Expert answer:Signature Assignment: Short-Term Funding

Solved by verified expert:Assignment Steps Resources: OECD Database, Corporate FinancePrepare a 12- to 15-slide PowerPoint® presentation with speaker notes requesting initial funding of $500,000 to start and run a start-up company. The proposed start-up company could be an existing business model (coffee shop, pet store, etc.) or could be something entirely new and exciting. Create the presentation in the following format, with at least one slide to cover each of the following areas: Title PageTable of ContentsExecutive SummaryInformation about the IndustryMarketing PlanCompetitor Analysis3 Year Income Statement (Profit & Loss) ProjectionsInclude your assumptions for why and how you will achieve your sales growth and what significant expenses and investments you expect to incur to achieve your revenue goals.3 Year Proposed Funding Schedule (Sources and uses of the funds received.)Break-Even AnalysisAcademic and Business References Review the following scenarios and assumption, and explain how it impacts your decision to expand:After Year 3, the investors are interested in your company expanding internationally to possibly outsource labor or to reduce manufacturing costs. What countries would you expand to first, and why? What factors would you need to consider in making this decision?What is the corporate tax rate in the countries you are considering expanding your business to, and how will that affect your decision to expand globally? (Use OECD Database or another resource to determine the corporate tax rate).The investors want to see a decision tree detailing the decisions you would make if you received $300K now and $200K at the end of three years instead of $500K up front.The investors would like your team to provide advantages and disadvantages of using debt financing versus selling company stock to raise capital for growth.Briefly explain the venture capital process. Does it make sense for your company to raise funds through venture capital? Format your presentation consistent with APA guidelines.
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OECD TAX DATABASE
EXPLANATORY ANNEX
PART II
TAXATION OF CORPORATE AND CAPITAL
INCOME
(Document updated October 2016)
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Table of contents
II.1. BELGIUM
II.1. CANADA
II.1. CHILE
II.1. FRANCE
II.1. GERMANY
II.1. GREECE
II.1. HUNGARY
II.1. ISRAEL
II.1. ITALY
II.1. LATVIA
II.1. LUXEMBOURG
II.1. MEXICO
II.1. NETHERLANDS
II.1. NORWAY
II.1. POLAND
II.1. SLOVAK REPUBLIC
II.1. SLOVENIA
II.1. SWITZERLAND
II.1. UNITED STATES
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II.2. BELGIUM
II.2. CANADA
II.2. CHILE
II.2. CZECH REPUBLIC
II.2. HUNGARY
II.2. ISRAEL
II.2. ITALY
II.2. LATVIA
II.2. MEXICO
II.2. NETHERLANDS
II.2. NORWAY
II.2. PORTUGAL
II.2. SLOVAK REPUBLIC
II.2. SPAIN
II.2. UNITED KINGDOM
II.2. UNITED STATES
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II.3. CANADA
II.3. GERMANY
II.3. LUXEMBOURG
II.3. KOREA
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II.3. PORTUGAL
II.3. SWITZERLAND
II.3. UNITED STATES
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II.4. AUSTRIA
II.4. BELGIUM
II.4. CANADA
II.4. CHILE
II.4. FINLAND
II.4 FRANCE
II.4. GERMANY
II.4. GREECE
II.4. HUNGARY
II.4. IRELAND
II.4. ISRAEL
II.4. ITALY
II.4. KOREA
II.4. LATVIA
II.4. MEXICO
II.4. NETHERLANDS
II.4. NORWAY
II.4. PORTUGAL
II.4. SLOVAK REPUBLIC
II.4. SLOVENIA
II.4. SWITZERLAND
II.4. UNITED STATES
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PART II. TAXATION OF CORPORATE AND CAPITAL INCOME
PART II, TABLE 1
CORPORATE INCOME TAX RATES
II.1. BELGIUM
The effective CIT rate can be substantially reduced by an allowance for corporate equity (ACE). The
amount of this allowance is neither related to the behaviour nor to the results of the company, but depends
only upon the amount of qualifying corporate equity and the yield on long term government bonds. There
is however an upper limit. The original upper limit (of 6.5 % for non-SMEs) was first temporarily reduced
to 3.8% in 2010 and 2011 and then permanently lowed to 3% from 2012 onwards. The effectively applied
ACE-rates are listed in the table below. Stricter carry forward rules concerning unused ACE-deductible
amounts were implemented from 2013 onwards.
