BGI LAW MAGAZINE 2010

GROUP INTERNATIONAL LAW MAGAZINE

How to do business and hold assets around the world

Letter from the President

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t is becoming increasingly important to have a global vision of the world of business, to be able to compare tax systems, company set-ups and enterprise structures, aspects that also guarantee the legal security and heritage of our clients and fulfil our requirements regarding profitability, whilst also ensuring greater economy in terms of labour costs, taxation and incorporation expenses.

In this respect, this new issue, the third in the series, aims to provide a simple and brief summary of some of the practical aspects regarding these matters in the legislation of the different countries where BGI is represented.

Gil Stern once declared, “Both optimists and pessimists contribute to our society. The optimist invents the airplane and the pessimist the parachute ...�

We, in our capacity as jurists, lawyers and legal and tax advisors, must work on both sides, given that both are required, especially now in view of the current parlous state of the world economy.

In this respect, we have combined the text with beautiful images representing the countries in question, thus helping to alleviate the ever tiresome and complicated explanations of our lawyers ... and yet, dear friends..., I hope this publication is both interesting and of use to you.

I extend my warmest regards to you all.

Juan Luis BaLmaseda de ahumada Y dieZ BGi PResidenT

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Contents BGI

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Austria

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Bulgaria

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Cyprus

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Czech Republic

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England & Wales

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France

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Germany

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Greece

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Gibraltar

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Hungary

104

Morocco

116

Portugal

134

Romania

146

Russia

154

Spain

166

Ukraine

182

Uruguay

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DISEÑO Y MAQUETACIÓN TEBALE (info@tebale.com)

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Think globally, win locally

albufeira – au. i.d. hallertau – athens – BARCELONA – bucarest – budapest – buenos aires – burgas – CASABLANCA –gibraltar – Kharkov – Kiev – LÉRIDA – limassol – lisbon – LONDON – luxembourg – madrid – marbella –marrakech – MILAN – Montevideo – moscow – munich – oporto – paris – praga –SOFIA – tanger – vienna – vigo

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n 1996, two established and prestigious law firms – Balms Abogados and Black Graf & Co (as it then was), solicitors in London, joined forces to establish Balms Group International (BGI), an international Organization of Independent Law Firms. Balms Abogados have offices in Marbella, Madrid, Vigo, Bucharest, Sofia, Burgas, Tangier, Marrakech and Casablanca. All BGI members are medium-size law firms (5-30 lawyers) equally prestigious and well-known in their respective countries. Currently, the founder members also have partners in Argentina, Austria, Bulgaria, Cyprus, Czech Republic, France, Germany, Greece, Hungary, México, Morocco, Portugal, Romania, Russia, Ukraine, United Estates (Miami). At this moment, we are considering the applications from other candidates to join BGI from Italy, Croatia, Panama, Guatemala, Dubai and China.

BGI is a group of individual partner–led firms, or as we refer to ourselves, a group, a “Legal Boutique”. BGI is far removed from the big law firms providing, in many cases, an impersonal and mass service. Furthermore, our fees are exceptionally reasonable, as we do not have the overheads and complicated structures that many of top 10 firms have.

BGI is a group of individual partner–led firms, or as we refer to ourselves, a group, a “Legal Boutique”. BGI is far removed from the big law firms providing, in many cases, an impersonal and mass service. Furthermore, our fees are exceptionally reasonable, as we do not have the overheads and complicated structures that many of top 10 firms have.

BGI members demonstrate a common corporate image, which is not just a logo, but more importantly the same group spirit and philosophy where, regardless of our independence, there is a homogenous spirit that makes us stand out from the crowd and it is the difference that makes us stand out from the crowd that makes the differences. All members pledge to demonstrate their commitment and to assist each other. With a global network of offices and a strong commitment to each other BGI is, as we like to say, a “Legal Boutique”.

BGI benefits from a World Secretariat, located in Spain, from which the network is managed.

We have our own website (www.bgi-law.com), corporate marketing, brochures, and periodical publications, such as our newsletter, “BGI News”, issued halfyearly, “Balms Group International Law Magazine”, also issued half-yearly and “Balms Group International Law Magazine” , issued annually.

In order to review our performance, develop new understandings of Law and improve services to our clients, we organise two conferences each year within the network, the Annual BGI International Conference, which is usually is held in May, and the Biannual BGI Conference which is held in the autumn.

Our aim is to offer the very best of legal services and tax advice to our clients in those places where we have offices, and our target is to have offices in those countries where our clients may seek our services and support.

Juan Luis BaLmaseda de ahumada Bgi PResidenT

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Cyprus How to do business and Hold assets around tHe world

1. Available Corporate Entities The main corporate entity used in Cyprus is the Limited Company by Shares, this corporate structure is divided into two subcategories:the Private Limited Company and the Public Limited Company.

A Private Limited Company is a company which by its Articles of Association: a. Restricts the right of transfer of shares

Law Cap.113 provides for a Limited Company by Guarantee. The essential difference compared with a Limited Company by shares is that the company does not have a share capital. The liability of the members of the company is limited to the maximum amount they have guaranteed, as opposed to a company limited by shares where the liability of the members/shareholders is limited to the number of shares they have subscribed for.

and b. Restricts the maximum number of shareholders to fifty and c. Prohibits an invitation to the public to subscribe for shares.

There is no minimum share capital for a Private Limited Company as opposed to a Public Limited Company, where there is a requirement of an issued share capital of at least €25,630.

In addition to the above, Cyprus Companies

Pursuant to the Partnership Law Cap. 116, another ‘corporate’ structure which can be registered and operate under Cyprus law is the Limited Liability Partnership. In such a structure there is a need for at least one General Partner who has unlimited liability and any number of limited partners whose liability is limited to the amount of their contribution to the partnership. Because of the requirement to have at least one unlimited liability partner this structure is not often used for business purposes.

2. Establishment of a Company in Cyprus Cyprus Companies are incorporated by lawyers. It is not possible to incorporate a company in Cyprus without going through a lawyer who will draft and sign the Memorandum and Articles of Association.

It is possible for a person wishing to acquire a Cyprus Company to buy a ready made company. These are companies who have already been established and the shares of such companies are transferred to the new buyer/shareholder. At the same time the new directors and secretary are appointed in accordance with the requirements of the new shareholder.

It is now possible to have a ‘one man’ company in Cyprus. This means that a company can be incorporated with a single person being the sole shareholder, director and secretary of the Company.

As from 1st October 2004, the Council of Ministers has approved complete freedom

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of direct investment from non-residents, in Cyprus.

Consequently, non-residents who wish to establish a company in Cyprus, or acquire shares in existing Cyprus companies, or otherwise to invest in or from Cyprus, no longer require approval by the Central Bank of Cyprus. Such applications should now be addressed directly to the Department of Registrar of Companies and Official Receiver.

The same applies for direct and portfolio investments by natural or legal persons from EU member states. Investors from the EU wishing to register a company in Cyprus or acquire shares in existing Cypriot legal entities should apply directly to the Registrar of Companies.

3. Necessary Information and Documentation required for Incorporation The following information and material is required for the relevant approval and formation of a company: (a) The proposed name of the company, which has to be approved by the Registrar of Companies. Our office keeps available several approved names for speedy cases. A list of presently available names can be provided on request. (b) The amount of the authorised capital of the company (c) The amount of the issued and paid up capital of the company

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There is no minimum share capiTal for a privaTe limiTed company as opposed To a public limiTed company, where There is a requiremenT of an issued share capiTal of aT leasT €25,630 shareholding. One beneficial owner of all the shares is permissible. If full anonymity and confidentiality is desired, nominee shareholders may be used who will hold the shares in trust for the beneficial owner. (f) Full names, professions, nationality and addresses of the directors and secretary of the company. All or any of the directors may be non-Cypriots. Cypriots (corporations or individuals) may also be directors or secretary of the company.

4. Anonymity Services Cyprus is fully compliant with the European regulation for the prevention of terrorism and money laundering. Lawyers who incorporate companies for clients need to go through the normal ‘Know Your Client’ procedures.

During the KYC procedure the Ultimate Beneficial Owner (‘UBO’) should be disclosed to the lawyer. The Ultimate Beneficial Owner is the natural person or persons who ultimately are the beneficial owners of the Cyprus Company.

(d) The main objectives and business of the company

When opening bank accounts in Cyprus for a Cyprus company, again the UBO needs to be disclosed to the Bank.

(e) Full name, profession, address and nationality of each shareholder and their respective

Provided the above are complied with, it is possible to provide full anonymity services in relation

to corporate structures. This is achieved by the service provider, through its associates, acting as registered shareholders, directors and secretaries of Cyprus companies on behalf of the UBO. For the protection of the UBO, the registered shareholder makes a declaration of trust, stating that it holds the shares on behalf of the UBO. In addition he signs a blank instrument of transfer giving authority to the UBO to complete the instrument of transfer and transfer the shares into his name, or any other name.

This method ensures that anybody searching the Companies Registrar for information will only see the nominee shareholder and director, thus providing anonymity to the UBO. There is no requirement to notify any other authorities of the identity of the UBO. The Service Provider has a duty of confidence towards the client and never discloses information about the UBO without a court order.

The Bank also has a duty of confidence and never discloses any information about the UBO to any third party without a court order.

5. Advantages of using Cyprus Companies There is no distinction between local and offshore companies. The offshore regime was abolished in Cyprus in 2004, when Cyprus became a member of the European Union.

Cyprus has one of the lowest, if not the lowest, corporate tax rate, which stands at 10%.

Dividends for Cyprus residents are taxed at

There is no disTincTion beTween local and offshore companies.

The offshore regime was abolished in cyprus in 2004, when cyprus became a member of The european union. cyprus has one of The lowesT corporaTe Tax raTe, which sTands aT 10% 15%, but dividends to non-residents have no withholding tax whatsoever. The dividends paid to non-residents may remain in Cyprus without any tax implications.

In addition there is no withholding tax on royalty payments to non-resident recipients when the right or asset giving rise to the royalty is used outside Cyprus, no withholding tax on payments of interest to non-resident recipients, no corporation tax on profits of the Cypriot company’s permanent establishment abroad, no capital gains tax on the profits from the sale of the Cypriot company’s foreign immovable property and no capital gains tax on profits from the disposal of securities.

When selling the shares of a Cyprus company there is no tax on the money received, provided the company has no immovable property in Cyprus. If there is immovable property situated in Cyprus, a calculation will be made of the value of the immovable property in relation to the total sale price of the shares and capital gains tax of 20% will be levied on that part of the sale price that relates to the immovable property.

This makes the use of a Cyprus company as the holding company of a business structure a particularly attractive proposition.

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In addition Cyprus is a signatory to arrangements under the Treaty for the Prevention of Double Taxation with many countries all over the world. A Double Taxation Prevention Treaty, in principle, enables tax paid in one country to be offset against the tax payable in another, in this way preventing double taxation.

Another important factor is the grant of an exemption or tax at a reduced rate on certain receipts such as interest, royalties, dividends, capital gains and others that are connected with a transaction carried out between parties associated with a Double Taxation Prevention Treaty.

When certain income is taxable under the Cyprus Income Tax legislation, but there is an exemption (reduced tax) under any Taxation Treaty, the income is taxed, if at all, but only according to the provisions of the Taxation Treaty.

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SomE of thE CouNtrIES thAt CypruS hAS DoublE tAxAtIoN trEAtIES wIth ArE: austria, bulgaria, belarus, belgium, canada, china, denmark, egypt, france, germany, greece, hungary, india, ireland, italy, Kuwait, malta, mauritius, norway, poland, romania, russia, singapore, south africa, sweden, syria, Thailand, united Kingdom, united states, *federal republic of yugoslavia, *slovenia,**slovakia, **czech republic, ***azerbaijan, ***armenia, ***Kyrkyzstan, ***moldova, ***Tajikistan, ***uzbekistan,***ukraine * Old treaty between Cyprus and Yugoslavia ** Old treaty between Cyprus and Czech Republic *** Old treaty between Cyprus and USSR

6. Accounts Pursuant to Companies Law Cap.113 a Cyprus company must maintain accounts in accordance with International Accounting Standards. Every company needs to have an auditor who will perform an annual audit of the accounts.

i.e change of shareholders, directors and secretary. Even if there are no changes, the Annual Return still needs to be filed.

The accounting period in Cyprus is from 1/1 to 31/12 of every year. An Income Tax return must be filed with the tax authorities by 31/12 of every year for the previous year.

As with all matters having legal consequences, however, advice should be obtained in relation to any proposed transaction or course of conduct as circumstances differ and points which are particular to an in individual set of circumstances may affect the advice given. Except where Costas Tsirides & Co L.L.C. has given specific advice, neither it nor any of its members accepts responsibility for the dissemination of the above article, nor for the reliance placed on the information contained in it by any person, firm or corporation.

The accounts of the Company must be filed with the Companies Registrar together with the Annual Return of the Company.

The Annual Return is filed every year with the Companies Registrar specifying any alterations in the structure of the company

Disclaimer The information set out above is believed to be correct as at 1st October 2009.

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Czech Republic How to Do business AnD HoLD Assets ARounD tHe woRLD

Pursuant to survey Doing Business 2010 carried out by the Organisation for Economic Co-operation and Development (OECD) among 183 countries, the Czech Republic was ranked 74th in the overall category “Ease of Doing Business� summarizing the following categories and the ranks attained by the Czech Republic therein: Starting a business: 113th Dealing with construction permits: 76th Employing workers: 25th Registering property: 62nd Getting credit: 43rd Protecting investors: 93rd Paying taxes: 121st Trading across borders: 53rd Enforcing contracts: 82nd Closing a business: 116th In the following lines, we take the liberty to provide you with a concise overview of basic principles and information in relation to doing business in the Czech Republic

and draw your attention to main issues and problematic areas connected with the aforementioned matter.

legal framework for establishment of companies, pursuing entrepreneurship and contractual relationships.

Setting up Business If a person intends to start a business in the Czech Republic, there are two prospective options how to carry on business activity: either as a natural person (on a selfemployed basis) or by establishment of a legal entity.

There are two significant acts relating to starting a business within the territory of the Czech Republic:

For the purpose of pursuing business activity in the Czech Republic as a natural person (as well as a legal entity), you must obtain a trade license. Applying for a trade license is a relatively simple process. If the required documents and the application form are in order, the entire process of registration takes 3 days. Next step consists in selection of the trade(s) that corresponds most to the pursued business activities. There are three different kinds of trades with specific requirements: free trades - no specific qualification is required; craft trades - apprenticeship or otherwise defined courses of vocational education and training are required; regulated trades - besides appropriate qualifications there are additional requirements defined in various regulations. The trade license registration stamp is worth 1.000 CZK regardless of how many various trades are to

1) Act No. 455/1991 Coll., the Trade Licensing Act regulates a range of specific duties of entrepreneurs relating to their trades and regulates in detail the course of official proceedings on declaring a trade or applying for a license and issuing trade licenses; 2) Act No. 513/1991 Coll., the Commercial Code provides an elementary

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be registered at once. After the trade license registration is completed, the entrepreneur must be registered at the tax office, the social office and health insurance.

Should the business be carried on in larger extent, it is recommendable to establish a legal entity (company). A company is established upon the signing of a memorandum of association or a founder’s deed by its founder(s) and incorporated (comes into existence) by registering in the Commercial Register kept by the respective Registry Court. The application form in respect of registration is to be equipped with a stamp worth CZK 5.000 (approximately EUR 200). There are four different legal forms of companies: general commercial partnership (v.o.s.), limited partnership (k.s.), limited liability company (s.r.o.) and joint-stock company (a.s.). The most common legal entities are a limited liability company and a joint-stock company.

A limited liability company is used particularly for small and medium-sized businesses. It may be established either by (i) a founder’s deed by one entity (whether an individual or a legal entity) or (ii) by a memorandum of association concluded by a group of entities or individuals up to 50. Nonetheless, a limited liability company with one shareholder cannot establish or become the sole shareholder of another limited liability company. One individual may be a sole shareholder of not more than three limited liability companies. The minimum registered capital is CZK 200.000 (approximately EUR 8.000). Corporate governance is simpler than that of a joint-stock company. A limited liability company does not have a board of directors. Its statutory body is formed by one or more managing directors. The law does

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not require the limited liability company to establish a supervisory board, however, a supervisory board may be established provided that the founder’s deed or memorandum of association stipulates so. Shareholders of a limited liability company are jointly and severally liable for company’s obligations only up to the unpaid aggregate of their investment contributions according to the entry in the Commercial Register.

A joint-stock company is used for large companies. It is established by a founder’s deed by one shareholder, being a legal entity, or by a memorandum of association by more than one shareholder (whether individuals or legal entities). Both the founder’s deed and the memorandum of association must be executed in the form of a notarial deed. Bearer shares are freely transferable, whereas transferability of registered shares may be restricted, but not excluded, by articles of association. Minimum registered capital is CZK 2.000.000 (approximately EUR 80.000) or CZK 20.000.000 (approximately EUR 800.000) if the company is founded through a public offer of shares. The statutory body of a joint-stock company is the board of directors. Each joint-stock company must establish a supervisory board. Shareholders of a joint-stock company are not liable for company’s obligations.

Foreign legal entities are allowed to conduct business activities under the same conditions and to the same extent as Czech entrepreneurs.

They may become founders or co-founders of a company, or may join an existing Czech company. Foreign companies may operate in the Czech Republic, either by establishing a branch office registered in the Czech Republic or by establishing a Czech company. A branch

office of a foreign company is not a Czech legal entity but functions as the representative of a foreign company and incurs obligations on the foreign company’s behalf. A foreigner being a natural person and intending to pursue a business activity in the Czech Republic, which is a trade pursuant to the Trade Licensing Act, is authorized to pursue such activity only upon a duly issued trade license.

Accounting and Tax System Once the company is incorporated and/or the trade license obtained, the person may carry on a business activity. The transactions and relevant events appertaining to the respective business are to be recorded, classified, summarized and interpreted in accordance with the Act No. 563/1991 Coll., on Accounting, laying down basic rules and regulations thereof. The Act on Accounting also defines the basic requirements for preparing and publishing annual reports and the conditions when a mandatory statutory audit of financial statements. All accounting units as defined by the law are required to keep their accounts in accordance with Czech Accounting Standards. The elementary principles of bookkeeping in the Czech Republic have been harmonized with the European Union standards and regulations.

The system of taxation of the Czech Republic resembles the systems of taxation of other European countries. Generally, taxes can be divided into direct taxes, related to the level of income of the subject, and indirect taxes, related to consumption or the purchase of goods and services. The system of taxation in the Czech Republic consists of the following taxes: value added tax (VAT), income taxes, real estate tax, road tax, estate tax, inheritance and

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gift tax, real estate transfer tax, energy taxes, custom duties and excise duty. Each type of tax is defined in a specific piece of legislation such as in the Act No. 586/1991 Coll., on Income Tax, or the Act No. 235/2004 Coll., on Value Added Tax. The Czech income tax rate for individual’s income is flat and amounts to 15 %.

The corporate tax rate is 19 %. There is a reduced tax rate for certain income (for instance a tax of 15 % is imposed on dividends paid

by Czech corporations, whereas the dividends paid between two Czech companies are tax exempt). As regards VAT, two rates apply: 20 % for most of goods and services and 10 % for specified goods and services such as food and beverages (other than alcohol), books, special healthcare products and social housing.

An individual (natural person) pays tax on his income as a wage earner or as a self-employed

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person. Tax for an individual who meets the criteria of a “permanent resident” of the Czech Republic is calculated on his income earned inside the Republic and abroad. A foreign resident who is employed in the Czech Republic pays tax only on income earned in the Republic. An employer is obliged to deduct, immediately on a monthly basis, the requisite tax from employees’ salaries. The tax year in the Czech Republic is the calendar year ending on December 31. The annual tax return must be submitted by the end of March of the following year, whereas if you are represented by an authorized Czech tax advisor, you may make an application to submit the tax return by the end June. Tax losses may be carried forward for up to five years and utilized against taxable profit arising in any of these years.

Health insurance and social security in the

Czech Republic is one of the highest in the European Union. The overall rate of health and social insurance premiums in the Czech Republic is 45 % for employees and 42,7 % for self-employed individuals.

The Czech Republic is part of the EU customs union which means that the import of goods into the Czech Republic is subject to the same rules as import to any other EU country. In case of trade with non-EU countries custom duty arises on the customs value of the imported goods. The calculation of individual custom duty is complex and depends on individual circumstances.

Employment Law Carrying on a business activity may entail also an employment of workers. The area of employment is regulated particularly by the Act-

No. 262/2006 Coll., the Labour Code, which is being constantly updated to include relevant EU legislation. There is also legislation covering wages, health and safety, social security, working time and many other aspects of employment. An employment relationship is constituted by an employment contract between employer and employee. The standard working week is 40 hours, and a compulsory rest period of at least half an hour must be granted for anyone who works at least six hours in one day.

Employees may work overtime, a maximum of eight hours in one week and 150 hours in a year, or 417 hours in a year if voluntary. Pay for standard weekend work must be increased by at least 10 %, and for overtime by at least 25 %. The statutory minimum paid holiday is 4 weeks. Longer holiday entitlements may be agreed in collective agreement or in individual

employment contract. The minimum monthly wage is CZK 8,000 (approximately EUR 320).

Employment may be terminated in the Czech Republic by the employer or the employee in several manners: - by agreement – concluded between the employer and the employee as of a fixed date; - by notice – in writing presented by the employer (giving a reason provided for by law is required) or by the employee (no reason needs to be given); - by immediate termination – by employer due to the specific reasons on the side of employee; - termination during the probationary period – by either the employer and the employee (no reason needs to be given); - upon the employee’s death.

The employment relationship between an employer and employee is established solely by means of an employment contract. Mandatory particulars to be specified in an employment contract are as follows: the kind of work; the place of performance of the work; the starting date. An employment contract must be concluded in writing and the employee must receive a copy thereof. The parties to an employment contract may agree upon a probationary period, however, not longer than 3 months.

The Labour Code also defines situations in which the performance of dependent work may be based on labour relations other than that of employment relationship. These relations are established by agreements concerning work performed in outside the employment relationship. So-called “work performance

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agreements� are designed to enable employers to attain their business goals in cases where it does not seem to be practical to recruit employees on the basis of full-time unlimited employment contracts. Such auxiliary labour relations are not subject to such strict limitations and conditions as in case of employment relationship.

Citizens of member states of the European Union and of the states constituting the European Economic Area (EEA) and citizens of Switzerland do not need a work permit for employment purposes in the Czech Republic.

Citizens of these countries have equal legal status as citizens of the Czech Republic. Nevertheless, the employer is obliged to notify the employment office and keep a record of their employment. In other cases, a regular work permit is to be obtained.

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Investment in the Czech Republic The Czech Republic offers incentives and business support through various schemes.

These schemes are available to new and existing foreign and domestic investors.

Depending on the specific scheme, the incentives may be as follows: - tax incentives (corporate tax relief for up to five years for new companies, partial tax relief for up to five years for existing certain companies); - job creation grants (financial support for creation of new jobs); - financial support for the training and retraining of new employees; - site support transfer of public land for a favourable price.

ThE SySTEm of TaxaTion of ThE CzECh REPubliC RESEmblES ThE SySTEmS of TaxaTion of oThER EuRoPEan CounTRiES. GEnERally, TaxES Can bE DiviDED inTo DiRECT TaxES, RElaTED To ThE lEvEl of inComE of ThE SubjECT, anD inDiRECT TaxES, RElaTED To ConSumPTion oR ThE PuRChaSE of GooDS anD SERviCES Incentives are available individually or collectively and are intended to have maximum impact in the early stages of projects. In the Czech Republic there is a business development agency of the Czech government, Czech Invest. Its services and programmes contribute to attracting foreign investment and developing domestic companies.

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PARTNERS JUDr. Vladimír Jašek, Ph.D.,LL.M. JUDr. Zdenka M. Nocarová, Ph. D.

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Nocarová Jasek & PartNers PraHa Main office v Jirchárích 148/4 cZ - 110 00 Prague 1 ^

ASSOCIATES Mgr. Zuzana Chýlová JUDr. Tomáš Temín, Ph.D. JUDr. Zdenka Všelichová, MAES JUDr. Josef Rericha JUDr. Pavel Just Mgr. Viktor Fojt Mgr. Alena Malachová Mgr. Michal Hess Vojtech Dobrkovský Lenka Bridová Petr Hradil Kristýna Vondrácková Veronika Kovárová

Phone: + 420 224 232 578/+ 420 224 233 706 Fax: + 420 224 232 578/+ 420 224 233 706 e-mail: njp@njp.cz Web: www.njp.cz

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England Wales & How to do business and Hold assets around tHe world

1. Alternative available corporate identities Britain has for many years offered the opportunity to incorporate businesses and asset –holding entities in a number of different, flexible ways. Incorporation of most companies is achievable with the minimum of formality.

guarantee, limited partnerships, open ended investment companies, community interest companies and of course trusts, which tend to be used in special circumstances, that can be utilised for the purpose of running businesses and for investment purposes.

A number of corporate identities are available throughout the EU, such as the societas europaea and the EEIG, but since these are not unique to England and Wales, they are not dealt with in this article.

The more usual entities are the private limited company (Ltd), the public limited company (PLC) and a relatively recent introduction, the limited liability partnership (LLP). Overseas companies may also register a branch/place of business in the UK.

