Ref. Ares(2016)3142669 - 01/07/2016
Category 5 Other Measures
doc 7
Measure
Country
E1
US Foreign Sales Corporations Ruling
Belgium
E2
Informal
Capital
Ruling*
Belgium
E3
US Foreign Sales Corporations Ruling
NL
E4
Informal
Capital
Ruling NL
E5
Foreign
Business
Operations
Relief
Denmark
E6
Bénéfice Mondial and Bénéfice Consolidé
France
E7
Foreign
Income Ireland
E8
Newly
Created
Companies
France
E9
Tax
Holidays
for
New
Businesses
Luxembourg
E10
Special
Depreciation
for
SMEs
Germany
E11
Incentives
for
SMEs*
Spain
E12
Micro
and
Small
Enterprises
Portugal
E13
Special Scheme for Accelerated Depreciation*
UK
E14
Scheme for Early Depreciation of Certain Assets*
Denmark
E15
Incentives for Investment (Law 2601/98)*
Greece
E16
Investment
Tax
Credits Spain
E17
Tax Credits - Environmental Protection*
Luxembourg
E18
Investment
Allowance* NL
E19
Major
Investment
Projects
Portugal
E20
Tax
Credit
for
Investment
Portugal
E21
Gibraltar
-
Development
Incentives*
UK
E22
Rollover
of
Capital
Gains
Germany
E23
Reinvested
Capital
Gains
Portugal
E24
Small
Islands
Income
Tax
Reduction
Greece
E25
St
Martin
and
St
Barthelemy
France
E26
Mutual Funds / Portfolio Investment Companies*
Greece
E27
Venture Capital Funds and Companies*
Spain
E28
Venture
Capital
Companies*
France
E29
Participation
Fund
Companies*
Austria
E30
Investment
Companies*
Sweden
E31
Limits on Taxes on Commercial Income
Germany
E32
Fixed
Tax
-
Transferable
Securities
Greece
E33
Representative
Office
Spain
E34
Tax Credits for Job-creating Investment*
France
E35
Tax Credits for Staff Training Costs*
France
E36
Listed
Companies
-
Reduced
Rates
Italy
E37
SGII
Companies
Portugal
E38
SCR,
SDR
and
SFE
Companies
Portugal
* Additional Measure
E 1
US Foreign Sales Companies Ruling
Belgium
General
US Corporations carrying on sales operations in certain countries other than
US (e.g. Belgium) may attribute part of the income realised from the sales
abroad to the relevant Foreign Sales Company (FSC). Under certain
conditions and limitations, the profits thus attributed to the FSC (as taxable
abroad) may be exempted in the US.
Conditions Attached
A US based enterprise establishing a FSC in Belgium may lodge an
application with the Belgian central tax authorities for a ruling under which the
taxable income is calculated on the basis of a percentage of certain expenses.
The applicant must disclose detailed information on itself and the anticipated
FSC (e.g. their legal form, activities, nature of the goods sold through the FSC
and cost incurred by it).
The FSC may operate in the form of a Belgian company (subsidiary) or a
branch office (permanent establishment) of the US base company.
The ruling, granted on individual basis, is valid for a period of three years and
it is tacitly renewed unless either party gives a notice of termination 6 months
before the end of the three-year period. The US based company must,
however, in order to keep the ruling valid, annually produce evidence of the
US authorities’ recognition of the FSC.
Tax Benefits
Should the FSC operate in the form of a branch office (Belgian permanent
establishment of the US based company), the taxable profit in Belgium is
determined on a notional cost plus basis with a mark-up percentage of 8%. All
“direct” costs incurred by the FSC in respect of advertising and sales
promotion activities, transport of goods and assumption of credit risks, may
however, be excluded from this notional cost plus tax base. Similarly, the
income taxes paid by the FSC are not included in the notional tax base.
In the case where the FSC operates in the form of a subsidiary (a Belgian
company) the taxable profit of the FSC is, in principle, determined on the
basis of the accounting profit with the necessary tax adjustments. Accordingly,
the taxable profit consists of the retained profits, non-deductible expenses and
the paid dividends. It is, however, accepted that the FSC’s transactions with
affiliated companies are at arm’s length (the FSC has not granted any
abnormal or benevolent advantages) when the thus determined profits are at
least 8% of the relevant costs incurred by it (see above).
E
2
Informal
Capital
Ruling
Belgium
General
The concept of informal capital is related to the centralisation (or
concentration) of a wide range of corporate functions of a (international) group
of companies. The scope of the centralised functions that a group company
may assume and carry out on behalf of the group is wide and may include, for
example, the following types of tasks:
- commercial strategy development, brand image development, advertising,
product development, research activities, distribution strategy planning, co-
ordination of vertical management, procurement of raw materials, etc.
Setting up an integrated structure of such separate functions may require “an
informal capital injection”, i.e. group companies place non-material resources
(e.g. know-how) which exist at the group level at the disposal of the group
company that assumes the responsibility for certain centralised functions.
Conditions Attached
The measure is available to companies subject to tax in Belgium, other than
those taxed under a regime providing for a notional tax base (e.g. co-
ordination centres, distribution centres and service centres).
Tax Benefits
Under Article 24 of the Belgian Income Tax Act (Code des impôts sur les
revenus) only those profits which result from a company’s own activities are
taxable in Belgium.
Under the ruling, the part of the profits which relates to informal capital
(directly contributing to the generation of income) is not considered as
resulting from the company’s own activities, but merely as a return on the
informal capital.
The informal capital is determined, on a case by case basis and according to
the range of activities undertaken, by reference to the net profit margin of the
company. This profit margin consists of two elements: the part which is
deemed to refer to the company’s own activities (always at least 10% of the
turnover) and that referring to the informal capital. The informal capital
amounts to the sum of the annual profit margin referring to the informal capital
during a period of max. 10 years.
