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KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
KPMG’S GICT European Roundtable 2013
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KPMG’S GICT European Roundtable 2013

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This year’s Global International Corporate Tax (GICT) European Roundtable Event took place on 13 September 2013 at the Renaissance Tower Hotel in Zurich. …

This year’s Global International Corporate Tax (GICT) European Roundtable Event took place on 13 September 2013 at the Renaissance Tower Hotel in Zurich.

This full day event started with a presentation series in which country specialist from France, Germany, Luxembourg, Switzerland, the Netherlands, United Kingdom, USA, China, Turkey and Russia focused on current hot topics in their respective country as well as shared their experiences and tax ideas for outbound structures for Swiss based companies and groups. The outbound structures mainly covered topics such as financing of foreign operations, acquisition of foreign businesses, licensing and IP structures etc.

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  • 1. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . International Corporate Tax – Global Team (GICT) GICT European Roundtable Zurich September 13, 2013
  • 2. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Notice ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN BY KPMG TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN. You (and your employees, representatives, or agents) may disclose to any and all persons, without limitation, the tax treatment or tax structure, or both, of any transaction described in the associated materials we provide to you, including, but not limited to, any tax opinions, memoranda, or other tax analyses contained in those materials. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.
  • 3. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Dated Material THE MATERIAL CONTAINED IN THIS PRESENTATION IS CURRENT AS OF THE DATE PRODUCED. THERE CAN BE NO GUARANTEE THAT SUCH INFORMATION IS ACCURATE AS OF THE DATE IT IS RECEIVED OR THAT IT WILL CONTINUE TO BE ACCURATE IN THE FUTURE. IN PARTICULAR, THE MATERIALS HAVE NOT BEEN AND WILL NOT BE UPDATED TO INCORPORATE ANY TECHNICAL CHANGES TO THE CONTENT OR TO REFLECT ANY MODIFICATIONS TO A TAX SERVICE OFFERED SINCE THE PRODUCTION DATE.
  • 4. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Agenda 9:00 – 9:45 Introduction, BEPS, EU Action Plan and Swiss Tax Reform III 9:45 - 10:10 Hot Topics 10.10 – 10.30 Structures 10.30 – 11.00 Coffee Break 11.00– 12:30 Structures 12:30 – 13:15 Lunch 13:15 – 14:15 Country workshops 14:15– 16:00 Client meetings
  • 5. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Who is Who Patrick Seroin Partner, Tax Practice, Fidal in France Tel: +33 1 55 68 15 93 pseroin@fidalinternational.com Martine Moor Partner, Tax Practice, KPMG in the Netherlands Tel: +31 20 656 10 06 moor.martine@kpmg.nl Oliver Dörfler Partner, Tax Practice, KPMG in Germany Tel: +49 211 475 6314 odoerfler@kpmg.com Fred Gander Principal, Tax Practice, KPMG in the US, based in the UK Tel: +44 20 7311 2046 fgander@kpmg.com Andreas Müller Partner, Tax Practice, KPMG in Switzerland Tel: +41 44 249 33 94 andrewmueller@kpmg.com
  • 6. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Who is Who Alastair Slater Senior Manager, Tax Practice, KPMG in the UK Tel: +44 20 76 94 14 17 Alastair.Slater@kpmg.co.uk Ayhan Ustun Partner, Tax Practice, KPMG in Turkey Tel: +902166819000 ayhanustun@kpmg.com Abe Zhao Partner, Tax Practice, KPMG in China Tel: +86 10 8508 7906 abe.zhao@kpmg.com Robert Wallingford Partner, Tax Practice, KPMG in Russia Tel: +7 495 937 4477 bwallingford@kpmg.ru Louis Thomas Partner, Tax Practice, KPMG in Luxembourg Tel +35 222 5151 5527 louis.thomas@kpmg.lu
  • 7. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Introduction
  • 8. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . OECD‘s BEPS Action Plan • Action 1: Address the tax challenges of digital economy • Action 2: Neutralize the effects of hybrid mismatch arrangements • Action 3: Strengthen CFC rules • Action 4: Limit base erosion via interest deductions and other financial payments • Action 5: Counter harmful tax practices more effectively, taking into account transparency and substance • Action 6: Prevent treaty abuse • Action 7: Prevent the artificial avoidance of PE status • Action 8-10: Assure that transfer pricing outcomes are in line with value creation • Action 11: Establish methodologies to collect and analyze data on BEPS and the actions to address it • Action 12: Require taxpayers to disclose their aggressive tax planning arrangements • Action 13: Re-examine transfer pricing documentation • Action 14: Make dispute resolution mechanisms more effective • Action 15: Develop a multilateral instrument
  • 9. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . EU Action Plan European Parliament Resolutions on aggressive tax planning (19 April 2012) Advisory to Commission and Council European Commission Communications on aggressive tax planning and good tax governance (6 December 2012): 1. Tax havens 2. Anti-hybrid design 3. New impetus for Code of Conduct group 4. EU Platform on good governance: EU taxpayer charter (as part of CSR) 5. Increase tax transparency and information exchange within EU Recommendation to EU Member States Coordinated blacklisting Avoid mismatches Influencing tax payer behavior Various measures
  • 10. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . EU Action Plan European Council (28 Member States) EU Country-by-country tax reporting EU law EU Code of Conduct group 1. Anti-hybrids 2. Spontaneous exchange of information APAs/rulings 3. Switzerland 4. Guidance notes tax regimes EU political agreement to be implemented domestically Council working party EU CCCTB Negotiations stalling Council working party EU FTT tax Enhanced relationship Council working party EU Mutual assistance directive Proposal for automatic exchange of information
  • 11. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Swiss Corporate Tax Reform III – Selected Questions • Reduction of Cantonal Income Tax Rates Minimal taxation? • IP Box Regime EU acceptance? Broad definition of qualifying IP Self-developed versus purchased IP? UK approach of definition of qualifying tax base? • R&D Incentives Bullet proof? • Notional Interest Deduction Regime Qualification as hybrid instrument? Qualification of qualifying equity?
