Tax-effective corporate structures

transcript

MIPIM 2012

Cannes, 6-9 March 2012

LAVECO LIMITED

Despina Sofia ComplexApartment 202, United Nations 8, Drosia 6042

Larnaca, CyprusTel: +357-24-636-919Fax: +357-24-636-920

E-mail: cyprus@laveco.com

for real estate

transactions

The aim of this presentation:to outline corporate structures which can help in the minimisation of taxes on income arising from the sale

of real estate

The LAVECO philosophy:

any outlay is an expense which reduces the profit of the company and thus the amount to be paid in dividends or re-invested for further development

• Tax: I have to cover this expense, just as I do all the others, such as:– costs of materials– wage costs– sub-contractor fees

• Why is this so important? • In times of recession: efficiency is particularly important,

since project-financing is already more difficult • What happens if our competitors follow the above

reasoning but we don’t? We will become the victims of competition; as we are less

efficient, we have to apply higher prices and thus our competitiveness is reduced

Only completely legal solutions, which do not infringe the written tax laws of the

given country, should be employed

The models outlined here are merely framework models,

and should not be construed as tax advice in a concrete case.

The solutions presented here by LAVECO can be used globally, and their application

should be realised in conjunction with experts from the country concerned.

I. Selling the real estate

II. Selling the interest (shares) of the project company

III. Selling the interest (shares) of the holding company

I. Solution: the real estate itself

is soldAdvantages:

• simple• transparent solution• uncomplicated for all parties• the change of ownership is registered in the

country in which the real estate is situated

OWNERSHIP OF PROPERTY

BUYER’S C

OMPANY

PROJECT COMPANY

FORMEROWNERSHIP OF

PROPERTY

PAYMENT

SALE OF OWNERSHIP RIGHTS

I. Solution: the real estate itself

is soldDisadvantages: • The PROJECT Company is subject to tax in

the country in which the real estate is situated on the profit made from the sale

• In general, the buyer is obliged to pay stamp duty in the country in which the real estate is situated

• Competitors can easily follow the details of the transaction

BUYER’S C

OMPANY

PROJECT COMPANY

FORMEROWNERSHIP OF

PROPERTY

PAYMENT

SALE OF OWNERSHIP RIGHTS

II. Solution: the shares of, or interests in, the PROJECT

Company are sold

Advantages:

• This is efficient if profit from the sale of shares or interests is not subject to tax

• It is also efficient if stamp duty is not payable after the purchase of shares and interests

SHAREHOLDER

OF THE PROJECT COMPANY

BUYER’S C

OMPANY

HOLDING C

OMPANY

PAYMENT

SALE OF THE SHARES OF THE PROJECT COMPANY

PROJECT COMPANY

FORMER SHAREHOLDER OF THE PROJECT

COMPANY

II. Solution: the shares of, or interests in, the PROJECT Company are

soldDisadvantages: • In certain countries, income from the sale of

the interests in local companies which own real estate is subject to taxation in that country

• In certain countries, the buyer of the interests in local companies which own real estate is obliged to pay stamp duty, just as in the purchase of the real estate itself

SHAREHOLDER

OF THE PROJECT COMPANY

BUYER’S C

OMPANY

HOLDING C

OMPANY

PAYMENT

SALE OF THE SHARES OF THE PROJECT COMPANY

PROJECT COMPANY

FORMER SHAREHOLDER OF THE PROJECT

COMPANY

III./1. Solution: sale of the shares of, or interests in, the company

owning the PROJECT Company with the insertion of offshore companies

What type of offshore companies are these?

Tax-free or fixed tax companies registered in the world’s tax havens (BVI, Bahamas, Belize, Panama, Cayman Islands, Seychelles etc.)

