modern wealth management tax planning via the netherlands march 30-31, 2010

Modern Wealth ManagementTax Planning via the Netherlands

March 30-31, 2010

Company profile

The Netherlands an attractive jurisdiction

International tax opportunities via the Netherlands

International tax opportunities via Belgium

Contents

Company profile

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 Netherlandsan attractive jurisdiction


Corporate income tax calculated in brackets (2010)

Income tax rate

0 - 200,000 20%

200,000 - excess 25,5%


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%





Extensive worldwide tax treaty network

- internationally acknowledged as high quality - never on black or grey list- 87 tax treaties - 10 in negotiation






Advance tax rulings from Dutch tax authorities

- tax authorities are open for discussion- Maprima has good relationship with tax authorities- upfront tax rulings






Advance tax rulings from Dutch tax authorities

no CFC legislation no capital tax / stamp duty


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


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)


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

Internationaltax opportunities

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

Holding company regime (current structure)

Parent companyParent

company

OpCoOpCo

Country of residence

Country of investment

=> 25% WHT dividend

OpCoOpCo

dividend



company

dividend


The Netherlands

Holding company regime (basic model)

Dutch holding company




OpCoOpCo Country of investment

Russianparent company

Russianparent company


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


company

OpCoOpCo



=> 25% WHT dividend

Holding company regime (advanced model)

OpCoOpCo

dividend


dividend

Cyprus

The Netherlands

Russian parent company

Russian parent company

dividend


=> 0% WHT

=> 0% WHT

=> 0-5% WHT


Holding company regime (advanced model)

UkraineLatvia

Estonia

Cyprus holdingcompany

Cyprus holdingcompany



COOP structuring

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)


company

OpCoOpCo



=> 25% WHT dividend


OpCoOpCo

dividend



company

dividend


The NetherlandsDutchCOOP


OpCoOpCo

dividend


Russia parent company

Russia parent company

dividend


The NetherlandsDutchCOOP

=> 0% WHT

=> 0-5% WHT



any country incl. tax haven

OpCo’s residing in EU -> 0% WHT to the Netherlands

Interest conduit company

Interest conduit company(basic model)

Group companyGroup

company

OpCoOpCo



=> 15% WHT interestloan

OpCoOpCo

interest


Group companyGroup

company

interest


The Netherlands


loan

loan

Dutch conduit company





RussiancompanyRussiancompany


The Netherlands

=> 5% WHT

=> 0% WHT

Saving of 10% WHT

interest

interest


Latvia UkraineEstonia


loan

loan

OpCoOpCo

Finance companyFinance company

Interest

interest

Interest conduit company(advanced model for CIT purposes)

loan

loan




Tax haven

The Netherlands

=> little or no taxation

=> moderate taxation (0.10%)

=> full deduction

Royalty conduit company

Royalty conduit company(current structure)

GroupcompanyGroup

company

OpCoOpCo



=> 15% WHT royaltyip / trademark

OpCoOpCo

royalty


Group companyGroup

company

royalty


The Netherlands

Royalty conduit company(basic model)

ip / trademark

ip / trademark






RussiancompanyRussiancompany


The Netherlands

royalty

royalty

=> 0% WHT

=> 0% WHT

Saving of 15% WHT

Royalty conduit company(basic model)

Latvia UkraineEstonia


ip / trademark

ip / trademark



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

Bank transfer service company

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)

Real Estate Financing Structures

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


loaninterest

-/-

+

Real Estate Financing Structures(Dutch loan alternative)

Real Estate



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


The Netherlands




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


The Netherlands




Real Estate

DutchReal EstateCo

DutchReal EstateCo

loan

loan

interest

Tax haven


-> no interest WHT

Distributing rental profits from PE to Dutch Real EstateCo are ignored due to one legal entity

-> no dividend WHT

Russia


The Netherlands




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


The Netherlands




Real Estate

DutchReal EstateCo

DutchReal EstateCo

loan

loan

Tax haven

interest


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


The Netherlands




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


The Netherlands




Real Estate

DutchReal EstateCo

DutchReal EstateCo

loan

loan

Tax haven

Russia



Þ Marginal tax base in the Netherlands


Þ No CIT tax in Tax haven


The Netherlands




Real Estate

DutchReal EstateCo

DutchReal EstateCo

loan

loan

Tax haven

Any country

Russia


The Netherlands



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


The Netherlands



Real Estate

DutchReal EstateCo

DutchReal EstateCo

interest



-> no interest WHT

Any country


-> no interest WHT

Distributing rental profits from PE to Dutch Real EstateCo are ignored due to one legal entity

-> no dividend WHT

Russia


The Netherlands



Real Estate

DutchReal EstateCo

DutchReal EstateCo


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


The Netherlands



Real Estate

DutchReal EstateCo

DutchReal EstateCo

hybrid loan


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


The Netherlands



Real Estate

DutchReal EstateCo

DutchReal EstateCo

capitalcapital/dividend


Any country


Dutch finance company is not subject to CIT tax in the Netherlands

Russia


The Netherlands



Real Estate

DutchReal EstateCo

DutchReal EstateCo

capital

hybrid loan

Real Estate Structuring (Dutch capital alternative)

Any country


The Netherlands



Real Estate

DutchReal EstateCo

DutchReal EstateCo

capital

hybrid loan

Real Estate Structuring (Dutch capital alternative)



Þ No CIT in the Netherlands


Þ No need to involve Tax haven

Any country

Any country

Questions

Modern Wealth ManagementTax Planning via Belgium

March 30-31, 2010

Belgian risk capital deduction

Principal / agent structures (commercially motivated)

Principal / agent structures (tax motivated)

Other Belgian opportunities

Questions

Contents

BelgianRisk capital deduction

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 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)


company

ClientsClients

Republic of China Seychelles / BVI

Russia, Europe, USA


PrincipalPrincipal

ClientsClients

Seychelles / BVIRepublic of China

AgentAgent Belgium or Netherlands

Russia, Europe, USA

Clients are dealing directly with 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

Principal / agent structures (tax motivated)

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)


company

ClientsClients

Hong KongRepublic of China

USA

Hong Kong - US (current structure)


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)


company

ClientsClients

Hong Kong

USA

Republic of China



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



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

Questions

Free feedback on feasibility of intended structures

via the Netherlands or Belgium

Contact: [email protected]

mailto:[email protected]

modern wealth management tax planning via the netherlands march 30-31, 2010

Documents

withholding tax

tax treaties

tax return

international tax law

tax offices accounting

attractive jurisdiction

capital tax stamp duty

netherlands maastricht