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Published byCadence Gawthrop Modified over 9 years ago
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Foreign Holding Structures for Indian Outbound Investments
Brussels, 2 September 2008
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Indian Group with Foreign Subs
Indian Parent Company Europe Asia North America
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Foreign Holding Company
Objectives are: Tax efficient repatriation of profits Obtaining treaty benefits (e.g. royalties) Indian deferral planning Tax efficient financing of foreign operations Protection under Bilateral Investment Treaties Organizational and business reasons Regulatory reasons
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Foreign Holding Company Example #1
Indian Parent Company Singapore Holding Company Dutch Holding Company NL Group Companies EU Group Companies US Group Companies
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Foreign Holding Company Example #2
Indian Parent Company Mauritius Holding Company Singapore Holding Company Luxembourg Holding Company Asian Group Companies EU Group Companies
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Ideal Holding Regime (1)
No taxes on dividend income and capital gains Losses on participations deductible Financing expenses deductible No thin capitalization rules No withholding tax on dividends paid to holding company No withholding tax on repatriation of profits No capital tax/stamp duties
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Ideal Holding Regime (2)
No CFC rules No subject-to-tax requirements No holding period No non-resident taxation exposure Politically stable, no exchange controls or foreign ownership restrictions, good infrastructure Excellent international reputation The preferred system is simple, predictable, reliable and has a long lifetime expectancy
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No Tax on Dividends DWHT in the source state
Non-resident taxation in the source state Taxation in the jurisdiction of the holding company DWHT on distributions by the holding company
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No Tax on Capital Gains Sale of shares in a subsidiary:
Separate capital gains tax in sources state Non-resident taxation in the source state Taxation in the jurisdiction of the holding company Sale of shares in the holding company: Taxation in the jurisdiction of the shareholder
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Financing Expenses Deductible
Thin Capitalisation or Earning Stripping Rules Other Limitations
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No CFC Rules CFC Rules (Anti) Passive Investment Rules
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Ruling System Which jurisdictions offer protection to (potential) investors through the issuance of advance clearance?
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No WHT on Interest and Royalties
Under domestic law Reduced by Tax Treaties Through European Directives Opportunities for group financing activities and group licensing activities
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Comparison Holding Regimes
NL SIN MAU CYP UK LUX BEL No taxes on dividends / capital gains No subject to tax requirement No exclusion of passive income Losses on participations deductible Financing expenses deductible No holding period No WHT on dividends paid No capital tax/stamp duties No CFC rules Ruling system No WHT on interest and royalties No non-resident taxation rules
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Possible Dutch Legal Entities
Public Limited Company (naamloze vennootschap) Bearer shares or registered shares Minimum capital EUR 45,000 No mandatory transfer restrictions Mainly used for listed companies or regulated companies Private Limited Company (besloten vennootschap) Only registered shares Minimum capital EUR 18,000 Mandatory transfer restrictions Cooperation (coöperatie) Special form of an association No share capital, but membership rights At least two members
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Some Legal Considerations
Incorporation by notarial deed Necessity statement of no objection (timing!) Necessity information on ultimate beneficial owners Contribution in kind to be evidenced by confirmation accountant Contribution in cash to be confirmed by bank statement Pre incorporation liabilities Appointment of/representation by management board Timely disclosure of annual accounts (Interim) dividend distributions No foreign exchange controls No securities and credit supervisions for non listed companies
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Dutch Flex BV: Towards a More Competitive Legal Form
Expected implementation: 2009 Main Objectives: Decrease of mandatory law elements Increase flexibility Abolish or replace ineffective rules Reduce legal uncertainties Facilitate needs of national and international legal community
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Dutch Flex BV: Towards a More Competitive Legal Form
INTRODUCED minimum capital € 0,01 no bank statement or accountant statement required at incorporation or for contributions reduction convocation time GMS electronic convocation GMS non-voting shares ABOLISHED: mandatory share transfer restrictions freely distributable reserve test financial assistance prohibition number of votes linked to nominal value shareholder resolutions outside meeting to require unanimity
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