Implications For Borac Plcs Subsidiary

Poland

The 1994 Accountancy Act majorly informs the accountancy law in Poland, and the Polish Generally Accepted Principles (GAAP). This act enumerates foreign companies that operate in the country through subsidiaries or branch outlets, compelling them to maintain all their respective accounting records following the Polish law. For example, on taxation, the subsidiary is required to observe the taxation guidelines and is taxed as per its global income generated from Poland. According to the Polish laws, the subsidiary established by Borac Plc will be treated as a separate legal entity, but will not be limited to undertaking similar business transactions as the parent company. If you require assistance with your business dissertation, we offer the most professional business dissertation help services in place to support you in your academic journey. However, for Borac Plc to establish a subsidiary, they will have to undergo all the necessary stipulations of forming a new company in Poland and comply with the Polish accounting policies.

A tax loss documented in a tax year can be carried forward over the next five consecutive years, however, in any specific year. Even so, within any particular year, the taxpayer might not withhold more than 50% of the loss sustained in the year in which it was documented (Deloitte, 2018). For instance, a taxpayer that incurred PLN 200 loss in 2015 might carry it forward to 2016 through 2020. Though the maximum loss deduction in any of these years might not exceed PLN 100; that is taking in an assumption that there are no further losses available for deduction. So far there is no option of carrying back tax losses in Poland.

In Poland capital expenditure is not subjected to tax-deductible directly, rather the acquired assets are depreciated for the sake of taxation

According to the accounting laws in Hong Kong, all financial reports must be prepared according to the Hong Kong Financial Reporting Standards (HKFRS) and the International Financial Reporting Standards (IFRS). In response to Borac Plc establishing a subsidiary in Hong Kong, they should understand that the subsidiary will be a separate legal entity, its liabilities would not affect the parent company, and it is considered as a fully autonomous entity from its parent company in the United Kingdom (Guide me Hong Kong, 2018).

The subsidiary will be treated equally to the existing local companies in Hong Kong concerning the taxation policy. In this case, the corporate tax is 16.5% annually. In Hong Kong, losses attributable to the business operation of the trade, businesses and professional firms can be carried forward for an unlimited time to offset against future assessable profits until wholly utilized. In cases, when taxpayers carry on more than one trade or business, the losses in one company can be used against the earnings of the other (DLA Piper, 2019). However, losses cannot be back-dated to offset against assessable profits in prior basis periods.

So far, there are no minimum taxation requirements to utilize tax losses. The country has an anti-avoidance guideline that limits the utilisation of losses brought forward against succeeding profits (Guide me Hong Kong, 2018). The same stipulation also applies if there is a variation in shareholding in the loss entity and as a direct or indirect outcome profit have risen to the entity and that change in shareholding was established for the main reason of utilizing the business’s tax losses against those profits.

In Hong Kong, the company’s start-up expenses that are incurred before the commencement of a trade, or a businesses are perceived as capital and are not tax deductible. On the other hand, capital expenditure incurred on the construction of structures and provision of machinery for business purpose are subjected to tax deductions.

According to the Singaporean accounting policies, all financial reports ought to be treated as per the Singapore Financial Reporting Standards (SFRS), and the International Financial Report Standards (IFRS). In case, Borac Plc establishes a subsidiary in Singapore; it will enjoy the benefits like other local companies operating in the same market. The subsidiary will be perceived as a separate legal entity from its mother company. The subsidiary will also be subjected to a corporate tax of 17% per year (Inland Revenue Authority of Singapore, 2018). In Singapore corporate taxpayers might offset trading losses against all revenues earned in the same period, comprising those from interest, rentals, or dividends. The entity might carry forward unutilized loss for an unlimited period against future profits. For a company to be allowed to carry forward its losses, it must be subjected to a shareholding test. For a business to eligible to carry forward its losses, it must not experience a considerable change in the shareholders and their respective investments as at the appropriate dates (Ottavia, 2017). These dates are the last day of the year, in which the entity initially experienced the loss and the first day of the taxation year of assessment, in which the entity aims to withhold the loss.

In Singapore, qualifying approved industrial buildings are given a 25% initial allowance and yearly allowances of 5% of the qualifying cost on a straight line basis. The primary allowances for machinery and plant is 20% with annual allowances of 13% for manufacturing and processing machinery, 8% for fixtures and telecommunication machineries and 10% for data-management equipment.

References

• Deloitte (2018). International Tax; Poland Highlights 2018. [Online] Retrieved at; https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Tax/dttl-tax-polandhighlights-2018.pdf
• DLA Piper (2019). Loss utilization. [Online] Retrieved at; https://www.dlapiperintelligence.com/goingglobal/tax/index.html?t=11-loss-utilization
• Guide me Hong Kong (2018). Hong Kong Subsidiary Registration. [Online] Retrieved at; https://www.guidemehongkong.com/business-guides/starting-a-company/hong-kong-incorporation-entity-types/hong-kong-subsidiary-registration.
• Inland Revenue Authority of Singapore (2018). Business Losses and Unutilised Capital Allowances. [Online] Retrieved at https://www.iras.gov.sg/irashome/Businesses/Self-Employed/Working-out-your-taxes/Deductions-to-Save-Tax/Business-Losses-and-Unutilised-Capital-Allowances/
• Ottavia (2017). The Accounting and Tax Treatment of Business Losses in Singapore. [Online] Retrieved at http://ottaviaholdings.com/resources/tax-and-accounting-services/treatment-business-losses-singapore/
• PWC (2018). Poland Corporate – Deductions. [Online] Retrieved at http://taxsummaries.pwc.com/ID/Poland-Corporate-Deductions

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