# Commission Decision of 12 January 2011 on the tax amortisation of financial goodwill for foreign shareholding acquisitions No C 45/07 (ex NN 51/07, ex CP 9/07) implemented by Spain (notified under document C(2010) 9566) (Only the Spanish text is authentic) (Text with EEA relevance) (2011/282/EU), Annex II: SUMMARY OF THE KPMG REPORT PRESENTED BY THE SPANISH AUTHORITIES Extent: E+W+S+N.I. Summary Table Country Company law governing mergers Are cross-border mergers prohibited by company law and subsequent legislation?(Yes/No/Not specifically addressed) Does case law or doctrine refer to the impossibility of a cross-border merger?(Yes/No/Not found) Have relevant de facto barriers been identified that impede a cross-border merger?(Yes/No) Have tax rules been identified which impose additional tax costs on a cross-border merger?(Yes/No/Uncertain tax treatment) Are there precedents of cross-border mergers in your jurisdiction?(Yes/No/Not found) Summary Argentina Law 19550 Articles 82 to 87 and 118 Not specifically addressed by either company law or the main legislation on the Trade Registry Yes Relevant doctrine states that cross-border mergers are not possible in Argentina Yes Registration issues with the relevant Trade Registry Yes. Taxation of the target company and its shareholders, since it is considered that the Protocol to the Treaty signed by Argentina and Spain should not apply. Moreover, relevant doctrine and the Argentinian tax administration points out that the roll-over regime can apply only to domestic mergers No Academic authors point out that a cross-border merger is not possible Taxation of the absorbed company and its shareholders Australia Corporations Act 2001 (main Sections 606, 413 and 611) The concept of cross-border mergers is not recognised under Australian company law Corporations Act 2001 lays down only three specific procedures with regard to mergers, none of which deals with cross-border mergers Not found Yes Cross-border mergers are not possible in Australia Uncertain tax treatment. A roll-over regime applies only to domestic mergers Not found Corporations Act 2001 does not specifically deal with a cross-border merger as a permitted transaction, and is therefore not possible Brazil Brazilian Civil Code (Law 10.406/02) and Law 6.404/1976 Not specifically addressed Not found Approval by the Council of State Approval by the register in SISBACEN is uncertain Restrictions in certain economic sectors do not permit a cross-border merger Uncertain tax treatment Brazilian and non-Brazilian (i.e. shareholders in the Brazilian company) taxpayers involved in a merger transaction at market value would suffer adverse tax consequences. No Only one transaction has been identified but it relates to a reverse merger in which some foreign companies were absorbed by a Brazilian entity There are major barriers which in practice prevent cross-border mergers Canada Canadian Business Corporations Act and applicable company law in Canadian Provinces Yes Both merging entities must apply Canadian legislation Only certain types of mergers (e.g. amalgamations) are theoretically permitted in British Columbia, but there is no precedent Not found Yes Yes/uncertain tax treatment If a 100 % subsidiary is wound up, the dissolved company and its shareholder would pay tax Not found As a rule, cross-border mergers are not possible (only in British Columbia under certain circumstances) except for the winding-up of a 100 % Canadian subsidiary Taxation of the dissolved company and its shareholders Chile Law 18.046 Article 99 Not specifically addressed Not found Yes Requirement for a certificate of cessation of business activity issued by the tax authorities, which can significantly delay the merger process. Other barriers exist in the form of the rules of the Central Bank of Chile, which would require a special request in order to carry out such a merger, foreign investment rules under Decree Law 600 and the fact that in certain economic sectors a cross-border merger would not be possible Uncertain tax treatment There is no certainty that domestic roll-over regime can be applied in a cross-border merger to both the shareholdersand the target company A cross-border merger would not generate tax effects other than the taxation due on retained profits to the date of the merger by the company being acquired The winding up of a Chilean entity into its direct subsidiary is not considered similar to a merger for Chilean tax purposes. Thus, the shareholders will be subject to Chilean corporation tax to the extent that the assets transferred are stepped up Yes Just one, but the only precedent involved a holding entity with no Chilean activities or assets There are relevant obstacles which may prevent a cross-border merger from being carried out Uncertain tax treatment for shareholders and absorbed entity China (a) PRC Company Law of 2005 for mergers involving only limited liability companies or joint stock limited companies established in Mainland China and (b) Provisions on the merger and division of foreign investment enterprises (issued in 2001) which govern mergers involving foreign investment in Mainland China Provisions on mergers of a foreign company issued in 2009 Existing rules refer only to domestic mergers On 22 June 2009 the Ministry of Commerce enacted a new set of provisions on mergers and acquisitions of a domestic company by foreign investors A cross-border merger