When figuring out how much tax each member of a tax group owes, we use the arm’s length standard from Article 34 of the Corporate Tax Law. This means transactions within the group must be priced fairly. For example, if one member sells something to another for more or less than it’s worth, we adjust the price to be fair.
If one member provides a service to another without charging, we treat it as if there was a fair charge, unless the law says otherwise.
If a member pays for something that benefits another member, we consider it as if the cost was passed on, if it’s fair to do so.
However, we must also ensure that the total taxable income of the group’s members doesn’t exceed the group’s total income.
If one member reports income or expenses that the others don’t, we don’t count it for tax purposes. For example, if one member makes money on a deal but the others don’t have related expenses, we ignore that income.
Regarding assets and liabilities transferred between group members, we treat it as if there’s no gain or loss, following the rules for Qualifying Group Relief in Article 26 of the Corporate Tax Law.
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