07.02.2022

Transfer pricing methodology. Transfer pricing methods

Taxpayer School

In accordance with the amendments made to the Tax Code of the Russian Federation federal law dated July 18, 2011 No. 227-FZ "On Amendments to Certain Legislative Acts of the Russian Federation in Connection with the Improvement of the Principles for Determining Prices for Taxation Purposes" transactions recognized as controlled are included in the scope of special control by the tax authorities for compliance with the prices applied in transactions, market level.

The Tax Code of the Russian Federation (hereinafter referred to as the Tax Code of the Russian Federation) was supplemented by the specified Federal Law with Section V.1 "Related Persons. General Provisions on Prices and Taxation. Tax Control in Connection with Transactions between Related Parties. Pricing Agreement".

The specified section of the Tax Code of the Russian Federation was put into effect (with the exception of certain provisions) on January 1, 2012.

From January 1, 2012, the provisions of Articles 20 and 40 of the Tax Code of the Russian Federation shall apply exclusively to transactions for which income and (or) expenses are recognized in accordance with Chapter 24 of the Tax Code of the Russian Federation before this date.

As a result, taxpayers have new responsibilities.

Organizations carrying out controlled transactions are obliged to draw up and submit to the tax authority a notification of controlled transactions at the end of the calendar year, as well as, at the relevant request of the tax authority, documentation on controlled transactions.


Who will be affected by the new transfer pricing rules?

The provisions of the legislation on transfer pricing are aimed at transactions between related parties and transactions equated to such.

As noted by the Ministry of Finance of Russia in a recent Letter dated 02.02.2015 N 03-01-18 / 3949, in sec. V.1 of the Tax Code of the Russian Federation establishes the rules for determining prices for tax purposes in connection with transactions between related parties, providing for the application of the "arm's length" principle generally accepted in world practice.

The essence of this principle lies in the fact that ordinary market participants, being independent partners, are at a certain distance from each other (distance of "arm's length"), in contrast to persons who, being interdependent, "go hand in hand" and establish between are contract prices different from market prices in order to reduce tax payments. According to the "arm's length" principle, for tax purposes, the value of prices (payments) is recalculated based on market values, as if the companies were independent.

This principle formed the basis of the 1995 OECD Guidelines on Transfer Pricing for Multinational Corporations and Tax Administrations, which is widely used in the practice of leading foreign tax administrations.

The provisions of sect. V.1 of the Tax Code of the Russian Federation are closely related to the approaches set out in this Guide, and are also devoted to transfer pricing. It is understood as the setting of prices in business transactions between different divisions of a single company or between members of a single group of companies in such a way as to redistribute the total profit of the group in favor of persons in a more favorable tax regime. Transfer pricing in many countries, including ours, is the object of close attention of the tax authorities.

The main criterion for interdependence remains the share of participation, namely when one organization directly and / or indirectly participates in another organization and the share of such participation is more than 25%.

Accordingly, transfer pricing obligations will primarily affect companies that carry out transactions with so-called "parent" and "subsidiary" companies. Particular attention will be paid to foreign related organizations and offshore companies.


Controlled transactions and related parties for tax purposes

Dan naya reference Information prepared on the basis of articles 105.1 and 105.14 of the new section of the Tax Code of the Russian Federation and using ConsultantPlus.


Controlled transactions

For tax purposes, controlled transactions are transactions between related parties (taking into account the specifics specified below), as well as transactions equated to them.

DRAWING At the request of the federal executive body authorized to control and supervise taxes and fees, the court may recognize a transaction as controlled if there are sufficient grounds to believe that the transaction is part of a group of homogeneous transactions made in order to create conditions under which such a transaction did not meet would be the signs of a controlled transaction listed above (clause 10, article 105.14 of the Tax Code of the Russian Federation).

Transactions are recognized as controlled transactions subject to the provisions of paragraph 13 of Article 105.3 of the Tax Code of the Russian Federation (paragraph 11 of Article 105.14 of the Tax Code of the Russian Federation).

Not recognized controlled following transactions(regardless of whether the transactions satisfy the conditions stipulated by paragraphs 1-3 of article 105.14 of the Tax Code of the Russian Federation):

1) the parties to which are members of the same consolidated group of taxpayers formed in accordance with the Tax Code of the Russian Federation (with the exception of transactions the subject of which is a extracted mineral recognized as an object of MET taxation, the extraction of which is taxed at a tax rate established as a percentage) ;

2) the parties to which are persons who simultaneously meet the following requirements:

  • the specified persons are registered in one subject of the Russian Federation;
  • these persons do not have separate subdivisions in the territories of other subjects of the Russian Federation, as well as outside the Russian Federation;
  • these persons do not pay corporate income tax to the budgets of other constituent entities of the Russian Federation;
  • these persons do not have losses (including losses of past periods carried forward to future tax periods) taken into account when calculating corporate income tax;
  • there are no circumstances for recognition of transactions made by such persons as controlled in accordance with subparagraphs 2-7 paragraph 2 of Art. 105.14 of the Tax Code of the Russian Federation;

3) transactions between the taxpayers specified in clause 1. Art. 275.2 of the Tax Code of the Russian Federation committed by them in the course of carrying out activities related to the production of hydrocarbon raw materials at a new offshore hydrocarbon field in relation to the same field;

4) interbank loans (deposits) with a term of up to seven calendar days (inclusive)

5) in the field of military-technical cooperation of the Russian Federation with foreign states, carried out in accordance with the Federal Law of July 19, 1998 N 114-FZ "On military-technical cooperation of the Russian Federation with foreign states".