Advantages: • No tax or fixed tax is payable in the country in which the

offshore companies are registered• The question of payment of stamp duty does not arise• Lawyer’s fees are lower than in the case of the sale of the

real estate itself

SHAREHOLDER

OF OFFSHORE COMPANY 1

BUYER’S C

OMPANY

OFFSHORE COMPANY 2

PAYMENT

SALE OF THE SHARES OF OFFSHORE COMPANY 1

PROJECT COMPANY

FORMERSHAREHOLDER OF

OFFSHORE COMPANY 1

SHAREHOLDER OF THE PROJECT COMPANY

III./1. Solution: sale of the shares of, or interests in, the company

owning the PROJECT Company with the insertion of offshore companies

What type of offshore companies are these?

Tax-free or fixed tax companies registered in the world’s tax havens (BVI, Bahamas, Belize, Panama, Cayman Islands, Seychelles etc.)

Disadvantages: • There is a certain negative image associated with offshore

companies – blacklists• The offshore company must be maintained, meaning additional

expense• In many jurisdictions, the change of ownership can not be

verified by official public documents, so the level of trust between buyer and seller is very important

SHAREHOLDER

OF OFFSHORE COMPANY 1

BUYER’S C

OMPANY

OFFSHORE COMPANY 2

PAYMENT

PROJECT COMPANY

FORMERSHAREHOLDER OF

OFFSHORE COMPANY 1

III./2. Solution: sale of the shares of, or interests in, the company owning

the PROJECT Company with the insertion of companies from Cyprus

Advantages:

• Income from the sale of interests in a company is not taxable in Cyprus, provided that the company does not own real estate in Cyprus

• No stamp duty is payable – there has been no change in the ownership of the real estate

• Lower lawyer’s fees• The change of ownership can be tracked and verified by the

Registrar of Companies• EU Registered Company

SHAREHOLDER OF

THE CYPRUS COMPANY

BUYER’S C

OMPANY

CYPRUS HOLDING COMPANY

PAYMENT

PROJECT COMPANY

FORMER SHAREHOLDER OF THE CYPRUS

COMPANY

CYPRUS COMPANY

III./2. Solution: sale of the shares of, or interests in, the company owning

the PROJECT Company with the insertion of companies from Cyprus

Disadvantages:

• transaction costs: company formation and maintenance fees

SHAREHOLDER OF

THE CYPRUS COMPANY

BUYER’S C

OMPANY

PAYMENT

PROJECT COMPANY

FORMER SHAREHOLDER OF THE CYPRUS

COMPANY

CYPRUS COMPANY

Advantages of the tax system in Cyprus:

According to 400 experts from one of the Big Four consulting firms, Cyprus has the best tax climate in Europe for the following reasons:

• The lowest rate of corporation tax: 10%• No capital gains tax• No inheritance tax• No gift tax• Dividends paid to non-residents are free of tax• No rules on thin-capitalisation • Ideal holding centre: 48 DTTs (in 2012)• EU image: Cyprus has been a full member of the European

Union since January 1st 2004

Advantages of the tax system in Cyprus:

• Transparency: all changes are recorded by the Registrar of Companies

• Operates in accordance with international standards: annual audited financial report

• Low maintenance costs: in comparison with other EU countries

• Professional infrastructure: the financial sector and background services in Cyprus are extremely well developed

• Stable: Cyprus has been present on the international market since 1974 – more than 38 years

FORMER OWNER OF HONG KONG

COMPANIES 1 AND 2

III./3. Solution: sale of the shares of, or interests in, the PROJECT Company owning the real estate with the

insertion of an English LLPAdvantages:

• The owner of the PROJECT Company is registered in a high prestige jurisdiction

• Income from the sale of interests in a company is not taxable in Cyprus, provided that the company does not own real estate in Cyprus

• No stamp duty is payable – there has been no change in the ownership of the real estate

• Lower lawyer’s fees

PROJECT COMPANY

PAYMENT

BUYER’S C

OMPANYHONG KONG COMPANY 1

HONG KONG COMPANY 2

PARTNER 50%

UK LLP

SALE OF THE SHARES OF HONG KONG COMPANIES 1 AND 2

PARTNER 50%

OWNER OF HONG KONG COMPANIES 2

FORMER OWNER OF HONG KONG

COMPANIES 1 AND 2

III./3. Solution: sale of the shares of, or interests in, the PROJECT Company owning the real estate with the

insertion of an English LLP

Disadvantages: • complicated structure• several companies• higher maintenance costs

