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Corporate Tax Planning

Our ‘raison d’être’ is to assist our clients to pay the lowest possible taxes.  As part of this we offer our corporate tax planning services.

Start planning today and reduce your corporate taxes

'Management and Control' in tax efficient structures

What is it and why is it important?​

In essence, it means where the company’s decisions are taken and by whom. It is of crucial importance, especially where the company is “visible” in the owners’ country of residence.

Going back in history

1906 to 1996 ... A pure question of fact

In a landmark case dating back to 1906: Lord Loreburn (in De Beers Consolidated Mines Ltd v Howe 5TC198) said:

” . . . the real business is carried on where the central management and control abides. It remains to be considered whether the present case falls within that rule. This is a pure question of fact, to be determined, not according to the construction of this or that regulation or by-law, but upon a scrutiny of the course of business and trading”.

 

90 years later, in 1996 in the case of Untelrab Ltd v McGregor (Inspector of Taxes); Unigate Guernsey Ltd v McGregor (Inspector of Taxes); it was held that:

“1) The burden of proving residence lay on the Revenue. If they failed to establish that the company’s residence was within their jurisdiction then the company ought not to be taxed.

(2) Although a board might do what it was told to do, it did not follow that the control and management lay with another, so long as the board exercised its discretion when coming to its decisions and would have refused to carry out an improper or unwise transaction.”

Both cases centred on whether a business connected with a high tax jurisdiction but operated from a low tax area could or should be taxed in the high tax area (in these two cases, the UK, but the same would substantially apply elsewhere).  Both instances were effectively decided on the question of “management & control,” i.e. where the decisions were taken.

 

Where and How

It is not enough to set up a company in, say, Cyprus or Singapore and claim to be liable to those jurisdictions’ lower rates of tax if the decisions concerning the company are clearly taken elsewhere.

MULTIPLE STRUCTURES IN TAX PLANNING Why is it desirable to use multiple structures in some instances?

The two most common reasons are (a) privacy and (b) enhanced tax planning:

PRIVACY

Most common-law-based countries operate a registry system whereby the directors and shareholders’ names and addresses are increasingly available for public search online (Singapore, The UK, Hong Kong, New Zealand).  Therefore, to provide a privacy level, it is pretty common to register an IBC to act as a shareholder, for example, in Seychelles, where there is no public access to the registry.


Please note that the advent of CRS is changing both the perception and reality of privacy. We would suggest you look at the OECD & Tax page of our website.

TAX PLANNING

The use of an IBC as a shareholder in a low tax company can provide a conduit for dividends to be paid not to the ultimate owner but to the zero tax company.  Additionally, some zero or nearly zero tax jurisdictions have tax treaties with high tax countries to allow repatriation of profit. Many countries offer attractive holding company regimes, and it can be worthwhile incorporating such a jurisdiction into a structure.

 

We can assist in creating such structures both for reasons of privacy and tax planning.

What do we offer?

Where & how?

We advise clients as to where and how management & control should be structured.

 

Tax hints

Don’t let the tax tail wag the dog.

 

In other words financial decisions should not solely be based on tax considerations but rather on the overall business/investment decision.

Company re-domiciliation

Sometimes a company may need to re-domicile but maintain its existing contracts and relationships. Such a company could re-domicile (change its place of registration to anther country).

 

Find out more from our re-domiciliation guide for more information.

Business set up guides

We have series of business guides avalable to our newsletter subscribers. 

Laptop Lifestyle

Many people want to both run a business but also not to be bound to a traditional office. We can advise on how to achive this.

Contact us.

Let us know what we can help you with?