Related persons



It is not a basis for recognizing persons as interdependent:

1) influence on the conditions and (or) results of transactions made by persons, and (or) the economic results of their activities, exerted by one or more other persons due to their predominant position in the market or due to other similar circumstances due to the peculiarities of the transactions being made (p. 4 article 105.1 of the Tax Code of the Russian Federation);

2) direct and (or) indirect participation of the Russian Federation, subjects of the Russian Federation, municipalities in Russian organizations in itself (clause 5, article 105.1 of the Tax Code of the Russian Federation).


What should a company do to comply with the new transfer pricing rules?

In order to comply with the requirements of transfer pricing legislation, taxpayers need to take a number of measures, which will include:

  • Drawing up a register of related parties for the reporting period.
  • Identification of controlled transactions for the reporting period.
  • Preparation and submission of notification of controlled transactions.
  • Preparation of documentation for each controlled transaction, which will include an analysis of the compliance of prices (profitability) of controlled transactions with the market level.
  • Questions about adjustment tax base, prices, terms of contracts
  • Regulation of interaction processes within the organization when collecting the necessary information.


Transfer pricing documentation requirements

In accordance with the Tax Code, the taxpayer, at the request of the tax authority, is obliged to submit documentation substantiating the compliance of prices applied in controlled transactions with the market level.

Wherein tax code does not establish the form of such documentation, but contains requirements for its content.

The transfer pricing documentation for a controlled transaction must contain:

  • information about the parties to the controlled transaction and their activities related to the controlled transaction;
  • a description of the controlled transaction and its terms, including a description of the pricing methodology;
  • information about the functions, risks and assets of the parties to the controlled transaction;
  • justification of the reasons for the choice and method of application of the method used for the analysis of transaction prices;
  • an indication of the sources of information used;
  • calculation of the range of market prices/profitability for a transaction with a description of the approach used to select comparable transactions;
  • the amount of income (profit) received and / or the amount of expenses incurred (losses incurred) as a result of the transaction, the resulting profitability;
  • information about the economic benefit received by the parties to the controlled transaction;
  • information about other factors that influenced the price/profitability of the transaction;
  • adjustments made by the taxpayer to the tax base and tax amounts (if any).

The taxpayer is also entitled to provide other information confirming that the commercial and/or financial conditions of the transaction are market-based.

The tax authority may request documentation in relation to controlled transactions not earlier than June 1 of the year following the year in which controlled transactions were made.

It should be taken into account that the taxpayer is released from the obligation to prepare and submit documentation in relation to controlled transactions in the following cases:

  • prices are applied in transactions in accordance with the prescriptions of the antimonopoly authorities or the price is regulated;
  • the taxpayer carries out transactions with persons with whom he is not related;
  • the subject of the transaction are securities and financial instruments of forward transactions circulating on the organized securities market;
  • the transaction has been subject to an agreement on pricing for tax purposes.

When preparing transfer pricing documentation, it must be taken into account that, in accordance with the Tax Code, the detail and thoroughness of such documentation must be commensurate with the complexity of the transaction and the formation of its price / profitability of the parties to the transaction.

Let us consider in more detail how the documentation for a controlled transaction (a group of homogeneous transactions) prepared in accordance with Art. Art. 105.15 of the Tax Code of the Russian Federation.

The main sections of the documentation:

1. Participants in the transaction: information about the taxpayer, information about the counterparty, a list of homogeneous controlled transactions

2. Characteristics of the scope (type) of the taxpayer's activities under a controlled transaction:

2.1. Description of goods (works, services) that are the subject of the transaction, including their classification, characteristic properties

2.2. The current level of competition in this field of activity

2.3. The level of state regulation in the field of taxpayer's activity

2.4. Conclusion on the impact of these factors on pricing

3. Characteristics of the group of companies, which includes the taxpayer

3.1. Ownership structure of a group of companies or part of such a structure containing persons who influence pricing in a controlled transaction

3.2. List of persons with whom a controlled transaction was made

3.3. Main competitive advantages of the group of companies

3.4. Characteristics of the place of the group of companies in the market in the relevant field of activity (leader, largest company, one of many, etc.)

3.5. Conclusion about the main characteristics of the group as a whole

4. Characteristics of a controlled transaction (functional analysis)

4.1. Information about the deal (group of deals)

4.2. Functional analysis of a controlled transaction

4.3. Conclusion about the functional profile of the parties

5. Pricing methodology

5.1. Information about the pricing method used in the analysis of the controlled transaction and sources of information on market prices

5.2. Description of pricing methodology

5.3. Justification of the reasons for the choice and method of application of the method used

5.4. Sources of information for pricing

6. Calculation of the price interval (profitability)

7. Final conclusion

Annex 1. Contains a functional analysis of the parties to the transaction with a study of the assets used by the parties (tangible and intangible), the functions performed by the parties (clause 6 of article 105.5 of the Tax Code of the Russian Federation), the risks distributed between the parties (clause 7 of article 105.5 of the Tax Code of the Russian Federation).

Appendix 2 Contains a description of the stages of selection of comparable companies for the study of the market level of profitability for the transaction (in case of choosing the method of comparable profitability for the study)

Annex 3 (Excel file).The file contains three attachments: a list of comparable companies; interval of market profitability; calculation of the actual profitability of the transaction - in case of choosing the method of comparable profitability for the study.



Introduction

6. Problems of transfer pricing in Russia

Conclusion

Bibliography


Introduction


Among the numerous means used to implement a more efficient production management system, a special role belongs to intra-production, intra-company, so-called transfer prices.

The history of the issue of transfer pricing is connected with the 50-60s of this century, when large monopoly transnational corporations began to form in industry due to the processes of concentration of production. The concentration of production, accompanied by the development of its specialization, assumed the transfer of products manufactured at one enterprise of the corporation to another enterprise of the same corporation. As a result, problems arose with the methods of valuation of such products and the principles of formation of the transfer price, called the transfer price.

