Submission of documents on international groups of companies -Publication

On 27 November 2017, Federal Law No. 340-FZ “On Amending Part One of the Tax Code of the Russian Federation in connection with the implementation of the international automatic exchange of information and documentation on international groups of companies” (hereinafter referred to as the “Law”) was published and enforced. The Labour Code has been supplemented with Chapter 14.4-1. SUBMISSION OF DOCUMENTS ON INTERNATIONAL GROUPS OF COMPANIES (hereinafter referred to as the “IGC”).

In this regard, we recommend you:

to inform your groups of companies of the entry into force of new provisions of the Tax Code of the Russian Federation;
to receive in advance the information about the compliance or non-compliance of the volume of revenue of your IGC with the requirements for submitting notifications of participation in the IGC and other documents to the tax authorities.
In case of compliance with the established requirements, we also recommend you to agree in advance the actions allowing the Russian organizations to receive exemption from the obligation to submit Country-by-Country Reports to the Russian Federation or submit the specified reports by the established deadlines.

The Federal Law envisages the duty for taxpayers-participants of the IGC (with the exception of foreign organizations that receive only income specified in Article 309 of the Tax Code of the Russian Federation) to submit to the tax authorities the following documents:

Notification of participation in the IGC ***

Submission date*: not later than eight months from the end date of the reporting period of the IGC parent company (corporate fiscal year)****.
Submission optionality**: it is obligatory (subject to meeting the requirements for the volume of revenues of the IGC). The right not to submit a notification is provided for cases when the parent company, or an authorized participant, or another participant in the IGC have provided a notification with details about all participants in this group recognized by tax residents of the Russian Federation. Participants named in the centralized notification are exempt from the obligation to submit it independently.
Form of submission: in electronic form.

Country-by-Country Report

Submission date*: not later than 12 months after the end of the reporting period
Submission optionality**: at the request of the Federal Tax Service of Russia.

Exemption from the obligation to submit a Country-by-Country Report is subject to the following conditions:

1) the parent company or an authorized participant of the IGC submits the Country-by-Country Report;

2) the parent company or an authorized participant of the IGC is recognized as a tax resident of a foreign state (territory) in respect of which all the following conditions are observed:

• the legislation of such a state (territory) provides for the duty to submit a Country-by-Country Report;

• such a state (territory) is a party to the treaty on the international automatic exchange of Country-by-Country Reports;

• such a state (territory) is not included in the list of states (territories) that allow for a systematic failure to fulfil obligations on the automatic exchange of Country-by-Country Reports;

• such a state (territory) is notified of a participant in the IGC, which is responsible for submitting a Country-by-Country Report;

3) total income (revenue) of the IGC is less than 50 billion roubles or less than the total amount of income (revenue) established by the legislation of a foreign state (territory).

Form of submission: in electronic form.

Master file

Submission date*: within three months from the receipt of the FTS request. The documents can be claimed not earlier than 12 months and not later than 36 months after the end of the reporting period specified in the request.

Submission optionality**: at the request of the Federal Tax Service of Russia.

Form of submission: in free form.

Local file

Submission date*: within 30 days from the receipt of the FTS request. The documents can be claimed not earlier than June 1 of the year following the calendar year in which controlled transactions are made.

Submission optionality**: at the request of the Federal Tax Service of Russia.

Form of submission: in free form.

* Notification of participation in the IGC, Country-by-Country Reports and Master File are submitted for fiscal years beginning on 1 January 2017. Local File is submitted for fiscal years beginning on 1 January 2018

**The notification requirements and all types of documents apply to international groups, provided that total income (revenue) is exceeded in the consolidated financial statements for the previous reporting period:

The parent company of the group is a tax resident of the Russian Federation

The parent company of the group is a tax resident of another state

more than 50 billion roubles.
the official exchange rate at the end of the fiscal year is used to translate this threshold into foreign currency.

more than the amount established by the legislation of a foreign state for submission of the Country-by-Country Report to the competent authority of this foreign state.

*** The international group of companies is recognized as a set of organizations and (or) foreign structures not incorporated into a legal entity, which are connected by means of participation in equity and (or) exercise of control, for which all the following conditions are met:

in respect of them, consolidated financial statements are prepared in accordance with the requirements of the legislation on accounting or the requirements of stock exchanges, including foreign stock exchanges;
the group consists of:

at least one organization (a foreign structure not incorporated into a legal entity), which is recognized as a tax resident of Russia or carries out activities in Russia through a permanent representative office;
at least one organization (a foreign structure not incorporated into a legal entity) that is not recognized as a tax resident of Russia or is recognized as a tax resident of Russia and carries out activities in the territory of a foreign country through a permanent representative office.

