Companies using transfer pricing are threatened with tax inspections

After last year’s enactment of the legislation, focused on the regulation of transfer pricing in matters of tax base assessment (Section V-1 of the Tax Code of the Russian Federation), fiscal bodies tackled seriously the inspection of organizations, which use such scheme of tax payment.

Federal Tax Service (FTS) has begun to inspect about 300 enterprises as far back as since the end of 2013. This year the work will be continued. Such statement was made by the Head of the FTS Mikhail Mishustin.

As a reminder, a transfer price is the price, at which goods (or services) are sold between different divisions of a company or between companies in the same group. Transfer prices allow redistributing of total income of the group of persons in behalf of persons located in states with lower taxes. This is the most simple and widespread scheme of the minimization of tax payment via the decrease of tax base.

Major taxpayers have an opportunity to coordinate in advance the principles of the price formation of such transactions with taxmen, by signing of an agreement with the FTS, in which there are positions of parties specified concerning the procedure for determination and usage of methods of the price formation on concrete transactions between related parties. By that the reasonableness of a contract market price, on which basis the tax liabilities are estimated, is not needed to be checked by fiscal bodies. Therefore, the administration of major taxpayers is simplified and possible expenses of enterprises in view of tax inspections are removed.

In other cases, companies are obliged to submit reports, confirming the market price of a transaction with affiliated companies, to tax authorities. For drawing up of the necessary report it can help a special module, contained in specialized software products Ruslana, Orbis, Amadeus of the European publisher of electronic databases Bureau van Dijk (BVD). Besides, the Agency Credinform is developing own transfer pricing module, the release is slated for 2014.