WTS. Which Tax Consequences

7/30/2019 WTS. Which Tax Consequences

1/14

TAX newsInTernATIonAl

August 2010

wic TaxCcad opptitiai fm tFiacia Cii?e tg t gbacm i ig igf c, t fiaciacii a ft a a ftax paig pptitiad pitfa tat mtia-tia cmpai dcid.

Dpit t gba impactf t fiacia cii ttax amificati a c-t pcific. I ti i pt ct d-pmt fm t ctjidicti.

At t d f a cmiccii cmpai ftd capita tctigic d t affct ttiiati f tax .

Dr. Christoph Seseke

WTS Seseke France


2/14

Tab f Ctt

1. C:Chinanhancssupporttosallanddiu-sizdntrpriss.................... ......... 3

2. Demk:TaxconsquncsothrstructuringoDanishcopanis.................... ......... 4

3. FCe:LossutilizationandcapitalrstructuringinFranc.................... ...................... ......5

4. Gemy:owdotaxsactthrfnancingandrcovroGrancopanis?.........6

5. D:StrngthndGnralnti-voidanculsinndiainordrtoincrastaxrvnus......8

6. TLy:taliantaxrulsgtworsinthlightoliquiditrstraintsanddcliningprofts......10

7. PTGL:Portugusgovrnntintroducsasurstoconsolidatthbudgt........11

8. SS:Wasofnancingandrfnancinginussia....................... ...................... ............ 12

9. ke:rainianconosursroadditionaltaxburdns...................... ............... 13

10.S:Claiingalossorabandondgoodwill....................................................................14

2 | InTernATIonAl TAX news

WTSllianc

c/oWTSGSturbratungsgsllschat

Thoas-Wir-ing1-3

80539munich,Gran

[email protected]

editorialTa:

WinridFigna

Tl.+49(89)28646-178

Fax-49(89)28646-111

Silkohlr

Tl.+49(89)28646-224

Fax+49(89)28646-2323

uthors:marGao,iclasolstSonn,Dr.Chris-tophSs,WinridFigna,kunjanGandhi,

Giovannioll,marinaLobardo,lxandr

ndrad,VitalSinitsin,elnaBuuva,Stuart

.kwstl

rtDirctor:klausSl,liquidstra

Printing:DSBusinssPrintSrvicsGb

WTSllianchasbrsinrgntinia

ustraliaustriaBrazil China

elSalvadorFinlandFrancGran

GhanandiandonsiarantalyLibriamaltamxicothrlandsigria

PolandSingaporSpainSwdn

SwitzrlandTaiwanTurrainS

This issue of INTERNATIONAL TAX NEWS is

published by WTS Alliance. The information is

intended to provide general guidance with respect

to the subject matter. This general guidance should

not be relied on as a basis for undertaking any

transaction or business decision, but rather the

advice of a qualied tax consultant should be

obtained based on a taxpayers individual

circumstances. Although our articles are carefully

reviewed, we accept no responsibility in the event

of any inaccuracy or omission. For further

information please refer to the authors.

Impit

Thfrstgoodnwsatrthglobalconoicandfnancialcrisisisanindicatoroaspradingrcovry.

owvr,itwilltaonthsorvnarstoovrcothipactothisassivartdownturn.ThisisrasonnoughorustodvotthisissuontrnationalTaxws,whichisalsodistributdat

thConrncothntrnationalFiscalssociation(F)ino,tothspcifcctsothconoic

andfnancialcrisisontax-rlatdattrsinvariouscountris.Thauthorsothisissupriarildal

withthqustionohowthisactscopanisinthrspctivcountris.

nthingiscrtain,atlastineurop:Furthrtaxcutscannotbxpctdasgovrnntshav

invstdconsidrablaountsinboostingthconoandarnowshortoon.ncrasdpublic

spndingtostiulatanconoicrcovryandconsolidationrquirntsornationalbudgtshardly

alloworarductioninpublicrvnus.

nthcoursothpasttwoars,thrhasbnsodvlopntineuroprgardingcopan

taxationandproprty/walthtaxsinparticular.TheuropanCoissionhasjustpublishdaeurostat

rportonthistopicwhichstatsthatthgovrnntsothecountrishavapplidfscalasurs

soastoallviatthipactothconoiccrisisandtoprvntaninvstntbaclog.

cntl39.3prcntothgrossdosticproductwntdirctltotrasur.Forthfrsttiinour

ars,taxrvnuassharoGDPdclindrothprviousarslvlin2008,thoughonlb0.4

prcnt.ongeuropancountris,DnartopsthlistwithtaxrvnuassharoGDPoovr

48prcnt.Thlowstsharisrcorddinoaniawithonl28prcnt.Thavragtaxburdnin

th27ecountrishasraindhighcopardtoothrcountrisaroundthworld.nrasonor

thisisthcoprhnsivsocialsstsinplacthroughouteurop.Taxparsinthearchargd

aboutathirdorintaxsthanthircountrpartsinthSorJapan.

owvr,anupwardtndnccanbobsrvdintharaoxcistaxs.navrag,VTinthe

hasrisnro19.2to20.2prcntinthlasttnars.tthsati,incoroxcistaxs

hasdclind,in2008by0.7prcnt.Thisisthostsignifcantdclinvrrcorddoranindividual

arandthusaclarindicatorothsvritothcrisis.