The relevance of this topic is confirmed by the fact that the study of this area of ​​activity of the company is given extremely insufficient attention, although the effectiveness of the functioning of the entire organization will depend on the effectiveness of the coordination of the transfer pricing system. Another important fact is related to the fact that the transfer pricing system itself is used only at enterprises with a high degree of organization of the internal information structure. This is especially true for Russian enterprises, where the implementation of the transfer pricing system takes place directly during the implementation of information support tools. Consequently, the problems of the information structure have the most significant impact on the very existence of the intra-company system of transfer prices, and directly determine the type of organizational structure of the enterprise.

The purpose of my course work is to study the theoretical aspects of transfer pricing. It is supposed to identify the main approaches and describe the proposed models of this system, analyze the role of both the elements of the system (responsibility centers) and the links between them (transfer prices). It is also supposed to identify and analyze the problems of the information structure that arise when agreeing on the transfer pricing system, which most often appear in the Russian practice of transfer pricing.


1. Concepts, goals and models of transfer pricing


The transfer price is defined as the price used in the exchange of goods within transnational corporations, joint ventures, between their subsidiaries in different countries. The transfer price is usually not widely publicized. The definition does not explicitly state (although it is implied) that the transfer price is somewhat different from the market price. It turns out that if there were no differences, and all transactions would be made at market prices, then the need to introduce the very concept of a transfer price would be in question.

Transfer pricing occurs when the products of one enterprise, which is part of the holding, are consumed by another enterprise of the holding, and is primarily characteristic of vertically integrated holding structures.

Transfer pricing should be aimed at solving the following tasks:

1) provide information to the heads of enterprises for making informed economic decisions;

2) ensure the consistency of the goals of enterprises and the group as a whole;

3) provide enterprises with autonomy in decision-making;

4) conduct a fair assessment of the activities of enterprises;

5) purposefully redistribute part of the profits between enterprises;

6) serve the purposes of tax optimization.

In practice, none of the transfer prices is likely to be equally successful in achieving all of the above goals. Therefore, very often there is a conflict of goals, as a result of which the managers of the corporate center are forced to look for compromise options for solving problems. For example, the task of autonomy of enterprises may conflict with ensuring the consistency of the goals of enterprises and the group. A fair assessment of the activities of enterprises may be contrary to the goal of redistributing profits. The tasks of profit redistribution and tax optimization can violate the autonomy of enterprises.

Transfer prices directly affect the financial results of enterprises. The system of transfer prices in the holding determines the types of responsibility centers: whether the enterprise is a cost center, an income center or a profit center. Transfer prices influence make-or-buy decisions - to produce an intermediate product in-house or to purchase it from outside. An intermediate product is a product that is transferred by a manufacturing unit to a consumer unit.

Actual prices in Russia are not market prices in the full sense of the word; they do not fully depend on supply and demand, but respond to other reasons of various kinds, including price proportions that are influenced by the transfer pricing of natural monopolies.

Consumers, both businesses and the public, are outraged not so much by the tariff hike itself, but by the lack of clarity about the extent to which it is necessary, who sets the new prices, and where the additional revenues will go. One of the most discussed issues today is the ratio of tax payments of natural monopolies, which constitute the income of the state, and the so-called rental income, which remains at the disposal of organizations. It is on the basis of the search for the optimality of this ratio that the state approach to regulating the prices of natural monopolies is formed.

At the same time, two directions of price regulation of natural monopolies can be traced. The first is tracking their spending, and above all the validity of investment programs. The second is an assessment of the extent of use, the so-called transfer pricing, as a result of which, for example, the price of oil, according to the accounting financial statements, turns out to be different from the so-called fair market price of oil.

The transfer pricing mechanism is as follows: the parent oil complexes buy oil from their subsidiaries at the so-called transfer price. A certain share of oil within 30-40% is sold for export, and the rest is processed at Russian refineries, on the terms of tolling contracts. At the same time, finished petroleum products are sold both on the domestic market and for export.

There are a number of factors that influence transfer pricing:

1. The presence of a competitive market. For an intermediate product, the basic principle of transfer pricing states that the transfer price should be as close as possible to the price at which the product can be sold to external buyers or purchased from external suppliers, i.e. to the market;

2. Availability of free capacities at the manufacturing unit. If the enterprise has free production capacities, then for the holding as a whole it is more preferable to purchase products within the group, as a result of which the holding's profit will increase (additional production will make it possible to cover part of the fixed costs associated with idle capacities);

3. Qualifications of managers. The transfer pricing system requires highly qualified corporate center managers. They are faced with the task of balancing various conflicting goals in order to achieve the optimal result for the holding;

4. Negotiating power of enterprises. Transfer prices between two enterprises provoke a conflict between them. The producer enterprise is interested in that the prices were as high as possible, the consumer enterprise, on the contrary, is interested in maximizing low prices Oh. The bargaining power of enterprises can have a significant impact on the level of transfer prices;

5. Importance for holding the benefits of vertical integration. Vertical integration reduces the economic risks in the holding, in particular the risk of dependence on suppliers and consumers, since the company can control the entire value creation process - from the extraction of raw materials to the sale to the end consumer. This becomes especially important if the markets are characterized by high volatility, that is, they are subject to strong fluctuations (seasonal, market, etc.).


2. Factors affecting transfer pricing. Transfer pricing methods


Transfer prices are developed by the corporation's management on the basis of a single policy and perform specific tasks that are not typical for conventional pricing.

The specific tasks of transfer pricing include:

distribution and redistribution of profits between parent and subsidiaries;

· minimization of customs and tax payments paid on a global scale;

· minimization of political, economic and credit risks;

distribution of sales markets and spheres of influence between various foreign divisions of TNCs;

gaining positions in new markets;

transfer of profits received by subsidiaries from countries where prohibitions or restrictions on the transfer of profits have been introduced;

· the intentional reduction of profits received by individual subsidiaries due to fear of demands from employees for higher wages or staff reductions.

