Choice of Entity / Characterisation of entities

A PPP arrangement may use various forms of corporate vehicles including a company, trust, partnership or joint venture.

From an entity level perspective, tax analysis should be performed to ensure the chosen project vehicle is taxed in the intended capacity. For example, the payment of an unfranked dividend to a shareholder, especially in the early years of the project, may not be efficient (as such payment could generate taxable income in the hands of the shareholder). Given that it is common for infrastructure assets to generate tax losses in the early years, the tax treatment of project entities as a trust or partnership (which have the ability to distribute pre-tax amounts) could be important.