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Company profile
The Netherlands an attractive jurisdiction
International tax opportunities via the Netherlands
International tax opportunities via Belgium
Contents
Company profile
founded in 1999
license from Dutch national bank (among the first 13 trust offices)
offices in the Netherlands (Maastricht) and Belgium (Brussels and Antwerp)
middle sized trust company (13 employees)
in-house international tax specialists
direct involvement partners
experience at BIG-4 tax offices (accounting, international tax law)
The Netherlands an attractive jurisdiction
Corporate income tax calculated in brackets (2010)
Income tax rate
0 - 200,000 20%
200,000 - excess 25,5%
The Netherlands an attractive jurisdiction
Corporate income tax calculated in brackets
No withholding tax on interest and royalties
The Netherlands an attractive jurisdiction
Corporate income tax calculated in brackets
No withholding tax on interest and royalties
Reduced tax rate on dividend distributions
Domestic rate 15%Tax treaties 0 – 10% EU parent/subsidiary directive 0%COOP structures 0%
The Netherlands an attractive jurisdiction
Corporate income tax calculated in brackets
No withholding tax on interest and royalties
Reduced tax rate on dividend distributions
Extensive worldwide tax treaty network
- internationally acknowledged as high quality - never on black or grey list- 87 tax treaties - 10 in negotiation
The Netherlands an attractive jurisdiction
Corporate income tax calculated in brackets
No withholding tax on interest and royalties
Reduced tax rate on dividend distributions
Extensive worldwide tax treaty network
Advance tax rulings from Dutch tax authorities
- tax authorities are open for discussion- Maprima has good relationship with tax authorities- upfront tax rulings
The Netherlands an attractive jurisdiction
Corporate income tax calculated in brackets
No withholding tax on interest and royalties
Reduced tax rate on dividend distributions
Extensive worldwide tax treaty network
Advance tax rulings from Dutch tax authorities
no CFC legislation no capital tax / stamp duty
The Netherlands an attractive jurisdiction
Favorable participation exemption regime
- The Netherlands invented the participation exemption (introduced in 1893, hence more than 100 years ago)
- Very high quality and has recently been improved even further
- Full exemption from Dutch CIT of dividends and capital gains
- No minimum holding period
The Netherlands an attractive jurisdiction
Participation exemption applicable if:
- share interest ≥ 5%, and - participation qualifies as active (trading, manufacturing), or
- participation is a real estate company
=> no taxation required, investment can be located in offshore jurisdiction
Functional currency
=> annual accounts and tax return can be reported in other currency than
euro (e.g. RUR, USD)
Limited partnerships
- tax transparent (i.e. not subject to Dutch taxation)- subject to tax (i.e. entitled to Dutch tax treaty network / tax rulings)
The Netherlands an attractive jurisdiction
Dutch Foundation
- separate legal entity- purpose is to separate economic and legal ownership- protection vehicle to avoid hostile takeovers
Dutch NV can issue bearer shares (i.e. shareholders can be anonymous)
Virtually no statutory audit
The Netherlands have a long tradition in trust related work
Trust offices are regulated by the Dutch central bank
International tax opportunities
Holding company regime (basic / advanced model)
COOP structuring
Interest conduit company regime (basic / advanced model)
Royalty conduit company regime (basic / advanced model)
Bank transfer service company utilizing Dutch banking system
Real Estate financing structures
Holding company regime (current structure)
Parent companyParent
company
OpCoOpCo
Country of residence
Country of investment
=> 25% WHT dividend
OpCoOpCo
dividend
Country of investment
Parent companyParent
company
dividend
Country of residence
