Solar Power in Spain
As part of its commitment to achieve the Kyoto targets, Spain has created a favourable climate for renewable energy generation through subsidising smaller power generating projects.
Issue: How to structure the inward investment into Spain for a solar power project with a capacity of 1.8MW and tax efficient extraction of operating profits.
Solution: The operating entity, a Spanish company, entered into a silent partnership agreement with a Dutch finance company. A “double dip” was achieved with profits being taxed in neither jurisdiction and distributed out of Holland via an EU parent company.
Franchising Activities for Hospitality Group
A well-known UK hospitality group sought advice in respect of its expansion into the US, Far East and Europe.
Issue: Part of the expansion program was to put in place a brand and intellectual property right exploitation structure for its future franchising arrangements.
Solution: The EU-based structure separated ownership of the business from the IP rights and brand. It allowed foreign source royalties (including US) to be paid under reduced rates of withholding tax without falling foul of relevant limitation of benefits provisions, with minimal taxation on receipt.
Intra-Group Financing and Treasury Operations
A pan-European logistics and distribution company wanted to incorporate a financing operation within its structure.
Issue: Recent case law in the UK and revenue practice in many developed jurisdictions has brought intermediate finance companies under attack. They often lack substance and arguments can be advanced that they fail the “beneficial ownership” test.
Solution: An EU-based finance structure was established whereby interest received was converted by way of convertible bonds so as to ensure no conduit arguments could be advanced. The structure was ultimately owned by an unrelated Dutch Foundation which issued certificates to the client holding company.
Alternative Share Option Plan Solutions
A Scandinavian corporate finance house wanted to implement a share option plan for its senior executives.
Issue: The aim was to convert an income tax charge on grant/exercise of the options (which would be taxed at 50%+) into a capital gains tax charge, taxed at 10%.
Solution: An “Alternative Share Option Plan” was designed by establishing an offshore investment vehicle into which the employees invested a sum of their own money (or with bank finance). The investment company acquired options, via an offshore purpose trust, in the employer company, thus achieving the desired result.
On-line Gaming
An on-line gaming business sought advice on how best to structure the business platform and allow tax efficient shareholder exit.
Issue: To ensure IP rights central to the business were held in a tax neutral environment. How to structure the business such that the operating profits were subject to a low rate of tax whilst allowing certain functions to be undertaken in high tax jurisdictions.
Solution: An offshore pension scheme was established for the shareholders through which they subscribed for shares in the EUbased IP holding and operating companies. The structure was subject to a full-functional analysis and detailed review of all contracts necessary to preserve and maintain the tax status of the group. The profits were subject to approximately 6% tax.
International Property Fund
A global private bank wanted to establish a real estate fund investing into various real estate asset classes in 15 countries around the world.
Issue: The aim was to mitigate tax on rental income, capital gains on exit and withholding tax on distributions to investors.
Solution: A multi-currency, multi-tiered investment fund was established as an Expert Fund in Jersey with various regional holding companies. An internal group finance company, to provide internal leveraging and to assist in minimising tax leakage on each asset class was also established.