Deadline for submitting a Transfer Pricing notification on controlled transactions

20 May 2022 is the deadline for submitting a Transfer Pricing notification (hereinafter – ‘TP Notification’) on controlled transactions for the year 2021.

In practice, taxpayers do not always manage to submit a correctly filled Transfer Pricing Notification within the prescribed period since its preparation is a time-consuming process requiring involvement of different departments. In order to avoid a 5,000 ruble fine companies can submit a corrected Transfer Pricing Notification.

Please kindly note that if a corrected Transfer Pricing Notification is submitted, the two-year period (within which a decision to initiate a tax inspection can be made) starts from the date of submission of such corrected TP Notification.

This was confirmed by the Court of Appeal in the dispute of PJSC VimpelСom (hereinafter - the ‘Company’) with the Federal Tax Service of the Russian Federation (No. 09АП-45621/2021 dated 14 March 2022), as well as by the Supreme Court, where the Company filed an administrative claim (the Decision of the Supreme Court of the Russian Federation dated 28.10.2021 No. АКПИ21-714, the Appeal ruling of the Appeal Board of the Supreme Court of the Russian Federation dated 10.02.2022 No. АПЛ21-563).

The information on this case may help you resolve possible doubts related to the submission of a TP Notification.

Brief review of the case:

  • On 21 May 2018 the Company submitted a TP Notification for the year 2017 (20 May 2018 was a day off).
  • On 24 October 2018 the Company submitted a corrected TP Notification, in which the numbers of some contracts were corrected and the information about one controlled transaction was updated. Besides, the contract number for a controlled transaction (related to the purchase of agency services from a foreign interdependent company) was changed.
  • On 29 December 2020 the Federal Tax Service of the Russian Federation issued a decision to initiate a tax inspection in relation to the abovementioned transaction.
  • The taxpayer decided that the Federal Tax Service violated the two-year period started from the TP Notification submission, during which a tax inspection can be initiated.

The main arguments of the Company and the position of the Supreme Court are indicated below:

According to the Company’s opinion:

According to the Supreme Court’s position:

The Tax Code of the Russian Federation does not state that a corrected TP Notification “rescinds” the original Notification and replaces it.

The Tax Code of the Russian Federation does not allow for partial correction of the information indicated in the previously submitted TP Notification, which means that it must be re-submitted to the territorial tax authority at the place of Company’s registration.

Having a significant number of controlled transactions, a taxpayer may repeatedly submit corrected TP Notifications. As a result the two-year inspection period would be infinitely reapplied, providing an unlimited timeframe for inspection control and making the two-year deadline unnecessary.

According to the clause 5 of article 105.17 of the Tax Code of the Russian Federation, inspections can be conducted in relation to controlled transactions completed in a period not exceeding three calendar years (and in the case stipulated by the paragraph 3 of the clause 2 of this article - in a period not exceeding five calendar years) preceding the year in which the decision to initiate a tax inspection was issued.

The Tax Code of the Russian Federation provides only one reason for extending the period of issuing a decision to initiate tax inspection. That is the submission of a corrected tax return form in which the amount of tax is smaller (or the amount of loss is greater) than in the original one, and only in relation to those transactions information on which has been changed.

The Federal legislation does not provide for a similar legal regulation with respect to the cases of submitting a corrected TP Notification.

If you have any questions, please do not hesitate to contact us. Our Transfer Pricing team will be glad to help you both in solving any methodological issues and preparation of the TP notification. 

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