  • 12. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Swiss Corporate Tax Reform III - Selected Questions • Changes in the Participation Exemption Regime Does CH need CFC rules or subject to tax or active business requirements? • Abolishment of Swiss Stamp Duty • Informal Capital Contribution Concept/Excess Profit Ruling How can such set-ups survive within the EU? • Irish Double Decker or CV/BV Structures Lifetime of such structures?
  • 13. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Country Updates
  • 14. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . China
  • 15. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Value Added Tax Reforms Expansion of scope Chongqing Shenzhen Shanghai Jiangsu Tianjin Beijing 2013 Jiangsu andAnhui Beijing Sept. 1, 2012 Oct. 1, 2012 Shanghai Jan. 1, 2012 Nov. 1, 2012 Fujian (including Xiamen) Guangdong (including Shenzhen) Dec. 1, 2012 Aug 1, 2013 Tianjin, Zhejiang and Hubei The remaining cities and provinces in China Beijing Tib et Jian gxi Fuji an Tianjin Anhui Shanghai Zhejiang Fujian Guangdong Hubei Jiangsu
  • 16. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . China - Switzerland FTA • Signed 06 July 2013 • Expected to take effect by mid-2014  Ratification required in China • General framework agreement  Operating procedures expected • Covers 99.99% of Swiss exports to China and 96.5% of China exports to Switzerland  Different outcome on trade balance based on different statistics • What to expect on Day 1:  99.7% of Chinese exports to Switzerland immediately exempt from duties  Slow tariff elimination process begins for Switzerland exports to China (zero duty target on 84.2% of Swiss exports in China within 15 years)  Existing rate is more than 5%  Many agricultural products are excluded from tariff reductions
  • 17. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . 2013 Circular 19: Typical Secondment Fundamental Criteria • Whether the Home Entity bears all or part of the responsibilities and risks in relation to the work products of the Secondees • Whether it is the Home Entity that normally reviews and appraises the job performance of the Secondees Reference Factors • Appropriate labeling • No over-reimbursement • IIT settlement • The Home Entity decides number, qualification, remuneration and working locations
  • 18. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . 2013 Circular 165: Guidance on “Unfavorable Factor” • It is OK if the applicant does not make any distributions to a non-HK resident enterprise • A single-project holding company should not be denied any DTA benefits simply based on the fact that it has only one investment • The tax authorities should not equate “assets” with the registered capital of the applicant • The tax authorities should not solely consider the number of staff and the size of staff costs of the applicant in assessing whether its staffing level is commensurate with its income • The mere fact that the applicant’s shares are controlled by a higher-level corporation should not negate the existence of rights and control or disposal of the applicant • The fact that the offshore dividend income is exempt in HK should not have a negative implication for determining the beneficial ownership of the income
  • 19. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . 2013 Announcement 40 • Advance tax clearance for certain trade-related outbound payment is abolished • For each covered remittance that exceeds USD 50,000, the Chinese payor needs to perform a tax recordal filing with its in-charge state tax bureau (ISTB), unless the remittance falls into an exemption list • The ISTB will not review the tax position associated with the remittance during the recordal filing • In the post-filing examination, if the ISTB discovers that the Chinese taxes have not been properly paid, it will issue a notice of tax deficiency to the taxpayer or the withholding agent, and may impose a penalty as well as late payment surcharges
  • 20. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . France
  • 21. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Recent Changes in the France - Switzerland Relationship: New DTT on Inheritance Taxes & Swiss Tax Administrative Assistance Act New Inheritance Tax Treaty The current DTT on inheritance taxes dates from 1953 Further to recent negotiations, a new DTT has been concluded by France and Switzerland in July 2013. Such DTT is not yet in force The revised treaty provides that : • Any inheritance and gifts granted to French tax resident are subject to both French and Swiss inheritance taxes (Swiss taxes are offset against French taxes) • Shares in real estate companies are qualified as real estate • Improved exchange of information Swiss Tax Administrative Assistance Act Improvement of international tax administrative assistance through the reform of the Tax Assistance Act (under discussion/consultation until September 18, 2013) with a view to comply with international standards for the exchange of information by : • Postponing the notification of persons who are concerned by an administrative assistance request (subject to conditions, e.g. the notification would jeopardize the outcome of the investigations) • Clarifying the applicable procedure for collective requests • Admitting, in certain cases, the treatment of requests based on stolen data
  • 22. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Recent and Expected Changes: Anti-abuse Provisions Anti Debt-push Down Mechanism (“Carrez” Amendment) Restriction on the deduction of interest on loans taken for acquisitions of participation, if management/control of the target is not performed in France Immediate Action Required • Processes to be documented • Period of justification:  Acquisitions before 2012/01/01: FY 2013 (if FYs end on December 31)  Other acquisitions: until the end of the FY following the acquisition New Definition of the Notion of “Abuse of Law” (measure currently discussed in Parliament) The “abuse of law” procedure currently enables the tax authorities to disregard structures/operations that are (i) either exclusively tax driven, or (ii) fictitious Proposed Change • An exclusive tax motivation would no longer be required – an essential tax motivation would suffice • The new definition would apply to tax reassessment notices sent as from January 1, 2014 – hence a retroactive tax effect! Subject to appropriateness of retroactive effect with constitutional principles, an immediate screening of structures implemented in the past is recommended  Directly aimed at fighting hybrid mismatches and other optimizations  “BEPS” spirit
  • 23. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Recent and Expected Changes: Transfer Pricing Transfer Pricing Documentation Requirements In place since FY 2010 Current requirement: hand over TPD at the beginning of tax audit Possible Harshening currently Discussed in Parliament: • Either obligation to file full documentation each year together with the annual CIT return • or file of a lighter TPD yearly (and keep the full TPD available for the inspector in case of tax audit) Stricter Scrutiny of Transfer Pricing, notably on Cross-border Business Restructuring and Exit Taxation (measures currently discussed in Parliament) Draft bill under discussion aims at reversing burden of proof on absence of transfer of profit, in case of transfer of risks and functions to a related entity outside France This would lead to an obligation for FrenchCo to: • Prove that an arm’s length compensation has been received in consideration of the transfer and • Provide the authorities with the new method / modalities of determination of income to be received by the transferee, even if located outside France Possible application as from FYs ending on December 31, 2013 – hence a need to immediately monitor the operational restructurings performed (“small” retroactivity)  “BEPS” spirit
