How double tax treaties can optimise international business profitability
Expert cross-border structuring of your international business can lead to significant tax savings.
When your business trades internationally or establishes overseas subsidiaries, there are many tax issues to consider. Invariably your business can save tax by structuring the way that it trades and holds overseas subsidiaries.
Certain countries, notably The Netherlands, Cyprus, Mauritius and lately Brunei Darussalam, have tax treaties with other countries that reduce withholding taxes on dividends, management fees and loans to levels lower than many other countries. Therefore you could establish an intermediary holding company to own your shares in that overseas country.
Mauritius is the largest investor in India and one of the largest in China, but the Mauritian companies are intermediary holding companies owned by US, UK and European parents. The Netherlands has the most extensive treaty network globally and has its own unique participation exemption system, whereby profits remitted to the Netherlands are not subject to The Netherlands' corporation tax in most cases and providing the holding exceeds a threshold (normally 20%) and is an ‘active’ holding (not part of a share portfolio).
Cyprus has the most extensive treaty network with the former Soviet Union and Eastern Europe, so normally a Cypriot intermediary holding company will result in tax savings. Make sure to ask for professional advice if you are crossing an international border to trade or establish subsidiaries.
Please contact us to see how we may optimise the profitability of your international business.