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SELLING SHARES, BUSINESS OR ASSETS?(HOW TAXES IN UKRAINE AFFECT TRANSACTION
STRUCTURE)
Reasons why buyers prefer purchasing assets to purchasing Ukrainian company shares/business (except for the traditional reasons of company problems and risks)
• i. Prohibitions imposed by banks and other creditors.
• ii. Share encumbrances.• iii. Privatization restrictions.• iv. The company's acquisition of the title to
assets can be challenged by third parties as being unlawful (good faith purchaser protection).
• v. Antimonopoly aspects.
Tax and customs authorities' treatment of various transactions with assets and shares
a) «Sales of real estate disguised as sales of shares»• i. Ukrainian court practices in sales of real estate disguised as sales of
shares/authorized capital ownership interests.• ii. Sham transactions can be challenged. • iii. The factors that minimize the risks of a sale of shares/authorized
capital ownership interests being treated as a sham transaction.
b) «Unusual transactions with assets» (person can be accused of dodging taxes through artificial schemes)
• i. Methods for withdrawing property and money.• ii. Tax authorities nullify assets withdrawals (challengeable/void
transactions, period of limitation).
• iii. Criminal liability for dodging taxes.
Tax and customs authorities' treatment of various transactions with assets and shares
c) «Assets withdrawal» (would it be safe to purchase assets from a person potentially bankrupt under obligations to the budget?)
• i. Nullification of transactions with potential bankrupts.• ii. Tax pledge.
d) Transition of tax risks in transactions with shares• i. Transition of the issuing entity's tax liabilities when an ownership
interest in its authorized capital/shares are sold.• ii. Transition of tax risks when an entity is reorganized.
e) Customs risks in property transactions• i. Import duty must be paid when the property contributed as foreign
investment is sold.• ii. Customs authorities' treatment of sales of shares/authorized capital
ownership interest as alienation of the property imported as a foreign investment.
Tax and customs authorities' treatment of various transactions with assets and shares
f) Risks of selling the property not registered in the balance• i. Transaction is nullified when property is sold without first being
registered in the balance, tax implications.• ii. Procedure for registering property in the balance.
g) Foreign organizations' financing their subsidiaries and joint ventures in Ukraine: tax risks
• i. Financing through authorized capital replenishment.• ii. Making additional contributions without increasing authorized
capital.• iii. Financing through granted loans.• iv. Granting free financial aid.
Thank you for your attention!