Similarly, there are a number of different types of entity, such as companies limited by

Private limited companies The vast majority of registered companies are

private companies – in July 2009, there was a total of approximately 2.6 million companies on the register maintained by the Registrar of Companies in Britain, of which only a little over 10,000 were public companies.

Public limited companies Public companies are more strictly regulated. They must have a minimum allotted share capital of, currently, ÂŁ50,000. Some, but not all, public companies are quoted (i.e. their shares are traded) on the London Stock Exchange or one of the alternative markets.

Those companies are therefore subject to additional regulation by the Financial Services Authority/London Stock Exchange.

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It Is PossIbLe to buy a ready-made, new, PrIvate comPany from IncorPoratIon agents, who maIntaIn a stock of comPanIes, just LIke any other commodIty. new dIrectors and a comPany secretary, If requIred, are then aPPoInted and changes made to the constItutIonaL documents may be made If necessary. the transactIon can be comPLeted over the teLePhone In a day Limited liability partnership Limited liability partnerships combine the advantage of limited liability with the advantage of the members being taxed as if they were a partnership. They are attractive to the professions, such as lawyers and accountants, many of whom have converted their partnerships into limited liability partnerships. They are also often used as vehicles for joint ventures between independent businesses.

2. Establishment of a corporation It is possible to buy a ready-made, new, private company from incorporation agents, who maintain a stock of companies, just like any other commodity. New directors and a company secretary, if required, are then appointed and changes made to the constitutional documents may be made if necessary. The transaction can be completed over the telephone in a day.

The cost of acquiring the company is approximately £100 and there will be further relatively modest charges for dealing with the changes mentioned above.

Alternatively a private limited company or an LLP can be formed in accordance with the par-

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ticular requirements of the promoter. Formation by this means can take up to two weeks.

The fee payable to the Registrar of Companies is £20. Alternatively, if same–day formation is required, the fee is £50. Fees will also be payable to the lawyer for setting up the company, dependent on the amount of work required.

To form a private limited company, the following documents must be filed with the Registrar of Companies: - Application to register, which contains, among other things, details of share capital, directors and registered office address - Memorandum of Association - Articles of Association (the constitutional document) - Fee £20/£50.

The documents required for formation of public companies and LLPs are similar, except that a public company has to demonstrate that it has a minimum allotted share capital of £50,000. Once it has done that, the Registrar of Companies will issue a certificate authorising the public company to commence business and borrow money.

3. Uses of a corporation Corporate structures are used in business and investment largely because of the wish to limit liability of the owners to the amount of the paid-up share capital of the company. While it is possible to use nominees as directors or shareholders in England, generally speaking it is not possible to trade through or own a company with complete anonymity.

Apart from the advantage of limited liability, corporations are often used to facilitate joint

ventures between different businesses/investors and as special purpose vehicles for the acquisition, holding and disposal of assets, usually real estate. A company can be structured so as to reflect the different interests of joint venturers in a specific project or a series of projects. Special purpose vehicle companies investing in land or buildings can be advantageous in limiting the owner’s liability to the particular property owned by the company, in dealing with funding and in a possible saving in tax – it may be more economical to dispose of a property by way of selling the shares in the company, rather than selling the property itself.

As has been mentioned, formation of a company in England is inexpensive and quick. The formal requirements are not difficult to meet.

For example, an English private company can be a “one man company” – only one director and one shareholder are required and they can be the same person.

A further advantage of an English company is that while it is necessary every year to file an annual return, giving details of officers and shareholders, the accounting requirements for small and medium-sized businesses are less onerous than for large corporations. A small business is one which satisfies two of the three following requirements: an annual turnover of not more than £5.6 million, assets of not more than £2.8 million and not more than 50 employees. A medium-sized business is one which satisfies two of the following three requirements: an annual turnover of not more than £22.8 million, assets of not more than £11.4 million and not more than 250 employees.

The London Stock Exchange and subsidiary

markets are in the forefront of capital and debt raising opportunities for public companies throughout the world. It is for that reason that the largest corporations seek a listing on the London Stock Exchange.

On the other hand, particularly in the case of the smaller family-owned private company, it is possible to use a company for business purposes and/or to hold investments and, at the same time, to take advantage of certain tax reliefs which are open to individuals. More information on this is given below. corPorate structures are used In busIness and Investment LargeLy because of the wIsh to LImIt LIabILIty of the owners to the amount of the PaId-uP share caPItaL of the comPany. whILe It Is PossIbLe to use nomInees as dIrectors or sharehoLders In engLand, generaLLy sPeakIng It Is not PossIbLe to trade through or own a comPany wIth comPLete anonymIty 4. Taxation of corporations and state assistance For the tax year applicable to corporations ending 31st March 2010, the standard corporation tax rate is 28%. The small companies rate (where profits for the year are less than £300,000) the rate is 21%.

Investors, whether British or from overseas, are treated by the UK tax authorities in the same way when it comes to levying tax on dividends paid by a company to its shareholders.

A foreign investor may be subject to further

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commerce over the Internet started sLowLy aPProxImateLy 30 years ago, but has now reached the stage where It affects us aLL In our daILy LIves, whether we are buyIng an aIrLIne tIcket or orderIng grocerIes. for many corPoratIons, ecommerce rePresents an ImPortant Part of theIr busIness. Indeed, some busInesses onLy oPerate through the Internet and wIth consequent Lower overheads, are abLe to offer goods and servIces at Lower PrIces than conventIonaL busInesses tax in his own country on UK dividends. On the other hand, tax may be alleviated if there is a Double Tax Treaty between the UK and the relevant country.

No special arrangements are made for foreign investors by way of grants or subsidies. Depending on the circumstances, English companies may be entitled to write off certain capital expenditure against profits (up to 100% for certain expenditure on plant and machinery). There are also various government–backed schemes to assist small companies in procuring working capital.

It is usually more advantageous, from a tax point of view when disposing of a business, to sell the shares in the company owning the business, rather than for the company to sell its business. This is because the tax payable on a capital gain by a company can be as high as 40%, whereas there

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tax payable by an individual on the gain made in disposing of his shares is 18% and there may be available entrepreneur’s relief, where the first £1million of gain is taxed at 10%. Better still, foreign investors may, depending on their circumstances, be able to escape any capital gains tax in the UK altogether (although they may be subject to tax in their own countries).

5. Courts and Commercial Dispute Resolution English law is often chosen as the governing law in contractual arrangements in international transactions and the English courts and arbitration system are popular in the world’s business community for determining disputes and differences. This is because they have acquired a reputation for speed, efficiency and

economy in dealing with commercial disputes and the law and legal system have adapted to meet the needs of business. For the larger claims there are specialist courts.

Access to the courts in England is open to everyone and while it is possible for a litigant to represent himself, it is advisable and usual for cases to be presented on a client’s behalf by a qualified lawyer.

Arbitration in the UK is also highly regarded by business people the world over. The advantages of arbitration over pursuing disputes through the courts are that the arbitration process is usually faster than the courts and proceedings are confidential to the parties involved, thereby avoiding publicity.

Mediation has become a growth area in dispute resolution and is encouraged by the courts. It enables the parties to a dispute to settle their differences through an informal process, guided and assisted by an experienced, usually (but not necessarily) legally qualified mediator. Mediation is non-binding and while this may, at first sight, appear to be a weakness in its usefulness, it can be an advantage, because it enables the parties to see the relative weak-

nesses and strengths of their own and their opponent’s cases at an early stage and this often encourages parties to compromise their claims and save the expense, worry and frustration of what can be protracted litigation.

6. Corporations and Ecommerce Commerce over the internet started slowly approximately 30 years ago, but has now reached the stage where it affects us all in our daily lives, whether we are buying an airline ticket or ordering groceries. For many corporations, ecommerce represents an important part of their business. Indeed, some businesses only operate through the internet and with consequent lower overheads, are able to offer goods and services at lower prices than conventional businesses.

The law often struggles to keep pace with the problems that can arise in ecommerce, simply because there is no ecommerce law as such and there are territorial/jurisdictional considerations.

For example, what law governs a contract made in cyberspace to supply goods between businesses located in the UK and Malaysia and which courts are to have jurisdiction to deal with any disputes?

Unless the parties have specified the law and legal system, there can be difficulties. In the absence of

any indication as to which law and which jurisdiction is to apply the UK courts will apply rules to determine whether they have jurisdiction, based on such matters as the location of the parties and the laws which have the greatest connection with the subject-matter of the dispute.

It is evident that corporations trading through the internet require legal advice to secure their trading relationships, to ensure compliance with the laws of different jurisdictions and to protect their intellectual property rights to an even greater extent than conventional trading.

7. Conclusion England was one of the first countries to recognise the corporation as a trading or investment entity, separate from the people owning the undertaking and as such we enjoy a wealth of experience in setting up and using corporations for these purposes. In addition, we have a wide variety of different types of companies and similar entities, from the single person private company to the large public corporation, flexible enough to meet every requirement. English law recognises that greater liberality is appropriate for the small private company, which is thus subject to less formal-

ity in its establishment and operation than larger companies. This makes England an attractive location for those who wish to trade or hold investments through the medium of a corporation. At the other end of the scale, London, as a world centre for finance, makes the UK the home of some of the world’s largest corporations as well.

Disclaimer The information set out above is believed to be correct as at 1st October 2009. As with all matters having legal consequences, however, advice should be obtained in relation to any proposed transaction or course of conduct as circumstances differ and points which are particular to an in individual set of circumstances may affect the advice given. Except where Black Graf LLP has given specific advice, neither it nor any of its members accepts responsibility for the dissemination of the above article, nor for the reliance placed on the information contained in it by any person, firm or corporation.

Derek AArons BlAck GrAf llP-lonDon

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France How to Do business AnD HoLD Assets ARounD tHe woRLD

1. Various Forms a. Incorporated Company In France, incorporated companies hold the advantage of limiting financial risks for their investors to the amount of their capital contribution.

The price of this advantage – a high level of imposed formalism – has been considerably reduced over the years. Thus, incorporated companies benefit from great freedom as regards their statutes and, since January 1st 2009, are no longer subject to an obligation to retain a minimum share capital.

Moreover, French corporate law takes on board progress in telecommunication technology, so that meetings of the board of directors or oversight committee (subject to any contrary provision in the statutes and excepting certain decisions such as the annual settlement of accounts) can be held without the physical presence of their members thanks to videoconference and telecommunications systems.

The most common forms of company are the

société à responsabilité limitée (private limited company – hereinafter “SARL”), the société par action simplifiée (simplified company – hereinafter “SAS”), and the société anonyme (public limited company – hereinafter “SA”).

While the SARL is considered akin to a partnership (considering the personal nature governing any transfer of its shares), the SAS and the SA are companies. In practice however, this difference has a tendency to blur, as the SAS and the SARL share a number of common characteristics: no minimum share capital, can be incorporated and owned by a single shareholder, nomination of an auditor necessary only in certain cases. In fact, the SARL and the SAS distinguish themselves more and more from the SA, which, with its minimum number of shareholders and rigid rules of operation, remains the sole form of institution allowed to issue publicly-traded shares. b. Other Structures i. Other Forms of Business Essentially, the société en nom collectif (gen-

eral partnership – “SNC”), société civile (civil law partnership), and Groupement d’Intérêt Economique (economic interest grouping – GIE) are the other forms of business vehicle available. They are less often used as they provide for greater liability (possibly joint liability) for their members in case of financial setbacks.

However, the absence of a minimum capital requirement, great operational flexibility, and tax transparency of these structures affords them an undeniable appeal as subsidiaries.

As an example, the société de participation (undeclared partnership) is often used in the construction business or in the fields of entertainment and publishing. It is a structure that is simple to implement (no registration with the Commerce and Companies Registry) and that provides no legal publicity obligation. ii. Société Européenne (European Company – “SE”) The European company allows investors wishing to operate in various countries of the European Union to benefit from a single set of

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rules and a unified system of financial management and disclosure. With a minimum capital of 120,000€, the location of its head office is set by its statutes and must correspond to the location of its central administration. The head office’s location determines the company’s governing law. The company is then registered in the country of its head office and is subject to taxation by all member States in which it maintains stable establishments. iii. Temporary or Minor Ventures To conduct business in the French market, it is not always necessary to set up a company. As such, it is possible to operate through a simple branch office.

- LIAISoN oFFICE A liaison or representation office only allows non-commercial activities to be carried out: market exploration, marketing, storage, or any other form of ancillary or preliminary activity. A liaison office does not constitute a stable establishment under tax law and is thus not subject to corporate taxation or to sales taxes. However, it is subject to certain local taxes and any salary-based taxation due to the employees working there.

- CoMMERCIAL REpRESENTATIvE oR AGENT The commercial representative is an employee of a foreign corporation carrying out commercial operations in France. He may be treated as an employee, a traveling salesman, an agent, or a sales representative (“vRp”). The vRp is a salaried commercial middleman who visits the clients of one or more businesses within a given territory. The vRp is granted great autonomy; his legal status is set by law.

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The mOST COmmOn fOrmS Of COmpany are The SOCIéTé à reSpOnSabIlITé lImITée (prIvaTe lImITed COmpany – hereInafTer “Sarl”), The SOCIéTé par aCTIOn SImplIfIée (SImplIfIed COmpany – hereInafTer “SaS”), and The SOCIéTé anOnyme (publIC lImITed COmpany – hereInafTer “Sa”) As an alternative, the trade agent, is a person or company that acts, as an independent contractor, in the capacity of agent for a foreign business. The agent is charged with negotiating and eventually concluding contracts of sale, purchase, leasing, or service for and on behalf of its principal (without participating in these contracts on his own behalf).

As with the vRp, the trade agent enjoys a protection in case of termination of the contract with his principal. Thus, in the absence of default, he may claim compensation for the damages suffered, which is generally established as equivalent to two years’commission.

- BRANCH oFFICE A branch office enables a foreign business to set up a first foothold in order to conduct commercial operations. Managed by a legal representative, it functions as an agency, attached to the head office, without any special formalities for decision making. It may conduct any industrial and commercial activities, but it does not have any legal autonomy and its parent company may be held responsible for all of its actions.

A stable establishment within the meaning of taxation law, the branch office is subject to corporate law and to sales tax. Its transformation into a subsidiary must respect the formali-

ties provided for business assets transfers and is subject to taxation.

2. Incorporating a Company In France, the time required to incorporate a company is amongst the shortest in the world.

The administrative formalities for company creation have been considerably simplified; the entire process can be conducted online. a. a One-Stop Service to Incorporate Companies: the Cfe All incorporation formalities are conducted through a one-stop service: the Centre de Formalité des Entreprises (Business Formality Centre – “CFE”). This service forwards to the appropriate administrative services, on behalf of the business, all items of the file required for incorporation, amendment or winding-up: - The office of the Commercial Court which, upon receiving the file, delivers a receipt of incorporation filing and, afterward, the “Kbis” excerpt for registration of the company; - The National Statistics and Economical Studies Institute (“INSEE”) that assigns the “ApE” code corresponding to the company’s activity, the SIREN (the company’s identification number) and SIRET (establishment number) numbers required to hire employees; - The Taxation Centre and the social security administration (“URSSAF”).

The CFE provides a print-out of the registration (downloadable “Mo” form) and the list of documents to provide. Registration of the company takes a few days and the cost of the administrative formalities for incorporation is approximately 85€, to which must be added the cost of publishing an announcement in a legal notice journal (approximately 300€).

It must be noted that some formalities are not dealt with by the CFE, such as: - Any requests for approval, licence, and registration to be obtained, as the case may be, from the governing bodies of regulated professions (e.g.real estate agent, etc.); - Formalities with the National Intellectual property Institute in order to protect trade names or trademarks; - Disclosure of “.fr” internet domain names to the French Internet Naming Cooperative Association (“AFNIC”); - Subscription to an employees pension fund (mandatory within 3 months following registration).

In franCe, The TIme requIred TO InCOrpOraTe a COmpany IS amOngST The ShOrTeST In The wOrld. The admInISTraTIve fOrmalITIeS fOr COmpany CreaTIOn have been COnSIderably SImplIfIed; The enTIre prOCeSS Can be COnduCTed OnlIne Finally, any formalities as regards the hiring of employees must be fulfilled with URSSAF by sending the Uniform Hiring Declarations. b. registering a liaison Office In principle, registration for a liaison office is not required. However, it becomes mandatory should the office maintain its own premises or should it hire many employees in France. The documents to provide are, notably, those related to the representative (identity, declaration of no criminal conviction, specific visas for expatriates, prefecture declaration or commercial visa, as the case may be, etc.), two copies of the foreign company’s

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frOm The mOmenT ThaT a fOreIgn COmpany COnduCTS a prOfIT-generaTIng aCTIvITy In franCe, TheSe prOfITS are Taxed In franCe. ThIS rule applIeS regardleSS Of The buSIneSS vehICle uSed, be IT a SubSIdIary, branCh OffICe, Or STable eSTablIShmenT statutes (translated into French) as well as a title to use to the premises (lease or ownership, as the case may be). c. foreign Company representative Employers whose business does not maintain an establishment in France and wish to hire employees subject to French employment law are responsible for the social security contributions of these employees. However, they have the option of designating, by written agreement, a social security agent residing in France to fulfill on their behalf their declaration and financial obligations as regards social security. In such cases, the declaration to URSSAF uses the “Eo” form. d. registering a branch Office Registering a branch office is a mandatory formality, fulfilled through filing of the aforementioned “Mo” form, accompanied by the following ancillary documents: - Two (2) copies of the parent company’s statutes

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(2 originals and 2 French official translations); - proof of effective establishment; - Certification of registration in the public companies’ registry of the home country; - Documents pertaining to the person having authority to bind the company: ID and sworn attestation of lack of criminal conviction, visa or prefecture’s declaration (in case of manager from outside the E.U.) and documents attesting the requisite qualifications if the activity is regulated.

3. Benefits of Creating a Subsidiary Even though as a matter of course the investor’s choice depends on his strategy, the creation of a subsidiary (an autonomous company governed

by French law and being a distinct legal person) can offset the costs of incorporation with some obvious advantages: - It allows the effective separation between the assets of the subsidiary and of the parent company, thus avoiding any unlimited liability for the foreign company as regards the debts of its

French establishment; - The subsidiary may eventually apply for public funding during its set-up or its expansion; - The subsidiary can implement agreements for technical or commercial royalties, commissions, management fees, etc.

4. A System Favourable to International Mobility of Employees French law offers an increasingly welcoming setting for the employees of foreign firms wishing to operate in France. As examples, the “skills and talents” work permit has been broadened to include managers, while a new “employee on assignment” work permit was created for employees traveling within the same group of companies. It must be kept in mind that residents of the European Union (excepting Bulgarian and Romanian citizens), the European Economic Area, and the Swiss Confederation are free to travel and work in France without a visa. on the social security side, numerous international agreements as well as E.U. regulations provide for an exemption from French social security contributions, as residents of signatory states remain affiliated to the social security systems of their home country.

As regards income tax, the Economy Modernization Act of the 4th of August 2008 has implemented a new scheme that is highly advantageous to foreign managers working in France: they benefit from income tax exemption as regards their income derived from their activity in France (“impatriation bonus”).

5. Corporate Taxation From the moment that a foreign company conducts a profit-generating activity in France, these profits are taxed in France. This rule applies regardless of the business vehicle used, be it a subsidiary, branch office, or stable establishment.

In the case of a branch office or stable establishment that does not have a distinct legal personality, the income from activities in France is appraised from the foreign company’s accounts.

The notion of “stable establishment” is defined in every taxation convention as a permanent business facility or a dependent agent. Thus, a foreign company that sends one of its employees to France to canvass the French market does not risk being deemed to maintain a stable establishment in France. However, should this employee begin to sign contracts in France for and on behalf of the foreign company, the latter

shall be deemed to maintain in France a stable establishment subject to taxation on profits derived from such activity in France.

The income subject to corporation tax is calculated as total income minus applicable deductions. Applicable deductions are those related to the activity conducted, notably such as: - Depreciation of tangible and intangible assets (excepting goodwill); - Reserves; - Rent for equipment and real property; - Salaries and social security contributions; - purchases of goods and energy expenditure; - Marketing costs; - Financing costs; - Etc. Apart from temporary additional contributions, tax on profits applies at the following rates: - Standard rate: 33.33% - Small businesses are taxed at the rate of 15% for the portion of their profits below 38,120€ and at the standard rate for any surplus; - Reduced rate of 15% for income from industrial property (royalties and capital gains on transfer) as regards patents, patentable inventions, and manufacturing processes;

- Capital gains for transfers of shares are totally exempted, excepting a fees contribution equal to 5% of the net profit from capital gains which is added to the taxable income at the standard rate.

A social security contribution of 3.3% applies to businesses whose profit, taxable at the standard rate, is higher than 2,289,000€. It is calculated on the relevant corporation tax, minus 763,000€.

Losses can be carried forward without time limitation, and may also be carried back.

Investors are helped by numerous tax incentives, such as a R&D tax credit, believed to be one of the most attractive in the world. Industrial, commercial, or farming concerns that incur R&D expenditure can obtain a tax credit applicable to their payable corporation tax. Should there be no tax payable, the R&D tax credit is reimbursed after three (3) years. “Growing small and medium businesses” and “young innovating businesses” can obtain an immediate reimbursement of their tax credit.

Newly created businesses within certain areas may, under certain circumstances, be admissible to a temporary, graduated exemption from corporation tax.

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6. Settlement of Commercial Disputes In France, the settlement of commercial litigation is of course under the jurisdiction of the state’s courts, although they do not have a monopoly on the matter. Indeed, arbitration is a common tool in such matters, especially in cases with an international dimension.

More specifically, Section L 721-3 of the Commerce Code provides: “The Commercial Courts have jurisdiction over: 1° Disputes pertaining to agreements between commercial parties, between financial institutions, or between any of the above; 2° Disputes pertaining to commercial companies and partnerships; 3° Disputes pertaining to commercial acts between any persons.

However, the parties may, at the time that they enter into a contract, agree to submit the above-mentioned dispute to arbitration.”

The Commercial Courts also have jurisdiction in insolvency and bankruptcy proceedings.

As of January 1st 2009, there were 141 Commercial Courts, composed of elected judges.

In principle, the court of the defendant’s residence or head office has jurisdiction. How-

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ever, commercial parties can stipulate in their agreements a departure from the general rules of territorial or material jurisdiction.

A lawsuit before the Commercial Court is commenced by writ of summon, by a joint motion, or even by the parties presenting themselves before the judge voluntarily. A writ of summon is a process delivered by bailiff, through which the plaintiff summons the defendant before the judge.

In urgent matters, summary proceedings and ex parte motions before the Commercial Court are also possible, where the plaintiff will submit his case directly and exclusively to the Court’s president sitting in chambers.

Summary proceedings are contested proceedings whose object is to rapidly obtain a provisional injunction. proceedings on ex parte motions are conducted without the defendant. They ask the president to order certain provisional injunction orders.

Such orders can only be issued in specific cases provided by law (as an example, nominating an auditor on the occasion of a capital increase).

More generally, these proceedings can be used at any time that the circumstances require a

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protective measure without informing the person concerned.

Summary and ex parte motion proceedings have in common their provisional nature.

A writ of summary summons is the usual way of bringing a matter before the judge having jurisdiction over summary matters. The contents and delivery of this writ is similar to an ordinary summons. However, the plaintiff may have the writ served on the defendant within a “reasonable delay” before the hearing, as opposed to the habitual 15-days notice in ordinary proceedings.

When a case requires expedition, the plaintiff may summon the defendant to appear at a given hour, even on holidays and on weekends. This procedure is called a “from hour to hour” summary summons. To employ this procedure, the plaintiff must present a motion to obtain the authorization of the judge for summary matters.

The ex parte motion is a written procedure by which a party requests a judge, in this case the Commercial Court’s president or his deputy, to order a measure, without the opposite party being called to the hearing. The motion must provide its reasons and bear a detailed indication of the documents upon which the request is based. proceedings before the Commercial Court have the particularity of being oral (as opposed to civil proceedings), in that the parties do not have to present their claims in writing.

More complex matters are assigned to a reporting judge for a preliminary hearing.

Following the pleadings, a judgment is pronounced, being either read during a public

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hearing or being made available to the parties at the office of the Court.

As with any decision rendered in first instance, a judgment of the Commercial Court may be appealed before the commercial division of the Court of Appeal. In addition, French law expressly recognizes arbitration in matters of commercial dispute resolution (both domestic and international). pursuant to Section L 721-3 of the Commercial Code, an arbitration clause (a clause through which the parties to a contract undertake to submit to arbitration any dispute that arises between themselves) is valid to resolve disputes that would otherwise be subject to the jurisdiction of the Commercial Courts.

7. e-Trade and Corporate Law online commerce, as defined in Section 14 of the Trust in online Economy Act of the 21st June 2004 (n° 2004-75), can in principle be freely conducted throughout French territory (Section 16), with the exception of certain specific activities (such as gambling). In addition, the Act provides that persons located in an E.U. member state other than France are subject to a certain number of regulations including the provisions governing prohibition or authorization of unsolicited email marketing.

In addition, Section 17 of the Act provides that online commerce is subject to the laws of the member State within which the person conducting such commerce resides, subject to an agreement to the contrary between that person and his client. However, this rule may not prevent a French consumer from enjoying the protection of French public policy laws, such

as the law guaranteeing consumers’ rights.

