need to file notifications on membership in the International Group, and start with preparing the country data, in particular, consider how to collect and consolidate information in the most effective manner, as well as assess the possibility of appointing an authorized company of the group responsible for the country-by-country reporting issues.