ThisissuontrnationalTaxwstllsouaboutcopanisostprssingconcrnsduringth

transitionoutothcrisisintrsorfnancing,nsuringtaxlosss,bnfttingrotaxincntivs,andothrtaxattrs.nindividualcass,walsovnturaloointothuturandwhichdvlopnts

prtainingtotaxpolicitighthavinstororcopanis.

Thsandothrtopicscanboundonthollowingpags.wouldlitothanthauthorsro

ussiaandScandinavia,Francandtal,ndiaandChina,Portugal,rainandthSwhohav

xaindthtax-rlatdaspctsothcrisisorthisissu.

enjothrad!

yourssincrl,

WinridFigna

Boardmbr,WTSGSturbratungsgsllschat

Pfac

August 2010

August 2010eDITorIAl


3/14


4/14

CAPITAl InCreAse AnD ConTrIBuTIon

ThincrasoaDanishcopanssharcapitaldosnottriggr

antaxliabilit.

thcopanyrcivsacapitalcontributionwithoutincrasingitsshar

capital,suchacontributionwillbtaxablunlssthconditionsorth

rciptotax-rcontributionsart.Thiswillnorallybthcas

ithcopanaingthcontributionisanafliatdcopanorth

(dirctorindirct)parntcopanothrcivingcopan.

CAPITAl reDuCTIon

ThrductionoaDanishcopanssharcapitalorthpurposo

covringopratinglossshasnotaxconsquncs.

DeBT CAnCellATIon, CoMPosITIon wITh CreDITors

AnD DeBT ConversIon

Dpndingonthspcifcsituation,adbtcancllation/copositionwith

crditorswillhavthollowingtaxconsquncsoraDanishdbtor

copan(thdbtor):

Triggering of income tax

Reduction of tax losses carried forward and basket losses

No tax consequences

InTrA-GrouP DeBTs

orall,thcancllationointra-groupdbtswillhavnotaxcons-

quncsorthdbtor.thcrditorisaorigncopany,itisacondition,

howvr,thatthcrditorisnotntitldtostothlossonthdbt

againstitsorigninco.

thdbtiswrittndowntoanaountbinglowrthanthvaluorth

dbtor,itahavtaxconsquncs.thdbtortsthconditionsorrcivingtax-contributionsrothcrditor,thdbtorwillost

lilalsobabltoavoidantaxconsquncsinthissituation.

Thtaxxptiondosnotappltoorignxchanggains.ncaso

partialdbtcancllation,thdbtorwillthrorbliabltopataxon

anorignxchanggainsonthpartothdbtbingrpaid.nthat

cas,taxationabavoiddbcancllingthntirdbtinstad.

eXTrA-GrouP DeBTs

Taxationasarsultodbtcancllationoxtra-groupdbtsdpnds

onwhthrtharrangntwiththcrditorsisindividualorcollc-

tiv.Gnrall,tharrangntiscollctivicrditorsrprsnting

orthan50%othunscurddbtsparticipat,andthraining

dbtsconsistoinorclaisonl.

Thdbtorwillbliabltopataxongainsondbtsitharrangnt

isconsidrdindividual.Thtaxablincoothdbtorwillb

incrasdbthaountothdbtrduction.

ncontrar,thdbtorwillnotnorallbliabltopataxongainson

dbtsitharrangntisconsidrdcollctiv.Carridorwardtax

losssandbastlossswill,howvr,brducdbythaountoth

dbtrduction.dbtiswrittndowntoanaountbinglowrthan

thvaluorthdbtor,thdbtorwillalsobliabltopataxonth

xcssaount.Thconvrsionodbtsintosharsorconvrtibl

bondsistratdasdbtcancllation.morovr,anubroprotc-

tivrulshavbnintroducdtothctthatthcancllationo

dbtsollowingacapitalcontributionistratdasdbtcancllation

undrcrtaincircustancs.

TrAnsFer oF loss-MAkInG CoMPAnIes

nstadothxistingownrscarryingoutarcapitalisation,itay

bconsidrdtotransrthloss-aingcopanytoanwgroup

oownrs.

Thnwownrswillonlbntitldtocarrorwardthtaxlossoth

transrrdcopanithcopanisagoingconcrnatthdatotransr.thtransrrdloss-aingcopanisashllcopan,th

burwillnotbntitldtostothlossagainstuturinco.a

loss-aingcopanistransrrdasagoingconcrn,itshould

alsobnotdthatthlossayonlybstoagainstuturinco

arndrobusinssactivitis.

solvenT lIquIDATIon oF loss-MAkInG CoMPAny

thownrsdcidtoliquidataloss-aingcopany,thtaxasst

inthorotaxlossscarridorwardandbastlossswillblost.

tispossibltotransrcarridorwardtaxlosss(butnotbast

losss)toanothrDanishconsolidatdcopanthroughatax-rrgrwiththloss-aingcopanasthdiscontinuingcopan.

This,howvr,onlapplistolosssgnratdbthloss-aing

copanwhilbingjointltaxdwiththrcivingcopan.

4 | InTernATIonAl TAX news August 2010

DenMArk

As a result of the nancial crisis, an increasing number of Danish companies are in need of new capital or a debt reduction. This

article focuses on the tax consequences of selected recapitalisation measures.

Tax cc f t tctig

f Dai cmpai

ConTACT Person

Niclas Holst Sonne, Attorney-at-Law

Accura Advokatpartnerselskab

TuborgBoulvard1

2900llrup,Copnhagn

Dnar

opag:www.accura.d

eail:[email protected]

Tlphon:+4539452909


5/14


FrAnCe

l tiiati ad capita tctig

i FacAt the end of an economic crisis companies often need capital restructuring (window dressing) which should not affect the utilization

of tax losses. We will show in this article the most current way used in France to restructure the capital of companies after outlining

the applicable tax utilization rules.