The informal capital is amortised for tax purposes over a period of at least 10
years. The injection of the informal capital is not taxable and there is no tax on
the informal capital as such but capital gains arising from a subsequent
transfer of the informal capital and liquidation proceeds are taxable in
Belgium.
E 3
US Foreign Sales Companies Ruling
NL
General
US Corporations carrying on sales operations in certain countries other than
US (e.g. the Netherlands) may attribute part of the income realised from the
sales abroad to the relevant Foreign Sales Company (FSC). Under certain
conditions and limitations, the profits thus attributed to the FSC (as taxable
abroad) may be exempted in the US.
Conditions Attached
A Dutch FSC carrying on preparatory and auxiliary activities may apply for a
cost plus ruling provided for in the Administrative Publication of 25 March
1985 (infobulletin 85/253). The cost plus ruling is granted for a period of 4
years (renewable) and it ascertains the minimum acceptable prices for intra-
group transactions of the FSC.
Tax Benefits
According to the Administrative Publication, the cost plus mark-up percentage
applicable to all operating expenses may vary, depending on the relevant
circumstances, between 5% and 15%.
In order for a FSC to be considered dealing at arm’s length it must show a
profit of at least the confirmed fixed percentage of the operating expenses.
Should the commercial profit, computed under the US rules, exceed the result
from the cost plus calculation, the excess amount is deemed to constitute a
contribution to the equity of the FSC and is therefore not included in its
taxable profit.
The tax on the profit calculated on the cost plus basis is levied at the standard
corporate income tax rate of 35%.
E
4
Informal
Capital
Ruling
NL
Conditions Attached
This ruling practice is based on Supreme Court decisions of 3 April 1957
(BNB 1957/165) and 31 May 1978 (BNB 1978/252) in which the informal
capital concept was developed in respect of interest free loans between
related parties. The ruling may be granted to entities liable to Dutch taxation
and it is valid for a period of 4 years (renewable).
Under Netherlands tax law formal contributions to, or withdrawals from, equity
capital do not constitute taxable profit. Similarly, informal contributions to, or
withdrawals from, a Dutch company’s equity capital are not regarded as
taxable corporate income. The informal capital ruling granted by a Tax
Inspector ascertains the amount of informal capital contribution.
For example, an informal capital ruling may stipulate that any commercial
profit in excess of the profit determined under a cost plus method with a fixed
mark-up percentage is deemed to be informal capital.
Tax Benefits The taxable profit of the holder of the informal capital ruling is adjusted with
the amount of the informal capital contribution, i.e. the ruling allows its holder
to impute an interest deduction on the basis of deemed interest on funds
advanced to it by related companies free of charge. The adjusted profit is
taxed at the standard corporate income tax rate of 35%. The informal capital
contribution is subject to a capital tax at a rate of 1%.
Under Netherlands tax law the profit of the related party that had made the
informal capital contribution, is adjusted with a corresponding amount. This
corresponding adjustment is, however, only applicable in respect of related
companies subject to tax in the Netherlands.
E 5
Foreign Business Operations Relief
Denmark
Conditions Attached
The foreign business operations relief is available with respect to foreign
business operations through branches located abroad (permanent
establishments) as well as conducted through a non-resident subsidiary taxed
jointly with the Danish parent company under the Danish ‘Joint Taxation’
rules. Other activities, such as shipping and transport of goods by vehicles
between two foreign destinations, salvage and engineering have also been
regarded as qualifying foreign business operations.
Tax Benefits
The tax relief granted to the income from foreign business operations equals
50% of the income tax proportionally attributable to the net taxable income
from the foreign business activity. Net foreign-source income is computed
according to the Danish tax law. The relief is granted in respect of qualifying
income, irrespective of the fact whether this income has been subject to tax
abroad. The relief will be gradually abolished by 1/7 a year, as from 1994
when the tax relief was reduced to 6/7 of the full 50% of the tax attributable to
the qualifying income. Accordingly, the relief will be completely abolished by
year 2000.
E 6
Bénéfice Mondial and Bénéfice Consolidé
France
Conditions Attached
Bénéfice Mondial (world-wide income): French resident companies, which
have obtained an approval from the Ministry of Economy and Finance may opt
to be taxed on their world-wide income by consolidating profits and losses of
all foreign direct operations with their own profits and losses.
Bénéfice Consolidé (consolidated income): French resident companies, which
have obtained an approval from the Ministry of Economy and Finance may
elect to compute taxable profits by consolidating the profits and losses of their
French or foreign subsidiaries to their own French source profits and losses.
The French parent company must hold at least 50% of the voting rights in the
subsidiaries concerned.
The duration of the application of both measures is at the discretion of the
parties concerned. It may be revoked or altered if there is a substantial
change made to the French corporate income tax rate (more than 5%), in the
case of a changeover from world-wide income taxation to consolidated
taxation, or in certain cases of abuse. Approvals regarding both these regimes
are only granted on a very limited basis.
Tax Benefits
Companies with foreign source income or French and foreign subsidiaries can
benefit from consolidated taxation of foreign source income or the relevant
part of group companies, respectively. The operating profits and losses are
set off against each other in order to reach an aggregate group taxable
income.
For the tax consolidation purposes the taxable profits (or losses) of the foreign
direct operations or the foreign subsidiaries are calculated under the rules of
the French Tax Code (CGI). Accordingly, any depreciation, valuation rules,
etc. allowed by foreign tax law but not by French tax law will be adjusted.
Long-term and short-term capital gains are also calculated at the level of each
branch, subsidiary, etc. and subsequently, with certain adjustments,
aggregated at the group level.