  • 24. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Recent Changes: Obligation to Submit Accounting Records in a Dematerialized Format Article 14 of the Amended Finance Act for 2012 brought changes regarding the submission of the file of accounting records when e-audits are carried out Requirement to Submit Accounting Records in a Dematerialized Format • Up until now, the submission of accounting records in a dematerialized format was optional • It is now a mandatory requirement, for all businesses subject to a tax audit and which keep their accounts using IT systems, to submit their accountings records in a dematerialized format for the purpose of an accounting audit, regardless of their business or tax regime • The files should be submitted as soon as the audit work begins (in a format that is to be defined by decree) • Penalties in case of failure to submit accounting records in a dematerialized format (up to 0.5% of the sales turnover) This measure shall apply to accounting audits for which an audit notice is sent after January 1, 2014 (i.e., audits covering fiscal years 2011,2012 and 2013, and possibly previous years if the company is in a tax- loss position)
  • 25. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Netherlands
  • 26. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Netherlands Tax System Tax Rate per January 1, 2013 • Statutory corporate income tax rate of 25% (20% for the first 200,000 Euro). Some Key Netherlands Tax Features • 100% participation exemption on dividends and capital gains (5% shareholding/no low taxed passive investment subsidiary). Liquidation losses tax deductible • 15% dividend withholding tax on dividends: often reduced to nil under tax treaty/PS Directive • 0% withholding tax on interest and royalties • Wide tax treaty network with over 90 countries reducing withholding taxes on dividends, interests and royalties (often to 0%) • Professional advance tax ruling practice • Fiscal unity regime for Dutch tax residents in case of 95% ownership (consolidated tax returns) • Innovation box resulting in an effective corporate tax rate of 5% on profits allocable to self-developed IP • Favourable tax treatment for foreign employees (30% tax ruling)
  • 27. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Recent Tax Developments Recent Tax Developments • Introduction of limiting excessive deduction of interest relating to the financing of participations as per financial years commencing on or after January 1, 2013; see next slide • Abolition of the Dutch thin capitalization rules as per financial years commencing on or after January 1, 2013 • 2013: announced: 50% depreciation at will to support capital investments • 2012 + 2013: 16% employer surtax for wages EUR >150k • General VAT rate of 21% since October 1, 2012 • 2012: New company law: Flex BV (facilitates for example: tracking stock and non voting shares) • Horizontal monitoring / enhanced relationship • Dutch government supports Dutch fiscal climate including support for Dutch holding and financing companies provided sufficient substance is in place
  • 28. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Public Debate • In the Dutch Press and the Dutch Parliament the role of the Netherlands as an international holding location has been the subject of discussions over the last half year • Dutch government stresses that the Netherlands is not a tax haven and that the economic benefits of the Netherlands as an international finance and services hub are not to be underestimated. Report published on 11 June 2013 indicates 10,000 jobs and € 3 billion taxes related to this sector • Generally, the Netherlands do not require a minimum substance for holding activities, only for finance and licensing entities a certain minimum substance is required, which can be provided by a trust company • Dutch APA practice remained largely remained unaffected by the debate, although DTA are cautious about being a good treaty partner; certain amount of FTE’s and exchange of information may be part of the package when applying for an APA
  • 29. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Public Debate • Dutch government published reaction on 30 August 2013:  Main message is that the Dutch government focuses primarily on global measures through discussions within the OECD, G20 and EU, not individual measures by the Netherlands  The Netherlands will strive to improve transparency • Several general measures are suggested:  Substance requirements (real risk and effective management) will apply to more companies  Spontaneous exchange of information to treaty partners if substance requirements are not met  Exchange of information for certain finance companies with an APA, if no activities other than licensing or financing in the Netherlands  APA requests for holding companies will only be processed if the group has certain economic nexus with the Netherlands • More specific measures regarding developing countries:  Renegotiation and inclusion of anti-abuse measures in treaties with 23 developing countries  Technical support to tax authorities of developing countries
  • 30. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Public Debate: Dutch Government’s Reaction on 30 August 2013 Measures 1.“At present – in contrast to many other countries – the Netherlands makes certain requirements of link companies that receive interest or royalty payments from other countries and pay out interest or royalties to other countries (these are known as financial service entities (dienstverleningslichamen)) when they wish to obtain advance certainty from the Dutch Tax Administration’s APA/ATR team. These requirements, which state that the management and the accounting must be conducted with capital that is consistent with the functions and risks of the company, will be included amongst the rules that apply to all such companies, even those that do not request advance certainty. This will be linked to the requirement that, when they rely on the application of a tax treaty with the Netherlands in their dealings in another country, their tax return must state whether they comply with these requirements. The Netherlands will spontaneously provide information about companies that do not meet the requirements to the relevant treaty partner. That state will then have all the relevant information it needs to assess whether the treaty benefits have been relied on with good reason. 2. Additionally, the Dutch Tax Administration will spontaneously share with foreign tax administrations the contents of APAs (Advance Pricing Agreements, advance certainty about transfer prices to be used in a group context) agreed with tax-paying entities in cases in which the group has no activities in the Netherlands other than receiving and paying out interest or royalties through the link company. 3. The government wants to take a third measure in the area of APAs and ATRs. Requests from companies that wish to have advance certainty about their “holding company activities” – receiving and paying out dividends – will only be considered when the group in which they operate has sufficient nexus with the Netherlands. Nexus can consist of actual presence or a serious plan to create that nexus. We may speak of actual presence if companies meet the requirements applicable to financial service entities. We think it is undesirable for the Dutch Tax Administration to deploy its capacity in cases in which there are no such ties. 4. In relation to developing countries, the Netherlands will suggest to Zambia that the bilateral treaty be updated and will approach the other developing countries about whether they wish to add anti-abuse provisions to the existing tax treaties. In concluding new treaties, what anti-abuse provisions they should include will be considered in close cooperation with the developing countries. Wherever possible, the Netherlands will further expand its support to capacity building in tax administrations in the partner countries and will release extra funds for this if necessary. In the end, capacity building is one of the most important ways in which developing countries can combat losses due to tax avoidance and tax evasion. 5. Finally, in the context of restricting integrity risks, the government proposes tightening the Regulations Governing Sound Operational Practices under the Trust Offices (Supervision) Act in consultation with De Nederlandsche Bank.”
