Corporate tax law : structure, policy and practice / Peter Harris.
2013
K4544 .H375 2013 (Map It)
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Items
Details
Author
Title
Corporate tax law : structure, policy and practice / Peter Harris.
Published
Cambridge, UK ; New York : Cambridge University Press, 2013.
Call Number
K4544 .H375 2013
ISBN
9781107033535 (hardback)
1107033535 (hardback)
1107033535 (hardback)
Description
li, 597 pages ; 24 cm.
System Control No.
(OCoLC)810273692
Bibliography, etc. Note
Includes bibliographical references (pages 587-592) and index.
Series
Record Appears in
Table of Contents
Preface
xiv
Table of cases
xvi
Table of statutes
xx
List of abbreviations
1
Introduction
1
Approach and focus
1
What is a `corporation' and why is it important?
4
The `corporate tax system'
8
Scope and structure of the book
12
1.
Taxation of corporate income when derived
17
1.1.
Identifying and classifying corporations
19
1.1.1.
Identifying corporations
22
1.1.1.1.
Definition
22
Corporations
23
Unincorporated entities
24
Exclusions
26
Foreign entities
29
1.1.1.2.
Extensions
32
1.1.2.
Classifying corporations
34
1.1.2.1.
Based on relations
34
1.1.2.2.
Based on situs: resident / non-resident
35
1.1.2.3.
Based on activities: size and character
37
1.1.3.
Exploring relations with owners and controllers
38
1.1.3.1.
Nature of ownership and control
38
1.1.3.2.
Degrees of ownership and control
39
1.1.3.3.
Common ownership and control of corporations
40
1.1.4.
Responses to concentrated ownership and control
42
1.1.4.1.
Non-intervention: separate entity approach
43
1.1.4.2.
Erosion of identity
46
Collapse of separate identity: consolidation
46
Within a separate entity approach: transfer of tax attributes
48
Hybrid approaches
49
Problems with minority owners
49
Attribution to all owners
50
Attribution to controllers only
51
1.1.4.3.
Reinforcement of identity: independent entity approach
53
1.1.5.
Classifying corporations by their owners and controllers
54
1.1.5.1.
Controlled corporations
55
Control by an individual
56
Test of control
56
Attribution of rights
58
Control by a corporation
60
Test of control
61
Attribution of rights
63
Sibling corporations
64
Control by a single person
64
Control by a group of persons
65
1.1.5.2.
Closely held corporations
67
Form of threshold
69
Type of participation
70
Attribution of participations
71
Type of participator
75
Level of participation
75
Type of corporation
75
1.1.5.3.
Associated corporations
76
1.2.
Corporate tax base issues
78
1.2.1.
General rules
79
Schedular vs. global
79
Should the corporate tax base follow financial accounts?
86
Relationship with accounting in practice
88
1.2.2.
Reinforcement of corporate identity: transfer pricing
93
Arm's length pricing
93
Relevant relationship
97
Attribution of rights
100
Corresponding adjustments and subvention payments
102
1.2.3.
Erosion of identity: corporate groups
103
1.2.3.1.
Transaction deferral
104
Deferral mechanism
105
What is a group?
109
1.2.3.2.
Loss relief
112
Losses of an independent corporation
113
Use in year in which incurred
113
Carry-back
114
Carry-forward
115
Group loss relief mechanism
118
Pure consolidation
119
Partial consolidation
119
Loss transfer
120
Group contribution
124
What is a group?
125
Minority shareholders
128
1.2.3.3.
Other areas
130
1.2.4.
Erosion of identity: other related corporations
131
Control by the individual
131
Closely held corporations
133
1.2.5.
Interface with personal income tax
136
Interface through events
136
Special rules for individuals: focus on simplified tax base
138
1.3.
Tax treatment
142
1.3.1.
Selecting the tax subject
144
Corporate taxation: in search of a philosophy
144
Options for tax subject
148
1.3.2.
Taxing the corporation
150
1.3.2.1.
Factors in selecting a corporate tax rate
151
Interfacing issues
151
Philosophical issues
153
Same rates as individuals
153
Temporary surrogate
154
Competition
157
1.3.2.2.
Options in selecting a corporate tax rate
159
Main rate
160
Progressive rates
161
Differentiation
165
Anti-erosion: alternative minimum tax
166
Anti-deferral: tax on excessive retention
167
1.3.3.
Taxing owners and controllers
169
1.3.3.1.
Factors and options for allocation
170
Partnership method
170
By reference to value of shares
172
Capital gains with deferral charge
174
1.3.3.2.
Partnership method
175
1.3.3.3.
Personal services income
176
2.
Taxation of corporate income when distributed
181
2.1.
Classifying corporate rights
185
2.1.1.
Identification of membership rights with corporate profits
188
2.1.2.
Hybrid instruments
191
2.1.2.1.
Debt instruments
192
2.1.2.2.
