Fred Awuttey presented on key tax planning tools for multinational enterprises (MNEs). Some common strategies MNEs use include shifting profits to lower tax jurisdictions, exploiting mismatches in entity and instrument treatment, using losses, foreign tax credits, and preventing permanent establishment. Controlled foreign company rules attribute some subsidiary income to parents to prevent tax haven use. MNEs also structure supply chains, use captive insurance, and strategically locate holding companies to minimize taxes. Countries tax based on residence and source, with tax treaties preventing double taxation.

1. Tax Planning Tool of MNE
Presentation by Fred Awuttey

2. Key tools for international taxation
• International Tax Planning Schemes
• Country taxing rights and tax treaties
• Residence rule
• Permanent Establishment
• Transfer pricing
• Anti Avoidance rule
– Controlled foreign companies
– Thin capitalization
– GAAR in local tax laws

3. Controlled foreign companies rule -CFC
• Cfc rules seek to attribute some income or all
of profit of company to its shareholders
• The effect is that CFC rules allow countries to
tax the profit of subsidiary in a parent
company
• Basically it is anti avoidance rule which
normally restrict subsidiary in tax haven and
to geographically mobile passive income

4. MNE typically structure tax planning by:
– Shifting profit from higher to lower tax jurisdiction
– Exploiting mismatches in treatment of entity’s and
instruments

5. Common tax planning schemes
• Use of losses
• Use of foreign tax credit
• Preventing the existence of a PE
• Deferral strategies and artificial diversion of
profit
• Use of non-resident companies
• Minimizing /eliminating WHT- This can done
through tax arbitrage

6. Common tax planning schemes
• Business restructuring / supply chain models
• Captive insurance schemes
• Migration-exit taxes
• Dual resident companies
• Treaty shopping
• Excessive deduction of interest
• Choice of holding company location
• Transfer pricing

7. Tax features of multinational Enterprises
• Each company in the group will have a
residence for taxation purpose ( perhaps more
than one)
• Tax administrations view tax on a jurisdictional
basis
– that is they will tax those group companies that
are resident in their jurisdiction( in fact, they may
sometimes also seek to tax all or part of the
income of other group companies

8. • Distinguish between:
– Companies which have their own legal identity
and resident status and may be organized in sub-
group
– Branches, which are legally a part of a company
and do not have their own legal entity ( and may
be permanent establishment for tax purpose)

9. Issue for discussion:
• Company without own legal identity has fairer
tax advantage over companies with own legal
identity.

10. Countries taxing right and tax Treaties
• Countries may tax on a residence basis or source
basis:
• Residence-: tax all income of a residence where
income is eraned
• Source:- tax all income sourced in the country (
interest, rent, dividend, capital gain, management
fees etc)
• Many countries tax on both bases. Tax treaties
exist to ensure that the same income is not taxed
twice.

11. • Thank you