Association en participation can assist with the assignment of a portion of profits or losses of a business.
In terms of the Maltese Companies Act, an association en participation is a contract whereby a person assigns to another person, for a valuable consideration contributed by the latter, a portion of the profits and losses of a business or of one or more commercial transactions.
Saving any agreement to the contrary, the associating party may not have other associates in the same business or transactions without the consent of his associates.
An association en participation shall be constituted by an instrument in writing although any such association so constituted shall not be subject to any other formalities prescribed in regard to partnerships and it shall not have a legal personality distinct from that of its members.
In regard to third parties the ownership of, or other rights over, a thing contributed by an associate, rights shall be vested in the associating party. In the relations of the parties among themselves, saving any agreement that a thing contributed is to be restored in kind, the associate shall, on the termination of the association, be entitled to the reimbursement of the value of his contribution.
The management of the business or of the transactions in respect of which the association was formed shall vest only in the associating party. Provided that the associate may, where it is so agreed and to the extent agreed, supervise such business or transactions. In terms of law, the associate is also entitled to an account of any transaction that is completed and where the association lasts for more than one year, to an annual account of the management of the business or transactions in respect of which the association was formed.
It is also to be noted that unless otherwise agreed, the associate shall bear the losses in the same proportion in which he partakes in the profits, and his liability shall be limited to his contribution.
In relation to the tax treatment of an association en participation, the association en participation’s tax obligations would be those of the parties to the arrangement and are taxed at the hands of each of the parties involved.
At KPMG our specialised team is able to set up an association en participation within three business days from the receipt of all due diligence documentation and funds.
With respect to the tax treatment of association en Participation, the association en Participation tax obligations would be those of the parties to the arrangement. Thus, depending if the party is a company or an individual such arrangement would be taxed at the hands of each of the parties involved.
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