REV BN 8: European Company Statute Tax Measures
Who is likely to be affected?1. Companies thinking of forming European Companies, once the European Company Statute (ECS) EU Regulation comes into force on 8 October 2004. General description of the measure2. The ECS permits the formation of a “European Company” (“Societas Europaea or “SE”). The ECS applies directly as law in member states, including the UK, and the DTI is introducing secondary legislation to facilitate its introduction. 3. SEs will be subject to the tax law of the country in which they are resident. It will be necessary to make some relatively minor changes to UK tax law to enable their introduction. Operative date4. The Government intends to include the necessary tax changes in Finance Bill 2005. This is a change to the timetable envisaged at the time of the 2003 Pre-Budget Report. The revised timetable is to allow time for proper consultation in the light of some possible changes in other EU legislation that might affect SEs (see paragraphs 6 and 7 below). 5. The ECS comes into force on 8 October 2004. For most purposes, SEs will be able to operate within the UK from that date within existing tax legislation. It is possible that some of the tax measures required will be announced in time to take effect from that date. 6. However, the operative date of other tax changes depends
on, the tax “Mergers Directive” (90/434/EEC). The
Mergers Directive may have some impact on the tax treatment of
the transactions
which
can be carried out to form SEs, or which SEs themselves can
enter into once they have been formed. 7. One of the proposed amendments to the MD is the addition of the SE to its scope. Other changes are proposed, including an extension of the scope of the transactions covered by the Directive. Currently it is not clear from what date the addition of the SE to the scope of the Directive and/or other changes will take effect. It could be 1 January 2005, but may be later than that. Consultation on Tax Changes8. The Government will consult on the tax changes required to allow for the formation of SEs in the UK later in 2004 when the proposals to amend the Mergers Directive are clearer. It is intended that the consultation should include draft Finance Bill clauses and a partial Regulatory Impact Assessment. If necessary, the consultation document will also set out full details of tax changes intended to take effect in advance of Finance Bill 2005. Further advice 9. If you have any questions about this change, please contact John Connor on 020 7438 7717.
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