23 International tax tips (updated 11 August 2008)
DisclaimerPlease note that no responsibility can be taken for consequences arising from relying on the following “23 Tax Tips”.
Warning to fellow tax professionals
One of our considerations in deciding on the style of English language used below was the position of the non-tax professional and the non-English native speaker. Accordingly, we have avoided the use of technical tax terminology where possible, in favour of more general wording. This may cause a degree of discomfort amongst fellow tax professionals, especially those with English as their native language. We apologise for any such discomfort.
- Many countries do not tax profits made in a foreign branch. Examples include Austria, Australia, Belgium, Cyprus, Denmark, France, Germany ... (in each case there are conditons to be fulfilled).
- If a Danish company owns French real estate, the profit from rental activities and any the gain on sale are not taxed in either country.
- The UK is one of the greatest tax havens of the world, especially for non-UK high net worth individuals with non-UK income.
- Consider routing cultural copyright royalties via a Danish company.
- Cyprus can be an excellent intermediary holding company or flow through financing jurisdiction.
- Since 1 January 2007 Hungary has become an interesting holding company jurisdiction.
- When setting up a company in Eastern Europe, consider using a holding company in Cyprus, Austria or the Netherlands.
- If you are using a Netherlands Antilles company (e.g., if used to receive royalties, interest or lease premiums) – beware! Be doubly sure that you are using the best jurisdiction.
- When setting up a company in India, consider using a holding company in Cyprus or Mauritius.
- It is perfectly possible, quite common and legitimate for there to be double taxation even though there is a double tax treaty between the two countries.
- If you wish to avoid US withholding tax on interest payments from the US – consider using portfolio debt.
- Never trust a tax treaty. Always double check the domestic law of the countries concerned to be sure that they do not unilaterally override the treaty. Many countries do.
- Sweden is one of the absolute best jurisidictions for locating an intermediary finance vehicle.
- A Hong Kong company is taxed on a territorial basis, so that income earned outside Hong Kong is not subject to tax there.
- Singapore taxes certain income at only 10%; and a Singapore holding company can derive certain kinds of income and pay it out totally free of tax in Singapore.
- If you want to know how much tax a certain person (individual) resident in Norway or Sweden has paid – just ask the authorities. Such information is public.
- Commissionaire and similar distribution arrangements can assist in the allocation of profits away from many high taxed countries - without breaching transfer pricing rules.
- Interest paid by a Danish holding company is generally fully tax deductible, even if the funds borrowed are used to acquire shares qualifying for the Danish participation exemption (subject to the thin cap rules and unless the foreign company is group taxed with its Danish parent).
- If withholding tax on interest coming from Greece is a problem, considering routing the loan via a UK company.
- If two unrelated companies based in different countries each own 20%-50% of a tax haven company, the income generated in that tax haven company is often not caught by CFC (controlled foreign corporation) rules in either country.
- When doing business with a related company in Australia, beware of what is probably the world’s toughest transfer pricing regime.
- If you have a German sales subsidiary covering Germany, why not let your Swedish subsidiary (taxed at 28%), Danish subsidiary (taxed at 25%) or Dutch (Netherlands) subsidiary (taxed at 25.5%) take over responsibility for sales in some parts of Germany - with each perhaps having a representative office in Germany - so that no German corporate tax is levied on such sales.
- It is possible to use a UK LLP (limited liability partnership) as an international trading vehicle. If structured correctly, neither this UK entity nor its owners will be liable to tax in the UK.
For further information please call +45 45 46 10 88 or by fax +45 45 46 10 89
email info@SheltonsGroup.com