When determining the transfer pricing policy, factors such as:

· the economic and political structure of the host country (the level of customs duties, import quotas, etc.);

· Legislation of the host country (tax, regulating foreign economic, entrepreneurial activity, monetary and credit sphere, etc.);

Degree of inflation in the market of the host country;

political, economic and credit risks (for example, the likelihood of changes in the political course of the state, legislation, devaluation of the national currency, risks of non-payment, etc.);

the level of prices in the market of the host country;

· the level of liberalization of the foreign exchange market;

· the order of expatriation (transfer) of profits from the host country;

the procedure for paying dividends in the host country, etc.

Enterprises strive to adhere to a uniform policy in the field of transfer prices on a global scale, adapting it to:

· differences in national legislation, customs and tariff policy, tax regulation of different countries;

· the conditions and requirements of the markets of the host countries;

management strategies.

All of the above factors are taken into account by the top management of the enterprise when deciding which country and which subsidiary to provide the opportunity to receive excess profits, in which country it is necessary to limit the receipt of profit by subsidiaries to maximize financial results. economic activity organizations .

It should be emphasized that the functions and tasks that are performed using transfer prices are implemented on the basis of a single policy within the organization.

There is also a mechanism for manipulating transfer prices, which consists in setting deliberately high or deliberately low prices for services or products of the parent company supplied to subsidiaries.

By setting inflated prices on the products exported by the parent company, the profits of the importing subsidiary are artificially reduced. Thus, it is redistributed in favor of the parent company. In order to redistribute profits in favor of the parent company, they use not only inflated prices for the supply of goods, but also for administrative, managerial, technical, educational services provided by the parent company, as well as patents, licenses, know-how.

To pursue a profit optimization policy, TNCs seek to minimize the total amount of taxes paid on a global scale. This is achieved by redistributing profits between countries with high and low level taxation. Thus, in the case of high tax rates in the host country compared to the TNC's home country, transfer prices will be inflated and profits will be redistributed to the country with lower tax rates. Thus, a reduction in taxable profits is achieved in countries with high taxation and an increase in the profits of a TNC unit in countries where tax rates are lower. As a result, the amount of tax payments on a global scale decreases. In the case of low tax rates in the host country compared to the home country of the TNC, the transfer prices of the parent company for products supplied to the subsidiary will be underestimated, which, as in the previous example, allows you to redistribute profits to countries with lower tax rates and minimize tax payments on a global scale.

Transfer prices are also used to reduce the total amount of customs duties paid in the host country. This can be achieved by underestimating the cost of imported goods into the country where the subsidiary is located.

Another task of transfer pricing is to minimize political, economic and credit risks for the parent company. The prices of goods imported into high-risk countries are inflated to cover losses that may arise in the event of the occurrence of these risks (for example, the risk of non-payment).

Transfer prices are also a mechanism for centrally dividing markets between subsidiaries in order to limit intra-company competition and gain positions in new or "difficult" markets. A certain branch of the TNC may receive low or even dumping prices, which will increase the competitive advantages of this company in the market of the host country. To achieve this goal, the parent company either allocates funds or changes the structure of production costs (by underestimating the share of fixed costs).

Information about the transfer pricing methodology is strictly confidential.

Practice has developed several methods for determining transfer prices:

1) Pricing based on market prices. If there is a perfect competitive market for the intermediate product, then for decision-making and evaluation of the activities of enterprises, it is optimal to set transfer prices at competitive market prices. The financial results of the enterprise reflect the real economic contribution of the division to the profit of the holding. The activity of the enterprise is regulated by the market, and the corporate center does not affect its financial results.

2) Marginal Cost Pricing: Used when a market for an intermediate product either does not exist or is imperfect and the manufacturing facility has spare capacity. Marginal costs are usually understood as short-term variable costs. This method allows, according to economic theory, to maximize the profit of the holding as a whole. However, at the same time, an enterprise supplying products at marginal costs operates with a negative financial result equal to fixed costs. This negatively affects the motivation of employees of the enterprise. Therefore, this method is rarely used in practice.

3) Full cost pricing: used in the same cases as the previous method, with the only exception that the price includes a surcharge to compensate for fixed costs. The premium to cover fixed costs depends on the volume of products sold.

4) Cost plus pricing: used in the same cases as full cost pricing, with the difference that the price includes a profit margin, i.e. the enterprise operates at a predetermined profitability. The surcharge can be based on variable costs or full costs. In the first case, the premium covers fixed costs and profits, in the second - only profit. The best solution seems to be to set a premium equal to the average industry profitability, provided that the latter can be reasonably calculated.

5) Pricing based on marginal cost plus a constant fixed premium: involves transferring products to the consumer enterprise at marginal costs and paying the latter a fixed premium to the producer enterprise.

6) Negotiated pricing. Negotiated transfer prices are most appropriate in situations where there are multiple market prices or selling costs for domestic and foreign markets are different. This method can be used under three conditions:

The manufacturing enterprise has the opportunity to sell products to the side, and the consumer enterprise can purchase products on the side in unlimited quantities;

Businesses have the same bargaining power;

There is a difference between selling expenses when selling goods to a foreign market or within a group.

The first two conditions make it possible to determine benchmarks for transfer prices, and the last one is necessary so that it would be more profitable for enterprises to cooperate with each other rather than with external counterparties. If at least one of the conditions is not met, a situation may arise in which the managers do not agree on a transfer price. Then the corporate center will have to participate in setting the optimal transfer prices, which will violate the autonomy of enterprises, which, as a result, will not be able to bear responsibility for other people's decisions.

