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29 August 2017

Moscow court finds in favour of corporate taxpayer in transfer pricing case

Luis Carrillo

Legal update service Lexology reported last week on the first instance of Moscow's commercial court finding in favour of a corporate taxpayer in a case relating to Russian transfer pricing (TP) rules.

RoubleThe court held that a sum equivalent to around €14 million had been unlawfully charged as additional tax accruals, with Lexology's legal reporters commenting that the decision "contains some important conclusions that can be useful for taxpayers in terms of documentation of controlled transactions for TP purposes, as well as in case of disputes with the tax authorities regarding the application of the rules of Section V.1 of the Russian Tax Code".

How Bureau van Dijk helped the taxpayer 

The taxpayer's case relied on the "comparable profitability method" (CPM). This involved calculating the "arm's-length profitability range" using financial data of comparable independent companies from Bureau van Dijk's Orbis database, which currently holds information on 245 million entities around the world.

The case against, presented by the Russian Federal Tax Service (FTS), was built on a different analysis, using the "comparable uncontrolled price" method. But the court decided that the FTS should have used the same method as the taxpayer, as it did not provide enough evidence to support changing methodologies.

Among other arguments in favour of the taxpayer, the court also highlighted that Russian tax legislation expressly allows the application of CPM methodology on an aggregated basis, and that taxpayers are free to determine the scope of aggregated transactions at their own discretion, taking the principles of completeness into account and using reliable comparability parameters.

Much of the case hinged on the "approach to the preparation of the TP documentation", a process that Bureau van Dijk can aid with its TP Document Manager, often used in conjunction with TP Catalyst and Orbis.

The reporters added that "taxpayers could start using some of the conclusions proposed by the court when documenting their TP policy".

Luis Carrillo

Luis Carrillo, GPG Leader, Tax & Transfer Pricing (TP)

With previous advisory experience in some of the Big 4 firms, Luis is global director for Bureau van Dijk’s tax and transfer pricing market, and is the global practice group leader for tax and transfer pricing.

With previous advisory experience in some of the Big 4 firms, Luis is global director for Bureau van Dijk’s tax and transfer pricing market, and is the global practice group leader for tax and transfer pricing.

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