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How are changes to the founding documents formalized?
How are changes to the founding documents formalized?
The company was founded by three shareholders. One of the co-founders, who currently holds a 34 percent stake, wants to donate his share to the other two co-founders in equal shares. How is this issue regulated?
The State Tax Service under the Ministry of Economy reported that in order to register any changes made to the constituent documents of commercial and public legal entities, as well as any subsequent changes to the facts recorded in the state register of legal entities, an application must be submitted no later than 40 business days from the date of the change. The application must indicate the change that has occurred and submit documents confirming that change. Documents are submitted during state registration of the fact of a change in the information in the charter of a commercial and public legal entity. You can find the list of documents here https://www.taxes.gov.az/az/post/666
At the same time, a change of founder in a resident legal entity means the transfer (sale) of shares by the founders of that legal entity to other founders. Thus, according to Articles 96.5 and 104.6 of the Tax Code, when a person's participation in the authorized capital or shares is presented at a price higher than the participation in the net assets or the proportional value of the shares, the difference between the actual presentation price and the nominal value of the participation in the authorized capital or share, and when the participation in the net assets or shares is presented at a price lower than the participation in the net assets or the proportional value of the shares (at a discount), the difference between the proportional value of the net assets and the nominal value of the participation in the authorized capital as of the date of conclusion of the purchase and sale agreement is taxable income. If the participation in the shares or shares were purchased at a price higher than the nominal price, the expenses deducted from income during the presentation of those participation in the shares or shares are taken into account at the actual purchase price of these assets.
If the founder is an individual, he is subject to tax at a rate of 14 percent in accordance with Article 101.2 of the Tax Code, and if he is a legal entity, he is subject to tax at a rate of 20 percent in accordance with Article 105.1 of the Tax Code.
Based on the above, if the participation share is provided at a price lower than the proportional value of the net assets to the participation share (free of charge), the difference between the proportional value of the net assets and the nominal value of the participation share in the authorized capital as of the date of conclusion of the donation agreement is subject to income tax at a rate of 14 percent in accordance with Article 101.2 of the Tax Code.
In addition, we would like to inform you that, according to the tax exemptions specified in the Tax Code, 50 percent of the income from the provision of the participation share or stock owned by the taxpayer for at least 3 (three) years is exempt from income and profit tax.
The company was founded by three shareholders. One of the co-founders, who currently holds a 34 percent stake, wants to donate his share to the other two co-founders in equal shares. How is this issue regulated?
The State Tax Service under the Ministry of Economy reported that in order to register any changes made to the constituent documents of commercial and public legal entities, as well as any subsequent changes to the facts recorded in the state register of legal entities, an application must be submitted no later than 40 business days from the date of the change. The application must indicate the change that has occurred and submit documents confirming that change. Documents are submitted during state registration of the fact of a change in the information in the charter of a commercial and public legal entity. You can find the list of documents here https://www.taxes.gov.az/az/post/666
At the same time, a change of founder in a resident legal entity means the transfer (sale) of shares by the founders of that legal entity to other founders. Thus, according to Articles 96.5 and 104.6 of the Tax Code, when a person's participation in the authorized capital or shares is presented at a price higher than the participation in the net assets or the proportional value of the shares, the difference between the actual presentation price and the nominal value of the participation in the authorized capital or share, and when the participation in the net assets or shares is presented at a price lower than the participation in the net assets or the proportional value of the shares (at a discount), the difference between the proportional value of the net assets and the nominal value of the participation in the authorized capital as of the date of conclusion of the purchase and sale agreement is taxable income. If the participation in the shares or shares were purchased at a price higher than the nominal price, the expenses deducted from income during the presentation of those participation in the shares or shares are taken into account at the actual purchase price of these assets.
If the founder is an individual, he is subject to tax at a rate of 14 percent in accordance with Article 101.2 of the Tax Code, and if he is a legal entity, he is subject to tax at a rate of 20 percent in accordance with Article 105.1 of the Tax Code.
Based on the above, if the participation share is provided at a price lower than the proportional value of the net assets to the participation share (free of charge), the difference between the proportional value of the net assets and the nominal value of the participation share in the authorized capital as of the date of conclusion of the donation agreement is subject to income tax at a rate of 14 percent in accordance with Article 101.2 of the Tax Code.
In addition, we would like to inform you that, according to the tax exemptions specified in the Tax Code, 50 percent of the income from the provision of the participation share or stock owned by the taxpayer for at least 3 (three) years is exempt from income and profit tax.