The Russian Federal Tax Services shed light on the required procedure to enter into an advance pricing agreement (APA) in a letter (No.ОА-4-13/85) published on January 12, 2011. The guidelines conform to the new transfer pricing rules adopted by the Russian tax authority, which went into effect in the new year. Those rules stipulate that Russian companies classified as major taxpayers can establish an APA with their tax authority. Russia’s APA guidelines align with the generally accepted international transfer pricing principles contained in the OECD Guidelines.
The letter provides an overview of the normative interaction between the taxpayer and the tax authorities in the course of an APA negotiation. Preliminary discussion of the main APA provisions is recommended before the taxpayer submits a formal application. The tax authority will then form a work group to consider the required documents the taxpayer must provide in its application. These documents include a description of the taxpayer’s activities, an outline of the main characteristics of the companies involved in the controlled transaction under review, and a functional analysis. The taxpayer must also specify the chosen transfer pricing method it will apply and provide corresponding sources of information.