Tax Control Methods for Transactions Between Mutually Dependent Persons: Advantages and Disadvantages

The paper examines the methods defined by the Tax Code of the Russian Federation with regard to the tax control of transactions between interdependent persons. The authors of the paper reveal the basic principles of choosing a particular method of pricing in transactions between interdependent persons: the choice by the taxpayer of the optimal pricing method, which, with regard to all sides of the analyzed transaction, will give the most accurate and well-reasoned conclusion about the conformity of the price applied in the analyzed transaction to the market level; comprehensive analysis of the parties to the transaction taking into account the available data; general availability of information sources that allow information about comparable transactions to search for; the tax authority must justify and prove the impossibility of applying the previous transfer pricing method before proceeding to an analysis of the current transfer pricing method used in the transaction. The algorithms of application of each method, its advantages and disadvantages, as well as optimal economic situations for application of specific methods of pricing in transactions between interdependent persons are revealed. Based on the analysis carried out by the authors of the paper, a conclusion is made about the riskiness of applying methods of tax control of transactions between interdependent persons, since each method has inherent risks that can lead to a dispute between taxpayers and tax authorities.