BEPS Action 13 and MNE reporting in Russia.

Under the Base Erosion and Profit Shifting (BEPS) Action 13, developed by Organisation for Economic Co-operation and Development (OECD), all large multinational enterprises (MNEs) are required to prepare a country-by-country (CbC) report with aggregate data on the global allocation of income, profit, taxes paid and economic activity among tax jurisdictions in which it operates. This CbC report is shared with tax administrations in these jurisdictions, for use in high level transfer pricing and BEPS risk assessments.

 

Since 01.07.2015 Russia has ratified the Convention on mutual administrative assistance in tax matters with the Federal law of 04.11.2014 N 325-FZ and the Convention is applied in Russia from 01.01.2016. The Convention prescribes an international exchange of tax information at the request of the interested party, as well as spontaneous and automatic data exchange. In this regard, a multilateral agreement of competent authorities on the automatic exchange of information on financial accounts (CRS MCAA) was developed.

 

To fulfill international obligations on automatic exchange of financial information with foreign states (territories), Russia has introduced a system of notifications on participation in MNEs with the entry into force of Federal law No. 340-FZ dated 27.11.2017 “On amendments to part one of the Tax code of the Russian Federation in connection with the implementation of international automatic exchange of information and documentation for international groups of companies”.

 

Thus, according to the Tax code of the Russian Federation, MNE – is a group of interdependent organizations and foreign structures without a legal entity, which has a certain structure and consolidated financial statements.

 

If the group of companies exceeds the aggregate turnover limit based on consolidated financial statements is required to submit documents to the tax authorities that contain information for the purposes of tax control of transactions, including for justifying prices for intra-group transactions.

 

There are the following limits on the total amount of income (revenue) for the financial year preceding the reporting period, under which participants of MNE are not required to submit documentation on the results of the reporting period:

• less than 50 billion rubles if the parent company is a resident of the Russian Federation;
• less than the amount of income required for the submission of a country report by a foreign country of which the parent company is a resident.

If the specified limits are not met, the MNE participant submits documentation on its activities to monitor transactions within the group at the end of the reporting period.

 

In particular, the MNE documentation in Russia includes:

 

• Notification about participation in MNE

Reporting obligation: if the total amount of MNE revenue for the financial year is more than the amount of revenue set for the submission of a country report by a foreign country of which the parent company is a resident.

Submission period: 8 months after the end of the parent company’s financial year.

Liability for submitting failure: a fine of 500,000 rubles.

 

• MNE reporting

This is information about income (expenses), profit (loss) received from activities in the Russian Federation and (or) a foreign country, the main indicators of participants’ activities and the amount of taxes.

MNE reporting consists of:

• Master file;
• Local file;
• Country by country report.

 

Master File (MF)

Reporting obligation: submitted by a participant of the MNE at the request of the tax authority.

Submission period: within three months from the date of the request receipt. MF can be requested not earlier than 12 months and no later than 36 months from the end of the fiscal year.

Liability for submitting failure: a fine of 1,000,000 rubles.

 

Local File (LF)

Reporting obligation: submitted by a participant of the MNE at the request of the tax authority.

Submission period: within 30 days from the date of the request receipt.

Liability for submitting failure: a fine of 1,000,000 rubles.

 

Country by Country Report (CbC)

Reporting obligation: submitted by the parent company or authorized participant, if they are residents of the Russian Federation. Other MNE participants submit a country report at the request of the tax authority.

Submission period: not later than 12 months from the end of the reporting period.

Liability for submitting failure: a fine of 1,000,000 rubles.

 

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