On April 8, 2016, the Ministry of Finance of the Russian Federation presented for public discussion a draft law addressing the preparation and submission of country-by-country (CbC) reports. The draft legislation, which amends Part One of the Tax Code of the Russian Federation, was developed in response to BEPS initiatives and in general, is in line with the OECD BEPS Action 13 recommendations.
The proposed amendments would require taxpayers who are members of an international group, whose total revenue for the preceding fiscal year was at least RUB 50 billion, to submit annual CbC reports. The following taxpayers must submit a CbC report:
- Parent company of an MNE (member that directly or indirectly participates in the capital of other group members).
- Authorized participant (authorized by the parent company, “surrogate parent” as defined in the OECD BEPS Action 13 recommendations).
- Member of an MNE whose parent company is not required under domestic law to submit a CbC report, or which is a tax resident of a jurisdiction that is not currently party to an international agreement on the automatic exchange of information on CbC reporting.
The draft law includes definitions of “member of an international group”, such as (1) an organization whose financial statements are included in the consolidated financial statements of the international group or would be included if the securities were publicly traded or (2) an organization whose financial statements are not included in the consolidated financial statements of the international group due to size or materiality of data. “International group” is defined as related companies, and includes at least one Russian tax resident entity and one non-Russian tax resident entity, or an entity that is tax resident in one state and is liable to tax from a permanent establishment in a member state (i.e., multinational enterprise or MNE).
MNE taxpayers shall notify the tax authority of their participation in the group by September 20th of each calendar year. Failure to notify or submitting false information will incur a penalty of RUB 50,000.
CbC Report Content
The CbC report must include the following information:
- Total amount of income (revenue) from transactions between related and independent parties.
- Amount of income (loss) before income tax.
- Amount of corporate income tax paid by a foreign organization.
- Amount of corporate income tax accrued by a foreign organization in the current year.
- Amount of share capital.
- Amount of retained profit.
- Number of employees.
- Value of tangible assets, excluding cash and cash equivalents.
- Identification information of each MNE member.
Failure to submit a CbC report or submitting false information incurs a penalty of RUB 100,000.
The penalties discussed above do not apply to violations identified in 2017-2019.
Reports are to be submitted within 12 months from the end of the relevant financial year. CbC reports must be submitted for financial years starting from January 1, 2017. Reports for prior years may be submitted on a voluntary basis.
Empowering you with knowledge. Preparing you for action.
Thomson Reuters BEPS research and technology solutions empower you with up-to-date knowledge, analysis and documentation tools to respond, comply and advise as new laws and standards are passed on a country-by-country basis. Learn more at tax.tr.com/BEPS.