1. YOUR RELIABLE PARTNER

2. New Regulations To Control Transfer Pricing

3. A new section to control of transactions will be in the Tax Code of Russia since January 1, 2012

4. New control mechanism includes: Rules for determining the controlled transactions Methods for determining the income on transactions between related parties Tax control procedure

5. At least one of the parties will reduce or increase the tax base on: - Corporate income tax - VAT - Personal income tax - Mineral Extraction tax Transactions are subject to control when :

6. What kinds of transactions will be under the tax control? Between related parties Foreign trade transactions Equated to transactions with related parties Transactions with offshores

7. Related parties Now Individuals or companies directly or indirectly own more than 25% of the shares of a company One person is subordinated to another ex officio Relatives Company - in case one person (or legal entity) posseses directly or indirectly more than 25% of shares Companies - when the same individuals are 50% of the Board of Directors Company and person who has athourity to appoint CEO or not less then 50% of Bord of directors Companies in witch CEO or not less of Bord of Directors was appointed by one person Company and its CEO Companies and individuals when share of direct participation os each previous person in each subsequent one is more than 50% Before Company directly or indirectly owns more than 20% of the shares of another company One person is subordinated to another ex officio Relatives

8. Equated to transactions with related parties Transactions with independent parties, whose role in the execution of the contract is minimal: – not perform any functions other than resale of goods or services – do not assume any risks – do not use the assets

9. Foreign trade transactions: Transactions with the global exchange trade commodities: - Oil and oil products - Ferrous metals - Non-ferrous metals - Chemical fertilizers - Precious metals and stones Transactions with off-shores

10. Transactions beyond the tax control : Transactions between the parties of the same consolidated group Transactions between the parties that: - Registered in one of the Russian regions - Do not have separate divisions in other Russian regions - Do not pay corporate income tax on the territories of other Russian regions; - Do not have losses for corporate income tax purposes

11. Transactions between Russian related parties are monitored under the following conditions:

12. Since 2014 year The amount of income of transactions of both parties is more than RUR 1 billion (2012 - RUR 3 billion; 2013 - RUR 2 billion) One of the parties is a payer of Mineral extraction tax, subject of transaction are minerals and the amount of income for the year is more than RUR 60 million One of the parties applies the special tax regime and the amount of income for the year is more than RUR 100 million One of the parties applies a tax rate of 0% and the amount of income for the year is more than RUR 60 million If at least one of the parties is a resident of the Special Economic Zone and the amount of income of transactions for the year is more than RUR 60 million

13. Transitional provisions All transactions meeting the criteria are under the control when the amount of income from one person per year exceeds: - 2012 - RUR 100 million - 2013 – RUR 80 million

14. The amount of income of transactions for the year is determined by adding the amounts of income received by the parties

15. Transactions made in calendar year Date of the contract - NO Date of recognition of income and expenses - YES

16. Since 2012 Control over transfer pricing will be a separate type of tax audit

17. The main differences of tax audit Controlled transactions - is carried out by the Federal Tax Service only - subject of audit is controlled transactions only - repeated audit is prohibited Conventional audit - usually is carried out by territorial tax body - subject of audit is taxation of current activity - repeated audit is possible

18. Period of tax audit No more than 3 years

19. Methods for determining the compliance of costs of transactions with market prices method of comparable market prices method of follow-up of prices cost method method of comparable cost-effectiveness method of distribution of profits

20. Consequences of identification of non-market prices One side of the transaction Additional charge of tax The other side of the transaction Adjustment of Tax Base

21. Thank you for attention!

22. CONTACT INFORMATION: 3, bld. 1, Krivokolenny side-street, Moscow, Russia Tel.: + 7 (495) 628-55-60, 621-10-15 Fax: +7 (495) 621-56-87 www.iclcgroup.com info@iclcgroup.com