On 5 February 2018, the State Fiscal Service (SFS) published Guidance Letter No. 204/6/99-99-15-02-02-15/IPK of 18 January 2018 clarifying definition of related parties regarding holding ownership of a director who owns the corporate rights of a legal entity of a non-resident in the amount of 24 percent.
According to article 14.1.159 of the Tax Code, related persons are legal entities and / or individuals whose relations may affect the conditions or economic results of their activities or activities of the persons they represent, taking into account the following criteria, in particular, for legal entities: the same legal entity or an individual directly and / or indirectly owns corporate rights in each such legal entity in the amount of 20% or more; for a natural person and legal entity: physical person directly and / or indirectly (through related persons) owns corporate rights of a legal entity in the amount of 20 and more percent.
Therefore, in case if an individual is an official (director) of a resident, he directly owns the corporate rights of a non-resident legal entity in the amount of 20 and more percent, then such legal entities (resident and non-resident) are considered related for transfer pricing purposes.