Notional
interest
rate (ACErate)
Non-SMEs
Small and
medium
enterprises
(SMEs)
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
3.442%
3.781%
4.307%
4.473%
3.8%
3.425%
3%
2.742%
2.63%
1.63%
1.131%
3.942%
4.281%
4.807%
4.973%
4.3%
3.925%
3.5%
3.242%
3.13%
2.13%
1.631%
The lower the return on equity before tax, the lower the effective tax rate due to this allowance for
corporate equity. E.g. the effective tax rate is only half the nominal tax rate when the return on equity
before tax is twice the notional interest rate. The following table illustrates the impact of the ACE on the
effective tax rate when the gross return on equity equals respectively 2, 3 or 4 times the notional interest
rate.
non-SMEs 2016
Gross return on equity (gROE)
gROE / ACE-rate
ACE-rate 2016
Tax base
Nominal CIT rate
CIT
Net profit
without ACE
2.262
gROE = 2 ACErate
2.262
gROE = 3 ACErate
3.393
gROE = 4 ACErate
4.524
2
0
2.262
33.99%
0.769
1.493
2
1.131
1.131
33.99%
0.384
1.878
3
1.131
2.262
33.99%
0.769
2.624
4
1.131
3.393
33.99%
1.153
3.371
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Effective CIT rate
33.990%
16.995%
22.660%
25.493%
II.1. CANADA
The representative sub-central government tax rate is an average of provincial corporate income tax
rates, weighted by the provincial distribution of the federal corporate taxable income.
A federal surtax increased the general federal corporate income tax rate by 1.12 % between 1995 and
2007. Budget 2006 eliminated this surtax for all corporations as of January 1, 2008.
II.1. CHILE
Business profits made by individuals or legal entities resident or domiciled in Chile are taxed via the
First Category Tax (FCT) levied at a tax rate of 24% in 2016 (in the case of taxpayers adhered to the totally
integrated with income attribution tax regime, an income tax rate of 25% will apply from 2017 onwards;
for taxpayers adhered to the partially integrated income tax system, a tax rate of 25.5% will apply in 2017
and 27% will apply from 2018 onwards). It applies to profits from any commercial activity whether the
enterprise is a legal entity, a branch, a permanent establishment of a foreign company, sole proprietorship
or an individual. The tax base is defined as total income less the costs and expenses required to produce it
taking into account inflation adjustments. A loss incurred may be carried back and/or forward and
deducted against profits without time limit. – It may also be offset against previous retained earnings in a
kind of carry-back.
Individuals and legal entities that are not resident or domiciled in Chile are generally taxed on any
income derived from Chilean sources at a standard tax rate of 35% (lower rates apply for some types of
income and are available under double taxation agreements).
II.1. FRANCE
The rates in Table II.1 include surcharges, but do not include the local business tax (Contribution
économique territoriale, which replaced the former local business tax, the Taxe professionnelle from
January 1st 2010), the 3 % additional contribution on distributed profits, the temporary surtax applied to
250 million
(rate of 5% in 2011 and 2012 and 10,7% onwards) abolished in 2016, and the turnover-based solidarity tax
(Contribution de Sociale de Solidarité sur les Sociétés). The Contribution Sociale de Solidarité sur les
Sociétés is levied at a rate of 0.16% (0.13% plus a surcharge of 0.03%) of the turnover of companies,
excluding VAT and is deductible for income tax purposes. [1]
The standard corporate income tax rate is 33.33% [2]. It is increased by a 3.3% surcharge (Contribution
Sociale sur les Bénéfices) for companies with a turnover of at least EUR 7,630,000 on the part of their
liable tax payments in excess of EUR 763,000 – resulting in an effective tax rate of 34.43% for companies
that have profits above EUR 2,289,000. Since 2011, many reforms have broadened the corporate tax base.
The carry-back of losses has been reduced from three to one year and the carry-forward of losses limited to
60 % of the income above EUR 1 million taxable profit, and eventually to 50 % as from 2012.
Furthermore, the deduction of net financial expenses has been limited to 85 % of net interest charges for
[1]
The French government has recently announced that both the temporary surtax and the turnover-based solidarity
tax will be phased out by 2017
[2]
The French government has recently announced that the standard corporate income tax rate will be gradually
lowered to 28% by 2020, starting in 2017
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2012 and 2013 fiscal years (only when they exceed EUR 3 000 000) and 75 % since 2014. Finally,
exemptions on capital gains on sale of affiliates have been reduced.
The Contribution économique territoriale (CET) is composed of two separate taxes, the corporate
property contribution (cotisation foncière des entreprises, or CFE) and the contribution for value added
(cotisation sur la valeur ajoutée des entreprises, or CVAE). Like the former local business tax (the Taxe
professionnelle, abolished in 2010), this tax applies to branches and subsidiaries established in France. The
value added).
The CFE is based on the value of owned or leased office premises. The productive investments are no
longer taxed, as it was with the previous local business tax, i.e. equipment and movable property which
include machines, tools, movable property and equipment. The CFE is calculated by multiplying the
cadastral value of the premises by a certain coefficient, assessed annually by the local authorities. The local
authorities also set the minimum contribution payable by the companies in their jurisdiction.
