A ten-year-old story is nearing completion about the adoption of new rules to counter the understatement of capital.
At yesterday's meeting with Prime Minister Vladimir Putin, the Finance Ministry and the Russian Union of Industrialists and Entrepreneurs (RSPP) agreed on a new version of the bill.
Big business accepted tougher control, but compelled the Finance Ministry to extend the transitional period. In 2012, the Federal Tax Service (FTS) will control transactions between mutually dependent companies worth more than three billion roubles per year, and worth more than two billion roubles in 2013. The ministry-planned level of one billion roubles will only be reached in 2014.
The discussion of the issue at the prime minister's meeting was a forced measure.
During Putin's meeting with the heads of the RSPP on April 21, Deputy Finance Minister Sergei Shatalov asked the prime minister to facilitate the adoption of the bill on toughening measures against transfer price formation.
The bill was adopted in the first reading in February 2010, but later got stuck in the State Duma as big business was quite happy about the lack of control over such transactions. In response to Shatalov's request, RSPP head Alexander Shokhin asked the prime minister to discuss the new version of the bill with the business community.
Yesterday's meeting was attended by Finance Minister Alexei Kudrin, Economic Development Minister Elvira Nabiullina and FTS head Mikhail Mishustin.
The business community was represented by Shokhin and Novolipetsk Steel Combine (NLMK) owner Vladimir Lisin.
Shokhin told Kommesant that, following the discussion, the transitional period for the introduction of the new rules was extended. After the first reading, the initial version of the bill provided for FTS control over domestic deals among mutually dependent companies with an annual turnover of more than one billion roubles starting in 2012. The sum could be less if one side used special tax regulations or if the transactions involved raw materials. Foreign trade transactions will only be controlled if they involve exchange commodities or are signed with offshore residents.
The sides decided that in 2012, the FTS will control transactions worth more than three billion roubles per year, and over two billion roubles per year in 2013. Transactions worth more than one billion roubles per year will be followed up starting in 2014.
The Finance Ministry also agreed to a two-year moratorium on control over transactions involving the residents of special economic zones or beneficiaries of special tax regulations.
Earlier, the RSPP worked to limit tougher control over prices on cross-border transactions in the first few years. However, the Finance Ministry did not agree to the initiative.
Now, Shokhin calls the version with higher thresholds "a compromise that will remove many concerns of the business community."
He mentioned among the remaining concerns the demand that private companies should prove to the tax authorities that they are using market prices.
Now, companies will have to stock papers on controlled transactions and submit them to the FTS on request. If they do not submit the papers and if they pay their taxes from prices below the market value, they will have to pay the difference and a fine equal to 40% of the concealed sum. The Finance Ministry agreed to postpone the introduction of the fine regulations to 2014.
"The new rules will become an additional burden for business and will increase its costs," Shokhin said. "Modern legislation on control over transfer price formation is one of the terms for entry into the Organisation for Economic Cooperation and Development and Russia hopes to join it sooner or later," Svetlana Stroikova from Pricewaterhouse explained to Kommersant.
She added that if Russia's trade partners establish tough price formation rules, it should do the same. Otherwise, "it will be difficult for Russian companies to operate abroad," Stroikova stressed.
Vadim Visloguzov