The Netherlands
Holding company regime (basic model)
Dutch holding company
Dutch holding company
Dutch holding company
Dutch holding company
OpCoOpCo Country of investment
Russianparent company
Russianparent company
Country of residence
The Netherlands
dividend
dividend
=> 0-5% WHT
=> 5% WHT
Saving of 15-20% WHT
Holding company regime (basic model) Ukraine
Belarus
For OpCo’s residing within EU -> 0% WHT to the Netherlands
Parent companyParent
company
OpCoOpCo
Country of residence
Country of investment
=> 25% WHT dividend
Holding company regime (advanced model)
OpCoOpCo
dividend
Country of investment
dividend
Cyprus
The Netherlands
Russian parent company
Russian parent company
dividend
Country of residence
=> 0% WHT
=> 0% WHT
=> 0-5% WHT
Saving of 20-25% WHT
Holding company regime (advanced model)
UkraineLatvia
Estonia
Cyprus holdingcompany
Cyprus holdingcompany
Dutch holding company
Dutch holding company
COOP is a cooperative association much like a partnership
No dividend withholding tax
Unlimited access to EU Directives and Dutch tax treaty network
Only one jurisdiction, thus easy to manage and limited annual maintenance costs
Alternative for Cyprus structures
Tax treatment and tax base guaranteed by Dutch tax authorities through upfront ruling
Easy exit
Holding company regime (COOP model)
Parent companyParent
company
OpCoOpCo
Country of residence
Country of investment
=> 25% WHT dividend
Holding company regime (COOP model)
OpCoOpCo
dividend
Country of investment
Parent companyParent
company
dividend
Country of residence
The NetherlandsDutchCOOP
Holding company regime (COOP model)
OpCoOpCo
dividend
Country of investment
Russia parent company
Russia parent company
dividend
Country of residence
The NetherlandsDutchCOOP
=> 0% WHT
=> 0-5% WHT
Saving of 20-25% WHT
Holding company regime (COOP model)
any country incl. tax haven
OpCo’s residing in EU -> 0% WHT to the Netherlands
Interest conduit company(basic model)
Group companyGroup
company
OpCoOpCo
Country of residence
Country of investment
=> 15% WHT interestloan
OpCoOpCo
interest
Country of investment
Group companyGroup
company
interest
Country of residence
The Netherlands
Interest conduit company(basic model)
loan
loan
Dutch conduit company
Dutch conduit company
Dutch conduit company
Dutch conduit company
OpCoOpCo Country of investment
RussiancompanyRussiancompany
Country of residence
The Netherlands
=> 5% WHT
=> 0% WHT
Saving of 10% WHT
interest
interest
Interest conduit company(basic model)
Latvia UkraineEstonia
OpCo’s residing in EU -> 0% WHT to the Netherlands
loan
loan
OpCoOpCo
Finance companyFinance company
Interest
interest
Interest conduit company(advanced model for CIT purposes)
loan
loan
Dutch conduit company
Dutch conduit company
Country of investment
Tax haven
The Netherlands
=> little or no taxation
=> moderate taxation (0.10%)
=> full deduction
Royalty conduit company(current structure)
GroupcompanyGroup
company
OpCoOpCo
Country of residence
Country of investment
=> 15% WHT royaltyip / trademark
OpCoOpCo
royalty
Country of investment
Group companyGroup
company
royalty
Country of residence
The Netherlands
Royalty conduit company(basic model)
ip / trademark
ip / trademark
Dutch conduit company
Dutch conduit company
Dutch conduit company
Dutch conduit company
OpCoOpCo Country of investment
RussiancompanyRussiancompany
Country of residence
The Netherlands
royalty
royalty
=> 0% WHT
=> 0% WHT
Saving of 15% WHT
Royalty conduit company(basic model)
Latvia UkraineEstonia
OpCo’s residing in EU -> 0% WHT to the Netherlands
ip / trademark
ip / trademark
Dutch conduit company
Dutch conduit company
IP userIP userCountry of investment
IP holderIP holderTax haven
The Netherlands
royalty
royalty
Royalty conduit company(advanced model for CIT purposes)
ip / trademark
ip / trademark
=> little or no taxation
=> moderate taxation (2.5%)
=> full deduction
Russian and non European clients with high volume or time critical transactions often use Dutch BV’s to make use of the Dutch banking system
