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The Taxation of Corporate Groups Under Consolidation

The Taxation of Corporate Groups Under Consolidation An International Comparison

Author: Antony Ting
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