  • 31. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Turkey
  • 32. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Corporate Income Tax Rate • 20% flat rate • Reduced corporate tax rates may be applicable under Investment Incentive Regime Capital Taxes and Duties • Equity capital is not subject to taxes and duties • Only 0.04% fund contribution payable on registered capital Corporate Income Tax Consolidation Rules • Not applicable (each company taxed on stand alone basis) Tax Losses • Carry forward 5 years (but no revaluation) • Carry back not available • Tax losses not impacted by change of shareholding in the company Personal Income Tax • Domestic rates from 15% to 35% • Certain exemptions may be available Indirect Tax/VAT • General rate of 18%; reduced rates 1% and 8%; exemptions are available such as export of goods and services; transactions of banks and insurance companies are not subject to VAT Introduction to the Turkish Tax System
  • 33. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Additional Slides
  • 34. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . France
  • 35. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Recent Changes: Update of the List of Non-Cooperative Jurisdictions Purpose of the List • Transactions involving entities/flows with Non- Cooperative Jurisdictions (“NCJ”) are subject to restrictive tax measures, with respect notably to:  Withholding taxes (higher rates up to 75%)  Rebuttal of the participation exemption regime (dividends / capital gains)  Transfer pricing (reversal of burden of proof)  Etc List of NCJs for 2012 • Anguilla, Belize, Brunei, Cook Islands, Costa Rica, Dominica, Grenada, Guatemala, Liberia, Marshall Islands, Montserrat, Nauru, Niue, Panama, Philippines, Saint Vincent and the Grenadines, Oman, Turks and Caicos Islands Update for 2012 • Territory removed: Philippines • Territories added: BVI, Jersey, Bermuda
  • 36. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Recent Changes: E-invoicing Relaxation of the Rules for Issuing Electronic Invoices Previously in France, only two e-invoicing systems were permitted: • EDI (i.e. dematerialized invoices) • Electronic signatures (signed invoices) As from 2013, a broader definition of e-invoicing is adopted: an invoice issued and received in any electronic format whatsoever • Businesses may use any technical solution so long as they set up documented and on-going controls to establish a “reliable audit trail” between the issued or received invoice and the delivery of the underlying goods or the performance of underlying services • A need to guarantee the authenticity of the source (guarantee of the supplier’s of the issuer’s identity of the content (no alteration of the content) and legibility from when the invoice is issued up until the end of the retention period • Recipient’s acceptance required The authorities’ guidelines are expected to be published at the end of June 2013 Practical impacts • Checking if the previous electronic signature put in place (if applicable) is still compliant • Configuring invoicing systems (new required information, issuance period) • Advantages of using e-invoicing : reduction of costs related to manual processing (risk of errors)
  • 37. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . “Trust-based” Relationship Introduction of an optional “trust-based” relationship between the tax authorities and taxpayers (launched in July 2013) • Yearly review by the tax authorities of the taxpayer’s obligations (transparency and cooperation of the taxpayer required / no benefit of full procedural guarantees!) • In exchange of a legal security (binding opinion to receive from the tax authorities) • However, greater firmness of the tax authorities outside this “trust-based” relationship… • Lack of attractivity to date
  • 38. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Germany
  • 39. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Treaty/Directive Shopping • German treaty/directive shopping rules were amended with effect of 2012 • Significant substance requirements • Apportionment clause introduced • Ability to claim WHT refund on dividends and royalties depends on other income earned by foreign shareholdersDividendDividend Parent Co Hol Co Sub 1 Sub 2 GmbH
  • 40. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Tax Act on Simplification of Company Taxation Tightening of Dual Consolidated Loss Rules • No deduction of tax loss generated within Organschaft regime if deducted abroad • Applicable to all open tax years • Particular relevance for KG holding structures KG Loan Organschaft US Sub Cos
  • 41. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Recent Law hanges Hybrid Debt Arrangements (Germany as lender) • Income on equity like hybrid debt is 95% tax exempt (corporate tax, trade tax) in Germany • Application of domestic participation exemption • New: Denial of dividend exemption to the extent payments are deductible at debtor level (trade tax exemption may still be achievable) • New rules generally applicable as of 1 January 2014 Real Estate Transfer Tax (RETT) • RETT also triggered in case of direct / indirect transfers in real estate owning entities • Group internal reorganizations generally not exempted • New: Repeal of RETT blocker in structures using KGs • New rules apply as of 7 June 2013
  • 42. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Luxembourg
  • 43. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Recent Changes: Luxembourg Corporate Taxation Increase of Aggregate Corporate Tax Rate in 2013 from 28.80% to 29.22% (Luxembourg-City) Minimum Corporate Flat Tax • Holding and/or financing companies (« SoParFi »): from EUR 1,575 to EUR 3,210 per annum (incl. solidarity surcharge) • Other activities: EUR 500 to EUR 20,000 per annum depending on balance sheet total of the company IP Tax Regime • 80% exemption system still applicable to recurring income and capital gains (patents, trademarks, designs & models, software, copyrights, domain names…) • Discussion to widen the IP regime No Change in Participation Exemption Rules No Change in Tax Ruling Practice
  • 44. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Netherlands
