Pharma and Life Sciences Tax News: Vol. 10, No.9:

The specifics of operating of multinational pharma companies in Russia imply a variety of transactions potentially subject to control from transfer pricing (TP) perspective, in particular, intra-group transactions (supply of goods, provision of services, etc.).

While TP issues were always of interest for multinational pharma, historically, they never were a hot topic in Russia due to very limited provisions in the RF Tax Code on this subject. This allowed pharma companies to build their financial models in Russia with the account of, mostly, market demand and pricing regulation applicable to essential and vitally important pharmaceuticals.

This all is going to change now with the adoption of the new TP rules in Russia applicable from 1 January 2012. This is a long-awaited document which raised debates in the Russian parliament and took so long to develop so as to satisfy the authorities and business community. While this may not be the end of the story, and some changes to the new law may still be expected later this year, Russian tax legislation is now definitely stepping in the new era which brings it close to the worldwide practices.

This flash report outlines the major changes introduced by the new law and raises issues for consideration.