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System and Organization Controls: Which compliance standard is the most suitable
26.09.2023System and Organization Controls (SOC) in versions SOC 1®, SOC 2® and SOC 3® are auditing and reporting standards of the AICPA (American Institute of Certified Public Accountants). These standards enable service providers such as data center operators or cloud providers to ensure and prove to their customers that they have the effective controls and measures necessary to provide the required services securely. The Ecovis consultants know the details.
SOC 1®: Internal Control over Financial Reporting (ICFR)
This standard is specifically designed to examine the controls in place at service providers that are relevant to the service provider’s financial reporting. There are two types of report:
- Type 1 – a report on the suitability of the design and adequacy of controls to achieve the relevant control objectives at a given time.
- Type 2 – a report on the effectiveness of controls in achieving the relevant control objectives during a specified period of time (typically 6 months or 1 year).
We check for you whether your service provider has installed comprehensive security measures for data processing.Gholamreza Aminzadeh, Senior Consultant, iAP-Independent Consulting + Audit Professionals GmbH – an Ecovis company, Berlin, Germany
SOC 2®: Trust Services Criteria
The controls to be examined (& reviewed) in SOC 2 and SOC 3 reports are measured (& assessed) against the so-called trust services criteria for security, availability, processing integrity, confidentiality and privacy. SOC 2 reports can also be Type 1 (adequacy of controls) or Type 2 (effectiveness of controls over a period of time).
SOC 3®: Trust Services Criteria for General Use Report
As with a SOC 2 report, a SOC 3 report addresses controls related to security, availability, integrity, and privacy/trust. SOC 3 reports are subject to the same audit criteria as SOC 2 reports. However, there are some differences between SOC 2 and SOC 3. For example, SOC 2 reports are confidential and are only provided to certain clients, whereas SOC 3 reports are intended for public consumption and are usually posted on the company’s website as a marketing tool.
Conclusion
Whenever accounting-related or financially critical data and processes are outsourced, companies should ask their future service providers for a SOC 1 report. If a company wants to outsource the processing of its sensitive customer data to an external service provider (cloud/computing center), the IT service provider in question should obtain a SOC 2 report. As a rule, the service provider’s clients do not ask for a SOC 3 report. The service providers themselves make the SOC 3 report available to the public and thus transport certified security.
For further information please contact:
Gholamreza Aminzadeh, Senior Consultant, iAP-Independent Consulting + Audit Professionals GmbH – ein Unternehmen von Ecovis, Berlin, Germany
Email: g.aminzadeh@audit-professionals.de

Real estate tax France: 3% annual tax on the market value of real estate properties
25.09.2023French and foreign legal entities owning real estate in France could be subject to file a tax return every year. Failure to comply may lead to an automatic tax of three percent based on the market value of the property. The Ecovis experts explain the details.
Scope of the tax
The 3% tax applies to any entity, French or foreign, with or without legal personality (such as limited companies, partnerships, economic interest groupings, syndicates, groups, pool joint ventures, trusts and comparable institutions, etc.) owning real estate properties or rights in rem in France on 1 January of the tax year, either directly or through an intermediary (Articles 990 D to 990 G of the French Tax Code (FTC)).
It is computed on the value of the French assets subject to the declaration obligation.
Exemptions
Some exemptions apply:
- Either linked to the nature of the entity (Article 990 E 1° and 2° of the FTC), such as (i) international organisations and sovereign States, (ii) listed entities and subsidiaries, or (iii) entities not considered to have a preponderance of real estate assets (i.e., French real estate making up less than 50% of the French assets, although it should be noted that this excludes real estate assets assigned to the professional activity).
- Or linked to the location of the entity’s registered office, which must be located either in France, within the European Union, in a country that has signed an administrative assistance agreement with France to combat tax evasion and avoidance, or with a country that has signed a treaty containing a non-discrimination clause (Article 990 E 3° of the FTC).
This last case concerns only the following entities: (i) those with a low preponderance of real estate, (ii) pension funds or entities recognised as being of public interest, (iii) some specific real estate investments (French SICAV, FPI), and (iv) entities which have undertaken to provide certain information:- Either to provide the tax authorities with information relating to the location, consistency and value of properties, identity and address of those who hold more than 1%, and the number of shares or other rights held by each of them by filing a yearly declaration (form 2476 SD) no later than 15 May,
- Or undertake, upon request, to provide the tax authorities with such information on the date of acquisition of the property or within 60 days.
The exemption may be partial if the entity concerned only partially discloses the identity of the holders on 1st January.
We support you in submitting the tax return for your real estate assets correctly and on time.Vanessa Raindre, Tax partner, MD Legal, Paris, France
Penalties
Failure to file a declaration can trigger the procedure for automatic taxation (Article L 66 4° of the tax procedural code) coupled with late payment interest (Article 1727 of the FTC) and the penalty provided for by Article 1728 of the FTC (minimum 10%).
Those benefiting from an exemption who have not complied with their filing obligations can still claim the exemption if they correct the situation within 30 days of the request by the tax administration. However, this correction is only available once.
For further information please contact:
Vanessa Raindre, Tax partner, MD Legal, Paris, France
Email: vanessa.raindre@mdlegal.fr

Tax on share options: Employee stock ownership plan in Croatia
22.09.2023Employee stock ownership has become a magnet for hiring new employees in Croatia. It is likely to become even more popular and widespread if legislators make necessary changes to the tax treatment of giving employees a share in ownership.
What is employee stock ownership?
An employee stock ownership plan (ESOP) is the name given to a social plan in which employees participate in the ownership of the company. By participating in ownership, employees feel more valued by their employers, which further motivates them to do their best at work. Their better performance leads to greater success for the company, and as a reward for better performance, employees receive the right to financial compensation – the dividend.
Tax legislation in Croatia
Taxation of the transfer of ownership shares to employees in Croatia is regulated by the Income Tax Act, although there are differences in the taxation of the transfer of ownership shares in limited liability companies and joint stock companies, explain the Ecovis advisors.
Croatian tax legislation is very complex, but we can accompany the entire process for you.Robert Špoljar, Tax advisory & Accounting Manager, ECOVIS FINUM, Zagreb, Croatia
In the case of a limited liability company, the transfer of ownership shares is treated as income from employment, which means that in addition to income tax, the owners must also pay contributions for pension and health insurance. This makes it a very expensive option for owners which is currently a major obstacle to increasing the number of ESOPs in Croatia.
Under the Croatian Personal Income Tax Act, the allocation of shares to employees of joint stock companies is considered capital income, which is a much more favourable option for companies.
In this case, the basis for taxation is the difference between the market price of the share and the contractual price of the share, and a capital gains tax is paid. However, there is no payment of contributions for pension and health insurance.
For further information please contact:
Robert Špoljar, Tax advisory & Accounting Manager, ECOVIS FINUM, Zagreb, Croatia
Email: robert.spoljar@ecovis.hr