cairo
DESCRIPTION
European Holding RegimesTRANSCRIPT
European Regional Meeting 2009 – Cairo
European holding company regimes
Jeroen van der Linden
HLB Schippers – Amsterdam, the Netherlands
January 31, 2009
Program:
• Introduction;
• European holding regimes;
• How to make use of a holding company?
• End.
Country/Firm report:
• HLB Schippers, largest firm within Dutch federation;
• HLB Schippers has 5 office locations, including Amsterdam;
• 250 people, including 15 partners;
• Audit, tax and legal services;
• Seperate International Business Desk, focus Asia and trust offices.
• Turnover 2008 approx. € 23 million
Reasons for holding companies:
• desire to consolidate foreign subsidiaries;
• creation of platform for future acquisitions;
• vehicle for cash redeployment;
• enabling access to EC Directives and Tax Treaties
• in order to save tax.
Key requirements for holding company jurisdiction:
• exemption for dividend income and capital gains;
• no withholding tax on dividends, interest and royalty outflows;
• access to EC Directives and strong network of Tax Treaties;
• no CFC legislation or anti tax haven legislation;
• political and economic stability.
• no or low tax on capital contributions;
India
Italy
Example of benefits of proper holding structure 1/2
Dividend is taxed with 15% Italian
withholding tax (WHT)
India
EU
holdco
Italy
0% Italian WHT
0% WHT
Example of benefits of proper holding structure 2/2
How about tax havens?
• no treaty available to reduce withholding taxes paid to tax haven;
• EU Member states agreed to phase out tax havens;
• can be obstacle in obtaining rulings from tax authorities;
• “smell factor” / lack of transparency;
• nevertheless combination tax haven with EU jurisdiction can have
best result.
EU holding locations to be discussed:
• Cyprus
• Luxemburg
• The Netherlands
• Spain
• Ireland
• Belgium
• Denmark
EU holding locations to be discussed:
• Cyprus
• Luxemburg
• The Netherlands
• Spain
• Ireland
• Belgium
• Denmark
EU holding locations to be discussed:
• Cyprus
• Luxemburg
• The Netherlands
• Spain
• Ireland
• Belgium
• Denmark
EU holding locations to be discussed:
• Cyprus
• Luxemburg
• The Netherlands
• Spain
• Ireland
• Belgium
• Denmark
EU holding locations to be discussed:
• Cyprus
• Luxemburg
• The Netherlands
• Spain
• Ireland
• Belgium
• Denmark
EU holding locations to be discussed:
• Cyprus
• Luxemburg
• The Netherlands
• Spain
• Ireland
• Belgium
• Denmark
EU holding locations to be discussed:
• Cyprus
• Luxemburg
• The Netherlands
• Spain
• Ireland
• Belgium
• Denmark
EU holding locations to be discussed:
• Cyprus
• Luxemburg
• The Netherlands
• Spain
• Ireland
• Belgium
• Denmark
Tax on capital contributions:
Parent
EU
holdco
Subs
Cash
Shares
Tax treatment of capital contributions
• Cyprus 0.6%, but exemptions may apply
• Luxemburg exempt
• The Netherlands exempt
• Spain 1%, but exemptions may apply
• Ireland exempt
• Belgium exempt
• Denmark exempt
Corporate Income Tax (“CIT) rates
• Cyprus 10%, (or 15% defense tax)
• Luxemburg 28.59% (combined)
• The Netherlands 20% - 25.5%
• Spain 30%
• Ireland 25% on passive income, 12.5%
only on trading income
• Belgium 24.98% - 33.99%
• Denmark 25%
India
EU
holdco
Italy
Dividend regime (participation exemption)
To what extent is dividend taxed in
EU holdco?
Dividend regime
• Full exemption
no minimum holding period
• Exemption denied if: >50% of activities of sub
(defence tax again) generate passive income and
are taxed less than 5%
• Requires: shareholding of 1% or more
Cyprus
Dividend regime
• No exemption, but credit for Dividend WHT and CIT of sub
• Requires shareholding of 5% or more
• To the extent the underlying tax in the participation is below 25%,
Irish tax will be payable.
Ireland
Dividend regime
• Full exemption
acquisition of at least Eur 1.2mio
minimum holding of 12 months
• Requires: shareholding of 10% or more, or
• Exemption denied if tax rate of sub is below 11%
(unless EU sub)
Luxemburg
Dividend regime
• Full exemption
• Requires: shareholding of 5% or more
• Exemption denied if: >50% of assets of sub generate
passive income and are taxed
less than 10%
• no minimum withholding period
the Netherlands
Dividend regime
• Full exemption
acquisition of at least Eur 6mio
• minimum holding of 12 months
• Requires: shareholding of 5% or more, or
• sub should be non-Spanish and
not from tax haven, subject to tax
• sub must have 85% operating
income
Spain
Dividend regime
• 95% exemption
acquisition of at least Eur 1.2mio
• minimum holding of 12 months
• Requires: shareholding of 10% or more, or
• Exemption denied if tax rate of sub is below 15%
(unless EU sub)
Belgium
• sub is “financial fixed asset”
Dividend regime
• 100% exemption
minimum holding of 12 months
• Requires: shareholding of 10% or more
• Exemption denied if shareholding company resides
outside EU and no tax treaty
exists with the resident country
(Denmark has app. 60 treaties
with countries outside EU)
Denmark
India
EU
holdco
Italy
To what extent are capital gains on
shares taxed in EU holdco?
