If a foreign company enters the Russian market, it will eventually have to deal with the subject of transfer pricing and the subsequent preparation and documentation of transfer pricing reports. Cross-border transactions and related operations must be conducted in accordance with international guidelines and local Russian requirements. Transfer pricing guidelines set in at this point and order these transactions sustainably.
Whom does transfer pricing affect?
Transfer pricing applies in particular to so-called controlled transactions. Controlled transactions are those transactions involving the sale of goods or the provision of services between related parties.
Such transactions are usually either:
- Transactions with foreign affiliated persons or companies, such as parent or sister companies – irrespective of turnover
- Transactions between related persons in the Russian domestic market – from a turnover of more than 1 billion rubles
- Transactions between related parties or companies which are carried out indirectly by means of a third, intermediary company.
Internal or external transfer pricing can be calculated internally or externally using five different calculation methods:
- Price comparison method
- Profitability method
- Profit distribution method
- Resale price method
- Expense method