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Home State Taxation and Company Law

Kanter, Marc (2006)
Department of Law
Abstract
The HST proposal aims to solve the cross-border loss relief issue by offering the Home State group the possibility to offset its tax losses against its taxable profits. The political arena within the Community has not proven capable of solving and creating a harmonized tax system. The Home State Taxation proposal can, therefore, prove to be the necessary compromise to solve the cross-border loss relief issue. My master thesis has analysed Home State Taxation from a company law perspective. I have primarily focused on minority and capital protection. My intentions have been to identify incompatible situations between company law and HST. Furthermore, I have analysed whether or not these discrepancies are resolvable within the framework of... (More)
The HST proposal aims to solve the cross-border loss relief issue by offering the Home State group the possibility to offset its tax losses against its taxable profits. The political arena within the Community has not proven capable of solving and creating a harmonized tax system. The Home State Taxation proposal can, therefore, prove to be the necessary compromise to solve the cross-border loss relief issue. My master thesis has analysed Home State Taxation from a company law perspective. I have primarily focused on minority and capital protection. My intentions have been to identify incompatible situations between company law and HST. Furthermore, I have analysed whether or not these discrepancies are resolvable within the framework of HST. The difference between the Home State's tax rules and the Host State's tax provisions may augment the total tax burden of the subsidiary. The allocation of the Home State group's total taxable profits might also become larger than the profits calculated under the Home State's rules. This allocation leads to a higher total tax burden for the subsidiary and for its shareholders. Similar outcome is feasible for the treatment of losses. If a member of the Home State group shows losses but still receives tax liability, minority shareholders loose the value of such losses and loose shareholder value when the tax is paid. Minority shareholders should, in the author's opinion, give their prior consent before the legal entities of the Home State group can comply with the HST regime. The allocation of the Home State group's taxable profits may threaten creditor protection as the statutory profits in the subsidiary does not likely correspond to the tax liability received and directed through the application of HST. This implies that the legal capital can be lost. Tax liability occurs even though the company is truly loss making. The transaction can also have severe effects on the liquidity. The issue of company law and HST is not easily handled within the framework of HST and the regime could compromise the intentions of, for example, the second directive. As illustrated in several examples, displeasing situations can emerge for both creditors and minority shareholders. The author has tried to find a solution to each encountered problem but has, most regrettably, failed. My conclusion is that the HST proposal jeopardizes minority and creditor protection. Other solutions must therefore be explored and analysed in order to find a way towards an internal market without tax obstacles. (Less)
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author
Kanter, Marc
supervisor
organization
year
type
H3 - Professional qualifications (4 Years - )
subject
keywords
Skatterätt
language
English
id
1559026
date added to LUP
2010-03-08 15:55:23
date last changed
2010-03-08 15:55:23
@misc{1559026,
  abstract     = {The HST proposal aims to solve the cross-border loss relief issue by offering the Home State group the possibility to offset its tax losses against its taxable profits. The political arena within the Community has not proven capable of solving and creating a harmonized tax system. The Home State Taxation proposal can, therefore, prove to be the necessary compromise to solve the cross-border loss relief issue. My master thesis has analysed Home State Taxation from a company law perspective. I have primarily focused on minority and capital protection. My intentions have been to identify incompatible situations between company law and HST. Furthermore, I have analysed whether or not these discrepancies are resolvable within the framework of HST. The difference between the Home State's tax rules and the Host State's tax provisions may augment the total tax burden of the subsidiary. The allocation of the Home State group's total taxable profits might also become larger than the profits calculated under the Home State's rules. This allocation leads to a higher total tax burden for the subsidiary and for its shareholders. Similar outcome is feasible for the treatment of losses. If a member of the Home State group shows losses but still receives tax liability, minority shareholders loose the value of such losses and loose shareholder value when the tax is paid. Minority shareholders should, in the author's opinion, give their prior consent before the legal entities of the Home State group can comply with the HST regime. The allocation of the Home State group's taxable profits may threaten creditor protection as the statutory profits in the subsidiary does not likely correspond to the tax liability received and directed through the application of HST. This implies that the legal capital can be lost. Tax liability occurs even though the company is truly loss making. The transaction can also have severe effects on the liquidity. The issue of company law and HST is not easily handled within the framework of HST and the regime could compromise the intentions of, for example, the second directive. As illustrated in several examples, displeasing situations can emerge for both creditors and minority shareholders. The author has tried to find a solution to each encountered problem but has, most regrettably, failed. My conclusion is that the HST proposal jeopardizes minority and creditor protection. Other solutions must therefore be explored and analysed in order to find a way towards an internal market without tax obstacles.},
  author       = {Kanter, Marc},
  keyword      = {Skatterätt},
  language     = {eng},
  note         = {Student Paper},
  title        = {Home State Taxation and Company Law},
  year         = {2006},
}