Copanissubjcttocorporatincotax,whicharainl

stoccopanis(socitisanonsandsocitsparactions

sipliis)andliitdcopanis(socitisrsponsabilitlii-

ts)havthchoicbtwntwolossutilizationssts:

loss carry forward permitting to compensate the losses

realized with benets in following business years;

loss carry back applicable upon option permitting to carry

back the losses realized to precedent business years.

CArry ForwArD

Carryorwardolosssisnotliitdinti.Thlossralizdin

onbusinssarisconsidrdasanxpnsinthollowing

businssar(s)anddductdassuchrothbnitralizd.

vrthlss,losssayonlybutilizdinthntrpriswhich

ralizdthlossstobcarridorward.Thror,losssa

notbcarridorwardiacopanchangsitsactivit,itspur-

posand/oritstaxrgi.ncasorgrlosssothrgd

copanyaybcarridorwardbythrcivingcopanyuponrqustandagrntothtaxadinistration.

CArry BACk

Thisrgipritsthcopnsationothdicitstatdatth

ndoabusinssarwiththbnitsralizdinththr

prcdntbusinssars.Thcarrbacisopratdupon

rqustbthcopan.Carrbacisnotprittdinbusinss

arswhrthcopancassitsactivit.Thbasisorth

carrybacisthbnit,includingbnitsoprioryarscarrid

orward,bortaxsrducdbydividndsdistributdandbn-

itsorwhichthcorporatincotaxhasalradbnpaidb

taxcrdits(.g.thtaxcrditor&Dcosts).Thcarrybacgivsristoaclaiagainstthtrasuraountingtothdicit

carridbacultiplidwiththtaxratapplicablinthcon-

crndprcdntbusinssars.Froanaccountingpointo

viw,thbooingothtaxclaicratsa(nontaxabl)bnit

inthlossaingbusinssar.

Thistaxclaiabusdortaxpantinthivollowing

businssars.notusdwithinthisdlaitisribursdb

thtaxauthoritis.

CoMPArIson oF The Two reGIMes

Thprincipaladvantagothcarrorwardisthrductiono

thcontributionsocial(socialcontribution)whichisatax

aountingto3.3%othcorporatincotaxdubcrtain

copanis.sthiscontributioniscalculatdonthbasisoth

corporatincotax,thcarrorwardrducsnotonlth

corporatincotaxbutalsothiscontribution.ncasocarr

bac,thcontributionsocialisnotrducd.Furthror,a

carrorwardrducsthproitparticipationothplos

othcopanandatorincrtaincopaniswhilstthcarr

bacdosnot.

Thcarrbachasthadvantagthatthtaxsavingiscrtain.

Whilstthtaxsavingincasocarrorwarddpndsonutur

bnits,thcarrbacconrsaclaiagainstthtrasuror

sur.Furthror,itincrassthquitothcopanduto

thbooingothtaxclaiinthbalancshtandthcorr-

spondingbnit.

CAPITAl resTruCTurInG

s iplwa tocopnsatlosssand incras thquit in

particularwithingroupsisthwrit-oodbts.ngnralth

writ-owillgnratabnitinthavordcopanywhichis

taxabl.existingtaxlossswillsobusdorvnworstax

gnratd.

payntintothcapitalrsrvswhichispossiblundrcrtain

jurisdictions(.g.inGran)islgallnotprittd inFranc.

ThostcoonthodocapitalrstructuringusdinFranc

isthsocalldcoupdaccordonwhichansacapitalincr-

asvntuallralizdbincorporationodbtsollowdb

acapitalrductionwhichisostwiththlosss.evniaccounting

wisthlosssdisappar,thrainortaxpurposs.So,this

thodpritsthincrasothquitratiowithoutloosing

thtaxlosss.

ConTACT Person

Dr. Christoph Seseke

WTS Seseke France SELARL

98boulvardmalshrbs

75017Paris

Franc

opag:www.wts.r


Tlphon:+33(1)53199398


6/14


h d tax affct t fiacig ad c

f Gma cmpai?Due to Germanys export oriented industries Germanys economy suffered a lot during the nancial crisis in 2009. Huge banking insti-

tutions required direct protection and nancial support from the German government to avoid a collapse during the nancial crisis.

Even if Germanys industry is softly turning upwards due to increased exports in the car industry, taking additional advantages from

the increased value of the US Dollar, access to liquidity is still on the agenda of most of Germanys companies. The way to bank nancing

has become harder. Banks have modied their scoring models and risk evaluation methods.

MeAsures To reDuCe neGATIve TAX ConsequenCes

oF CerTAIn TAX rules

SooGranstaxrulsiplntdatthndo2008

hadturndoutasvrngativwithrgardtothconoic

rcovrandbusinssrstructuring.Forthatrasonthintrst

strippingrulacc.to4hGranncoTaxCod(eStG)and

liitationinlosscarrorwardsincasoshartransracc.to

sc.8cGranCorporatncoTaxCod(kStG)havbn

odiidatthndo2009inthsocalld"Wachstusbschlu-

nigungsgstz(Growthcclrationct)".Thostatrial

changstothintrststrippingrulwranincrasinth

intrstcaproe1illiontoe3illionorarsro

2009onwardsandanincrasdcilingro1%to2%orth

quityratiotstorgroupcopaniscopardtothgroupquity

ratio.nadditionacarrovrorunutilizdeBTDthrsholds

royars2007onwardshasbnnwlyintroducd.Furthrth

losscarryorwardrulhasbnodiidbyaprivilgorshartransrsinthcoursorcapitalization.Thprrquisitsto

bnitrothrulsarrathrstrict,inparticularthpropr

tiingobuingthsharsisostrlvant.Thlosscarror-

wardrulsinsc.8ckStGhavgnrallybnodiidbytaing

intoaccountthhiddnrsrvsatthpointobuyingthshars.