  • 45. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Structures to Finance Acquisitions • Over the last few years, the discussion regarding the erosion of the Dutch tax base mainly focused on interest deductions. Several articles limiting interest deductions have been introduced in this respect:  Article 10a: no interest deduction if intra-group loans are related to tainted transactions (dividends, capital contributions and intra-group transfers) and if interest income is not subject to sufficient taxation (10%)  Article 15ad: limited interest deduction if loans are used to buy Dutch target which is included in a Dutch fiscal unity  Article 13l: limited interest deduction if value of (foreign) participations exceeds the fiscal equity.  As of 1 January 2013 no fixed debt-equity ratios • For bona fide business transactions and expansions of operational businesses the above limitations generally do not have a large impact • No further restrictions of the participation exemption expected • No anti-hybrid rules, so participation exemption may apply, even if deduction abroad • Good relationship with Dutch tax authorities, willing to confirm tax treatment in advance
  • 46. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Participation Financing Regime: Section 13l CITA Amendment Rule Escapes • Introduction of specific rules for participation financing in section 13l CITA per January 1, 2013 • Additional rule besides anti-base erosion rules • Only applies if the sum of the acquisition price of the participations exceeds the equity of the Dutch parent. • Excessive participation debt = acquisition price of participations -/- (fiscal) equity of the taxpayer • Non deductible interest = • Average participation debt * total interest costs -/- 750k Average total debt • Effect: excessive interest not deductible. • In connection with this regime, the thin- cap rules are abolished as per 1-1-2013 • Also applies for reorganisations • Interest up to € 750,000 always deductible • Expansion investments are not taken into account when calculating the excessive participation debt • Acquisitions, expansions and capital contributions are not to be taken into account when determining the participation debt if and when they relate to the operating activities in a certain period, which covers the 12 months preceding the operational expansion through to the following 12 months Target NL Acquisition Holding Bank Bank debt Foreign subsidiary
  • 47. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Interest Foreign Co Dutch Hol Co Loan Bank Interest Deduction for Participations: Bosal Gap • Bill on Budget agreement for Dutch Stability Pact • Limits excessive deduction of interest relating to a participation in a subsidiary, i.e. ‘Bosal interest’ (section 13l Dutch CITA) • Measures into effect on 1 January 2013 • Thin capitalization rules in the Netherlands are abolished as of 2013 • “Acquisition debt”: broad scope - includes 3rd party loans • Safe harbour # 1: EUR 750K, below this the interest deductible in full • What is excessive? Interest Loan Foreign Sub
  • 48. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Limitation on Interest Deduction for Participations: Bosal Gap • The amount of debt that is considered to relate to the financing of participations (participation debt) is calculated as follows:  Acquisition price of the participations -/- the fiscal equity of the taxpayer • The non-deductible excessive interest is then calculated as follows:  Average participation debt x Total interest and costs -/- Euro 750K threshhold Average total debt Balance sheet (in Euro million): Profit before interest deduction: 25 Interest paid: 30 Taxable profit before 13l: 25 -/- 30 = -5 Participation loan: 400 -/- 250 = 150 Disallowed interest: Participation debt / total debt x interest paid 150/450 x 30 = 10 -/- 0.75 threshold = 9.25 Tax deductible interest: 30 -/- 9.25 = 20.75 Taxable profit after art. 13l: 25 -/- 20.75 = +4.25 Participation 400 Equity 250 Otherassets 300 Loans 450
  • 49. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Limitation on Interest Deduction for Participations: Bosal Gap Expansion Investments • Exception for ‘expansion investments’: acquisitions and contributions if these relate to an expansion of the operating activities of the group (and transferred to the Dutch company within 12 months period) • Production-, distribution- and sales activities can be regarded as operating activities. Portfolio investments are not regarded a part of the operating activities But no Exception if: a) the interest in respect of the financing of such an expansion is also deducted elsewhere in the group (double dip); b) a double interest deduction is created (hybrid loans, financing through a group company subject to a low rate of tax); or c) the participation would not have been held by the Dutch taxpayer, but for the interest deduction • In respect of situation b) if the taxpayer can prove that ultimately the interest income is subject to a reasonable level of taxation (>10%), then the expansion investment exception also applies for such a situation • If the effective tax rate is less than 10%, then the expansion investment exception may still apply if the taxpayer can prove that the funding arrangement in connection with the transaction was substantially driven by business reasons
  • 50. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Limitation on Interest Deduction for Participations: Bosal Gap Active financing activities • Debts are not taken into account in the total debt, nor interest on such debts, if they relate to receivables which are kept in relation to active finance activities performed by the Dutch company • Whether finance activities are active depends on the following factors:  Not incidentally arranging and executing financial transactions  Via own bank accounts  For group companies  Qualified personnel  Offices which are equipped with facilities common for financial services Pre 2006 acquisitions • Optional: the taxpayer can leave out 90% of the acquisition price of participations acquired or expanded in a financial year started on or before 1 January 2006.
