Basic elements[ edit ] These include: Contractual Agreement - IJVs are established by express contracts that consist of one or more agreements involving two or more individuals or organizations and that are entered into for a specific business purpose. Thus, an IJV is not merely a contractual relationship, but rather the contributions are made to a newly formed business enterprise, usually a corporation, limited liability company, or partnership.
However, although the cross-border element can raise potential problems for example, withholding taxes and non-deductibility of paymentsit can also in certain jurisdictions create tax planning opportunities.
Payments, deductible in a high tax country where operations or sales are located, may legitimately be made to a low taxed company in another jurisdiction.
Even better, money may be borrowed in the parent company's high tax home any interest paid is tax deductible and used to subscribe for shares in an overseas company which in turn lends to the joint venture interest again may, depending on the jurisdiction, be deductible.
A financing instrument may be regarded as debt in the country where the borrower resides allowing a deduction for interestbut equity in the country where the lender is located giving the lender a credit for taxes paid by the borrower.
Activities can be conducted through a branch or dual resident that is, an entity treated as tax resident in more than one jurisdiction and therefore expenses may fall to be deducted against income in two jurisdictions.
However, the anti-arbitrage rules can stop UK tax advantages arising to UK joint venture parties from, for example, hybrid financing instruments. For more information on the anti-arbitrage rules see Practice note, Financing multinational groups: Arbitrage rules and UK outbound financing: In regard to tax efficiency, there is a fundamental difference between the tax treatment of dividends and interest: If this is the case, the joint venture parties may try to take advantage of this by giving a joint venture company a large loan capital and a small share capital.
The taxable profits of the joint venture company are thereby reduced, although it should be noted that many jurisdictions have anti-avoidance legislation to prevent this highly geared structure.
Such structures are "thinly capitalised" and can often be attacked under either thin capitalisation or transfer pricing rules. Broadly, the way these rules generally operate is to treat interest incurred on "excessive" debt as non-deductible for tax purposes.
For a more detailed explanation of these rules, particularly in the context of the UK, see Practice note, Thin capitalisation and transfer pricing.
Also, the tax laws of many jurisdictions seek to penalise interest payments cross-border to affiliates. For example, interest paid by German partnerships to its partners can be treated as an allocation of profit and be non-deductible.
Interest payments by French entities will in general qualify for deduction, but restrictions may apply if interest payments are set at a non-commercial rate, or, in some cases, on payments to equity holders in the joint venture. Assuming that the interest payable is likely to be deductible, the next consideration is whether the joint venture company or, as the case may be, the joint venture parties have sufficient tax capacity to benefit from the deductions.
For an overview of the main tax issues to consider when forming and operating an international joint venture in France, Germany and selected other jurisdictions, see PLC Cross-border, Practice note, Tax: Many countries impose withholding tax on interest.
For a detailed summary of the provisions contained in the Directive, see Practice note, Tax treatment of cross-border payments for intellectual property. UK withholding tax will only need to be considered if a UK joint venture company is paying interest to a non-resident UK joint venture party.
For an explanation of how UK withholding tax is applied, see Practice note, Withholding tax. For a more detailed consideration of the tax issues which may arise in respect of debt financing, see Practice note, Lending activities: Planning for losses Losses, in a tax sense, may arise because of start up operating deficits of the joint venture or in capital intensive joint ventures, particularly infrastructure projects, where tax depreciation and investment deductibility rules in the parent companies' home territories permit an accelerated deduction for tax purposes.Unsuccessful Examples Across Border Joint Ventures World Economy Joint Ventures 1 Joint Ventures A joint venture is a mechanism for combining complementary assets owned by separate firms.
These assets can be tangible, such as machinery and equipment, or intangible, such as technological know-how, production or marketing skills, brand names, and market-specific information.
The joint venture company is called Kribhco Reliance Kisan Ltd.
“For the company and for me personally. Anil biggest loser envisages a new technical agreement. when the . Feb 05, · Examples of successful,unsuccessful and not so successful of cross border joint ventures in recent times? Give examples of some successful, not-so successful and clearly unsuccessful cross-border joint ventures?Status: Resolved.
An international joint venture (IJV) occurs when two businesses based in two or more countries form a partnership. A company that wants to explore international trade without taking on the full responsibilities of cross-border business transactions has the option of forming a joint venture with a foreign partner.
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You can only upload videos smaller than heartoftexashop.com: Resolved. INTERNATIONAL JOINT VENTURES continue to rattle across the newswires. In the last month, UK-based Vodafone and U.S.-based Liberty Global announced an agreement to consolidate their Dutch operations into a € billion JV that will combine their respective positions in the country’s mobile and cable markets.