guest speaker – raffi sossoyan licensed canadian chartered professional accountant and u.s....

Guest speaker – Raffi Sossoyan

Licensed Canadian chartered professional accountant and U.S. certified public accountant.–Currently Vice-President, Global

Financial Reporting at Velan Inc.

Copyright © 2014 McGraw-Hill Ryerson, Limited. All rights

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Guest speaker – Raffi SossoyanPreviously, was a Canadian, U.S. and

International tax specialist with several companies including:• Deloitte• SNC-Lavalin• Transat• PwC• BCE Emergis• YPG

About Velan Inc.

• Manufacturer of a broad range of industrial valves for use in most industry applications including power generation, oil and gas, refining and petrochemicals, liquefied natural gas and cryogenics, pulp and paper, geothermal processes, subsea and shipbuilding.


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About Velan Inc. (continue..)

• Over $500 million sales and 2,000 employees worldwide.

• 16 manufacturing plants and 5 stocking & distribution centers in 10 countries.

Expansion to India –Why?

• India’s recent growth has led to an increasing need for electrical power.

• Indian government policies promote its utilities to use local rather than foreign manufacturers.


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Expansion to India –Why? (continue..)

• Prices and delivery times for supplying the Indian market from existing plants were not competitive.

• Internal need to outsource certain head-office support services to low-cost jurisdictions.

Expansion to India –Constraints

• India is a high tax jurisdiction.– Effective corporate income tax rate over 40% vs. 27%

for a Quebec-based company.• India is a very bureaucratic jurisdiction.

– Red tape and burdensome regulations.– Many different types of taxes (customs duty, excise,

duty, central sales tax, state sales tax, transfer taxes).• Strong foreign currency controls.

– Indian businesses transacting with each other must use the Indian rupee.


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Form of Investment – 2 Choices

Cons:• Worldwide sales into India

from other subsidiaries may be “attracted” to the Indian branch resulting in increased taxes.

• Limited flexibility with tax planning.

• Does not solve local content or outsourcing issues.


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Pros:• Easy to set-up – less

start-up costs• Start-up phase losses

can be used to reduce taxes on profitable Canadian operations

• Repatriation of profits are easier – No foreign currency controls.

1. Foreign Branch of Canadian Corporation

Form of Investment – 2 Choices

Cons:• Subject to foreign

currency controls.• Greater compliance

costs and administrative burdens.

• No loss utilization in start-up phase.


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Pros:• More Indian sales

opportunities due to local content.

• Simpler to offshore head office support services.

• Corporate veil.• Easier to obtain local

financing.• Greater flexibility with tax

planning.

2. New Indian Subsidiary

Expansion to India –Tax Considerations

• Minimize effective corporate income tax rate.– Debt push down– Transfer pricing

• Minimize taxes on repatriation of profits.– Dividend distribution tax of 16.995%

• Minimize indirect taxes.– Special economic zones (“SEZs”)

• Minimize taxes on future exit.– Not a concern for Velan Inc.


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Expansion to India –Final Structure

PUBLIC CO

(Canada)

100%

HOLDCO

(Canada)

100% 30.41%

LUXCO

(Luxembourg)

69.59%

INDIA CO

(India)


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guest speaker – raffi sossoyan licensed canadian chartered professional accountant and u.s....

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