Section X. Tax control in connection with the transactions between interdependent persons. Pricing Agreement
Chapter 29. Interdependent persons. Procedure for determining the share of participation of one organization in another organization or individual in the organization
Section 5.1 & "Interdependent persons. General provisions on prices and taxation. Tax control in connection with the transactions between interdependent persons. Pricing Agreement The US Tax Code is introduced by Federal Law No. 227-FZ of July 18, 2011. This Federal Law amends Part One and Two of the US Tax Code, US Law No. 943-1 of March 21, 1991, "On the Tax Authorities of the United States." This Federal Law came into force on January 1, 2012.
According to paragraph 1 of Art. 105.1 The US Tax Code recognizes individuals as being interdependent for tax purposes (hereinafter referred to as "interdependent persons") if the characteristics of the relationship of these persons can affect the conditions and (or) the results of transactions carried out by them and/or the economic performance of these persons or the activities of the persons represented by them . To recognize the mutual dependence of persons the influence is taken into account, which may be due to the participation of one person in the capital of other persons, in accordance with the agreement concluded between them or in the presence of another person's ability to determine decisions taken by others. At the same time, such influence is taken into account irrespective of whether it can be provided by one person directly and independently or jointly with its interdependent persons recognized as such in accordance with Art. 105.1 of the US Tax Code.
For the purposes of the US Tax Code, interdependent persons are recognized (clause 2 of Article 105.1 of the Tax Code of the United States):
1) organization in case one organization directly and (or) indirectly participates in another organization and the share of such participation is more than 25%;
2) an individual and an organization in the event that such an individual directly and/or indirectly participates in such an organization and the share of such participation is more than 25%;
3) organizations in the event that the same person directly and/or indirectly participates in these organizations and the share of such participation in each organization is more than 25%;4) the organization and the person (including an individual together with its interdependent persons specified in sub-item 11), who has the authority to appoint (elect) the sole executive body of this organization or to appoint (elect) at least 50% of the composition the collegial executive body or the board of directors (supervisory board) of this organization; 5) organizations whose sole executive bodies, or at least 50% of the composition of the collegial executive body or the board of directors (supervisory board) of which are appointed or elected by decision of the same person (an individual, together with its interdependent persons indicated in the sub-clause 11);
6) organizations in which more than 50% of the composition of the collegial executive body or the board of directors (supervisory board) are the same individuals in conjunction with the interdependent persons specified in sub. 11;
7) the organization and the person exercising the powers of its sole executive body;
8) organizations in which the authority of the sole executive body is exercised by the same person;
9) organizations and (or) individuals in the case if the share of direct participation of each previous person in each subsequent organization is more than 50%;
10) individuals in the event that one individual submits to another individual according to his official position11) an individual, his spouse, parents (including adoptive parents), children (including adopted children), full-time and half-brothers and sisters, a guardian (trustee) and a ward.
The share of participation of a natural person in an organization is the aggregate share of the participation of this individual and his interdependent persons listed in sub-item 11, in the specified organization.
If the influence on the conditions and (or) the results of transactions made by individuals and (or) the economic results of their activities is provided by one or more other persons due to their pre-eminent position on the market or due to other similar circumstances conditioned by the peculiarities of the transactions, such influence is not the basis for recognizing persons as interdependent for tax purposes.
Direct and (or) indirect participation of the United States, US entities, municipal entities in United States organizations does not in itself constitute a basis for recognizing such organizations as interdependent. These organizations may be recognized as interdependent for other reasons.
In the presence of circumstances specified in Clause 1, Article. 105.1 The US Tax Code, organizations and (or) individuals who are parties to the transaction are entitled to self-admit themselves for tax purposes by interdependent persons on grounds not provided for in cl. 105.1 of the US Tax Code.
The court can recognize persons as interdependent for other reasons not provided for in cl. 105.1 of the US Tax Code, if the relations between these persons have the characteristics specified in Clause 1, Article. 105.1 of the US Tax Code.
The share of participation of one organization in another organization is determined in the form of the percentage of direct and indirect participation of one organization in another organization expressed in percentage terms. The share of direct participation of one organization in another organization is directly attributed to the share of the voting shares of another organization or directly belonging to one organization in the authorized (share) capital (fund) of another organization belonging to one organization and, in case of impossibility of determining such shares, directly belonging to one organization, determined in proportion to the number of participants in another organization. The share of indirect participation of one organization in another organization is the share determined in the following order:
1) all the sequences of participation of one organization in another organization are determined through the direct participation of each previous organization in each subsequent organization of the corresponding sequence;
2) the shares of direct participation of each previous organization in each subsequent organization of the corresponding sequence are determined;
3) the products of shares of direct participation of one organization in another organization are summed up through the participation of each previous organization in each subsequent organization of all sequences.
Additional circumstances when determining the share of participation of one organization in another organization or an individual in an organization are accounted for in court.
The specified rules are applied also at definition of a share of participation of the physical person in the organization.
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