The Federal Law substantially increases sanctions for TP violations.
The changes primarily affect fines for the non-payment or underpayment of tax as a result of the application in commercial and/or financial transactions of conditions that are not comparable with the commercial and/or financial conditions of transactions between non-related persons.
The fine is set at 100% of the unpaid amount of tax on income referred to in paragraph 1 of clause 6.1 of Article 105.3 of the Tax Code, but not less than 500,000 roubles.
It is important to note the following:
- The changes affect only cross-border controlled transactions;
- Fines become payable only on the basis of an audit.
Fines for the non-submission TP reports of all kinds (notifications of controlled transactions, TP documentation and country-by-country reports) or for the provision of incorrect information in such reports are substantially increased. For example, the fine for the non-submission of a controlled transaction notification will increase from 5,000 to 100,000 roubles, while the fine for the non-submission of a notification of membership of an MNE group will rise from 50,000 to 500,000 roubles. For other types of reports the increases are even more substantial, reaching as high as 1,000,000 roubles.
The Federal Law also introduces a fine of 500,000 roubles for the non-submission of TP documentation (for each individual transaction or group of similar transactions). In addition, a fine of 1,000,000 roubles is introduced for a failure to submit the financial statements of foreign companies within a multinational enterprise group.
Furthermore, the provision exempting a taxpayer from a fine if it provides documentation supporting the arm’s length nature of prices in controlled transactions will now be applicable only to transactions within Russia.