  • 51. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Russia
  • 52. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Trends in International Taxation Tax presence of foreign companies in Russia Relationships with offshore jurisdictions “Beneficial ownership” concept Exchange of information “Substance over form” approach Tax Policy for 2013-2015 Tax policy for 2013-2015 Court practice Clarifications of the Russian Ministry of Finance and tax authorities Protocols to DTTs Court practice Changing approach of Russian tax authorities to international taxation
  • 53. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Changes in Tax Legislation and Practice Tax presence of foreign companies in Russia • Plans to introduce the concept of tax residence of legal entities into tax legislation “Beneficial Ownership” Concept • Changed approach of the tax and Ministry of Finance authorities to the definition of beneficial owner of interest income derived from euro bonds • Plans to introduce into the Russian Tax Code a definition of beneficial owner
  • 54. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Changes in Tax Legislation and Practice Exchange of Information • Changes by Protocols to DTTs with Cyprus, Luxembourg, Switzerland • Prospective conclusion of separate information exchange agreements (with offshore jurisdictions?) “Substance over Form” Approach • Challenging financial structures on the basis of “thin capitalization” rules and application of “substance over form” approach Relationships with Offshore Jurisdictions • Attempts to toughen the tax regime re transactions with foreign companies registered in jurisdictions with preferential tax regime ("CFC rules"), Tax Policy Plan for 2014-2016 • Attempts to make changes to the civil law regarding the disclosure of information on the beneficiaries of entities registered in offshore jurisdictions, Tax Policy Plan for 2014-2016
  • 55. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Impact on International Structures • Increased attention to the place of effective management of foreign companies and substance requirements in foreign jurisdictions to avoid creation taxable presence in Russia • Additional requirements to confirmation of the beneficial owner of income for DTT application • Challenging of “back-to-back” structures • Russian tax authorities could receive information on foreign structure of the Russian groups • Foreign tax authorities could start to assist the Russian tax authorities to collect taxes • Change of the approach of tax authorities to challenge the international structures and operations • Necessity of justification of the economic substance of transactions • Additional control and tax expenses relating to transactions with offshores: limitation of cost deduction, withholding taxation of other income etc • Taxation of profits of offshore subsidiaries 1 2 3 4 5
  • 56. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Beneficial Ownership Concept dividends/royalties/interest dividends/royalties/interest Offshore jurisdiction Jurisdiction with DTT RF The right to apply tax benefits according to DTT is provided only if the recipient is • the beneficial owner of the income; and • is not an intermediary, agent, that has limited rights with respect to the disposal of income Foreign Co Foreign Co Op Co • The definition is stipulated in Comments to OECD Model Convention • Article 11 to DTT with Cyprus (point 1) does not directly contain this condition for application of the benefit • The right to apply the benefit should be determined by the Russian tax authorities.
  • 57. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . • Foreign company has the actual right on income if it has legal rights to receive such income (i.e. contract) Methodological of the tax authorities Recommendations • The beneficial owner of income should determine the subsequent economic fate of income Letters of the Russian Ministry of Finance (2010, 2011, 2012) • Arguments based on OECD comments: the court practice is in favour of taxpayers Court practice • It is proposed to insert the definition into the Russian Tax Code General trends of the tax policy for 2013- 2015 years Possible interpretations Beneficial Ownership Concept The definition is not stipulated in the current Russian legislation
  • 58. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Thin Capitalization Rules Thin Capitalization Rules are Applied to Controlled Debt due to: • foreign company that directly or indirectly owns more than 20% of the charter capital of the borrower • Russian company that is affiliated with such foreign company • debt guaranteed by foreign shareholder or its Russian affiliates Implications of the Use of Thin Capitalization Rules • The maximum amount of deductible interest expense for profits tax purposes is calculated • The difference is treated as dividends:  Does not decrease the profits tax base  Subject to withholding tax Main Trends of the Tax Practice: • DTT provisions with respect to non- discrimination/unlimited deduction of interest generally do not override the thin capitalization rules • Challenges of loans from foreign “sister” company
  • 59. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Germany Russia loan interest onloan For Taxpayer: Conclusions of Commercial Court of Moscow in the case № A40-82055/11-91- 354: • provisions of p. 3 of Protocol to Russia Germany DTT provides for unlimited interest deduction • Conclusions made by Presidium of Supreme Commercial Court of the Russian Federation in case dated 15.11.2011 № 8654/11 are not applicable since in this case Supreme Commercial Court analyzed different grounds for interest deduction Against Taxpayer: Conclusions of Commercial Court of Moscow in the case № A40-37344/11-107- 60: • Conclusions made by Presidium of Supreme Commercial Court of the Russian Federation in case dated 15.11.2011 № 8654/11 are applicable. Thus, local Russian thin cap rules stipulated by item 2 of Art. 269 of RF Tax Code should be applied Loan and interest were fully paid Thin Capitalization Rules Different Courts Reach Different Conclusions on Applicability of DTT to Thin Cap Facts Russian Co Foreign Co
  • 60. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Turkey
  • 61. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Overview of the General Tax Environment for Foreign Investors
  • 62. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Thin Capitalization • Limitation of interest deduction only applies to group interest • Debt-equity ratio is 3:1 (not applicable to banks) • External debt secured by group may fall under thin capitalization rules if secured by “cash guarantee” • If thin capitalization rules become applicable, interest (on the exceeding portion) is non-deductible for corporate tax plus it is re-characterized as dividend for withholding tax perspective Interest Withholding Tax • 10% withholding tax on interest paid to foreign companies (0% on interest paid to banks) Reverse Charge VAT (18%) on Interest paid to Foreign Companies (exempt for interest paid to banks) Stamp Tax Charged on Loan Contracts (exempt for bank contracts) Banking and Insurance Transaction Tax (BITT) 5% on Interest paid to Turkish Banks (not applicable if the lender is a foreign entity) Resource Utilization Support Fund on Foreign Loans • Only applicable on loans from a foreign source) • RUSF applies as 3% of principle on a foreign currency loan which may be reduced or eliminated totally depending on the maturity (0% if maturity > 3 year) • RUSF applies as 3% of interest only on a TL loan irrespective of the maturity Tax Issues Related to Financing
