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Part 3.COMPANY TAXES

Warming up

Translate the following phrases into Ukrainian paying attention to the way the first noun is translated.

Net income; company taxation; corporation tax; stock market; group tax; head office; development arrears; tax control; management contract; tax break; board member; board meeting; resident company; home country; host country; tax treatment; tax exemption.

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As individuals are taxed on their incomes, companies are taxed on their profits, which is just another word for net income. Like income taxes, company or corporation taxes have been falling in recent years in many countries, as government have attempted to encourage industrial development. In con­sidering company taxation it is important to remember that a company is a separate taxable body quite distinct from its own­ers or shareholders as individuals.

It needs to be stressed, that a company's income is not its operating profit. Expenses and allowances must be set against gross income before tax is assessed. Each country is different in how corporation taxes are paid or what allowances are avail­able though it is generally true that former British colonies often follow the British system closely.

What is important, however, is the question of where a company is resident. All companies must be resident some­where, and that is where their group tax will be assessed. This will usually be determined (if there is any doubt) by the location of a company's head office, where its main board members are situated and where board meetings are held.

Countries take different attitudes towards the taxing of the subsidiaries of foreign-based companies. Industrially devel­oped countries tend to tax the profits made by the subsidiary in their country. There have even been attempts by governments to attempt to impose taxes on the whole of a company's prof­its worldwide, even if there is only a small subsidiary based in the host country. Some countries do not tax the profits of the overseas subsidiaries of their resident companies until they are repatriated to the home country though, of course, any profits may have been taxed already in the host country.

The tax treatment of foreign companies varies greatly. Some countries attempt close control over these enterprises, requiring them to register the value of large investments with the minister of finance. This is particularly true of developing countries. If they are anxious to stimulate industrial develop­ment the countries may offer tax exemptions (so-called "holidays") for a number of years to foreign companies setting up there. This may not apply just to foreigners. A government may offer tax concessions to any companies, domestic or foreign, to move to or set up in a depressed area of the country. These are generally known as development areas. Not strictly taxation but the control that countries attempt to extend to foreign enterprises are measures to limit the repatriation of dividends from the host country to the home country, or the reimburse­ment of loans from headquarters to the subsidiary, or even fees for management contracts and royalties on patents. The home country in this case may limit the amount of investment it is prepared to make, or simply closing down when the tax breaks cease. This is a very complex area of taxation, and before going into an overseas market it pays to take professional advice.

(from "Guide to International Finance" by Alen M.)

Date: 2016-04-22; view: 959