This thesis discusses the development in the tax area for tax free company restructuring. In the process I account for the rules of restructuring in the areas of tax-exempt divisions and rules of exchange of shares. By taking in to account the practical issues, I analyze the problems as well as the possibilities the new objective rules of restructuring induce. With the enactment of L110A in 2007, the tax restructuring regulation was significant objectified with the purpose of creating a more simple opportunity to accomplish tax neutral restructuring. The objective of the new rules was to make it easier and faster for companies to adjust the corporate restructure to changed market conditions. On 1 March 2009 an agreement regarding a comprehensive tax reorganization called L202 was signed. As a result of this on 22 April 2009 the Tax Minister announced a comprehensive tax reform package, which was agreed on 29 May 2009 and officially launched in 2010. For most part the rules of restructuring are now two-stringed which means that a restructure of a company can be carried out with or without preceding permission from the tax authorities. The permit required a business justification based on the company’s interest. In addition to the justification of the permission, shareholders interests cannot be the aim of the restructuring. A restructuring in according to the new objective rules do not acquiring a business justification. In order to avoid the misuse of the rules, and ensure that the set of rules are not applied for speculation in tax avoidance, an additional set of restrictive rules were added to the law. The tax-exempt rules of exchange of shares can be carried out with, or without the tax authorities’ permission. An exchange of shares mean that a company acquire a part of another company’s share capital, with the effect that the acquiring company obtain the majority of the votes in the acquired company. In exchange, the shareholders in the acquired company receive shares in the acquiring company, and eventually a cash payment. Regardless of what set of tax-exempt rules are used, it is a condition for using this rules that the acquiring company has the majority of the votes in the acquired company after the exchange of shares. Tax-exempt divisions are used to split up companies into two or more parts by transferring assets and liabilities to one or more receiving company. The transferring company can either cease to exist or continue with the remaining activities. In connection with tax-exempt divisions there are three major restrictions to take into account. In the case the transferring company continues to exist, a branch rules apply to the transferred assets and liabilities. The branch rules state that the transferred assets have to make out an independent part of the transferring company. This means that the transferred assets have to be functional as a separate business. Regardless of the branch rules there are rules governing the balance-sheet which means that the ratio between the transferred assets, and liabilities has to be identical with the ratio between the assets and liabilities in the transferring company. If only a branch of the company is to be transferred this kind of balance-adjustment is in conflict with the branch rules. It is almost impossible to make these rules contemporize. Consequently I recommend that branch de-merges are carried out on the basis of a preceding permission from the tax authorities. With L202 the holding demand is introduced as a natural change of consequences following the change of the taxation regulations. L202 has not restricted the possibilities for generational changes. However, the simplification of the protection regulations has made the possibilities easier for using the objective set of regulations. I determine that a taxed restructure should always be taken into consideration. This point is strengthened by the crisis that many companies have gone through the last couple of years. The analysis of the two supplementary systems, the authorization system and the objective system, shows that there are a number of risks related to the use of the rules without permission. In several situations the trade values, branch-demands and balance sheet ratios, or adjustments to this, may cause uncertainness in regarding to the safeguard procedure. In case of doubt I recommend the tax authorities’ permission is applied prior to the restructure. Is the restructure carried through without permission and subsequently it is settled by the tax authorities that one or more rules are not observed, the entire restructure is no longer tax-exempt. However, it is possible subsequently to apply for permission if the business justification is well-founded. If the business justification is missing, or if the restructure does not contain considerable doubt regarding the conditions, the objective rules are recommended.
|Educations||MSc in Auditing, (Graduate Programme) Final Thesis|
|Number of pages||72|