Consequences for taxpayers
In accordance with Article 105.16−3 of the Tax Code of the Russian Federation (hereinafter, the Russian Tax Code
), Russian constituent entities of foreign MNE Groups have the right not to submit CbC reports to the FTS subject to certain conditions, including when foreign UPEs of such foreign MNE Groups are tax residents of the countries (territories) that automatically exchange CbC reports with Russia. In such cases, the FTS may obtain CbC reports prepared by UPEs of foreign MNE Groups in their tax jurisdictions as part of the automatic data exchange with the tax authorities of the respective jurisdictions.
However, if UPEs of foreign MNE Groups are tax residents of the countries included in the list of countries (territories) that fail to ensure the automatic exchange of CbC reports on a regular basis, the FTS is authorized by clause 7 of Article 105.16−3 of the Russian Tax Code to request CbC reports directly from Russian constituent entities of foreign MNE Groups as part of the "secondary filing" procedure due to the fact that it is not possible to obtain CbC reports as part of the automatic data exchange.
To fulfill the respective obligation, taxpayers are required to prepare and submit electronic CbC reports in a timely manner (not later than three months from the date of receiving the request) in accordance with the requirements for the preparation of the XML schema of CbC reports, as established by Order
No. ММV-7−17/123@ of the FTS dated 6 March 2018. A fine of RUB 100,000
, which is to be increased to RUB 1,000,000
starting 1 January 2024 after the introduction of the expected changes
 to the Russian Tax Code, is charged for a failure to submit a CbC report or for submission of a CbC report containing inaccurate information.
In addition, we note that there are currently no clarifications with regard to the reporting periods to which the List will apply once it enters into force. Specifically, it is unclear whether the List may be applied retrospectively. Therefore, there is a risk that the FTS will request CbC reports from Russian constituent entities of foreign MNE Groups, including with respect to prior reporting periods for which no CbC reports were obtained as part of the automatic data exchange with the respective countries.
There is also uncertainty regarding the amount of fines to be charged in relation to CbC reports for prior reporting periods that may be requested by the FTS after 1 January 2024. In particular, there is a risk that a fine of RUB 1,000,000
may also be applied to prior reporting periods.
It should be also noted that the published List does not include countries that were excluded from the Order because they had previously suspended the automatic exchange of CbC reports with Russia (e.g., Great Britain, Switzerland and Cayman Islands). Please note that the FTS may also request CbC reports from Russian constituent entities whose UPEs are registered in the above countries based on the fact that such countries are not parties of the Competent Authority Agreements concluded by Russia to ensure the international automatic exchange of CbC reports (paragraph 3, subclause 2, clause 6, Article 105.16−3 of the Russian Tax Code).
A failure to provide a CbC report upon request or provision of inaccurate information may cause the FTS to pay particular attention to intragroup transactions effected between Russian and foreign constituent entities of MNE Groups, and potentially result in TP or general tax audits by the FTS or develop a reputation of a "mala fide" taxpayer.