On 3 May 2018 the Decree of the Ministry of Finance of the Russian Federation N 60н “Concerning approval of Procedure of Advance Pricing Agreement (hereinafter – APA) conclusion for the purposes of taxation of international transactions a one party of which is a tax resident of foreign jurisdiction, which has signed double tax treaty with Russia” was published. This Decree came into force starting 4 June 2018.
This Decree establishes procedure of APAs conclusion with regard to international transactions with participation of several appropriate authorities of foreign jurisdictions, which have signed double tax treaties with Russia. It is important to note that APAs could be concluded by Russian entities which are recognized as the largest taxpayers only.
APAs conclusion procedure with participation of the Russian tax authorities (RTA) and appropriate authorities of foreign jurisdictions is divided in the following stages:
1. Preliminary discussion with the RTA;
2. Filling an application to the RTA on conclusion of APA;
3. Consideration of such application by the RTA;
4. Negotiations between the RTA and appropriate authorities of foreign jurisdictions;
5. Conclusion of APA between a taxpayer and the RTA (or revision of APA in accordance with an agreement between the RTA and appropriate authorities of foreign jurisdictions).
Theoretically, implementation of such mechanism could allow Russian taxpayers to avoid potential litigations with the RTA on the application of the Russian transfer pricing legislation.