**** The parent company of the IGC is a participant who directly and / or indirectly participates in other participants of this international group or otherwise controls them, and whose share (control) is sufficient to ensure that the financial statements of other participants are included in the consolidated financial statements of such a participant in the IGC (unless the financial statements of such a participant are included in the consolidated financial statements of another participant in this international group).

Responsibility and exceptions in the application of sanctions:

Report	Infringement	Sanction	Reference to the regulatory act	Exceptions to the application
Notification of participation in the IGC	failure to submit notifications	50 thousand roubles	Article 129.9 of the Tax Code of the Russian Federation	Tax offenses identified for reporting periods beginning in 2017, 2018 and 2019
	misrepresentation
Documents related to the IGC or Country-by-Country Reports	failure to submit documents	100 thousand roubles	Articles 129.10-129.11
	misrepresentation

Information on the contents of the notification and documents

Name of the document / report	List of the main data to be contained in the document
Notification of participation in the IGC	Information: Information on the taxpayer; details on whether the taxpayer is a parent company or an authorized participant; information on inclusion in the list of strategic enterprises and strategic joint-stock companies; information on the federal executive body authorized to grant a prior consent; the name of both the parent company of the group and the company that is an authorized member of the group (if any), as well as the date of the last day of the reporting period.
Country-by-Country Report	Information: on the total amount of income (revenue) for transactions in the reporting period, including breakdown by income (revenue) for transactions with participants of this IGC, and the amount of income (revenue) for transactions with other persons, including associated organizations; on the amount of profit (loss) before taxation for the reporting period; on the amount of the calculated corporate income tax (income tax (profit) or its equivalent) for the reporting period; on the amount of the paid corporate income tax (income tax (profit) or its equivalent) for the reporting period; on the amount of equity as of the end date of the reporting period; on the amount of the accumulated profit as of the end date of the reporting period; on the number of employees for the reporting period; on the value of tangible assets at the end of the reporting period; identification information about each participant in the IGC, including the state (territory) in accordance with the law of which such a participant is incorporated, the state (territory) of the tax residence and the main activities of each participant in the IGC. Information should be provided for each individual jurisdiction.
Master file	Information: on the structure of participation in equity and on the control of an international group of companies, as well as information on the markets for goods (works, services) in the form of a scheme; on the activities of the group with a description of the main factors affecting the financial result, the sequence of supplies of the five largest goods (works, services), other goods and other activities that form more than 5% of the revenue of the group of companies for the reporting period; on intangible assets (their description, a list of significant contracts connected with them, general description of the pricing methodology, etc.); on financial activities (a brief description of the group's financing system); other information, for example, a brief functional analysis of participants, a list and a brief description of pricing agreements, consolidated financial statements.
Local file	In addition to the information contained in Clauses 1 and 2, Article 105.15 of the Tax Code of the Russian Federation, there should be submitted: information on the structure of the taxpayer's management bodies and identification information on persons to whom management reporting should be submitted, and the states (territories) in which such persons carry out their core business; information on the activities of the taxpayer and its market strategy, information on the restructuring of the taxpayer's activities within the IGC and the transfer (receipt) of intangible assets, as well as an explanation of how such a transaction affected the activities of the taxpayer; information on the main competitors of the taxpayer; description of the reasons based on which it was concluded that the price applied to the controlled transaction (group of similar transactions) corresponds to the market price; description of adjustments made to ensure the compatibility of transaction conditions (if any); copies of material agreements between participants in the IGC that affect pricing in a controlled transaction (a group of similar transactions); copies of agreements on pricing, tax clarifications of the competent authorities of foreign states (territories) used in transactions between the IGC participants that are relevant to the analysed controlled transaction (a group of similar transactions), in the preparation of which the federal executive authority, the supervisory and oversight body in the field of taxes and fees did not take part; audit report on the accounting (financial) reporting of the taxpayer for the last reporting period (if the taxpayer is subject to mandatory audit or has conducted a voluntary audit).

Drafts of orders and electronic reporting formats are published on the official portal regulation.gov.ru.