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The New Guidance of the Russian Federal Tax Service on Intra-Group Services
In Alignment with the 2017 OECD Transfer Pricing Guidelines?
In the last decade, the position of the Russian tax administration on the deductibility of intra-group services charges was rather unclear. Firstly, the payments – even if charged at arm’s length – were often treated as base eroding payments that are considered unjustified. This applies especially to the application of the indirect allocation method. Secondly, any cross-border payments for management and administrative services required extensive documentation (so called „act of acceptance“). Eva Frehner and Georgy Galumov describe the evolution of this transfer pricing concept in Russia and assess the future practice change in light of the new guidance that is highly appreciated by multinational enterprises in the aftermath of COVID-19.
1. Introduction
Multinational enterprises (MNEs) optimise both the location and the size of their functional units at all levels of their value chain. Consequently, one global functionally specialised servicing company frequently performs intra-group services for all entities. Such an organisational set-up leads to more effective management and coordination of the output, i.e. provision of standardised intra-group services. On top of that, the MNE pr...