Thrulstipulatsthatuptothportionoundrlinghiddn

rsrvs-whicharsubjcttotaxinGran-thlosscarr

orwardwillnotorit.Thassudhiddnrsrvsardtr-

indasdirncbtwnairartvaluosharsandtax

booquit.Thairartvalucanbrgularlassudb

thactualpurchaspric.

DIFFerenT wAys oF reCAPITAlIzATIon

Thrardirntwastorcapitalizastrssdcopan.n

thodiswaivingloansrothsharholdrsand/orothrcrditors.

Thwaivrosharholdrloansistratdastaxnutralcontribution,

howvronlyuptothairartvaluothrcivablatthdat

owaivr.Thisportionothloanwithavaluozroistratdas

taxablinco.Thwaivrothirdpartloansisalwasataxabl

vnt.ndrorrrulsthrwasaprivilgavailablorinco

gnratdrorcapitalizingwhichwastratdastaxxptundr

crtaincircustancs.Grantaxauthoritisallowasiilarx-

ptionaccordingl.Firstl,icrtainrquirntsartangain

arisingrothrcapitalizationcanbostagainstlosscarr

orwardswithouttaingintoaccountthliitationindducting

losss.Gnrall,lossscanbstoagainstproftsuptoe1

illionwithoutliitations.Frothproftxcdingthe1illion

thrsholdonly60%canbstoagainstthraininglosss.Thus,

aportiono40%wouldbtaxabl.thrquirntsart,th

dcrsuspndsthisrul.nadditiontaxauthoritisgrantarli

rotaxsduongainsrorcapitalization.Fortradtaxpurposs

thlocaltaxofchastoagronthatautonoousl.npractic,

dutothstrictrquirnts,itisrcondabltoagrin

advancwiththtaxofconthapplicationothisspcifcrli

orrcapitalizationgains.

MoDIFIeD InsTruMenTs oF FInAnCInG

tisarathrintrstingvariationtocobinthwaivrwithth

instruntoadbtorwarrant,i..anagrntthatthloanrvivs

ithcopanrcovrsandisabltorpathloan.Tothxtnt

thatthwaivrhasbnddtaxablthrvivalothloanwill

btratdastaxdductiblxpns.Thisctightbvr

intrstingroataxplanningprspctiv,sincitallowsadduction

withoutthlossliitationruls.

tthont,thartvaluoloannotsandbondsissudb

copanisisotnblowthprincipalaount.thcopanis

abltorpurchasthnotsrothartthcopanydisposs

orothcorrspondingliability.nthiscas,howvr,thcopany

wouldtriggragainarisingrothdirncbtwnairart

valuothnotandthloanaountprincipal(conusion).Thris

acrtainpossibilitthatthisgainalsobnftsrothspcifc

rcapitalizationrli.nothroptionightbtousadirntgroup

copantorpurchasthnots.nthatcasthloannotwill

surviv.ndrthisscnarioanycapitalgaincanbpostpondtoth

latrrpant.

Currntly,stoclistdcopanisarissuingconvrtibls.Dpnding

onthatursothishybridinstrunt,thcoponntinhrntor

thuturswapistratdasquitcontributionoraccountingand

taxpurpossaswll.nothradvantagisthatthrisnochang

insharholdrownrshipaslongasthconvrsionhasnotbn

xrcisd.

MeThoDs oF wInDow DressInG

Forbalancshtplanningpurpossthrarvariousoptionsinth

GranorganizationTaxctandspcialcontributionrulsor

partnrshipswhichallowataxnutraltransroasstsonthon

handandastpuporaccountingpurpossinthsinglfnancial

statntonthothr.

ouTlook on FuTure TAX leGIslATIon

Gran'sgovrnntannouncdasvrcut-bacinpublic

GerMAny / PAGe 1


7/14


GerMAny / PAGe 2

spndingovrthnxtars.Bnow,thrisnoannouncnt

oincrasingtaxs.Ws,howvr,thatorotntaxrors

arincrasingthtaxbasisanddisallowingtaxstructuringoppor-tunitis.ThrararlsignalsorurthrchangstoVTCod

includingVTrats.

nsuary,thrardirntoptionsorstructuringcopanis

andcopanis'balancshts.nancasththodshav

tobaccopanidbdtaildtaxplanning.