The Netherlands have no currency control measures
Dutch banking system is highly reliable
No delays in payments
Bank transfer service company(utilizing Dutch banking system)
Dutch company owns real estate in Russia
Real Estate qualifies as a permanent establishment (PE) under Dutch/Russia DDT
- rental income subject to Russian CIT
One legal entity, therefore all transactions (interest, repayments) between Dutch Company and PE will be ignored
- no WHT on interest, royalty
and dividends
Real Estate Financing Structures(essence of permanent establishment)
Real Estate
DutchCompanyDutch
Company
Russia
The Netherlands
interest deduction at Russian
Real EstateCo
interest pick-up at Russian FinanceCo
=> No advantage from group perpective
Real Estate Financing Structures(basic structure)
RussianFinanceCoRussian
FinanceCo
Real Estate
RussianReal EstateCo
RussianReal EstateCo
loaninterest
-/-
+
Real Estate Financing Structures(Dutch loan alternative)
Real Estate
RussianReal EstateCo
RussianReal EstateCo
Real Estate in Russia qualifies
as a permanent establishment (PE) and is subject to Russian CIT
Interest deduction of Dutch Real EstateCo is allocated to
PE and is deductible in Russia
Russia
Finance companyFinance company
The Netherlands
Real Estate Financing Structures(Dutch loan alternative)
Dutch conduit company
Dutch conduit company
Real Estate
DutchReal EstateCo
DutchReal EstateCo
loan
loan
Tax haven
Interest payments from PE to Dutch Real EstateCo are ignored due to one legal entity
-> no interest WHT
Russia
Finance companyFinance company
The Netherlands
Real Estate Financing Structures(Dutch loan alternative)
Dutch conduit company
Dutch conduit company
Real Estate
DutchReal EstateCo
DutchReal EstateCo
loan
loan
interest
Tax haven
Interest payments from PE to Dutch Real EstateCo are ignored due to one legal entity
-> no interest WHT
Distributing rental profits from PE to Dutch Real EstateCo are ignored due to one legal entity
-> no dividend WHT
Russia
Finance companyFinance company
The Netherlands
Real Estate Financing Structures(Dutch loan alternative)
Dutch conduit company
Dutch conduit company
Real Estate
DutchReal EstateCo
DutchReal EstateCo
loan
loan
rental profits
Tax haven
Dutch Real EstateCo is effectively not subject to CIT tax in the Netherlands
No interest WHT on interest payments to Dutch conduit company
Russia
Finance companyFinance company
The Netherlands
Real Estate Financing Structures(Dutch loan alternative)
Dutch conduit company
Dutch conduit company
Real Estate
DutchReal EstateCo
DutchReal EstateCo
loan
loan
Tax haven
interest
Dutch Real EstateCo is effectively not subject to CIT tax in the Netherlands
No interest WHT on interest payments to Dutch conduit company
Only small pick-up at Dutch conduit company (interest spread)
No interest WHT on interest payments to Finance company
No CIT tax on interest in Tax haven
Russia
Finance companyFinance company
The Netherlands
Real Estate Financing Structures(Dutch loan alternative)
Dutch conduit company
Dutch conduit company
Real Estate
DutchReal EstateCo
DutchReal EstateCo
loan
loan
Tax haven
interest
Þ Full interest deduction in Russia
Þ No interest and dividend WHT in Russia
Þ Marginal tax base in the Netherlands
Þ No interest WHT in the Netherlands
Þ No CIT tax in Tax haven
Finance companyFinance company
The Netherlands
Real Estate Financing Structures(Dutch loan alternative)
Dutch conduit company
Dutch conduit company
Real Estate
DutchReal EstateCo
DutchReal EstateCo
loan
loan
Tax haven
Russia
Þ Full interest deduction in Russia
Þ No interest and dividend WHT in Russia
Þ Marginal tax base in the Netherlands
Þ No interest WHT in the Netherlands
Þ No CIT tax in Tax haven
Finance companyFinance company
The Netherlands
Real Estate Financing Structures(Dutch loan alternative)
Dutch conduit company
Dutch conduit company
Real Estate
DutchReal EstateCo
DutchReal EstateCo
loan
loan
Tax haven
Any country
Russia
Finance companyFinance company
