INVESTING VIA THE NETHERLANDS OVERVIEW, FEATURES AND STRUCTURING POSSIBILITIES

Transcription

1 INVESTING VIA THE NETHERLANDS OVERVIEW, FEATURES AND STRUCTURING POSSIBILITIES

2 Contents 1. General: Tax rate and tax base, tax treaty 2. Trademark structure 3. Interest free loan structure 4. Confidentiality Dutch limited partnership 5. Joint venture structure 6. Dutch investment structure 7. Trading structure 2

3 I General: Tax rate and tax base Ukraine CIT rate of 19% (16% from 2014) Dividend, Interest and Royalties withholding tax is 15% (as reduced or eliminated by tax treaties) Participation exemption on dividends coming from non-tax haven entities that are controlled by Ukrainian parent (generally 20% ownership required) No CFC rules No thin cap rules although there are some limitations on interest payments to related parties Generally, 85% of payments made to tax havens are deductible for tax purposes 3

4 I General: Tax rate and tax base the Netherlands CIT rate of 25% (20% for income up to EUR ) Dividend withholding tax is 15% (as reduced or eliminated by tax treaties or EU Parent-Subsidiary Directive) No withholding tax on interest and royalty payments Participation exemption on capital gains and dividends Exemption for foreign branch income (profits and losses) Back-to-back financing and licensing arrangements No capital duty (as per 1 January 2006) / No stamp duties Technically no CFC rules Thin cap rules abolished 4

5 I General: the Netherlands Ukraine Tax Treaty WHT on dividends is 5% if the Netherlands company owns directly at least 20% of the capital in the Ukrainian company; 0% WHT if it owns directly at least a 50% stake and the value of the holding is at least USD 300,000 WHT on interest payments is 2% in case of interest paid to banks or financial institutions or 10% in other cases WHT 0% for use of scientific work and 10% on all other royalty payments Gains from the sale of shares in a Ukranian company deriving most of its value from Ukranian real estate may be taxed in the Ukraine; gains from all other types of shares are only taxable in the shareholder s state of residence 5

6 II Trademark structure Malta II Nominal License fee Offshore Malta I Dutch BV UkrCo Step plan 1. Offshore company will incorporate a Maltese Limited company (Malta I); 2. Malta I will incorporate a Maltese subsidiary (Malta II) as well as a Dutch BV; 3. Malta II will acquire a trademark (against an interest bearing debt); 4. Malta II will conclude a license agreement with Dutch BV; 5. BV will conclude sub-license agreements with UkrCo; 6. UkrCo will pay royalty fees to Dutch BV, which will in principle be fully taxable in the Netherlands; 7. Dutch BV will pay only a nominal fee to Malta II; 8. However, Dutch BV is allowed under Dutch tax law to deduct an arm s length royalty payment meaning that only a small spread will actually be taxed in the Netherlands; 9. The nominal royalty payments received by Malta II will effectively be taxed against a rate of 5%. The total combined effective tax rate at the level of Dutch BV and Malta II should be no more than 4%; 10. Malta II and Dutch BV can dividend the proceeds from the royalty structure to Malta I without any withholding tax being due. The received dividend should not be taxable at the level of Malta I due to the applicability of the participation exemption; 11. Malta I can make dividend distributions to the Offshore company without withholding tax; 12. After the debt has been settled, Malta II can be liquidated and the trademark can via Malta I be distributed to the Offshore company without any adverse tax consequences. Any increase in the value of the trademark between the moment of acquisition of the trademark and the moment of liquidation of Malta II should not be taxed in Malta. 6

7 III Interest free loan structure Objective To create an interest deduction at the level of UkrCo (rest of the world) while on the other hand only a small corresponding spread should be taxable in the Netherlands. Malta Malta sub Netherlands UkrCo -/- Interest free loan Interest bearing loan Steps 1. The Maltese Sub grants an interest free loan to the Netherlands; 2. Subsequently, the Netherlands will grant an interest bearing loan to UkrCo. Tax treatment The Netherlands will receive interest payments from UkrCo; On the other hand no corresponding interest has to paid by the Netherlands to the Maltese Sub; However, from a Dutch tax point of view, the Netherlands will be deemed to pay an arm s length interest to the Maltese Sub; As a result, the Netherlands should report only a small spread on its financing activities which is subject to Dutch taxation; UkrCo should be able to deduct the interest payments to the Netherlands (double dip). Point of attention: UkrCo interest deductibility limitations need to be monitored and the 10% WHT on interest payments (WHT can be credited against Dutch tax due) 7

