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The procedure for holding a mutual agreement procedure on DTT issues has been approved

Pepeliaev Group advises that order No. 102n of the Russian Ministry of Finance dated 11 June 2020 approved the Procedure for a mutual agreement procedure application to be filed and reviewed in accordance with the provisions of a DTT[1].

The Order was published on 11 September 2020 and comes into force in a month, that is on 11 October 2020[2].

It has been over 6 months since the draft of the document was published and its text has been substantially cut back. It has probably taken so long owing to the government’s policy to revise DDTs.

A MAP application

An application for a mutual agreement procedure (a MAP application) can be filed with the Russian Ministry of Finance by a Russian resident or by a Russian citizen (regardless of the residence) in the event of a non-discrimination dispute if double taxation has taken place or may take place. Such persons are listed in article 142.8(2) of the Russian Tax Code (the “Tax Code”).

The Procedure contains an indicative list of documents that should be attached to the application. The standard identification documents should be accompanied by the relevant person’s position with references to the facts and circumstances as well as to “what the taxation procedure's non-conformity in Russia and/or abroad to the provisions of the Treaty consists of”. The documents to be attached also include the tax audit materials and “detailed information about any pre-trial or court proceedings and any decisions regarding the situation at hand in Russia or abroad”.

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The Mutual Agreement Procedure Guidelines published for reference on the website of the Russian Ministry of Finance contain more detail regarding the documents which may be provided in specific cases.

The Procedure establishes the limitation period for a MAP application to be filed, which is three years from the date of the delivery of a tax audit report, or a well-grounded opinion in tax monitoring, or a foreign tax authority’s decision that, in the taxpayer’s opinion, has caused double taxation.

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It remains an open issue whether a MAP application may be filed for future periods, i.e. periods that have not yet been checked by the tax authority. The international provisions allow this to be done. The Procedure sets out that the application should refer to the tax period in which the double taxation has taken place or may take place. The three years are a time limit that commences on the date when the audit report was issued. That is, an application may be filed at any time before the issuing of the audit report, and only within three years after the audit report is issued. On the other hand the documents to be attached to the application explicitly include the tax audit materials. If the provided information or documents are incomplete according to the Procedure, the MAP will be denied for the taxpayer.

Consideration of the application

The Russian Ministry of Finance makes the decision to proceed with or to deny the MAP within 90 days from the date when the taxpayer’s application and all the necessary documents are received.

The MAP may be denied in the following cases:

  1. the deadline for filing an application has been missed;
  2. the information in the application or in the attached documents is incomplete and/or inaccurate;
  3. there is a court decision regarding the issue set out in the application and such decision has come into force.

The above grounds are listed in the first paragraph of clause 10 of the Procedure. At the same time, the second paragraph specified that if the deadline for filing the application is met and the information is complete and accurate, the Russian Ministry of Finance issues a decision to hold the MAP.

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The draft Procedure provided only for one ground for a MAP to be denied - a court decision that has come into force. However, the “clarification” of the grounds for a MAP to be denied included in clause 10 of the Procedure raises the question not only in terms of a legal technicality, but also in terms of substance: if the deadline and completeness criteria are met, can a Russian court’s decision be overcome? However, like in many other cases, the Procedure provides no answer to this question.

What to think about

There is no doubt that the Procedure in such a reduced form is of no use for the taxpayers. In many aspects, specifically at the beginning, it only duplicates the provisions of the Mutual Agreement Procedure Guidelines.

The Procedure does not regulate such important issues as the applicability of MAPs to transfer pricing, the possibility of suspending tax collection until a MAP is completed, the procedure for implementing a decision made following a MAP and for the taxpayer to participate in this process.

Despite the above, there are individual cases when a MAP is applied in Russia even now. Therefore, even now taxpayers can feel free to apply for a MAP. This is particularly so as no state duty is provided for filing such an application. A MAP application can be filed regardless of whether other methods to protect the taxpayer’s rights, such as contesting the tax authority's decision in and out of court, have been used. Based on our experience, in many cases the tax authorities withdraw or substantially reduce their claims when they receive a taxpayer’s MAP application.

Help from your adviser

Based on their experience our lawyers are ready to assist in preparing for a MAP, in particular[3]:

  • to carry out a preliminary analysis of whether it is prudent to apply for a MAP in a specific case;
  • to participate in negotiations with the HQ and foreign advisers from the relevant jurisdiction;
  • to assist with drafting an application and the necessary set of documents; if a MAP application is filed with a foreign tax authority, to draft the documents for foreign advisers because a violation of a DTT results from the conduct of the Russian tax authorities;
  • to represent the company at all stages of the process;
  • to consider applying alternative international tools for settling tax disputes.



[1] The procedure and timeframes for an application to be filed and reviewed for a mutual agreement procedure to be held in accordance with an international tax treaty to which the Russian Federation is a party (the Annex to Order No. 102n of the Russian Ministry of Finance dated 11 June 2020; the “Procedure”).

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