Page 35 - Strategic Tax Planning for Global Commerce & Investment

Strategic Tax Planning for Global Commerce and Investment

The fundamental requirements for as finance company
jurisdiction are:

 A low tax rate or the possibility of syn-
thetically generating one
 If the countries to be financed levy an in-
terest withholding tax, reduced or zero
withholding tax rates under the relevant
double tax treaties, and

 Ability to remit profits up to the parent
free of dividend withholding or distribu-
tion taxes.

Synthetic low-tax Finance Companies using hybrid
instruments

Multinationals are often able to create a synthetic low-tax
financing structure in high-tax jurisdictions using hybrid
instruments. Hybrid instruments are widely used in
international tax planning and their use generate a synthetic
low-tax rate in a finance company is only one of their many
applications. A hybrid instrument is defined as a form of
financing that gives rise to a tax-deductible payment in the
country receiving the finance but no corresponding taxable
receipt in the country that provides it.
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