Presentation Transcript

1. Modern Wealth Management Tax Planning via the Netherlands March 30-31, 2010
2. Contents Company profile The Netherlands an attractive jurisdiction International tax opportunities via the Netherlands International tax opportunities via Belgium
3. Company profile
4. 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)
5. The Netherlandsan attractive jurisdiction
6. The Netherlands an attractive jurisdiction Corporate income tax calculated in brackets (2010)
7. The Netherlands an attractive jurisdiction Corporate income tax calculated in brackets No withholding tax on interest and royalties
8. 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%
9. 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
10. 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
11. 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
12. 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
13. 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)
14. 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
15. Internationaltax opportunities
16. 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
17. Holding company regime
18. Holding company regime (current structure) Parent company Country of residence => 25% WHT dividend OpCo Country of investment
19. Holding company regime (basic model) Parent company Country of residence dividend Dutch holding company The Netherlands dividend OpCo Country of investment
20. Holding company regime (basic model) Ukraine Belarus Saving of 15-20% WHT Russian parent company Country of residence dividend => 5% WHT Dutch holding company The Netherlands => 0-5% WHT dividend OpCo Country of investment For OpCo’s residing within EU -> 0% WHT to the Netherlands
21. Holding company regime (advanced model) Parent company Country of residence => 25% WHT dividend OpCo Country of investment
22. Holding company regime (advanced model) Ukraine Latvia Estonia Saving of 20-25% WHT Russian parent company Country of residence => 0% WHT dividend Cyprus holding company Cyprus => 0% WHT dividend Dutch holding company The Netherlands dividend => 0-5% WHT OpCo Country of investment
23. COOP structuring
24. Holding company regime (COOP model) 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
25. Holding company regime (COOP model) Parent company Country of residence => 25% WHT dividend OpCo Country of investment
26. Holding company regime (COOP model) Parent company Country of residence dividend The Netherlands Dutch COOP dividend OpCo Country of investment
27. Holding company regime (COOP model) any country incl. tax haven Saving of 20-25% WHT Russia parent company Country of residence dividend => 0% WHT The Netherlands Dutch COOP dividend => 0-5% WHT OpCo Country of investment OpCo’s residing in EU -> 0% WHT to the Netherlands
28. Interest conduit company
29. Interest conduit company (basic model) Group company Country of residence loan => 15% WHT interest OpCo Country of investment
30. Interest conduit company (basic model) Group company Country of residence loan interest Dutch conduit company The Netherlands loan interest OpCo Country of investment
31. Interest conduit company (basic model) Latvia Ukraine Estonia Saving of 10% WHT Russian company Country of residence loan interest => 0% WHT Dutch conduit company The Netherlands loan => 5% WHT interest OpCo Country of investment OpCo’s residing in EU -> 0% WHT to the Netherlands
32. Interest conduit company (advanced model for CIT purposes) Tax haven Finance company => little or no taxation loan interest The Netherlands Dutch conduit company => moderate taxation (0.10%) loan Interest Country of investment OpCo => full deduction
33. Royalty conduit company
34. Royalty conduit company (current structure) Group company Country of residence ip / trademark => 15% WHT royalty OpCo Country of investment
35. Royalty conduit company (basic model) Group company Country of residence ip / trademark royalty Dutch conduit company The Netherlands ip / trademark royalty OpCo Country of investment
36. Royalty conduit company (basic model) Latvia Ukraine Estonia Saving of 15% WHT Russian company Country of residence ip / trademark royalty => 0% WHT Dutch conduit company The Netherlands ip / trademark => 0% WHT royalty OpCo Country of investment OpCo’s residing in EU -> 0% WHT to the Netherlands
37. Royalty conduit company (advanced model for CIT purposes) Tax haven IP holder => little or no taxation ip / trademark royalty The Netherlands Dutch conduit company => moderate taxation (2.5%) ip / trademark royalty Country of investment IP user => full deduction
38. Bank transfer service company
39. Bank transfer service company (utilizing Dutch banking system) 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
40. Real Estate Financing Structures
41. Real Estate Financing Structures (essence of permanent establishment) 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 Dutch Company The Netherlands RealEstate Russia
42. Real Estate Financing Structures (basic structure) Russian FinanceCo + interest deduction at Russian Real EstateCo interest pick-up at Russian FinanceCo => No advantage from group perpective loan interest Russian Real EstateCo -/- RealEstate
43. Real Estate Financing Structures (Dutch loan alternative) Russian Real EstateCo RealEstate
44. Real Estate Financing Structures (Dutch loan alternative) Finance company 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 Tax haven loan Dutch conduit company loan The Netherlands Dutch Real EstateCo RealEstate Russia
45. Real Estate Financing Structures (Dutch loan alternative) Finance company Interest payments from PE to Dutch Real EstateCo are ignored due to one legal entity -> no interest WHT Tax haven loan Dutch conduit company loan The Netherlands Dutch Real EstateCo interest RealEstate Russia
46. Real Estate Financing Structures (Dutch loan alternative) Finance company 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 Tax haven loan Dutch conduit company loan The Netherlands Dutch Real EstateCo rental profits RealEstate Russia
