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In an expanding global marketplace, opportunities for internationalizing your business have never been greater. Entity setup, Human Resource considerations, compliance with local regulations are just some of the challenges corporation must consider when expanding overseas. However, a critical challenge which lays the foundation for success of any overseas expansion, which often does not get its due, is the implementation of an efficient tax structure. Without it, exposures to significant compliance penalties are heightened, and the ability to benefit from profits generated in international markets are limited at best. Join us to learn about the complexities of international tax, and specific strategies to leverage in setting up profitable tax structures.
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Ask, Share, Learn – Within the Largest Community of Corporate Finance Professionals
Building the Foundation for Successful International Expansion: Tax Structure & Strategy
• Understand the tax-related questions you need to ask when expanding into a new international market
• Discover the impact of common tax structures on the effectiveness profit repatriation
• Understand how to define or refine a tax minimization strategy for a specific international market
Learning Objectives
After attending this event you will be able to:
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Ask, Share, Learn – Within the Largest Community of Corporate Finance Professionals
Building the Foundation for Successful International Expansion: Tax Structure & StrategyLee Sheehan, Head of Tax, Radius
About RADIUS
RADIUS – Global Growth ExpertsRadius helps businesses move into new markets, manage overseas operations and outsource entire global accounting and administrative functions.
OverseasConnect– a cloud-based software platform that allows you to manage all of your global operations from your desk
Services include:
• International accounting
• Finance
• Banking
• Tax
• HR
• Legal
• Compliance services
Withholdings Taxes (WHT)
Defining Withholdings Taxes (WHT)• WHAT is it?
– WHT is a tax levied by a Fiscal Authority on income sourced in their country
• WHY is it there?– WHT is a means for a Fiscal Authority to collect tax in-country
(especially important where funds flow cross border)
• WHEN does it apply? – WHT applies on fund flows between related legal entities operating
in different countries– WHT applies to dividends, interest and royalties – WHT does NOT generally apply on capital transactions
(sale of a company)
Withholdings Taxes (WHT)
Dealing with WHT• Can be a “provisional tax” (payment on account) or a
“final tax”
• Liabilities may be reduced or eliminated, by virtue of;– A Double Tax Agreement (‘DTA’) – vast majority of situations– Operation of specific local legislation in a country
– Other mutual agreement (EU Parent/Subsidiary Directives)
• May not necessarily be an additional or absolute cost – it may just shift tax from one country to another
• Without planning ahead there will be real cost or “tax leakage” – some “tax leakage” may be unavoidable
Withholdings Taxes (WHT)Example 1: Full Credit
The income (dividend) was subject to 25% in the home country, the WHT is less. No additional tax (or “tax leakage”) has occurred. The tax has simply moved between the home country and the overseas country.
HOME COUNTRY Gross dividend to tax $100Tax at 25% 25WHT suffered (20)Final tax to pay $ 5 Net Dividend $80
WHT $20
Withholdings Taxes (WHT)Example 2: Partial Credit
The income (dividend) was subject to 15% in the home country, however the WHT is more. In almost all situations the relief for WHT is limited to the local tax payable on the same source of income therefore there is potential “tax leakage” of $5.
Net Dividend $80WHT $20
HOME COUNTRY Gross dividend to tax $100Tax at 15% 15WHT suffered (15)(limited to tax payable on income)
Final tax to pay $ 0
Withholdings Taxes (WHT)Example 3: No Credit
The income (dividend) was subject to 25% in the home country, however the home country does not recognise the WHT. Therefore there is considerable “tax leakage”. The $100 income stream has suffered a total tax of $45 in two different countries. An effective tax rate of 45%.
Net Dividend $80WHT $20
HOME COUNTRY Gross dividend to tax $100Tax at 25% 25WHT suffered (0)(Home country does not allow or recognise WHT)
Final tax to pay $ 25
Withholdings Taxes (WHT)Example 4: Exemption
The income (dividend) is exempt in the home country but the income stream has suffered 20% WHT in the overseas country. There is therefore potential “tax leakage” of $20.
Net Dividend $80WHT $20
HOME COUNTRY Gross dividend to tax $100Tax at 25% 0WHT suffered (0)(limited to tax payable on income)
Final tax to pay $ 0
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