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Modern Wealth Management Tax Planning via the Netherlands March 30-31, 2010.

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Presentation on theme: "Modern Wealth Management Tax Planning via the Netherlands March 30-31, 2010."— Presentation transcript:

1 Modern Wealth Management Tax Planning via the Netherlands March 30-31, 2010

2  Company profile  The Netherlands an attractive jurisdiction  International tax opportunities via the Netherlands  International tax opportunities via Belgium Contents

3 Company profile

4  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 Netherlands an attractive jurisdiction

6  Corporate income tax calculated in brackets (2010) Incometax rate 0-200,00020% 200,000-excess25,5%

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 structures0%

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 International tax opportunities

16  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 (current structure) Parent company Parent company OpCo Country of residence Country of investment => 25% WHTdividend

19 OpCo dividend Country of investment Parent company Parent company dividend Country of residence The Netherlands Holding company regime (basic model) Dutch holding company Dutch holding company

20 Dutch holding company Dutch holding company OpCo Country of investment Russian parent company Russian parent company Country of residence The Netherlands 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

21 Parent company Parent company OpCo Country of residence Country of investment => 25% WHTdividend Holding company regime (advanced model)

22 OpCo dividend Country of investment dividend Cyprus The Netherlands Russian parent company Russian parent company dividend Country of residence => 0% WHT => 0-5% WHT Saving of 20-25% WHT Holding company regime (advanced model) Ukraine Latvia Estonia Cyprus holding company Cyprus holding company Dutch holding company Dutch holding company

23 COOP structuring

24  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)

25 Parent company Parent company OpCo Country of residence Country of investment => 25% WHTdividend Holding company regime (COOP model)

26 OpCo dividend Country of investment Parent company Parent company dividend Country of residence The Netherlands Dutch COOP Dutch COOP Holding company regime (COOP model)

27 OpCo dividend Country of investment Russia parent company Russia parent company dividend Country of residence The Netherlands Dutch COOP Dutch COOP => 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

28 Interest conduit company

29 (basic model) Group company Group company OpCo Country of residence Country of investment => 15% WHTinterest loan

30 OpCo interest Country of investment Group company Group company interest Country of residence The Netherlands Interest conduit company (basic model) loan Dutch conduit company Dutch conduit company

31 Dutch conduit company Dutch conduit company OpCo Country of investment Russian company Russian company Country of residence The Netherlands => 5% WHT => 0% WHT Saving of 10% WHT interest Interest conduit company (basic model) Latvia Ukraine Estonia OpCo’s residing in EU -> 0% WHT to the Netherlands loan

32 OpCo Finance company Finance company Interest interest Interest conduit company (advanced model for CIT purposes) loan Dutch conduit company Dutch conduit company Country of investment Tax haven The Netherlands => little or no taxation => moderate taxation (0.10%) => full deduction

33 Royalty conduit company

34 (current structure) Group company Group company OpCo Country of residence Country of investment => 15% WHTroyalty ip / trademark

35 OpCo royalty Country of investment Group company Group company royalty Country of residence The Netherlands Royalty conduit company (basic model) ip / trademark Dutch conduit company Dutch conduit company

36 Dutch conduit company Dutch conduit company OpCo Country of investment Russian company Russian company Country of residence The Netherlands royalty => 0% WHT Saving of 15% WHT Royalty conduit company (basic model) Latvia Ukraine Estonia OpCo’s residing in EU -> 0% WHT to the Netherlands ip / trademark

37 Dutch conduit company Dutch conduit company IP user Country of investment IP holder Tax haven The Netherlands royalty Royalty conduit company (advanced model for CIT purposes) ip / trademark => little or no taxation => moderate taxation (2.5%) => full deduction

38 Bank transfer service company

39  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)

40 Real Estate Financing Structures

41  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 Dutch Company Dutch Company Russia The Netherlands

42  interest deduction at Russian Real EstateCo  interest pick-up at Russian FinanceCo => No advantage from group perpective Real Estate Financing Structures (basic structure) Russian FinanceCo Russian FinanceCo Real Estate Russian Real EstateCo Russian Real EstateCo loan interest -/- +

43 Real Estate Financing Structures (Dutch loan alternative) Real Estate Russian Real EstateCo Russian Real EstateCo

44  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 company Finance company The Netherlands Real Estate Financing Structures (Dutch loan alternative) Dutch conduit company Dutch conduit company Real Estate Dutch Real EstateCo Dutch Real EstateCo loan Tax haven

45  Interest payments from PE to Dutch Real EstateCo are ignored due to one legal entity -> no interest WHT Russia Finance company Finance company The Netherlands Real Estate Financing Structures (Dutch loan alternative) Dutch conduit company Dutch conduit company Real Estate Dutch Real EstateCo Dutch Real EstateCo loan interest Tax haven