Foreign taxes are credited in France. The foreign tax credit, however, is first
subject to a per country limitation and then restricted to the French corporate
income tax which would normally apply to the income from each country in
each taxable year, as recomputed under French rules.
E
7
Foreign
Income
Ireland
Dividends received by and Foreign branch profits of the Irish resident
companies holding the respective certificates, following submission of an
investment plan directed towards the creation or maintenance of employment
in Ireland or involving additional employment in Ireland, are exempt from Irish
corporate income tax.
1) Repatriated Dividends from a Foreign Subsidiary
Conditions Attached
The measure applies to certain dividend repatriations by a foreign subsidiary
(51%) located in a treaty country to its Irish resident parent company. A
certificate must be obtained from the Minister for Finance on the basis of an
investment plan. The dividends must be applied for the purposes of the
investment plan which must be directed towards the creation or maintenance
of employment in trading operations carried on in Ireland.
Tax benefits
Double taxation relief for the repatriated dividends is provided by way of an
exemption from Irish corporation tax rather than the normal way of giving
double taxation relief through a credit for foreign tax.
2) Relief for Foreign Branch Trading Profits
Conditions Attached
The measure applies to foreign branch trading profits and related capital gains
of an Irish resident company which undertakes an investment project leading
to the creation of substantial new employment in Ireland. Companies must be
certified by the Minister for Finance on the basis of an investment plan. The
investment plan must be framed in accordance with published guidelines.
These guidelines stipulate conditions in relation to employment and
investment in permanent capital.
Tax Benefits
Double taxation relief for the foreign branch trading profits is provided by way
of an exemption from corporation tax rather than the normal way of giving
double taxation relief through a credit for foreign tax. Related capital gains are
also exempted from capital gains tax.
E
8
Newly
Created
Companies
France
Conditions Attached
The measure is available to new companies (incorporated between 1 January
1995 and 31 December 1999) with industrial, commercial and artisan
business activities. The companies must be genuinely new enterprises and
they may therefore not have been created as a result of a corporate
reorganisation. No more than 50% of the shares (representing the share
capital or voting rights) of these companies may be held, directly or indirectly
by other companies.
In order to qualify for the benefits of the measure, companies must satisfy with
activity and location tests. Certain activities are expressly excluded from the
scope of application of the measure. These are banking, financial and
insurance activities, management of real estate rental activities and
agricultural activities. The premises and the management of the companies
must be situated in the defined rural or urban development zones.
Tax benefits A full corporate income tax exemption for the initial 24 months, which is
reduced to 75 per cent, 50 per cent and 25 per cent for each of the three
subsequent 12-month periods, respectively.
E 9
Tax Holidays for New Businesses
Luxembourg
Conditions Attached
The measure is available to new enterprises or enterprises manufacturing
new products, which stimulate growth and improve the structure of the
economy, or which will lead to a better geographical distribution of economic
activity, provided that they do not compete with existing business.
Tax Benefits
The amount of the tax relief depends on the extent of investment in land,
buildings and equipment and is granted for a fixed period, usually for 8 years
starting from the commencement of the new facility. The maximum amount of
the tax relief is 25% of the taxable profits.
E 10 Special Depreciation for SMEs
Germany
Conditions Attached
Companies, of which the total taxable net asset value is no more than DEM
240,000 and of which the taxable capital (as determined for the purposes of
the business tax on capital) does not exceed DEM 500,000, qualify as small
and medium sized enterprises. For the purposes of the special depreciation,
these requirements must be met at the beginning of the tax year in which the
fixed assets are acquired.
Tax benefits
Small and medium sized enterprises may claim an additional depreciation
allowance of 20% of the acquisition cost of movable fixed assets. The
allowance may be claimed only in the year of acquisition and it is additional to
normally allowed depreciation but deducted from cost for the purposes of
calculating tax depreciation in subsequent years. It is available only if the
assets are kept in business in Germany by the taxpayer for at least 1 year.
In addition, small and medium sized enterprises may make allocations to a
depreciation reserve of up to 50% of the expected manufacturing or
acquisition costs of future depreciable assets, with a ceiling of DEM 300,000.
The reserve will be taxed as soon as the regular depreciation scheme starts to
apply to the new assets. The reserve will also be taxed if no assets are
acquired or manufactured within 2 tax years after the reserve was created.
E
11
Incentives
for
SMEs
Spain
Conditions Attached
A company qualifies as small or medium sized company (SME) if its turnover
in the preceding tax year was lower than ESP 250 million. If the company is
newly created, this threshold is applied to its turnover of the current (first) tax
year. The SMEs in Spain are granted a wide range of different tax benefits.
Some of the conditions attached to them are dealt with in more detail below.
Tax Benefits
(A) New tangible fixed assets may be freely depreciated for tax purposes,
provided that there is an increase in the annual average amount of salaried
personnel. The increase in the amount of personnel must be maintained for a
total consecutive period of 48 months, starting from the tax year in which the
incentive was used for the first time.
(B) New tangible fixed assets of any of which the value does not exceed ESP
100,000 may be freely depreciated for tax purposes, however, only up to a
total amount of ESP 2 million for each tax year.
(C) New tangible fixed assets may be depreciated for tax purposes, using an
increased rate determined by multiplying the depreciation rate allowed under
the official table by a coefficient varying from 1.5 to 2.5. The size of the
coefficient depends on the useful life of the asset. For assets with useful life of
less than 5 years the coefficient is 1.5, with a useful life of at least 5 but less
than 8 years the coefficient is 2.0 and for assets with useful life of at least 8
years the coefficient is 2.5.
(D) SMEs may establish a tax deductible provision for bad debts. The
maximum deductible allocation is 1% of the balance of debtors.
