Russian Tax Code amended: new rules on exchange of financial account information and country-by-country reports

22.12.2017

Legal update No 623

Goltsblat BLP advises that the Russian President has signed Law No. 340-FZ dated 27 November 2017 significantly amending the Tax Code of the Russian Federation (the “Tax Code”) in relation to international exchange of financial account information and country-by-country reports. Please see a summary of the most vital provisions of the Law below.

Tax Control

A competent foreign authority may participate in a tax audit or tax monitoring, if so provided for by an international agreement.
Country-by-Country Reporting

New concepts are introduced, such as multinational enterprise group (MNE group), parent entity of an MNE group, constituent entity of an MNE group, reporting entity of an MNE group.

A constituent entity of an MNE group (if the group has revenues of RUB 50 bn or more) must now produce the following documents:

1. a notification that it is a part of the MNE group;

2. country-by-country data on the MNE group, including:

  • global documentation relating to the MNE group;
  • national documentation of the constituent entity;
  • country-by-country report on the MNE group for the countries (territories) in which its constituent entities are tax resident.

The Tax Code is supplemented by Chapter 20.2 prescribing automatic exchange of country-by-country reports for the financial years starting 2017. Russia’s Federal Tax Service (the “FTS”) announces on its official website that, if an MNE group’s 2017 financial year coincides with the calendar year, country-by-country reports are to be filed by the end of 2018. In addition, the Law allows groups reporting through the FTS to file such reports voluntarily for 2016 in order to avoid using a secondary reporting mechanism in other jurisdictions. The Law states expressly that the information obtained from country-by-country reports may not be regarded as independent proof of tax non-payment.

International Automatic Exchange of Financial Account Information

Chapter 20.1 is added to the Tax Code, requiring financial market organisations to provide the FTS with financial information about their clients, beneficiaries and persons directly or indirectly controlling them.

The FTS will share such information with competent authorities in jurisdictions committed to automatic exchange of financial account information where the above persons are tax resident. To obtain information about Russian tax residents’ accounts, Russia has to report information on its non-residents’ accounts.

Chapter 20.1 of the Tax Code comes into force on official publication of the Law. The FTS announced on its website on 28 November 2017 that the Law had come into force and stated that the first reporting on accounts opened before 2018 by clients not tax resident in Russia would be due by 31 July 2018.
Following the above-mentioned Federal Law, on 21 December 2017 71 countries activated exchange relationships with Russia. With many of them the first information exchange will take place in 2018 for the 2017 reporting period.

Goltsblat BLP will continue to monitor trends in this area and will be updating you on all major developments.

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