47. Real Estate Financing Structures (Dutch loan alternative) Finance company Dutch Real EstateCo is effectively not subject to CIT tax in the Netherlands No interest WHT on interest payments to Dutch conduit company Tax haven loan Dutch conduit company loan The Netherlands interest Dutch Real EstateCo RealEstate Russia
48. Real Estate Financing Structures (Dutch loan alternative) Finance company 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 Tax haven loan interest Dutch conduit company loan The Netherlands Dutch Real EstateCo RealEstate Russia
49. Real Estate Financing Structures (Dutch loan alternative) Finance company Full interest deduction in Russia No interest and dividend WHT in Russia Marginal tax base in the Netherlands No interest WHT in the Netherlands No CIT tax in Tax haven Tax haven loan Dutch conduit company loan The Netherlands Dutch Real EstateCo RealEstate Russia
50. Real Estate Financing Structures (Dutch loan alternative) Finance company Full interest deduction in Russia No interest and dividend WHT in Russia Marginal tax base in the Netherlands No interest WHT in the Netherlands No CIT tax in Tax haven Tax haven loan Dutch conduit company loan The Netherlands Dutch Real EstateCo Any country RealEstate
51. Real Estate Financing Structures (Dutch capital alternative) Finance company 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 Dutch conduit company The Netherlands Dutch Real EstateCo RealEstate Russia
52. Real Estate Financing Structures (Dutch capital alternative) Finance company Interest payments from PE to Dutch Real EstateCo are ignored due to one legal entity -> no interest WHT Any country Dutch conduit company The Netherlands Dutch Real EstateCo interest RealEstate Russia
53. Real Estate Financing Structures (Dutch capital alternative) Finance company 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 Any country Dutch conduit company The Netherlands Dutch Real EstateCo rental profits RealEstate Russia
54. Real Estate Financing Structures (Dutch capital alternative) Finance company 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 Any country Dutch conduit company hybrid loan dividend The Netherlands Dutch Real EstateCo RealEstate Russia
55. Real Estate Financing Structures (Dutch capital alternative) Finance company 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 Any country capital/dividend capital Dutch conduit company The Netherlands Dutch Real EstateCo RealEstate Russia
56. Real Estate Structuring (Dutch capital alternative) Finance company 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 Any country capital Dutch conduit company hybrid loan The Netherlands Dutch Real EstateCo RealEstate Russia
57. Real Estate Structuring (Dutch capital alternative) Finance company Full interest deduction in Russia No interest and dividend WHT in Russia No CIT in the Netherlands No interest WHT in the Netherlands No need to involve Tax haven Any country capital Dutch conduit company hybrid loan The Netherlands Dutch Real EstateCo Any country RealEstate
58. Questions
59. Modern Wealth Management Tax Planning via Belgium March 30-31, 2010
60. Contents Belgian risk capital deduction Principal / agent structures (commercially motivated) Principal / agent structures (tax motivated) Other Belgian opportunities Questions
61. Belgian Risk capital deduction
62. 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
63. Example Latviantax 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%
64. Simplified structure Latvian finance company loan interest Latvian/foreign subsidiary
65. 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%)
66. 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%
67. Belgian finance company Capital contribution Latvian company interest Belgian finance company Latvian /foreign subsidiary loan
68. 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%)
69. Advantage Belgium / Russia Latvia Gross income € 125,000 Tax -/- 18,750 Net income € 106,250 Belgium Gross income € 125,000 Tax -/- 229 Net income € 124,771 Annual advantage € 18.521
70. 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
71. Principal / agent structures (commercially motivated)
72. 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
73. Principal / agent structures (current structure) Trading company Seychelles / BVI Republic of China Clients Russia, Europe, USA Clients may prefer not to deal with an offshore company
74. Principal / agent structures (Belgian or Dutch agent) Trading company Seychelles / BVI Republic of China Clients Russia, Europe, USA
75. Principal / agent structures (Belgian or Dutch agent) Principal Seychelles / BVI Republic of China Agent Belgium or Netherlands Clients Russia, Europe, USA Clients are dealing directly with Belgian or Dutch agent
76. Principal / agent structures (Belgian or Dutch agent) Agent Belgium or Netherlands Clients Russia, Europe, USA Clients are dealing directly with Belgian or Dutch agent and are unaware of the principal located in offshore jurisdiction
77. Principal / agent structures (tax motivated)
78. 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%
79. Hong Kong - US (current structure) Trading company Hong Kong Republic of China Clients USA
80. Hong Kong - US (current structure) Trading company Hong Kong Republic of China !!! PE USA Clients USA may acknowledge permanent establishment => Hong Kong company subject to US tax
81. Hong Kong - US (Belgian sales office) Trading company Hong Kong Republic of China Clients USA
82. Hong Kong - US (Belgian sales office) Trading company Hong Kong Republic of China Belgian sales office Belgium => Resale minus ruling 0.75 – 2.50% over sales Clients USA Mitigating risk of USA acknowledging permanent establishment => due to DTT Hong Kong/Belgium respectively Belgium/USA
83. Hong Kong - US (Belgian sales office) Trading company Hong Kong Republic of China Belgian sales office Belgium => Resale minus ruling 0.75 – 2.50% over sales Europe Russia Ukraine Clients USA Mitigating risk of USA acknowledging permanent establishment => due to DTT Hong Kong/Belgium respectively Belgium/USA
84. Other Belgian fiscal opportunities patent income deduction (6.8% taxation on R&D related royalties) no taxation on capital gains
85. Questions
86. Free feedback on feasibility of intended structures via the Netherlands or Belgium Contact: info@maprima.com