Russian Adjustment Profits Rise

July 25, 2018

Russian Adjustment Profits Rise

~1-minute read. This article is part of our CrossBorder Audit Alert series.

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Adjustments in Russia Climb Higher and Higher

 

In 2015, RUB 142M (USD $2.2M) was the average tax adjustment from transfer pricing. Taxpayer voluntary adjustments equaled RUB 30B (USD $460M) in fiscal year 2015, up from RUB 15B (USD $230M) in fiscal year 2014. This upward trend is expected to continue over the next several years.

The Russian Supreme Court confirmed that local tax authorities are entitled to adjust prices within intra-group transactions if unjustified tax benefit is proven. This ruling has led to RUB 1.2B (USD $18.5M) of tax adjustments.

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In an attempt to raise revenue and lower the budget deficit, HM Revenue and Customs announced that that between 2011-2016, HMRC secured 5.9 billion of additional tax by challenging the transfer pricing arrangements of multinational corporations! The total amount secured in 2016/17 was 1.6B which was a 50% increase over the amount collected in 2015/16.

Similarly, the Diverted Profit Tax, which is designed to encourage large companies to comply with international tax rules including transfer pricing, raised 281M in 2016/17. This was a 90% increase from 2015/2016.

To collect this amount, the HMRC has 82 full time staff in its specialist transfer pricing group. This number is expected to increase dramatically.

CrossBorder Solutions predicts that this upward trend will continue and MNC taxpayers should expect transfer pricing audits and adjustments to increase dramatically.

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