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Enron Mail |
Mike:
The entities that have been set up in Argentina to conduct physical gas and electricity trading will remain in place and will most likely be the entities that will execute transactions. A quick analysis of the tax issues that I see are as follows; 1. Services performed out of Brazil on behalf of the Argentine companies will have to be paid for on an arm's length basis by the Argentine companies. There will likely be a high withholding tax on such payments unless there is a treaty provision between Argentina and Brazil that exempt or reduce the withholding. I will check on the treatment under the treaty. 2. The issue of where the trading activity is managed will also be an issue. If only back office support is provided out of Brazil and payment is handled per the discussion above, there will likely be no issue with subjecting the actual trading transactions to tax in Brazil. However, if the trading activity itself is done out of Brazil, there are tax issues that must be addressed. I will begin addressing these general issues with local counsel. However, as soon as you can provide details of how the operations will be consolidated, I can provide more precise guidance. Regards Lynn To: Lynn Aven/NA/Enron@Enron, Brent Hendry/NA/Enron@Enron, Andrea Calo/SA/Enron@Enron, Scott Mills@EES, Luis Juarros/SA/Enron@Enron, Allen W Ueckert/NA/Enron@Enron, Guillermo Canovas/SA/Enron@Enron, Cristian Folgar/SA/Enron@Enron, Rodolfo Freyre/SA/Enron@Enron, Julian Poole/SA/Enron@Enron cc: Joe Kishkill/SA/Enron@Enron, Orlando Gonzalez/SA/Enron@Enron, Miguel Padron/NA/Enron@ENRON, Remi Collonges/SA/Enron@Enron, Brett R Wiggs/SA/Enron@Enron, Mark Taylor@ECT, Carlos Bastos/SA/Enron@Enron Subject: Argentina Trading in Brazil We are in the process of working through the regional objective of consolidating intellectual capital I.E. we want Argentina trading activity to be consolidated into the Sao Paulo trading operations. 1 What are the tax, legal, regulatory, accounting and operational consequences of this move? 2 Are there any commercial restrictions I need to be aware of? 3 Are there any barriers to payments and receivable management? 4 Could accounting be managed out of Brazil? 5 Are there any Argentine banking requirements that would require the payables and receivable function to remain in Argentina? 6 Are there any conflicts with Brazilian law or banking regulations? 7 Is there any additional taxation exposure such as in the case of the US as we decrease Argentina functional independence? 8 Are there any Argentine regulatory conflicts with operating out of Brazil? 9 Are there any Argentine legal conflicts with operating out of Brazil? 10 How do we and can we operate Enron America del Sur S.A. and Enron Comercializadora de Energia S.A. out of Brazil? 12 If necessary what functions need to remain in Argentina to resolve any legal, regulatory, accounting or tax issues? 13 Can the stack managers be live in both Argentina and Brazil to resolve any identified issues? 14 Are there any legal or tax advantages to the Brazilian operational structure? 15 Mostly are there any fatal flaws I need to be aware of? Under this structure the stack managers for the following current and future products will ideally be operated in Brazil: Arg Gas Onshore Physical Arg Power Onshore Physical Pending local derivatives company The stack manager for Arg Power, Offshore, Financial will continue to be operated from North America as designed and agreed upon. I need a quick readers digest version of what I am up against here. We can get into more details as we proceed. Please advise ASAP (Monday morning if possible with the short version) so I can proceed with the best way to accomplish this organizational objective and corresponding structure. MFG
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