(E) SMEs do also qualify for an exemption from corporate income tax on
capital gains realised on the disposal of fixed assets. This exemption is
subject to the conditions that the capital gains realised do not exceed ESP 50
million per year and that it is reinvested in other fixed assets within 3 years.
(F) From 1 January 1997, the first ESP 15 million of profit made by a SME are
subject to tax at a reduced rate of 30%.
E 12 Micro and Small Enterprises
Portugal
Conditions Attached
In order to qualify as a micro or small enterprise a Portuguese resident
company or a non-resident company with a Portuguese permanent
establishment must meet the following requirements:
1) the turnover of such enterprise may not exceed PTE 600 million in the first
year during which the incentive is applied and
2) no more than 50% of it may be, directly or indirectly owned by another
enterprise of which the turnover exceeds this turnover limit in the fiscal
periods of 1998, 1999 and 2000.
Additionally, the company must carry on industrial, commercial or agricultural
activity as its main activity. The measure will be available for the micro and
small enterprises during the tax years 1998, 1999 and 2000.
Tax Benefits
Qualifying additional investments of micro, small and medium sized
enterprises entitle to a deduction of the taxable corporate income equal to
10% of the relevant additional investment. The deduction, however, may not
exceed an amount equal to 30% of the taxable corporate income.
This 30% limit will be increased by 10% where the taxable profit, in the
accounting period to which the investment relates, is at least 20% higher than
the taxable profit in the preceding period and the enterprise withholds an
amount of profit equal to such minimum increase in profits. The withheld profit
may not be distributed during the three subsequent fiscal years.
The additional investment is determined as being the difference between the
investment made during the relevant accounting period and the simple
arithmetic average of the investment made in the previous two accounting
periods in fixed assets used by the enterprise within the Portuguese territory.
E 13 Special Scheme for Accelerated
Depreciation
UK
Conditions Attached
This temporary one-year measure (applicable only in respect of the
accounting year ending between 1 July 1998 and 30 June 1999) was
introduced in 1998. It is available to small and medium sized enterprises
which invest in plant and machinery other than those in connection with
leasing of cars, ships, railway assets or long-life assets.
Tax Benefits
Investment in qualifying plant and machinery entitles the SME to an increased
first year allowance at a rate of 40% instead of the normal allowable
depreciation at a rate of 25% (declining balance method).
E 14 Scheme for Early Depreciation of Certain Assets
Denmark
Conditions Attached
The scheme is applicable if the taxpayer has formally entered into a contract
on the acquisition of machinery or other capital assets and the acquisition cost
(excluding financing costs) of such assets is, in any year, at least DKK
770,000. In determining whether this requirement is met, the acquisition costs
of all qualifying assets are pooled each year.
Subject to the same annual acquisition cost limit the scheme is equally
applicable in cases where the taxpayer manufactures the asset to be used
within his own business.
In order for the taxpayer to apply the scheme, he must have placed a definite
order for the purchase of an asset or definite plans must have been made to
process an asset within the business. The delivery or completion of such an
asset must take place within 4 years.
Tax Benefits
The depreciable basis is the contracted or calculated price of the asset. Once
the acquisition agreement has been concluded a total of 30% of the
acquisition cost exceeding DKK 770,000 may be depreciated for tax purposes
before the delivery or completion of the asset. However, no more than 15% of
the acquisition cost may be depreciated in any year before the delivery or
completion has taken place.
In calculating what percentage of allowable depreciation pertains to each
separate asset, an amount equal to 30% of the pooled acquisition costs in
excess of DKK 770,000 is divided among the assets acquired or
manufactured in that year in proportion to individual acquisition costs. The
resulting figure is then divided by the number of year anticipated for the
asset’s delivery or completion.
If the acquisition contract is terminated, the delivery does not take place within
four years or the plans are abandoned before the completion of the
manufacturing process, any advance depreciation taken under the scheme
must be brought back to the taxable business income.
E 15 Incentives for Investment (Law 2601/98 ex1892/90)
Greece
Conditions Attached
The benefits of the measure are available for investment defined in law
2601/98 of which the purpose is to encourage private investment in Greece, to
promote regional development and business competitiveness, and to create
employment. In general, the qualifying investments involve the construction,
expansion and modernisation of facilities, and the purchase/installation of
equipment and technology.
For the purposes of the incentive law, Greece is divided into four major
regions/development areas (A, B, C and D). Certain additional benefits are
given for investments located in the northern part of Greece known as Thrace
(part of region D). With respect to the maximum amounts of the tax
concessions, a distinction is made between investments made in the tourism
industry (hotels and other tourist accommodation) and investments made in
other industry (e.g. in manufacturing and craft industry). Mining enterprises
are always regarded as falling in the region C unless they actually come within
region D.
Tax Benefits
Qualifying enterprises making eligible investments may claim accelerated
depreciation on fixed assets purchased between 1 July 1990 and 31
December 1994. Regular depreciation rates are increased by a percentage of
0% to 150%, depending on the region, the number of work shifts and the
sector of the activities.
Enterprises making qualifying investments, as defined in the incentive law, are
entitled to income tax exemption for their undistributed profits for a period of
ten years as from the investment year.
The incentive law provides also for an investment reserve with respect to new
investments in the regions B, C, D and Thrace. A qualifying investor can claim
a reduction in taxable profits, provided it is completed by 31 December 2004.
The maximum amount, which may be deducted from taxable profits, is
determined as a percentage of the net annual profits (from 60% to 100%) in
the year of investment and the cost of the investment (from 40% to 100%),
again depending on the region.
E
16
Investment
Tax
Credits
Spain
General
Investments in new tangible fixed assets (A), export related investments (B),
research and development activities (C), staff training (D), publication of
books, films or audio-visual productions (E) and environmental investments
(F) qualify for different tax credits dealt with in more detail below.
