tax-effective corporate structures
DESCRIPTION
Tax-effective corporate structures. for real estate transaction s. MIPIM 2012 Cannes, 6-9 March 2012 LAVECO LIMITED Despina Sofia Complex Apartment 202, United Nations 8, Drosia 6042 Larnaca, Cyprus Tel: +357-24-636-919 Fax: +357-24-636-920 E-mail: cyprus @laveco.com. - PowerPoint PPT PresentationTRANSCRIPT
Tax-effective corporate structures
MIPIM 2012
Cannes, 6-9 March 2012
LAVECO LIMITED
Despina Sofia ComplexApartment 202, United Nations 8, Drosia 6042
Larnaca, CyprusTel: +357-24-636-919Fax: +357-24-636-920
E-mail: [email protected]
for real estate
transactions
The aim of this presentation:to outline corporate structures which can help in the minimisation of taxes on income arising from the sale
of real estate
The LAVECO philosophy:
any outlay is an expense which reduces the profit of the company and thus the amount to be paid in dividends or re-invested for further development
• Tax: I have to cover this expense, just as I do all the others, such as:– costs of materials– wage costs– sub-contractor fees
• Why is this so important? • In times of recession: efficiency is particularly important,
since project-financing is already more difficult • What happens if our competitors follow the above
reasoning but we don’t? We will become the victims of competition; as we are less
efficient, we have to apply higher prices and thus our competitiveness is reduced
Only completely legal solutions, which do not infringe the written tax laws of the
given country, should be employed
The models outlined here are merely framework models,
and should not be construed as tax advice in a concrete case.
The solutions presented here by LAVECO can be used globally, and their application
should be realised in conjunction with experts from the country concerned.
I. Selling the real estate
II. Selling the interest (shares) of the project company
III. Selling the interest (shares) of the holding company
I. Solution: the real estate itself
is soldAdvantages:
• simple• transparent solution• uncomplicated for all parties• the change of ownership is registered in the
country in which the real estate is situated
OWNERSHIP OF PROPERTY
BUYER’S C
OMPANY
PROJECT COMPANY
FORMEROWNERSHIP OF
PROPERTY
PAYMENT
SALE OF OWNERSHIP RIGHTS
I. Solution: the real estate itself
is soldDisadvantages: • The PROJECT Company is subject to tax in
the country in which the real estate is situated on the profit made from the sale
• In general, the buyer is obliged to pay stamp duty in the country in which the real estate is situated
• Competitors can easily follow the details of the transaction
OWNERSHIP OF PROPERTY
BUYER’S C
OMPANY
PROJECT COMPANY
FORMEROWNERSHIP OF
PROPERTY
PAYMENT
SALE OF OWNERSHIP RIGHTS
II. Solution: the shares of, or interests in, the PROJECT
Company are sold
Advantages:
• This is efficient if profit from the sale of shares or interests is not subject to tax
• It is also efficient if stamp duty is not payable after the purchase of shares and interests
SHAREHOLDER
OF THE PROJECT COMPANY
BUYER’S C
OMPANY
HOLDING C
OMPANY
OWNERSHIP OF PROPERTY
PAYMENT
SALE OF THE SHARES OF THE PROJECT COMPANY
PROJECT COMPANY
FORMER SHAREHOLDER OF THE PROJECT
COMPANY
II. Solution: the shares of, or interests in, the PROJECT Company are
soldDisadvantages: • In certain countries, income from the sale of
the interests in local companies which own real estate is subject to taxation in that country
• In certain countries, the buyer of the interests in local companies which own real estate is obliged to pay stamp duty, just as in the purchase of the real estate itself
SHAREHOLDER
OF THE PROJECT COMPANY
BUYER’S C
OMPANY
HOLDING C
OMPANY
OWNERSHIP OF PROPERTY
PAYMENT
SALE OF THE SHARES OF THE PROJECT COMPANY
PROJECT COMPANY
FORMER SHAREHOLDER OF THE PROJECT
COMPANY
III./1. Solution: sale of the shares of, or interests in, the company
owning the PROJECT Company with the insertion of offshore companies
What type of offshore companies are these?
Tax-free or fixed tax companies registered in the world’s tax havens (BVI, Bahamas, Belize, Panama, Cayman Islands, Seychelles etc.)
Advantages: • No tax or fixed tax is payable in the country in which the
offshore companies are registered• The question of payment of stamp duty does not arise• Lawyer’s fees are lower than in the case of the sale of the
real estate itself
SHAREHOLDER
OF OFFSHORE COMPANY 1
BUYER’S C
OMPANY
OFFSHORE COMPANY 2
OWNERSHIP OF PROPERTY
PAYMENT
SALE OF THE SHARES OF OFFSHORE COMPANY 1
PROJECT COMPANY
FORMERSHAREHOLDER OF
OFFSHORE COMPANY 1
OFFSHORE COMPANY 1
SHAREHOLDER OF THE PROJECT COMPANY
III./1. Solution: sale of the shares of, or interests in, the company
owning the PROJECT Company with the insertion of offshore companies
What type of offshore companies are these?
