www.integra-international.net BEST LOCATION OF TRADING COMPANIES
www.integra-international.net contents – specific country 1.Basics a. ¿Is my country considered tax haven or low taxation territory?. b. Location factors. 2.Tax treaties. 3.Tax rates. 4.Anti-avoidance regulations. a.General. b.CFC regulations. c.Thin-capitalization rules. d.Transfer pricing regulations. 5.Expatriates. 6.UE Directives on dividends, interests and royalties. 7.Internal regulations for avoiding double taxation on dividends and other incomes 8.Best place to set up a trading company.
www.integra-international.net 1. Basics a.¿Is my country considered tax haven or low taxation territory? Spain is not considered a tax haven territory or low taxation territory for any country. b.Location factors: Advantatges: UE Estate member, climate, sanity, secure and efficient bank system, language, labour costs not very hight respect western UE, good relationships with Southamerica. Disadvantatges: long period to set up a company (1 month), people doesn’t speak ingles very well.
www.integra-international.net 2. Tax treaties Germany Algeria Australia Austria Belgium Bolivia Brazil Bulgaria Canada Czech Republic Chile China Cyprus Korea Croatia Cuba Double Tax Treaties with Spain Denmark Ecuador Egypt United Arab Emirates Slovak Republic Slovenia United Estates Estonia Philippines Finland France Greece Hungary India Indonesia Iran Ireland Iceland Israel Italy Japan Latvia Lithuania Luxembourg Macedonia Malaysia Malta Morocco Mexico Norway New Zealand The Netherlands Poland Portugal United Kingdom Romania Russian Federation Former USSR South Africa Sweden Saudi Arabian Switzerland Thailand Tunisia Turkey Venezuela Vietnam Argentina
www.integra-international.net 3. Tax rates Individual tax CONCEPT NON-RESIDENTS (without permanent establishment) RESIDENTS General24%Scale 15%-43% Seasonal workers2%Scale 15%-43% Dividends and interests18% Capital gains derived from savings18% Other capital gains24%Scale 15%-43% Pensions8% / 30%/ 40%Scale 15%-43% UE Royalties10%Scale 15%-43%
www.integra-international.net 3. Tax rates Corporate tax CONCEPT NON-RESIDENTS (with permanent establishment) RESIDENTS General 30% Small companies - 25% up to 120.000 € 30 % from 120.000 € Oil and gas research and extraction 35% Reinvestment the sale of certain assets -18% EP Supplementary taxation: Transfer income abroad has a supplementary tax of 18%. (not aplicable in UE Estate members and some DTT)
www.integra-international.net 4. Anti-avoidance regulations a.General Operations by Spanish company with a resident in tax haven or low taxation territory: a.The tax haven company maybe considered resident in Spain if its main assets are, directly or indirectly, located in Spain and its main activity is performed in Spanish territory with some exceptions. b.The expenses related to services performed expenses are not deductible. (except if it is possible to prove that the service is real and necessary) c.Operations are valued at market price in spite of both companies are not related parties. d.Non application of the exemption to avoid international double taxation. e.Strict money laundering prevention rules.
www.integra-international.net 4. Anti-avoidance regulations b. CFC regulations Spanish company shall include as profits certain passive income obtained by non-resident company (except UE Estate members) if: -Spanish company holds, direct or indirect, stake of at least 50% and -non-resident company pays a tax under 75% of the tax it would be charged in Spain on the same revenue.
www.integra-international.net 4. Anti-avoidance regulations c. Thin-capitalization rules Spanish companies can not deduct the interest accrued on the part of the debt with non resident related companies exceeding the ratio of 3 times the equity amount. A different ratio may be applied if the taxpayer so requests to the Tax Administration This rule is not aplicable when the non resident company is located in another EU Estate, except if it is considered a tax haven..
www.integra-international.net 4. Anti-avoidance regulations d. Transfer pricing regulations. In Spain it is applied the same EU and OCDE criteria: Operations between related companies must be performed at market prices (arms lenght). The main methods to determine the market price are: - Comparable free price - Increased cost. - Resale price - Distribution of results - Net margin of the set operations Management fees: For the correct application of the costs the companies involved have to: - Describe the services provided - Analyse the costs incurred - Justificate the mark-up to be applied - Comparison between the cost applied and the market value. Cost sharing:Similar to managemen fees taking into account the share in the risks and the results of the participants.
www.integra-international.net 5. Expatriates a.Individuals who become resident in Spain can opt to be taxed according to non residents tax rules for the period which exercice the option and 5 the following Tax periods. Conditions: Non residents in Spain during 10 years previous. Labour contract. Work effectively performed in Spain. Employer is a company or organization resident in Spain or permanent establishment located in Spain. The salaries or wages are not exempt from non-resident income tax in Spain. The individual is considered Spanish resident for DTT´s purposes but only pay taxes in Spain for the assets located here. b.UE residents and non residents in Spain can opt to pay as a residents in Spain without losing their non resident estatus if at least 75% of their income comes from Spanish labour or economics activities.
www.integra-international.net 6. UE Directives on dividends, interests and royalties According to the UE Directives 2003/48/CE and 2003/49/CE, in Spain there is not witholding taxes on dividends and interest between UE members countries. According to the UE Directive 2003/49/CE, in Spain there is a witholding tax of 10% on royalties between EU members countries (temporary period). In Spain there is a reduced witholding tax in most of the DTT’s: 0 % (minimum)-15% (maximum) except DTT with Philippines: 20% on Royalties.
www.integra-international.net 7. Internal regulations for avoiding double taxation on dividends or other incomes a.EXEMPTION. Requirements: - Distributed profit comes from, at least 85%, abroad business activities (passive income is not included). - It is not applicable if profit comes from tax haven. -The profit taxed with similar taxation than in Spain. b.ORDINARY TAX CREDIT METHOD. When the requirements of the exemption are not met. The lower of: - The tax effectively paid abroad on the related income or gains. -The Spanish corporate tax liability atributable to such income or gains.
www.integra-international.net 8. Best place to set up a trading company Setting up trading company in Spain: Advantatges Expatriates especial regime. UE directives are applicable Internal regulation for avoiding double taxation Wide network of DDT´s Spain is not a tax haven or a low taxation territory Tax incentives for investment abroad: export-related investment credit, R& D and tech. Innovation credit, credit for personel costs,… Disadvantatges: There is not an specific regulation for trading companies. Other EU contries have tax rates more competitive. General anti-avoidance regulation CFC regulations Thin-capitalization rules Transfer pricing measures Please explain tax advantages or disadvantages for setting up trading companies in your country. Please explain the best place, in you opinion, for setting up trading companies for international business by a company of your country and the main reasons. Please give examples for cases which you have advised or which you would like to discuss with the other participants.
www.integra-international.net 8. Best place to set up a trading company IRELAND Advantatges Trade activities, undertake risks and have sufficient substance Corporate tax: 12,5% (trade rate) UE directives are applicable Wide network of DDT´s It is not a tax haven or a low taxation territory Economical enviroment CFC rules have not been established. Disadvantatges: Witholding on dividends, interest, royalties on patents is 20% (but with DTT or EU members could be lower or zero) Thin-capitalization rules (except countries with DTT and EU members) Transfer pricing measures Please explain tax advantages or disadvantages for setting up trading companies in your country. Please explain the best place, in you opinion, for setting up trading companies for international business by a company of your country and the main reasons. Please give examples for cases which you have advised or which you would like to discuss with the other participants.