Conditions Attached and Tax Benefits
The investment tax credits, which may be set off against corporate income tax
liability, vary from 5% to 25% of the invested amount:
(A) An amount equal to 5% investments in new tangible fixed assets (except
for land) in Spain may be credited against corporate income tax. The assets
must be kept in use for a period of at least 5 years (or for the asset’s useful
life if this is shorter than 5 years).
(B) Investments made to set up foreign permanent establishments, or to
acquire at least 25% of the capital in existing foreign companies or newly
created foreign subsidiaries. The activities of such branches and subsidiaries
must be directly related to the export activities of the Spanish investor (finance
and insurance activities do not qualify) or contracting of its tourism services in
Spain. In the tax period in which the qualifying (25%) stock ownership is
acquired, the total investment made in that year and in the two preceding
years qualify for the 25% tax credit.
Similarly, expenses incurred in respect of promotion, publicity and marketing
carried out abroad over periods exceeding 1 year entitle the Spanish
taxpayers for the 25% export related investment credit.
The export related investment credit is, however, limited to 15% of the
investor’s income or to 4% of his total export related receipts and it must be
reduced by 65% of any subsidies received.
(C) Research and development expenses incurred in any tax year entitle to a
tax credit amounting to 20% of these expenses. Should the expenses exceed
the average amount of expenses in the preceding 2 tax years, the rate of 20%
will apply to an amount equal to the average amount and a rate of 40% to the
excess. These credits must be reduced by 65% of any subsidies received.
(D) Staff training related expenses incurred by employers entitle them to a tax
credit of 5% of such expenses. Should the expenses exceed the average
amount of expenses in the preceding 2 tax years, a rate of 10% will apply to
the excess. These credits must be reduced by 65% of any subsidies received.
(E) An investment credit of 5% and 10% (reduced by any subsidies received)
is granted for the publication of new books and the production of films (and
audio-visual productions), respectively.
(F) A tax credit of 10% is granted for investments in fixed assets made to
preserve or improve the environment. The credit must be reduced by the
amounts of any subsidies received.
The sum of the above investment credits is limited to 35% of the corporate
income tax liability regarding all other investments apart from investments in
new tangible fixed assets and environmental investments. In the case of
investments in new tangible fixed assets the investment credit is limited to
15% of the corporate income tax liability. Any unused credit may be carried
forward for 5 years subject to the 35% or 15% limitation in each period,
respectively.
E 17 Tax Credits - Environmental Protection
Luxembourg
Conditions Attached
In order to qualify for the tax credit the investments must be used in
Luxembourg and they should be intended for environmental protection, saving
energy, reducing waste or enabling disabled individuals to work. Certain
assets are expressly excluded from the scope of this tax credit. These are:
assets depreciated over less than 4 years, assets acquired on the transfer of
an enterprise or an autonomous part or subdivision of an enterprise, second-
hand assets, assets of which the acquisition price is less than LUF 35,000 and
cars for personal use.
Tax benefits
The tax credit is set off against corporate income tax payable and it is granted
in addition to the normal tax depreciation on the acquisition price of the same
assets. The tax credit amounts to 8% of the acquisition price of all qualifying
assets in each tax year up to a maximum value of total investments of LUF 6
million while a reduced rate of 4% is applied in respect of the excess.
E
18
Investment
Allowance
NL
Conditions Attached
Income tax liable persons conducting a business and companies liable to
corporation tax are entitled to an investment allowance on the basis of their
investments in fixed assets.
In principle, all investments in fixed assets qualify for the investment
allowance. Certain fixed assets, for example, houses, stocks, licences, and
cars not meant for road transport and haulage, however, do not qualify.
The investment allowance is wholly or partially withdrawn if the fixed assets,
for which the investment allowance was obtained, are sold within a period of 5
years from their purchase.
Tax Benefits
The allowance amounts to a certain percentage of the total sum invested in
qualifying fixed assets in any particular year. The allowance can be deducted
when calculating the taxable profits. The percentage decreases with the
increase of the invested amount. It varies between 0% and 27%, depending on
the total sum of investments made as follows (in 1999):
Invested
amount
(NLG)
Percentage
3,800 – 64,000
27
495,000
–
556,000
3
above 556,000
0
E
19
Major
Investment
Projects Portugal
Conditions Attached
Individual contractual incentives may be negotiated and agreed with the
central government with respect to corporate income taxation (IRC), transfer
tax, local real estate tax and stamp taxes. Such incentives are available for
industrial investment projects undertaken between 1994 and 1998. The total
value of such projects must be at least PTE 5 million and they should be of
particular interest for the domestic economy.
Such tax incentives may also be granted under a conventional scheme to
investment projects carried out until the end of 1999 even if their total value is
less than PTE 5 million, provided that the following requirements are met.
1) the projects are aimed at the reorganisation, modernisation, merger or
concentration of enterprises situated in those regions considered to be under
economic and social reorganisation, or
2) they are aimed at internationalisation of Portuguese enterprises.
Tax Benefits
With respect to corporate income tax (IRC), the incentive is usually granted in
a form of a deduction from the taxable income. The deduction amounts to 10%
of the value of the investment.
Otherwise the incentives are established on case by case basis.
E 20 Tax Credit for Investment
Portugal
Conditions Attached
This regime is available for Portugal resident companies and non-resident
companies with Portuguese permanent establishments, whose main activities
consist of exercising commercial, industrial or agricultural activity. Finance
and real estate activities are expressly excluded from the scope of application
of this measure. The measure will be applied for the last time in 1998.
