Tax treatment of the Société Civil in the United Kingdom
In the past, our experience has been that UK Revenue have accepted the transparent nature of a société civile immobilière and, for example, regarded the gains of an individual société civile immobilière member which have been treated as transparent in France and taxed there, also as being transparent in the United Kingdom and taxed as that of the individual with the benefit of double taxation relief. It would appear, however, that the cases of Joseph Carter & Sons Ltd v Baird and Wear Ironmongers Ltd v Baird  STC 120 caused the Revenue to change its view in relation to SCIs and the case of Memec plc v Inland Revenue Commissioners  STC 754 caused the Revenue to review the classification of foreign entities generally. In particular, the Double Taxation Relief (Estate Duty) (France) Order, 1963 [S.I. 1963 No. 1319] in Article IV(g) specifically refers to “an interest in a partnership,which term includes … a société civile under French law, … and in the case of a société civile immobilière this shall be where the land developed in accordance with the objects of the société is located”. As a result in Tax Bulletin issue 39 (February 1999) the Revenue set out a list of those factors which it considered relevant, being:
a) Does the entity issue share capital or something else, which serves the same function as share capital?
b) Does the foreign entity have a legal existence separate from that of the persons who have an interest in it?
c) Is the business carried on by the entity itself or jointly by the persons who have an interest in it?
d) Do the assets used for carrying on the business belong beneficially to the entity or to the persons who have an interest in it?
e) Who is responsible for debts incurred as a result of the carrying on of the business: the entity or the persons who have an interest in it?
f) Are the persons who have an interest in the entity entitled to share in its profits as they arise: or does the amount of profits to which they are entitled depend on a decision of the entity or its members, after the period in which the profits have arisen, to make a distribution of its profits?
Particular attention is paid by the Revenue to factors (c) and (d). Whether an entity is fiscally transparent or opaque will not necessarily be the same in all cases or for all taxes. Sociétés civiles immobilières are stated to have been last considered in February 2000 and are now to be regarded as being opaque.
The Revenue subsequently issued in Tax Bulletin issue 50 (February 2001) its views on a number of different overseas business entities; whether they were transparent or opaque and when that Revenue view had last been considered.
Tax treatment of the Société Civil in the United Kingdom
For the Business Lawyers there are several firm-level surveys investigating barriers to SME internationalisation have been undertaken by private individuals and public organisations in OECD, APEC and other economies involved in the OECD enlargement and enhanced engagement processes since the 2007 OECD-APEC study. The specific OECD countries covered by the investigations include Australia, Canada, Finland, Ireland, Korea, Spain, Sweden, Turkey, UK, and USA. China, India, Indonesia, Russia, and South Africa are the non-OECD member countries investigated. A few of these studies offered sectoral perspectives on barriers to SME internationalisation.
Top Barriers and Drivers to SME Internationalisation
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Internationalisation and international entrepreneurship among small and medium-sized enterprises (SMEs) is a topic of considerable relevance, principally owing to the observed growth effects of cross-border venturing, and the demonstrated capacity of SMEs to drive economic development at national, regional, and global levels. This realisation was at the heart of an OECD-APEC study on Removing Barriers to SME Access to International Markets, which provided general findings on the major barriers to SME globalization as perceived by SMEs and policymakers in OECD and APEC member economies (OECD, 2008). The need to obtain a greater depth of understanding and an updated view of the issues raised by the OECD-APEC study provided a raison d’être for a follow-up project. Other value adding features include the additional focus on motivations for SME internationalisation; the coverage of recently available documentation from economies involved in the OECD enlargement and enhanced engagement process; and the sub-national and sectoral insights offered on SME internationalisation barriers, motivations and support programs.
State aid: Commission requires Spain to abolish tax scheme favouring acquisitions in non EU countriesJanuary 13, 2011
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State aid: Commission requires Spain to abolish tax scheme favouring acquisitions in non EU countries
The Commission has requested Spain, to abolish a 2002 provision in its corporate tax that allows Spanish companies to amortise ‘financial goodwill’ deriving from acquisitions of shareholdings in companies in third countries, under EU state aid rules. This follows and closes an investigation which had already resulted in a decision, in 2009, concluding that the scheme amounted to illegal aid as regards acquisitions of shareholdings in other EU countries. In October 2007, the Commission started a formal investigation into a provision of the Spanish Corporate Tax Law over concerns that it provided an advantage for Spanish companies acquiring foreign ones (see IP/07/1469). Article 12(5) of the law provides that a Spanish company may amortise the ‘financial goodwill’ resulting from the acquisition of a shareholding of more than 5% in a foreign company during the 20 years following the acquisition. The Commission also asks for the recovery of any aid granted under this provision since 21 December 2007 where concrete legal obstacles to investment could not be demonstrated. Amortising goodwill is generally allowed in full mergers and cannot discriminate between national and foreign firms. It consists in the write off, over a period of time, of the ‘excess’ price paid for the acquisition of a business compared with the market value of the assets composing it. The Spanish provision allowed for the amortisation of the financial goodwill (difference between the cost of the shares and the market value of the target company’s assets) in the acquisition of shareholdings in foreign companies. This is a clear exception from the general Spanish tax system in that it allows the amortisation of goodwill even where the acquiring and the acquired companies are not combined into a single business entity. The provision was the subject of complaints and questions from Members of the European Parliament. As a result Spain no longer applied the measure regarding acquisitions in other EU countries. In 2009 the Commission concluded that the scheme amounted to state aid in that it treated more favourably Spanish acquisitions in other Member States than Spanish-Spanish transactions without any objective reason. The Commission kept the investigation open with regard to acquisitions in non-EU countries (see IP/09/161) in order to examine alleged evidence of obstacles to cross-border business combinations that Spain committed to provide. Spain argued that the measure was needed to offset fiscal and other legal obstacles allegedly faced by acquirers in the non-EU countries. However, the Commission could not identify any such explicit obstacles in the vast majority of the more relevant third countries whose legislation it examined. Therefore today’s decision concludes that the tax provision also amounts to a clear and unjustified advantage in the case of acquisitions in third countries. As a consequence, the Commission asks Spain to repel the provision also for what concerns acquisitions outside the EU and to recover any aid granted in this fashion since the start of the EU investigation, in 2007, with the exception of the countries where such obstacles (e.g. ban on cross-border legal combinations) have been or can be demonstrated (India and China). The non-confidential version of the decision will be made available under the case number C 45/2007 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved.