On 3 August 2018, the President of the Russian Federation signed Law No. 302-FZ “Concerning Amendments to Parts One and Two of the Tax Code of the Russian Federation”

Under the new Law domestic transactions will only be subject to transfer pricing rules where the contracting parties are domestic entities that are subject to different tax rates or special tax regimes and where the revenue from those transactions exceeds 1 billion rubles per year.

Specifically, only transactions between Domestic Entities that meet any of the conditions below will be subject to the Law:

1. The parties to the transaction apply different tax rates on profits derived from that transaction.
2. One of the parties pays mineral extraction tax at ad valorem rates.
3. One party applies or both parties apply a special tax regime (for example, the unified tax on imputed income or the unified agricultural tax).
4. One of the parties is exempt from profits tax.
5. One of the parties is an operator or holder of a license to develop a new offshore deposit.
6. One or both parties are residents of the Skolkovo research center.
7. One or both parties apply an investment tax deduction for profits tax purposes.

The new law also provides a unified revenue threshold of 60 million rubles for cross-border transactions to be classified as controlled for transfer pricing purposes.

The new law will be effective for transactions that take place after 1 January 2019, irrespective of when the relevant contract was concluded.

The law also contains amendments that are not directly related to transfer pricing, including:

• The exclusion of movable property from the scope of assets tax.
• A 0% Value Added Tax (VAT) rate for services involving the exportation or importation of goods by ship under chartering (time chartering) agreements.
• The streamlining of documentation required to support the 0% VAT rate for exported goods.
• Changes to the time limits for conducting an in-house tax audit.