In order to qualify for the tax credit the investments shall be made in new fixed
assets, other than:
• land, except if intended for the purposes of exploration or exploitation of
mining concessions, natural and source mineral water, quarries, clay pits
and sand pits in extractive industry projects,
• construction, acquisition, repair and improvement of any building other
than manufacturing premises,
• light
vehicles,
• furniture and comfort or decoration goods,
• social equipment, or
• other capital goods not directly and necessarily connected with the
productive activity carried out by the enterprise.
The assets must be kept in the use of the company for a period of at least 3
years.
Tax Benefits
Qualifying additional investments entitle the relevant taxpayer to a deduction
from their taxable corporate income an amount equal to 5% of the relevant
additional investment. The deduction, however, may not exceed an amount
equal to 15% of the taxable corporate income.
The additional investment is determined as being the difference between the
investment made during the relevant accounting period and the simple
arithmetic average of the investment made in the previous two accounting
periods in fixed assets used by the enterprise within the Portuguese territory.
E 21 Gibraltar - Development Incentives
UK
Conditions Attached
The Development Aid Ordinance gives tax incentives for both residents and
non-residents. Licences may be granted for development projects which meet
the following requirements:
The projects must be new projects which create immovable property in
Gibraltar. They must either, create 3 houses, benefit tourism, create
employment, or improve Gibraltar’s economic or financial infrastructure. The
applicant must prove the economic benefit to Gibraltar and the project must
require an investment of at least GBP 200,000 over 2 years or at least GBP
500,000 over 5 years.
Tax Benefits If a licence is granted, the company is exempt from corporate income tax in
respect of profits arising from the development until the profits exceed the
expenditure on the project. In addition, the shareholders are exempt from tax
on the distributed profits which have been exempt from the corporate income
tax at the hands of the company carrying out the project.
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Rollover
of
Capital
Gains
Germany
Conditions Attached
Assets qualifying for the measure are: stocks or shares of corporate entities,
real estate, buildings, ships, depreciable movable assets with useful lives of at
least 25 years and certain agricultural and forestry enterprises’ fixed assets. A
6-year holding period prior to sale is required (except for the agricultural and
forestry enterprises’ fixed assets).
Tax Benefits
Generally 50% of the capital gains realised on the sale of fixed assets (100%
in the case of buildings and land) may be deducted from the cost of qualifying
replacement assets. If replacement is not effected immediately, the allowable
deduction may be carried forward as a tax-free reserve for the following 4
business years (6 years for buildings and ships whose construction has begun
within 2 years).
The deduction will also be available against replacement assets acquired in
the period prior to that of the sale.
Future depreciation of the replacement assets is based on acquisition cost
less the amount of untaxed capital gain, as with involuntary conversions. If
replacement assets have not been acquired, the profit for the business year in
which the tax-free reserve must be released must be increased by 6% of the
released amount for each year the tax-free reserve has existed.
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Reinvested
Capital
Gains Portugal
Conditions Attached
The measure is available in respect of capital gains arising from the disposal
of tangible fixed assets.
Tax Benefits
The difference between the realised capital gains and capital losses on
tangible fixed assets is exempted if the total consideration received is
reinvested in the acquisition, production or construction of any elements of
tangible fixed assets until the end of the third financial period following its
realisation. If only part of the consideration is reinvested, only the
corresponding part of the capital gain qualifies for the exemption.
Although such a capital gain is not taxed in the year in which it is realised, it
does not necessarily remain untaxed because it is deducted from the
acquisition cost of the reinvestment (replacement asset). Accordingly, the
exempted capital gain effectively reduces the future depreciation allowances
and increases the capital gains realised on a future disposal.
E 24 Small Islands Income Tax Reduction
Greece
Conditions Attached
The measure is available to legal persons, joint ventures and associations
created under the civil code and which carry on their operations in small
Greek Islands with less than 3100 inhabitants.
Tax Benefits
The normal income
tax rates are reduced by 40%.
E 25 St Martin and St Barthelemy
France
Conditions Attached Four particular tax incentive schemes designed to promote the economic
development of the over-seas departments apply in the islands of St Martin
and St Barthelemy. These are:
A temporary exemption of corporate income tax for enterprises with an
approval from the Ministry of Economy and Finance (article 208 q CGI). This
measure is applied to corporate income tax liable companies created before
31/12/2001, provided that their objectives and activities have been approved.
A long-term fiscal scheme (article 1655 b CGI) is applicable to limited
companies (i.e. société anonyme, société commandite par actions, société à
responsabilité limitée) which have as their objective to research and exploit
ores in the departments of Guadeloupe, Guyane, Réunion and Martinique, or
to carry out agricultural, forestal or industrial activities in the department of
Guyane. The application for the prior approval must be lodged with the
Ministry of Economy and Finance prior to 31/12/2001.
Reduced tax base scheme (article 217 b CGI) applied to corporate income tax
liable enterprises, of which the activities fall within the following sectors:
agriculture, tourism, fishing, new energy sources, building and public works,
transport, etc.
Investment incentive scheme (articles 199, 163, 217 of the CGI) is available
for corporate income tax liable enterprises, of which the activities fall within
the following sectors: agriculture, tourism, fishing, new energy sources,
building and public works, transport, production and distribution of audio-
visual works, etc.
Tax Benefits
The temporary exemption scheme provides for a full exemption from
corporate income tax for a period of 10 years from the creation of a qualifying
company.
Companies eligible for the long-term fiscal scheme are exempted from
corporate income tax liability for a period of 25 years as from their creation.
Only 2/3 of the profits (or losses) are taken into account in calculating the
corporate income tax due of the companies qualifying for the reduced tax
base scheme. This reduction of the tax base is applicable until the end of
2001.
Investments made in regional development companies carrying on their
activities in the over-seas departments entitle to a deduction from the taxable
corporate income of the investor up to a maximum of FFR 10,000,000.
NB! Irrespective of any particular regime, the difficulties in enforcing tax laws
in St Martin and St Barthelemy have lead to a situation where, in practice,
corporate income taxes are not always imposed or collected.