The Act to promote Competition in Favour of Consumers (3rd January 2008) has amended certain dispositions of the Consumers Code in order to adapt it to the growth of online sales. These amendments have been in force since June 1st 2008: - Improved information regarding consumers’ rights to cancel; - obligation for businesses to give a delivery deadline; - prohibition on businesses from surcharging the communications media through which consumers can track their orders, exercise their rights to cancel, or trigger a warranty; - Clarification that reimbursement to a consumer who has invoked his right to cancel includes the costs of original shipping and handling; - Reimbursement of consumers through a real payment method. on March 1st 2002, the December 22 2000 regulation replaced the Brussels Convention to define the rules governing judicial jurisdiction, recognition and execution of judgments in commercial and civil matters.

As such, in disputes between a consumer and a business, when the contract has been made with a goods or service provider that “by any means, directs his business towards the member State within which the consumer resides”, Sections 15 and 16 of the regulation provide that the consumer’s lawsuit can be brought either before the courts of the member State in which the business is located or those of the consumer’s residence.

EriC PariSOT – LawyEr – aVEnS-PariS

CoMpArATIVE TABLE oF MAIn ForMS oF InCorporATED CoMpAnIES In FrAnCE

SARL/EURL

SA with board of directors (usual form)*

SAS

Main Advantages

Incorporation and operation are simple

Structured for “delegation and oversight”, public offer and listing on registered securities exchange are possible

Freedom in adapting the statutes for shareholders’ relations, organization and transfers of capital

Management

One or more manager, obligatorily a natural person (may be a shareholder or not)

Single CEO (both chairman of the board and general manager) or 2 persons (1 chairman of the board and 1 general manager), a maximum of 5 deputy general managers, 3 to 18 members on the board of directors

At least one president (natural or legal person – statutes may provide that the SAS is to be represented by another person), provision for corporate governance body is possible

Status of Management

A minority manager may hold a concurrent employment contract under certain conditions (work distinct from the corporate mandate, link of subordination). Minority managers are treated as employees, while majority managers are treated as independent workers

The president may hold a concurrent employment contract if conditions are met (work distinct from the corporate mandate, link of subordination).

President’s remuneration is treated as salary for fiscal and social security purposes (as other employees)

As a SA

Appointment and Dismissal of Managers

Majority decision by shareholders totalling at least 50% of shares. May claim damages for unfair dismissal

Set by board of directors

Freely set by statutes

Minimum Capital

No minimum. Amount is set by statutes.

Capital must be paid up to at least 1/5 and any balance paid up within 5 years

37,000€. Capital must be paid up to at least one-half at incorporation and any balance paid up within 5 years

No minimum. Amount is set by statutes.

Public trading is prohibited. Capital must be paid up to at least one-half at incorporation and any balance paid up within 5 years

Contribution

Contribution in industry allowed: a shareholder makes his work, his activity, and his professional expertise available to the company. Does not constitute a part of the company’s assets, but allows the attribution of shares (hence sharing in any profit and participating in collective decisions)

Contribution in industry prohibited.

Contribution in industry allowed

Shareholders

1 to 100 natural or legal persons. Meeting at least once per year to approve the annual financial statements

At least 7 shareholders, including at least 1 natural person. Meeting at least once per year to approve the annual financial statements

At least 1 shareholder (legal or natural person). Only some decisions are taken in general meeting: approbation of financial statements, mergers, alteration to capital, wind-up

Meeting Quorum

Extraordinary General Meeting: 25% of shares upon first convocation and 20% upon second convocation

Annual General Meeting: 20% of voting shares upon first convocation and none upon second convocation.

Extraordinary General Meeting: 25% of shares upon first convocation and 20% upon second convocation

Freely set by statutes

Minority Veto

Annual General Meeting: 50% +1 of shares upon first convocation and relative majority upon second convocation. Extraordinary General Meeting: 33% +1 of votes

Annual General Meeting: 50% of votes Extraordinary General Meeting: one-third of votes

Freely set by statutes

Liability of Shareholders

Transfer of Shares

Limited to contribution (excepting civil or criminal liability)

3% registration fees (limited to 5,000€) for shares.

For SARL shares, an equal allowance for each share equivalent to 23,000€ divided by total amount of shares

Auditor

Auditor mandatory if two out of the 3 following thresholds are met: revenue before tax >3.1 M€, balance sheet >1.55 M€, 50+ employees

Auditor mandatory

Auditor mandatory for SAS owning or owned by other companies or if two out of the 3 following thresholds are met: revenue before tax >2 M€, balance sheet >1 M€, 20+ employees

Taxation

Corporate tax or option for income tax in certain cases

Corporate tax or option for income tax in (if less than 5 years of existence)

Corporate tax or option for income tax in (if less than 5 years of existence)

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Germany How to do business and Hold assets around tHe world

I. Forms of Business Organisations “Internationalization” means the geographical decentralization of business operations in international markets. With the increasing globalization of all business operations, internationalization is becoming increasingly important to promote sales through greater market proximity, reduce wage and associated labour costs, avoid import restrictions, leverage transportation advantages and obtain support under investment promotion measures.

Just what concrete forms global operations should take depends on each company’s situation and its strategy. Each legal form which is chosen when a company is established has advantages as well as disadvantages in terms of the rights and duties for the founder(s) and in particular with regard to liability.

In Germany, a distinction is made between three legal forms, namely Einzelunternehmen (sole proprietorships), Personengesellschaften (partnerships) and Kapitalgesellschaften (companies).

1. Preliminary Stages First, it is possible to cooperate with an independent commercial agent. If business is to be conducted locally, maintaining only a representative office may suffice.

If a foreign company is registered in its home country, this company may apply for the registration of an independent branch in the commercial register if business operations have exceeded the scope of a representative office. An independent branch is a part of an enterprise which is geographically separate from the head office and whose manager is authorized to independently transact and conduct business of the same type as in the head office. Business is thus transacted permanently and independently within the country, the branch being suitably organized in terms of equipment and personnel, meaning that it is authorized to issue its own invoices and has its own account and separate business assets.

The manager of the foreign company must file the application for the registration of the in-

dependent branch in the commercial register himself. Additionally, the registration of a trade or business is required.

If the foreign company is not registered in the commercial register in its home country, the branch still has the possibility to register in the commercial register. Registration is mandatory if a turnover of around €250,000.00 per year or more is achieved from the purchase and sale of goods or a turnover of around €150,000.00 per year or more is achieved for services provided.

The costs for registration in the commercial register amount to around €450.00.

2. Einzelunternehmen – Sole Proprietorships Sole proprietorship is the legal form most frequently used in Germany. This legal form is especially well suited for small and mediumsized enterprises. If the sole proprietor is a Kaufmann (merchant), the addition “eingetragener Kaufmann” (e.K.) (registered merchant) must be added to the firm name.

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A sole proprietor has all the rights vested in the enterprise but is also subject to all the obligations. The proprietor himself must provide the equity capital and he bears the risk of its loss himself.

The advantages of a sole proprietorship obviously include the possibilities to make decisions independently, quickly and freely. The disadvantage is the unlimited liability which includes not only the business assets but also the proprietor’s private assets.

3. Personengesellschaften (Partnerships) An essential feature of a partnership is that several partners share the rights and obligations.

The capital must be contributed by several persons amongst whom liability and responsibility are divided. (a) oHG – offene Handelsgesellschaft (General Partnership) For a general partnership, at least two persons are required who run the commercial business of a fully qualified merchant together. No regulations exist for an oHG with respect to the amount of contributions and the capital.

All partners of an oHG are subject to unlimited, direct, and joint and several liability. This makes the company highly creditworthy. (b) GbR – Gesellschaft bürgerlichen Rechts (Civil-Law Partnership) A civil-law partnership is an association under German Civil Law consisting of at least two partners who mutually agree in a partnership agreement to promote the achievement of a common goal. If the partnership runs a com-

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mercial business, it becomes an oHG. A civil-law partnership has partial legal capacity. It can thus be party in legal proceedings and owner of a piece of property.

Here, too, all partners are liable jointly and severally. Neither minimum capital nor entry in the commercial register is required. (c) KG – Kommanditgesellschaft (Limited Partnership) The purpose of a limited partnership is to run a commercial business under a common firm name. A KG has two types of partners, general partners and limited partners. The general partner is liable fully, directly and jointly and severally. The limited partners are subject to limited liability since they can be held liable only up to the amount of their limited partner’s share.

Their rights are limited to the control and thus the inspection of all books and balance sheets.

In the event of extraordinary business transactions, they may raise objections and have the right to give notice of termination. (d) GmbH & Co. KG (Corporate Partnership) In a GmbH & Co. KG, the sole general partner of the limited partnership is a GmbH (a company with limited liability). The limitation of liability is a distinct advantage here. The GmbH as the fully liable partner is liable only up to the amount of the company’s assets. The limited partners can be held liable only up to the amount of their capital contribution. (e) Private Limited (Ltd.) European freedom of establishment also enables founders in Germany to choose this

British legal form of enterprise. A minimum capital of one pound sterling is sufficient and liability is limited.

The disadvantage is that a registered office in Great Britain is required. Moreover, an annual balance sheet in English must be filed with the central commercial register in the UK. In addition, there is the legal form of a silent partnership which will not be dealt with here.

4. Kapitalgesellschaften (Companies) A Kapitalgesellschaft is a company having its own legal personality and is thus a legal entity.

With companies, the focus is always on the capital brought in. Companies are formed by registration in the commercial register and they are represented by their corporate bodies, namely the management board and the supervisory board. The shareholders are not liable with their private property. The sole exception here is the general partner of a KGaA. Types of companies are the joint-stock company (AG), the company with limited liability (GmbH) and the partnership partly limited by shares (KGaA). (a) AG – Aktiengesellschaft (Joint-Stock Company) The capital of a joint-stock company is divided up into shares. Each shareholder is thus the owner of a stake in the company but has no power of management or representation.

Shareholders of a joint-stock company are liable only with their contribution, meaning the value of the share they hold.

A minimum share capital of €50,000.00 is required for the formation of a joint-stock compa-

ny and whether establishment of the company is based on cash or non-cash capital contributions is immaterial. The articles of association of an AG must be notarized and the company must be registered in the commercial register.

The shareholders have the right to be provided with information at a general meeting of shareholders and they have voting rights at the meeting in proportion to the number of shares they hold. If the company is dissolved, the shareholders are entitled to a share of the company assets, but only after all other creditors have been satisfied. The obligations of shareholders are limited to their capital contributions up to the amount of the value of their shares and the liability through possession of the shares.

Large enterprises frequently use this legal form. (b) GmbH – Gesellschaft mit beschränkter Haftung (Company with Limited Liability) A company with limited liability can be established for any legal purpose. The number of persons is of no consequence here. It is thus possible to establish a one-man-GmbH. The shareholders are liable only up to the amount of their contribution. The GmbH must have a minimum share capital of €25,000.00. A notarized company agreement is required and the company must be registered in the commercial register. The costs for the establishment of a GmbH amount to around €1,500.00 to €2,000.00. (c) Unternehmergesellschaft - haftungsbeschränkt (Entrepreneurial Company with Limited Liability) This so-called Mini-GmbH is a sub-form of the normal GmbH. The essential difference is the share capital of a Mini-GmbH which is a mini-

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mum of €1.00. Contributions in kind are not admissible. The application for registration in the commercial register cannot be filed until the full amount of the share capital has been paid in. The Mini-GmbH is a legal entity.

In legal relations and business transactions, the expression “Unternehmergesellschaft (haftungsbeschränkt)” must be added to the company’s name (also permitted: “UG (haftungsbeschränkt)”). This informs potential business partners that liability is limited.

One quarter of the profits generated must be put aside by a Mini-GmbH each year. This requirement to form a reserve has been provided by the legislator so that in this way the amount of the share capital of a normal GmbH is achieved. Once this is achieved, the “Unternehmergesellschaft (haftungsbeschränkt)” can be converted into a GmbH. To establish a company with a maximum of three shareholders, a model protocol may be

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used. This includes the articles of association, the list of shareholders, and the appointment of the managing director, all of which must be recorded by a notary. As a rule, however, the costs for notarization are in the lower doubledigit range.

II. Residence Only the most important principles concerning residence in the Federal Republic of Germany can be discussed below: Citizens of the European Union are not required to hold a residence permit or permanent residence permit. They are only required to register with the registration authorities.

Furthermore, they receive a certification ex officio concerning their right of residence.

Freedom of establishment also includes the right to set up one’s own business in Germany.

When setting up a commercial establishment in Germany, EU citizens can pursue their business activities under the same conditions as national residents. If it is a trade or business for

which a permit is required, they must obtain an appropriate permit. In addition, the opening of a trade or business must be registered with the community concerned.

Citizens of states which belonged to the EU prior to May 1, 2004 as well as citizens of the new EU member states Malta and Cyprus enjoy full freedom of establishment and the right of free movement of workers. Freedom to provide services means that every EU citizen may offer his services in Germany for awhile independently without having an establishment here.

With respect to the candidate states in central and east Europe (such as Bulgaria and Rumania), certain transitional periods still apply regarding the free movement of workers and the freedom to provide services.

III. Taxes 1. Income Tax Even if only a small agency office (see above) is opened in which merely orders are accepted,

this is deemed a so-called permanent establishment for tax law purposes. A tax return must be filed for such a permanent establishment.

The problem of double taxation for one and the same income is solved by the double taxation conventions in force between Germany and the foreign states in question.

2. Value-Added Tax If goods are imported from a non-EU-country, import VAT (19%) is payable in addition to the EU customs tariff. If the goods are sold in Germany, this is deemed sales within the country which is subject to taxation with the consequence that 19%, or the reduced rate of 7%, of VAT must be added to the invoice amount and be paid to the tax authority. However, prepaid taxes can be deducted. The entrepreneur may receive a refund from the tax authorities for the import VAT paid. The situation is different for movements of goods within the European Union. As a rule, this is free of VAT in the country of origin if the parties concerned

use the VAT identification number of their respective EU country.

3. Trade Tax Every business enterprise is subject to trade tax. This tax is calculated on income from trade or business and the amount of tax is also co-determined by the community concerned through a multiplier (a so-called rate of assessment). This varies from community to community. However, there is a tax-exempt amount of â‚Ź24,500.00 per annum, except for companies.

4. Capital Gains Tax The capital gains tax is a form of levying income tax. It is payable on income from capital assets. In 2009, this tax amounted to 20% for profit shares (dividends) and 40% for interest on capital investments, plus the solidarity surcharge.

5. Corporation Tax Corporation tax is levied on the income of corporations, associations of persons and

funds or estates which have their management or their registered seat within the country. Legal entities such as companies (joint-stock companies/AG, companies with limited liability/ GmbH, and entrepreneurial companies with limited liability/Mini-GmbH) are subject to corporation tax.

The corporation tax is calculated on the basis of the company’s taxable income. The current tax rate is 15%, plus a solidarity surcharge of 5.5%, i.e. a total rate of 15.825%.

As has been shown, investments in the Federal Republic of Germany are practicable and make good business sense both from a legal standpoint and in terms of tax law. The guaranteed rule of law in this country as well as swift handling of legal and tax law matters by authorities and courts ensures for the investors a high degree of safety for their investments.

DR. PRyMUSALA & COLLEAGUES

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Greece How to do business and Hold assets around tHe world

A. Alternative corporate structures available in Greece Greek legislation contains provisions for various types of companies, so that a potential investor has a choice and can select to suit his particular needs and economic intentions.

The companies can be classified on the basis of several criteria. The main types of an enterprise can be categorised as personal and capital companies as follows: a. Personal Companies - General Partnership (Omorythmos Eteria – OE)

A General Partnership can be established by two or more parties, physical persons or legal entities. All the partners are jointly and several liable with their entire personal estate for the partnership’s debts and obligations without limitation in liability. The law does not require a specific minimum capital.

The Articles of Association of a partnership do not require a public deed so that a private contract is sufficient, unless there is a contribution to the capital for which a notarial deed is required, such as contribution of real property. The Articles of Association must be filed with the Court of First Instance of the district in which the

partnership has its registered seat.

- Limited Partnership (Eterorythmos Eteria – EE) A Limited Partnership is formed by at least one general partner, who has unlimited liability with his entire personal estate for the debts and obligations of the partnership, and at least one limited partner, with liability limited to the amount of his respective partnership contribution. The Limited Partnership is similar to a General Partnership except as regards the liability of the limited partner. If the limited partner is engaged in the management of the partner-

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ship he/she loses his/her limited liability status. b. Capital Companies - Limited Liability Company (Eteria Periorismenis Euthinis – EPE) A Limited Liability Company (LLC) may be established by one or more participators, with a minimum share capital of 4.500 Euros, which must be fully paid up at the time of incorporation. At least 50% of the above capital must be paid in cash. Contributions in kind are permitted only if they are capable of being identified and included in the balance sheet. The LLC is incorporated by execution of the Articles of Association before a notary, the filing of the notarial deed before the Court of First Instance of the district in which the LLC has its registered seat and a

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summary published to the Governmental Gazette. The partners of an LLC may be physical or legal entities and are liable only to the extent of their contribution to the capital of the company, except in certain specific cases. An LLC is administered by one or more Administrators appointed by the Articles of Association or by the partners’ General Meeting. If no provision regarding the representation of the company is made, then representation of the company has to be by all of the members of the LLC acting collectively. Each partner has one portion of participation in the company composed by one or more parts (shares) in the company’s capital.

The decision making procedure is based on the majority of the partners both in numbers

and in the parts (shares) in the capital. Certain resolutions require qualified majority. If there is one shareholder (Sole Owner Limited Liability Company), the minutes of the General Meeting are signed by the shareholder and a notary public.

- Societe Anonyme (Anonymos Eteria – AE) A Societe Anoynme (a company limited by shares - S.A.) is the purest form of capital company with legal personality for the debts of which the company is solely liable with its assets. An S.A. can be established by one or more persons, either individuals or legal entities, with a minimum share capital of 60.000 Euros, payable in full upon incorporation of the company. For particular business activi-

ties, e.g banks, the law may require a higher minimum capital. An S.A. is incorporated by execution of the Articles of Association before a notary, its registration (approval as the case might be) by the relevant public authorities and a summary is published in the Government Gazette. Companies whose shares are listed on the Stock Exchange are subject to special provisions. The share capital consists only of assets that can be monetarily valued.

These assets cannot include claims arising by an undertaking to perform work or supply services. The share capital is divided into shares. The nominal value of each share may not be fixed at an amount lower than 0,30 Euros or higher than 100 Euros.

There are two main administrative organs in

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an S.A.: the General Meeting of the Shareholders (GSM) and the Board of Directors (BoD). The General Shareholders Meeting is the supreme governing body of the company which has the exclusive authority to decide on important issues affecting the company, such as the election of the BoD, the approval of the company’s balance sheet, the appropriation of the annual profits etc. The GSM exercises its powers by passing resolutions in accordance with the Articles of Association of the company and the law. The Board of Directors is competent to represent the company collectively and decide on every matter concerning

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the management of the company, the administration of its property and generally the implementation of the company’s objects.

The Articles of Association may provide for matters for which the BoD can delegate the administration and right of representation to one or more persons, members or not. There must be at least three members of the BoD elected by the General Shareholders Meeting for a period not exceeding six years, as provided for in the Articles of Association. All Directors may be re-elected and may be freely removed from office. Unless otherwise pro-

vided in the general law or in the Articles of Association, the decisions of the BoD are by an absolute majority of the Directors who are present and represented in the meeting, in any case being not less than three.

B. Establishment of a corporation There have been significant efforts to simplify the procedures for the establishment of a company, to make the process quicker and more effective and to reduce the control of the public authorities, especially in the case of the Societe Anonyme. Furthermore, corporate legislation has been adapted to the needs of

a modern corporation whilst new amendments are to be adopted aimed at simplifying, speeding up and reducing the cost of the establishment procedures.

The legal requirements and the cost of establishment differ according to the type of company.

There are some basic requirements which apply to all kind of companies in general, such as the registration of the company’s name in the Chamber of Commerce and Industry, drafting of the Articles of Association and registration of the company’s activities with the tax author-

ity of the company’s registered seat.

C. Uses of a corporation in Greece Greece has a reform-oriented economy which offers an attractive business environment with infrastructure and human resources that meet the most demanding expectations in today’s knowledge-based business world.

Taking into consideration the specific characteristics of each type of company, including the limitation of liability of the owners for the company’s debts and obligations, personal companies are usually used for small-scale operations,

while the capital companies, and especially the LLC, are well suited to entrepreneurs with small and medium size activities; the S.A. is the most appropriate type of company for major economic activities. A foreign company can establish a branch or a Greek-affiliated company in Greece.

D. Taxation When an investor is deciding which type of company is suitable for his/her needs, regard must be had to the corporate taxation provisions in force.

Greece has signed and ratified Double Taxation Agreements with many countries.

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E. Access to Courts and Commercial Dispute Resolution Court proceedings demands a lot of time mainly because a big number of disputes are brought before the relevant Courts.

On the other hand, the basic benefits of alternative dispute resolution, speed and flexibility, make such methods attractive for corporate disputes. The cost of an arbitration may be higher than court procedings, so a cost benefit analysis must be undertaken before proceeding to arbitration. The application of arbitration and mediation is growing in Greece. The Code of Civil Procedure regulates the procedure for domestic arbitration, whilst for international commercial arbitration Greece has adopted the UNCITRAL Model Law on International Commercial Arbitration, with some amendments. The law defines which arbitrations are considered as international.

F. Corporations and E-commerce E-commerce is a new way of doing business,

bringing a new reality and dimension to the economic life of the markets, especially in those sectors where the customers use the advantages of e-commerce without loss of quality. Businesses and households around the world have immediate information and access to any kind of services and goods, tangible or intangible.

National, European and international legislation make great efforts to follow up the technological innovations. In Greece, there are laws governing issues arising from the use of the new technologies, such as e-commerce, electronic signatures, cyber crime, protection of personal data etc.

G. Conclusion In this article the more usual forms of companies are mentioned. As there are also other type of companies, such as the silent partnership, limited partnership by shares and other companies governed by specific legislation, the particular needs and requirements of the entrepreneur, whether a natural person or a small or

large corporation, must be examined in order to choose the type of company which meets his/her business purposes.

Disclaimer The information contained in the above article, valid on 20 April 2010, does not constitute legal advice or consultancy and does not create or constitute a lawyer – client relationship between KMG LAW FIRM and a reader of this article. As legal advice must be tailored to the specific circumstances of each case and laws are constantly changing and additionally as the law differs in each legal jurisdiction and may interpreted or applied differently depending on your location or situation, nothing provided herein should be use as a substitute for the advice of a lawyer, and no person, firm or corporation may rely on it. KMG LAW FIRM accepts no responsibility regarding or in connection with this publication, article and/or their contents.

KMG LAW FIRM

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Gibraltar How to Do business AnD HoLD Assets ARounD tHe woRLD

1. Introduction For many years now, the preferred vehicle for conducting business has been a company. One of the biggest advantages being that the company takes on a legal identity of its own, quite separate from its promoter.

There are other corporate vehicles available and these are discussed later on.

Similarly, corporate vehicles have long been used to hold assets and amongst other things, they are a means of providing separation from the individual promoter.

Gibraltar has developed an excellent hub for the establishment of international business in areas as diverse as Financial Services & ECommerce, Trading and E-Trading and the use of a Gibraltar corporate vehicle has been instrumental in this.

Gibraltar now has a highly developed business services infrastructure where one can passport your EU licence in financial services such as insurance and reinsurance, EU-wide pensions, banking and funds administration, amongst others.

2. The different types of corporate identities and their uses Company law in Gibraltar is governed by the Companies Act 1930 and is based on the UK Companies Act 1929. There are several types of corporate identities available in Gibraltar, namely: (i) Limited Liability Partnership (LLP) In Gibraltar limited liability partnerships are formed under the Limited Partnerships Act. An LLP has elements of partnerships and corporations. In an LLP one partner is not responsible or liable for another partner’s misconduct or negligence.

This is an important difference from that of a typical partnership. In an LLP, all partners have a form of limited liability for each individual’s protection within the partnership, similar to that of the shareholders of a company.

The Act requires an LLP to have a registered office in Gibraltar and if none of the partners are resident in Gibraltar, to ap-

point a secretary resident in Gibraltar. (ii) Companies There are four different types of company that can be incorporated in Gibraltar. In accordance with the Companies Act, companies are required to be incorporated in Gibraltar as either: a) A company limited by shares; b) A company limited by guarantee and having a share capital; c) A company limited by guarantee and not having a share capital; d) An unlimited company with or without share capital.

The services of a professional (lawyer, accountant or company manager) should be sought when incorporating a company, although this is not a strict requirement.

Generally, the cost of setting up a Gibraltar company will be approximately ÂŁ950 for the first years fees and incorporation, and

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approximately £ 650 every year thereafter, depending on the services required. This is usually considered to be money well spent as the professional will take on the burden of producing and implementing the incorporation documents as well as managing the company for the client.

A limited company may own assets, enter into contracts, borrow and lend money, and sue and be sued in its own name. The legal personality of the limited company is separated from its individual shareholders, but please note that it is sometimes common practice for banks and landlords to seek personal guarantees from the directors, making them personally liable for obligations should the business fail.

The liabilities of a company are distinct from those of its shareholders. The company is liable for its debts to the full extent of its assets, but this liability does not extend to the personal assets of its shareholders. A company also has perpetual existence, so the ownership can pass at any time through the transfer of the shares, this being an ideal vehicle for expansion.

