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Risk Analysis Economies Of Central And South America.

2157 words - 9 pages

The economies of Central and South America offer attractive business opportunities. However, these are accompanied by a set of risks, which businesses need to understand and manage effectively. In this paper we will discuss a business risk analysis of MBS Inc in the Venezuelan market.Taxation and Double Taxation Risks.The accounting standards adopted by The Republic of Venezuela coincide with International Accounting Standards (USDT, 2004). MBS Inc.'s own financial statements will have to adhere to International Accounting Standards to avoid double taxation. The Republic of Venezuela foreign investment legislation provides general assurances on the rights of foreign investors to remit profits and dividends from their investments in the Republic of Venezuela (ANDEAN Community, 2004). However, in some cases these rights are subject to currency tax and export restrictions, and no guarantee can be given that all profits will be able to be remitted (ANDEAN Community, 2004). To aid these restrictions, Companies use partnerships in both domestic and international tax-planning structures as a result of the increase in global commerce. A number of these tax structures incorporate a multitude of both domestic and foreign partnerships (U of F, 2004). MBS Inc uses the same strategies. By opening subsidiary companies in Venezuela and Europe, modeled after our subsidiaries MBSUSA and MBSUK, MBS Inc. should be able to successfully maneuver around the double taxation threat.Taxation in The Republic of VenezuelaTaxable Base.Taxable profit is determined based on adjusted gross income reduced by deductible costs and tax depreciation. For corporate income tax purposes, adjusted gross income means gross income (i.e. a company's world-wide income) received (accrued) during the reporting period either in cash, in kind or in intangible form. Gross income includes total income from the sale of goods (work, services), fixed assets and gratuitous transfers (McGraw-Hill & Irwin, 2003).Foreign Tax Credit.A tax credit system is effective to avoid double taxation of income derived from abroad. A credit is allowed for foreign taxes paid up to the amount of tax due on such income, provided there is a tax treaty with the state in which the tax was paid and proof of taxes paid can be obtained (USDT, 2004). The tax credit system effectively avoids the potential for double taxation of income derived overseas. Taxation law in The Republic of Venezuela is developing and is taking the shape of its northern neighbors. It is possible therefore that the current interpretation of the law or understanding of current practices may change which would, in turn, affect the Company's taxation as well (USDT, 2004).Legal Risks.Future legislation and the resulting impact on the Company cannot be fully anticipated, though there is significant political support for legislative changes that will further improve The Republic of Venezuela growing market economy (USDT, 2004).An Inside Look At MBS...

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