In November 2017, Russia adopted the Organisation for Economic Co-operation and Development's Base Erosion and Profit Shifting (BEPS) Action 13 recommendations, including requirements in relation to a master file, local file, and country-by-country (CbC) report.¹ New requirements relevant to the master file and CbC report apply to financial years commencing on or after 1 January 2017 (with an optional filing of a CbC report for financial years commencing in 2016). The first reporting period for a local file is a calendar year 2018.

With respect to multinational groups with an ultimate parent entity (UPE) or a surrogate parent entity (SPE) outside of Russia, there is no requirement to file a CbC report locally via a Russian constituent entity for financial years commencing on or after 1 January 2017 if all of the following conditions are met:

1. The jurisdiction of the UPE or SPE has a legislation in place requiring the filing of a CbC report.
2. The jurisdiction of the UPE or SPE is a participant of the agreement with Russia on the automatic exchange of CbC reports as of the filing deadline for the report (12 months from the end of the financial year of the multinational group).
3. The jurisdiction of the UPE or SPE is not included on the list of jurisdictions which systematically fail to fulfil obligations associated with the automatic exchange of CbC reports.
4. Tax authorities of the UPE or SPE jurisdiction were notified about the SPE appointment for the multinational group, if such notification is required by local laws.

With respect to requirement (b) above, Russia has activated an automatic exchange of CbC reports with 48 countries² as of December 2017. At the same time, some of the countries representing significant foreign investors into Russia are currently not on this list, for example, Canada, China, Singapore, the United States and a few others. It is important to note that if Russia does not activate the automatic exchange with these countries by the first CbC reporting filing deadline (12 months after the end of the financial year, with the first deadline on 31 December 2018 for the calendar year end), Russian constituent entities belonging to multinational groups with UPEs or SPEs from these countries will be required to file their CbC reports with the Russian tax authorities. Failure to submit the report may result in a penalty of RUB100,000 (approx. US$1,717), except for financial years starting in 2017 through 2019, where there is a penalty exemption.

Multinational groups should monitor the status of the exchange relationships activation for CbC reporting and to determine their filing approach in advance of their filing deadlines.

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ENDNOTES

¹ See EY Global Tax Alert, Russian State Duma adopts draft law on BEPS Action 13 implementation, dated 17 November 2017.

² Argentina, Australia, Austria, Belgium, Brazil,* Cayman Islands, Chile,* Colombia, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Guernsey, Hungary, Iceland, India, Indonesia, Ireland, Isle of Man, Italy, Japan, Jersey, Latvia, Liechtenstein,* Luxembourg, Malaysia,** Malta, Mauritius, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovakia, Slovenia, South Africa, South Korea, Spain, Sweden, Switzerland,** United Kingdom, and Uruguay.*

* Effective for tax periods starting on or after 1 January 2017.

** Effective for tax periods starting on or after 1 January 2018.

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CONTACTS

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
  evgenia.veter@ru.ey.com
• Maxim Maximov
  maxim.maximov@ru.ey.com

Ernst & Young LLP, Russian Tax Desk, New York

• Kirill Lukyanets
  kirill.v.lukyanets1@ey.com

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