Preference shares
197
2.1.3.
Excessive debt
198
2.1.4.
Amalgamation and fragmentation
204
2.1.4.1.
Amalgamation
204
2.1.4.2.
Fragmentation
207
2.1.4.3.
Third-party intermediation
207
2.2.
Identifying distributions
208
2.2.1.
Fundamental features of dividends
209
2.2.1.1.
Allocation
209
2.2.1.2.
Quantification
211
2.2.1.3.
Timing
211
2.2.1.4.
Dual character
212
2.2.2.
Intercepting corporate profits: hidden profit distributions
215
2.2.2.1.
Transfers of assets
216
Shareholder level
217
Corporate level
221
2.2.2.2.
Assumption or forgiveness of liability
224
2.2.2.3.
Loans and use of assets
225
2.2.2.4.
Provision of services
228
2.3.
Dual nature of corporate income
229
2.3.1.
Economic double taxation: the classical system
230
2.3.1.1.
The charge
231
Shareholder taxation
231
Corporate distributions tax
233
Withholding and dual taxation
234
2.3.1.2.
Expenses in deriving dividends
235
2.3.2.
Should corporate income be taxed twice?
239
2.3.2.1.
Corporate vs. unincorporated sectors
241
2.3.2.2.
Dividends vs. other returns
243
2.3.2.3.
Distribution vs. retention
248
2.4.
Dividend relief
251
2.4.1.
Options and factors in selecting dividend relief
251
2.4.1.1.
Types
252
2.4.1.2.
Corporation and shareholder tax bases
254
2.4.1.3.
Preference income
256
2.4.1.4.
Extent of relief
257
2.4.1.5.
Dividend streaming
258
What is dividend streaming?
259
Why engage in dividend streaming?
260
Options for dividend streaming
262
2.4.2.
Corporate-level dividend relief
262
2.4.2.1.
Dividend deduction system
263
Preference income
264
Extent of relief
266
Dividend streaming
267
2.4.2.2.
Split-rate system
270
Preference income
270
Extent of relief
271
Dividend streaming
272
2.4.2.3.
Corporation tax credit system
273
Preference income
275
Extent of relief
275
Dividend streaming
276
2.4.3.
Shareholder-level dividend relief
277
2.4.3.1.
Dividend exclusion system
277
Expenses in deriving dividends
281
Preference income
284
Extent of relief
285
Dividend streaming
286
2.4.3.2.
Shareholder differentiation system
288
Expenses in deriving dividends
292
Preference income
294
Extent of relief
295
Dividend streaming
297
2.4.3.3.
Dividend tax credit system
298
Expenses in deriving dividends
301
Preference income
302
Extent of relief
305
Dividend streaming
308
2.5.
Reconciling the corporation and shareholder taxes
311
2.5.1.
Recording corporate tax treatment
314
2.5.1.1.
Recording share capital
315
2.5.1.2.
Recording profits
316
Corporate profits with tax treatment
317
Corporation tax
319
Taxable income
321
2.5.2.
Allocation of profits as retained or distributed: ordering rule
322
2.5.2.1.
Returns of capital
322
2.5.2.2.
Different types of profits
325
3.
Taxation of corporate income: international aspects
327
3.1.
Resident corporations
330
3.1.1.
Foreign income / resident shareholders: scenario 2
330
3.1.1.1.
Foreign tax relief
331
3.1.1.2.
Classical system
333
3.1.1.3.
Dividend relief at the corporate level
334
3.1.1.4.
Dividend relief at the shareholder level
336
3.1.2.
Domestic income / non-resident shareholders: scenario 3
341
3.1.2.1.
Classical system
341
3.1.2.2.
Dividend relief at the corporate level
342
3.1.2.3.
Dividend exclusion and shareholder differentiation systems
344
3.1.2.4.
Dividend tax credit and imputation systems
347
3.1.3.
Foreign income / non-resident shareholders: scenario 4
354
3.2.
Non-resident corporations
356
3.2.1.
Domestic income / non-resident shareholders; scenario 5
356
3.2.1.1.
Corporate income when derived
357
Corporate tax base
357
Tax treatment
361
3.2.1.2.
Corporate income when repatriated or distributed
362
3.2.2.
Foreign income /resident shareholders: scenario 6
367
3.2.2.1.
Corporate income when derived: CFC and PFIF rules
368
3.2.2.2.
Identification and taxation of distributions
372
3.2.2.3.
Dividend relief: underlying foreign tax relief
375
Corporate-level dividend relief systems
375
Shareholder-level dividend relief systems
375
Switching forms of dividend relief
378
No-dividend relief: classical treatment
379
3.2.3.
Domestic Income / resident shareholders: scenario 7
380
3.3.
Extent of relief: whose corporate tax system?
382
4.
Creating share interests
386
4.1.
Issue of shares
388
4.1.1.
In return for cash
388
4.1.2.
