To undertake by means of the formula of Tax exemption

Of which the tax exemption consists?

One is a contract by which a company (the franchiser), yields to another one (franchise-holder), in exchange for a commercial return (canon), right to the operation of a set of rights of industrial or intellectual property, marks, names, labels, models, rights of author, etc, for reventa of products or the benefit of services. In addition it implies the benefit continued by the franchiser of commercial or technical attendance during the use of the contract, as well as faculties of control of this towards the activity of the franchise-holder, being in force normally by pact of exclusive feature.

The purpose of this contract is to create an extensive network of distributers that facilitates the greater diffusion in the market of the goods or services of a company.

Which are their inconvenient advantages and?

Advantages
Better product distribution and services
Establishment of an ample network, without needing realizing great investments.
Entrance of a major I number of competitors, with a distribution network it uniforms and effective.
It reduces the monopolitical pressure of the great multinationals.
The franchise-holder can take advantage of the knowledge, experience, prestige and customer of the franchiser

Disadvantages
Smaller benefit by unit, since this it is shared
Sometimes, the price is very lifted
The exclusive feature which the commercial relation is put under
Difficulty to diversify and to extend the business without consent of the franchiser
Lack of freedom to organize its own business, since he is subject to the instructions of the franchiser.

Obligations of the parts

Obligations of the franchiser:
To register in the Registry of Franchisers, created to the effect by the corresponding Independent Community.
To facilitate the future to franchise-holder, 20 days before the company/signature of the contract, all the information necessary to be able to freely decide its incorporation to the tax exemption network. Mainly, the data of the franchiser, description of the sector of activity of the business, content and characteristics of the tax exemption, structure and extension of the network and essential elements in the agreement.
To incorporate new products, being improved the existing ones and allowing that the franchiser makes use of the rights of industrial and intellectual property on the same.
To facilitate in time the merchandize to the franchise-holder.
To form, to train and to give continuous technical help to the franchise-holder.
To program the prices so that one makes sure the yield and stability the business
To control stocks and the quality of products.
To respect the exclusive feature clauses.

Obligations of the franchise-holder:
To pay the established canon, that can consist of an initial amount plus a percentage on the sales and products provided by the franchiser.
To respect the instructions received in the matter of prices, quality, image and prestige.
To apply the commercial system indicated by the franchiser.
To allow to the quality controls and financiers of the franchiser.
To use the distinguishing signs, know how and the rights of intellectual property yielded by the franchiser exclusively for the operation of the tax exemption. This obligation could be effective until after the completion of the contract.
To keep secret from the data and information, coming from the franchiser, to which it has access on the occasion of the contract.
To respect the pacts of exclusive right.
Not to yield to a third party the rights and obligations that are from the agreement, except for consent of the franchiser.

Data to consider

Before establishing a tax exemption, he is advisable to realize a market study to know his operation, possibilities of expansion and success, as well as the volume of business that can generate. Thus it will be valued what percentage of the gains supposes the requested canon and the commercial and financial situation of other similar tax exemptions of the sector.

As far as the contract in himself, before signing it, he is advisable to put under it the examination of a legal expert, since from the beginning certain ends must be clear: the quality criteria, the control systems that will settle down, its regularity, the consequences of the breach of some requirement of the decided ones, the yielded measures of protection on the goods and rights. etc.

One is due to put special attention to the clauses of noncompetition, exclusive feature and confidentiality and to delimit from the beginning who and in what percentage is going to support the ordinary and extraordinary risks of the business.

Fiscal and countable aspects

For the franchiser

The income that derive from the contract of fran- quicia will integrate in their rent like income of their enterprise activity with the object of the PERSONAL INCOME TAX (if she is physical person), to the type that corresponds in each case. If one were a legal person, these rents would pay by the Tax of Societies, to 35% with general character and 30% in case of small companies whose net amount of number of businesses in the previous immediate tax period, is inferior to 250 million pesetas.

As far as the IVA, all this to type de116% must be indicated that the franchiser will have to repel to the franchise-holder the corresponding quotas of IVA, on the one hand, on sale of merchandizes (when takes place) to this last one, and on the other, to the consisting of benefit of services the technical attendance to the franchise-holder, (unless, by the character of merchandizes, these are subject to the reduced type of 7% or to the superreduced one of 4%).

From an accounting point of view, the income that the tax exemption contract generates for the franchiser consider an entrance of the activity and happen to integrate themselves in Cuenta de Pérdidas and Ganancias of the corresponding exercise.

For the franchise-holder

Whether she is physical person (subject aI PERSONAL INCOME TAX), as if she is legal person (subject to the Tax of socie- dades), the canon (royalties) who pays to fran- quiciador by the cession of the tax exemption consi- dera deductible cost, for being necessary for the activity (safe in the case of objective estimation of the IIRPF, where there are no deductible expenses).

It only remains to add that, with the object of the IVA, the franchise-holder it will have to support the quotas that to him the franquiciadador repels, being able to deduce later them with the limitations established in the fiscal norm.

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