The report notes that Russia has concluded almost 90 tax treaties and has a mutual agreement procedure (MAP) program, but there is limited experience with resolving MAP cases. A small number of new MAP cases are initiated each year and there were 23 MAP cases in progress on 31 December 2018.
The peer review report considers that generally Russia complies with around half the elements of the minimum standard under BEPS Action 14 and is aiming to make further progress on addressing some of the remaining aspects of the standard.
All Russia’s tax treaties contain a provision relating to the MAP, generally in line with the OECD Model. The tax treaty network is partly consistent with the BEPS minimum standard but around 30% of the tax treaties do not provide for the competent authorities to consult together to eliminate double taxation in cases not provided for in the relevant tax treaty. Also more than 20% of the double tax treaties do not include a provision providing for a MAP to be implemented regardless of any time limits in the domestic law; or set a time limit for making transfer pricing adjustments.
The report also notes that around 10% of Russia’s double tax treaties require a timeline to file a MAP request that is shorter than three years from the first notification of the action that could result in double taxation.
The report therefore notes that Russia needs to amend a significant number of the double tax treaties. Russia has signed the multilateral instrument (MLI) to update its treaties for tax treaty related BEPS recommendations. For double tax treaties not covered by the MLI Russia intends to engage in bilateral negotiations with its treaty partners to introduce treaty changes to comply with BEPS action 14.
With regard to the prevention of tax disputes Russia has a bilateral advance pricing agreement (APA) programme, but this does not provide for the roll-back of bilateral APAs.
The peer review report notes that Russia provides access to the MAP in all eligible cases; but has not set up a documented bilateral notification process in cases where the competent authority considers that the MAP request is not justified.
Russia has published clear guidance on the availability of the MAP and its practical application; but the guidance does not reflect Russia’s policy on using arbitration within the MAP. Also the MAP profile does not reflect the details of Russia’s APA and MAP programme.
The implementation of the points set out in the stage 1 peer review report will be examined in the stage 2 peer reviews.
