Controlled Transactions in 2024: What You Need to Know
One of the key topics of interest for businesses and taxpayers is controlled transactions. What are they, which transactions are subject to control, and how can you avoid issues with tax authorities?
What Are the Controlled Transactions?
Controlled transactions are financial operations between related parties that are subject to mandatory oversight by the Federal Tax Service (FTS). Tax authorities pay special attention to transactions between related parties, as well as with counterparties that are treated as related.
Types of Controlled Transactions
According to current legislation, controlled transactions can be divided into several categories:
1. Transactions Between Related Parties
Related parties are companies and individuals who can influence each other. These include, for example, relatives as well as people in a position of employment dependence. The following criteria are used to determine relatedness:
– Family ties (parents, children, spouses, siblings).
– Employment relationship (superior and subordinate).
– Participation in the company’s capital (ownership of more than 25% of shares).
– Executive function (appointment of management bodies by related parties).
It is important to note that transactions between related parties are not illegal. The main requirement is that the terms of such transactions must be consistent with the terms that would be agreed upon between independent parties.
2. Contractual Obligations Between Entities Treated as Related Parties
These transactions are monitored in a manner similar to transactions between related parties. The term “treated as related parties” refers to entities that may influence each other but do not have a direct relationship of dependency.
3. Transactions Recognized as Controlled by Court Decision
If tax authorities or courts detect violations, transactions may be recognized as controlled even retroactively. This can happen if, during an audit, it is found that the terms of the transaction do not correspond to market conditions.
Why Is Control Necessary?
The control of transactions aims to prevent tax evasion and ensure fairness in business practices. Tax authorities use various methods of analysis and monitoring. Therefore, it is crucial that all transactions that may be considered controlled comply with market conditions and are properly documented.
How to Avoid Violating the Law
To avoid violations, it is generally recommended to:
– Submit timely notifications about controlled transactions.
– Carefully document all transactions, especially those between related parties.
– Conduct market price and condition analysis to ensure your transactions meet market standards.
– Consult with tax experts and legal advisors to stay informed about the latest legislative changes.
By following these steps, businesses can reduce the risk of fines and ensure compliance with tax regulations.
