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The Taxation of Corporate Groups Under Consolidation

The Taxation of Corporate Groups Under Consolidation An International Comparison

  • Author:
  • Publisher: Cambridge University Press
  • ISBN: 9781107033498
  • Published In: December 2012
  • Format: Hardback , 336 pages
  • Jurisdiction: Australia, France, International, Italy, Japan, Netherlands, New Zealand, Spain, U.S. ? Disclaimer:
    Countri(es) stated herein are used as reference only
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    The rise of corporate groups in the last century dictates a shift in the income tax law: instead of treating each company as a separate taxpayer, the tax consolidation regime is increasingly common. Antony Ting presents the first comprehensive comparative study of eight consolidation regimes in Australia, France, Italy, Japan, the Netherlands, New Zealand, Spain and the USA. In the study, he critically analyses and compares alternative policy options with respect to ten key structural elements. The study improves understanding of the design and implementation of consolidation regimes and sets the stage for the search for a model. It provides valuable information with respect to the best practices, as well as the pitfalls, in the design of a consolidation regime. The book is essential to countries contemplating the introduction of a new consolidation regime and offers important insights into the management of such a complex structure through careful policy-orientated choices.

    • Comparative study of consolidation regimes provides essential information to countries contemplating the introduction or fine-tuning of a consolidation regime

    • Analyses alternative policy options with respect to ten key structural elements, thereby improving the understanding of the design and implementation of consolidation regimes

    • Provides important insights into how the application of the enterprise doctrine to the taxation of corporate groups can affect the complexity of a tax system and how the level of complexity can be managed to a large extent through the choices of policy options

  • List of figures
    ix
    List of tables
    xi
    Preface
    xiii
    Glossary of terms
    xiv
    List of abbreviations
    xv
    Part I    The enterprise doctrine: theory and practice
    1
    1         The rise of corporate groups: a challenge to the tax law
    3
    1.1       The rise of corporate groups
    3
    1.2       Tension between traditional legal principle and commercial reality
    5
    1.3       Tax consolidation: a response to the rise of corporate groups
    5
    1.4       The purpose, analytical approach and content of this book
    7
    2         Application of the enterprise doctrine to group taxation: theory
    13
    2.1       The separate entity doctrine
    13
    2.1.1     Historical development of legal personality of companies
    13
    2.1.2     Companies as separate taxable units
    14
    2.1.3     The rise of corporate groups: a challenge to the doctrine
    15
    2.2       The enterprise doctrine
    16
    2.2.1     Development of the enterprise doctrine in corporation law
    16
    2.2.2     The enterprise doctrine and the tax law
    18
    2.2.3     Why is the enterprise doctrine more appropriate for the taxation of corporate groups?
    19
    2.3       Key dimensions of application of the enterprise doctrine
    27
    2.3.1     Taxable unit
    27
    2.3.2     Tax base
    28
    2.4       Taxonomy of group taxation models under the enterprise doctrine
    38
    3         Application of the enterprise doctrine to group taxation: practice
    39
    3.1       Key dimensions of application of the enterprise doctrine in practice
    40
    3.2       Application of the enterprise doctrine: corporate groups as taxable unit
    41
    3.3       Application of the enterprise doctrine: tax base of a company
    46
    3.4       Application of the enterprise doctrine: key functions of a group taxation regime
    52
    Part II   Comparative analysis of key structural elements of consolidation regimes
    59
    4         Policy objectives and structural elements of consolidation
    61
    4.1       Why do countries allow consolidation?
    62
    4.2       The single entity concept
    73
    4.3       Consolidation of group results
    81
    4.4       Liability to tax
    83
    4.5       Election to consolidate
    87
    4.6       The “all in” rule
    91
    4.7       Summary
    97
    5         Definition of a group
    102
    5.1       Eligible entities
    104
    5.2       Excluded entities
    116
    5.3       Interposed non-member entities
    117
    5.4       Ownership requirements
    122
    5.5       Change of parent company
    134
    5.6       Summary
    134
    6         Treatment of losses
    139
    6.1       Pre-consolidation losses
    140
    6.1.1     Joining time
    144
    6.1.2     Leaving time
    160
    6.2       Group losses
    162
    6.2.1     During consolidation
    164
    6.2.2     Leaving time
    166
    6.2.3     De-consolidation
    169
    6.3       Summary
    171
    7         Treatment of assets
    176
    7.1       Joining time: transition between the two doctrines
    176
    7.2       During consolidation: intra-group asset transfers
    191
    7.3       Leaving time: transition between the two doctrines
    197
    7.4       Summary
    203
    8         Treatment of intra-group shareholdings
    207
    8.1       Joining time: transition between the two doctrines
    209
    8.2       During consolidation: intra-group share transfers
    214
    8.3       Leaving time: transition between the two doctrines
    222
    8.4       Summary
    227
    9         Interactions between consolidation and other parts of the income tax system
    232
    9.1       Regimes designed under the separate entity doctrine
    233
    9.1.1     Loan forgiveness regime
    233
    9.1.2     Elections by individual group members
    236
    9.1.3     Foreign tax relief regime
    237
    9.2       Regimes designed under the enterprise doctrine
    239
    9.2.1     Thin capitalisation regime
    240
    9.2.2     Controlled foreign company regime
    243
    9.3       Truncated application of the enterprise doctrine to a corporate group
    244
    9.3.1     Intra-group assets
    244
    9.3.2     Interest expenses on acquisitions of subsidiaries
    249
    9.3.3     Dual status of PEs as consolidated group members
    252
    9.4       Tax treaty
    254
    9.4.1     Consolidated subsidiary: eligible for treaty benefits?
    255
    9.4.2     Non-discrimination: PEs
    259
    9.4.3     Non-discrimination: non-resident companies
    262
    9.5       Interactions with another consolidation regime
    264
    9.6       Anti-avoidance rules
    266
    10        A model consolidation regime?
    270
    10.1      Summary of policy options for the key structural elements of consolidation regimes
    271
    10.1.1    Core rule: the single entity concept
    271
    10.1.2    Consolidation of group results
    273
    10.1.3    Liability to tax
    273
    10.1.4    Election to consolidate
    274
    10.1.5    Definition of a group
    274
    10.1.6    The “all in” rule
    277
    10.1.7    Treatment of pre-consolidation losses
    277
    10.1.8    Treatment of group losses
    279
    10.1.9    Treatment of assets (except intra-group shares)
    280
    10.1.10   Treatment of intra-group shares
    283
    10.2      Searching for a model consolidation regime
    285
    10.3      Conclusion
    292
    Bibliography
    295
    Index
    310
  • Antony Ting
    University of Sydney

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