7) Dual pricing consists in setting different prices for the manufacturing enterprise and the consumer enterprise. For example, the first can sell products at "full cost plus markup" prices, the second can receive products "at marginal costs". In this case, the difference is written off to the corporate center. In practice, dual pricing is not widely used, the main reason is that the profit of the group as a whole is not equal to the total profits of enterprises. Prolonged use of dual pricing can lead to a deterioration in the competitiveness of enterprises. In addition, this method complicates the consolidation financial statements in the holding, since it is necessary to constantly eliminate intra-holding turnovers.


3. Business process responsibility center in transfer pricing


Let's consider the main element of the transfer pricing system, the responsibility center. An element of transfer pricing is a business unit of an organization - a responsibility center, which is understood as a department (a set of departments) and / or a division of the company, which has the following features:

· Responsibility for profits and losses from their activities. Responsibility, backed up by appropriate authority, contributes (but is not sufficient) to the further development of departments, increasing its productivity and making optimal decisions in each specific situation, from which the whole company ultimately benefits. Responsibility means that all income and losses of this responsibility center are reflected in its budget. Own products (services) and, possibly, their markets. Each responsibility center produces its own products (provides services), which it sells either to the external market or to other responsibility centers at a certain price.

· Clearly defined functions. The responsibility center is a separate association within the company, which is assigned certain functions.

· One manager. Each responsibility center has its own leader who controls its activities, makes decisions and bears responsibility within the limits of the authority given to it.

· Communication with the organization. Since each responsibility center is an organizational unit of the company as a whole, its head at regular intervals reports on the results achieved to the representatives of the top management of the company, and also informs him (asks for consent) when making decisions. important decisions(for example, decisions on all issues exceeding $1.5 million). In turn, the top management of the corporation makes sure that the activities and development of the responsibility center do not lag behind the development of the entire organization (for example, joint staff trainings are held). The responsibility center adopts the organizational culture of the corporation, its goals and mission.

In practice, allocate the following types responsibility centers:

Profit centers (profit centers) - a unit that controls both its costs and its income. The activities of these centers are evaluated on the basis of their profits. The goal may also be to increase market share or the number of orders. Such responsibility requires an appropriate degree of freedom in decision-making.

Cost centers - a unit that controls only its own costs. These are typical departments that do not have direct access to the external market (for example, the production department). The task of the cost center is to minimize costs for a given output. Their activity is estimated by the value of deviations of actual costs from planned ones.

Cost centers - these include units for which it is difficult to establish the relationship between costs and results. For example, in the central office or research department. Expenditure centers are managed based on the approval of the expenditure budget, and results can only be evaluated in the medium or long term. Costs are measured by the number of patents or innovations.

Investment centers - a unit that controls costs, revenues and investments. It is responsible for the use of equity and debt capital, has full autonomy in managing all or part of the company's assets.

Revenue centers - a division that controls only its own revenues. It is only responsible for revenue and is not responsible for costs. The scope of their powers is limited to those decisions that affect the amount of sales revenue within the established cost-revenue relationship. The performance of a revenue center is assessed on the basis of the achieved turnover or profit margin. The creation of a revenue center aims to increase turnover and optimize the company's sales.

The more products a company produces, the more responsibility centers there will be, the more difficult it becomes to manage the economy of the entire organization. However, dividing the firm into profit/cost centers, etc. can rather be called conditional, because in practice the boundaries between them are quite blurred. Most often, a company has profit centers and one or two cost centers.

The allocation of responsibility centers allows:

Reduce the time it takes to make decisions, and therefore increase the speed of response to customer needs.

Maintain accurate cost records for products and processes.

Account for income. (Each center knows how much money it has earned).

Evaluate the performance of departments, i.e. how efficiently all business units are performing.

The allocation of responsibility centers requires:

1. Creation of a financial planning system - approval of the form of intra-company reporting, improvement accounting.

2. Psychological and professional training of personnel. First, people need to understand what they are doing and how important their work is to the entire firm. And secondly, they must be able to "grow and develop" with the organization.

3. Installation of a new information system. Necessary drastic change of the entire information management system of the organization: not only the amount of information, but its content and users become fundamentally new.

It is important to note that the Responsibility Center system builds on, but does not necessarily match, the existing organizational structure.


4. Control over transfer pricing for tax purposes


Article 40 of the Tax Code of the Russian Federation regulates the procedure for the tax authority to control the price of a transaction for tax purposes. Today, the application of the norms of this article raises many questions, both on the part of taxpayers and law enforcers. government agencies. The article highlights the most likely prospects for improving approaches to control over transfer pricing.

In accordance with the conceptual approach defined by the Main Directions of Tax Policy for 2008–2010, the Ministry of Finance of the Russian Federation developed and submitted to the Government of the Russian Federation a draft law that provides for amendments to the Tax Code aimed at improving the legal regulation of public relations in the field of tax control over the correctness of the calculation and full payment of taxes.

This draft law is aimed at preventing those methods of minimizing taxes, which are based on the use in a transaction of a price that deviates from the price that would be applied by independent persons who are not connected by relations of participation in capital, common control or other relations that allow them to influence economic results and (or) conditions and results of transactions.

The main goal of the draft law is to streamline and improve the efficiency of tax control over the correct calculation and completeness of tax payments when applying transfer pricing, clarify the list of related parties and improve the basis for determining the compliance of prices used in controlled transactions with regulated or market prices for tax purposes.

Taking into account the independence, significance and volume of the subject of legal regulation, it is proposed to recognize Art. 20 and 40 of the Tax Code and at the same time supplement part 1 with a section regulating the relevant legal relations and determining for tax purposes general provisions on related parties and controlled transactions, as well as on the recognition of the conformity of prices applied in controlled transactions with regulated or market prices. This section is supposed to include six chapters, which define:

1) interdependent persons, as well as the procedure for determining the share of participation of one organization in another organization or an individual in an organization;

2) general provisions on prices, as well as a list of sources of information used in determining the compliance of the price of a controlled transaction with regulated or market prices;

3) methods used to determine whether the price of a controlled transaction corresponds to market prices;

4) a list of controlled transactions, as well as the procedure for substantiating prices and declaring in tax authorities on controlled transactions made by the taxpayer;

5) the procedure for collecting taxes based on the assessment of the results of controlled transactions on the basis of regulated or market prices;

6) general provisions on pricing agreements concluded between tax authorities and taxpayers.

The bill provides for amendments to the Tax Code regarding the powers of tax authorities to exercise control over the completeness of the calculation and payment of taxes, taking into account the pricing factor and extending to an exhaustive list of controlled transactions:

1) transactions where a party is a taxpayer registered in a constituent entity of the Russian Federation where a reduced corporate income tax rate is established;

2) some foreign trade transactions, the subject of which are goods of world exchange trade, which are part of the following commodity groups: oil and oil products, ferrous metals, non-ferrous metals, precious metals, precious stones (according to the list of such goods approved by the Ministry of Economic Development of Russia);

3) transactions with residents of jurisdictions with reduced taxation and foreign countries(territories under the jurisdiction of foreign states) that do not provide the Russian Federation with information on taxpayers who are registered in these states (in these territories) and/or on the payment of taxes and fees (according to the list of foreign states and territories approved by the Russian Ministry of Finance).

The draft law clarifies the definition of the market price while maintaining the current principle, according to which the price applied by the parties to the transaction is accepted for tax purposes, unless otherwise provided by the Tax Code. Until proven otherwise, this price is considered to be in line with the market price.

It is proposed to recognize the market price for taxation purposes as the price that is within the range of prices established by the Tax Code for transactions with identical (and in their absence - homogeneous) goods (works, services) that are made in comparable economic (commercial) conditions by persons who are not interdependent. When identifying the range of market prices, the peculiarity of the method used for determining the correspondence of the transaction price to market prices is taken into account. The price applied in a specific controlled transaction should not be taken into account when forming such an interval.

The choice and use of methods for determining the correspondence of the transaction price to market prices are among the most difficult points in the practice of applying tax legislation and countering transfer pricing, which entails tax minimization. It is required to clarify the rules, according to which the values ​​of market prices used by the tax authorities when making decisions on additional tax assessment are selected from the set of transaction prices. The tax authority has the right to make such a decision if the actual transaction price does not correspond to the settlement interval, which is two central quartiles of the market price interval. Thus, it is proposed to exclude random extreme points, which for some reason were taken into account when estimating this interval.

The proposed design will improve the efficiency of tax control, as well as optimize the costs of both taxpayers for the implementation of legislation and tax authorities.

In the draft law, the list of methods for determining the correspondence of the transaction price to market prices is supplemented by the method of the sale price of the processed product (secondary product), the method of comparable profitability and the profit distribution method; in addition, the content of the currently used methods for determining the market price is specified.

For taxation purposes, any method (with some exceptions) can be used that, taking into account the actual circumstances and conditions of the controlled transaction, will most reasonably determine the correspondence of the transaction price to market prices. At the same time, the method of comparable market prices is recognized as a priority. The composition, description and procedure for using the methods for determining the correspondence of transaction prices to market prices provided for by the draft law are generally consistent with international rules.

In addition, it is planned to develop and approve by the Ministry of Finance of Russia methodological guidelines on the procedure for determining the correspondence of the transaction price to market prices for tax purposes.

The draft law expands the list of sources of information used to determine the compliance of the transaction price with market prices, in particular by including:

1) information on exchange prices and quotations of world exchanges - for goods that are the subject of world exchange trade;

2) customs statistics of foreign trade of the Russian Federation published by the Federal Customs Service of Russia;

3) data on prices (limits of price fluctuations) and exchange quotations contained in official sources of information of authorized state authorities and local governments in accordance with the legislation of the Russian Federation, constituent entities of the Russian Federation and municipal legal acts;

4) information on prices (limits of price fluctuations), exchange quotations for completed transactions contained in published and / or publicly available publications and information systems;

5) information about market value objects of appraisal, which is established in accordance with the legislation governing appraisal activities in the Russian Federation.

The draft law establishes a list of documents and information that taxpayers submit to the tax authorities and which substantiate the compliance of prices used in controlled transactions with market ones. The information specified in such a list corresponds to the information used in international practice.

If a taxpayer makes several transactions of the same type, documents should be considered prepared provided that they contain data on all transactions of the same type, and not on each of them. At the same time, the main task is to justify the transaction price in accordance with the proposed algorithm for determining the market price, based on the method established by the Tax Code. The specified algorithm for substantiating the market price of the transaction will actually be used by both taxpayers and tax authorities.

In cases of additional taxes, it is inappropriate to hold taxpayers liable under the Tax Code for committing tax offenses who have submitted documents substantiating the market nature of the actual prices of transactions with related parties.

The draft law introduces the duty of a taxpayer to submit to the tax authorities information on controlled transactions made in the tax period, if the amount of income or expenses from all controlled transactions concluded during a calendar year with one person (several persons who are parties to a controlled transaction) exceeds 100 million rubles . It is assumed that such information should be indicated in the annexes to tax returns for corporate income tax, income tax individuals, as well as to tax declarations to be submitted to the tax authorities in the application of special tax regimes.

The described procedure will facilitate the formalization of data on events and transactions that are the subject of control over the use of transfer pricing in order to minimize taxes, as well as improve financial discipline.