ConTACT Person

Winfried Figna - Head of M&A

WTS AG Steuerberatungsgesellschaft

Thoas-Wir-ing1-3

80539munich

Gran

opag:www.wts.d

e-mail:[email protected]

Tlphon:+49(89)28646-178


8/14


InDIA / PAGe 1

niprissiblavoidancarrangntisdfndtoanastp in,orapartorwholo,anarrangntwhosainpurposisto

obtainataxbnftandit:

As every country struggles to increase their tax revenues in times of nancial crisis, India introduced General Anti-Avoidance Rules

(GAAR) as a tool to prevent tax leakage and increase the efciency of the Tax Department to augment tax collections. Provisions of

Indian GAAR have been codied in section 112 to section 114 and section 161 of the Code. Section 161 of the Code provides that the

Commissioner of Income Tax can invoke GAAR, if the tax payer has entered into any arrangement which is an impermissible avoidance

arrangement.

stgtd Ga Ati-Aidac r i Idia

i d t ica tax

G A A r

CeTeSGTSBLGTS

BeTWeePeSSDeLGT

mSLeGT

eSLTSTemSSeBSe

FTePVSSFTeDeCT

TXCDe

eTeeDTCeDT

meTmLLyemPLyeD

FBFDePPSeS

LCkSCmmeCLSBSTCe,

WLePT

narrangnt,orthpurposothabovdfnition,wouldlac

corcialsubstanciitrsultsinsignifcanttaxbnftbutdos

nothavasignifcantctuponthbusinssriss,orntcash

owsorthlgalsubstancorctothavoidancarrangnt

asawholisinconsistntwithordirssignifcantlyrothlgal

oroitsindividualstpsoritincludsroundtripfnancing,tc.

Thconsquncsodclaringanarrangntasanipris-siblavoidancarrangntabdtrindb:

Disregarding, combining or re-characterizing any step

in, or a part or whole of, the impermissible avoidance

arrangement

Treating the impermissible avoidance arrangement as if

it had not been entered into or carried out

Treating or deeming parties or persons who are connected

persons in relation to each other as one and the same

Disregarding any accommodating party or treating any

accommodating party and any other party as one and

the same

Re-allocating or re-characterizing any accrual or receipt

of a capital or revenue nature or any expenditure,

deduction, relief or rebate

Re-characterizing any equity into debt or vice versa

Thtrstaxbnit,bonaidpurpos,roundtripinancing

andaccoodatingpartyhavbndindinthCodbroadly.

tiswllsttldthatitisunconstitutionalorthssssingicr

()toattpttaxcollctionwithoutauthoritolaworlgal

basis,andataxparliwiscannotscaptaxpantsin

disrgardothlaw,orhrndrshislliablorproscution

asataxvadr.

ThDirctTaxCodhasdvisdandintroducdaGnralnti-

voidanculwhichpowrsaCoissionroncoTax

todclartransactionsasaniprissiblavoidancarrang-

ntiitrsultsintaxbnitsorcratsrightsorobligations

btwnprsonsorrsultsinabusoDTCprovisionstoacilitat

taxvasion.ThpathahadindicatsthatthGinthDTC

indicatthatthjudiciallaccptddistinctionbtwnpris-

sibltaxplanningandtaxvasionisboundtoboblitratddu

towidrcovragandstatutoryincorporation,thgoalothTax

icrwithrgardtorvnulaag.

ThoughthvisdDiscussionPapronDTChasproviddora

saguardoa thrsholdliitor applicationoG,and

rcourstoDisputsolutionPanl,thapprhnsionoitbing

applidarbitrarilandinaroutinashionstillxistsandon


9/14


ConTACT Person

Mr. Kunjan Gandhi

World Tax Service India Pvt Ltd

maatlalousBacbaclaation

Churchgat

mubai400020ndia

opag:www.worldtaxsrvic.in


Tlphon:+91(226)1455600

InDIA / PAGe 2

hopsthatitisapplidandaturltonsurthatthbusinss

counitisnotsubjcttoanuncrtaint.

DrP ProCeDure

ConveysACCePTAnCe

FIles oBJeCTIon

FIles oBJeCTIon

wITh DrP

DrP PAssesDIreCTIon

Ao PAsses FInAl

orDer

APPeAl BeFore

The ITAT For The

TAX PAyer

30 DAys

30 DAys

TAX PAyer

DrAFT orDer By Ao


10/14


Itaia tax gt i t igt f iidit

tait ad dciig pfit

The InTeresT BArrIer rule

ntrstxpnssarulldductibluptothaountointrst

inco.excssintrstxpnssardductibluptoanaount

qualto30%otheBTDothcopany.Sincnoscapclaus

isprovidd,thisliitationayprovcriticalintiswhnoprating

losssararrouncoon.

owvr,thintrstbarrirrulisappasdinitsipactbyso

carr-ovrasurs:

non deductible excess interest expenses can be deducted

in the following scal years to the extent that excess

interest accrued in those same years is lower than 30%

EBITDA;

starting from scal year 2010, it is also allowed tocarry over, without temporal limitations the amount of

EBITDA which has not already been matched by interest

expenses.

Finall,whrasagroupocopanisoptstobtratdasa

nationalfscalunit,non-dductiblxcssintrstxpnssarising

atasinglcopan,abostagainstthxcsseBTDo

othrgroupcopanis(includingnon-rsidntonsauniqu

aturaongsiilarprovisionsadoptdb othreuropan

Countris).

BAD DeBT wrITe DownsThdductionobaddbtwritdownsisordinarilysubjcttorathr

tightconditionswhich,inssnc,rquirthdonstrationthat

thwritdownisconoicallsoundrthanflingorcarringon

aclaiagainstthdbtor.Suchaconditionisinanycasdd

tobtwhnthdbtorissubjcttobanruptcoranalogous

insolvncprocdurs.

loss CArry ForwArD

Lossscanbcarridorwardorfvars,includingtharin

whichthlosshasbnincurrd.ndrsoconditions,aspcial

rgiapplistostart-upi..losssincurrdinthfrstthryars

ollowingthstartothbusinss;assuchlossscanbcarrid

orwardwithouttporalliitations.

nthothrhand,unliothrtaxlgislations,taliantaxlawdos

notallowthcarr-bacolosss.

