Legislation amendments on international exchange of financial information for tax purposes

In the article «Russia has acceded to the Multilateral Competent Authority Agreement on automatic exchange of Country-by-Country Reporting» as of 07.03.2017 was noted, that for complete actual use of the Agreement (Multilateral Competent Authority Agreement on Country-by-Country Reporting) it is necessary to adopt the relevant domestic law. Such law was adopted in the end of 2017.

According to the Federal Law as of 27.11.2017 №340-FZ, Chapter 14.4-1 was added to the first part of the Tax Code of the Russian Federation. Submission of documentation for multinational groups of companies.

The new chapter of the Tax Code legislatively gives the definitions of such concepts as multinational group of companies and its member, country-by-country information and reporting for a multinational group of companies, global and domestic documentation. Regulations for notification on participation in the multinational group of companies, country-by-country information, global and domestic documentation were defined.

For violation of the specified requirements the tax liability of financial market entities was imposed:

• failure to provide financial information in time - 500 th RUB penalty
• non-inclusion of financial information about the client, beneficiary party and persons directly or indirectly controlling them - 50 th RUB penalty for each act of infringing
• violation of the procedure for determining tax residency of clients, beneficiaries and persons directly or indirectly controlling them - 50 th RUB penalty for failure to take measures for each
• illegal non-presentation of the notification on participation in the multinational group of companies or submission of the notification containing false data within a specified period of time - 50 th RUB penalty
• illegal non-presentation of the country-by-country reporting or present the report containing false data within a specified period of time - 100 th RUB penalty
• late file of global documentation by tax payer

Chapter 20.1 was also added to the first part of the Tax Code of the Russian Federation. Automatic exchange of Country-by-Country Reporting with foreign countries (territories).

The following definitions are specified in the Chapter: international automatic exchange of Country-by-Country Reporting with relevant authorities of foreign states (territories); the structure of financial market and its clients; financial services; financial information; beneficiary party; person controlling the client; financial assets.

In addition to the above, the following items were determined: the rights and responsibilities of financial market entities on representation of information to the relevant federal executive authority and its powers in connection with the automatic exchange of financial reporting; restriction on the use of information contained in the Country-by-Country Reporting;

The law was published and entered into force taking into account the features of application of particular provisions.

According to the experts of Information Agency Credinform, more than 300 largest Russian holding companies, 2016 total revenue of which meet the requirements of the Agreement on exchange of Country-by-Country Reporting (according to the Information and Analytical system Globas), are obligated to submit the Country-by-Country Reporting. Among these companies are: FEDERAL GRID COMPANY OF UNIFIED ENERGY SYSTEM, GASPROM, MOSENERGO, NOVOLIPETSK STEEL, LUKOIL, Transneft, SIBERIA AIRLINES, RusHydro, URALKALI, Mining and Metallurgical Company NORILSK NICKEL.