Dear colleagues,

We sincerely wish you a Merry Christmas and a Happy New Year! May the New Year 2024 bring only pleasant surprises, growing numbers, well-being and prosperity. Thank you for your cooperation and trust. 

With best wishes,
Your swilar team

On 01.09.2022 clause 3 of the article 1 of the Federal Law dated 02.07.2021 No. 347-FZ came into force, which amended the Federal Law dated 13.03.2006 No. 38-FZ “On Advertising” (hereinafter referred to as the “Law on Advertising”) and obligated participants in the Internet advertising placement market to transfer data about it to a unified information system created by Federal Service for Supervision in the Sphere of Telecom, Information Technologies and Mass Communications (Roskomnadzor) – the Unified Register of Internet Advertising (hereinafter referred to as “URIA”).

Important: the new requirements apply to internet advertising that is displayed only in the Russian Federation.

Distinguishing between advertising and other information of a non-advertising nature

According to the article 3 of the Law on Advertising, advertising is information distributed in any way, in any form and using any means, addressed to an indefinite number of persons and aimed at drawing attention to the object of advertising, creating or maintaining interest in it and promoting it on the market.

On 14.11.2023, in order to clarify the concept of advertising and eliminate ambiguities, as well as to distinguish advertising fr om other information of a non-advertising nature, the Federal Antimonopoly Service of Russia approved the Guidelines for compliance with mandatory requirements “The Concept of Advertising” (Order No. 821/23).

Additionally, the Federal Antimonopoly Service of Russia has provided answers to frequently asked questions about advertising, and also provides examples of advertising on the Internet that are subject to marking, which can be found here.

Important: each case is unique and is considered individually.

What exceptions are there?

All advertising on the Internet is subject to marking, with the exception of:

• social advertising;
• announcements on the websites of TV channels and radio programs that are duplicated on the Internet without changes compared to the original sources;
• mailings via own database of e-mail addresses and push notifications.

What must be done to carry out Internet advertising marking?

1. Familiarize yourself with the register of advertising data operators (hereinafter referred to as “ADO”) on the official website of Roskomnadzor, register on the website of one of the ADOs, read the terms of service, tariffs and accept the offer agreement.
2. After activating access in your personal account of ADO, fill in the information about the counterparties participating in the placement, about the agreement, about the advertising creative. Download a sample advertisement.

Immediately after registering the creative, ADO will assign it an advertising identifier (token) – erid, which looks like a set of numbers and Latin letters (for example, 5UGfwMukZ4).

Important: one token is given per creative; any change in the creative requires obtaining a new token.

1. Include in your advertisement:

• the mark “advertising”, other expressions cannot be used (for example, “sponsored material”, etc.);
• information about the advertiser – the full name of the company or a link to the website (website page) with information about the advertiser;
• advertising identifier (erid).

1. Enter in your personal account of the ADO service on any day, starting from the date of completion of placement, but no later than the 30th day of the month following the month of displaying advertising on the Internet, the information:

• about the platform(s) wh ere the creative was shown;
• on statistics of shows;
• on the fulfillment of obligations under the agreement.

1. Check the information in URIA. Access for Russian users without registration, with a State Services (Gosuslugi) portal account.

Important: not only you, but also your counterparty can receive an advertising identifier and transfer information about placement, if you provide for the corresponding obligations in the agreement. In this case, the same person must receive the advertising identifier and transmit statistics of shows.

You can find out more details about these stages here.

Who exercises control?

The controlling government authorities are the Federal Antimonopoly Service of Russia (issues of classifying information as advertising; control over the presence of the mark “advertising”; control over the indication of information about the advertiser) and Roskomnadzor (presence of an identifier (token); transmission of information about advertising to URIA through ADO).

What is the liability for violation of requirements?

On 01.09.2023, the Federal Law dated 24.06.2023 No. 274-FZ “On Amendments to the Code of the Russian Federation on Administrative Offenses” came into force, which establishes measures of administrative liability for violations in the field of marking of Internet advertising:

• Failure to provide, or untimely provision of information about distributed Internet advertising to URIA, or provision of incomplete, unreliable, irrelevant information (part 15 of the article 14.3 of the Code of the Russian Federation on Administrative Offenses):
• citizens: 10.000 – 30.000 rubles;
• officials: 30.000 – 100.000 rubles;
• legal entities: 200.000 – 500.000 rubles.
• Distribution of Internet advertising without an advertising identifier or violation of requirements for its placement when distributing Internet advertising (part 16 of the article 14.3 of the Code of the Russian Federation on Administrative Offenses):
• citizens: 30.000 – 100.000 rubles;
• officials: 100.000 – 200.000 rubles;
• legal entities: 200.000 – 500.000 rubles.

It should be noted that administrative liability applies to offenses identified after 01.09.2023. At the same time, the new rules apply, among other things, to Internet advertisements that were placed before that date, continue to be displayed after that date, and the transaction for them has not been closed.

For archived advertisements, the placement of which ended before 01.09.2022 (i.e. transactions for them have been closed) and which are currently available for reading, obtaining and placing an identifier is not required. However, it is recommended to indicate the date of their publication (see Recommendations of Roskomnadzor).

On 28.11.2023 a so called “Big Tax Law” Federal Law No. 539-FZ of 27.11.2023 was published, which makes revolutionary changes in transfer pricing already fr om 01.01.2024.

We have compiled a detailed overview of the planned changes.