The first step when forming a Gibraltar Company is to ensure that the proposed name is acceptable to the Company Registrar. Once the name is approved, the following documents require to be submitted in accordance with the provisions of the Companies Act: - Memorandum of Association - Articles of Association - Declaration of Compliance - Notice of Situation of Registered Office - Statement of Nominal Share Capital

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There Are four differenT TyPes of ComPAny ThAT CAn be inCorPorATed in GibrALTAr. in ACCordAnCe wiTh The ComPAnies ACT, ComPAnies Are required To be inCorPorATed in GibrALTAr As eiTher: A ComPAny LimiTed by shAres; A ComPAny LimiTed by GuArAnTee And hAvinG A shAre CAPiTAL; A ComPAny LimiTed by GuArAnTee And noT hAvinG A shAre CAPiTAL or An unLimiTed ComPAny wiTh or wiThouT shAre CAPiTAL A registration fee of £50 is payable at the time of presentation of the documents. The Memorandum and Articles of Association must be embossed with the appropriate Stamp Duty.

The time taken to incorporate a Company is normally between one and two days. A Certificate of Incorporation is issued. Under Gibraltar legislation only barristers or acting solicitors of the Supreme Court may incorporate Companies for gain. (iii) Asset holding companies Many jurisdictions now have in place a specialist “Holding Company Regime”. At present Gibraltar does not distinguish between holding companies and companies for other purposes, but certain characteristics of the overall Gibraltar regime for companies make the jurisdiction particularly attractive for this purpose.

Additionally, setting up a holding company is becoming an increasingly popular option for those business people wanting to take advan-

tage of the fact that Gibraltar has no capital gains taxes or exchange controls. Such advantages can include the untaxed profits from the successful sale of assets such as property.

al of the Financial Services Commission before operating as a PCC. An annual licence fee of £3,000, plus £1,250 per cell, is currently payable to the Financial Services Commission.

Finally, a Gibraltar holding company is subject to the EU Parent-Subsidiary Directive as implemented in the Parent Subsidiary Rules 2008. The Directive was designed to facilitate the payment of dividends within groups of companies without these being subjected to taxation at several different levels.

(v) Trusts In common law legal systems such as Gibraltar, a trust is a relationship in which a person or entity (the trustee) holds legal title to certain property (the trust property), but is bound by a fiduciary duty to exercise that legal control for the benefit of one or more individuals or organisations (the beneficiaries), who hold beneficial or equitable title.

(iv) Protected Cell Companies (PCC) The Protected Cell Companies Act provides for a PCC to create one or more cells for the purpose of segregating and protecting cellular assets. As a result, the rights of creditors would be limited to the assets of the cell of which they are creditors.

The PCC may, in respect of any of its cells, create and issue shares (the cell shares) the proceeds of which (the cell share capital) are comprised of the cellular assets attributable to the cell in respect of which the cell shares were issued. A PCC may also pay a dividend on individual cells (a cellular dividend), subject to available profits, and by reference to the assets and liabilities of the cell.

A company may be incorporated as a PCC or converted, if permitted by its Articles, into a PCC. The name of the company would include reference to its PCC status and each cell must have its own distinct name or designation.

Insurance companies and collective investment schemes require the consent and approv-

GenerALLy, The CosT of seTTinG uP A GibrALTAr ComPAny wiLL be APProximATeLy £950 for The firsT yeArs fees And inCorPorATion, And APProximATeLy £650 every yeAr ThereAfTer, dePendinG on The serviCes required. This is usuALLy Considered To be money weLL sPenT As The ProfessionAL wiLL TAke on The burden of ProduCinG And imPLemenTinG The inCorPorATion doCumenTs As weLL As mAnAGinG The ComPAny for The CLienT The trust is governed by the terms of the (usually) written Trust Agreement or Deed and local law. The entity (one or more individuals, a partnership, or a corporation) that creates the trust is called the settlor.

The common benefits that trust arrangements offer include providing personal and financial safeguards for family and other ben-

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The rATe of CorPorATion TAx in GibrALTAr is CurrenTLy 22% buT wiTh effeCT from 1 JAnuAry 2011, A new rATe of 10% wiLL APPLy To ALL ComPAnies exCePT enerGy And uTiLiTy Providers, whiCh wiLL PAy A 10% surChArGe And Thus inCur A rATe of 20%. These wiLL inCLude eLeCTriCiTy, fueL, TeLePhone serviCe And wATer Providers eficiaries, postponing or avoiding unnecessary taxes, and establishing a means of controlling or administering property as well as meeting other social or commercial goals.

In certain circumstances, the income received by a trust or beneficiary under a trust may be exempted from paying income tax in Gibraltar. The Trustee Act is the main legislation governing trusts in Gibraltar. Such trusts are particularly attractive to a non-resident in Gibraltar because there is no estate duty, inheritance tax, capital gains tax, wealth tax or gift tax applicable in Gibraltar. No stamp duty is payable on the transfer of any assets (other than on real estate situated in Gibraltar) held by such a trust.

The trust commonly known as the Asset Protection Trust seeks to protect the assets of a settler from such situations as political

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strife, forced repatriation, confiscatory taxes, exchange controls and, most recently, risks associated with litigation arising out of malpractice or negligence suits. However, such trusts may be invaded by a creditor of the settlor should it be revealed that transfers into the trust lacked legal propriety.

3. Corporation Tax The rate of corporation tax in Gibraltar is currently 22% but with effect from 1 January 2011, a new rate of 10% will apply to all companies except energy and utility providers, which will pay a 10% surcharge and thus incur a rate of 20%. These will include electricity, fuel, telephone service and water providers.

With effect from 1 July 2009, a start up rate of 10% applies to any business established in Gibraltar after 1 July 2009. Tax will be assessed on an actual year basis.

As an anti-avoidance provision, it will not apply in respect of any commercial activity being carried out before 25 June 2009 and that is reorganised by the taxpayer in the name of a different entity for the purpose of benefiting from the scheme.

Finally, any income which is accrued outside of Gibraltar by a Gibraltar company, will not be liable to tax on that income in Gibraltar.

4. Commercial Dispute Resolution (Mediation) Like in many other jurisdictions, in Gibraltar, dispute resolution or mediation as it is generally commonly referred to, is increasingly popular and often encouraged by the courts as a means for entities to settle their differences, prior to resorting to the full legal system.

Mediation is generally quicker and far more cost effective than litigation and allows both parties to achieve closure far less painfully.

5. E-commerce (Gibraltar as an International e-Business Centre) E-commerce in Gibraltar is governed by the Electronic Commerce Act 2001.

The informATion, CommuniCATion And TeChnoLoGiCAL revoLuTion hAs CreATed new eConomies for mAny CounTries And Thus hAs hAd A Profound imPACT on CommerCe, eduCATion, enTerTAinmenT, bAnkinG, Leisure, TrAveL And LeGisLATion. GibrALTAr hAs subsequenTLy been deveLoPinG sTrATeGies To CreATe An ideAL seTTinG for businesses To TrAde eLeCTroniCALLy. This onLine business underTAkinG is suPPorTed by A fAsTer And more reLiAbLe frAmework of TeLeCommuniCATions, infrAsTruCTure And LeGisLATion in view of AssisTinG The GrowTh of eLeCTroniC TrAde The Government of Gibraltar is endeavouring to make Gibraltar an International e-Business Centre and firmly believes that Gibraltar is in a position to benefit greatly from its development as an information society.

The information, communication and technological revolution has created new econo-

mies for many countries and thus has had a profound impact on commerce, education, entertainment, banking, leisure, travel and legislation. Gibraltar has subsequently been developing strategies to create an ideal setting for businesses to trade electronically. This online business undertaking is supported by a faster and more reliable framework of telecommunications, infrastructure and legislation in view of assisting the growth of electronic trade.

outside the customs union and the common agricultural policy. This very particular status means that VAT is not applicable but all relevant corporate and fiscal EU directives and regulations apply to Gibraltar.

Under the Act, subject to any agreement by the parties to the contrary, a contract may be concluded by transmission of offer and acceptance through electronic means.

Finally, taking into account the new low rate of corporate tax of 10% together with the fact that any income which is accrued outside of Gibraltar by a Gibraltar company, will not be liable to tax on that income in Gibraltar, makes Gibraltar a very interesting jurisdiction for doing business.

A contract entered into through an established service provider shall be considered to have been entered into in Gibraltar and the law of Gibraltar shall apply to that contract unless the parties agree otherwise.

6. Conclusion Gibraltar has a unique status in the European Union. It is a part of EU territory under arrangements entered into at the time of the United Kingdom’s accession in 1973, but is

Gibraltar is a well regulated and respected place for doing business and forms part of the Organisation for Economic Co-operation and Development’s (OECD) white list of jurisdictions.

Disclaimer The contents of this article are not intended to constitute legal advice. You are advised to seek specific independent legal advice before undertaking any commercial activities.

The information set out in this article is believed to be correct as of 21st April 2010.

Paul l. Borge – Cruz & Co. Partner

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Hungary

How to do business and Hold assets around tHe world

1. Legal entities under Hungarian Law In Hungary the Act IV of 2006 on business associations (“Companies Act”) regulates the establishment and operation of companies. There are companies with limited liability and companies with unlimited liability, depending on whether the owners are responsible for the debts of the company, or not.

Since companies with limited liability are the recommended vehicle for undertaking business in Hungary, we only deal below with the rules relating to such companies.

1.1. Companies with limited liability There are two types of companies with lim-

ited liability: the limited liability company ´´ ´´ Tár(in Hungarian: “Korlátolt Felelosségu saság” or “Kft.”) and companies limited by shares (in Hungarian: “Részvénytársaság”).

1.1.1. Limited Liability Company The limited liability company (“LLC”) is a business organization that can be established with a pre-determined amount of capital. Under the provisions of the Companies Act the initial capital of an LLC must be at least HUF 500,000,-* consisting of either monetary subscription or contribution in kind.

Members’ ownership is represented by business shares, which do not qualify as

securities, but can be freely transferred.

However, restrictions and exclusions regarding transfers may be included in the articles of association.

The supreme decision-making organ is the Member’s Meeting. Members’ voting rights are usually in the same proportion as the value of their ownership. However, different arrangements are permissible. In the LLC the Managing Director is responsible for management issues.

A single person/entity may establish an LLC, in which case the rights and authority of the members’ meeting are exercised by the founder.

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Companies limited by shares Can be either private or publiC. publiC Companies limited by shares are Companies whose shares (some or all) are traded publiCly or are dealt with on a regulated market. private Companies limited by shares are Companies whose shares are not offered to the publiC, or are no longer available to the general publiC, or are removed from the regulated market 1.1.2. Company Limited by Shares Companies limited by shares can be either private or public. Public companies limited by shares are companies whose shares (some or all) are traded publicly or are dealt with on a regulated market. Private companies limited by shares are companies whose shares are not offered to the public, or are no longer available to the general public, or are removed from the regulated market.

The share capital of a public company limited by shares must be at least HUF 20 million*, while the minimum amount of share capital prescribed for private companies limited by shares is HUF 5 million*, consisting of either monetary subscription or contribution in kind.

In the business world, private companies limited by shares are far more common than public companies limited by shares, so, in this Article, we only describe the rules relating to private companies limited by shares.

The ownership of the shareholders is represented by shares, which qualify as securities and can be either certificated or dematerialized. The supreme body of the company is

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the General Meeting and the managing body is the Board of Directors, consisting of 3-11 members. However, the private company limited by shares may dispense with the Board of Directors and instead assign the rights and obligations of the Board to a sole executive officer, the General Director.

1.1.3. Auditor and other possible organs of the company The supreme body of the company is entitled to appoint an auditor to audit the financial statements of the company as specified in the Hungarian Accounting Act. The appointment of the auditor is obligatory where the company’s annual net sales revenue exceeds HUF 100 million on average in the two financial years preceding the financial year under review, and the average number of employees of the company in the two financial years preceding the financial year under review exceeds 50 persons.

The members have the option of appointing a supervisory board to supervise the business association’s management. The supervisory board consists of not less than 3 and not more than 15 members. A supervisory board is obligatory in the following cases especially: - for private companies limited by shares if it is requested by shareholders controlling at least five per cent of the total number of votes; - for any company, if the annual average number of full-time employees of the company exceeds two hundred.

2. Establishment of a Company To set up a company articles of association (or a deed of foundation) and other related documents have to be signed before an attorney at

in hungary eaCh Company has to use a Company name that Clearly distinguishes it from other Companies whose names are already registered or reserved. it is therefore reCommended that steps be taken to reserve a Company name before the establishment of the Company, in order to avoid refusal of the appliCation for registration beCause the name is identiCal or similar to an existing or reserved Company name law or a notary, at least part of the monetary subscription and contribution in kind of the founders must be paid up and put at the disposal of the company, and application made for registration of the company in the companies registry before the Court of Registration.

Hungarian companies are deemed to exist legally only after registration in the companies registry.

However, they may begin to conduct business during the period between the date of submission of the application for registration and the date of registration as a “pre company�.

2.1. name reservation procedure In Hungary each company has to use a company name that clearly distinguishes it from other companies whose names are already registered or reserved. It is therefore recommended that steps be taken to reserve a company name before the establishment of the company, in order to avoid refusal of the application for registration because the name is identical or similar to an existing or reserved company name. The duty payable for reserving a company name is HUF 15,000,-*.

The Court of Registration will make a decision on the name reservation within 1 working day from receipt of the application. The corporate name is reserved for a period of 60 days, during which period the application for registration of the company has to be submitted.

2.2. Company registration procedure In Hungary there are two types of company registration procedures: the regular and the simplified company registration procedure.

The deadline for the Court of Registration to decide on registration in case of a regular company registration procedure is 15 working days. The duty payable for registration of an LLC and a private company limited by shares is HUF 100,000,-* and the publication fee is HUF 5,000,-*.

The simplified company registration procedure is faster and cheaper and it can be used to establish both a limited liability company and a private company limited by shares. However, in this procedure a standard prescribed form of articles of association must be used to establish the company, the provisions of which may not be modified. The Court of Registration must deal with the registration within 1 working hour from the filing of the application. The duty is HUF 15,000,-* and there is no publication fee to be paid.

3. Purchasing Real Estate in Hungary 3.1. acquiring ownership of real estate In Hungary data relating to real estate appears on the land register kept by the land registry office. Unlike in some other countries, it is not obligatory under Hungarian law to have real estate sale and purchase agreements prepared by a notary, but it is also possible to have

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under hungarian law, aCquisition of real estate must be perfeCted by registration of ownership in the land registry. a so-Called serviCe fee of huf 6,600,-* is payable for land registration, whiCh has to be paid simultaneously with the filing of the appliCation at the land registry. the statutory deadline for the land registry to deal with the registration is 22 working days them prepared and countersigned by an attorney at law.

Before the conclusion of a sale and purchase agreement the land register is inspected and if the purchaser intends to build on the land, investigation needs to be made, at the municipality where the land is situated, as to the zoning of the land, the restrictions, if any, with regard to building and, further, the local building regulations of the municipality.

In Hungary there are restrictions relating to the acquisition of agricultural land. Hungarian citizens are permitted to own agricultural land of a limited size or value, but the acquisition of agricultural land is generally prohibited in the case of legal entities, even if registered in Hungary.

EU nationals and legal entities established in any member state of the European Union, or in a state which is party to the Agreement on the European Economic Area, or in other

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states which are, by reason of international conventions, treated in the same way, may acquire non-agricultural land under the same conditions applicable to resident persons.

Any other foreign persons and legal entities may acquire real estate not qualifying as arable land (other than through inheritance) only with the authorization of the competent public administration body of the Government. The duty payable for the authorization procedure is HUF 50,000,-* for each proposed intended purchase.

3.2. registration procedure at the land registry Under Hungarian law, acquisition of real estate must be perfected by registration of ownership in the land registry.

A so-called service fee of HUF 6,600,-* is payable for land registration, which has to be paid simultaneously with the filing of the applica-

tion at the land registry.

The statutory deadline for the land registry to deal with the registration is 22 working days.

3.3. duties The general rate of duty to be paid for the acquisition of real estate with a market value of up to HUF 1 billion* is 4%, while above this amount the duty is 2% of the market value.

However, the maximum duty is HUF 200 million*. The same rate of duty is payable on the acquisition of shares in a company owning real estate in Hungary, provided that the shares acquired exceeds 75 per cent of all the shares in the company. In making the calculation of the number of shares held in a company, the shares of a spouse, registered partner, child, parent of the transferee and the companies in which such persons have influence and the shares held in other related companies - as defined by law - must be included. In the case of the acquisition of residential property, the amount of duty is 2 per cent of the market value up to 4 million HUF, and an additional 4 per cent for the excess above 4 million HUF. Furthermore, the acquisition of real estate

property is 2 per cent of the market value if the buyer is licensed to engage in marketing of real estate properties and at least 50 % of his net income of the previous tax year originate from such activities or the buyer is licensed to provide financial leasing. In both cases the buyer shall sell, respectively lease the property with ownership transfer at the end of the leasing term within two years.

3.4. permits 3.4.1. Building Permits There is a possibility of applying for a so-called �theoretical building permit� where there is a need to clarify technical, environmental, archaeological, etc. requirements in advance.

The advantage of such a permit is that the participating authorities are bound by their rulings, contained in the permit, for a year from the issue of the final theoretical permit, even if the relevant legal provisions or other mandatory rules have changed in the meantime.

Another advantage can be that a theoretical permit may be applied for while ownership of the land is being registered. However, no construction can start in that period. The statutory deadline for the decision on the applica-

tion is 22 working days (or 10 working days in case of a simplified building permit) from the receipt of the application. a hungarian resident Company is taxable on its worldwide inCome, while a non-resident Company is taxable only on its hungarian sourCed inCome and in addition, on inCome taxable in hungary based on double tax treaties An effective building permit may be applied for only if and when the title of the new owner has been registered.

The statutory deadline for a decision on an application depends on other considerations, such as whether it is a normal or a simplified building permission, and what kind of building activity has to be performed; but it is at least 10 working days, at most 45 working days from the receipt of the application. Specific authorities are also needed, generally to be acquired from the authority issuing the building permit. Substantive construction works cannot be started until receipt of a final and non-appealable building permit. An effective

building permit expires if work does not start within 2 years from the date when it became final and non-appealable. A building permit also expires if, although work starts within 2 years, the building is not suitable for the grant of an occupancy permit within 5 years from the date of issue of the building permit.

It is also possible to initiate a so-called consolidated procedure, which includes part theoretical building permission and part effective building permission.

3.4.2. Occupancy Permit On completion of construction and before commencing use or occupation of a new building, an occupancy permit must be obtained, confirming that the construction has been carried out pursuant to the building permit and in accordance with statutory requirements.

However, in some cases an occupancy announcement is sufficient. The statutory deadline for the decision is 22 working days from receipt of the application.

4. Taxation 4.1. Corporate tax A Hungarian resident company is taxable on

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as of 1 may 2004, no Customs duty applies to the movement of goods between hungary and other member states of the eu. goods imported from third Countries to the Community are subjeCt to the same Customs tariffs, regardless of whiCh member state is the first destination. ffeCtive from 1 may 2004, hungary, as an eu member state, has had to apply Community Customs legislation, Common Customs tariffs and Customs preferenCes on the basis of free trade agreements ConCluded by the eu or granted unilaterally its worldwide income, while a non-resident company is taxable only on its Hungarian sourced income and in addition, on income taxable in Hungary based on double tax treaties.

A company that is not incorporated in Hungary, but has its effective place of management in Hungary and reports this fact to the Hungarian Tax Authority, is to be considered a Hungarian resident for corporate tax purposes and, therefore, is subject to corporate tax on its worldwide income if there is no double tax treaty between Hungary and the country of its residence. If a double tax treaty is in place, the treaty regulations determine residence. The standard rate of income tax is 19% for Hungarian and foreign companies. The tax rate for the first HUF 50 million* of taxable income can be 10% instead of 19%. This tax benefit is in general available only to taxpayers who fulfil certain requirements.

The tax benefit has to be recorded as tied-up reserves; and it has to be spent on investment, on hiring previously unemployed staff or on the repayment of outstanding debts to a financial institution. The tax benefit is generally regarded as a “de minimis” grant.

4.2. personal tax rates Residents are subject to income tax on worldwide income, regardless of whether or not the

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funds are remitted to Hungary. Non-residents are taxed on income from Hungarian sources only. However, tax treaty provisions may override domestic legislation.

The Act of Personal Income Tax classifies income under different categories. Each category determines taxable income according to specific rules. Any revenue received by an individual should be classified on the basis of the relationship between the provider and the recipient, any third parties related to them, and the actual circumstances of receipt of the income.

Progressive tax rates apply to income: up to HUF 3,930 million the rate is 17%; above this level it is 32%.

4.3. social security In Hungary social security contributions cover health, pension and unemployment insurance.

The social security tax base, in most cases, equals the personal income tax base.

Employer’s tax: 27% Employee’s tax: 17% 4.4. Customs & excise duties As of 1 May 2004, no customs duty applies to the movement of goods between Hungary and other member states of the EU. Goods imported from third countries to the Community are

subject to the same customs tariffs, regardless of which member state is the first destination.

Effective from 1 May 2004, Hungary, as an EU member state, has had to apply Community customs legislation, common customs tariffs and customs preferences on the basis of free trade agreements concluded by the EU or granted unilaterally.

Due to accession to the EU, national customs legislation can only assist in the application of the Community customs legislation.

4.5. taxation of members of companies that own real estate The new concept of a company that owns real estate referring to taxpayers and related parties owning real estate in Hungary where the value of Hungarian real estate exceeds 75% of the aggregate market value of assets shown in the financial statements, and a member (shareholder) is a foreign resident in a country with which Hungary has not concluded a double taxation agreement, or the effective treaty allows the taxation of the exchange rate gain in Hungary. Consequently, if - with the related party data also taken into account - the company group qualifies as an entity that owns real estate, then each member of the group qualifies as such independently.

The tax is payable by non-resident persons who derive income from the disposal or divestment of a share in a company that owns real estate (“member of a company that owns real estate”).

Tax liability is incurred as of the day of disposing of the share or the reduction of registered capital by means of divestment.

The obtaining of the shares of a company that owns real estate will be imposed by a stamp duty except the person/legal entity reports this ac-

tion as a notified share obtainment.

If a person notifies the Hungarian Tax Authority that he or she obtained a share of at least 30 per cent and above in the capital of a legal person established according to Hungarian laws, and in any foreign person other than a controlled foreign company (“notified share”). there are various tax inCentives Currently available in hungary. however, the most benefiCial of these is the development tax allowanCe, whiCh is aCCessible in all regions of the Country The capital gains from the sale of a notified share shown for the tax year, on condition that the taxpayer has shown the share in question under his assets for at least one year previously shall be deducted from the pre-tax profit.

If the tax payer does not notify the Hungarian Tax Authority within 30 days from obtaining the notified share he or she shall pay tax and also duty after the his or her share.

4.6. tax incentives There are various tax incentives currently available in Hungary. However, the most beneficial of these is the development tax allowance, which is accessible in all regions of the country.

The development tax allowance can be claimed if the investment value reaches HUF 3 billion* or HUF 1 billion* in certain preferred regions. note:*EUR 1,- is HUF 272,- according the exchange rate of the Hungarian National Bank as of February 16, 2010.

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Morocco HOW TO DO BUSINESS AND HOLD ASSETS AROUND THE WORLD

Introduction Due to its thousand-year history, its geographic location and its political stability, Morocco has always been called upon to play an important role on the international scene and is keeping up with globalisation changes.

Morocco was a French protectorate from 1912 to 1956, and the legal system is heavily influenced by the French legal system.

King Mohammed VI is the current ruler and is perceived to be a great moderniser.

The country still has a strong French link, with France being its primary trade partner, creditor and foreign investor, the French being the largest investors in Morocco.

The economy is considered to be fairly liberalised owing to the privatisation of certain sectors out of state control from 1993. King Mohammed VI has instituted some legal reforms, including economic liberalisation that has attracted foreign investment. Over the past decade, Morocco has embarked on an ambitious programme of structural reforms in several fields, aiming to further

liberalise its markets and enhance the competitiveness of its economy.

1. Investment regime and exchange control 1.1 Guarantees regarding investments No investment operation in Morocco requires any prior authorisation.

However, a foreign investor must notify the “Office des Changes” of an investment having been made within the following six (6) months.

Foreign investments in Morocco benefit from investment incentives (See Point 3.2).

1.2 Exchange control Under Bill 1589 dated 15/09/1992, a transfer abroad: - Must be declared to financial interme diaries when it concerns: l dividends and benefits; l wages; l property income;

royalties and licence rights; technical assistance fees to nonMoroccan residents or nationals. l l

- Must be previously authorised by the Ministry of Finances, when it concerns: l share transfers; l business transfers (“fonds de commerce”); l liquidation; l real estate and personal property transfers; l payments to a current account by shareholders; l loans.

Every foreign investor can have a foreign currency account in a Moroccan bank. This account can only receive convertible foreign currencies. This account can be used for any: - exchange operation; - payment; - transfer; - Withdrawal.

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2. Corporate aspects An operator wanting to operate in Morocco would have to create either a branch or a company.

Creating such a branch to enter the Moroccan market would be an option that could allow the avoidance of procedures and taxes related to the creation of companies.

The corporate tax regime is based upon territoriality.

The costs of establishing a branch is approximately six thousand (6.000, 00) Dirhams (approximately five hundred and forty (540.00) euros) for establishment costs and fifteen thousand (15.000, 00) Dirhams (approximately one thousand, three hundred and fifty (1,350.00) euros) for fees.

In Morocco, corporate tax is levied on companies conducting business activities in Morocco, irrespective of their form or objects.

In that respect, domestic and foreign companies, as well as coordination centres, which conduct business activities in Morocco, are subject to corporate income tax.

Coordination centres are defined as branches or subsidiaries of a company, or an international group of companies, with their seat outside Morocco, which performs management, coordination or control activities for the exclusive benefit of that company or international group.

2.1 Creation of a branch A foreign company which wants to operate in Morocco can have a branch without a legal personality in Morocco.

A branch which is regarded as permanent establishment is registered, just like companies, in the register of commerce, which falls under the supervision of the Ministry of Justice.

In order to obtain a certificate of establishment, all new companies or branches in Morocco must register with the tax authorities in the Registry of Taxpayers.

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2.2 Creation of a company The joint-stock company (“société anonyme” SA) and the private limited company (“société à responsabilité limitée” - SARL) are the most used types of company in Morocco.

In both types of company, shareholders are liable for the company’s debts only up to the amount of their respective contributions.

Commercial companies operating in Morocco must be registered with the commercial registry.

2.2.1 Legal regime applicable to the SA Shareholders may be either individuals or corporate bodies. An SA must have at least five (5) shareholders.

The minimum share capital is three hundred thousand (300,000) Dirhams (approximately twenty six thousand seven hundred (26,700) euros). Shares must have a minimum nominal value of one hundred (100) Dirham (approximately eight point nine (8.9) euros).

At least one-quarter (1/4) of the nominal val-

ue of the shares must be paid at subscription.

The remaining amount must be paid within three (3) years.

ments to the articles of association) require the approval of shareholders holding more than two-third (2/3) of the share capital. The quorum is one half (1/2) of the share capital.

The SA can be managed in two ways: (i) By a board of directors. The board must have at least three (3) and no more than (12) directors. A corporate body can be appointed as director. Each director must own at least one (1) share. The chairman of the board must be an individual. (ii) By a directorate (“directoire”) and a supervisory council (“conseil de surveillance”): - The directorate must have at least (1) member and no more than five (5) members. A corporate body cannot be appointed a member of the directorate. A member of the directorate cannot be member of the supervisory council.

- The supervisory council must have at least three (3) members and no more than twelve (12) members. A corporate body can be appointed a member of the supervisory council. Each member of the supervisory council must own at least one (1) share.

Collective decisions are taken in the general meeting, which can be ordinary or extraordinary. (i) Ordinary collective decisions (approval of the annual accounts, approval of regulated agreements, appointment and removal of general managers) require the approval of shareholders holding more than one-half (1/2) of the share capital. (ii) Extraordinary collective decisions (amend-

Transfers of shares in an SA between shareholders or to close relatives of shareholders are unrestricted. Transfers of shares to thirdparties may be subject to the prior approval of the general meeting or the board of directors or the directorate.

In addition to articles of association, shareholders’ agreements are usually recommended to include specific legal provisions such as details on the company’s governance and for the transfer of shares between shareholders.

A statutory auditor must be appointed for every SA. The approximate costs of incorporation of an SA are as follows: - Registration at the commercial registry and tax authorities + publicity = five thousand (5,000.00) Dirham (approximately four hundred and fifty (450.00) Euros) (with a minimum share capital of three hundred thousand (300.000) Dirham); - Legal assistance in drafting articles and board minutes and minutes for general meetings and follow up of formalities = thirty thousand (30,000.00) Dirhams (approximately two thousand, seven hundred (2,700.00) Euros).

The incorporation of an SA takes an average of two to three weeks, once all the documents have been collated.

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2.2.2 Legal regime applicable to the SARL Shareholders may be either individuals or corporate bodies. An SARL may be constituted by one (1) shareholder and a maximum of fifty (50) shareholders.

The minimum share capital is ten thousand (10,000) Dirhams (approximately 900 euros).

Shares must have a minimum nominal value of one hundred (100) Dirhams (approximately eight point nine (8.9) euros).

The share capital must be fully paid-up at subscription. The shares may be satisfied either by a cash contribution or contribution in kind.

At the shareholders choice, an SARL is managed by one or several managers, who must be individual bodies and may be either a share-

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holder or a non-shareholder.

Collective decisions are taken in general meeting, which can be ordinary or extraordinary. (i) Ordinary collective decisions (approval of the annual accounts, approval of regulated agreements, appointment and removal of managers) are made by shareholders holding more than one-half (1/2) of the share capital and threequarter (3/4) for removal of a manager. The quorum is one-half (1/2) of the share capital. (ii) Extraordinary collective decisions (amendments of the articles of association) are made by shareholders holding more than three-quarter (3/4) of the share capital. The quorum is three-quarter (3/4) of the share capital.

Transfers of shares in an SARL between share-

holders or to close relatives of shareholders are unrestricted. Transfers of shares to third-parties are subject to the consent of the majority of nontransferring shareholders holding at least threequarters (3/4) of the company’s shares.

Appointment of a statutory auditor is not mandatory in an SARL. However, if the company has an annual turnover beyond fiftymillion (50,000,000) Dirham (approximately four million four hundred and fifty thousand (4,450,000) euros), a statutory auditor must be appointed.

The approximate costs for the incorporation of an SARL are as follows: - Registration with the commercial registry and tax authorities + publicity = three

thousand (3,000) Dirham (approximately two hundred and seventy (270) Euros) (with a minimum share capital of one hundred thousand (100,000) Dirham); - Legal assistance in drafting articles and board minutes and minutes for general meetings and follow up of formalities = fifteen thousand (15,000.00) Dirhams (approximately one thousand, three hundred and fifty (1,350.00) Euros).

The incorporation of an SARL takes an average of two to three weeks once all documents are collated.

3. Tax regime 3.1 Common Regime 3.1.1 Tax upon incorporation of the company The taxes levied upon incorporation of a com-

pany in Morocco are as follows:

Ad valorem stamp duty is charged on:

- The contribution of capital upon the formation of a company or the increase in a company’s existing capital is subject to registration duty at the rate of 1.0% per formation or increase of capital, where the contribution is in cash.

- bearer bills, promissory notes and other bills of exchange at the rate of 1 centime per MAD 10 or portion of a dirham; and

- In addition, stamp duty is levied on all contracts, agreements and documents which are subject to registration duty.

Special stamp duties are charged on the transport of goods and registration papers.

The rate of standard stamp duty is based on the length of the document. Currently, it is charged on all deeds or documents (private or not) prepared by or presented to the courts. The rate is MAD 20 per page, irrespective of size.

- paid-up or non-paid-up shares at the rate of 10 centimes per MAD 10.

3.1.2 Subsidiaries of Foreign Companies Subsidiaries set up in Morocco by foreign companies are treated as local companies, independent of their foreign parent-company for legal and taxation purposes.

Dividends paid by resident companies to non-

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resident shareholders are subject to a 10% withholding, regardless of the residence status of the recipient, unless a lower treaty rate applies (the rate provided in the treaty between Morocco and UK is 10% and with France it is 15%).

However, when a treaty rate is higher than the domestic rate, the latter is applicable).

3.1.3 Income Tax Moroccan corporations are subject to a unitary tax system, as follows: Taxable income is the profit from all activities carried on by an enterprise, including profits from the disposal of current or fixed assets and from the disposal of assets on the cessation of business.

The tax base is the difference between taxable profits (i.e. working profit plus income from all activities carried on by the company) and costs incurred in connection with the activities which are subject to tax.

The corporate tax rate is 30% (as of 1 January 2008).

The amount of tax payable by a company may not be less for any financial year than a minimum amount as calculated on turnover.

Nevertheless, the minimum levy is not payable by a company during the first 36 months following commencement of its business operations.

This exemption will cease to apply from the 61st month following the establishment of the company (even if it has not yet commenced its business operations).

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The minimum levy is payable at the rate of 0.5% on profits, and may not be less than MAD 1,500.

It is offset against the amount of corporate tax (exceeding the minimum levy) levied in the following 3 years.

3.1.4 Reduced rates Reduced rates are applicable for certain form of activities: - Coordination centres are subject to corporate tax of 10% on the amount of their operating costs, increased by income from non-operating activities.

- Foreign contractors carrying on engineering, construction or assembly works, or works relating to industrial or technical installations, may opt to be taxed on the total contract price net of VAT and similar taxes at the rate of 8% (rather than being subject to the normal rate at 30%).

The minimum levy is not applied to such foreign contractors when the 8% corporate tax applies.

- The income of export enterprises (with regard to income relating to the export of goods and services) are exempted from tax during the first 5 years of operation.

Thereafter, they benefit from a 50% corporate tax reduction.

3.1.5 VAT Value Added Tax (VAT) is a non-cumulative

tax levied at each stage of the production and distribution cycle.

Thus, suppliers of goods and services must add VAT to their net prices.

VAT is levied on transactions carried out in Morocco by persons who, either habitually or occasionally, purchase goods for resale or engage in an activity of an industrial, commercial, artisan or professional nature, as well as in importation transactions.

VAT also covers: - supplies of service of any kind; - import activities; - self-supply (goods or services used by the entrepreneur for private purposes); and - supply of goods manufactured by the entrepreneur and used for the purpose of a taxable transaction.

Goods supplied and services rendered for export by the taxpayer are entitled to exemption with a credit for previously paid VAT. This exemption applies to the most recent sale or supply of services in Morocco which results in a direct and immediate export. Proof is required.

The same exemption is applied to the goods supplied and services rendered within exportfree zones.

The rate applied under VAT Law depends on the type of activity undertaken.

The standard rate is 20%, reduced to 7% for sales and supplies of goods for general consumption.

3.1.6 Other taxes on companies Companies in Morocco are subject to: - tax on dividends, levied at source: dividends or profit distributions are not taxed when received by domiciled corporate taxpayers.

- Dividends paid to non-residents are subject to withholding tax at the rate of 10%.

- Tax on interest levied at source: 20%; - Tax on royalties: 20%.

The rates mentioned above may be reduced by virtue of double tax treaties signed with other countries: - Treaty signed with UK: n interest: 10% n royalties: 10% - Treaty signed with France: n interest: 10% n royalties: 10%.

See below in paragraph 3.1.8, a list of double taxation treaties.

3.1.7 Tax on individuals Resident individuals are subject to income tax on their worldwide income.

Individuals are regarded as having their habitual residence in Morocco when they have their permanent home there, their centre of economic interests is located there or they reside in Morocco for any period or periods exceeding 183 days in any 365-day period.

Non-residents generally are subject to tax on their total Moroccan-sourced income, irre-

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spective of the length of their temporary stay in Morocco.

Tax is generally imposed on total income at progressive rates.

Graduated rates apply with effect from 1 January 2010 as follows:

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AnnuAl InCome (DH)

rATe %

DeDuCTIble lump sum

0 to 30 000

0%

-

30 001 to 50 000

10%

3.000

50 001 to 60 000

20%

8.000

60 001 to 80 000

30%

14.000

80 001 to 180 000

34%

17.200

Over 180 000

38%

24.400

An individual’s investment income of is included in the taxpayer’s overall income and taxed at the progressive tax rates.

Investment income: Dividends: The gross amount of inbound dividends received by a resident individual is included in such person’s taxable base. The amount of foreign tax paid abroad on foreign dividends may be set off against the general income tax due in Morocco only if permitted under an applicable income tax treaty.

Interest: Interest is regarded as income from movable capital and therefore subject to income tax.

ThE EConomy is ConsidEREd To bE faiRly libERalisEd owinG To ThE pRivaTisaTion of CERTain sECToRs ouT of sTaTE ConTRol fRom 1993. KinG mohammEd vi has insTiTuTEd somE lEGal REfoRms, inCludinG EConomiC libERalisaTion ThaT has aTTRaCTEd foREiGn invEsTmEnT. ovER ThE pasT dECadE, moRoCCo has EmbaRKEd on an ambiTious pRoGRammE of sTRuCTuRal REfoRms in sEvERal fiElds, aiminG To fuRThER libERalisE iTs maRKETs and EnhanCE ThE CompETiTivEnEss of iTs EConomy Net income from movable capital consists of the gross amount of interest and other payments or benefits received in the course of the year preceding the taxation year.

Profits derived from the disposal of immovable property are subject to income tax by way of a final withholding tax at the rate of 20%.

Royalties:

However, this tax may not be less than 3% of the selling price of the property.

Royalties payable to resident individuals are generally subject to tax under the category of professional income. Therefore, they are taxed at the graduated rates.

3.1.8 Tax treaties Morocco has signed bilateral tax treaties with a view to mitigating double taxation with the following countries:

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126

sIgnATure

enTry InTo forCe

Denmark

08 may 1984

01 January 1992

Uae

09 February 1999

02 July 2000

Bahrain

07 april 2000

10 February 2001

egypt

22 march 1989

21 September 1993

LeBanOn

20 October 2001

07 august 2003

germany

07 June 1972

08 October 1974

BeLgiUm

04 may 1972

05 march 1975

BULgaria

22 may 1996

06 December 1999

CanaDa

22 December 1975

09 november 1978

Spain

10 July 1978

16 may 1985

FinLanD

25 June 1973

01 February 1980

FranCe

29 may 1970

05 march 1975

itaLy

07 June 1972

10 march 1983

LUxemBOUrg

19 December 1980

16 February 1984

nOrway

05 may 1972

18 December 1975

netherLanDS

12 august 1977

10 June 1987

pOrtUgaL

29 September 1997

27 June 2000

Uk

08 September 1981

29 november 1990

rUSSia

12 October 1996

20 September 1999

SwitzerLanD

31 march 1993

27 July 1995

UniteD StateS

01 august 1977

30 December 1981

3.2 investment Charter Regime Foreign investment in Morocco benefits from investment incentives. Foreign investment is defined as investment made by corporate bodies or individuals having a foreign nationality, resident or non-resident, or by corporate bodies or individuals having Moroccan nationality, but living abroad.

Incentives for the establishment phase: - exoneration of registration fees for land acquisitions; registration fee of 3% for acquisition of building land; - 1% registration fee for share capital subscriptions and share capital increases; - reduced import dues (2.5% or 10% ad valorem); - exoneration of patent tax during the first five years of operation; - exoneration of urban tax during the first five years of operation; - exoneration or reimbursement of VAT for equipment, material and tools acquired locally or imported.

Incentives for the operational phase: - exoneration for exporting companies of corporate tax or income tax during five years and thereafter, reduction of 50%; - free transferability of the capital invested and related revenues (for investments in foreign currency), including free transferability of income resulting from share transfers.

3.3 Export free zones regime Morocco has a specific regime for companies operating from Export Free Zones deriving from Law n°19-94 dated 29 December 1994.

Since the enactment of Law 19-94, the follow

ing zones have been created: - the EFZ of Tangier and the EFZ of Nador - the special development zone of TangermĂŠditerranĂŠe, which contains four EFZs in the regions of Tetouan and Fahs Bni Mkada.

3.3.1 Scope Only activities geared towards exports are authorised in these zones, provided they operate in the following areas: - Agro-industry; - Leather and textile industry; - Chemical and parachemical industry; - Metallurgic, mechanic, electric and electronic industry; - Services linked to the above industries.

The zones are open for both Moroccan and foreign companies.

3.3.2 Prior approval1 Every applicant to the EFZ regime must get prior approval from the company in charge of the EFZ (eg Tangier Free Zone Company) to being located in the EFZ. This regime applies to industrial, commercial and service activities geared towards export and carried on in EFZs by resident or nonresident individuals or legal entities.

1 Specific fees (between 500 hundred dirhams and 20 000 dirhams) will be charged for assistance to obtain the prior approval.

3.3.3 Description of the specific tax regime - Without time limit: Goods imported into Export-free Zones are exempt from VAT.

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The constitutions of companies, and share capital increases operating in export-free zones are exempt from registration tax.

All acquisitions of land which are necessary to create activities in export-free zones are exempt from registration tax.

Companies located in the zones are also exempt from National Solidarity Tax (“Participation à la Solidarité Nationale”) and Business Licence Duty (“Impôt des Patentes”). dividends distributed by companies located in the zones are exempt from tax when they are distributed to non-residents. They are subject to a 7.5% tax when distributed to residents.

- Exemptions limited in time: Activities benefit from reduced direct taxes for fifteen (15) years: - Corporation tax (“Impôt sur les sociétés”) rate is 8.75% (as compared with a normal rate of 30%).

- Personal income tax (“Impôt général sur le revenu”) payable by individuals on income derived from export-free zones is reduced from 80%.

Real estate and machinery connected with the activities of the company are exempt from Urban tax (“Taxe urbaine”) for fifteen (15) years.

3.3.4 Other rules Activities carried on in export-free zones are not

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concerned with foreign-exchange restrictions.

Payments for activities carried on in export-free zones must be made in convertible currencies.

Foreign corporations are subject to taxation on income arising in Morocco if they have or are deemed to have a permanent establishment in Morocco.

Taxation of corporations is the same irrespective of ownership, and foreign owned corporations are essentially regarded as Moroccan corporations insofar as they are incorporated in Morocco.

4. labour law 4.1 brief overview of employment law in morocco 4.1.1 Employment contracts Two types of contract co-exist: contracts for a fixed term and contracts for an indefinite term.

Contracts for a fixed term are only permitted for the replacement of an employee, as a result of a temporary increase in business activity, when a business first commences operating, or for the launch of a new product. probationary period: The probationary period of an indefinite term contract is three (3) months for managers, one and a half (1 ½) months for employees and fifteen (15) days for workers. These periods can only be renewed once. Probationary periods in fixed term contracts cannot exceed a day for each week of the fixed term up to an absolute maximum of two (2) weeks for a con-

tract with a six (6) month term or less, and a month for a contract with a term of more than six (6) months. weekly rest days and public holidays: Daily rest days must be given on Friday, Saturday and Sunday or the weekly market day and must be granted to all workers at the same time working at the same establishment.

It must last for a period of twenty-four (24) hours and start and finish at midnight.

It is prohibited for employees to work during public holidays. A list of these holidays can be found on the Moroccan government website (www.maroc.ma). holidays: After six (6) months of service, every employee is entitled to annual paid holiday of at least a day and a half for each month of effective work carried out. Additionally, the employer must grant a day and a half for every five (5) years of service whether continuous or not. The maximum that can be granted is thirty (30) days. During the holiday, the employee is entitled to be paid the same remuneration he would have received had he been working. salary: Salaries must be paid in Moroccan currency. Since 1 July 2004, the minimum salary for the non-agricultural sector (salaire minimum interprofessionnel garanti or “SMIG”) and the agricultural sector minimum wage (salaire minimum agricole or “SMAG”) is set at nine point sixty-six (9.66) Dirham per hour and fifty (50) Dirham per day.

Employers must also pay a Seniority Bonus as follows: - 5% of salary after two (2) years service; - 10% after five (5) years; - 15% after twelve (12) years; - 20% after 20 years.

4.1.2 Recruiting foreign workers The Labour Code provides that every employer who wishes to recruit a foreign worker must obtain authorisation from the government body responsible for workers.

Any employment contract entered into with foreigners must conform to the precedent contract issued by the government body responsible for workers and must stipulate that in case of refusal of approval form the necessary authority, the employer will bear all costs associated with returning the foreign worker to their country of origin.

The employment of a foreign employee is conditional upon obtaining a visa from the Ministry of Labour. The same visa is required each time the contract is renewed.

Also, the employee must contact the immigration service of the Ministry of Labour and provide the following documents: - an employment contract in the form required by the immigration service; - a passport with photo identification; - a medical certificate no more than a month old stating that the employee is fit to carry out the proposed job; - documents certifying professional qualifi-

cations (diplomas, employment certificates from previous employers‌.).

These conditions apply when the employee’s activity relates to a domestic employment contract. Employees who are employed on contracts outside Morocco (they are paid by the parent company of their employer in Morocco) are not concerned with this preliminary procedure and only a residency permit is required in such a case.

4.1.3 The end of the contract A defined term contract ends at the end of the term provided by the contract or at the end of the job which was the reason for the contract.

The early termination of such a contract as a result of termination by one of the parties (but not due to misconduct or force majeure) gives rise to the payment of damages of an amount equivalent to the salary corresponding to the period left to run on the contract. An indefinite term contract can be terminated, so long as provisions relating to the grounds for termination and the notice period are observed. notice period: In the absence of serious misconduct by a party, the unilateral termination of the fixed term contract is subject to a notice period. Its duration is regulated by legislation and regulations, the employment contract itself, CBAs, internal rules or common practice.

Failure to respect the period obliges that party to pay damages to the wronged party. dismissal indemnity: the employee under an indefinite term contract is entitled to an

indemnity following six months of work with the same business. For each year of work, the amount is equal to: ninety-six (96) hours of salary for the first five (5) years; one-hundred and forty-four (144) hours for a period from the sixth to the tenth years; one hundred and ninety-two (192) hours for the period from the 11th to the 15th years; and two-hundred and forty (240) hours beyond the 15th year. disciplinary dismissal: In cases of serious misconduct, the employee can be dismissed without notice or indemnity. This is subject to certain procedural requirements, which the employer must respect.

Redundancy: dismissal on grounds of new technology, restructuring or economic difficulties can only be justified in a business of more than ten (10) employees.

4.1.4 Collective Relations Collective negotiations: Negotiations must take place annually, by sector and by business.

Collective bargaining agreements must be authorised by the Tribunal of First Instance of the place where the agreement will be applied and then by the responsible government body.

The right to strike: The Labour Code does not contain any provisions relating to the right to strike.

The matter therefore is regulated by the Constitution (article 14) and limited by the dahir of July 1957 relating to trade unions and article 288 of the Criminal Code which makes it illegal to incite the withdrawal of labour.

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Portugal HOW TO DO BUSINESS AND HOLD ASSETS AROUND THE WORLD

Breaking with an old practice of bureaucratic excesses in the constitution of commercial companies in Portugal, as well as in the relations between the citizens and the Administration, Portugal has, in the last years, improved several measures to change this situation, in order to simplify processes and profit from internet resources to agilize procedures.

There are several examples of these simplifications, such as the online registration of all acts concerning real estate, the status of all the judicial procedures in all courts, the delivery of pieces and documents to courts via the internet, etc.

Today, we would like to give notice of the EMPRESA NA HORA (COMPANY IN THE DAY) measure that, in one working day, allows us: 1. To obtain the name of the company 2. To sign the deed of constitution, adopting one of the drafts previously approved by the State.

3. To register the company, as well as the directors elected.

4. To register the logotype and trademarks 5. To enroll in Social Security.

With these quick measures, the Company can be fully integrated in the market the following day, which allows investors, besides the safety awarded by an instrument of the Public Administration, to access remarkable gains in time and money that can be saved.

In situations such as these, said investors must of course make an option in choosing more elaborated bylaws or contracts between shareholders, and the role of the Law Cabinets is essential; nevertheless, our intervention does not jeopardise the benefits that we can take out from online sources.

Below, we refer to some of the most important and significant characteristics of the Empresa na Hora, which is a relevant step

that both national and foreign investors can use in order to improve the creation of social structures to make business in Portugal.

How it works Through this Empresa na Hora initiative, you will be able to set up a “one-man” company – a private limited company or a (“PLC”) on the spot, at just one desk.

The process of setting up companies through this initiative is extremely simple, as illustrated below: Choose a pre-approved name and memorandum and articles of association pack Create the company at any On the Spot Firm desk Deposit the amount of the share capital in any bank

Submit the statement of the activity start-up at the On the Spot Firm desk or in your local Revenue Office

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Procedure for incorporating a firm: 1. Choose a name from the list of pre-approved names given on this site, or check the list that is available at the Empresa na hora desk. The name chosen will only be kept when you get to the desk and start the setting-up process. Therefore, the name that you want to use – even though it might be available on this site or on the list provided – may not be available when you arrive at the desk. A phrase alluding to the object of the company can always be added to the pre-approved name. For instance, if the chosen name is ‘ABCDE’, and the company is going to be involved in the catering sector, the name can be changed to ‘ABCDE – Catering’.

From January 2006, the use of Certificates of Admissibility of a Name will be permitted.

2. Choose one of the pre-approved standard Memorandum and Articles of Association packs, available on this site and in the portfolio packs available in the offices; 3. The members of the future company should go to an Empresa na hora desk to start the incorporation process. A list of available desks can be found in the Contacts area of this site.

Items needed If the members of the future company are private individuals, they will need to take with them: • their Tax Identification Card; • an Identification document (identity card, passport or driving licence).

• their Social Security Card (optional) In the case of legal persons/corporations, you will need to show: • the Legal/corporate person tax identification or identity card;

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• a current extract of the entry in the Commercial Registry; • the Minutes of the General Meeting granting powers of company incorporation.

This service will cost €360.00, plus stamp duty of 0.4% of the value of the share capital. This amount is payable at the time of incorporation, in cash or by cheque.

For firms whose company object is technological development or research the cost of the service is €300.00, plus stamp duty of 0.4% of the value of the share capital.

The Memorandum and Articles of Association will be prepared and the registration of the company will be carried out there and then.

You will straightaway be issued with a copy of the entry in the commercial register, the legal/ corporate person identification card and the social security number of the company.

As soon as the company is set up, you will be able to submit a Activity Start-up Statement at the help desk, for tax purposes, duly completed and signed by the accountant. If you do not do this on the spot, it must be done within 15 days of the incorporation.

Within no more than 5 working days of incorporation, the members must deposit the sum of the share capital in any bank, on behalf of the company.

FAQ - What kind of enterprise can be set up at an Empresa na Hora desk?

- What is presupposed when it comes to setting

up an Empresa na Hora company?

- Are there any companies that cannot be created at an Empresa na Hora desk?

- Which Empresa na Hora desk should I go to?

- Do all the members have to be present when an Empresa na Hora company is incorporated?

- Can I reserve the name I want in advance for my Empresa na Hora company from the names on the list?

- How much does it cost to set up an Empresa na Hora company?

- When does the share capital of the Empresa na Hora company have to be deposited?

- When can withdrawals be made from the capital of an Empresa na Hora company?

- Does the choice of a pre-approved name restrict the company functions I intend for my firm in any way?

- I have a valid Certificate of Admissibility for a name. Can I use it to set up my Empresa na Hora company?

- Is the company registered with the Revenue Office, Social Security and other public services at the time it is set up?

- Can the Empresa na Hora incorporation procedure be used if the members are legal/corporate persons? What if they are foreign legal/ corporate persons, are any prior formalities required?

- Can foreign citizens create an Empresa na Hora company? Are there any prior formalities to be observed in these cases?

- Does the Statutory Auditor have to be present when a PLC is incorporated under the Empresa na Hora scheme?

- Does the accountant have to be present when an Empresa na Hora company is created?

- Which website will the publications be posted on?

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What kind of enterprise can be set up at an Empresa na Hora desk?

A: The following can be created: • One-man companies • Private limited companies / partnerships • Public Limited Companies (PLCs)

What is presupposed when it comes to setting up an Empresa na Hora?

A: With Empresas na Hora, the name has to be chosen from a list of pre-approved figurative expressions that can be found on the website, but it is only allocated during the incorporation procedure. Moreover, it will still be necessary to choose one of the Memorandum and Articles of Association standard packs, previously approved and available on the website, or at the help desks.

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Are there any companies that cannot be created at an Empresa na Hora desk?

A: Yes. It is not possible to set up companies whose incorporation requires any prior authorizations, companies whose share capital is paid in by contributions in kind, European PLCs, groups of subsidiary firms, cooperatives and non-stock companies.

company, the members must attend and be bearers of an identity document and a tax identification number. If they cannot be present and they are represented by third parties, the power of attorney, identification document and tax identification number must be produced by the proxy.

Which Empresa na Hora desk should I go to?

A: Any Empresa na Hora desk, no matter where the registered office of the company you wish to create is located.

Can I reserve the name I want in advance for my Empresa na Hora company from the names on the list?

A: No. The choice of name can only be made when the Empresa na Hora company is being created, at one of the help desks.

Do all the members have to be present when an Empresa na Hora company is incorporated?

A: Yes. When creating an Empresa na Hora

How much does it cost to set up an Empresa na Hora company?

A: It costs €360.00, including paperwork.

There is a reduction of €60 if the main activity of the company is classed as an informatics or related activity, or if it is concerned with research and development. Stamp duty of 0.4% of the value of the share capital deposits is added to this fee.

When does the share capital of the Empresa na Hora company have to be deposited?

A: If the share capital has not yet been deposited when the company is being set up, the members must undertake the responsability for doing so, in cash, within 5 working days.

When can withdrawals be made from the capital of an Empresa na Hora company?

A: Withdrawals can be made from the capital

of an Empresa na Hora company at any time, once it has been incorporated.

bility of a Name will only be allowed from January 2006.

Does the choice of a pre-approved name restrict the company function I intend for my firm in any way?

A: No. The pre-approved names are made up of figurative expressions that do not indicate any particular activity, and so the parties concerned are free to add a descriptive phrase related to the object of their enterprise to complete the name.

Is the company registered with the Revenue Office, Social Security and other public services at the time it is set up?

A: The parties involved can immediately submit the statement of activity start-up, for tax purposes. If they do, they should complete the form provided by the Government Tax Office (Direcção Geral de Contribuições e Impostos).

This form comes in triplicate, two copies of which have to be signed by the accountant who will stamp it, and by the members. The third copy must be signed by the Registrar, and must bear the embossed seal and be submitted to the members as proof that they have started the company activity. If they do not submit it

I have a valid Certificate of Admissibility for a name. Can I use it to set up my Empresa na Hora company?

A: No. The use of Certificates of Admissi-

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there and then, they will have to do so within 15 days at any Revenue Office, otherwise they will be liable to a fine.

The Registry Office will computerize the data needed to inform the Inspectorate-General of Labour (Inspecção Geral do Trabalho) about the start-up of activity, as well as the information required for the formal registration of the company with the Social Security and in the Commercial Register. These documents can be submitted at the help desks in the Enterprise Formalities Centres (CFE), at the Revenue and Social Security offices opened there for this purpose, where they will be entered on the computer at once.

Can the Empresa na Hora incorporation procedure be used if the members are legal/

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corporate persons? What if they are foreign legal/corporate persons, are any prior formalities required?

A: There is absolutely no obstacle if the members of the enterprise are legal/corporate persons. But there are certain prior formalities that must be observed, and so it is best to seek advice beforehand from the Commercial Registry Office or CFE where the procedure will take place. The following documents are needed to identify the company: 1. Legal/Corporate Person Identity Card – nipc (photocopy); 2. Original Extract from the Commercial Registry Office, showing all valid registrations issued within the past year; 3. Identity Cards and Tax Identification Num-

bers of the legal representatives of the company (photocopies); 4. Minutes recording the decision of the General Meeting (this may not be necessary if it is provided for in the company’s articles of association); 5. Photocopy of the current Deed of Incorporation or Memorandum and Articles of Association, issued by the Commercial Registry Office, to confirm that the company may be involved in the procedures to incorporate other companies; As far as foreign legal/corporate persons are concerned, the following documents, duly translated, are required; Document proving the company’s legal exist-

ence in the country of origin; Memorandum and Articles of Association of the company; Minutes of the decision that the company may be involved in the incorporation of another; Identification of the legal representatives of the company; A legal/corporate person number will also have to be applied for in advance from the National Registry of Companies - RNPC - identifying the company in Portugal.

Can foreign citizens create an Empresa na Hora company? Are there any prior formalities to be observed in these cases?

A: There is no legal bar to foreign citizens participating in the setting up of companies

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in Portugal. But there is one prerequisite, which is the legal requirement to be in possession of a tax identification number at the time the company is incorporated. It is sometimes necessary for foreign residents in Portugal to seek advice from the Border and Foreigners Control Service (SEF) with a view to removing any obstacle to their participation as members of the company that is to be created.

Does the Statutory Auditor have to be present when a PLC is incorporated under the Empresa na Hora scheme?

A: No. The Statutory Auditor must state that the position is accepted, and this statement will be submitted when the firm is incorporated

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Does the accountant have to be present when an Empresa na Hora is created?

A: No. The accountant only has to sign and put their stamp on the forms stating the start-up of an activity.

Which website will the publications be posted on?

A: Publications will appear on an Internet site that is freely accessible to the public, at http://publicacoes.mj.pt.

JOSE SERRAO, DIAS SILVA E ASSOCIADOS SOCIEDADE DE ADVOGADOS, RL May, 2010.

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Romania HOW TO DO BUSINESS AND HOLD ASSETS AROUND THE WORLD

The business environment in Romania affords an excellent opportunity to establish and develop a business. The economy of Romania is one of the most advanced emerging economies in Europe, ensuring an exciting business environment and stunning growth rates.

A. Types of companies in Romania Romanian regulations allow setting up four types of companies: General partnership, Limited Partnership, Limited Liability Company, Joint Stock Company.

Since the liability of some or all shareholders is unlimited (i.e. they guarantee the obligations of the company with their own assets) in the case of general and limited partnerships, the most common type of company is that where the liability of the shareholders is limited to the amount of their participation in the registered capital of the company, as in the case of the limited liability company and the joint stock company, which are the most popular legal

forms of organising business in Romania.

Also, a foreign company can establish a branch, subsidiary or a representative office in Romania.

Limited liability company The limited liability company is used on a large scale due to the lower capital requirements and for other reasons described below. The limited liability company’s obligations are backed by its assets and the shareholders are only responsible to the extent of their share capital.

The law requires a minimum capital of approximately 50 euros; only one shareholder is required. An individual or another entity can establish or participate in as many limited liability companies as he/it wishes, but can only be the sole shareholder of one limited liability company.

On the other hand, the maximum number of shareholders is 50, and no one can be-

come a member without the approval of the others; the creditors of the company cannot recover the debts owed by the company from the personal assets of the members -they can only have recourse against the capital of the company.

This type of company cannot be utilised for the purpose of carrying on business as a bank, an investment fund, or an insurance company.

Another advantage of the limited liability company is that a person may be the sole shareholder as well as the sole director.

Also, a limited liability company may be established for the purpose of acquiring immovable assets in Romania by foreign citizen, as a sale/purchase vehicle, due to the fact that companies incorporated under Romanian law are Romanian legal entities, and there is no restriction on the purchase of real estate by Romanian entities.

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Joint stock company The joint stock company is the most complex type of company in Romania. The minimum amount of capital is higher than for limited liability companies, amounting to 25.000 euros, and at least 30% of the issue value of each share has to be deposited in a bank account upon establishment of the company.

If the duration of the company is not specified in the articles of association, joint stock companies usually last longer than any other type of company, because the shares are transferable.

The existence of the company doesn’t depend upon the existence of the founders. There have to be at least 2 (two) founding members. If the company has less than 2 shareholders for longer than 9 months, any interested person may ask the court to dissolve the company.

There are specific steps that have to be taken: management is more complicated than in the case of the limited liability company, as the main promoters of such a company are: the censors, the board of directors (within the unitary system) or 2 separate bodies comprising a directorate and a supervisory board (within the two-tier system) and the general meeting (ordinary and extraordinary) of shareholders.

As a result of the ability to transfer stock, anyone can obtain a large share of the business, and the shareholders may come to have less control on the direction of the company.

The joint stock company is the only company under Romanian law which may issue bonds and whose shares may be traded on the stock exchange, if the special requirements of the Law on Public Offering of Stocks and Securi-

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ties are met and the company is listed on the stock exchange Branches and subsidiaries of a foreign company Foreign companies can establish branches in Romania, but the branch, according to Romanian law, does not have legal personality.

Legally, the branch has no separate status from the foreign company itself. It is merely carrying on business in Romania.

A foreign company will be liable to the employees and creditors of the branch for the actions of, and debts contracted by, its managers and agents on behalf of the branch. The opposite of a branch is a subsidiary, which has legal personality.

Consequently, the subsidiary of a foreign company is a Romanian legal entity and, accordingly, it is subject to Romanian law, and can be established in any of the above-mentioned corporate forms. It is liable, on its own behalf, for its actions. Subsidiaries and branches can only carry on the activities which the parent company is authorised to pursue.

Representative offices The representative office tax is approximate 4,000 euros/year, but it has to be noted that it is not allowed to undertake trading operations.

A representative office (in the name and) on behalf of a legal foreign entity may only undertake juridical deeds and activities for that entity and may not undertake any trading activities.

It is established in order to advertise its foreign owner in Romania, to provide information for scientific research or for similar purposes of a preparatory or auxiliary nature.

In ApRIL 2009, the RomAnIAn GoveRnment IntRoduced A fLAt-RAte tAx, cALcuLAted AccoRdInG to the Income ReceIved In the pRecedInG yeAR. If the Amount of the pRofIt tAx Is hIGheR thAn the fLAtRAte tAx, the compAny must pAy the pRofIt tAx. conveRseLy, when the Amount of the pRofIt tAx Is LoweR thAn fLAt-RAte tAx, the compAny must pAy the fLAt-RAte tAx B. Incorporating a company in Romania The main documents to be submitted to vthe Trade Registry in order to incorporate a company comprise: 1. articles of association; 2. proof of payment for the company’s capital; 3. the reservation of the company’s name; 4. special affidavits required by law; 5. specimen of signature(s) for the director(s); 6. evidence of intended location of the future headquarter (free-lease agreement, lease agreement, sale-purchase agreement, etc.); After submitting the file to the Trade Registry, the company is incorporated within 5-6 days.

C. Taxes for companies The standard rate of corporation profit tax is 16%, a lower rate compared with other countries in the European Union. In April 2009, the Romanian Government introduced a flatrate tax, calculated according to the income received in the preceding year. If the amount of the profit tax is higher than the flat-rate tax, the company must pay the profit tax.

Conversely, when the amount of the profit tax is lower than flat-rate tax, the company must pay the flat-rate tax.

The standard rate of VAT is 19%. A company can be registered for VAT or not. Under the Romanian Fiscal Code a company must be registered for VAT when its turnover exceeds 35,000 euros.

The rate of tax on dividends paid by a Romanian company depends on the status of the beneficiary of the dividends, as follows: 1. dividends paid to another Romanian legal entity: the rate of tax is 10%; 2. dividends paid to a natural Romanian person: the rate of tax is 16%; 3. dividends paid to a foreign legal entity: the rate of is 16%; if the foreign legal company is an EU country and holds at least 25% by value of the capital of the Romanian company and has done so for a constant period of 2 years, the rate of tax is 10%.

4. dividends paid to a natural foreign person, the rate of tax is 16%.

D. Courts and Commercial Dispute Resolution Arbitration Investors can choose arbitration by the Court of International Commercial Arbitration, attached to the Chamber of Commerce and Industry of Romania, for the settlement of international and domestic commercial disputes,

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its jurisdiction being based on the agreement concluded between parties.

Resolution of disputes by the Arbitration Court has the following main advantages: 1. awards are final and binding on the parties; they enjoy a wide international recognition as Romania, alongside over 100 countries, signed the 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards; 2. confidentiality - the hearings are not public; access to information on disputes at the Arbitration Court is allowed only with the parties’ consent;

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3. speed - proceedings are disposed of within twelve months in international arbitration and six months in domestic arbitration; Arbitration costs are higher than the costs involved in proceedings in the normal court system, because, unlike trials heard by the courts of justice, the parties must bear, among other things, the fees and expenses of arbitrators as well as the arbitration expenses. In addition, arbitration organisations, are also expensive to run. mediation Based on the principle of win-win, both par-

ties can benefit from commercial mediation.

Due to the complexity of business, mediation can provide a variety of solutions to conflicts: instalment payments, negotiation of the value of the debt, starting a new business, renegotiation of agreements. Confidentiality in commercial mediation is very important for business partners and it can be preserved by using mediation. courts of Justice In the courts, the notion of privacy does not exist, bearing in mind that commercial trials are public and stamp duty, in most cases, is, depending on the value of the subject, reserved to the court. Also a trial can take a long time,

in comparison with arbitration and mediation.

Nothing can guarantee an impartial solution as well as the court, considering the subjective factors of risk when choosing an arbitrator in an arbitration settlement.

E. Conclusion The Romanian market offers extensive possibilities of developing a business with minimum expense and taxation. As one of the most flexible markets in Europe it has been referred as a “Tiger� economy, due to its high growth rate and rapid development. In 2009, economic growth in Romania was among the EU’s fastest, providing a long-term challenge for investors.

Disclaimer This article was drafted on the basis of Romanian legislation in force as at 1st February 2010.

Balms & Asociatii Romania is not liable for changes to the laws after the issuance of the present article.

The information contained within the present article is believed to be correct as at 1st February 2010 and has been strictly limited to a brief overview of the legal matters that have been officially published and that are publicly available and accessible and effective as of the date hereof.

In this article, Romanian legal concepts are

expressed in English terms and not in their original Romanian terms. The translation of these concepts into English may not accurately represent the scope and extent of the respective legal concepts of Romania.

Our assessments may therefore only be relied upon under the express condition that any issue of interpretation will be governed and interpreted by Romanian law.

Dragos Visan For anD on behalF oF sCa balms & asoCiatii 1st February 2010.

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Russia HOW TO DO BUSINESS AND HOLD ASSETS AROUND THE WORLD

Starting a business In the current state of development of international economic relations, attraction of foreign investment is a topical issue for Russia. Each state interested in attracting foreign investment in its national economy is striving for creation of the most favourable conditions for investment activities, by means of establishing a legal regime, which lays down a framework for the foreign entrepreneurs’ operations.

Russia, being the largest country in the world, has enough opportunities for attracting business and investment. However, according to World Bank Group’s research on the ease of doing business, Russia was ranked 106 out of 188 countries which is slightly higher than Nigeria but worse than Fiji and Sri-Lanka. The research shows that nine stages have to be completed to register a company, which takes, on average, 30 days. At the same time, the registration fee is relatively modest, comprising 2.8% of the income per capita, which is well below the international average of 41.5 %.

Foreign investors who are considering the option of buying ready-made or setting up business in Russia, should take into account several factors. Particular attention should be given to the following points: • Non-transparency of the legal system; • Informal structure of business; • Tax evasion schemes.

Choosing the form of a business Once the decision to set up a business has been made, a choice has to be made as to what kind of business organisation will best match the goals of the future enterprise. It is possible to choose from a variety of forms for operating a business, virtually regardless of the sector selected. This decision requires due consideration of several important factors: the extent of personal liability and possible responsibility of other investors for the organisation’s debts, tax advantages and disadvantages, costs of starting and operating the organisation, the complexity of the management structure and the difficulty of raising capital with the par-

ticular form of organisation.

It is possible to establish: • a representation office or a branch office (subdivisions of a foreign legal entity which are located in a place other than the head office and are not considered to be Russian legal entities); • a sole proprietorship (the simplest form, in which the owner has unlimited liability for debts); • a Russian legal entity.

Representation offices and branch offices The difference between a branch office and a representation office lies in the nature of the activities they are entitled to perform.

A representation office is the simplest way to establish a local presence in Russia. It is restricted in its activities to implementing only auxiliary non-commercial functions for its head office (e.g. accumulation of information, promotion of its foreign founder). On the other hand, a branch office is entitled to carry out all the functions of the foreign legal

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entity, including representation.

Branch offices are accredited by the State Registration Chamber with the Ministry of Justice of Russia. Generally, representation offices are accredited by different authorities (the Chamber of Commerce and Industry of the Russian Federation, the Bank of Russia, the Ministry of Foreign Affairs of Russia, the Ministry of Justice of Russia, Federal Air Transport Agency) depending on the nature of the head office’s activity. Furthermore, a representation office must be registered at the State Registration Chamber with the Ministry of Justice of Russia.

It usually takes about 3 to 6 weeks to register the subdivision of a foreign legal entity from the moment of submitting the documents to the authorised body. The duration of the accreditation of a branch is 1, 2, 3 or 5 years, with the right to extend. Accreditation of a representation office is usually granted for up to three years, also with the right to extend.

The procedure requires a large volume of documentation to be prepared, authorised, notarised and apostilled or legalised and includes the following stages: • Accreditation with the appropriate authorities; • Tax registration; • Registration with the state statistics committee; • Registration with the Russian non-budgetary funds; • Registration of the seal (optional); • Opening of a bank account; • Licensing by the appropriate government authority (if needed).

The branch office’s registration fee is RUR 60,000 (approximately EUR 1,500) plus EUR 300 – 1,500 (depending on the period of accreditation). A fee of EUR 700 – 1,500 is payable for

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AttrAction of foreign investment is A topicAl issue for russiA. eAch stAte interested in AttrActing foreign investment in its nAtionAl economy is striving for creAtion of the most fAvourAble conditions for investment Activities, by meAns of estAblishing A legAl regime, which lAys down A frAmework for the foreign entrepreneurs’ operAtions registration of a representative office (depending on the period of accreditation). The foreign founder may wish to outsource this complicated procedure by employing a suitable company to deal with matters on its behalf. In this case the professional fees for the whole process of accreditation will be about RUR 120,000 (approximately EUR 3,000).

Sole proprietorship A sole proprietor may engage in any type of business, with few exceptions. It is obligatory to pay a registration fee (of merely RUR 400 or approximately EUR 10) and to comply with certain laws. The main drawback of carrying on business as a sole proprietor is that the owner is personally liable for all debts the business incurs. Once registered as an individual entrepreneur, you become a Russian tax resident and must submit personal income tax declarations. Sole proprietorship can be a suitable option for those providing consultancy or similar types of service.

However, it is probably not advisable for a foreign investor, whose intention is to make significant gains, to start as a sole proprietor.

Legal entities The Civil Code of the Russian Federation allows for Russian legal entities to be established in various forms. It provides for such legal entities as full (general) partnerships, limited partnerships, limited liability companies (LLC), additional liability companies, production cooperatives, joint stock companies (JSC) (open and closed) and unitary enterprises (state-owned legal entities not open to foreign investors).

The most common forms of legal entities in Russia are joint stock companies and limited liability companies. In December 2009 there was a total of approximately 4,232,189 companies on the register 3,217,769 of which were limited and additional liability companies and 196,145 – joint stock companies.

A legal entity comes into existence only after it complies with the state law that authorise its creation. The fee payable to register a legal entity is RUR 2,000 (approximately EUR 50). The full registration process typically takes from three to four weeks from the date the documents are submitted, and includes practically the same stages as the accreditation of a branch office or a representation office (joint stock companies, in addition, have to register the issue of shares in the Federal Service for Financial Markets). A company has full legal capacity after registration with the tax authorities (which deals with registration requirements and taxpayers’ registration at the same time) and can operate fully after opening a bank account. The registration procedure is simplified by the “one-stop” process, which means that there is no need to provide documents to non-budgetary funds and the state statistics committee: the tax authorities are responsible for the whole registration process.

Accounts can be opened after registration. In

the case of an LLC, prior to registration, a cumulative account is opened to pay the charter capital. For an LLC, 50% of the charter capital must be paid prior to state registration and for a JSC, 50 % of the charter capital must be paid within 3 months after state registration. The rest must be paid within the period established by the foundation agreement, but not more than one year after the date of state registration.

As an alternative, it is possible to buy an off the shelf company (preliminary approval or subsequent notification of the Federal Antimonopoly Service is required in certain cases).

Limited liability companies The minimum charter capital of a limited liability company (LLC) is RUR 10,000 (approximately EUR 230). All members of the LLC have liability limited to the amount of their capital investment. The number of participants may not exceed 50.

For registration purposes the following documents are required: • An application; • The protocol of the founders’ meeting or the resolution of the founder on the establishment of the LLC (if the LLC has only one founder); • The Charter of the LLC (the constitutional document); • Confirmation of the legal status of the founder(s) (extract from the trade register); • Confirmation of payment of the registration fee; • A copy of the passport of the proposed General Director of the LLC; • Power of Attorney issued by the founder(s) for establishment of the LLC (if applicable); • Power of Attorney issued by the founder(s)

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the civil code of the russiAn federAtion Allows for russiAn legAl entities to be estAblished in vArious forms. it provides for such legAl entities As full pArtnerships, limited pArtnerships, limited liAbility compAnies, AdditionAl liAbility compAnies, production cooperAtives, joint stock compAnies And unitAry enterprises s for filing the application for state registration of the LLC (if applicable); • The Charter (Articles of Association, Bylaws) of the founder(s) (to be provided to a bank); • Confirmation of the future location (letter of intent from landlord and copy of the certificate of landlord’s ownership etc); • Foreign tax registration certificate of founders (to be provided to a bank); • Bank letter of good standing of a foreign legal entity.

Professional fees for the whole process of the

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LLC’s incorporation start from RUR 120,000 (approximately EUR 3,000).

Joint stock companies Joint stock companies (JSC) may be either open or closed, and are broadly similar to western public and private companies. An open joint stock company (OJSC) may have an unlimited number of shareholders and its shares may be traded similarly to public companies. OJSC companies must disclose certain financial and other information annually.

Closed joint stock companies (CJSC) are more

popular than OJSCs. They are limited to a maximum of 50 shareholders and disclosure requirements are less strict.

Shareholders bear the risk of losses only to the extent of their contributions, except in the cases of subsidiary liability. The minimum charter (share) capital for an OJSC is RUR 100,000 (approximately EUR 2,300) and for a CJSC – RUR 10,000 (approximately EUR 230).

Management of a joint stock company lies ultimately with the general meeting of shareholders. A company with over 50 shareholders must have a board of directors. The company’s executive body may be collegiate and/or a sole person (director, general director).

Professional fees for the whole process of incorporation of a JSC amount to RUR 200,000 (approximately EUR 4,650).

In choosing between an LLC and a JSC when

establishing a wholly-owned subsidiary, LLCs appear to be more popular than JSCs for various reasons. The main general corporate benefit of an LLC is that the procedure for the establishment and the operation of an LLC is significantly less burdensome and time-consuming, since there is no legal requirement that an LLC must issue shares or perform the procedural steps required in connection with issuance (e.g. the establishment and maintenance of a securities register). An LLC is more flexible when it is necessary for participants in the LLC to change (increase or decrease) the charter capital of the company. JSCs have to file a list of their affiliates regularly with the Russian authorities. Furthermore, the procedures for approving certain transactions in a JSC are more complex. However, there has to be weighed against the cost of this complexity the shareholders’ ability to

protect their interests, making the JSC for an investor embarking upon a joint venture with a Russian partner. Since June 2009 it has become possible for shareholders of both types of the abovementioned legal entities to enter into shareholders’ agreements.