In return for non-business assets
391
4.1.2.1.
From an individual
392
4.1.2.2.
From another corporation
395
4.2.
Transfer of a business: incorporation
396
5.
Transferring share interests
405
5.1.
Shareholder-level consequences
407
5.1.1.
Fungibles: identifying shares
408
5.1.2.
Factors in determining tax treatment
410
Double taxation of retained profits
410
Stripping effect of dividends
412
Timing: whose tax rate?
414
Unrealised corporate gains: the problem of enveloping
416
5.1.3.
Options for tax treatment of gains on disposal of shares
419
5.1.3.1.
Consistency between taxation of dividends and capital gains on shares
420
Dividend exclusion
421
Shareholder differentiation
425
Dividend tax credit
427
5.1.3.2.
Integration of taxation of dividends and capital gains on shares
427
5.1.3.3.
Specific relief of capital gains on shares
431
5.1.3.4.
Concessional capital gains taxation
432
5.1.3.5.
Full taxation
435
5.1.4.
International issues
437
Shares held by non-residents
437
Shares held in non-resident corporations
439
5.2.
Corporate-level consequences
439
5.2.1.
Defining a sufficient change
440
5.2.1.1.
Of ownership
443
Threshold issues
443
Test period
446
Small shareholdings
447
Indirect change without direct change
448
Direct change without indirect change
451
5.2.1.2.
Of business / activity
453
5.2.2.
Limitations on indirect transfer of gains and losses
458
5.2.2.1.
Rules for realised losses
459
One rule or multiple rules
459
Knife-edge or graduated approach
460
Year of change
462
Carry-back of losses
463
5.2.2.2.
Extending to unrealised gains and losses: the core issues
463
Two-step tax arbitrage
463
Scoping the potential for tax arbitrage and counteracting measures
466
Removing the corporate tax attribute
467
Removing the ability to offset the tax attribute
468
5.2.2.3.
Change of ownership of loss corporation
469
Limitations on carry-forward of unrealized losses
470
Consolidation
472
Transfer the loss to a profit
474
Transfer a profit to the loss
477
5.2.2.4.
Change of ownership of profit corporation
478
Consolidation
479
Transfer the profit to a loss or vice versa
482
5.2.3.
Limitations on carry-forward of other corporate tax attributes
483
5.2.4.
Leaving a corporate group
485
5.2.4.1.
Deferred transactions
486
5.2.4.2.
Carried-forward losses and other tax attributes
488
5.3.
Sale of shares versus sale of corporate activity
489
Issues for the seller
490
Competing interests of the purchaser
492
6.
Terminating share interests
494
6.1.
Partial share termination
495
6.1.1.
Returns of capital
497
6.1.2.
Cancellation of capital
500
6.2.
Share termination only: redemptions and share buy-backs
502
6.2.1.
Share redemptions
503
6.2.2.
Share buy-backs
506
6.3.
Corporate termination: liquidations and related proceedings
508
6.3.1.
Corporate consequences
509
Calculation of corporate income
510
Change of control
511
In-kind distributions to shareholders
514
6.3.2.
Shareholder consequences
515
6.3.2.1.
Insolvent corporations
516
6.3.2.2.
Solvent corporations
517
Disposal-only treatment
517
Dividend and disposal treatment
519
7.
Varying share interests
522
7.1.
Within a corporation
524
7.1.1.
Substitution
524
Scope of substitution
524
Triggering the substitution: options and convertible notes
527
7.1.2.
Splitting: focus on bonus shares
528
Bonus shares and the capitalisation of profits
530
Proportionate bonus share issues
532
Disproportionate bonus share issues
535
7.1.3.
Consolidation
537
7.2.
More than one corporation
537
7.2.1.
Merger
538
7.2.1.1.
Threshold for relief
539
7.2.1.2.
Consequences for the shareholder
543
7.2.1.3.
Consequences for the merged corporation
546
7.2.1.4.
Consequences for the merging corporation and survival of tax attributes
550
7.2.2.
Division
552
7.2.2.1.
Threshold for relief
553
7.2.2.2.
Consequences for the shareholder
557
7.2.2.3.
Consequences for the distributing corporation
560
7.2.2.4.
Consequences for the distributed corporation and survival of tax attributes
562
8.
Dividend and capital stripping and value shifting
564
8.1.
Dividends into capital: just the disposal
566
8.1.1.
Disposal of dividends
567
8.1.2.
Sales cum-dividend
569
8.2.
Capital re-characterised: value shift then disposal
572
8.2.1.
Direct value shift
573
8.2.2.
Indirect value shift
576
8.2.2.1.
By distribution
577
8.2.2.2.
By corporate gift
579
8.3.
Disposal, value shift, disposal: stock lending, repos and the full strip
581
8.3.1.
Stock lending and share repurchase agreements
581
8.3.2.
Full strip
583
References
587
Index
593