What will be changed:

1. A 15% withholding tax has been introduced on intragroup services provided by foreign related parties;
2. The list of related parties will expand;
3. More transactions will be recognized as controlled;
4. The amount of additional tax charges will increase;
5. Penalties for failure to comply with transfer pricing rules will increase;
6. The list of information submitted in transfer pricing reporting will be expanded;
7. New “safe” intervals for interest rates.

Below we will consider each of these significant changes separately.

    1. Withholding tax on services of foreign related parties

According to the new rules, a withholding tax of 15% will obligatory be withheld from the services of foreign related parties with residence in a country with which the DTT has been suspended.

For transactions with other countries, it is necessary to read the terms of the DTT agreement.

    2. Expansion of the list of related parties

The list of related parties will be added to:

• the related party and its controlled foreign company (CFC)
• CFC’s of the same related parties,  «sister’s» CFC
• foreign structures without the formation of a legal entity registered in an offshore jurisdiction (or if at least one of the participants in such a structure is registered in an offshore jurisdiction)

    3. Expansion of the definition of a controlled transaction

Transactions, one of the parties to which is a person whose place of registration (place of residence, place of tax residence) is a so-called offshore jurisdiction, are considered controlled.

Since the list of offshore jurisdictions was expanded from 01.07.2023, all international transactions with these jurisdictions, even with independent partners, will be considered controlled from 01.01.2024.

Reporting on such transactions must be submitted after exceeding the threshold of 120 million rubles per year.

At the same time, transactions will not be recognized as controlled if the following conditions are met:

• transactions were concluded before March 1, 2022
• the procedure for determining prices and (or) pricing methods (formulas) used in such transactions did not change after March 1, 2022,
• transactions are not recognized as controlled in accordance with transfer pricing legislation as of March 1, 2022.

    4. Possible additional tax charges

When a tax audit is carried out and it is discovered that prices other than market prices have been used for a controlled transaction, the tax base will be adjusted to the median value (and not to the maximum-minimum value of the corridor, as it was previously).

If tax authorities make a transfer pricing adjustment to the tax base in the Russian Federation for foreign trade transactions, these adjustments will be qualified as hidden dividends from sources in the Russian Federation (the so-called “secondary adjustment”), and will be subject to withholding tax at a rate of 15% (in addition to the penalty).

If the taxpayer independently carries out a transfer pricing adjustment before the start of control measures and the corresponding funds are transferred by a foreign partner to an account in a Russian bank, this transfer pricing adjustment would not qualified as hidden dividends.

Thus, the total possible amount of additional tax charges can be up to 35% of the price adjustment amount:

20% additional profit tax + 15% withholding tax

    5. New levels of penalties

For non-payment or incomplete payment of tax as a result of the application of prices that do not correspond to market prices:

• in relation to foreign trade transactions – 100% of the amount of unpaid tax on the profit of the foreign counterparty, equal to the amount of the transfer pricing adjustment (but not less than 500 000 rubles)
• in relation to domestic Russian transactions – 40% of the amount of unpaid tax (but not less than 30 000 rubles)

For failure to submit within the prescribed period or provision of a notification of controlled transactions containing misinformation – 100 000 rubles

For failure to submit documents within the prescribed period – documentation regarding a specific transaction (group of transactions), notification about participation in an international group of companies (for each fact of violation) – 500 000 rubles.

For failure to submit within the prescribed period or provision of documents containing misinformation – country report, global documentation, local documentation, accounting (financial) statements of a member of an international group of companies (for each fact of violation) – 1 000 000 rubles.

    6. More information to submission to tax authority

Expanded information required to be submitted to the Federal Tax Service from 01.01.2024

Notification of controlled transactions

(compulsory annually no later than 20.05.)

· terms of the transaction (details are established only for goods transactions)

· methods and sources of information used in the transfer pricing (previously not required to be disclosed)

· value creation chain for transactions in the field of foreign trade in raw materials (according to the list of the Ministry of Industry and Trade, clauses 5-6 of Article 105.14 of the Tax Code of the Russian Federation) only with related parties.

Documentation on transfer pricing
(upon request of the Federal Tax Service within 30 days)

· information on income and expenses, number of employees, amount of profit (loss), value of fixed assets and intangible assets of a foreign counterparty that is a party to a controlled transaction (including the attachment of relevant supporting documents)

· description of the terms of the transaction

· financial statements of a foreign counterparty.

The refusal of an independent counterparty to provide the requested information must be reported to the Federal Tax Service of Russia.

In transactions with related counterparties, the taxpayer does not have the right to refer to a refusal to disclose information.

Disclosure of information will require the taxpayer to collect a significant amount of additional information, as well as its systematization and storage in the accounting system.

      7. New “safe” interest intervals for loans

From 01.01.2024, the lower lim it of the basic “safe” intervals for loan transactions is reduced:

• for loans in RUB: min – 10% of the key rate of the Central Bank of the Russian Federation (but not less than 2%), max -150% of the key rate of the Central Bank of the Russian Federation;
• for loans in CHF and JPY: min – 1%, max – corresponding rate plus 5%;
• for loans in EUR, CNY, GBP and other currencies: min – 1%, max – corresponding rate plus 7%.

The first reporting period under the amended rules is 2024, notification of controlled transactions must be submitted before 20.05.2025, but an audit of contracts that are subject to changes and possible adjustments to international transactions must be carried out now.

There are many changes in transfer pricing, and the risks of additional charges for transfer pricing are increasing.

High-quality documentation remains a tool for protecting the taxpayer’s position regarding approaches and methods for justifying market prices

We have been working with transfer pricing and preparing documentation for our clients for many years.

We will gladly support you in preparing a reasoned tax position.