This paper explores the preferential tax treatments of social enterprises in corporations or limited liability partnership under the Commercial Act, the main purpose of which is to disburse their earnings & profits for entities trying to accomplish social purposes. The reviewed results are as follows.
First, tax deferral or exemption treatments on contributions in kind are to be applied to investors in social enterprises.
Second, the income on social enterprise level may as well not be subject to tax.
Third, social enterprises had better not be under the burden of acquisition tax and property tax incurred in the acquisition or hold of business properties.
Fourth, social enterprises don"t have to put aside earnings reserve.
Fifth, earnings surplus should not be added to current earnings in the calculation of distributable earnings & profits, but net operating losses should be deducted.
Sixth, the existences of debts to social enterprises and identities of creditors are to be scrutinized.
Seventh, social enterprises need to be empowered to sell certified emission reductions for improving their earings and the related tax issues should be reviewed along with it.
Eighth, dividends from social enterprises may as well not be subject to tax on the investors" level.
Ninth, interests income from social enterprises may as well not be subject to tax on the investors" level as well.
Tenth, social enterprises may adopt the tranching structures for improving senior shareholders" financial returns and the related tax issues should be reviewed along with it.
Eleventh, Government need to grant tax credits or subsidies to investors in case social enterprises go beyond specific level set with respect to accomplishments of social impacts.
Twelfth, non-profit organizations investing in social enterprises are allowed for more generous tax treatments with regard to limitations on inclusion of "Reserve Funds for Proper Purpose Businesses" in Deductible Expenses.
Thirteenth, Social Stock Exchange needs to be introduced and the related tax issues should be reviewed along with it.
Fourteenth, social purpose expenditures and ordinary expenditures of social enterprises are to be under separate accounting.
Fifteenth, social enterprises in limited liability partnership need to be considered as corporation in offsetting deductions of social purpose expenditures against earnings of social limited liability partnership. The tranching structure thereof may as well be considered as guarantees between partners. But the amount transferred from subordinated partners to senior partners and guarantee fees be deemed to be the contributions to social enterprise, which are deductible in calculating subordinated partners" income.