E 26 Mutual Funds / Portfolio Investment Companies
Greece
Conditions Attached
The measure (Law 608/70, as amended by Law 1969/91 and Law 2579/98) is
applied to entities (mutual funds and portfolio investment companies) whose
exclusive purpose is hold securities (shares, bonds, titles of participation in
mutual funds, bank deposit certificates, Government treasury bills and other
stock exchange titles).
The minimum share capital of an investment company must be at least GRD
500 million, their shares must be listed on the Athens Stock Exchange within 6
months following their formation and the securities owned by them must be
deposited for custody with a bank legally operating in Greece.
Tax Benefits
The measure provides for an exemption from all taxes, stamp duties,
contributions, etc. levied on capital and revenue from all sources.
E 27 Venture Capital Funds and Companies
Spain
Conditions Attached
Companies whose purpose is the promotion, through temporary participation
in the share capital, of non-financial (and non-listed neither participating in with
more than 25% of the share capital of listed companies) companies, are
deemed as venture capital companies (VCC).
The share capital of a VCC must be at least ESP 200 million of which at least
50% must be paid in at the time the VCC is formed and the remaining 50%
within 3 years. A Venture Capital Fund (VCF) must have an initial capital of
ESP 275 million. A minimum of five shareholders is required in order for a
company to qualify as a VCC and correspondingly a minimum of five
participants is required for a fund to qualify as a VCF.
A VCC may grant participating loans to its subsidiaries if the loans granted
serve its business purpose.
Both VCCs and VCFs must keep at least 60% of their assets in shares or
participations in the capital of the ‘target companies’. Additionally, both VCCs
and VCFs require prior administrative approval and, they must be registered
as such with the Ministry of Economy and Finance as well as the Mercantile
Registry.
Tax Benefits
• 100% relief from corporate income tax on dividends, regardless of the
ownership period and the size of the stock ownership,
• Partial corporate income tax exemption for capital gains on disposal of
shares (the exemption amounts from 99% to 50% of the capital gain,
depending on the holding period, varying from 3 to 10 years, respectively,
• 100% relief from withholding tax on the distribution of dividends and other
profit distributions, regardless of the ownership period and the size of the
stock ownership.
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Venture
Capital
Companies
France
Conditions Attached
In order to qualify as a venture capital company and thereby for the beneficial
tax treatment, a French company must meet the following requirements:
The company must be incorporated as a stock corporation, i.e. either as a
“société anonyme” or a “société commandite par actions”. It must hold shares,
convertible bonds or similar securities of French companies subject to
corporate income tax and the share holding in each such company may not
exceed 40% of the voting rights attached to the shares.
Tax Benefits
Venture capital companies are exempt from corporate income tax on their
dividend income and capital gains.
Moreover, the dividend distributions of the venture capital companies attract
favourable tax treatment:
In respect of the dividends received the corporate shareholders of the venture
capital companies benefit from the long-term capital gains tax treatment (i.e.
subject to tax at a rate of 18%), and
Individual shareholders are subject to income tax on dividends received at a
flat rate of 16% instead of the regular progressive rates.
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Participation
Fund
Companies
Austria
Conditions Attached
Only Austrian resident limited companies (AGs) can qualify as Participation Fund
Companies (PFC). A PFC has to be financed by an issue of certificates providing
their owners a pro-rata share of the annual profits of the participation fund. The
certificates may be issued up to a maximum of 15 times the nominal share capital
of the PFC (of which the nominal amount must be at least 150 million ATS). The
participation fund must be invested in Austrian enterprises registered in the
commercial register and all investments must be held for a period of at least 10
years.
Tax Benefits
PFCs are exempt from corporate income tax with respect to the part of income
attributable to the participation fund. Dividends and other profit distributions from
companies in which the PFC participates are exempt from withholding tax. Income
received by the holders of the certificates (with the exception of the certificates
owned by the PFC itself) is exempt from withholding tax (and is not subject to
individual income tax). Special tax privileges apply to participations (and to income
received from them) held by the PFC as a trustee.
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Investment
Companies
Sweden
Conditions Attached
An Investment Company (IC) is a company or economic association, of which the
exclusive or semi-exclusive activity is to manage securities or other similar
movable property and whose principal objective is to offer its shareholders an
investment form that spreads out the risk over a broad portfolio of securities.
In order to qualify as an IC, a large number (several hundred) of individuals must
be participants or hold the shares of the IC (in case law it has been held that 80
individual shareholders is not enough to qualify).
This individual shareholders requirement is usually met where an IC is a listed
company (on the Swedish Stock Exchange).
Tax Benefits
Capital gains and losses realised on the sale of shares and other securities are
disregarded for taxation purposes. Instead, an amount equal to 2% of the market
value of the shares and other securities held by the IC at the beginning of each tax
year (calendar year) is deemed to be taxable income of the IC (at the standard
corporate income tax rate of 28%).
Dividend income received by an IC is fully taxable.
Distributed dividends are deductible but the IC cannot incur taxable loss due to
dividend distributions.
Management expenses are deductible.
Unit Trusts (värdepappersfonder)
The same rules apply also to unit trusts, except that an amount equal to 1.5%
(instead of 2%) of the market value of the shares and other securities held is
deemed taxable (at the standard corporate income tax rate of 28%).
E 31 Limits on Taxes on Commercial Income
Germany
Conditions Attached
The measure applies to commercial enterprises that are liable both to income
tax and to the tax on income from trade and industry (Gewerbesteuer). Such
businesses whose taxable income exceeds DEM 100,278 is entitled to a
relief.
Tax Benefits
The measure provides for a limitation of income tax rates. In calculating the
taxable income the “Gewerbesteuer” is a deductible item.