The bill provides for the possibility of concluding between taxpayers and tax authorities of preliminary agreements on pricing for tax purposes. The institution of pricing agreements is widely used in international practice and allows related parties to sign agreements with tax authorities prior to making controlled transactions, which fix methods for determining the correspondence of transaction prices to market prices. Fulfillment of the terms of such an agreement and the application of the price stipulated by it in a controlled transaction should not entail additional assessments by the tax authorities of the results of this transaction and the additional assessment of taxes on it.

Taking into account the international practice of preparing and concluding such agreements on a paid basis, a state fee is established for consideration of a taxpayer's application for concluding a pricing agreement. At the same time, the introduction of pricing agreements is necessary only as taxpayers, tax and judicial authorities accumulate experience in applying the new provisions of the Tax Code on transfer pricing, as well as subject to the training of employees of tax authorities in the relevant specialization.

The draft law establishes liability for the taxpayer's unlawful failure to provide information within the established time limit or the provision of false information about controlled transactions made in the tax period with one person (several persons who are parties to a controlled transaction). It is also proposed to introduce sanctions for violation by the taxpayer of the terms of the pricing agreement, which resulted in non-compliance with the procedure for applying prices for tax purposes established by the Tax Code.


5. International methods of transfer pricing


Russian tax legislation does not contain rules prescribing which price to use for tax purposes in cases where the transaction price is subject to tax control. The taxpayer, in principle, can sell the goods at a price convenient for him. The tax code does not oblige him to use the market or any other price. To recalculate the "wrong" transaction price for tax purposes is the prerogative of the tax authorities.

In the member countries of the Organization for Economic Cooperation and Development (OECD), as well as in some other states, a different procedure applies. There, the legislator obliged taxpayers to draw up a special price calculation for transactions that may be subject to tax control. At first glance, it seems that this only complicates the situation. However, practice says otherwise. As a rule, all disagreements between the taxpayer and the tax authority on the price of controlled transactions are resolved through negotiations. The arbitration courts of these countries consider only isolated disputes on this issue.

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The price of goods and services can be determined in various ways. One of these methods is transfer pricing (TP). Let's consider all its features.

What is transfer pricing?

Transfer pricing is the establishment of value based on intercompany prices. They may differ from the market. The main advantage of this method is the maximum reduction in company taxes. Its essence lies in the fact that there is a transfer of total profit in favor of firms located in countries with a minimum tax burden. Transfer pricing has the following advantages:

  • The distribution of spheres of influence between different branches of the company.
  • The withdrawal of funds earned by subsidiaries from countries with restrictions on the withdrawal of capital.
  • Capturing most of the market by artificially reducing the cost of production.

Transfer pricing is relevant not only for large holdings, but also for representatives of small and medium-sized businesses. Reducing taxation and, as a result, increasing profits is achieved in completely legal ways. The final cost is formed on the basis of the subjective properties of the object.

Transfer pricing regulation

The first transfer pricing laws were adopted in the United States more than half a century ago. In the 1990s, corresponding international norms appeared. In Russia, laws were adopted only in 2012. Transfer pricing is regulated by Chapter 6.1 of the Tax Code of the Russian Federation, as well as Articles 20 and 40 of the Tax Code of the Russian Federation. The regulations list situations in which the tax authorities have the right to check the prices set by the company. Consider the objectives of pricing regulation:

  • Creation of obstacles to artificially reduce the profit received by the company.
  • Exclusion of barriers for firms that are conscientious taxpayers.

The laws of the Russian Federation are based on international experience. In particular, an important principle is at work: comparing the prices charged by related firms with the prices that would be charged by independent firms.

In what case will transfer pricing be controlled?

Additional control is introduced for transactions that differ in the following characteristics:

  • Transactions between parties that depend on each other (including those involving a supporter).
  • Operations between Russian firms and representative offices of other countries.
  • Transactions made on the foreign market with exchange products (for example, metals). Additional verification is carried out only when the annual revenue of the company exceeds 60 million rubles.
  • One of the counterparties is located in a zone with preferential taxation.
  • For one of the counterparties, the tax rate is 0%.
  • The transaction is carried out with the participation of an entity that extracts natural resources and transfers funds to the severance tax treasury.
  • Transactions between sister firms if their share in the parent firm is 25% or more.
  • Transactions between an entity and its CEO.
  • Transactions between enterprises where the CEO is the same person.

There may be other grounds for checks. However, all of them must be confirmed by law. Control is exercised only when the transaction amount exceeds a certain level. As a rule, it is 60-100 million rubles.

In what cases will there be no control?

The list of transactions in respect of which additional control is not performed is defined by Article 104.4 of the Tax Code of the Russian Federation:

  • Transactions performed by representatives of the consolidated group that comply with the laws of the Russian Federation.
  • Transactions made between persons with legal addresses within one region.
  • Transactions between enterprises that do not have separate subdivisions in other subjects of the country or other states.
  • Transactions between parties that pay tax to the budget of the same region.
  • One of the parties has no losses for the previous period, which reduce the tax burden.
  • None of the participants switched to a special taxation regime.

Regulations assume that the cost of transactions between independent firms is a priori.

Who are related parties in transfer pricing?

TP involves the calculation of the cost based on prices established between related parties. But what is meant by interdependent persons? These are companies that can influence each other's financial performance. Such firms are subject to special control by the tax authorities, as they have the opportunity to reduce the fiscal burden and remove profits from taxation.

Related persons can influence the following indicators of each other:

  • The cost of transactions.
  • Income and profit margins.
  • Other economic parameters.

The relationship of persons is determined according to the following principles:

  • Direct or indirect participation of individual entrepreneurs or legal entities in the capital of the company, amounting to at least 25%.
  • The kinship between FL.
  • The presence of an official subordination.