  • 63. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Mergers • A legal merger between two Turkish companies can qualify as tax free subject to certain provisions. The basic rule is to conduct the merger on the basis of book values (i.e. No step up, no carve out) De-Mergers • Real estate properties, participation shares or whole production/service units can be transferred to another company as capital in-kind; which is qualified as a tax free de-merger subject to conditions • The basic rule is to perform the de-merger on the basis of book values hence the acquiring entity takes over the potential tax liability between fair value and book value (in case of future exit). Certain holding period and procedural requirements apply Conversion of Forms • Conversion of legal forms can be done tax free subject to similar provisions that apply for mergers Share Swaps • Share Swaps in between two Turkish entities can be done tax free (subject to certain conditions) Capital Reduction • Normally not a taxable transaction; but repatriation of other reserves from the company through capital reduction is subject to challenge by the tax authorities The tax authorities have been increasingly challenging the use of tax free re-organisations both through “legal procedures” and “substance” of such transactions Tax Free Business Reorganizations
  • 64. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Dividend Withholding Tax • Domestic rate 15% • Reduction under applicable tax treaties (73 DTTs in force); minimum rate 5% • EU Directives not applicable Royalty Withholding Tax • Domestic rate 20% • Usually reduced to 10% by the tax treaties Interest Withholding Tax Domestic rate 0% (interest paid to foreign banks) or 10% (interest paid to foreign corporations) • Usually not reduced by the tax treaties Professional Service Fees (e.g. management, technical assistance fees etc) • Domestic rate 20% • Usually eliminated by the tax treaties if service not performed in Turkey for period > 183 days Withholding tax represents the final taxation for a non-resident unless a permanent establishment is registered in Turkey Withholding Tax on Payments to Non-Residents
  • 65. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Overview of Transfer Pricing Regulations • In effect since 2007, through new Corporate Tax Law • Similar to OECD model in terms of content • Has been a point of attraction in recent tax audits in last years Acceptable Methodologies • Comparable prices; Cost plus; Resale price; Other methods (if the above are not applicable) Documentation Requirements • A simple TP form has to be prepared by each company as an attachment to annual Corporate Tax declaration • Large Corporations (VIP) Tax Office taxpayers are required to prepare an annual TP report for domestic and international related party transactions; other corporate taxpayers have to prepare TP report only for their international related party transactions • Annual TP Report has to be prepared by tax return submission date,and it has to be submitted to the tax authorities upon their request Advance Pricing Arrangements (APAs) • Corporate taxpayers can apply to the Ministry of Finance for an APA • Taxpayers can apply for bilateral or multilateral APAs in order to determine the appropriate method for controlled cross border transactions • The method negotiated with the Tax Administration becomes definite according to the conditions and period determined under the APA with no more than three years after the date of signing of the APA Transfer Pricing Regulations
  • 66. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . General Incentives • VAT exemption on purchase of eligible investment equipment (either domestic or import) • Customs Duty exemption on import of eligible investment equipment • RUSF exemption on import of eligible investment equipment Specific Incentives (based on Large Scale Investments, Region or Strategic Investment) • Reduced corporate tax rate (see next page) • Provision of free land • Social Security Premium support • Interest subsidy on project financing credits In order to benefit from those Specific Incentives, the Investment should be also in the list of “Encouraged Sectors” announced by the Council of Ministers Decree For all incentives, it is required to obtain an Investment Incentive Certificate (IIC) from the Turkish Treasury before the commencement of investment Investment Incentive Regulations
  • 67. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Investment Incentives are determined based on the improvement index of the city where the investment will be located Investment Incentive Regulations
  • 68. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Corporate Income Tax • 100% of R&D and innovation expenditures are deductible from taxable profits for corporate tax purposes provided that the companies making these expenditures are located in a R&D Centre and employ at least 50 R&D personnel Personal Income Tax • The salaries of R&D and support personnel are exempt from income tax until 2013 at the following portions under certain conditions:  90% exemption for the employees having a PhD,  80% exemption for other employees Social Security Support • 50% of the employer’s contribution of social security premiums (limited to the amount computed on monthly social security ceiling) is supported for five years for each R&D and support personnel. The incentive will be financed by the Ministry of Finance Technological Enterprise Capital Subsidy • A capital subsidy of up to TL 100 thousand would solely be given once to business ideas of university and college graduates focusing on technology and innovation, without requesting any guarantee Stamp Tax Exemption • All documents made out regarding R&D and innovation facilities within the scope of the Law No 5746 (R&D Law) are exempt from Stamp Tax Investment Incentive Regulations
  • 69. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Hot topics
  • 70. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Advance Pricing Arrangements (APA) • Turkey has adopted the following measures already in its Corporate Tax Regime since 2007:  Implementation of a Transfer Pricing regime similar to OECD guidelines, which adopted in strict manner. Transfer Pricing has become a focus area for tax audits on multinational companies in recent years  Implementation of a 30% withholding tax regime for various types of payments to tax-haven countries. However, the list of tax haven countries not yet been announced by Turkish authorities  Implementation of a CFC regime whereby foreign companies with more than 50% Turkish ownership, deriving passive income and subject to a tax burden of < 10% are captured by Turkish tax regime • Turkey has recently increased its efforts to be able to more effectively fight against international tax planning structures, as follows:  Turkey has taken an active role to sign “information exchange treaties” with many countries in the recent years, some of which include well known off-shore investment jurisdictions.  Turkey is also renewing its old DTTs to add “information exchange” and “administrative cooperation” clauses to those DTTs  Turkey has signed the “administrative cooperation agreement” with EU to enable more effective information flow and administrative support for auditing cross-border transactions with EU  Turkish tax administration has been restructured to include new sub departments focused on foreign sourced income and transfer pricing applications of cross border transactions Fight Against International Tax Planning
