It is tempting for the organiser/developer to consider that he is merely sharing the profits and that his income therefore does not fall within the scope of VAT. This will almost never be the case. A developer, for example, usually has no rights to the country (although this is not always the case), but rather acts as a kind of highly specialized real estate consultant and negotiator. His services are therefore taxable and the value of the consideration he receives depends on a fictitious “profit”. When a contractor acts in this role, they are generally considered a construction service provider to the landowner under the terms of the contract, since the landowner ends up selling (or renting) the developed properties. The builder thus provides some kind of taxable service (although it may be exempt from tax as a construction of new housing, but this could in itself lead to the need to register for VAT). (ii) contracts of purchase and sale (there is no transfer of assets or objects with payment of a price); and a cost-sharing agreement is concluded where co-participants with common interests incur costs for the realisation of the assets and rights of one of the group entities – which they make available to the others – in accordance with justified levy criteria. A contribution to the costs, taking into account the realization, would be a means of offsetting the enterprise holding the right or asset. On the other hand, taking into account the relationship between the companies of an economic group, the intra-group service contract establishes an effective service at a fair price, as if it were a company independent of the group.
`In view of the foregoing, in a contract for the sharing of costs and expenses signed between undertakings of the same economic group involving residents and non-residents of the country, the activities made available to the resident legal person by a non-resident legal person must be registered with Siscoserv if the activity in question is provided for in the NBS. It is a transaction involving an operation which entails a change in the own funds of the legal person, provided that the reimbursement offered in return for the activity provided constitutes an expenditure which necessarily involves a change in own funds. Under the cost-sharing agreement, certain services are subcontracted by the central legal entity for the benefit of the other members, the resulting mandatory relationship is of the nature of a genuine provision of services, the mandated third party being the supplier and the legal entities of the group as policyholders. who benefit from indeed`s services. If the supplier is located or resides abroad, the registration of information on Siscoserv is mandatory, which is carried out by a policyholder residing in Brazil. Cost-sharing arrangements are effective alternatives for the delivery of shared services. In this situation, DGT examined cost-sharing arrangements for VAT purposes in accordance with Chapter VIII of the OECD Transfer Pricing Guidelines and the case law of the Court of Justice of the European Union. Under cost-sharing arrangements, each participant makes certain contributions, which are in principle geared towards the expected benefits. These contributions take the form of services provided for the benefit of other participants. In the event of an inadequacy between the benefits and contributions paid under the agreement, an adjustment shall be made by means of compensation. In dismissing the appeal, the Court concluded that there was no partnership and that Keydon had provided services to the other company in exchange for an expected share of the company`s profits: the Guidelines considered such compensatory payments that ensure a fair distribution of the profits made and, as such, constitute a possibility to: ensure compliance with the arm`s length principle. For example, a branch may provide services under a CCA and the value of those services may be less than the actual benefit that the branch derives from the agreement (compared to the benefit that the branch had anticipated).
In that case, the branch would be required to pay compensation to the other branch in order to compensate for this imbalance. The participant paying such compensation would incur additional costs, while the participant receiving such compensation would receive reimbursement of its own costs. In our view, the Brazilian tax authorities are not entitled to tax transfers transferred abroad under a cost-sharing agreement with non-resident companies for the following reasons: The second agreement dealt with the joint venture aspect. He noted that the two companies were involved in a “joint venture” to redevelop the property. However, the joint venture would be in Crofthaven`s name and controlled by Crofthaven`s board of directors, which was able to raise the funds for the company. The agreement went to great lengths to point out that there was no other partnership and that the partner companies could not sue each other for negligence. Net profits are expected to be split between the two companies, 95% on Crofthaven and 5% on Fivegrange. Although these are legitimate contracts justified by the need to optimize costs and standardize operations at all levels, the tax implications of the agreements have sparked discussion. This includes determining whether group transactions are located exclusively in Brazil or whether the centralization of these activities takes place abroad. The advantage for the parties when they claim that their contract is a joint venture is that they could then consider their `share of the profits` resulting from the exempt sale of the renovated immovable property as outside the scope of VAT as a result of the joint venture.
On the other hand, if only one party owns the property and a service is provided by the redevelopment or development company to the owner, those services are assessed by default and thus create a charge tax for the owner who makes a tax-exempt supply of the property. These agreements are better referred to as “cost-sharing agreements” or “cost-sharing agreements”. According to the OECD Guidelines, a cost-sharing or cost-sharing agreement (“CCA”) is “a contractual arrangement between commercial entities to share the contributions and risks associated with the joint development, production or acquisition of intangible assets, property, plant and equipment or services, provided that such intangible assets, tangible assets or services are likely to benefit the creation of a sole proprietorship of each of the participants”. Such a contractual agreement must comply with the minimum content requirements of the Spanish Corporate Tax Regulation and must be concluded in accordance with the arm`s length principle. The communication from the Commission of the European Union of 19. September 2012 on transfer pricing provides that a CCA respects this principle if the contributions of each participant under the agreement are consistent with the contributions that would have been made by independent companies in comparable circumstances. If the distribution of profits does not in fact fall within the scope of VAT, it must be ensured that it is a pure distribution of profits, since it is not a consideration for a supply. In fact, it`s better to think about it, not to ask, “Am I making a profit?” but “Is this money I receive in exchange for something I do for the other party?” Because profit is considered not to be taken into account only if this is exactly the case; That is, nothing is delivered in exchange for profit. Profit can therefore only be a return on the capital invested in a company.
It can present itself as profits that are made through a true partnership. They can take the form of dividends distributed to shareholders. It is unlikely that anything other than outside the scope will be taken into account, unless it can be demonstrated that it is not consideration for a supply to another party. So where would there be a situation where two parties coming together to make the most of a mutual business opportunity could be considered a mutual offer? Example A “stationary” retailer decides that he wants to set up an Internet operation. .