To M.B., mentor and friend.
One for all, all for one.
The Three Musketeers (1844)
Athos, Porthos, Aramis
and D’Artagnan, protagonists of the novel written by Alexandre Dumas, had clear
that if there was a way to defeat the vile Cardinal Richelieu, that was
sticking together through thick and thin. Throughout their story, they realized
that their strength resided in their unity: acting as a single entity, they
could accomplish things they could not even imagine acting on their own.
Construction and
engineering companies often find themselves in a similar situation in a bidding
process when they are going solo:
they may lack the know-how of part of the works, or they are just not large
enough –as far as technical or financial requirements are concerned- to be
considered a serious bidder. In such cases, two or more companies may decide to
join their forces, not to overpower the Cardinal’s musketeers, but to be awarded
a contract. The most common vehicle to this is a Joint Venture.
Joint ventures (JV) are widely used all around the globe to
carry out and execute significant works. They are mentioned in the Directive 2004/18/EC of the European
Parliament and of the Council of 31 March 2004 on the coordination of
procedures for the award of public works contracts, public supply contracts and
public service contracts as
a valid way to bid in a tender. They exist as an entity as long as the
works last, and in the countries we are considering (as well as the majority of
jurisdictions) they have no legal personality, making the partners liable for
any responsibility incurred by the JV. And basically there is where their
common attributes finish. From there, revenue distribution to partners, duties
and responsibilities, even the way their name is formed varies from
jurisdiction to jurisdiction. Let’s take a look at them:
SPAIN
Law
18/1982 regulates UTEs (Unión
temporal de empresas) configuring a vehicle with no legal personality, but
with relevance in terms of taxation. In fact, the aforementioned law does not
fully regulate UTEs from a commercial law point of view, but their tax
implications. It is fair to say that
back in 1982, the main purpose of this regime was to favor the internationalization
of the construction and industrial sectors. Its main incentive was to consider
exempt revenue obtained outside Spain. This is just another reason that
explains why Spanish companies traditionally rank high in the standings of
global constructors (link here)
It is relevant to note that all the characteristics we are
going to mention about UTEs are oriented to meet the requisites that the tax
legislation demands UTEs to be eligible for tax benefits.
Their members
–companies or individuals, Spanish or foreigners- use the UTE as a vehicle to
perform a specific service or execute a particular work. The legal
responsibility of the members is always under the form of solidarity. The UTE
has to be registered in a public document before a notary and inscribed in the
Special Registry for UTEs. The members also appoint a manager, who will be in
charge of representing the entity with regard to third parties, being
responsible internally.
A UTE has its own accounting, can hire personnel, issue
invoices, open bank accounts, sign contracts with the client, and more
importantly, file its own taxes.
There are not special features as far as indirect taxation
is concerned (IVA), whereas the CIT
Law wording has some interesting aspects to be examined. A UTE will file its yearly CIT form 200 as if
it was a taxable person, but will not pay any taxes as it will allocate its taxable
base (positive or negative) to its Spanish members the following year,
according to their participation share.
This mechanism implies another tax advantage that is a
one-year deferral in the taxation of this revenue as the member will allocate
on its CIT the taxable base of the UTE in the previous year.
FRANCE
As opposed to Spanish UTEs, Groupements momentanés d’entreprises (GME) are less autonomous and
more dependent on their members (called cotraitants).
Also, their regulation stems from the freedom of contract, without a specific
law defining them.
Thus, GMEs are arranged as a private contract, in which the
parts have to decide whether the responsibility will be individual (every
member is responsible for its own part of the work) or solidary. Also, members
will have to determine the scope and duration of the works, and more
importantly, a representative.
Given that GMEs are totally dependent on their members, a
representative has to be appointed amongst them. Its main duties are
representing the GME, being the only interlocutor between the client and the
members. It makes the bids and signs the contracts.
The form of payment may vary, depending on the type of GME
chosen. In a GME with individual responsibility, payment is made to each member
separately. In a solidary GME, the client usually makes its payments to a
common bank account; the representative is responsible to distribute it to the
rest of the members in accordance to their participation share.
It is relevant to remark that a GME cannot hire personnel
(each member keeps the direction and surveillance of their own workers), nor
open bank accounts. Invoicing is made through its members.
ITALY
The Italian Public
Contracts Law has a different approach to Raggrupamenti Temporanei di Imprese (RTI, also known as Associazioni
Temporanei di Imprese, ATI),
establishing a difference between:
- Horizontal RTI: partners execute the same kind of work, in terms of complexity and relevance. Again, there is a representative (mandatario), who will have a minimum participation share of 40%. The rest of the partners will have a minimum participation share of 10%. Jurisprudence has stated that there must be a correlation between the participation share and the effective work. Legal responsibility between the members of the RTI is under the rules of solidarity.
As far as taxation is concerned, the lack of law provisions
in this topic leads us to jurisprudence and sentences. Basically, there are two
scenarios. In case the RTI carries out works that, according to the tax
authorities are indivisible, a taxable person would be formed for CIT and VAT
purposes. In case the nature of the works allows them to be divided, no taxable
person is formed, and the partners will allocate its taxable base according to
their participation share.
