23 Jul 2020 12:33

Interfax launches service for analysis of tax risks in cross-border transactions

Interfax has developed a module that determines the arm's length range for transactions with European interdependent companies in order to demonstrate the market nature of these transactions in tax documents.

The new module is part of the ASTRA-Interfax system, the most popular Russian service for automated preparation of paperwork on controlled transactions.

"The new module was developed especially for Russian companies that must report controlled transactions. It takes into account Russian specifics and contains financial data only on verified companies that meet the requirements of the Tax Code of the Russian Federation. This made it possible to create a service that effectively reduces tax risks at an affordable price. Until now, only services from major global providers that were not adapted to Russian realities were available on the market," the head of the ASTRA project, Artyom Peregudov said.

When checking for transfer pricing, the tax authorities devote most of their attention to cross-border transactions. Under the recommendations of the Organization for Economic Cooperation and Development and the requirements of the Russian Tax Code, the transactional net margin method can be used to justify intra-group transactions. This method compares the net profit margin of the analysed transaction with the net profit margins of arm's length parties from similar transactions based on analysis of financial statements.

ASTRA can help in cases where it is necessary to determine the arm's length range in Russia or the European Union in order to justify a controlled transaction.

In cases where the party being assessed is registered in Europe and there are not enough comparable companies in the given country, the search for comparable companies is done successively, first in the analysed country, then in the region (Western or Eastern Europe) and in the whole European Union.

"This is the approach used by the largest companies, leading auditors and the actual Federal Tax Service of Russia. Our new service will thus make it possible to justify transactions with any company registered in Europe," Peregudov said.

About 15,000 companies in Russia file reports on controlled transactions every year.

ASTRA-Interfax (tp.interfax.ru) is a professional solution for analysis and justification of transfer pricing that helps companies manage tax risks at all stages of controlled transactions, from planning to preparation of financial statements.