E 32 Fixed Tax – Transferable Securities
Greece
Conditions Attached and Tax Benefits
This measure (law 2238/94 art. 12) was notified as a measure which does not
follow the general business taxation system.
Greece has subsequently indicated that there is not any special tax regime in
this sector.
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33
Representative
Office
Spain
Conditions Attached
The measure is available for Spanish permanent establishments (PEs) /
representative offices (ROs) of foreign investors, when the operations of these
PEs/ROs do not cover a full production cycle generating income in Spain, the
said cycle being concluded by the non-resident company or by one or more of
its PEs. No consideration may arise, apart from covering the costs incurred by
the PE/RO and no part of the products or services may be intended for third
parties. (Article 50(4) of Law 43 of 27 December 1995).
Tax Benefits
The PEs/Ros, as defined in Article 50(4) of Law 43 of 27 December 1995, are
liable to pay corporate income tax at the standard 35% rate, but the taxable
income is determined on the basis of a fixed cost plus mark-up of total
expenses incurred by them in the performance of their activities. The mark-up
rate for the purpose of calculating the taxable income is fixed, by an order of
23 December 1997, at 15%.
All income of an accessory nature, such as interest or rents, which does not
stem from the object of the representative offices activities, is added to the
amount calculated on the cost plus basis. Capital gains or losses accruing
from the assets allocated to the representative office are equally taken into
account for the purposes of calculating the taxable income in Spain.
E 34 Tax Credits for Job Creating Investment
France
Conditions Attached
The measure applies to all companies subject to normal corporate income tax,
irrespective of their legal form (sociétés civiles, sociétés commerciales, etc.)
or of their activities (commercial, artisan, industrial, agricultural, non-
commercial, etc.).
The measure is only applicable in 1998, 1999 and 2000 (when it will expire).
Tax Benefits
The tax credit amounts to FFR 10,000 for each additional employee,
calculated as an average number of salaried employees during the year in
question and compared with the corresponding number from previous year.
The comparison is always made between two subsequent calendar years,
even if the financial year (accounting period) of the company would not tally
with the calendar year.
The maximum annual tax credit is FFR 500,000 and it can only be set off
against the 10% supplementary corporate tax contribution (as provided for in
article 235 ter ZA of the CGI).
The credit may be carried forward (until 2000) but it can never lead to a tax
refund. In the case where the average number of salaried employees
decreases (compared with the corresponding figure of the previous year) the
negative balance of the credit can be set off against future credits or against
credit carried forward from previous years. If such a set off is not possible, the
negative balance must be returned to the treasury. The amount of negative
balance that has to be returned to the treasury is limited to the amount of the
credits used against the 10% contribution.
E 35 Tax Credits for Staff training Costs
France
Conditions Attached
The measure applies to enterprises which have incurred training expenses
that are greater than the respective expenses during the previous calendar
year provided that such expenses are not credited against the compulsory
contribution to training.
Tax Benefits
The tax credit amounts to 25% of the training expenses exceeding the
respective figure of the previous calendar year and it is set off against the
company’s corporate income tax liability. Should the credit exceed the
corporate income tax liability, the excess is refundable. The credit is, however,
limited to a maximum amount of FFR 1,000,000 per year.
E 36 Listed Companies – Reduced Rates
Italy
Conditions Attached
The measure is available for companies whose shares are quoted on an
Italian stock exchange.
Tax Benefits
Under the Italian differentiated income tax system the taxable profits of limited
companies are subject to corporate income tax at the standard corporate
income tax rate of 37%, except for that part of the profits which is deemed to
correspond to a ‘ordinary return on capital’. The part of the income which is
deemed to correspond to the ordinary return on capital is taxed at a reduced
rate of 19%. The overall tax rate resulting from this differentiated taxation of
corporate income may not, however, be less than 27%.
In the case of quoted companies the reduced tax rate applicable to the part of
income corresponding to the ordinary return on capital is further reduced to
7% and the minimum overall tax rate is 20% (instead of 27%). These reduced
rates are applied to the corporate income during the first three years following
the year when the shares of the company were quoted on a stock exchange
for the first time.
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37
SGII
Companies
Portugal
Conditions Attached
The tax benefits provided for in the measure are available for qualifying real
estate investment and management companies (SGIIs) that are authorised by
the Minister of Finance. The authorisation (SGII recognition) is granted by way
of an administrative ruling.
Tax Benefits
Corporate income tax (IRC) is levied at a reduced rate of 25% (instead of the
standard IRC rate of 34%) on the taxable profits of SGIIs. Additionally,
immovable property rental income derived by qualifying SGIIs is exempt from
withholding of IRC.
The SGIIs are also exempt from the real estate transfer tax (SISA) on the
acquisition of immovable property and from municipal tax on buildings or parts
of urban buildings intended to be let for residential occupation.
The above mentioned reduced IRC rate and the exemptions apply to SGIIs
during their year of incorporation and the following 7 years.
E 38 SCR, SDR and SFE Companies
Portugal
Conditions Attached The measure (provided for in Articles 23, 24 and 25 of the Rules on tax
concessions) was available for
a) venture capital companies (SCRs) incorporated in 1989-1990,
b) regional development companies (SDRs) incorporated in 1989-1992, and
c) business promotion companies (SFEs) incorporated in 1989-1990.
The applicability of the relevant rules has not been extended and therefore,
the measure has expired as of 1998.
Tax Benefits
Venture capital companies (SCRs) and regional development companies
(SDRs) were exempt from corporate income tax during the first 5 years of their
business operations and business promotion companies (SFEs) during the
first 8 years of their business operations. Interest received on deposits of these
companies did not qualify for the exemption but was subject to tax at a
reduced rate of 20%.
Document Outline