Tax-free or fixed tax companies registered in the world’s tax havens (BVI, Bahamas, Belize, Panama, Cayman Islands, Seychelles etc.)
Disadvantages: • There is a certain negative image associated with offshore
companies – blacklists• The offshore company must be maintained, meaning additional
expense• In many jurisdictions, the change of ownership can not be
verified by official public documents, so the level of trust between buyer and seller is very important
SHAREHOLDER
OF OFFSHORE COMPANY 1
BUYER’S C
OMPANY
OFFSHORE COMPANY 2
OWNERSHIP OF PROPERTY
PAYMENT
SALE OF THE SHARES OF OFFSHORE COMPANY 1
PROJECT COMPANY
FORMERSHAREHOLDER OF
OFFSHORE COMPANY 1
OFFSHORE COMPANY 1
SHAREHOLDER OF THE PROJECT COMPANY
III./2. Solution: sale of the shares of, or interests in, the company owning
the PROJECT Company with the insertion of companies from Cyprus
Advantages:
• Income from the sale of interests in a company is not taxable in Cyprus, provided that the company does not own real estate in Cyprus
• No stamp duty is payable – there has been no change in the ownership of the real estate
• Lower lawyer’s fees• The change of ownership can be tracked and verified by the
Registrar of Companies• EU Registered Company
SHAREHOLDER OF
THE CYPRUS COMPANY
BUYER’S C
OMPANY
CYPRUS HOLDING COMPANY
OWNERSHIP OF PROPERTY
PAYMENT
SALE OF THE SHARES OF OFFSHORE COMPANY 1
PROJECT COMPANY
FORMER SHAREHOLDER OF THE CYPRUS
COMPANY
CYPRUS COMPANY
SHAREHOLDER OF THE PROJECT COMPANY
III./2. Solution: sale of the shares of, or interests in, the company owning
the PROJECT Company with the insertion of companies from Cyprus
Disadvantages:
• transaction costs: company formation and maintenance fees
SHAREHOLDER OF
THE CYPRUS COMPANY
BUYER’S C
OMPANY
CYPRUS HOLDING COMPANY
OWNERSHIP OF PROPERTY
PAYMENT
SALE OF THE SHARES OF OFFSHORE COMPANY 1
PROJECT COMPANY
FORMER SHAREHOLDER OF THE CYPRUS
COMPANY
CYPRUS COMPANY
SHAREHOLDER OF THE PROJECT COMPANY
Advantages of the tax system in Cyprus:
According to 400 experts from one of the Big Four consulting firms, Cyprus has the best tax climate in Europe for the following reasons:
• The lowest rate of corporation tax: 10%• No capital gains tax• No inheritance tax• No gift tax• Dividends paid to non-residents are free of tax• No rules on thin-capitalisation • Ideal holding centre: 48 DTTs (in 2012)• EU image: Cyprus has been a full member of the European
Union since January 1st 2004
Advantages of the tax system in Cyprus:
• Transparency: all changes are recorded by the Registrar of Companies
• Operates in accordance with international standards: annual audited financial report
• Low maintenance costs: in comparison with other EU countries
• Professional infrastructure: the financial sector and background services in Cyprus are extremely well developed
• Stable: Cyprus has been present on the international market since 1974 – more than 38 years
FORMER OWNER OF HONG KONG
COMPANIES 1 AND 2
III./3. Solution: sale of the shares of, or interests in, the PROJECT Company owning the real estate with the
insertion of an English LLPAdvantages:
• The owner of the PROJECT Company is registered in a high prestige jurisdiction
• Income from the sale of interests in a company is not taxable in Cyprus, provided that the company does not own real estate in Cyprus
• No stamp duty is payable – there has been no change in the ownership of the real estate
• Lower lawyer’s fees
PROJECT COMPANY
PAYMENT
CYPRUS HOLDING COMPANY
BUYER’S C
OMPANYHONG KONG COMPANY 1
HONG KONG COMPANY 2
PARTNER 50%
SHAREHOLDER OF THE PROJECT COMPANY
UK LLP
SALE OF THE SHARES OF HONG KONG COMPANIES 1 AND 2
OWNERSHIP OF PROPERTY
PARTNER 50%
OWNER OF HONG KONG COMPANIES 2
OWNER OF HONG KONG COMPANIES 1
FORMER OWNER OF HONG KONG
COMPANIES 1 AND 2
III./3. Solution: sale of the shares of, or interests in, the PROJECT Company owning the real estate with the
