© Grant Thornton LLP. All rights reserved. International Developments and Trends in International...

© Grant Thornton LLP. All rights reserved.

International Developments and Trendsin International Taxation

Günter Spielmann

Executive director, EMEA Tax servicesGrant Thornton International


Some initial comments……………..

• There have been recent changes to trusts in Cyprus• A Cyprus trust is a form of SPV• There are many different forms of SPV's in use globally• There are many jurisdictions offering different types of

SPV's• There haven been recent significant trends in international

tax policy concerning SPV's• We will look at SPV's from a global view in terms of recent

international developments and trends in international taxation


Should a Multinational use a SPV?

As the result of either a direct or indirect investment into host country:– Are there tax incentives available in the host country that defer

home country tax and reduce global tax– Are there tax incentives available in the intermediary country that

defer home country tax and reduce global tax

Home countrylocal co.

Host countrylocal co.

Intermediarycountry local co.


What is an SPV?

• Corporation in a tax favored location• Corporation performing a tax favored function• Often located in tax friendly countries• Other times located in commercial centers• Could serve as a conduit of corporate fund transfers • Could also be used as a repository for corporate funds• Often used to manage the deferral of income in the home country• Often used to manage to global tax rate of a multinational


Uses of a SPV

SPV as a holding company• The ownership of foreign activities can be

centralized in an SPV company which either has offshore operating branches or owns the shares of overseas subsidiaries conducting active trade and business in other countries.

• The SPV company would serve as the clearing house for profits from foreign operations, accumulating profits, reinvesting and expanding in new countries, with only concessional rates of tax applying.

Shareholder

SPV Hold Co

Subsidiaries


Uses of a SPV

SPV as a holding company• Deferral of tax on dividends• Deferral of tax on capital gains• Ability to retain funds offshore @ nil or low tax• Favorable withholding tax on remittance

Shareholder

SPV Hold Co

Subsidiaries


Uses of a SPV

SPV as lending company• Debt principal loaned from SPC to operating co• Interest deducted @ operating co• Interest subject to w/h tax @ operating co• Debt principal not deductible @ operating co• Debt principal not subject to w/h tax @ operating co• Interest subject to nil/low tax @ SPV• Interest deferred from tax @ shareholder level Shareholder

SPV Hold Co

Subsidiaries SPV Fin Coloan


Uses of a SPV

SPV as licensing company• Royalties are deductible by licensee operating co• Royalties subject to w/h tax @ licensee operating co• Royalties subject to nil/low tax @ SPV• Royalties deferred from SPV shareholder tax

Shareholder

SPV Hold Co

Subsidiaries IP Colicense


Uses of a SPV

SPV as administrative company• Performs management functions e.g. HR, Legal, IT etc.• Fees deducted at user entities• Fees subject to nil/low w/h tax• Fees subject to nil/low tax @ SPV• Fees deferred from tax @ shareholder level• Beware of jurisdictions with foreign base services regime

Shareholder

SPV Hold Co

Subsidiaries SPV Admin Co


Uses of a SPV

SPV as trading company• Purchase of goods from related or 3rd party @ arms length• Goods are sold @ arms length to related or 3rd party• Resale margin parked in SPV• Resale margin deferred from tax @ shareholder level• Beware of CFC jurisdictions with foreign base sales anti-deferral

Shareholder

SPV Hold Co

Subsidiaries SPV Trade CoSales


Uses of a SPV

SPV as shipping company• Generally requires foreign flag of convenience• Ship’s profits kept offshore from shareholder through SPV• Some income streams from shipping may violate deferral• Beware of shareholder jurisdictions with foreign base shipping

Shareholder

SPV Hoco

Subsidiaries Ship CoLease


Uses of a SPV

Other uses of SPV’s• Offshore banking• Asset protection trusts• Offshore trusts******• Captive insurance• Offshore mutual funds• Real estate holdings• Free trade zones• E Commerce zones• Technical support call centers

*****A popular Cyprus SPV the subject of recent local amendments


Where are the most popular SPV locations?

• Bahamas• Barbados• Bermuda• BVI• Cayman Islands• Channel Islands• Cook Islands• Cyprus• Gibraltar• Hong Kong• Ireland• Isle of Man

• Labuan• Luxembourg• Madeira• Malta• Mauritius• Monaco• Panama• Samoa• Switzerland• Turks & Caicos• Vanuatu


What are some trends in international tax policy concerning SPV's?

• Controlled Foreign Corporations regimes• Transfer Pricing• Thin Capitalization• Treaty shopping and/or limitation on benefits• Tax transparency reporting• Increased penalties• General Anti Abuse rules• Increased tax authority cooperation• Tax Information Exchange Agreements (TIEA's)• US Model Agreement for FATCA compliance• More countries adopting US FATCA type compliance


Thank You

Thank You For Your Attention


International Developments and Trendsin International Taxation

Günter Spielmann Executive director, EMEA Tax servicesGrant Thornton

[email protected]

mailto:[email protected]

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