Taxation A foreign legal entity which is active in Russia in any form is required to register with the Russian tax authorities, whether its activities are taxable or not.

Profits are taxed at the rate of 24% (or of 20 % in certain regions of Russia), which is now one of the lowest rates among the major economies.

Companies and sole proprietors with an annual turnover within the limit of RUR 45 million (approximately EUR 1.04 million), assets of not more than RUR 100 million (approximately

EUR 2.3 million) and not more than 100 employees can use a simplified taxation system.

The application of the simplified system of taxation implies replacement of the profit tax or personal income tax, property tax and value added tax. If the taxed base is gross income, or EBIT, the applicable tax rate is 6%. If the taxed base is profit (income less deductible expenses), the rate is 15%.

As for dividends the following tax rates are applicable: • 9% on dividends payable by Russian companies to Russian shareholders; • 15% on dividends payable by Russian companies to foreign legal entities and on dividends received by Russian companies from foreign legal entities.

The standard rate of VAT is 18 % (although a lower rate of 10 % applies to certain products,

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including some foodstuffs, some children’s goods, medical products and printed press materials). Russian and foreign legal entities, including their representative offices and branches, with tangible and intangible property (with certain exceptions) in Russia are subject to property tax of up to 2.2%. Russia has signed and ratified 76 double tax treaties, including the Netherlands, Cyprus and Switzerland (entities engaging in investment activities in Russia are often incorporated in the abovementioned jurisdictions).

Courts and Commercial Dispute Resolution Foreign companies enjoy the same legal rights as domestic entities. The trial period in the state courts is relatively short: in the first instance cases must be considered within three

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months of receipt of the statement of claim.

However, the main drawback of the Russian legal system is that sometimes judges are found to lack independence and impartiality.

As an alternative to the state courts, foreign investors may refer disputes to a private arbitration tribunal, including ad hoc and institutional arbitration tribunals located either within or outside Russia. The arbitration proceedings may cover a wide range of issues. Unfortunately, quite frequently arbitration awards are not enforced by Russian courts, fully or at all.

Although mediation and other forms of alternative dispute resolution are fairly widely talked about in the legal community, there is neither any established practice for invoking such procedures in the Russian Federation, nor any legislative regulation available for

these kind of proceedings (apart from commercial arbitration).

Conclusion The Russian legal system was subject to dramatic changes in the last decade of the 20th century and has been steadily improving throughout the first decade of the 21st to become one of the most attractive targets for foreign investors. There is a wide range of types of entities to select from in order to meet the needs of entrepreneurs. Smaller entities will enjoy less complicated registration procedures and benign tax regimes, while larger corporations may be subject to special tax rebates. Either way Russia claims to be one of the most important growth centres of the international economy and a place of choice for international business.

Disclaimer The information set out above is believed to be correct as at 31st December 2009. As with all matters having legal consequences, however, advice should be obtained in relation to any proposed transaction or course of conduct as circumstances differ and points which are particular to an in individual set of circumstances may affect the advice given. Except where Yurbureau LLC has given specific advice, neither it nor any of its members accepts responsibility for the dissemination of the above article, nor for the reliance placed on the information contained in it by any person, firm or corporation.

Inessa LevInskaya for and on behaLf of urbureau LLC, MosCow

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Spain HOW TO DO BUSINESS AND HOLD ASSETS AROUND THE WORLD

1. Spain’s Profile Spain has been one of the world’s leading economic performers over the last decade, based on an annual rate of growth well above the European average. Spain is considered to have the ninth largest economy in the world in terms of GDP and the sixth largest in terms of direct foreign investment.

Even though the country is suffering from the world economic crisis, in the year 2009 Spain obtained the maximum rating from the agency, Fitch and Moody’s.

The enviable geo-strategic situation that Spain enjoys with regard to Europe and the Latin American market, the country’s pleasant climate and the excellent education and professional qualifications of the country’s new generations, means that the provision of services to large multi-national companies constitutes Spain’s main source of income, accounting for almost 70% of the country’s economic activity. In this respect, since 1996 incentives have been offered for the crea-

tion of small and medium-sized enterprises through public grants and subsidies. Spain has also significantly improved its infrastructures, which means that, today, the country has a world-class transport network consisting of almost 14,000 km of motorways and more than 15,000 km of railways. A high percentage of the railway connections are high-speed links.

Spain’s economic structure is on a par with that of the most developed countries and, as we mentioned above, the services sector accounts for almost 70% of total GDP, whilst industry accounts for 17%. The importance of agriculture has declined significantly, today accounting for just 2.5% of GDP, whilst the remaining 11% corresponds to the building industry and the rest of the complementary sectors that it encompasses. All of these factors make Spain a prime destination for investment, endowing the country with a high rating in terms of economic and legal stability and reliability.

2. How to Invest and Set Up Businesses in Spain Setting up business operations or investing in Spain can be carried out by: a) Non-resident physical persons, b) Legal persons that hold foreign capital c) State-owned bodies of foreign sovereignty, d) Spanish companies with majority-share foreign capital.

In all cases, the investment procedures entail the same legal and fiscal restrictions as for a resident, without any other kind of limiting proviso or conditioning factor.

The only formal requirement, over and above those established by current legislation regarding the incorporation of a company in Spain, is that the investor or, where appropriate, the notary public before whom the Deed of Incorporation is executed, has the responsibility to present a form declaring the invest-

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ment that has been made to the Department for Foreign Transactions. It is very important to point out that this document, which simply testifies to the amount of the investment, is presented exclusively for statistical and monitoring purposes. This means that its presentation to the authorities does not entail any kind of authorisation or verification on the part of regulatory bodies.

Furthermore, for investments that originate from tax havens, the same procedures as those described above are required, with the sole exception that a declaration must be made both before and after the investment, except in two cases: - Investment in publicly issued negotiable instruments or participation in investment funds registered with the Securities and Investments Board (CNMV).

- When the foreign investment does not exceed 50% of the capital held by the Spanish company that is being used as a vehicle.

Whatever the case may be, this declaration does not constitute any form of authorisation or verification regarding the entry of capital.

For their part, purely informative declarations must also be made for other kinds of transactions (also for informative and statistical purposes only) to bodies such as the Bank of Spain, including, for example: - Financial loans granted between residents and non-residents and vice versa.

- Offsets or loan debts that derive from intermediation operations on the financial markets.

- Financing or postponed payments for periods of more than one year.

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In accordance with the above and as a general rule, all acts, legal business dealings and salepurchases of any kind that take place in Spain with foreign capital can be carried out under the country’s entirely liberalised system, being restricted solely for safeguarding purposes and due to exceptional measures introduced by the European Union in relation to certain countries and the corresponding Spanish regulations that may be applicable.

In this respect, the most common legal vehicles for carrying out investments in Spain consist of mercantile companies, although it is not absolutely essential to set up a company of this kind in order to invest, given that, as we have previously stated, any physical or legal person, either public or private, can make investments, acquiring full legal status to act on his or its own behalf.

3. Mercantile Companies and Corporations in Spain In view of the general framework for the investment of capital and the establishment of business dealings in Spain, mercantile companies constitute the most habitual instruments for the pursuit of any kind of commercial activity.

The procedures required for the setting up of Spanish companies are similar to those that exist in all of the OECD countries. Although there are large numbers of different company formats, two stand out among all the others: the Private Limited Company (S.L.) and the Public Limited Company (S.A). These two formats constitute practically 90% of the companies that are registered at the Spanish Registry of Companies.

The enviable geo-sTraTegic siTuaTion ThaT spain enjoys wiTh regard To europe and The laTin american markeT, The counTry’s pleasanT climaTe and The excellenT educaTion and professional qualificaTions of The counTry’s new generaTions, means ThaT The provision of services To large mulTi-naTional companies consTiTuTes spain’s main source of income In order to set up a company of any kind, it is necessary to fulfil two incorporation procedures: 1) The creation of a deed before a Notary Public.

2) The entry of this deed at the Registry of Companies.

The doctrine regarding this matter has been subject to systematic debate over the years, especially with regard to whether the granting of the deed before the Notary Public constitutes an essential requirement or not for the company agreement to be perfected - an ad solemnitatem requirement - or whether, on the contrary, this is simply a formal step in order for the company to gain access to the Registry of Companies. In principle, the doctrine tends to weigh down more heavily towards the second viewpoint, given that the validity of a company agreement that is not recorded in a public deed is accepted, because the incorporating members have decided to set up the company in that manner. Nevertheless, for legal purposes, this company will be considered to be irregular with regard to the existing proviso that these companies must be governed by a specific set of rules.

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The typical procedure for setting up a company in Spain is as follows:

INCORP. PROCEDURES

Request to Reserve Company Name Opening of Bank Account

Provisional Tax ID (NIF) Deposit of Company Capital Drafting of Articles of Association Creation of Administration Body

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Declaration of Foreign Investment

Granting of Public Deed

Payment of Stamp Duty

REGISTRY OF COMPANY

Definitive Tax ID (NIF)

Prior to incorporation, it is a common requirement when setting up a company for the members to sign and legalise the internal rules that will govern the company, in accordance with the legislation applicable to each type of company. This takes the form of a series of “Articles of Association”.

All Articles of Association must necessarily include the following details: the name of the company; the purpose of the company, which can be concrete and specific or as wideranging as the founding members may wish; the company’s address on Spanish territory; the company’s capital; the shares into which the company is divided; the duration of the company; the date on which it is to start its operations; the date on which the company year ends; and, finally, the make-up of the administrative body.

a) Public Limited Companies.

The Public Limited Company (S.A.), although still the company par excellence and of greatest importance within the Spanish legal system, has been relegated to a more minor role with the increase in the number of private limited liability companies. Public limited companies (S.A.) are characterised by the shareholders’ contribution of large amounts of capital, amounts required to create companies of a certain size and importance within the market.

In order to be set up, Public Limited Companies require a minimum capital of 60,101.21 euros, which is represented by and split into shares, with the capital being entirely subscribed by the shareholders, even though the Public Limited Companies Law permits just

25% of the shares to be paid, establishing a maximum period of five years for the remaining shares to be paid up.

The company can be set up under one shareholder’s name or can feature an indeterminate number of shareholders, who can be either natural or legal persons. Their liability is limited to the capital that is contributed and they do not have personal liability with regard to company debts.

Public Limited Companies require the fulfilment of certain specific demands as part of their habitual operations, such as, for example, the requirement to carry out an annual audit by an independent and properly qualified expert who is accredited and duly registered at the Registry of Companies.

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b) Private Limited Companies. (S.L.) The Private Limited Company (S.L.) is the most common type within the Spanish legal system.

Its rising popularity vis-à-vis the public limited company (S.A) is explained by the less stringent demands and legal monitoring formalities that an S.L entails compared with an S.A. A Private Limited Company can be set up with a minimum capital of 3,005.06 euros, divided into company shares, which, unlike public limited companies, must be entirely (100%) subscribed and paid up.

The number of shareholders can be established in the company agreements without any limitations being introduced in this respect. In the same way as with public limited companies

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(S.A.), the shareholders are not personally liable for the company’s debts. They are only answerable to the extent of the capital contributions they have made.

The average time it takes to set up a company in Spain is approximately 2 weeks, except for a New Limited Company (S.L.N.E.). With regard to incorporation costs, this will depend on the company’s capital, but a Private Limited Company (S.L.) with a minimum capital of 3,005.06 euros may cost up to 350.00 euros in total, including the notary’s deed and entry at the Registry of Companies. c) New Limited Companies (S.L.N.E.) This is a new and recently established type of company that was created in order to

provide an incentive for setting up small and medium-sized enterprises. The make-up of this kind of company is exactly the same as that of a private limited company, which is why is can be considered to be a kind of private limited company, with the difference that the number of shareholders is limited to a maximum number of five, all or whom must be natural persons. For its part, the company capital, which in the case of a private limited company (S.L.) has no limit, can rise in this kind of company to a maximum of 120,202.00 euros.

The most striking characteristic of this type of company is that it can be entered at the Registry of Companies by means of a single electronic document, together with the deed of incorporation, within a maximum period of

48 hours after the deed is executed. The company name must necessarily bear the surnames of one of the incorporating shareholders.

4. The Tax System The Spanish tax system is modern, dynamic and up to date. The fiscal pressure in Spain is some four points lower than in its neighbouring countries. The last tax reform carried out by the Spanish authorities was in 2007.

Spanish regulations establish that all persons with financial interests in Spain, irrespective of their nationality, must have a fiscal identification code (CIF), in the case of natural persons, or a fiscal identification number (NIF), in the case of legal persons.

This document can be obtained from the Spanish Tax Office free of charge. In the case of

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companies, if the administrator is not resident in Spain, he must also obtain an identification code (CIF) and to establish an address in Spain so that he can be located.

In Spain, over and above various indirect taxes, a range of different direct taxes are imposed on company operations, the creation of structures and investments made from abroad. Depending on the type of investor, Company Tax, Income Tax (IRPF) or Non-Residents Income Tax may be applied.

With regard to Company Tax (IS), the rates applied range from 35% in the case of large companies to 25% in the case of small and medium-sized companies, both of which are applied to the taxable base.

In relation to the calculation of this taxable

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base, the legal criteria concerning the allocation of income and costs generally coincide with accounting principles, with the accrual concept generally being applied in order to calculate income and costs, although all deductible costs must be entered as such in the accounts within the same year in which they are applied as a deduction for tax purposes.

Income Tax (IRPF) is applied to the net profits obtained by a resident in Spain, with income being considered to be all earnings generated in any country throughout the world. The rate of tax applied in this case depends on the size of the earnings, ranging between 18% and the marginal rate of 43%.

Non-Residents Income Tax is applicable to all natural persons who do not have their tax

residence in Spain, but have generated earnings from their work and professional activities within the geographical boundaries of the Iberian Peninsula and these constitute at least 75% of their worldwide income. The general tax rate for non-residents is 24%.

The Stamp Duty (AJD) applied to the incorporation of companies comes to between 0.5% and 1% of the capital, corresponding to the company that is being set up, depending on the case in question.

5. The Judicial System and Conflict Resolution In order to resolve disputes that arise out of international transactions, Spanish companies or other foreign companies have the option of proceedings in the ordinary courts or, in an

increasing number of cases, turning to the option provided by the Courts of Arbitration.

Although arbitration is a more expensive procedure, it ends up being cheaper due to the speed with which a decision is reached, especially when compared with the ordinary judicial channels.

The Spanish procedural system can be considered to be based on a form of continental law, with certain elements in Civil Prosecution Law being similar to the Anglo-Saxon system, such as the predominance of oral testimony in judicial hearings, based on the idea of promoting flexible procedures that reduce useless formalities and enhance speed and efficiency, thus encouraging a rapid response from judges and courts. Furthermore, Spain has ratified nu-

merous bilateral and multilateral agreements regarding the recognition and enforcement of foreign judicial judgments, especially with its neighbouring countries and with all countries in which the principle of reciprocity applies.

of the greater speed, efficiency and flexibility of the arbitration system compared with the ordinary courts, are increasingly prepared to submit their disagreements to this form of conflict resolution.

It is very difficult - and in many cases impossible - to predict the time it may take for a decision to be reached in a civil/mercantile case, although we might expect to see a period of between 8 and 10 months elapse before the first verdict is issued.

What is more, Spanish jurisprudence is proving to be increasingly favourable to arbitration, both with regard to arbitration agreements and in relation to the performance of arbitral awards. Further, the current Arbitration Law, which is based on the UNCITRAL Model Law on Arbitration, helps to make Spain an ideal venue for international arbitration activities.

Whatever the case may be, arbitration is emerging as an increasingly real alternative when it comes to resolving business disputes, especially with regard to problems relating to international agreements or large transactions, given that companies, being well aware

JorgE MartĂ­N LoSa BaLMS aBogadoS Madrid

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The Balms Children’s FoundaTion is a puBliC FoundaTion CreaTed aT The Beginning oF The TwenTy-FirsT CenTury By Balms aBogados and iTs memBers. in This respeCT, Based on our awareness oF soCial inequaliTies, Bgi’s memBers deCided To pool Their eFForTs and skills in order To plaCe Them aT The disposal oF Children, eFFeCTively deFending and promoTing Their righTs in aCCordanCe wiTh The provisions oF The inTernaTional ConvenTion on The proTeCTion oF Children, whiCh was signed By The uniTed naTions in The hague BaCk in 1993.

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The raison d’être of the Balms Children’s Foundation is to promote international cooperation in order to raise the living standards of the most disadvantaged children, based on a commitment to provide education, training and sustenance.

The Foundation also works to imbue children with a series of values and principles based on respect for others, effort, hard work and sacrifice. At the Balms Foundation we believe that promoting education and certain socio-cultural relations at the lowest level constitutes the only way of ensuring the inculcation of a series of social values, based on which it is possible to build a better world and guarantee sustained development, thus eradicating inequality and combating misery and injustice.

Our working philosophy is founded on action.

We have considerable faith in our collaborating partners and in our capacity to implement our social project through committed and transparent management.The Balms Children’s Foundation has consolidated various different projects.

First, it helps to maintain, co-manage and develop a Hospice alongside the Imago Foundation in one of the poorest neighbourhoods of Bogotá, in San Joaquín del Vaticano, Colombia.

This hospice provides food, education, guidance, entertainment, clothes and assistance to more than 100 girls and boys, children who, in ordinary circumstances, would be destined for a life of failure, delinquency and drugs.

A second budding project in Peru, which is based on a joint initiative with the Association of Former Students of the Santiago Apóstol School and the Congregation of the Sacred Heart of Jesus in Peru, aims to build and maintain a school for some 600 pupils, thus strengthening and extending the provision of education within a depressed area.Another initiative which we pursue with enthusiasm at the Balms Foundation and that consolidates the Foundation’s social work, consists of our col-

laboration under the heading of international adoption. We currently have an adoption agency (ICAE) with its headquarters in Vigo and another based in Madrid, whose purpose is to provide stable families for Colombian children, who, for different reasons, cannot live with their biological parents. Since our agencies were founded, our role has been to advise families interested in adopting children, together with the provision of integral management and supervision of the entire adoption process, including notification of the allocation of a child, preparation of the trip and recommendations regarding future eventualities that may arise. In this respect, we provide legal assistance through our lawyers and emotional and psychological assistance through a series of social workers.

The Balms Foundation is financed exclusively by private funds, irrespective of any subsidies or aid that may be received from public bodies. Essentially, the organisation’s day-to-day activities are based on the sponsorship of children and on the work of volunteers, not to mention the organisation of sporting and cultural events, golf championships, jumblesales, charity dinners, raffles and all kinds of other activities aimed at supporting the project. Our vocation to serve others, both as lawyers and as a Foundation, guarantees that each and every cent of the funds we raise goes entirely to “our boys and girls”.

The Balms Children’s Foundation is officially recognised and registered as a Social Charity Foundation by means of an Order dated 24th October 2002. It was registered as a Development Cooperation Agency on 26th May 2005 under number 0123. In this respect, even though we are not enjoying the most propitious economic climate at present, your help is essential and, however little you may be able to give, any small amount can make all the difference to children who have absolutely nothing.

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Ucrania HACER NEGOCIOS Y GESTIONAR PATRIMONIO ALREDEDOR DEL MUNDO

1. Breve descripción de la organización y los tipos de entidades comerciales en Ucrania Las sociedades extranjeras pueden operar en Ucrania tanto abriendo y registrando una oficina de representación, como constituyendo una sociedad a través de la realización de una inversión extranjera.

conveniente. Cuando se constituye una Sociedad Limitada, el capital social está formado por las aportaciones de su socio o socios fundadores. El capital mínimo autorizado no debe ser inferior al salario mínimo estipulado por ley (869 UAH). La ley también establece en diez el número máximo de socios de una sociedad limitada.

Acciones no debe superar 100, y una Sociedad Privada sólo tiene derecho a asumir la colocación privada de acciones (dentro un determinado círculo de personas).

La forma de organización comercial más común en Ucrania es la sociedad, constituida por entidades legales y/o personas físicas, aportando sus activos y participando en actividades comerciales.

Estas sociedades incluyen: Sociedades por Acciones, Sociedades Limitadas, Sociedades de Responsabilidad Adicional, Asociaciones Completas y Asociaciones Limitadas.

Una sociedad por acciones se elige cuando hay más de diez socios, y suele utilizarse si la sociedad desea atraer capital externo, incluyendo operar con sus acciones, ya que esto asegura la publicidad de las actividades de la compañía.

Una sola persona puede constituir y ser propietaria de una Sociedad por Acciones. Los datos sobre la propiedad de las acciones deben registrarse y publicarse para estar a disposición del público. El capital mínimo autorizado es 1.250 multiplicado por el salario mínimo (es decir, 1250 x 869 UAH).

Si lo que se quiere es tomar decisiones rápidas y que la responsabilidad del socio fundador se restringa a su aportación al capital autorizado de la sociedad, la Sociedad Limitada, SL, es la forma de constitución más

No hace mucho que se adoptó la Legislación sobre Sociedades por Acciones, basada en las buenas prácticas de gestión empresarial y en los principios de la OCDE. Las Sociedades por Acciones están divididas en Sociedades Públicas y Privadas. El número de accionistas de una Sociedad Privada por

Una Sociedad por Accione Anónima tiene el derecho ilimitado de hacer ofertas públicas de acciones.

La ley también contempla la posibilidad de firmar contratos con accionistas. Sin embargo, dichos contratos no son muy comunes y casi siempre suelen aplicarse los estándares de la legislación inglesa. Es importante saber que los contratos de accionistas no pueden invalidar los requisitos de la ley ucraniana ni

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regular ningún asunto de forma diferente a lo dispuesto por la ley. Debe tenerse en cuenta que para los tribunales ucranianos, estos contratos no pueden estar sujetos a leyes extranjeras (las sentencias de los tribunales extranjeros no son vinculantes en Ucrania, aunque se tienen en cuenta cuando se tratan disputas similares).

Las organizaciones comerciales se rigen a través de los órganos directivos que forman los socios.

En Ucrania no hay una institución para la gestión de las compañías, es decir, no es posible delegar funciones de dirección a terceros.

Las sociedades de responsabilidad adicional y las asociaciones completas y limitadas no son muy comunes. Y esto se debe a que la ley exige que estas entidades se constituyan para llevar a cabo determinadas actividades económicas.

Los empresarios privados (autónomos), que no tienen estatus de entidad legal, también pueden llevar a cabo actividades comerciales.

2. Creación de sociedades (constitución) Se considera que una entidad legal está constituida a partir de la fecha de su registro.

Para inscribir una sociedad en el registro deben presentarse los siguientes documentos: - Formulario solicitando el registro de la entidad legal.

- El original o una copia compulsada de la resolución para constituir una entidad legal firmada por los socios fundadores o por un organismo debidamente autorizado por los socios fundadores.

- dos copias de los documentos de constitución; un documento que confirme el pago de la tasa de registro de la entidad legal (170 UAH).

Si uno de los socios fundadores es una perso-

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na extranjera, también debe presentarse un documento confirmando el registro en el país de residencia de dicha persona, incluyendo un extracto del registro mercantil o bancario.

El registro de una entidad legal lleva tres días.

Tras finalizar el registro, la entidad legal debe ser registrada ante las autoridades tributarias, de pensiones y de seguridad social. Dichas autoridades pueden tardar hasta dos semanas en realizar el registro.

Cuando se constituye una sociedad de acciones, la emisión de acciones de la sociedad debe registrarse, lo que generalmente prolonga el periodo de constitución y registro de la sociedad hasta un máximo de seis meses. La tasa del registro de emisión de acciones es del 0,1% del valor nominal de las acciones emitidas, pero no debe superar el quíntuple del salario mínimo.

Las oficinas de representación o sucursales de sociedades extranjeras deben estar acreditadas en Ucrania.

Una entidad mercantil extranjera que quiera abrir una oficina de representa-ción en Ucrania debe presentar una solicitud al Ministerio de Economía de Ucrania (la solicitud es gratuita), un extracto del registro mercantil del país en el que esté registrado la sede principal de la entidad, una referencia del banco en el que dicha entidad extranjera tenga su cuenta, y un poder notarial autorizando la representación en Ucrania, que debe ser emitido de acuerdo con la ley del país en el que está registrada dicha entidad. Debe pagarse una tasa de registro de 2.500 USD. Si la oficina de representación desea llevar a cabo una actividad comercial, debe registrarse

en las oficinas de las autoridades tributarias.

La constitución y el registro no son ni complicados ni largos.

Dicho esto, la disolución de una entidad legal es más problemática debido a las inspecciones obligatorias que deben realizar las autoridades de supervisión.

3. Inversión extranjera en Ucrania En Ucrania, la inversión extranjera debe ser comunicada a las autoridades estatales para ser registradas. Las inversiones monetarias sólo se pueden realizar en la divisa nacional ucraniana, por lo que las inversiones monetarias extranjeras deben realizarse a través de cuentas de inversión abiertas en bancos ucranianos autorizados.

Para el registro de una inversión extranjera debe presentarse un documento en la administración territorial del NBU (Banco Nacional Ucraniano) en un plazo de 30 días, a partir de la fecha de realización de la inversión.

El registro de inversiones extranjeras se confirma por medio de una notificación emitida por la administración territorial del NBU. 4. Fiscalidad Los principales impuestos que existen en Ucrania son: el Impuesto sobre Sociedades, el IVA y el Impuesto sobre la Renta de las Personas Físicas.