insertion of an English LLP
Disadvantages: • complicated structure• several companies• higher maintenance costs
PROJECT COMPANY
PAYMENT
CYPRUS HOLDING COMPANY
BUYER’S C
OMPANYHONG KONG COMPANY 1
HONG KONG COMPANY 2
PARTNER 50%
SHAREHOLDER OF THE PROJECT COMPANY
UK LLP
SALE OF THE SHARES OF HONG KONG COMPANIES 1 AND 2
OWNERSHIP OF PROPERTY
PARTNER 50%
OWNER OF HONG KONG COMPANIES 2
OWNER OF HONG KONG COMPANIES 1
Advantages of English LLP companies:
• EU prestige, not registered in a blacklisted country• Companies formed on the basis of the LLP Act of
2000 are classified as legal entities: limited liability• Flow-through taxation: non-resident members are
not subject to tax, provided that they receive no income from local sources
• Ideal for holding purposes, not recommended for trade and services within the EU: VAT complications
Advantages of Hong Kong companies:
• Former British territory, the British legislation in regards to company registration remains untouched
• Territorial principle of taxation; tax is only
payable on income from local sources (16.5%), income from other sources is not taxable (0%)
• Independence: Far away from the EU, falls
under the jurisdiction of China
WHAT CAN LAVECO OFFER YOU?
• Company formation• Bank account opening
• Secretarial services• Fiduciary services• Asset protection
• Yacht registration• Full legal support
COMPANY FORMATION
• 40 jurisdictions• Different types of companies:
- Classic offshore companies (Seychelles, BVI, Belize)- European companies (Cyprus, Bulgaria, Hungary)- Prestigious companies (UK Ltd, UK LLP, Hong Kong)
• Wide network of partners• Shelf companies in 12 jurisdictions• Vintage companies
BANK ACCOUNT OPENING
• 15 banks in 6 countries• Current, deposit and investment accounts• Bank cards• Internet banking• Some banks do not require personal presence
SECRETARIAL SERVICES
• Virtual office services• Tel/Fax/Mail forwarding
FIDUCIARY SERVICES
• Companies fully managed by our directors• The client is in “silence”• Professional management & administration
ASSET PROTECTION
• International Trust in Cyprus• The Panama Foundation• The St. Kitts Foundation
YACHT REGISTRATION• US flags• Registration of yachts in
Seychelles• No estate tax• No individual ownership• The owner is a company
FULL LEGAL SUPPORT
• Power of Attorney• Certificate of Good Standing
• Accounting and Auditing• Notarization and Apostille
WHY LAVECO?1. We have been around for 20 years since 19912. Same place, same people for 20 years
Stability3. Our prices are neither too low, nor too high4. We know our clients’ requirements5. Multi-lingual experts in all offices6. Prices are the same for everybody7. Network of offices8. Data confidentiality
LAVECO KFT.33/a Raday St., Budapest
Hungary 1092Tel: +36-1-456-72-00Fax: +36-1-456-72-01
E-mail: [email protected]
LAVECO LIMITEDDespina Sofia Complex
Apartment 202, United Nations 8Drosia 6042
Larnaca, CyprusTel: +357-24-636-919Fax: +357-24-636-920
E-mail: [email protected]
LAVECO LTD.Third Floor, Blackwell House, Guildhall Yard,
LondonEC2V 5AE United Kingdom
Tel: +44-207-556-0900Fax: +44-207-556-0910
E-mail: [email protected]
LAVECO EOODPorto Lagos No.1, Ent.2, Floor 5, Ap.42
1463 Sofia, BulgariaTel: +359-2-953-2989
Mob: +359-888-126-013Fax: +359-2-953-3502
E-mail: [email protected]
OPTITAX CONSULT S.R.L.59 Buzesti Str., A5 Block
1st Scale, 1st Floor, 62nd Flat1st District, Bucharest, Romania
Tel.: +40-21-311-61-76 Mob: +40-747-595-132Fax: +40-21-311-61-82
E-mail: [email protected]
LAVECO LTD.Suite No 2 Olivier Maradan Building
Olivier Maradan StreetVictoria, Mahe, Seychelles
Tel.: +248-32-22-61Fax: +248-32-49-32
E-mail: [email protected]
THE LAVECO GROUP OFFICES:
Thank you for your attention!
Despina Sofia ComplexApartment 202, United Nations 8, Drosia 6042
Larnaca, CyprusTel: +357-24-636-919Fax: +357-24-636-920
E-mail: [email protected]