TaxTMI 
TaxTMI 
Treatment of expenditure incurred for formationof 100% subs
22 Jun 2015 
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Formation expenses classification: costs to establish a foreign subsidiary may be capital or revenue; accounting standard treats preliminaries as revenue.
Classification of costs to establish a wholly owned foreign subsidiary depends on factual determination of capital vs revenue classification and whether expenditures were for the taxpayer's business; the taxpayer carries the onus of proof. Identified expenditures include legalisation, licence, professional and visa fees and share capital transfers. Accounting guidance on intangible assets treats preliminary legal and secretarial establishment costs as revenue expenses, which informs accounting treatment though each case requires facts-based assessment. (AI Summary)
Classification of costs to establish a wholly owned foreign subsidiary depends on factual determination of capital vs revenue classification and whether expenditures were for the taxpayer's business; the taxpayer carries the onus of proof. Identified expenditures include legalisation, licence, professional and visa fees and share capital transfers. Accounting guidance on intangible assets treats preliminary legal and secretarial establishment costs as revenue expenses, which informs accounting treatment though each case requires facts-based assessment. (AI Summary)
We haveestablised new 100% subsidiary company inUAE.for thispurposewe haveincurredexpensesin India and use Pl guide for accountingtreatment