The contribution for value added by businesses (CVAE) is assessed on the value added companies
realize during the previous calendar year or the last 12-month financial year if this does not coincide with
the calendar year. It applies to firms concerned by the CFE with turnover exceeding EUR 152,500. Only
companies with annual pre-tax turnover of over EUR 500,000 must pay the CVAE, but all have to declare
the value added created during the fiscal year. The CVAE rate is theoretically 1.5% for companies with an
annual pre-tax turnover of over EUR 50 million. Below this amount, companies are subject to a reduced
CVAE rate, adjusted according to the level of the company turnover. The assessed value added is itself
capped, depending on the case, at 80% or 85% of t
is below or above EUR 7,600,000).
II.1. GERMANY
The representative sub-central government corporate income tax rate is for Berlin. In the years
between 2000 and 2007 this rate was 0.05 (general rate) * 410 % (local multiplier (
%.
As the local business tax was deductible from its own base, the effective rate was 20.5 / 120.5 = 17 %.
This implies that the effective central government corporate income tax rate in 2007 was 26.375 % *
(1-0.17) = 21.9 %. The combined corporate income tax rate in 2007 was therefore 38.9 %, as it also was in
2006, 2005, 2004, 2002 and 2001. In 2003, the effective central government corporate income tax rate was
27.96 % * (1-0.17) = 23.2 % due to a temporary increase in the tax rate in order to finance the repair of the
damages caused by the major floods in 2002. The combined corporate income tax rate in 2003 was
therefore 40.2 %. In 2000, the effective central government corporate income tax rate was 42.2 % * (10.17) = 35 %. The combined corporate income tax rate was therefore 52 %.
With the Corporate Tax Reform in 2008 the representative sub-central government corporate income
tax rate was changed to 14.35 % (0.035 general rate * 410 % multiplier (
). Local business tax is
no longer deductible from its own base. The central government corporate income tax rate was reduced to
15 %. The combined corporate income tax rate is now at a level of 30.18 %.
II.1. GREECE
Corporate Taxation
According to the Greek Income Tax Code in force, which was enacted with the Law 4172/2013 and
replaced the previous Code (Law 2238/1994), the tax rate imposed on the worldwide income acquired by
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legal persons and legal entities is 26%. This rate applies to income derived during the tax years beginning
on or after 1.1.2014. For additional information concerning previous years, see explanatory notes for table
II.4.
According to the Law 4334/2015 (Art. 1), the corporate income tax rate was increased to 29%. This
rate applies to profits derived during the tax years beginning on or after 1.1.2015.
Legal persons and entities that are subject to CIT include:
a.
b. Private companies that were established in Greece or abroad (partnerships) and keep doubleentry books
c. Non-profit legal persons governed by public or private law and established in Greece or
abroad, that keep single-entry books, including all types of associations and foundations,
except any income derived in pursuit of the fulfillment of their mission, which is not subject to
tax,
d. Cooperatives and Associations that keep double-entry books,
e. Civil law societies, civil profit or non-profit companies, joint-stock or silent companies, that
keep double-entry books, provided that they are engaged in business activities,
f. Joint ventures that keep double-entry books
g. Legal entities (as defined in Art. 2 of the Income Tax Code) that keep double-entry books
and are not included in the previous cases.
Profits from business activity derived by Agricultural Cooperatives and producer groups are subject to
a 13% tax rate.
The Law provides certain tax exemptions. For instance, the Greek State, the Bank of Greece, as well
as the Holding Companies, the Undertakings for collective investment in transferable securities
(UCITS) established in Greece or in another EU or EEA member-state and the Hellenic Republic
Asset Development Fund are fully exempt from taxation.. Government bodies are only liable to tax in
respect of income from capital and surplus from capital transactions. A special tax regime (tonnage tax)
applies for the operation of ships under Greek flag. Additionally, tax exemption applies in any income
derived in Greece by foreign legal persons or individuals according to the special provisions of a Double
Taxation Convention or a Multilateral International Convention or reciprocity conditions (NATO, UN,
diplomatic missions etc.).
Distributed profits are subject to a withholding tax of 10%. In case of a parent-subsidiary relationship,
dividend payments and profit distributions paid by subsidiary permanent establishment companies to their
parent companies established in another EU Member-State shall be exempt from withholding tax provided
that the conditions set forth in Art. 63 ITC are fulfilled (application of the EU Parent-Subsidiary
Directive).