8 IV Confidentiality Dutch Limited Partnership STAK Offshore Co STAK Step plan 1. Incorporation of an off shore company; 2. Incorporation of two Dutch STAKS (foundations); 3. Incorporation of a Dutch CV (partnership); 4. Incorporation of Malta Company; 5. Incorporation of a Dutch BV; 6. Contributing the shares in Ukraine Co to Dutch BV. CV Malta Company Considerations Offshore Co could for example be a Jersey or New Zealand trust; The actual place of management of the two STAKS should be outside the Netherlands (in for example Switzerland); The CV should be transparent from a Dutch point of view; as a consequence, the CV is not subject to tax in the Netherlands; Limited partners may be subject to Dutch CIT if a PE is found to exist in NL. Consequently, the Dutch participation exemption will apply to dividends received and capital gains realized. Dutch BV Ukraine Co Benefits The only withholding tax on dividends in the entire structure at the level of Ukraine Co; No capital gain tax in this structure; No pick up at the level of the offshore company. 8

9 V Joint venture structure Tax considerations Russia Ukraine BV I BV II 50 % 50 % BV III OpCos Dividend and capital gains realized by BV III on its shareholding in foreign subsidiaries should be tax exempt in the Netherlands due to the applicability of the Dutch participation exemption; Dividends and capital gains realized by BV I and BV II on their shareholding in BV III should be tax exempt in the Netherlands due to the applicability of the Dutch participation exemption; On dividend payments made by BV I to its Russian shareholder a 5% Dutch withholding tax should be levied. However, under certain circumstances part of the WHT will be refunded by the Dutch tax authorities; The dividends received by the Russian shareholder should be tax exempt in Russia; On dividend payments made by BV II to its Ukrainian shareholder no Dutch withholding tax should be levied; The dividends received by the Ukrainian shareholder should be tax exempt in Ukraine; Possibility to have Fiscal Unity of Dutch entities involved (Shareholder agreement). 9

10 VI Dutch investment structure 10

11 VII Trading structure Vendors Panama Company Commission Trading Company B.V. Buyers Due to the ongoing discussions at the OECD, G20 and EU level it becomes more and more crucial to be able to show that companies used in (trading) structures are not companies that merely exists on paper but contrary, that they have a real function and that they have qualified as well as sufficient staff on their payroll; This means that the existing, currently-often-used, trading structures where the SPV is owned by the UBO (and consequently does not constitute an independent company) and/or has no qualified staff will be more and more in the near future successfully attacked by the tax authorities all over the world; In order to prevent this we have recently set up our own trading companies that are completely independent from the UBO s. Furthermore, in the near future we will be hiring one or more qualified senior traders in order to be able to make 100% certain that the trading structures offered by us are completely bullet proof; All the trading will be done in name of Trading Company BV (Trading BV) and on behalf of the UBOs. Trading BV will act as a commissionaire only. For its activities it will receive a commissionaire fee; Instead of charging a set up as well as a yearly maintenance fee for a structure the trading BV will charge a fee on the in- and outgoing amounts. This commission will also be used to cover the costs of the professional trader mentioned before, start up costs as well as taxes due in the Netherlands; The remaining % will be split and paid for example to a Panama company as a remuneration for the fact that this company has introduced Trading BV to all the other parties involved and made it possible for the BV to start up the trading business. We would advise clients to use a country like Panama or Hong Kong with whom the Netherlands has signed a treaty for the avoidance of double taxation instead of a jurisdiction like the BVI, with whom the Netherlands does not have a tax treaty. It both cases (tax treaty / non-tax treaty countries) 0% corporate income tax will be levied in the Netherlands. The benefit of using a tax treaty country is that its entities cannot be disregarded that easily (for Dutch purposes) compared to entities situated in non-treaty countries; For completeness sake we would like to note that all the trading should and will be properly documented and will be backed by adequate Transfer Pricing Reports as well as bench mark studies. We will also prepare a complete business plan (up-front and keep it fully updated); As a final point it should be noted that it is imperative that the aforementioned trader is not only fully qualified but is also really conducting the required activities meaning that certain activities should be conducted at the level of Trading BV instead of at the level of the seller and/or buyer. The trader should be able to act as a fully independent professional.

12 Contact details Guus Poelen (Tax Partner) Gustav Mahlerplein 60-p, ITO-tower, 7th floor 1082 AM Amsterdam, The Netherlands Tel. +31 (0) Mob. +31 (0) Fax +31 (0)