In accordance with the Common Reporting Standard, an active company is a company whose passive income generated during the past calendar year was less than 50% and total assets generating passive income or intended to generate it were less than 50% over the same period. If passive income is more than 50%, then the company will be considered a passive one.
The competent authorities of a country in which an active company maintains an account will report information on its accounts only to the company’s country of domicile and to the country where the company is actually located. However, in case of a passive company, in addition to reporting information on the company’s account to its country of domicile, information on its beneficiary, who is an individual, must be reported to such person’s country of tax residence.
According to the Commentary to Section VIII of the Common Reporting Standard, passive income means a portion of total income that includes:
- Income similar to interest;
- Rent payments and royalties;
- Amount by which income exceeds losses as a result of selling or exchanging financial assets that generate passive income;
- Amount by which income exceeds losses as a result of transactions in any financial assets (including future, forward, option and similar transactions);
- Net income from swap transactions, etc.