Transfer Pricing Alert | 10 March 2017

Russia revises draft law on BEPS Action 13 CbCR implementation

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Executive summary

On 6 March 2017, the Russian Finance Ministry presented for public discussion a new version of the draft law aimed at the introduction in Russia of documentation requirements for multinational enterprises (the Draft) in accordance with the Organisation for Economic Co-operation and Development’s (OECD’s) Base Erosion and Profit Shifting (BEPS) Action 13 on Country-by-Country Reporting (CbCR). This Alert summarizes the main changes in the Draft as compared with the prior version published on 6 September 2016.1

Detailed discussion

Overview of key changes

  • The new version of the Draft aligns the definitions of an ultimate parent entity (UPE) and a surrogate parent entity (SPE) of a multinational enterprise (MNE) with the definitions under BEPS Action 13. The definition of consolidated financial statements has also been modified.
  • It is still possible to refrain from submitting individual notifications of participation in an MNE if the UPE, the SPE or another constituent entity of the MNE have submitted a notification in Russia containing a full list of Russian constituent entities. In addition, the time limit for submitting notifications has been altered from three months to eight months from the end date of the UPE’s last financial year.
  • The consolidated revenue threshold used to determine whether an MNE group with a foreign UPE has an obligation to submit a CbC report and a notification should now be determined based on the rules existing in the respective foreign jurisdiction that corresponds to the OECD recommendations.
  • The Master file may now be requested not only from the Russian tax-resident UPE of an MNE group but also from any other constituent entities of the group, which are tax residents of Russia. The contents of the Master file has changed significantly as compared with the prior version of the Draft (the changes are discussed in detail below).
  • The Draft eliminates uncertainty as to whether the Local file would be an additional requirement for controlled cross-border transactions between an MNE’s members, stating that it would effectively replace the currently existing requirement to prepare transfer pricing documentation.
  • Fines for the non-submission of the Master file and Local file (or the submission of misstated information) have been excluded.
  • The law will enter into force from the date it is signed, but will apply to MNEs’ fiscal years commencing from 1 January 2017. It is stated that the new requirements will also apply to transactions concluded in prior periods if amounts of income and/or expenses relating to those transactions are recognized for taxation purposes on or after 1 January 2017.
  • It remains possible for CbCR to be submitted on a voluntary basis for fiscal years commencing before 1 January 2017.
  • On 26 January 2017, Russia’s Federal Tax Service (FTS) signed the Multilateral Competent Authority Agreement (MCAA) on the Automatic Exchange of Country-by-Country Reports.2

General provisions

Language of CbC reports

The Draft clarifies that the CbC report, Master file and Local file must be submitted in Russian. The only exception is made for the CbC report of an MNE group in which the parent company is not deemed to be a tax resident of Russia in the reporting year.

Exchange rate for translating revenue amounts

Where the UPE or SPE of an MNE group prepare consolidated reports in a currency other than Russian currency, the threshold values established for the preparation of CbC data (50 billion rubles) would be determined using the year-average exchange rate of the foreign currency to the Russian ruble for the fiscal year immediately preceding the fiscal year for which the CbC report is to be submitted.

State secrets and strategic enterprises

The CbC report and Master file are not allowed to contain information that constitutes State secrets or directly and/or indirectly pertains to military-technical co-operation with foreign states. Exchange of CbC reports in relation to MNEs’ members, which have been included under Russian law in the list of strategic enterprises and strategic joint stock companies and in relation to subsidiaries of such entities may also be limited/disallowed.

Country-by-Country report

Choice of data sources

The Draft establishes that a CbC report may be compiled based on financial statements prepared in accordance with any internationally recognized financial reporting standards or local reporting rules and other information, which helps to ensure the completeness and accuracy of data provided in the CbC report. At the same time, there must be consistency in the use of particular sources of information from one year to the next. The reasons for change of an information source must be disclosed.

Master file

Who prepares it?

As noted above, under the new version of the Draft any taxpayer may be required to present the Master file, whether it belongs to a Russian-based or foreign-based MNE group. Responsibility for preparing and submitting a Master file (similarly as the notification of participation in an MNE group and the CbCR) may be assigned to the SPE.

When might it be requested?

The Master file may now be requested in the course of any control measures along with transfer pricing audits. According to the Draft, the Master file must be submitted within 3 months upon request from the federal tax authority, but not earlier than 15 months from the end date of the last complete financial year indicated in the request.

Contents of Master file

In the new version of the Draft, the composition of the Master file has largely been brought into line with the recommendations of the OECD’s BEPS Action 13. Gone, for example, is the requirement to disclose the conditions of contracts between group companies. In its place is a requirement to provide a list and brief description of key contracts for the provision of services and the use of intangible assets.

The key information to be disclosed in the Master file is as follows:

  • A description of the group’s business, including key value drivers, a description of the five main products/services, including supply chains for those products/services and geographical markets for those products/services in which the group operates, a description of the main intra-group transactions involving the provision of services, a brief functional analysis of the group and a description of key business restructuring events which occurred during the period reviewed
  • A description of key intangible assets which may materially influence the group’s activities and a description of intra-group transfer pricing policies in relation to intangible assets
  • A description of the intra-group financing structure, including main sources of financing, and intra-group transfer pricing policies in relation to financial activities
  • Information on the group’s financial and tax position for the period concerned

Not only financial statements but also management reports, tax returns and any other consolidated statements may now be used in preparing the Master file.

Local file

Change relative to existing documentation requirement

As noted above, the new version of the Draft eliminates uncertainty over whether members of an MNE group will be required to prepare a Local file in addition to or in place of the existing transfer pricing documentation requirements. Now a Local file is regarded as the only type of documentation (in addition to the CbC report and Master file) that members of an MNE group would be required to submit in relation to cross-border controlled transactions.


There have been no changes as far as notifications of participation in an MNE group are concerned, and the respective penalty for its late submission or submission of inaccurate information is 50,000 rubles.

As for the three-tier transfer pricing documentation, the new version of the Draft prescribes sanctions in amount of 100,000 rubles only in relation to the late submission or submission of inaccurate information in the CbC report. The submission of a revised CbC report, as long as it occurs before inaccuracies are discovered by the tax authorities, would release a taxpayer from penalties.

Penalties concerning the Master file and Local file will not be applied.


It is advisable for MNE groups to evaluate the impact on the group of the introduction in Russia of the requirements contained in the Draft, including the necessary level of disclosure, related risks and the group’s readiness to organize the timely and correct disclosure of necessary information.

Future Alerts will report on any developments with respect to CbCR legislation.


1. See EY Global Tax Alert, Russia issues new version of draft law on BEPS Action 13 implementation, dated 9 September 2016.

2. See EY Global Tax Alert, Russia joins Multilateral Competent Authority Agreement for Country-by-Country Reporting, dated 30 January 2017.

For additional information with respect to this Alert, please contact the following:

Ernst & Young (CIS) B.V., Transfer Pricing and Operating Model Effectiveness, Moscow
  • Evgenia Veter
    +7 495 660 4880
  • Maxim Maximov
    +7 495 662 9317

EYG no. 01125-171Gbl