Gains on shares (if participation exemption applies)
India
EU
holdco
Italy
To what extent are capital gains on
shares taxed in EU holdco?
Gains on shares (if participation exemption applies)
Gains on shares (if participation exemption applies)
• Cyprus exempt
minimum holding period 1 year,
sub must be operating company,
• Ireland exempt, but
Other rules apply for gains on shares in companies owning
immovable property
and EU resident or Treaty
country.
Gains on shares (if participation exemption applies)
• Cyprus exempt
• Luxemburg exempt
• The Netherlands exempt
• Spain exempt, but not to tax haven
• Ireland exempt, but
• Belgium exempt
• Denmark exempt, when held for 3 years
Interest payments relating to the acquisition of the Subs
Subs
Parent
EU
holdco
Loan
Interest on the loan deductible?
• Cyprus yes
• Ireland in principle yes
• Luxemburg yes
• The Netherlands in principle yes
• Spain in principle yes
• Belgium yes
• Denmark more or less
Interest payments to non-EU shareholder
Subs
Parent
EU
holdco
Loan
WHT on interest on shareholder’s loan?
• Cyprus 0%
• Ireland 15% - 0%
• Luxemburg 0% (Soparfi)
• The Netherlands 0%
• Spain 18% - 0%
• Belgium 15% - 0%
• Denmark 30% - 0%
Certainty in advance for the applicability of the participation
exemption?
• Cyprus clearance upon request
• Luxemburg clearance likely upon request
• The Netherlands advance tax rulings available
• Spain advance tax rulings available
• Ireland non-binding opinions
• Belgium advance tax rulings available
• Denmark advance tax rulings available
Withholding taxes payable on dividends paid by the holding
company?
Parent
EU
holdco
Subs
• Cyprus 0%
• Luxemburg 15% - 0%
• The Netherlands 15% - 0% (BV) or 0% (Coop)
• Ireland 15% - 0%
• Spain 18% - 0%
• Belgium 25% - 0%
• Denmark 28% - 0%
Number of Tax Treaties in force (per 1 jan 2008)
• Cyprus 42
• Luxemburg 51
• The Netherlands 86
• Spain 68
• Ireland 46
• Belgium 88
• Denmark 85
Concluding remarks
Although the Netherlands seem the best location for a holding company
it always depends on the case at hand….
And the winner is ……………………………….
How to make use of a holding company?
1. For which types of clients or potential clients?
2. What are the advantages for you?
3. Create an international client team;
4. Some examples.
1. For which types of companies?
• Companies that sell products internationally;
• Companies with foreign subsidiaries;
• Companies with foreign branches;
• Companies with intellectual property (royalty);
• Companies with (intragroup) financing activities.
2. What are the advantages for you?
• You can make your client happy (lower effective tax rate);
2. What are the advantages for you?
• You can make your client happy (lower effective tax rate);
• Show the strengths of our international network to your client;
• Opens the door for future international tax projects (e.g. transfer
pricing, supply chain management services, reorgs, etc);
• Use the succes as a showcase for attracting new clients.
3. Create an international client team
• Representatives from key countries where the company is active;
• Share client information within the team (e.g. group structure);
• Set up a conference call to discuss the opportunities;
• Define the communication strategy;
• Share examples with the client / target in order to build trust.
4. Some examples
a) New clients;
b) Existing clients.
Targeting new clients
• Creation of cross border target team
Example 1: End 2007 HLB Schippers and
HLB Ler Lum have jointly targeted a large
Malaysian palm oil company with
various plants in the Netherlands
Targeting new clients
•NL 2 BVs
NL BV
Egypt
Malaysia
Potential client wishes to
move:
1) EU HQ functions
and
2) Non Dutch subsidiaries to
a country outside Malaysia
Problem:
Is there a treaty between
third country (for instance
Singapore) and
Netherlands/ROW
ROW
Targeting new clients
•NL 2 BVs
NL BV
Egypt
Malaysia
???
Proposal 1:
In case Singapore will be
the new HQ:
Egypt should be held by
NL BV, to avoid 15% WHT
between Egypt and
Singapore.
ROW
Targeting new clients
•NL 2 BVs
Coop
Egypt
Malaysia
???
Proposal 2:
To avoid dividend tax from
Netherlands to ???
(perhaps no 0% treaty
rate), the use of a Dutch
cooperative was
proposed.
HQ will be moved while
holding function remains
in Europe.
ROW
Targeting new clients
UK ltd
Coop
US LLC
Dutch BVCyprus Ltd
Targeting new clients
Latvia
Cyprus
Private
indiv.
To existing clients
• Example 1: Analysis of international legal structure
HLB Schippers will perform an initial quick scan of your client’s
existing structure and provide advice how to optimise the
structure (i.e. create cash savings for your client). We are
currently doing the follow-up on a quick scan for a client of HLB
Australia.
To existing clients
Fiji comp
Coop
Private
individual (Fiji)
NA NV
Proposal:
International holding
structure that lowered the
effective tax burden.
Dividend tax from Fiji
+ eventually from NA
To existing clients
• Example 2: Entry into Europe
Your client is considering an entry into Europe for doing
business. This could be a natural moment to consider a
European holding structure. We have done this recently for a
large Russian investor which was referred to us by Vantis UK.
To existing clients
•NL 2 BVs
BV
Jersey
Austria
BVI
Coop
Proposal:
Acquisition vehicle that
could set of its finance
costs with profits of the
Dutch target.
BV had enough substance
for Austrian tax purposes.
Questions?
• Jeroen van der Linden (tax);
• Pascal Belfroid (audit)