Withinthcontxtoafscalunit,losssrgdollowingthst

upothfscalunitcanbostagainstthfscalunitinco.

re-CAPITAlIzATIon ThrouGh DeBT surrenDer

Whil,gnrallspaing,adbtsurrndrgnratsataxabl

capitalgainonthpartothdbtor,itisworthnotingthataspcial

rgiappliswhnthsurrndrisadbasharholdro

thdbtor.

nthiscas,thaountothsurrndrwillincrasthtaxbasis

othsharsorthsharholdr(thusrducingutur,possibl

capitalgains)butistaxnutralorthdbtorcopan.

ConTACT Person

Giovanni Rolle

R&A Studio Tributario Associato

CorsoFrancia,32

10143Torinotal

opag:www.taxwors.it

e-ail:[email protected]

Tlphon:+39(011)4338351

Marina Lombardo

R&A Studio Tributario Associato

PiazzaSantnglo,1

20121milano

tal

opag:www.taxwors.it


Tlphon:+39(02)40047079

ITAly

Despite a so-called Anti-Crisis Decree (Law Decree No.185/2008) having reached the legislative oor back in early 2009 and a more

recent Contingency Finance Act in Summer 2010 (Law Decree No. 78/2010), no specic corporate tax measure has been undertaken

so far in view of the nancial crisis. The sole exception is represented by the revision of the so called Industry Analyses which are

used as a basis for the determination of presumptive turnover and income of SMEs. There are, however, some corporate income tax

rules that may gain the spotlight in a time of generalised liquidity restraints paired with declining prots.


11/14


PorTuGAl

Ptg gmt itdc ma

t cidat t bdgtAn article recently published in the OECD Review concluded on Budgeting1 in Portugal: Portugal has made substantial progress in

addressing scal imbalance through a combination of scal restraint and an ambitious structural reform agenda. The Portuguese

experience highlights that improving scal discipline does not just depend on having institutional mechanisms and rules in place; it

also requires sustained political commitment, especially when cutting public expenditure.

Thglobalcrisisbcasvrinthlataro2008.

ACCorDInG The oeCD PorTuGAl -

eConoMIC ouTlook 2010

Thgovrnnthasrcntlyadsowlcoovstobring

orwardfscalconsolidationin2010andstaorabitioustargt

orthbudgtdfcitalsoin2011.Thisisssntialtoostring

invstorconfdncinfscalsustainabilitandnsuringaccssto

xtrnalfnancing.

Thnwtargtsorthpublicdfcitar7.3%oGDPin2010

(prviousl8.3%),4.6%in2011(prviousl6.6%),3.0%or2012

and2.0%or2013.Thisansthatth3%targtwillbrachd

aararlirthaninitiallorcast2.

ThPortugusgovrnnthasdciddinthPrograor

StabilitandGrowth2010-20133(suarilnownasPeC),onthollowingasurstodalwiththfnancialcrisis:

a)nthxpnditursid:(i)toanticipatthphasingoutoall

thanti-crisisstiulusasurs;(ii)torducthtransrstoth

stat-owndntrprissctor;(iii)torinorcthrductionin

cntralgovrnntxpnditur;(iv)torduc5%inthsalaris

oholdrsopoliticalandpublicanagntofcs;(v)thr-

ductionocapitalxpnditur;and(vi)thrductionintransrs

tothrgionalandlocalgovrnnts.

b)nthrvnusid:(i)toincrasallVTratsb1%;(ii)an

additionaltaxationonprsonalincobadoptinganincrasobtwn1%and1.5%inthgnralratsoPrsonalncoTax

(S),andanincraso1.5%inSwithholdingrats;and(iii)th

additionaltaxationoncorporatincobadoptinganincras

o2.5%oCorporatncoTax(C)totaxablproftsxcding

2illion.

Byondthadditionalabov-ntiondadditionalasurs,,thr

isastoasursinitiallyplanndbythPortugusgovrnnt

or2011inthcontxtothPrograorStabilitandGrowth,

thathavbnanticipatdor2010,nal(i)changsinth

unplontbnftsch;(ii)thtaxationocapitalgains;

and(iv)thcrationoaspcialSbracttaxdatarato45%4.

1yar:2009;2fcialinoration;3fcialinoration;4fcial

inorationothministroFinancandPublicdinistration.

ConTACT Person

Alexandre Andrade, Head of Tax Department and Projects

and Public Works Department CCA

Carlos Cruz & Associados, Sociedade de Advogados, RL

uaVictorCordon,n.10-,4thand5thFloor

Lisbon

Portugal

opag:www.cca-advogados.co


Tlphon:+351(21)3223590


12/14


russIA

wa f fiacig ad fiacig i ria

InCreAse oF AuThorIzeD CAPITAl

Thsharholdrscandcidonthincrasothauthorizdcapital

othircopan.Thtransroundsinvstdintothauthorizd

capitalisanon-taxabltransaction,althoughinsocassVT

iplicationsshouldbindd.Forxapl,ithparntcopan

invstsafxdasstinstadoonythnthlattrshouldpartiallyrstorprviouslrcovrdinputVTproportionalltothfxd

asstsrainingboovalu.owvr,thsubsidiarcanrcovr

thsaVTaount.

sTrICT rules For MInIMuM neT AsseT vAlue

Thattrouchorsriousconcrninthiscasshouldbth

statontasstvalu.Thussiancorporatlawprovidsthatth

copansntasstvalushouldnotblssthanitsauthorizd

capital;othrwisthcopanyshallbwoundup.Thus,thincras

othauthorizdcapitalwillstthbaroiniuaccptabl

voluontasstsatthsahighlvl.Thurthrdcraso

thauthorizdcapitalisnotalwasawaout,sincitcanrsultin

ataxablinco.