The Netherlands
Dutch conduit company
Dutch conduit company
Real Estate
DutchReal EstateCo
DutchReal EstateCo
Real Estate Financing Structures(Dutch capital alternative)
Real Estate in Russia qualifies
as a permanent establishment (PE) and is subject to Russian CIT
Interest deduction of Dutch Real EstateCo is allocated to
PE and is deductible in Russia
Any country
Russia
Finance companyFinance company
The Netherlands
Dutch conduit company
Dutch conduit company
Real Estate
DutchReal EstateCo
DutchReal EstateCo
interest
Real Estate Financing Structures(Dutch capital alternative)
Interest payments from PE to Dutch Real EstateCo are ignored due to one legal entity
-> no interest WHT
Any country
Interest payments from PE to Dutch Real EstateCo are ignored due to one legal entity
-> no interest WHT
Distributing rental profits from PE to Dutch Real EstateCo are ignored due to one legal entity
-> no dividend WHT
Russia
Finance companyFinance company
The Netherlands
Dutch conduit company
Dutch conduit company
Real Estate
DutchReal EstateCo
DutchReal EstateCo
Real Estate Financing Structures(Dutch capital alternative)
rental profits
Any country
Dutch Real EstateCo is financed through a hybrid loan
A hybrid loan is considered equity in the Netherlands
Repatriation of funds via dividend distributions
- dividend income received at Dutch conduit company is tax free
Russia
Finance companyFinance company
The Netherlands
Dutch conduit company
Dutch conduit company
Real Estate
DutchReal EstateCo
DutchReal EstateCo
hybrid loan
Real Estate Financing Structures(Dutch capital alternative)
dividend
Any country
Dutch conduit company is financed through capital
Repatriation of funds either via repayment of capital or via dividend distributions
- WHT on dividends depends on DTT
- Repayment of capital is tax free
Russia
Finance companyFinance company
The Netherlands
Dutch conduit company
Dutch conduit company
Real Estate
DutchReal EstateCo
DutchReal EstateCo
capitalcapital/dividend
Real Estate Financing Structures(Dutch capital alternative)
Any country
Dutch Real EstateCo is effectively not subject to CIT tax in the Netherlands
Dutch finance company is not subject to CIT tax in the Netherlands
Russia
Finance companyFinance company
The Netherlands
Dutch conduit company
Dutch conduit company
Real Estate
DutchReal EstateCo
DutchReal EstateCo
capital
hybrid loan
Real Estate Structuring (Dutch capital alternative)
Any country
Finance companyFinance company
The Netherlands
Dutch conduit company
Dutch conduit company
Real Estate
DutchReal EstateCo
DutchReal EstateCo
capital
hybrid loan
Real Estate Structuring (Dutch capital alternative)
Þ Full interest deduction in Russia
Þ No interest and dividend WHT in Russia
Þ No CIT in the Netherlands
Þ No interest WHT in the Netherlands
Þ No need to involve Tax haven
Any country
Any country
Belgian risk capital deduction
Principal / agent structures (commercially motivated)
Principal / agent structures (tax motivated)
Other Belgian opportunities
Questions
Contents
General
introduced in 2006
3 objectives
- abolishing differential tax treatment between equity and liabilities - lowering effective CIT burden - alternative instrument for Coordination Centre
deduction of fictitious interest cost calculated over equity 4.473%
‘small’ companies are entitled to deduction of 4.973%
- employees ≤ 50 - annual turnover ≤ € 6.25 mio - balance total ≤ € 3.125 mio
Example Latvian tax treatment
Latvian finance company has equity of € 2,500,000
Assets are lent to group companies at 5% interest
CIT rate in Latvia is 15%
Simplified structure
Latvianfinance company
Latvianfinance company
Latvian/foreignsubsidiary
Latvian/foreignsubsidiary
interestloan
CIT in Latvia
Commercial income (5% x € 2,500,000) = € 125,000= taxable income € 125,000
CIT rate 15%
Taxation € 18,750
(effective tax rate 15%)
Implementing Belgian finance company
Latvian finance company has equity of € 2,500,000
Incorporation of Belgian finance company
