Tax Messenger

The deadline for filing Notifications of Membership of MNE Groups for 2023 is imminent

29.08.2024

We would like to draw your attention to the fact that the deadline for submitting Notifications of Membership of a Multinational Enterprise Group (MNE Group) for 2023 expires on 31 August 2024 for MNE groups whose fiscal year coincides with the calendar year.

Notifications must be submitted to the tax authorities electronically in XML format in accordance with the current form prescribed by Order No. MMV-7-17/124@ of the Federal Tax Service of 06.03.2018 (as amended up to 16.07.2020) “Concerning Approval of the Format of a Notification of Membership of a Multinational Enterprise Group and the Procedure for Completing it and Submitting it in Electronic Form”.

Tougher controls over country-by-country reporting by foreign MNE groups

We would also like to remind businesses that Order No. YeD-7-17/915@ of the Federal Tax Service of 01.12.2023, which establishes the List of Countries Which Systematically Fail to Fulfil Obligations Relating to the Automatic Exchange of Country-by-Country Reports (“the List”), took effect from 22 January 2024.

According to Article 105.16-3 of the Tax Code of the Russian Federation (“the Tax Code”), Russian members of foreign MNE groups have the right not to submit a CbC report to the Federal Tax Service if certain conditions are met, including where the foreign parent companies of the MNE groups concerned are residents of states (or territories) with which Russia carries on the automatic exchange of CbC reports. In this case the Federal Tax Service may obtain CbC reports prepared by the parent companies of foreign MNE groups in jurisdictions in which they have a presence through automatic exchange with the tax authorities of the relevant jurisdictions.

However, if the parent companies of foreign MNE groups are residents of countries included in the List, the Federal Tax Service has legal grounds to request CbC reports directly from Russian members of MNE groups via the secondary filing mechanism owing to the inability to obtain them via automatic exchange.

To comply with a request from the Federal Tax Service to submit a CbC report, taxpayers must prepare and submit a CbC report no later than three months after receiving that request. The report must be submitted in XML format in accordance with the requirements established by Order No. MMV-7-17/123@ of the Federal Tax Service of 06.03.2018. The fine for failing to submit a CbC report or for submitting a CbC report containing inaccurate information increased from 100,000 rubles to 1,000,000 rubles as a result of amendments to the Tax Code effective from 1 January 2024.

We should point out that, at present, there is no official guidance regarding the reporting periods in relation to which the List can be applied. In particular, there is a risk that the Federal Tax Service may request CbC reports from Russian members of foreign MNE groups in relation to past reporting periods (i.e., periods which began before 1 January 2024) for which CbC reports were not received via automatic exchange with the relevant countries.

It is also important to note that many Russian companies are currently experiencing difficulties in obtaining CbC reports and other necessary information from foreign parent companies of MNE groups. In view of this fact, it is essential for taxpayers to contact parent companies in advance to obtain a CbC report. They must then adapt the report received to Russian requirements for the preparation of the CbC report XML schema, which differ substantially from the requirements of other jurisdictions, in order to submit the CbC report to the Federal Tax Service on a timely basis.

How can we help?

Preparation and filing of Notifications of Membership of an MNE Group in XML format in accordance with Russian requirements and assistance in the preparation and filing of Notifications of Membership of an MNE Group in accordance with the requirements of foreign jurisdictions
Preparation of CbC reports in XML format in accordance with Russian requirements and the requirements of foreign jurisdictions with which there is no automatic exchange
Filing of a completed CbC report in XML format on the taxpayer’s behalf to the Federal Tax Service, and assistance in filing with the tax authorities of foreign jurisdictions with which there is no automatic exchange
Methodological support on various issues relating to country-by-country reporting, including support in liaising with the parent companies of foreign MNE groups and the tax authorities in the jurisdictions in which MNE groups have a presence
Preparation of responses to demands from the tax authorities to submit a CbC report, and preparation of requests to state bodies (the Ministry of Finance and the Federal Tax Service) to provide clarifications regarding the preparation of CbC reports, including the applicability of fines in cases where a taxpayer is unable to obtain information needed to prepare a CbC report from the foreign parent company of an MNE group