Valuation for taxation

In accordance with article 40 «Maxims of price estimation of goods, works and services for the purposes of taxation» of Tax Code of Russian Federation, the rating authority when controlling computation of taxes has the right to verify the correctness of using transaction prices in the following cases:

1. Between interrelated people;
2. When barter transaction is effected;
3. When foreign trade transaction is effected;
4. When departure of transaction price (upward or downward) from the price level, applied by the taxpayer to identical (similar) goods (works, services) within a short time, is more than 20%.

In the events that the prices of goods, works and services, applied by the parties of transaction, deviate for more than 20% (upward or downward) from the market price of identical (similar) goods (works, services), the rating authority has the right to make a motivated award about additional tax charge or penalty fee, calculated assuming that the results of this transaction are valuated using market prices for respective goods, works and services.

Often, it’s very difficult for companies to give the rating authority a proof that transaction is effected using market prices.

For example, it may concern certain (possibly unique) goods (works, services) which don't have identical (similar) analogues, common criteria of comparison with analogue or analogous transactions within retrospective period.

It could be payments on license agreements or commercial concession agreements for using trademarks, trade names, intellectual property and analogous unique intangible assets.

Confirmation of market prices is especially urgent when such relations occur between interrelated (affiliated) people.

In this case valuation report is additional argument and evidential basis when disputing with the rating authority.

The most reasonable variant of tax risks minimization is market price confirmation by appraiser’s research at the moment of formation of such contracts, especially when they are connected with significant payments and are long-term.

Russian Valuation Service is glad to render such services for you as well as give you any consultations based on our experience and knowledge.