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Who are considered as related parties?

Last updated: February 08, 2024

Income Tax Act § 8. Associated persons

(1) Persons are deemed to be associated if they have common economic interests or if one person has dominant influence over the other. In any case, the following persons shall be regarded associated persons:
1) spouses, registered partners, cohabitees or direct blood or collateral relatives;
2) companies belonging to one group for the purposes of § 6 of the Commercial Code;
3) legal person and natural person who owns at least 10 per cent of the share capital, total number of votes or rights to the profits of the legal person;
4) one person, together with other persons with whom the person is associated, owns more than 50 per cent of the share capital, total number of votes or rights to the profits of a legal person;
5) legal persons where more than 50 per cent of the share capital, total number of votes or rights to the profits belong to one and the same person or associated persons;
6) persons who own more than 25 per cent of the share capital, total number of votes or rights to the profits of one and the same legal person;
7) legal persons where all members of the management boards or the bodies substituting for the management boards are the same persons;
8) an employer and its employee, the employee’s spouse, registered partner, cohabitee or direct blood relative;
9) a person is a member of a management or controlling body of a legal person (§ 9), or a spouse, registered partner or direct blood relative of a member of a management or controlling body.

LEGAL PERSON

Income Tax Act § 9. Management or controlling body of legal person

(1) A management or controlling body of a legal person is any authorized body or person who, pursuant to an Act governing the legal person, a partnership agreement, the articles of association or any other legislation regulating the activities of the legal person, has the right to participate in managing the activities of the legal person or in controlling the activities of the management body of the legal person.

(2) Management or controlling bodies include management boards, supervisory boards, partners authorized to represent general or limited partnerships, procurators, founders until registration of the legal person, liquidators, trustees in bankruptcy, auditors, controllers and revision committees. Directors of branches of foreign companies and managers of other permanent establishments of non-residents are also deemed to be management bodies.

(3) The provisions of subsections 1 and 2 apply to both legal persons in private and public law and to resident and non-resident legal persons.

GROUP

Commercial Code § 6. group

(1) If a company is a partner or shareholder of another company and owns a majority voting interest therein, the participating company is called the parent undertaking, and the company in which it participates is called a subsidiary. A company in which another subsidiary or subsidiaries, with or without the parent undertaking, have a majority voting interest is also a subsidiary of the parent undertaking.

(2) A subsidiary is also a company in which another company (parent undertaking) has control as a partner or shareholder, on the basis of an agreement or without an agreement.

(3) A parent undertaking together with its subsidiaries forms a group.

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