PROJECT COMPANY

PAYMENT

BUYER’S C

OMPANYHONG KONG COMPANY 1

HONG KONG COMPANY 2

PARTNER 50%

UK LLP

SALE OF THE SHARES OF HONG KONG COMPANIES 1 AND 2

PARTNER 50%

Advantages of English LLP companies:

• EU prestige, not registered in a blacklisted country• Companies formed on the basis of the LLP Act of

2000 are classified as legal entities: limited liability• Flow-through taxation: non-resident members are

not subject to tax, provided that they receive no income from local sources

• Ideal for holding purposes, not recommended for trade and services within the EU: VAT complications

Advantages of Hong Kong companies:

• Former British territory, the British legislation in regards to company registration remains untouched

• Territorial principle of taxation; tax is only

payable on income from local sources (16.5%), income from other sources is not taxable (0%)

• Independence: Far away from the EU, falls

under the jurisdiction of China

WHAT CAN LAVECO OFFER YOU?

• Company formation• Bank account opening

• Secretarial services• Fiduciary services• Asset protection

• Yacht registration• Full legal support

COMPANY FORMATION

• 40 jurisdictions• Different types of companies:

- Classic offshore companies (Seychelles, BVI, Belize)- European companies (Cyprus, Bulgaria, Hungary)- Prestigious companies (UK Ltd, UK LLP, Hong Kong)

• Wide network of partners• Shelf companies in 12 jurisdictions• Vintage companies

BANK ACCOUNT OPENING

• 15 banks in 6 countries• Current, deposit and investment accounts• Bank cards• Internet banking• Some banks do not require personal presence

SECRETARIAL SERVICES

• Virtual office services• Tel/Fax/Mail forwarding

FIDUCIARY SERVICES

• Companies fully managed by our directors• The client is in “silence”• Professional management & administration

ASSET PROTECTION

• International Trust in Cyprus• The Panama Foundation• The St. Kitts Foundation

YACHT REGISTRATION• US flags• Registration of yachts in

Seychelles• No estate tax• No individual ownership• The owner is a company

FULL LEGAL SUPPORT

• Power of Attorney• Certificate of Good Standing

• Accounting and Auditing• Notarization and Apostille

WHY LAVECO?1. We have been around for 20 years since 19912. Same place, same people for 20 years

Stability3. Our prices are neither too low, nor too high4. We know our clients’ requirements5. Multi-lingual experts in all offices6. Prices are the same for everybody7. Network of offices8. Data confidentiality

LAVECO KFT.33/a Raday St., Budapest

Hungary 1092Tel: +36-1-456-72-00Fax: +36-1-456-72-01

E-mail: hungary@laveco.com

LAVECO LIMITEDDespina Sofia Complex

Apartment 202, United Nations 8Drosia 6042

LAVECO LTD.Third Floor, Blackwell House, Guildhall Yard,

LondonEC2V 5AE United Kingdom

Tel: +44-207-556-0900Fax: +44-207-556-0910

E-mail: london@laveco.com

LAVECO EOODPorto Lagos No.1, Ent.2, Floor 5, Ap.42

1463 Sofia, BulgariaTel: +359-2-953-2989

Mob: +359-888-126-013Fax: +359-2-953-3502

E-mail: bulgaria@laveco.com

OPTITAX CONSULT S.R.L.59 Buzesti Str., A5 Block

1st Scale, 1st Floor, 62nd Flat1st District, Bucharest, Romania

Tel.: +40-21-311-61-76 Mob: +40-747-595-132Fax: +40-21-311-61-82

E-mail: office@optitax.ro

LAVECO LTD.Suite No 2 Olivier Maradan Building

Olivier Maradan StreetVictoria, Mahe, Seychelles

Tel.: +248-32-22-61Fax: +248-32-49-32

E-mail: seychelles@laveco.com

THE LAVECO GROUP OFFICES:

Thank you for your attention!

Despina Sofia ComplexApartment 202, United Nations 8, Drosia 6042

Tax-effective corporate structures

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