Partnerships, joint ventures – other legal entities
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(2000-2012)
TAX RATES FOR LEGAL ENTITIES
(except for those subject to corporate income taxation)
Type of legal person
Limited partnership
(EE) & Unlimited
general partnership
(OE), Civil law
communities
Joint ventures, Civil
companies, , Silent
partnerships and
Participation
companies
Legal services
companies of L.518/89,
Notary companies of
L.284/93
1/1/2000
31/12/2004
1/1/200531/12/2005
1/1/200631/12/2006
1/1/200731/12/2007
1/1/2008 31/12/2009
1/1/201031/12/12
24%
22%
20%
20%
20%
35%
32%
29%
25%
25%
25%
25%
25%
25%
25%
25%
25%
25%
Partnerships under the Greek Law may be either general or limited partnerships. From 2010 to 2012
the above mentioned tax rate of 20% was imposed on the profits relating to partners who were individuals,
following the deduction of their entrepreneurial fee, whereas the profits corresponding to legal entities
partners were taxed at a 25% rate.
The Law 4110 /2013, as replaced by the Law 4172/2013 brought significant changes to the tax regime
of partnerships, civil law societies, silent partnerships, participation companies, joint-ventures, legal
services and notary companies, which from 1/1/2013 onwards are taxed with the following tax schedule:
Partnerships, joint ventures
Income
bracket
50.000
Excess
Tax rate
(%)
26%
and other legal entities keeping single entry accounting books
(2013-2016)
Tax bracket
13.000
Total amount of
50.000
13.000
33%
The tax treatment of the legal entities that keep double-entry books is now aligned with that of
corporations (SAs, LLCs and PCCs), which means that the total amount of their net profits is taxable at the
level of the entity (taxation at the level of the entrepreneur is abolished), whereas a 10% withholding tax is
imposed on distributed profits.
All the above rates are decreased by 40% for income earned from business activities in Greek islands
with less than 3.100 inhabitants.
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II.1. HUNGARY
The rates do not include a turnover-based local business tax. Local governments are entitled to levy a
local business tax on corporations in their jurisdiction, which is generally levied on the net sales revenue
less the revised total sum of the acquisition costs of goods sold and the value of mediated services,
subcontractor fees, material costs and costs directly related to R&D activities. The maximum rate is 2 %.
Some local governments grant exemptions for small businesses.
The rates do not include the innovation tax as well. This tax is levied on the same basis as the local
business tax. The innovation tax rate was 0.2 % in 2004, 0.25 % in 2005, and is 0.3 % from 2006. Small
and micro enterprises are exempted from this tax.
As from 2007 credit institutions are obliged to pay 5 % surtax on interest income from loans
associated with state subsidies. This tax is excluded from the table.
As from 2009 corporations supplying energy products are obliged to pay a surtax of 8 % on the basis
of (adjusted) profit before taxation. As of 1 January 2013 the rate of this surtax is 31%. This tax is
excluded from the table.
In 2005 and 2006 credit institutions and financial enterprises were obliged to pay a special tax on their
interest income (tax rate was 6 %) or on the profit before corporate income tax (tax rate was 8 %). This tax
is excluded from the table.
In the period of 1 September 2006-31 December 2009, taxpayers were obliged to pay a surtax of 4 %
on the basis of (adjusted) profit before taxation.
As from September 2010, financial corporations are obliged to pay an extra levy. Different rules have
been applicable to institutions engaged in different activities.
A temporary sectoral crisis tax was levied in years 2010-12 the energy, telecommunications and
consumer goods retail sectors. The crisis tax was levied on the net sales turnover realized by corporations
in the specific taxable sectors.
II.1. ISRAEL
The following table shows the historical tax rates for tax on the combination of wages and salaries and
profits that the Financial Institutions pay in lieu of VAT.
Period
1 January 2000 -14 June 2002
15 June 2002- 29 February 2004
1 March 2004- 30 June 2006
1 July 2006- 30 June 2009
1 July 2009 31 Dec 2009
1 January 2010 31 Aug 2012
1 Sept 2012-31 May 2013
1 June 2013-30 September 2015
1 October 2015
Tax rate
(percent)
17
18
17
15.5
16.5
16.0
17.0
18.0
17.0
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II.1. ITALY
Italian Local Income Tax
ILOR
Law no.825 of 1971 introduced local income tax.
This tax was applied:
in the case of individuals wherever resident, on income accrued within the territory of the State,
excluding income from employment calculated for personal income tax purposes;
In the case of legal persons, on the overall net income calculated for the purposes of corporate
income tax.
Although initially the revenue was allocated to local authorities, starting from 1974 the income was
included in the State budget and the tax was no longer considered as local.
The tax was deductible for the purposes of personal income tax, while for the purposes of corporate
income tax, it was deductible from 1971 to 1990, partially deductible in 1991 and non-deductible until its
abolition in 1998.
This tax was abolished with the introduction of IRAP (Regional Tax on Productive Activities).
The Dual Income Tax (DIT)
The Dual Income Tax (DIT) is a special regime for the taxation of business income introduced with
legislati …
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