Dutch tax saving possibilities for Ukrainian MNC’s. Juan Telting

Dutch tax saving possibilities for Ukrainian MNC’s

Juan Telting

STP Tax Lawyers

Kiev

October 2015

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Agenda

- Dutch (tax) features- International structures with Dutch companies

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Dutch (tax) features

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The NetherlandsKey benefits

Attractive tax facilities

Legal and economic stability

Outstanding legal and financial

services and personnel

Extensive bilateral investment

treaties network (including Russia,

Ukraine, Kazakhstan)

Extensive bilateral tax treaty network

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The NetherlandsCorporate income tax system

Dutch participation exemption

Key features:

All benefits (dividends and capital gains) arising from a qualifying shareholding are exempt from Dutch Corporate Income Tax.

Conditions: at least 5% of the paid up nominal share capital of a company with a capital

dividend into shares;

the taxpayer does not qualify as an investment institution; and

the subsidiary does not qualify as a so-called low taxed passive subsidiary.

Costs related to the acquisition or disposal of a participation such as legal fees, compensations, notary fees, etc. are not deductible.

Losses arising from the liquidation of a (foreign) subsidiary are deductible (provided certain conditions are met).

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The NetherlandsKey tax features (1)

No withholding tax on dividends and royalties

Participation exemption

Loss compensation

Group relief

Financing with hybrid loans

Extensive tax treaty network

Access to EU law and protection (Parent/Subsidiary Directive &

Interest/Royalty Directive)

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The NetherlandsKey tax features (II)

Transfer Pricing Modeling

Asset protection by use of foundation

Use of the tax-friendly Coöperation

Ruling practice

No capital tax or stamp duty

30% ruling for expats

Innovation Box regime

High level investment protection

No exchange control

Flexible corporate law

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The NetherlandsUBO-register and shareholders-register

Fourth anti money laundering Directive: Member States should

register the ultimate beneficial owners (>25%) of entities

Information to be disclosed:

Name

Date of birth

Nationality

Residence state

Interest in entity

UBO-register is open for governments bodies and persons with a ‘legitimate

interest’

UBO-register should be opened in the course of 2017 at the latest

Next to the UBO-register, the Netherlands will register the direct shareholders

(>25%) of Dutch entities as from 1 January 2016. 8

Foreign investment company taxed at >10%

CIT

Corporate income tax systemInternational holding structure with applicability of the Dutch Participation Exemption

Dutch subsidiary Foreign active trading company

Dutch Holding Company

0% dividend withholding tax

Received dividends and capital gains fully tax exempt

In case of liquidation: liquidation loss deductible

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International structures with Dutch companies

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Ukraine/The NetherlandsDouble Tax Convention

• Acces to DTC: Companies taxresident in Ukraine or NL

• Tie breaker: Place of effective management

• Intra-group transactions: Arms’ length principle

• Dividends NL ↔ Ukraine: 5%WHT (0% if >50% and >300.000 USD)

• Interest NL ↔ Ukraine: 10% WHT (2% on loans from financial institutions)

• Royalties NL ↔ Ukraine: 0% WHT (for industrial royalties)

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SFI-structure

Ukrainian company Dutch SFIInterest

WHT reduced to 2%

Dutch-Ukraine tax treaty: reduced withholding tax of 2% on interest payments to an SFI (Special Financial Institution)

ForeigncoInterest

No WHT

Foreignshareholder

Definition of SFI: “a resident enterprise or institution, irrespective of its legal form, in which non-residents hold a direct or indirect participating interest through a shareholding or otherwise and whose objective is or whose business consists to a major extent of receiving funds from non-residents and channeling them to non-residents”.

STP Tax Lawyers has experience with obtaining the required Application of the Dutch Central Bank.

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International Ukrainian Holding structureUkrainian outbound investments

Ukrainian Parent company

EUSubsidiary

CzechSubsidiary

USSubsidiary

Current situation:

10% 5%5-15%

TurkishSubsidiary

5%

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Ukrainian outbound investmentsInternational holding structure with a Dutch Holding Company

Ukranian Parent company


Reduced to 5% / 0% dividend withholding tax*

TurkishSubsidiary

EU-subsidiary CzechSubsidiary

10% 0%

USSubsidiary

0%*0%

Proposed situation:

*LOB clause in Treaty should bechecked

14* Economic substance required

Ukrainian outbound investmentsInternational holding structure with a Dutch Holding Company and Cooperation

Ukranian Parent company


Reduced to 0% dividend withholding tax*

Dutch Coop

TurkishSubsidiary

EUSubsidiary

CzechSubsidiary

* Economic substance required

10% 5%

USSubsidiary

0%**0%

Proposed situation:

**LOB clause in treaty should be checked

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UkrainianCompany

ActiveCompany

Ukrainian outbound investmentsLicensing Structure

Dutch LicensingCompany

License agreement

Sublicense

0% withholding tax on royalties

0% withholding tax on royalties

Income on royalties taxable?

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UkranianCompany

Ukrainian inbound investmentsCurrent situation

Turkish Company

UkranianCompany

Czech Company

UkranianCompany

Russia

Withholding tax:Dividends 10%Interest 10%Royalties 10%



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UkrainianCompany

Ukrainian inbound investmentsProposed situation

Turkish Company

Ukrainian Company

Czech Company

UkrainianCompany

Russian Company

1. Withholding tax:Dividends 5%Interest 10%/2%Royalties 0%



Dutch Holding Company / Coop



1. 1. 1.

2. 2. 2.

2. Withholding tax:Dividends 0/15%Interest 0%Royalties 0%

2. Withholding tax:Dividends 0%Interest 0%Royalties 0%

2. Withholding tax:Dividends 5%Interest 0%Royalties 0%

Substance requirementsNew legislation applicable since 1 January 2014

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• At least 50% of the board of directors with decision taking powers must be resident of the Netherlands;

• Aforementioned Dutch resident board members must be sufficiently competent and qualified to perform their tasks (such duties of the board of directors include at least the decision-making on the transactions to be entered into as well as ensuring the proper handling of such transactions entered into);

• The company has qualified personnel at its disposal; • The decisions of the executive board members must be taken in the Netherlands; • The company’s main bank account is in the Netherlands (entitlement and control); • The bookkeeping of the company must take place in the Netherlands; • The company’s registered address is in the Netherlands and is not, as far known to the

company, considered as a tax resident of another country; • With regard to its activities, the company must incur real risks; • The level of equity of the company is sufficient to carry out its functions.

Tax experts cover all areas of tax lawIntertwined with almost all practices and disciplines of the legal industry

General tax practice;

Employment tax;

European tax law;

International tax planning and M&A;

Structured Finance;

Investment management / Funds;

Real estate;

Tax litigation;

Tax Assurance & Tax Control Framework;

Tax compliance;

Tax audits;

Due Diligence Investigation;

Transfer pricing;

VAT;

Estate planning & high-net-worth

individuals.

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Biography

Juan Telting Partner

E-mail: [email protected]: +31885060603Mobile: +31624760547

Juan started at Coopers & Lybrand, one of the predecessors of PwC in 1997. After working at PwC for ten years, Juan was looking for new challenges in his day-to-day work. Not only in advising clients, but particularly in using his own business skills. The next logical step was setting up his own tax advisory firm.

Juan advises in national and international areas and has affinity with Russian, Ukrainian, CIS, Turkish and Eastern European companies. He deals mainly with company restructuring and financing. Juan furthermore regularly advises real estate companies and high-net worth private individuals. Juan sits on the boards of various charities.

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