Submission of notification of controlled transactions

LEGAL DIGEST, NEWS \ 25.02.2021

Please be reminded that it is necessary to submit a notification of controlled transactions for 2020. The deadline for submitting the document to the tax authorities is May 20, 2021.

The notification should be submitted by taxpayers who have made controlled transactions in the calendar year. Controlled transactions are recognized as transactions between related parties, if the conditions and summational limits set by article 105.14 of the Tax Code of the Russian Federation are met.

The main criteria for interdependence include:

• the company or individual has a certain share of the issued capital that gives them the right to vote;
• an individual has official powers and a legal entity has a legal status that allows managing the company’s actions.

The summational limits and the scope of conditions for recognizing a transaction as a controlled one depend on the category of the related party.

If such a person is a resident of the Russian Federation, the transaction will be recognized as controlled one if the amount of income for the corresponding calendar year exceeds by more than 1,000,000,000 rubles, and at least one of the conditions is met:

• the parties to the transaction apply different profits tax rates to the profits, the obtaining of which is associated with such transactions;
• at least one of the parties is a Mineral Extraction Taxes payer using a percentage rate, and the target of a transaction is the extracted mineral product;
• one of the parties is exempt from the duties of a taxpayer of the corporate profit tax;
• one of the parties is a tax payer whose activities are associated with the production of hydrocarbons at a new offshore field of hydrocarbon fuels, and the other party is not subject to such conditions;
• at least one party to the transaction is a research corporate centre for the Skolkovo project or a participant in the project under the Federal Law No. 216-FZ dated 29/7/2017;
• at least one of the parties applies an investment tax deduction for profits tax;
• at least one of the parties to the transaction is a payer of excess-profits tax from the production of hydrocarbons, which takes into account the income (expenses) for such a transaction when calculating the taxation base for it

If the related party is a non-resident of the Russian Federation, then a transaction with a summational income criterion exceeding 60,000,000 rubles will be recognized as controlled one.

Also, any transactions with off-shore companies are equated with transactions between related parties, even if there is no such interdependence actually. However, for such transactions, the summational criterion of 60,000,000 rubles for year is also applied.

Transactions may also be considered controlled for a number of other reasons.

In addition, at the request of the tax authority, the taxpayer is obliged to provide documentation regarding a specific transaction or a group of similar transactions. The tax authorities are entitled to send such a request not earlier than June 1 of the year following the year of performance of controlled transactions (i.e., starting from June 1, 2021, documentation for 2020 may be requested). The taxpayer is obliged to submit documentation within 30 days from the date of receiving such a request.

The documentation is drawn up in any form and contains the information listed in article 105.15 of the Tax Code of the Russian Federation, including:

• on the activities of the taxpayer and the persons who made the controlled transaction (analysis of the functions performed by the parties, the risks assumed, etc.);
• information about the methods used to determine the market price.

In the matters of preparing a notification of controlled transactions and providing documentation on them, please contact Acsour specialists.