within the meaning of this document is not possible Not found Yes A cross-border merger is not allowed Uncertain tax treatment Notice 59 (which contains the provisions on the reorganisation of corporation tax) does not apply to cross-border mergers, and hence tax neutrality will not apply, even though cross-border mergers are not allowed in China Not found In 2009 a new Company Law applicable to mergers by foreign investors was adopted. However, cross-border mergers (within the meaning of this document) are not allowed Colombia Articles 172 et seq. of the Commercial Code Not specifically addressed. However, cross-border mergers are accepted in practice as guidelines are provided by the Companies Supervisor. A Colombian branch would have to carry on the economic activity of the foreign entity in a relevant number of economic sectors, which in practice prevents the completion of a cross-border merger No Yes Foreign investment rules, principally the impossibility of a Colombian branch carrying on certain economic activities Yes Taxation of shareholders Yes, but not with Spanish companies There are relevant barriers which may delay or prevent a cross-border merger Taxation of shareholders Ecuador Companies Act (R.O. 312 of 5.11.1999) and Articles 337 to 344 of the Act Amending the Companies Act (R.O. 519 of 15.5.2009) Not specifically addressed It is not possible to carry out a cross-border merger in Ecuador because the Ecuadorian entity would have to be wound up. Not found Yes It is not possible to carry out a cross-border merger in Ecuador Uncertain tax treatment A roll-over regime exists only for domestic corporate restructurings No Cross-border mergers are not possible in Ecuador India Sections 391 to 394 of the Companies Act of 1965 Upstream mergers are prohibited under Section 394(4)(b) of the Companies Act Not found Yes Upstream mergers are not possible Yes As regards upstream mergers, tax costs would exist for the absorbed company and its shareholders even though cross-border mergers are not allowed in India No There only precedents relate to reverse mergers (no precedents for upstream mergers) Upstream mergers are not permitted Japan Companies Act 86 of 26 July 2005 Not specifically addressed However, using the criterion set by the Ministry of Justice when the Companies Act was introduced in 2006, cross-border mergers should not be allowed Yes Relevant doctrine and the Ministry of Justice state that cross-border mergers are not possible in Japan The Legal Affairs Bureau in Japan does not allow registration of cross-border mergers In theory, since the Companies Act does not address cross-border mergers, tax treatment is uncertain No The Legal Affairs Bureau in Japan does not allow registration of cross-border mergers Mexico General Law on Commercial Companies Not specifically addressed Not found Yes Restrictions in certain economic sectors would not allow a cross-border merger Yes As regards upstream mergers, tax costs exist for the target company and its shareholders Yes, but not with Spanish companies Taxation of the target company and its shareholders Morocco Law 17-95 on Public Limited Companies. (However, all principles also apply to the Law on Private Limited Companies) Not specifically addressed Not found in Morocco Yes Foreign exchange regulations may prevent a Spanish company from taking over a Moroccan company Uncertain tax treatment Tax neutrality rules apply only to mergers between national entities Not found No specific legal provisions. The major legal, tax and de facto barriers would prevent a cross-border merger Peru Law 268.87 General Companies Act (GCA) Not specifically addressed A cross-border merger is not possible in Peru because the Peruvian entity would have to be wound up Yes Yes A cross-border merger is not possible in Peru Uncertain tax treatment A roll-over regime exists only for domestic corporate restructuring Not found Cross-border mergers are not possible in Peru United States Company law applicable in US States US laws do not prohibit or treat mergers differently to other business combinations with foreign entities However, some States (e.g. Delaware) do not permit such mergers where the laws of the other jurisdiction do not permit a cross-border merger No Yes Strict limitations in certain sectors under certain national security laws Strict rules for obtaining approval for the cross-border merger process No However, failure to comply with tax-free rules would trigger adverse tax consequences In practice, shareholders in US companies often oppose cross-border mergers because of the tax burdens that could result for them Not found, but such mergers are likely to have taken place in Delaware A cross-border merger would only be possible in certain States subject to the completion of a number of requirements Venezuela Commercial Code of 26 July 1955 and Article 340 of the Commercial Code Not specifically addressed A cross-border merger is not possible in Venezuela because the Venezuelan entity would have to be wound up No Yes A cross-border merger is not possible in Venezuela Uncertain tax treatment A roll-over regime exists only for domestic corporate restructurings Not found Cross-border mergers are not feasible in Venezuela --- Source: https://www.legislation.gov.uk/eudn/2011/282/annex/II (the official version) Page: https://openlegislation.uk/eu-decision-2011-282/annex-II Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.