CAPITAl InJeCTIons BeyonD AuThorIzeD CAPITAl

InCreAse

Thrarwasoainginvstntsintoaussiancopan

withoutthauthorizdcapitalincras.Butfrstoallitshouldb

notdthatthussiancivillawasagnralrulprohibitsgiting

(grantingasstsorr)btwncopanis,vnbtwnaparnt

andasubsidiary.Thisrstriction,shoulditbviolatd,ipliscrtain

civillawriss.owvr,thrarsoxcptionsrothis

prohibition.

Forxapl,thLawonLiitdLiabilitySocitis(atypoussianbusinssntitnownaswhichisororlsssiilartoLtd./

LLC)asprovisionorso-calldasstsinvstnt,aninjction

oasstsadbsharholdrswithoutthincrasoits

authorizdcapital.

nothrxaplisfnancsupportrndrdtoacopanincas

oitsinsolvncortoprvntinsolvnc.

requIreMenTs For TAX neuTrAl FunDInG

nyway,rgardlssocivillawiplications,thtaxlawprovidsthat

gratuitoustransroundsorproprtywillbxptrocorporat

profttaxonlithgrantingpartisasharholdrothaccptingcopanwiththsizosharinitscapitalxcding50prcnt,

orvicvrsa.tisnotdsirabltograntVTablitstothaccpting

partbcausoVTriss.

Waivingliabilitis,ingnral,isnotthtaxnutralsolution,sincth

ussianTaxCodstipulatsthataccountspayablbcoataxabl

incoatthontowrit-ooranrason.owvr,th

ussianministroFinancblivsthatithcrditorwaivsth

dbtorthloanwhichhhislarlirissudtothdbtorthnsuchasituationshouldbrgarddnotaswaivingdbtbutasjust

grantingundswhichcanbtaxnutral,but,again,onlyonconditions

thatonpartyownsorthan50prcntasasharholdroanothr

part.

partrothosstandardwaysofnancing/rfnancingthrcould

bsospcifcwassuitablorcrtainsituations.Forxapl,

iaorignanuacturrstablishsadistributioncopanyinussia,

onoththodsofnancingthlattrcouldbtradcrdit(dlay

opaynt).owvr,itshouldbnotdthatussiantaxlawrgards

tradcrditasaindodbtorthincapitalizationrulspurposs.

When a Russian company nds itself in a difcult nancial situation and/or needs nancing/renancing then the following measures to increase

its assets can be taken:

ConTACT Person

Vitaly Sinitsin, Leading Lawyer, Tax & Legal Practice

ENERGY CONSULTING/ Audit ZAO

7Pavlovsaalitsa

115093moscow

ussia

opag:www.c-group.ru


Tlphon:+7(495)9809081xt.4151


13/14


ukrAIne

uaiia cm ff fm additia

tax bd

MAnDATory PAyMenT oF DIvIDenDs In 2010

ThLaworainnStatBudgtorainor2010,whichwas

adoptdonpril27,2010,andbcactivonpril30,2010 (Law

on Budget),atriallchangdthordropantodividndsb

corcialcopanis.nparticular,pursuanttothandntsto

rticl30othLaworainnJoint-StocCopanis,introducd

bythLawonBudgt,in2010joint-stoccopanisarobligedtopay

dividndsinanaountnotlssthan30%othirntproftinth

rportingarand/orthirundistributdproft.Thabov-ntiond

aountodividndsaybincrasd(butnotrducd)bythrsolution

osharholdrstingoajoint-stoccopany.Thus,in2010paynt

odividndsatthaountoatlast30%othjoint-stoccopans

proftismandatory.

tshouldbnotdthat,xcptorcrtainspcifccass,panto

dividndsissubjcttoadvanccorporatprofttaxpayntinanaount

o25%othgrossaountodividndsontoposuchdividnds.With

thisinviwitisquitclarthatstablishingthntiondrquirnttoandatorilpadividndsthlgislatornsursadditionalinowo

undsintothstatbudgt.

ForthsaocopltnssitshouldbnotdthatthCntralTax

fcoraininitsLttrasoma18,2010o.9637/7/15-0217,

outlindthapproachthatthrquirnttoandatorilypaydividnds

shallbapplidtoalltypsobusinssntitis(i..notonlytojoint-stoc

copanisbutalso,orxapl,toliitdliabilitcopanis).This

approachisnotinlinwiththlaw,whichxplicitlprovidsorth

discussdrquirntonlinrspctojoint-stoccopanis.

new rules For usInG CreDITeD AMounT oF InPuT vATThLaworainnndingCrtainLgalctsraino.

2275-Vasoma20,2010,introducdnwrulsorusingcrditd

aountoinputVT.

BasdonthntiondLaw(para.3oFinalprovisions)ngativVT

balancaccuulatdbythtaxpayrayrducongoingVTliabilitis

othtaxparonlinthaountoVTactuallpaidbsuchtaxpar

tothsupplirsogoods(wors,srvics).Thunpaidpartothaccu-

ulatdngativVTbalancisblocdintrsoitsusasVT

crditorosttingongoingVTliabilitis.

