Recognition of individuals as interdependent entails the need to comply with the rules for applying prices when they conclude transactions. Under the subp. 1 2 paragraph 40 of the article of the Tax Code, tax authorities. Meanwhile, in practice, difficulties often arise in determining interdependent persons. Let us further consider the main problems of law enforcement practice.
Relevance of the issue
Disputes regarding the consequent recognition of persons as interdependent are primarily caused by gaps in legislation. We turn to the NK.
Paragraph 1 of article 20 of the Code provides for the grounds on which persons are considered interdependent. At the same time, in clause 2, the possibility of a court to recognize entities as such in the presence of other circumstances is enshrined if relations between them can affect the results of transactions related to the sale of services, goods, works.
Thus, recognition of individuals as interdependent entails the application of the provisions of article 20. However, the Tax Code does not establish the procedure for the tax authority. In particular, should the inspection preliminary file a lawsuit in order to recognize the subjects as interdependent or the fact of recognition of the individuals as reflected in the decision of the Inspectorate of the Federal Tax Service entails subsequent verification and confirmation in court?
Moreover, paragraph 2 does not indicate an authority authorized to act as an applicant. Based on the content, the applicant should be the IFTS, in which one of the interested entities is registered. Meanwhile, the Tax Code does not provide for the right of the supervisory authority to submit claims to the court on the establishment of legally significant facts.
Which individuals are considered interdependent?
In the first paragraph of article 20 signs of such entities are fixed. Meanwhile, the domestic legislation uses in many respects similar concepts of affiliated and associated persons. The latter include entities that are indirectly / directly involved in the management, capital and control of another company. This status avoids double taxation.
Affiliates are mentioned in several regulatory acts, for example, Federal Law No. 948-1 and the State Property Committee Order No. 723-r of 1994.
Affiliates are legal entities and individuals capable of influencing the activities of an organization and citizens conducting entrepreneurial activities.
As for the interdependent persons, their signs are:
- Direct / indirect participation of one legal entity in another, if its total share is more than 20%.
- Subordination by the position of one citizen to another.
- The presence of marriage, kinship, family (the adoptive parent adopted, including), guardianship, guardianship relations.
Share
It can be:
- direct (direct);
- indirect;
- mixed.
In the first case, everything is simple. One enterprise, for example, may have more than 20% of voting shares, 20% of the authorized capital in an LLC.
The second case involves the participation of one company in another legal entity through third parties. The indirect share can be determined as follows:
- To establish the existing sequence of participation of one company in another through the participation of each previous legal entity in each following in the corresponding sequence.
- Determination for each previous company of a share of direct participation in each subsequent company in order.
- Summation of the products of the quantities obtained in the previous paragraph.
In the third case, there is an indirect and direct participation, amounting to more than 20%.
Job reporting
It takes place in the presence of labor relations between citizens.
Job title - one of the essential conditions of the contract between the employer and the employee. The name is also indicated in the work book. Accordingly, the presence of contracts with job titles entails recognition of individuals as interdependent when they make transactions.
Marriage
In paragraph 3 of article 20 of the Tax Code there is a link to the Family Code. Accordingly, only the presence of an officially registered marriage entails recognition of individuals as interdependent . Accordingly, cohabitants (subjects of a common-law marriage) are not considered interdependent.
In paragraph 3 of article 20 there is also such a thing as "property relations". By them we mean relations of intimacy, arising not from kinship, but from a marriage. This also includes relations between blood relatives of a spouse with another spouse or between their relatives. However, these persons cannot be considered interdependent due to the lack of official registration of relations.
Relatives
In article 14 of the UK there is a list of close relatives. Meanwhile, the concept of relationship of kinship is not disclosed in the Code. However, taking into account the provisions of Article 4 of the UK, it can be disclosed with the help of civil law norms.
According to Article 14, relatives are recognized as relatives:
- In a straight line descending / ascending line. These include parents, children, grandparents, grandchildren.
- Half sisters and brothers.
Exceptions to the Rules
The presence of any of the above signs entails recognition of individuals as interdependent . Meanwhile, by none of the mentioned criteria can an organization and an individual be recognized as such, including JSCs and its shareholders-citizens. A similar exception is provided for organizations connected to each other through an individual (general director, founder).
The value of interdependence in taxation
It is worth saying that the tax consequences of recognizing individuals as interdependent are not so often applied in practice. The use of the institution of interdependence is determined by the provisions of Article 40 of the Tax Code governing the establishment of market prices.
However, recognition of individuals as interdependent entails the application of certain norms of Part 2 of the Tax Code. For example, subparagraph 2 1 of paragraph 220 of the article secures the possibility of using a tax deduction for the purchase and sale of residential real estate by citizens who have the signs specified in paragraph 2 20 of the Code. When considering disputes, it must be borne in mind that the requirements enshrined in Art. 20, must take place at the time of the transaction. So, if the transaction was concluded between persons cohabiting, but not officially married, the tax deduction is not subject to application, even if subsequently the court recognizes them as interdependent.
Effects
Recognizing individuals as interdependent is a very specific procedure. Moreover, the tax authorities often interpret the rules enshrined in Article 20 of the Tax Code rather peculiarly. Some IFTSs believe that recognizing interdependence entails significant consequences for individuals. This conclusion is refuted by judicial practice.
Recognition of individuals as interdependent entails an assessment of the results of transactions between them . No other consequences are provided by law.
Recognition of individuals as interdependent: sample notice
Tax Code established the obligation of payers to report on their income. Since recognition of individuals as interdependent entails an assessment of the results of transactions concluded by them , the Federal Tax Service Inspectorate has the right to demand a report on concluded agreements. As indicated in Art. 105.15 Tax Code, the payer at the request of the tax service must provide documentation for a specific transaction (or group of agreements). The subject can present several reports or a single paper. Recognition of interdependence can be carried out by a person independently, according to the Tax Code or by court order. In the reporting document there is a column where you need to put down the corresponding figure.
The document indicates information on the activities of the person who completed the controlled transaction. If the payer uses the methods enshrined in Sec. 14.3 Tax Code, information about them should also be indicated in the report.
Explanations of the BAC Presidium
Due to the fact that recognition of individuals as interdependent entails an assessment of transactions concluded by them, the Federal Tax Service Inspectorate may charge taxes and penalties. Moreover, as the Presidium of the Supreme Arbitration Court explains, the fact of mutual dependence on the grounds not provided in paragraph 1 of Article 20 of the Tax Code is established in a court with the participation of the IFTS and the payer as part of the consideration of disputes regarding the imposition of arrears on the latter.
The preliminary recognition of the interdependence of the court (until the inspection of the Federal Tax Service Inspectorate observes the procedure for applying prices) is not carried out at the request of the control body.
An organization (seller) and its head (buyer), which, together with its son, owns 100% of its shares, may be recognized as interdependent under the provisions of Art. 20 of the Tax Code and in order to implement the rules of Art. 40 of the Code.
When individuals are recognized as interdependent, an assessment of the results of transactions between them entails additional taxes only if there is evidence that the cost of goods (work, services) deviated from the market by more than 20%.