Impuesto de Sociedades El tipo general del impuesto de sociedades es el 25%. La declaración del impuesto de sociedades debe presentarse a las autoridades tributarias cinco veces al año, y el impuesto también se paga cinco veces al año.

Las cantidades que se pagan a entidades lega-

les extranjeras en Ucrania está sujeto a un impuesto del 15%. La parte que realiza el pago retiene el 15%. La renta de entidades legales extranjeras, que está sujeta a imposición, incluye intereses de obligaciones, ingresos por venta de propiedades inmobiliarias, ingresos por venta de valores, pagos de leasing, etc.

Los ingresos de los no residentes obtenidos por servicios de flete están sujetos a un tipo impositivo del 6%.

Los tipos impositivos para rentas de no residentes pueden verse reducidos por los Convenios de Doble Imposición. Dichos convenios también pueden regular los impuestos de determinados tipos de ingresos únicamente dentro de los países en los que esté registrada la entidad que recibe dichos ingresos.

Impuesto sobre el Valor Añadido El tipo del IVA es 20%. En general, la normativa del IVA se basa en los principios estipulados en la Directiva 2006/112/ÅÑ EU de 28.11.2006.

Las declaraciones de IVA se presentan a las autoridades tributarias de forma mensual, y el impuesto se paga 12 veces al año.

Es obligatorio darse de alta en el IVA si la cantidad de las transacciones impo-nibles supera los 300.000 UAH al año, pero se aplican otras condiciones dependiendo del valor de las transacciones, cuando se venden bienes o servicios vía Internet.

Desde el punto de vista fiscal, la venta/adquisición de un negocio es más be-neficiosa si se realiza vendiendo/adquiriendo la entidad comercial en lugar de vender/adquirir sus activos. Esto se explica porque el IVA no es aplicable a las transac-ciones que impliquen dichas ventas/adquisiciones.

Dicho esto, el tipo impositivo más reducido apli-

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cable a la venta de acciones es del 15% del beneficio, tanto en el caso de que la venta la realice por parte de una entidad legal extranjera, como cuando esta venta sea realizada directamente por una pe-sona residente en Ucrania.

El tipo aplicable a la plusvalía por venta de acciones por parte de una entidad legal residente en Ucrania es el 25%, y cuando la venta la realiza un extranjero el tipo es el 30%.

En algunos casos, la ley ucraniana permite que un extranjero elija una residencia fiscal ucraniana. Esto permite que la renta recibida en Ucrania se grave al 15% en lugar del 30% aplicable a los no residentes. Dicha elección sería conveniente si la mayor parte de la renta de la persona física se genera en Ucrania. Un extranjero puede elegir una residencia fiscal ucraniana en los siguientes casos:

Impuesto sobre la Renta de las Personas Físicas El tipo principal del Impuesto sobre la Renta de las Personas Físicas es el 15%. La renta obtenida por extranjeros y generada en Ucrania se grava al 30%, salvo los ingresos obtenidos como intereses (tipo del 5%), los dividendos y los royalties (en los que el tipo es el 15%).

La mayoría de los impuestos se cargan en el momento de su pago a la persona física.

- residencia permanente en Ucrania, que debe estar debidamente registrada en el pasaporte de la persona física (por ejemplo, permiso de residencia permanente ucraniano, o si cursa estudios en un centro educativo) - la duración de la estancia en Ucrania es de un mínimo de 183 días del año fiscal - la persona física está registrada como empresario privado

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5. Contabilidad y declaraciones Las normas para calcular los impuestos en Ucrania son bastante complicadas y difieren considerablemente de las normas de la contabilidad financiera. En especial, las fechas de reconocimiento de ingresos y costes son diferentes, y existe un determinado número de gastos que no cuenta para determinar los beneficios imponibles. Dicha situación exige una contabilidad paralela a fines fiscales, así como para la presentación de las cuentas.

Todas las sociedades y representantes de entidades legales extranjeras que operan en Ucrania deben presentar sus cuentas anuales de acuerdo con los estándares nacionales de reporting financiero.

Estos estándares se basan en los IFRS (Estándares Internacionales de Reporting Financie-

ro). Sin embargo, contienen ciertas diferencias, y por este motivo es ne-cesario realizar numerosos cambios si las cuentas se elaboran de acuerdo con los IFRS. 6. Interacción con las autoridades de supervisión La inspección tributaria es el principal medio de supervisión de las actividades comerciales.

La ley estipula inspecciones programadas que no pueden tener lugar más de una vez al año, e inspecciones no programadas.

Las inspecciones no programadas, de acuerdo con la legislación vigente, pue-den llevarse a cabo de manera frecuente.

Las autoridades tributarias emiten decisiones basadas en los resultados de sus inspecciones, y

estas decisiones pueden ser apeladas tanto por vía administrativa ante la máxima autoridad de supervisión, como por vía judicial.

Una apelación suspende el curso de una decisión, pero en el caso de realizar una apelación ante los tribunales, sólo ocurrirá si el tribunal ha emitido una orden adecuada.

7. Relaciones laborales En Ucrania, debe obtenerse un permiso de trabajo para extranjeros para contra-tar extranjeros (incluyendo puestos de trabajo en compañías con capital extranjero). Se tarda alrededor de un mes en obtener dicho permiso.

No es necesario ningún permiso especial para contratar a un ciudadano ucra-niano. Las relaciones laborales están reguladas de acuerdo con la legislación que se ha adoptado y que se

utiliza desde los tiempos de la Unión Soviética así que tiene un fuerte sesgo social. Por esa razón, los criterios para despedir a un trabajador están es-trictamente definidos por la ley, y salvo algunos excepciones, un contrato de trabajo no puede rescindirse.

8. Sistema legal y resolución de conflictos Las disputas que surjan entre empresas y personas físicas se presentarán ante los tribunales de jurisdicción general. La estructura de los tribunales de jurisdicción general consta de tres instancias: la primera instancia (que examina el caso), la instan-cia de apelación y la instancia de anulación. El Tribunal Supremo de Ucrania es el máximo tribunal de jurisdicción general.

Los tribunales mercantiles se ocupan de con-

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flictos entre empresas y empresa-rios autónomos. Además, para tratar casos de intentos de adquisición hostiles de empresas, se han introducido cambios en la ley que exigen que todos los conflictos em-presariales, independientemente de quiénes sean las partes (personas físicas o entidades legales), deben presentarse ante el Tribunal Mercantil Local.

La estructura de los tribunales mercantiles también tiene tres instancias. El Tribunal Supremo Mercantil Ucraniano es la máxima autoridad del sistema de los tribunales mercantiles.

Los tribunales administrativos resuelven conflictos en el campo de la administración que implican a las autoridades estatales y municipales. Por ejemplo, los conflictos derivados de las inspecciones fiscales dentro de la jurisdicción de los tribunales administrativos. El sis-

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tema de los tribunales administrativos también consta de tres instancias. El Tribunal Supremo Administrativo de Ucrania es la máxima autoridad del sistema de tribunales administrativos.

La ley contempla que cuando existan elementos extranjeros en los contratos, las partes pueden elegir la ley aplicable para la ejecución de dichos contratos, y además escoger la jurisdicción relacionada con el conflicto contractual. Las peticiones que formulen las partes con relación a estos temas deben realizarse por escrito.

Las normas aplicables a las relaciones legales que tengan un componente extranjero y la capacidad legal de los extranjeros y de las entidades extranjeras están re-guladas por la Ley ucraniana sobre derecho privado internacional.

En Ucrania hay un sistema de tribunales de

arbitraje. Las entidades legales y/o las personas físicas tienen derecho a recurrir a dichos tribunales para resolver cualquier tipo de conflicto civil o mercantil y se someten al dictamen del tribunal de arbi-traje. Sin embargo, hay exclusiones y algunos casos no pueden presentarse ante los tribunales de arbitraje. Estos casos incluyen los conflictos derivados de los bienes inmuebles, las diferencias que surgen en las relaciones laborales, en las relaciones empresariales y los conflictos en los que al menos una de las partes es no residente.

En Ucrania no existe la figura de la mediación y por lo tanto no existen leyes que regulen la mediación. En materia internacional se utiliza sobre todo el Tribunal de Arbitraje Mercantil Internacional de la Cámara de Comercio.

Esta información es válida a 26 de abril 2010.

9. Conclusiones A pesar de que su sistema fiscal y su legislación son bastante complicados, Ucrania ha realizado una serie de cambios cuyo objetivo es simplificar las operaciones comerciales y atraer inversiones. Como resultado de estos cambios, la constitución de sociedades es ahora más rápido y menos costoso. Todavía es necesario hacer progresos con relación a la propiedad inmobiliaria, a la gestión empresarial, a la protección jurídica a la propiedad privada, y también es necesario realizar cambios en los modelos de reporting financiero. Esperamos que los procesos de reformas que están en macha actualmente den buenos resultados.

Yana Bugrimova – Consulting group pruDEns – uCrania

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Uruguay

HOW TO DO BUSINESS AND HOLD ASSETS AROUND THE WORLD

1. Introduction Featuring a land surface area of somewhat more than 176,000 square kilometres, Uruguay is the smallest and, at the same time, least populated of the Latin American countries in South America. Nevertheless, it is also the country with the highest levels of education and health care and standards of living.

Located entirely within an area featuring a warm climate and covered in grasslands, practically the entire country is ideal for agriculture and cattle-raising. In this respect, the Eastern Republic of Uruguay (which is the country’s official title) has based its economy on stockbreeding for its almost two hundred years’ existence and, more recently, on agroindustry and the provision of services. In recent decades, the country has taken advantage of its strategic location between the largest countries in South America, Argentina and Brazil, to develop a role as a financial centre and centre for service provision throughout the region. Alongside Argentina, Brazil and Paraguay, Uruguay is one of the

founding members of the integration agreement known as MERCOSUR (or Southern Common Market).

Featuring a strong tradition of institutional stability and respect for democratic values, Uruguay is also considered to be one of the least corrupt nations in South America, alongside Chile. This background, combined with the high cultural level of its inhabitants and its highly qualified workforce, make the country an attractive option for multinational companies. These companies value both the country’s legal stability (although the judicial system is not as rapid and efficient as might be desired) and its macro-economic performance. The country’s economy has maintained a favourable and stable course, in spite of the fact that political parties of different ideological persuasion have taken turns in government over the last 25 years. Nevertheless, Uruguay is also a country in which State-run companies play an important role in the economy, especially within the fields of telecommunications, fuels, electrical en-

ergy and banking. Furthermore, although the scarce population limits the development of the country’s domestic market in the short term, its strategic location and its international links, especially those established through MERCOSUR, make Uruguay an excellent base for producing goods and services aimed at the entire region.

In recent years the country’s economy has enjoyed sustained growth (based on a rate of 6.1% for the five-year period, 2004 - 2009), taking advantage of the favourable prices for foodstuffs and other agricultural “commodities” on the international market. This expansion has been strengthened by means of foreign capital investment, which has been fostered through the existence of a nondiscriminatory legal system and a series of specific policies designed to promote investment of this kind.

2. Direct investment by foreign companies When setting up business in the country, foreign companies have the option of creat-

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ing a branch of the foreign enterprise or a local subsidiary, one that is entirely controlled by the foreign company in question.

In relation to branches of a foreign company that may be set up, Trading Companies Law 16.060 establishes the following requirements: inscription of the notary documents (legalised and translated where necessary) corresponding to the company agreement and the minutes of the competent decision-making body at the parent company featuring the decision to set up operations in Uruguay, at the National Trade Register. This document must also indicate the town or city where the branch is to be set up, the capital that will be set aside for this purpose and the names of the persons who will administer and represent the branch. The branch must maintain separate accounting books with regard to the parent company and these must be in the Spanish language. If the parent company is a share-based capital company or a limited liability company, an extract of the company’s purpose, the name of the branch and its inscription details at the National Trade Register must also be published in the Official Gazette and in another journal.

With regard to the legal forms of a subsidiary company, although other kinds of company regulated by Uruguayan legislation exist, foreign companies generally opt for either a public limited company or a limited liability company.

3. Public limited companies Public limited companies in Uruguay are set up with two founding members. However, once the incorporation process has been completed, the share capital can be held entirely by just one shareholder. The shares that make up the capital of a public limited company can be bearer

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shares, registered shares or shares established by deed, depending on the provisions of the company agreement or articles of association.

Companies with bearer shares have no restrictions regarding their activities, although they have been prohibited in certain highly regulated and controlled sectors, such as financial intermediation, telecommunications and others. More recently, it was forbidden for rural real estate to belong to public limited companies with bearer shares. It was also established that, should such real estate belong to companies with registered shares, the corresponding shareholders must be legal entities. Nevertheless, given the strong presence of foreign investment in agricultural exploitations through the use of investment funds, the law has been modified to enable these funds to serve as shareholders, without identifying the investors themselves.

Public limited companies are incorporated by means of a company agreement that must be subscribed by at least two founding members, whose signatures are certified by a notary (or by means of a public deed). This agreement must be approved by a State monitoring body, which is currently known as the Internal Audit Office of the Nation, attached to the Ministry for Economic Affairs and Finance. This State body is also responsible for verifying the minimum capital payments and subscriptions required by law. Specifically, the founding members must pay up at least 25% of the capital established in the company agreement and subscribe the remaining amount up to 50%. The law does not establish a time period to this effect and neither does it require the company to establish a time period for the payment of either the subscribed capital or the outstanding nonsubscribed company capital.

We should mention the fact that no minimum amount of company or contractual capital is established. The founding members or the Shareholders Meeting can establish any amount they wish. Originally, the Trading Companies Law demanded a minimum amount of capital at public limited companies, which coincided with the maximum amount of capital that could be established at limited liability companies. This was in line with the approach adopted by the legislators of the time that public limited companies were only appropriate for large companies and investment projects that involved large capital contributions. For smaller companies and projects, the parties were meant to turn to the limited liability company format. However, in the end, the Uruguayan Parliament realised that, in practice, public limited companies were the most frequently used company format throughout the country, even among small businesses, or even to simply serve as the owner of some property or bank account. Conversely, some limited liability companies had been obliged to reduce their capital in order to avoid having to change their company format.

Continuing with the incorporation process, once the articles of association have been approved by the Internal Audit Office of the Nation, the document must be entered into record by a notary and then entered at the National Trade Register. The process culminates with publication of the company’s address, name and capital, as well as an extract of the company’s purpose and its inscription details at the National Trade Register, in the Official Gazette and in another journal.

The time period required to carry out the incorporation process described above comes to

two or three months, although, in practice, these kinds of companies tend to be set up by specialised legal practices or offices, who keep them ready to be transferred at any moment to parties interested in acquiring them, which means that said parties can begin operating immediately. Notwithstanding the above, there is no problem in the founding members of these companies being physical persons or legal entities resident abroad.

As far as the administration and operation of public limited companies is concerned, these companies must have an Administrator or a Management Board, a figure who can be established through the articles of association or by delegated decision of a Shareholders’ Meeting.

By means of a Government Decree, it has been “interpreted” that the Management Board can be made up of a single member, who occupies the office of President and serves as the company’s representative (notwithstanding other persons granted power of attorney or any managers who may be appointed). There are no nationality or residence requirements when it comes to occupying any of these posts.

Shareholders’ Meetings must be held in the place where the company has its headquarters, although there is no other similar requirement in law for sessions held by the administrative body). Shareholders can be represented by a simple letter-proxy, without any need for the signature to be certified, provided that the powers being granted are limited to a single and specific Shareholders’ Meeting. The company’s administrators, directors, managers and employees cannot act as proxies. The Ordinary Shareholders’ Meeting must take place within 180 days following the end of the financial year and has the authority to evaluate the com-

pany’s accounts and the proposed distribution of utilities, documents that must be prepared by the administration bodies. The Meeting can also appoint members of the administrative or management structure and, eventually, the members of the internal supervision and review body. Special Shareholders’ Meetings can be held at any time in order to address any question that does not come under the authority of the Ordinary Meeting, especially in order to make decisions regarding any changes that are made to the articles of association. It can also consider matters that fall within the remit of the Ordinary Shareholders’ Meeting when these questions need to be resolved urgently.

In closed public limited companies, the internal supervisory and review body (trade unions acting independently or review committees that form part of an official college) is optional. However, at open public limited companies such review bodies are compulsory. Furthermore, the operation of companies of this kind comes under the ongoing supervision of the Internal Audit Office of the Nation.

Bearer shares are conveyed by simply handing over the certificates that represent them, whilst endorsable registered shares require the endorsement and handover of the share certificates and the inscription of the process in the company’s shares register. Uruguayan law expressly authorises share syndication agreements, which can be contrary to the company itself and third parties if they are entered in the National Trade Register and fulfil certain other requirements.

4. Limited liability companies As far as limited liability companies are concerned, these are characterised by the fact that

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their capital is made up of company shares that cannot be represented by negotiable certificates of title. For this reason, their conveyance always requires modification of the company agreement, in which respect all of the requirements established must be fulfilled in order to set up companies of this kind.

These requirements include the following: a written company agreement that must be subscribed by at least two members, whose signatures are certified by a Notary (or by means of a public deed). The company agreement must be entered at the National Trade Register and the details must be published in the Official Gazette and in another journal, as in the case of public limited companies. However, unlike the latter, limited liability companies are not subject to the supervision of the Internal Audit Office of the Nation.

Also unlike public limited companies, limited liability companies must continue to have at least two members, even after they have been officially set up, in order to avoid grounds for advanced winding-up settlements. Furthermore, these companies cannot have more than 50 members. If they do come to have this number of members, they must be turned into public limited companies.

The regime for conveying shares in the company will depend on whether these shares are being transferred to other members, in which case this can be freely done (except when it affects “the majorities regime), or they are being transferred to third parties. In the latter case, this process requires the unanimous approval of all the other members, if the number of members comes to five or less. If the number of members is more than five, the conveyance process must be approved by members who make up 75% of the company’s capital (not including the share of the potential transferor).

Should approval for the transfer to this third

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party be denied, the member in question can appeal to a judge based on the reasoning that this is unjustified. If the judge understands that the denial is unjustified, he can authorise the transfer, which, nevertheless, will trigger a preferential right for said members to acquire the shares.

All of these regulations (together with others, such as limitation of the term to an extendable period of 30 years, which does not exist in the case of public limited companies) have made limited liability companies somewhat less popular than public limited companies.

This relative lack of popularity has also been brought about by the fact that the limited liability of the members regarding the company’s debts is subject to two exceptions: when these debts consist of unpaid income tax or when they have to do with employment loans.

Furthermore, the law formerly established a maximum amount of capital for this kind of company, although this regulation has recently been removed.

In spite of the requirements highlighted above, this type of company can be officially set up within a shorter period of time and featuring lower costs. These companies are not levied by the Public Limited Companies Monitoring Tax (some US$ 400 a year) and, furthermore, given that these are general partnerships, they are liable to be treated as “partnerships” in the jurisdictions of their controlling members, which is why they are preferred by some foreign investors.

5. The uruguayan tax system We can highlight two important aspects of the Uruguayan tax system: application of the criterion of territorial authority when it comes to determining the jurisdiction of the Uruguayan tax authorities, and the strong incidence of indirect taxation with regard to tax collec-

tion. With regard to indirect taxes, we might highlight the Value Added Tax that is imposed on imports and the circulation of goods and services, whose general rate is 22%, although a basic rate of 10% exists for food products and medicines, for example. Goods and services linked to the fields of education and culture are tax free.

Personal Income Tax was reinstated in the year 2007, after an absence of more than three decades. The same law created a Tax on the Income of Non-Residents (IRNR), which levies the income of non-resident legal entities and physical persons that is generated in Uruguay, except in cases where the income is generated by a permanent establishment located in the country.

As far as business revenue is concerned, this is levied by the Tax on Business Activities (IRAE), provided that the income is generated in Uruguay. This tax stands at a rate of 25%. Furthermore, the payment or accreditation of dividends is taxed at a rate of 7%, provided that the dividend originates from revenue of Uruguayan origin (which means that revenue from a foreign source and the dividends obtained thereby are exempt from payment of the IRAE).

For its part, the Tax on the Income of NonResidents (IRNR) stands at 12%, except for dividends “paid or accredited by tax-payers” under the IRAE regime, whose rate is 7%, as mentioned above. Lower rates exist in order to encourage bank deposits in the national currency, public tender certificates of indebtedness and quotation on the Stock Market.

The Wealth Tax levies assets (such as real estate, bank accounts, loans, etc.) that are located in the country as of 31st December each year, with the law authorising the deduction of very few liabilities. The rate of taxation in this case is 1.5% and this applies to legal entities (resident or not).

At an international level, for many years Uru-

guay was not especially prone to reaching double taxation agreements with other countries, due possibly to its system’s emphasis on the criterion of territorial jurisdiction. In fact, the only agreements of this kind that still exist include the agreements signed in 1987 with Germany and in 1993 with Hungary. Nevertheless, in recent years Uruguay has begun to negotiate new treaties with the OECD countries, which has led to agreements being signed with Mexico (ratified by the Uruguayan Parliament by not yet ratified by the Mexican Parliament), Spain and Portugal (both ratified by the Lower House of Uruguay’s Parliament but pending consideration on the part of the Upper House).

these projects from having to pay the Tax on Business Activities (IRAE), taking into account factors such as the amount of local employment generated, the technology employed, the project’s favourable impact on the economy, etc. Exemption can be as high as 100% of the revenue generated for the corresponding period established to this effect.

It is worth pointing out the fact that for a project to be classified as being of “national interest”, the amount invested does not necessarily have to be that high. If the project fulfils the conditions mentioned above, an investment of some US$ 300,000 can obtain a 50% to 60% exemption from the Tax on Business Activities (IRAE).

6. Regime for promoting investment In general, Uruguay promotes investment throughout its entire territory and, in particular, foreign investment. In this respect, the country guarantees the full repatriation of the capital that is invested and the free shipment of utilities. In fact, free trade has existed in Uruguay since the 1970’s and it is habitual for prices to be agreed and paid in US dollars in many trade transactions, such as property and motor vehicles.

As an instrument for promoting investment, Law 16.906 regulates the advantages relating to investments in general and those relating to projects that are classified as being of “national interest”, in particular.

The general benefits entailed include exemption from paying the Wealth Tax and VAT for moveable goods that are linked to the productive cycle and computer equipment.

For investment projects that are classified as being of “national interest”, the benefits include those mentioned above, whilst these are also extended to other fixed assets and the construction of civil works.

Furthermore, the Government can exempt

7. Free trade zones Free Trade Zones constitute one of the various instruments that Uruguay has established in order to develop its traditional role as a centre for services throughout the region. Various free trade zones exist on Uruguayan territory, which have been created and are exploited by private companies that reach agreements with what are known as “direct users”. Direct user companies must pay a fee to the exploitation companies, but, as a result, they are not levied by any kind of national tax, except for contributions to the social security system for Uruguayan personnel who render services in these zones. Meanwhile, foreign personnel can renounce the Uruguayan social security system (up to 25% of the company’s employees can be foreign, although administrative authorisation can be requested for this percentage to be increased).

In this respect, companies that use Free Trade Zones are not levied by either the Tax on Business Activities (IRAE), the Wealth Tax or Valued Added Tax. Neither do they have to pay any other national tax that may exist or that is likely to be created in the future. Both the

entry of goods and services into the Free Trade Zone, as well as their repatriation abroad, are exempt from any kind of taxation.

If goods are transferred from a non-free-trade part of Uruguayan territory to a Free Trade Zone, these are treated as if they were exports (and are not subject to any specific taxation and are exempted from VAT and from Excise Duty). On the contrary, if goods are transferred from Free Trade Zones to Uruguayan territory, these are treated as imports and are taxed accordingly. The provision of services from the Free Trade Zones in non-free-trade Uruguayan territory is not permitted.

Companies that use the Free Trade Zones generally set themselves up as public limited companies or limited liability companies, or even as branches of foreign companies.

The size of the fees charged vary according to the Free Trade Zone, the amount of space contracted and the services offered by the exploiting company. Until recently, these Free Trade Zones were located on the outskirts of cities, in areas prepared for industrial production and large-volume storage. However, given that, in practice, a large number of the user companies were service providers, Free Trade Zones have recently be authorised in modern buildings located in the City of Montevideo itself. These facilities were designed specially for companies providing services throughout the region (such as accounting and audit companies, legal and financial advisors, software development companies, call centres, etc.)

Other special regimes exist, such as “temporary admission” facilities, “free ports” and “special port depots”, all of which offer different advantages and benefits for companies working within the export business.

Dr. ricarDo romero mm&a consultants

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Edition I – BGI MAGAZINE – 2008 How to Purchase a Real State Around the Word

Edition II – BGI MAGAZINE – 2009 Legislation Related to World Wide Inheritance Law

Edition III – BGI MAGAZINE – 2010 How to do Business and Hold Assets Around the World

BGI MAGAZINE 2011 Next Issue

LABOUR LAW

As dear old Oscar Wilde once said, “it is better to be beautiful than to be good, but it is better to be good than to be ugly�.

This should always be the case and, among our senses we should always have a sense of humour, and common sense, perhaps the least common sense of all.

We are bringing you once again a new issue of our BGI Law Magazine, with the aim of entertaining you as well as informing you about how to do business in different parts of the world. In this respect, we aim to be more beautiful and entertaining than good, in the technical sense, and more good than ugly. We hope you agree...