If there are other signs of interconnectedness, the tax authorities have the right to go to court and establish them. Signs can be recognized by companies on a voluntary basis.

Obligations of participants in transfer pricing

Transfer pricing companies have the following responsibilities:

  • Annual submission to the Federal Tax Service on transactions subject to additional control. Notice must be sent by May 20 of the next period.
  • At the request of the tax authorities, the company must provide all documents related to the transaction.

The company can be checked at any time for the objectivity of pricing.

Transfer pricing methods

Comparable market price method

The comparable market price method is considered a priority. That is, it can be used in all cases, excluding situations with legal restrictions. Its essence is to establish the value based on the prices of similar objects. This method is relevant only if there is information from open sources about prices for identical products. Consider the situations in which the SRP method should be used:

  • A transaction with a counterparty, the terms of which are identical to the terms of internal transactions made by the entity.
  • Issuance of a loan.
  • Trademark development.
  • Transactions with products for which there are stock quotes or other statistical data.

In all these cases, you can find information about the prices of objects that are comparable to the object being sold.

Resale price method and cost method

The principle of applying the resale price method and the cost method lies in the fact that in this case there is a comparison of the market range of profitability of independent persons with the gross profitability acquired as a result of a transaction with a person who depends on the company.

For example, a company purchases products from a related party and then sells them to an independent party. In this situation, the resale price method is relevant. Within its framework, the receipt by the distributor of gross margin (VR), the objectivity of purchase prices is checked. The resulting value must be compared with the BP of independent distributors. If the BP within the transaction is within the market interval, the purchase price is recognized as the market value.

The cost method involves the analysis of not purchase prices, but sales prices. It is necessary to compare the VR of spending with the market interval of independents.

These methods are rarely used. This is due to the fact that it is quite difficult for a company to find data on the VR of independent persons. In addition, the transactions being compared must be comparable.

Comparable profitability method

The comparable profitability method is quite popular. Within its framework, operating profitability parameters are taken into account. Consider the steps of applying the method:

  1. Carrying out functional analysis.
  2. Selecting the participant to be tested.
  3. Selection of a financial indicator.
  4. Search for the source of data.
  5. Search for companies whose performance is comparable.
  6. Determination of the market interval of profitability.
  7. Comparison of the tested participant's profitability with the market interval.

Consider an example. The company is engaged in wholesale purchases. That is, you need to find organizations that also specialize in bulk purchases. Then, companies, information about which is not publicly available, are excluded from the resulting list. After that, the market interval is determined. After that, the profitability of the subject is compared with the profitability of comparable organizations.

IMPORTANT! The method will be relevant in the event that there is no completeness of data for the application of the above methods.

Profit distribution method

This method is used extremely rarely. This is due to the fact that it is very complex. Its essence lies in the redistribution of profits of all participants in the operation in proportion to the functions that they performed. When distributing, you can focus on the features of the distribution between independent participants in a comparable transaction.

Sources of information

The shopping center involves the use of a specific list of data. The information you need can be obtained from sources such as:

  • Data on the prices of stock and commodity exchanges.
  • Customs statistics.
  • Information posted on public resources.
  • Information received by information and price organizations.
  • Data on comparable transactions already carried out by entities.
  • Financial and statistical reporting.
  • The conclusion received from independent appraisers.

The company also has the right to use other information that is needed for adequate pricing.

ATTENTION! The sources used must be verifiable. This is required to ensure the possibility of checking the adequacy of the shopping center.

Main tasks of transfer pricing management

The shopping center is managed by the tax service. Management is necessary to solve the following tasks:

  • Ensuring work on the verification of established prices by local tax authorities.
  • Analysis and evaluation of processes taking place in the market.
  • Control over the observance of the law of the country.
  • Consideration of applications relating to pricing agreements.
  • Formation of proposals for improving legislation in the area under consideration.
  • Informing enterprises about innovations.
  • Ensuring the stability of the work of regulatory authorities.

The tax authorities have the right to check companies, request the necessary documents. Penalties are issued on the basis of the audit.

Required documents

An enterprise must keep documentation on the shopping center when the amount of its income from transactions with the same participant is more than 100 million rubles. The form of documents is not established by law, however, papers must contain the following information:

  • The activities of participants in transactions that are controlled.
  • List of participants in operations.
  • Details of the operation: conditions, chosen pricing method, terms of receipt of payments.
  • Information about the participants in the transaction: their functions, existing risks.
  • Explanation of the choice of pricing method.
  • Links to data sources used in pricing.
  • Data on income and expenses for the operation.
  • Data on tax adjustments made.

The documents must contain information that could affect the pricing of the transaction.

ATTENTION! The Tax Service has the right to request transfer pricing documentation from the company. Documents must be submitted to the service within a month from the date of the request.

Reporting

The new rules oblige the company to submit reports on transactions to the tax service only if the income from the transaction amounted to more than 100 million rubles. Applications must be submitted no later than May 20 of the following year. The document must include the following information:

  • subject of the operation.
  • Information about the participants in the transaction.
  • Data on income arising from the operation.

Tax services have the right to check the correctness of the shopping center. This is necessary to control the payment of tax in full.

ATTENTION! The tax authorities, not the company, bear the burden of proving the adequacy of transfer prices. That is, the tax service cannot oblige the enterprise to prove the validity of the shopping center.

Legal responsibility of the company

If, as part of the audit, a discrepancy between the established prices and market prices is found, the tax authorities may oblige the company to pay additional tax, taking into account the executed transaction. A certain fine may also be imposed on the firm. If a discrepancy is found for 2014-2016, the penalty will be 20% of the amount of unpaid tax, for 2017 - up to 40%. In order to establish a fine, the enterprise's offense must be proven. Documents of the organization and other sources can be used for this.

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