In the beginning of 2018 Russia began automatic exchange of tax information under the OECD Convention (Organization for Economic Co-Operation and Development) and introduced new reporting requirements for members of multinational enterprise (MNE) groups.

What companies does the law apply to?

The reporting must be filed by MNE groups with consolidated revenue over RUB 50 bln in the preceding fiscal year (if the parent company of a MNE is a Russian tax resident)*. In addition, the following conditions apply:

• the company prepares consolidated financial statements in accordance with the requirements of the legislation of the Russian Federation or stock exchanges;
• at least one member of MNE group is subject to taxation in Russia (Russian resident company or a foreign company);
• at least one member of MNE group is subject to taxation outside of Russia (foreign company or a Russian resident company).

* If the parent company of a MNE group is not a Russian tax resident, the revenue threshold is defined by local Country-by-Country reporting requirements.

What’s included in the reporting?

1. Notification on the membership in a MNE group

The MNE group membership notification must be submitted to the Tax Service no later than 8 months after the end day of the parent company’s reporting period. For example, if the MNE parent company’s fiscal year ended on December 31, 2021, the Russian member of MNE group must file a notification no later than August 31, 2022.

The notification for tax authorities must include the following:

• company’s registration data,
• MNE member status,
• information on whether a company or parent entity are on the Russian strategic enterprises list,
• information on the parent company,
• information on an authorized MNE group member (if the parent company chooses a MNE group member to prepare and file notifications for all the MNE members).

If there are several members of a MNE group in Russia, the notifications can be submitted in two different ways:

• Each Russian MNE group member files a separate notification;
• The parent company chooses one Russian member to prepare and submit notification for all Russian members.

2. Country-by-Country report

Country-by-Country report (CbCR) must be submitted within 12 months from the end of the relevant financial year. The report must be submitted by Russian tax residents (the parent company or authorized MNE group member).

CbCR must include:

• revenue,
• profit (or loss) before tax,
• corporate income tax paid,
• share capital,
• retained profit,
• number of employees,
• tangible assets,
• identification information of each MNE group member.

3. Master file

Russian tax authorities can request a MNE group member to provide a master file not earlier than 12 months and not later than 36 months after the end date of the reporting year. It is submitted by a Russian tax resident and can be done by only one MNE group member.

The master file contains the following information:

• structure of participation in capital,
• markets for goods / works / services,
• activities,
• intangible assets of MNE group,
• financial activities,
• other information required by the law.

4. Local file

Russian tax authorities can request a MNE group member to provide a local file (national documentation) not earlier than June 1 of the year following the reporting calendar year. The local file is prepared by Russian MNE group members and includes information on controlled transactions with foreign MNE group members (similar to transfer pricing documentation).

Why Country-by-country reporting shouldn’t be neglected

Submitting incorrect information or failure to submit a MNE group membership notification results in a fine of RUB 50,000; and in case of CbCR, Master file or Local file – RUB 100,000 for each report.

We would also like to note that absence or incorrect information in the MNE group membership notification may result in penalties not only from Russian Service but also from foreign tax authorities and negatively affect the whole group of companies.

Our services

Our company specializes in accounting and legal services for foreign companies that operate in Russia, and will be happy to assist your business with preparation and filing of the relevant reporting documentation.

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