Capital contribution in Belgian finance company
Assets are lent to Latvian or foreign group company at 5% interest
Risk capital deduction 4.973%
CIT rate in Belgium in 33.99%
Belgian finance company
Belgianfinance company
Belgianfinance company
LatviancompanyLatvian
company
Latvian /foreignsubsidiary
Latvian /foreignsubsidiary
Capital contribution
loan
interest
Taxation in Belgium
Commercial income (5% x € 2,500,000) = € 125,000
Less: capital risk deduction (4.973%) -/- 124.325
Taxable income € 675
CIT rate 33.99%
Taxation € 229
(effective tax rate 0.18%)
Advantage Belgium / Russia
Latvia
Gross income € 125,000Tax -/-18,750
Net income € 106,250
Belgium
Gross income € 125,000Tax -/- 229
Net income € 124,771
Annual advantage € 18.521
Benefits Belgian finance company
easy to implement / dissolve
low effective tax burden (can be as low as 0%)
minimum equity € 1,000,000
annual benefit starting from € 5,000 and increasing exponentially
Principal / agent structures (commercially motivated)
Principal located in low tax jurisdiction => little or no CIT
Agent located in the Netherlands or Belgium => clients are unaware of location principal => clients are only dealing with Dutch / Belgium company => agent is located respectable jurisdiction => low taxation on the basis of resale minus method
Principal / agent structures (current structure)
TradingcompanyTrading
company
ClientsClients
Seychelles / BVIRepublic of China
Russia, Europe, USA
Clients may prefer not to deal with an offshore company
Principal / agent structures (Belgian or Dutch agent)
TradingcompanyTrading
company
ClientsClients
Republic of China Seychelles / BVI
Russia, Europe, USA
Principal / agent structures (Belgian or Dutch agent)
PrincipalPrincipal
ClientsClients
Seychelles / BVIRepublic of China
AgentAgent Belgium or Netherlands
Russia, Europe, USA
Clients are dealing directly with Belgian or Dutch agent
Principal / agent structures (Belgian or Dutch agent)
ClientsClients
AgentAgent Belgium or Netherlands
Clients are dealing directly with Belgian or Dutch agentand are unaware of the principal located in offshore jurisdiction
Russia, Europe, USA
Belgium / Hong Kong structures
Belgium as parent company of Hong Kong company => no withholding tax on dividend distributions to Belgium => only 1.7% effective Belgian CIT on dividends received
Belgium as subsidiary of Hong Kong company => no withholding tax on dividend distributions to Hong Kong
one of the few Western countries concluded DTT with Hong Kong => elimination of permanent establishment risk
attractive to establish a sales company in Belgium => resale minus ruling of 0.75 – 2.5%
Hong Kong - US (current structure)
TradingcompanyTrading
company
ClientsClients
Hong KongRepublic of China
USA
Hong Kong - US (current structure)
TradingcompanyTrading
company
ClientsClients
Hong Kong
USA
Republic of China
PE
USA may acknowledge permanent establishment=> Hong Kong company subject to US tax
!!!
Hong Kong - US (Belgian sales office)
TradingcompanyTrading
company
ClientsClients
Hong Kong
USA
Republic of China
Hong Kong - US (Belgian sales office)
TradingcompanyTrading
company
ClientsClients
Hong Kong
USA
Republic of China
Belgian sales officeBelgian
sales officeBelgium
Mitigating risk of USA acknowledging permanent establishment=> due to DTT Hong Kong/Belgium respectively Belgium/USA
=> Resale minus ruling 0.75 – 2.50% over sales
Hong Kong - US (Belgian sales office)
TradingcompanyTrading
company
ClientsClients
Hong Kong
USA
Republic of China
Belgian sales officeBelgian
sales officeBelgium
Mitigating risk of USA acknowledging permanent establishment=> due to DTT Hong Kong/Belgium respectively Belgium/USA
=> Resale minus ruling 0.75 – 2.50% over sales
EuropeRussiaUkraine
Other Belgian fiscal opportunities
patent income deduction (6.8% taxation on R&D related royalties)
no taxation on capital gains
Free feedback on feasibility of intended structures
via the Netherlands or Belgium
Contact: [email protected]