"Involved with the BEPS", an article for the "Neft Rossii" magazine (issue 11-12, November-December 2015)

"Involved with the BEPS", an article for the "Nef...

Anton Oussov, Head of the KPMG Oil & Gas practice in Russia and the CIS, focuses on the upcoming increase in tax expense for Russian transnational oil companies.


In addition to the recent tax residency and CFC legislation stipulating large amounts of extra documentation on foreign structures, Russian oil companies will soon be subject to one more complication, this time on the part of G20 and OECD. Last autumn OECD presented a complex plan of international tax reform actions aimed at correcting the international tax legislation deficiencies described in the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project report. The project focuses on taxing revenues on the territories where they were actually obtained, and in order to achieve this, transnational companies with consolidated revenue over EUR750 million are faced with additional requirements to the contents and structure of both main documentation reflecting the Group's structure and operations and local documentation on controlled deals.


"It is obvious that this tax initiative will result in a new burden for business: taxpayers will have to find resources to prepare and present a large amount of documentation," says Anton. "Apart from being collected, the information needs to be cross-checked with other reports including national tax and financial reporting, consolidated financial statements, and other types of information presented to the regulators. To conduct such large-scale check, the company will hardly stretch enough staff familiar with both financial reporting and tax. Thus, Russian transnational oil companies must be prepared for a substantial increase in tax compliance expenses in the nearest future, which with the negative situation in the oil prices area will hardly be considered a positive development by the market."


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