Tax Sharing And Funding Agreements

Under the new International Financial Reporting Standards, tax groups must ensure that they have a tax financing agreement that applies an “acceptable allocation method” according to the Urgent Issues Group`s (UIG) 1052 Tax Consolidation Accounting interpretation. If the tax financing agreement does not provide for an “acceptable allocation method”, group members may be required to account for dividends and capital distributions or capital injections considered capital deposits in their accounts. The proposal to introduce an ITSA in the context of GST is reflected in the Executive Board`s report Review of Legal Framework for the Administration of the Goods and Services Tax (December 2008) (the report). In that report, the Tax Commission recommended, inter alia, that members of a GST group or a GST joint venture should be able to enter into an indirect tax sharing agreement4 In Press Release No. 42 of 12 May 20095, the Government accepted this recommendation. . . .

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