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 Netherlands an attractive jurisdiction

6. The Netherlands an attractive jurisdiction
Corporate income tax calculated in brackets (2010)
Income
tax rate -
200,000
20%
excess
25,5%

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 %
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. International tax 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
=> 5% WHT
dividend
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
=> 0-5% WHT
dividend
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
Dutch
COOP
The Netherlands
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
=> 0% WHT
dividend
Dutch
COOP
The Netherlands
=> 0-5% WHT
dividend
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
interest
loan
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
=> 0% WHT
interest
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
interest
loan
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
royalty
ip / trademark
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
=> 0% WHT
royalty
ip / trademark
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
royalty
ip / trademark
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
Real Estate
Russia 41

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
-/-
Real Estate 42

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

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
Real Estate
Russia 44

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
Real Estate
Russia 45

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
Real Estate
Russia 46

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
Real Estate
Russia 47

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
Real Estate
Russia 48

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
Real Estate
Russia 49

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
Real Estate 50

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
Dutch
Real EstateCo
The Netherlands
Real Estate
Russia 51

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
Dutch
Real EstateCo
The Netherlands
interest
Real Estate
Russia 52

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
Dutch
Real EstateCo
The Netherlands
rental profits
Real Estate
Russia 53

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
Dutch
Real EstateCo
The Netherlands
Real Estate
Russia 54

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
Dutch
Real EstateCo
The Netherlands
Real Estate
Russia 55

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
Dutch
Real EstateCo
The Netherlands
Real Estate
Russia 56

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
Dutch
Real EstateCo
The Netherlands
Any country
Real Estate 57

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. Risk capital deduction
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 loan interest Latvian finance company
Latvian/foreign
subsidiary

65. Commercial income (5% x € 2,500,000) = € 125,000
CIT in Latvia
Commercial income (5% x € 2,500,000) = € 125,000
= taxable income € 125,000
CIT rate %
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%) -/
Taxable income € 675
CIT rate %
Taxation €
(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
Republic of China
Seychelles / BVI
Clients
Russia, Europe, USA
Clients may prefer not to deal with an offshore company

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

75. Principal / agent structures
(Belgian or Dutch agent)
Principal
Republic of China
Seychelles / BVI
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) Hong Kong USA Trading company
Republic of China
Hong Kong
Clients
USA

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

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

82. Hong Kong - US (Belgian sales office)
Trading
company
Republic of China
Hong Kong
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
Republic of China
Hong Kong
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: