Problems with and Remedies for a Consolidated Return
Asian Tax Journal Vol. 10 No. 1 (2009), pp. 223-248
Abstract
This study evaluates and seeks remedies to improve the consolidated return system which has been introduced at the end of 2008 under the Corporate Income Tax Law as follows;First, in determining a completely controlled subsidiary, the term "total outstanding stock" should not include non－voting, non－cumulative, non－participating preferred stock, and a transfer of stock with a condition of repurchase or a option to repurchase is not regarded as a transfer of ownership of the stock. Second, a limitation on the deduction of loss arising after a subsidiary was controlled completely but before a consolidated return was elected, and loss arising within 4 years after a subsidiary was controlled completely should be eliminated. Instead, a limitation in relation to built－in gain or loss and a limitation on the loss carryback should be introduced. Third, recaluculation of income arising from related party transactions should not apply for a consolidated retrun, stock basis adjustments are required for the income or loss of a subsidiary, and minimum tax and foreign tax credit of a consolidated group should apply on a consolidated basis. Fourth, the difference between allocated tax amount under a consolidated return system and allocated tax amount in accordance with tax sharing agreement is treated as contribution or distribution.
Keywords
- Consolidated Return
- Loss Carryforwards
- Built－in Gain(Loss)
- Single Entity Theory
- Intercompany Transaction
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