Companies that, in addition to their ordinary day-to-day transactions, transact with related parties - that is, carry out controlled transactions - have a number of obligations under the law. To meet them on time, management needs to keep track of which requirements apply in its particular situation and when they must be fulfilled. In practice, however, these obligations are often remembered only at year end, when the financial year is being closed and the last corporate income tax (CIT) return is being prepared.

The arm’s length principle applies to every related-party transaction

The basic requirement in all transactions with related parties is compliance with the arm’s length principle: the price and terms of a transaction must be those that unrelated parties would agree in comparable circumstances. The arm’s length principle must be observed in all transactions with related parties, regardless of the type and amount of the transaction. It applies both to the transaction price and to the other terms of the transaction.

Related parties are defined in Section 1, Clause 18 of the law "On Taxes and Fees", and the definition is broader than many companies tend to assume. Controlled transactions, in turn, are defined in Clause 29.¹ of the same section.