The Russian Ministry of Finance has proposed some transfer pricing amendments (Draft legislation No. 720839-7) and submitted them to the State Duma for approval (preliminary examination of the draft law submitted to the State Duma). The draft law contains the following suggestions:

MAP process:

As part of the BEPS initiative, Russia committed to implement the minimum standard on effective dispute resolution. Thus, the draft law suggests rules with regard to requests from the tax authorities for transfer pricing documentation; provisions for the Ministry of Finance to initiate the MAP process within 90 days after receiving the taxpayer’s application; and measures allowing the tax authorities to request additional documentation from the taxpayer.

The MAP process will be initiated by the taxpayer or by a competent foreign authority of a country that has entered into an income tax treaty with Russia.

The taxpayer could apply for the MAP process within three years from the time of the first notification with regard to the actions that resulted in the double taxation (that is, from the date of the tax audit protocol delivery).

Controlled transactions involving intangibles:

The draft legislation suggests that specialized functional analysis will be required that takes account of (1) DEMPE functions (development, enhancement, maintenance, protection and exploitation of intangibles), (2) risks related to DEMPE, and (3) additional comparability criteria for intangibles (e.g. their exclusivity, duration of legal protection, etc.).

Profit-split method:

The draft legislation proposes that control over intangibles be considered when analyzing applicability of the Profit Split method.

If the draft law legislated, these changes will enter into force on 1 January 2020.