What are the implications?
From the effective date of the FTS Order, the automatic exchange of CbC reports filed with the Federal Tax Service by parent companies of Russian multinational enterprise groups (MNE groups) no longer takes place with the tax authorities of the UK and individual administrative units thereof.
It should be noted that, on 17 March 2022, the UK and individual administrative units thereof likewise suspended the exchange with the Federal Tax Service of CbC reports filed by parent companies of MNE groups in those jurisdictions.Russian MNE groups
From the effective date of the Order, members of Russian MNE groups that are tax residents of the UK and/or individual administrative units thereof will be obliged to file CbC reports for 2021 with the tax authorities of those jurisdictions by the end of 2022 under the "secondary filing mechanism".
We also remind readers that member companies of MNE groups are required in the current calendar year to submit a notification of participation in an MNE group ("MNE Group Notification") with the tax authorities for:
1.the 2021 calendar year:
- by 1 January 2023 in the Isle of Man and
- by 30 November 2022 in Guernsey
2.the 2022 calendar year:
- by 31 December 2022 in the UK and Jersey.
Failure to file CbC information (CbC Report and MNE Group Notification) within the prescribed time limit or the filing of inaccurate information in those countries is penalised by fines of:
Foreign MNE groups
- from 300 and 3,000 pounds sterling respectively plus additional charges for each day overdue.
- up to 20,000 pounds sterling for failure to file without good reason in Guernsey.
The Federal Tax Service can, in the same way as foreign tax authorities, likewise send requests for CbC reports for the 2021 calendar year to Russian members of foreign MNE groups (with parent companies in the UK, Guernsey, Jersey and/or the Isle of Man) under the "secondary filing mechanism".
When a request is received from the Federal Tax Service, the CbC report must be submitted electronically in XML format no later than three months after the date of the request.
Under the Russian Tax Code, failure to file a CbC report within the stated deadline or submission of a CbC report containing inaccurate information will result in the imposition of a 100,000 rouble fine.
Failure to submit a CbC report or inaccurate reporting may also draw additional attention from the Federal Tax Service towards intra-group transactions with foreign members of the MNE group and may potentially prompt the Federal Tax Service to order TP audits or general tax audits, as well as earning the company a reputation as a "bad-faith" taxpayer.