eKTP 19

Tax Treatment on Controlled Transactions and Transactions Between Relatives
Part 2


1. Definition pursuant to Section 2 of the Income Tax Act 1967 (ITA)

"Person" includes a company, a body of persons, a limited liability partnership, a limited liability partnership and a corporation sole;

"Individual" means a natural person;

2. Definition pursuant to Section 140(8) of the ITA

“Relative” means a parent, a child (including stepchild and a child adopted in accordance with any law), a brother, a sister, an uncle, an aunt, a nephew, a niece, a cousin, an ancestor or a lineal descendent.

“Transactions” means any trust, grant, covenant, agreement, arrangement or other disposition or transaction made or entered into orally or in writing (whether before or after the commencement of the Income Tax Act 1967) and includes a transaction entered into by two or more persons with another person or persons.

3. Meaning of “Control” and “Associated”

Section 139 of the ITA refers to “control” as both direct and indirect control. The interpretation of related companies or companies in the same group (referred to in the context of holding and subsidiary companies) is provided for under subsection 2(4) of the ITA.

Examples of control and associated persons can be found in page 4 of Transfer Pricing Guidelines 2012.

Under the Guidelines, two companies are associated companies with respect to each other if one of the companies participates directly or indirectly in the management, control or capital of the other company; or the same persons participate directly or indirectly in the management, control or capital of both companies.