Ministry of Revenues provided clarification on the restricting related party transactions

The Ministry of revenues clarified that related parties are legal entities and/or individuals, whose relationship may affect their economic performance or performance of persons they represent, matching any of the following:

- Legal entity that exercises control over the business activities of the taxpayer, is controlled by such taxpayer or is under common control with such taxpayer;

 - Individual or members of his family, who exercise control over the taxpayer;

- officer of the taxpayer authorized to carry out on behalf of the taxpayer legal acts to establish, change or terminate legal relations, as well as members of his family;

 - taxpayers-participants in business combination regardless of its type and organizational form that conduct their business activities through the formation of such combination.

Expenses incurred in connection with the sale / exchange of goods, works and services related to such taxpayer or persons under tolling operations are recognized to the extent not exceeding the proceeds of such sale/exchange.

Thus, when making a taxable transactions for the sale /exchange of goods, works and services with related to such taxpayer persons or in tolling operations all expenses incurred in connection with such transactions should not exceed obtained from such transactions revenue, i.e. these transactions do not give rise to losses in tax accounting (Letter from Ministry of Revenues of 17.07.2013, № 7057/6/99-99-19-03-02-1513).