Tocopar,borthdiscussdandntstothLaworain

nVTwrintroducd,thunpaidpartothaccuulatdngativ

VTbalanccouldnotbclaidorrundbutstillcouldbusdor

osttingthongoingVTliabilitis,i..asVTcrditothnxtrporting

priod.

ThnwrulsshallbappliduntilJanuar1,2011.Startingro

Januar1,2011,blocdngativVTbalancabaccountdas

VTcrditandostagainstVTliabilitisundrthrulsxistingbor

thdiscussdLawbcactiv.

new rules For DeDuCTInG TAX losses oF PrevIous

TAX PerIoDs

ThLaworainnndingCrtainLgalctsraino.

2275-Vasomay20,2010liitdthaountotaxlosssoprvious

taxpriods,whichisallowdtobdductdin2010.aly,thaount

allowdordductionwasrducdto20%othtaxlosssaccuulatd

bthtaxparbJanuar1,2010.Thraindr(i..80%osuch

taxlosss)shallbaccountdasdductiblxpnssonlystartingro

2011.

partrothabovchangsitshouldbnotdthatinthnarstuturinrainthadoptionothtaxcodisplannd,thdrat

owhichhasalradpassdthfrstradinginVrhovnaadao

rain.

Gnrall,thdrattaxcod,ifnalladoptd,abassssdas

considrablraisingthtaxburdn.Thdrattaxcodliitsthlisto

xpnsswhicharallowdordduction.copardwiththctiv

taxlgislation,whichnsurscoparativlbalancdrgulationoth

rlationsbtwntaxauthoritisandtaxpars,thdrattaxcodcon-

sidrablwidnspowrsandauthoritisotaxauthoritisandprovids

oradditionalobligationsothtaxpars.adoptdthtaxcodwill

bringalongalotoconusionwithinvitablngativipactonthcono.

In the following we give a short overview with respect to certain changes in the tax environment in Ukraine which resulted from the

efforts of the Ukrainian government to mitigate the impact of the nancial crisis. In general, such efforts were aimed mainly at mitigating

the impact of the nancial crisis on the state budget, rather than on relieving the economy from extraordinary tax burdens. Among such

changes are the following:

ConTACT Person

Elena Bukuyeva, Senior Adviser

KM Partners

5PanivsaVul.,FithFloor

01033kiv

rain

opag:www.-partnrs.co


Tlphon:+380(44)4907197


14/14

14 | A 2010

usA

Caimig a f abadd gdi

reCovery oF TAX BAsIs By DIsPosAl oF non

PerForMInG BusIness

Forangrowthorintdcopanis,anacquisitionainvolv

thadditionoanwproductorsrviclintothpurchasrs

xistinglinsobusinss.nsocass,thacquisitionab

onwtchnologythatisstillinthdvlopntstag.thnwly

acquirdproductlinortchnologydosnotprorasanticipatd,

thpurchasradcidtodiscontinuthlinortotrinat

urthrdvlopntothacquirdtchnology.nsituationswhr

thpurchasdasstscanbsoldtoanunrlatdpartasagoing

concrn,thtaxpayrwillgnrallybabltorcovritsraining

taxbasisinthpurchasdasstsatthtiothsal.

reCovery oF TAX BAsIs ouTsIDe A TrAnsACTIonowvr,inaninstancs,thtaxparabunabltosll

undrproringassts(.g.,whrthproductorsrvicisno

longrcorciallviabl).vrthlss,undrthrightcir-

custancsthtaxpayraystillbabltorcovritsraining

taxbasisinthacquirdgoodwillintharitdiscontinusth

acquirdbusinss.

DIsConTInuATIon oF A BusIness

nordrorabandondgoodwilltobdductibl,thtaxrgula-

tionsrquirthatthrbaclosdandcopltdtransaction,

ixdbidntiiablvnts.Thcopltdiscontinuationoa

businsscanqualiasanidntiiablvntthatwillntitlataxpartoclaialossonpurchasdgoodwillattributablto

thatbusinss.actorisstablishingthatthpurchasd

businsshasbntrinatdandthatnonothasstsothat

businssarbingusdinthtaxpayrsrainingbusinss.s

aurthrrquirnttoclaialossonthabandondgoodwill,

thrgulationsprovidthatthtaxparanotrtainano

itsothrSction197intangiblsacquirdinconnctionwith

thacquisitionothtradorbusinss.

wTs oBservATIons

Taxparsthathavacquirdanon-proringbusinssshould

carullyrviwthcurrntstatusothbusinssandutilization

othbusinssassts,includingintangibls.nappropriatcir-

custancs,taxparsabntitldtoclaialoss.nso

circustancs,proactivstpsabtantostrngthna

taxparspositionorclaiingaloss.

ConTACT Person

Stuart A. Kwestel, J.D., LL.M., Managing Director

World Tax Service US LLC

2120adquartrsPlaza

morristown,J07960

S


Tlphon:+1(973)4011118

When a US taxpayer acquires a business through an asset acquisition or a share purchase treated as an asset acquisition (e.g., LLC

acquisition or qualied stock purchase with a Section 338 election), the purchaser will receive a fair market value (FMV) tax basis in

the acquired assets. Under existing US tax regulations, the assets are categorized into seven classes and the purchase price is allocated

in ascending order of class based on the FMV of the assets in each class. If the purchase price exceeds the FMV of the assets identied

in classes I VI, the excess is allocated to class VII, which represents the goodwill or going concern value of the business acquired.

Under Internal Revenue Code Section 197, the goodwill is amortized over a 15 year period for income tax purposes.

WTS. Which Tax Consequences

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