  • 71. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . Asset Peace Act • Not long after the Asset Peace Act No: 5811, which had been first introduced in Turkey on November 2008 (as a part of the fiscal stimulus response to the global financial crisis; aiming to legalize certain unrecorded assets and encouraging their injection into Turkish economy) a new Law that can be called as the 2nd Asset Peace Act entered into force with Law No: 6486 on May 29, 2013  The assets that could be declared under the Asset Peace Law covers (cash/gold/marketable securities/other capital market instruments/immovables that are verified by a reasonable documentation) possessed abroad as of April 15, 2013  The application has to be done until 31 October 2013 (an extension is expected until year-end)  There will be 2% tax to be paid on the value of the declared assets  The assets declared as such will be recorded under the equity of the Turkish taxpayer’s balance sheet and can not be withdrawn from the company in any manner  No tax investigations and assessment can be made due to the declared assets  Furthermore, the amounts to be declared under the Asset Peace Act will be able to offset against any potential adjustment to the tax base (in terms of Income Tax, Corporate Tax or VAT) with respect to periods prior to 1 January 2013 irrespective of the reason of that adjustment  The income from foreign participations (e.g. dividend, capital gains) or commercial income derived through a foreign representative or Permanent Establishment that are transferred to Turkey until 31 December 2013 shall be also exempt from taxation without any further condition • In view of the above, the Asset Peace Act brings significant tax advantages to taxpayers who may have assets or investments out of Turkey which can be declared under this regime Tax Amnesty through “Asset Peace” Act
  • 72. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . New Fiscal Policy • Turkish Government has been discussing for a long time to use tax policy more effectively to fight against these challenges and recently a number of tax law changes have been put in place that may impact the M&A and/or financing transactions in the market. The major changes include; New Financial Expense Restriction • The Council of Ministers has been entitled to determine that up to 10% of financing expenses incurred on debt that exceeds the shareholders equity may be disallowed from corporate tax base effective from year 2013. The Council of Ministers have not yet used this authority. Turkish tax law already included a “thin capitalization” limit for related party debt but this represents an additional restriction on financial expense deduction that also includes debt from non-related parties hence trying to make it more advantageous for investors who apply equity instead of debt financing Increase in Funds Payable on Cross-border Loans • Under the existing regime, the Resource Utilization Support Fund (“RUSF”) has been applied as 3% of foreign currency loans received from abroad that had a maturity of less than 1 year. Through a recent law, the duration to get exemption from RUSF has been increased to 3 years and a gradual decline of RUSF from 3% to 2% and 1% is determined for maturity dates of 1 year and 2 years respectively. This represents an additional cost for Turkish companies on short term debt financing Increase of VAT Rates on Residential Real-estate Sales • Turkish real estate market has been enjoying a reduced VAT rate of 1% on sale of residential units that are below 150 square meter. Through a recent law, the VAT rate has been increased to 8% and 18%, respectively, for residential houses that exceed certain value per square meter. There is a grandfathering rule for real estate projects that were licensed before the date of new law Other Key Fiscal Policy Changes in 2013
  • 73. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . United Kingdom
  • 74. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . IP Developments Patent Box • Profits arising from qualifying patents to be taxed at 10% • Legislation introduced in Finance Act 2012, applies from 1 April 2013 by election with a 5 year transitional period • Qualifying patents defined widely • Qualifying income includes royalties, embedded royalties on product sales and patent sale income • Legal owners (acquisition or self-development) + exclusive licence holders + cost sharing arrangements within scope R& D Expenditure Credit • Legislation included within Finance Act 2013 – applies for expenditure from 1 April 2013 • Credit rate for 2013 is 10% • If you make a profit, the credit can be offset against your tax bill • If you make a loss, you may be entitled to a cash payment from HMRC; however there is a complicated offset process which will delay actual payment of cash to companies with losses • Companies with tax losses will require sufficient PAYE/NIC relating to R&D to ‘frank’ any cash repayment • Existing super-deduction scheme (225% for SMEs, 130% for non-SMEs) continues until April 2016 in parallel
  • 75. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . UK CFC Reform and GAAR Controlled Foreign Companies • Applies for CFC accounting periods beginning on or after 1 January 2013 • CFC charge restricted to profits passing through “gateway” (largely by reference to UK significant people functions or “SPFs”) – designed to pick up profits artificially diverted from the UK only • There are the following entity-level exemptions: temporary period (12 months from coming under UK control); excluded territories (white list and “whiter than white” list); low profits (£500,000 of which no more than £50,000 non-trading finance income); low profit margin; and tax (local tax at least 75% of corresponding UK tax) • Numerous exclusions (e.g. profits from property businesses) and special rules for banks and insurance companies • Proposed partial (75%) finance company exemption for income from qualifying loan relationships – i.e. effective rate 5% (by 2015) • Full exemption for finance companies where loans from “qualifying resources” (including relending of interest receipts and distributions) GAAR • Counteracts “tax advantages” arising from “tax arrangements” that are “abusive” • Counteraction on “just and reasonable” basis (with “consequential relieving adjustments”) • No clearance procedure • Is not aimed at a reasonable choice between different courses of action that are taxed in different ways
  • 76. © 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved. . The UK as a Holding Company Jurisdiction Although the UK’s corporate tax regime is complex, the UK has developed into a tax-efficient holding company location Key features include: • no dividend withholding tax; • comprehensive distribution exemption; • capital gains exemption for substantial shareholdings; • foreign branch exemption; • restriction of “controlled foreign companies rules” to artificial diversion of profits from the UK; and • stable system now designed with clear policy intention of creating an attractive holding location The reforms that lead to the current tax regime were commenced by the previous government, so the risk of material change in tax law is low The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.

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