Notification of controlled transactions 2020

LEGAL DIGEST, NEWS \ 06.05.2020

The term for submitting a notification of controlled transactions for 2019 expires on May 20, 2020. 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:

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

Let us take a closer look at the types of controlled transactions.

Controlled transactions with related parties – residents of the Russian Federation

Transactions will be considered controlled if the amount of income for the year is more than 1 billion rubles and at least one of the conditions is met:

• the parties to the transaction apply different profits tax rates (except for the rates under clauses 2-4 of article 284 of the Tax Code of the Russian Federation) to the profit received in connection with such transactions;
• 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;
• at least one party to the transaction applies the Single Agricultural Tax or Unified Tax on Imputed Income;
• 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 that applies VAT exemption;
• 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.

Controlled transactions with non-residents of the Russian Federation

Transactions with related foreign parties are recognized as controlled on the general grounds established by clause 1 of article 105.14 of the Tax Code of the Russian Federation. Transactions are considered controlled if the summational criterion of 60,000,000 rubles for the year is exceeded.

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.

Documentation on controlled transactions

At the request of the Federal Tax Service, the company should provide documentation on controlled 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, 2020, documentation for 2019 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.

To obtain an advice on controlled transactions and prepare notification and documentation for them, contact Acsour specialists.