46  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 company Finance company The Netherlands Real Estate Financing Structures (Dutch loan alternative) Dutch conduit company Dutch conduit company Real Estate Dutch Real EstateCo Dutch Real EstateCo loan rental profits Tax haven

47  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 company Finance company The Netherlands Real Estate Financing Structures (Dutch loan alternative) Dutch conduit company Dutch conduit company Real Estate Dutch Real EstateCo Dutch Real EstateCo loan Tax haven interest

48  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 company Finance company The Netherlands Real Estate Financing Structures (Dutch loan alternative) Dutch conduit company Dutch conduit company Real Estate Dutch Real EstateCo Dutch Real EstateCo loan Tax haven interest

49  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 Finance company Finance company The Netherlands Real Estate Financing Structures (Dutch loan alternative) Dutch conduit company Dutch conduit company Real Estate Dutch Real EstateCo Dutch Real EstateCo loan Tax haven Russia

50  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 Finance company Finance company The Netherlands Real Estate Financing Structures (Dutch loan alternative) Dutch conduit company Dutch conduit company Real Estate Dutch Real EstateCo Dutch Real EstateCo loan Tax haven Any country

51 Russia Finance company Finance company The Netherlands Dutch conduit company Dutch conduit company Real Estate Dutch Real EstateCo Dutch Real 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

52 Russia Finance company Finance company The Netherlands Dutch conduit company Dutch conduit company Real Estate Dutch Real EstateCo Dutch Real 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

53  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 company Finance company The Netherlands Dutch conduit company Dutch conduit company Real Estate Dutch Real EstateCo Dutch Real EstateCo Real Estate Financing Structures (Dutch capital alternative) rental profits Any country

54  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 company Finance company The Netherlands Dutch conduit company Dutch conduit company Real Estate Dutch Real EstateCo Dutch Real EstateCo hybrid loan Real Estate Financing Structures (Dutch capital alternative) dividend Any country

55  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 company Finance company The Netherlands Dutch conduit company Dutch conduit company Real Estate Dutch Real EstateCo Dutch Real EstateCo capital capital/dividend Real Estate Financing Structures (Dutch capital alternative) Any country

56  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 company Finance company The Netherlands Dutch conduit company Dutch conduit company Real Estate Dutch Real EstateCo Dutch Real EstateCo capital hybrid loan Real Estate Structuring (Dutch capital alternative) Any country

57 Finance company Finance company The Netherlands Dutch conduit company Dutch conduit company Real Estate Dutch Real EstateCo Dutch Real EstateCo capital hybrid loan Real Estate Structuring (Dutch capital alternative)  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

58 Questions

59 Modern Wealth Management Tax Planning via Belgium March 30-31, 2010

60  Belgian risk capital deduction  Principal / agent structures (commercially motivated)  Principal / agent structures (tax motivated)  Other Belgian opportunities  Questions Contents

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 ≤ € mio

63 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%

64 Simplified structure Latvian finance company Latvian finance company Latvian/foreign subsidiary Latvian/foreign subsidiary interest loan

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 Belgian finance company Belgian finance company Latvian company Latvian company Latvian /foreign subsidiary Latvian /foreign subsidiary Capital contribution loan interest

68 Taxation in Belgium Commercial income (5% x € 2,500,000) = € 125,000 Less: capital risk deduction (4.973%)-/ 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 €

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 Trading company Clients Seychelles / BVI Republic of China Russia, Europe, USA Clients may prefer not to deal with an offshore company

74 Principal / agent structures (Belgian or Dutch agent) Trading company Trading company Clients Republic of China Seychelles / BVI Russia, Europe, USA

75 Principal / agent structures (Belgian or Dutch agent) Principal Clients Seychelles / BVI Republic of China Agent Belgium or Netherlands Russia, Europe, USA Clients are dealing directly with Belgian or Dutch agent

76 Principal / agent structures (Belgian or Dutch agent) Clients Agent Belgium or Netherlands Clients are dealing directly with Belgian or Dutch agent and are unaware of the principal located in offshore jurisdiction Russia, Europe, USA

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 Trading company Clients Hong Kong Republic of China USA

80 Hong Kong - US (current structure) Trading company Trading company Clients Hong Kong USA Republic of China PE USA may acknowledge permanent establishment => Hong Kong company subject to US tax

81 Hong Kong - US (Belgian sales office) Trading company Trading company Clients Hong Kong USA Republic of China

82 Hong Kong - US (Belgian sales office) Trading company Trading company Clients Hong Kong USA Republic of China Belgian sales office Belgian sales office Belgium 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

83 Hong Kong - US (Belgian sales office) Trading company Trading company Clients Hong Kong USA Republic of China Belgian sales office Belgian sales office Belgium 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 Europe Russia Ukraine

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:


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