Russian Tax Service Said To Be Targeting Oil Firms In Transfer Pricing Probe

by Tatiana Smolenskaya, Tax-News.com, Moscow

18 February 2005

The Russian Federal Tax Service has denied reports that it is targeting firms in the oil sector with tax investigations into their transfer pricing methods.

According to a report by Reuters, a source within the FTS has revealed that bills for back taxes have been sent to a number of integrated oil firms relating to breaches of a rule stipulating that internal prices must not stray more than 20% out of line with prevailing market prices.

However, FTS spokeswoman Yelena Tolgskaya told Reuters: "Information that claims have been sent to big oil companies on the basis of an audit of 2001 do not correspond to reality".

Nevertheless, one subsidiary of an oil firm has been accused of artificially lowering internal prices by 8 billion roubles ($285 million), which could result in a subsequent bill for back taxes of around 2 billion roubles.

It has also been reported that Russian electricity monopoly Unified Energy Systems could become the subject of a tax claim related to an investigation into transfer pricing in 2001, with the possibility that claims for later years could follow.

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