Читать книгу International Taxation - Adnan Islam - Страница 37

Brubeck Boilerplate Corp., a U.S. corporation, manufactures electric heaters in its domestic plant. It manufactures 220-volt heaters for the central European market in its branch in the Grand Duchy of Aukum. Aukum law requires every foreign-owned plant to adopt a fixed opening amount of capital investment and to compute its taxable income as if it were incorporated under Aukum law. Remittances from the branch to the home office are treated as if they were dividends and are subject to a withholding tax of 12%.

Brubeck also manufactures heaters for the Middle Eastern market in the Emirate of Jamul. Local business custom has impelled Brubeck to place its Jamul branch into a legal entity called an enterprise. Under Jamul law, and by the terms of the formation documents, the enterprise creates an entity with separate legal personality, a separate balance sheet, and separate local tax liability. Ownership of the enterprise is evidenced by share certificates. The duration of any enterprise is limited by law to 10 years, the shareholders are fully liable for any debts of the enterprise, and the share certificates are not transferable without permission of the Jamul Foreign Investment Board.

The following discussion reviews the law as applied to the facts presented in example 1.

The 1996 “check-the-box” Treasury regulations permit an unincorporated business organization to elect to be treated as a corporation or as a partnership. Under prior law, the determination of whether the Aukum and Jamal entities constitute branch operations or affiliated corporations is an analysis of whether each entity possesses sufficient corporate characteristics.