On November 2017 the STI has published the Commentary of the above-mentioned and stated the circumstances, which may be evaluated to determine when the arrangements are not genuine.

Not genuine arrangements may be considered a transaction, a contract, an obligation and other arrangement, which is used for aggressive tax planning. The STI may evaluate if the arrangement was established for valid commercial reasons, which reflect economic reality, or if the purpose of the arrangement was tax planning.

The STI has published a list of circumstances which may be considered in order to evaluate if the arrangement is not genuine:
·       the managers or the management bodies of an entity do not have appropriate qualifications to execute their duties;
·       an entity does not have employees or have too few employees to execute its activity;
·       employees of an entity do not have appropriate power of attorney to execute the functions agreed;
·       competences, experiences, time spent to execute work functions of employees of an entity do not correspond with the activity of the entity or/and minimal requirements;
·       the main decisions of an entity are not made by the managers or management bodies of the entity;
·       the meetings of the board members are organized in other country that the one an entity is established/registered;
·       an entity does not execute real active activity (e.g. there is no production);
·       an entity receives only passive activity income;
·       there is no factual presence (e.g. no office, no equipment, etc.) in the country an entity is established (if such presence is needed to execute the activity of the entity);
·       an entity does not have bank account in the jurisdiction in which it is registered;
·       an entity’s operation period is brief or it was only established before the payment of dividends;
·       other circumstances.

We would like to note, that the STI comments that all circumstances will be evaluated jointly, i.e. if the entity satisfies some of the circumstances mentioned above, the entity will not be automatically assumed to be a not genuine arrangement, but other circumstances will also be estimated.