deWaardKramer

Efficient international structure

deWaardKramer organizes and maintains tax-efficient and financially efficient structures for its internationally active clients. These structures should be practicable for the different business units in particular, and should also result in the lowest-possible average tax liability.

Planning

In consultation with you we will prepare a chart showing the flows of goods and services, as well as the accompanying financial flows, within the different business units. On the basis of the available business plans, we will together choose a business model and corporate structure which best suits your company's needs.

If your company produces goods, provides services and/or sells products outside the Netherlands, it may, in certain circumstances, be deemed to have a "permanent establishment" in the country or countries in question. Your Dutch company will then be taxed abroad on the profit attributable to the permanent establishment. Tax liabilities may also arise in less obvious situations, for instance if you use a permanent representative abroad.

Permanent establishment or foreign company

Activities outside the Netherlands can be transferred to a foreign company (associated company) or a permanent establishment. The choice for either of these depends on the circumstances. For instance, profit expectations can be a major factor in the choice you make. Generally speaking, launching activities abroad will involve losses in the first instance. If the foreign business is transferred to a company, then the Dutch parent company cannot set off these initial losses, unless they are downward revaluations. But losses incurred by a permanent establishment abroad can be charged to the Dutch profit. Then again, if the permanent establishment starts generating profits, your company will only be entitled to a reduction in double taxation once these losses have been recouped. These are only some of the factors you will have to take into account before you can make an informed choice.

Transfer pricing

Intercompany transfers of goods and/or services within an international group will give rise to transfer pricing issues. International tax conventions stipulate that these intercompany transfers must take place "at arm's length", that is to say, at the same prices as would be charged on a commercial basis to unrelated parties. Such provisions are intended to prevent companies shifting profits to low-tax countries, as the profit allocation within a group can be influenced by the transfer of activities between the various group companies and the allocation of particular profit margins to the various commercial activities. Very strict rules on documentation have been introduced to make it possible to determine whether the transfer prices charged within international groups are at arm's length. These rules require that records must be kept to show how the transfer prices have been calculated and whether the transfer prices are consistent with normal market practices between independent parties. If it cannot be proved that arm's length prices have been charged, a country's tax authorities may adjust these prices and hence the profit to be taxed in that country. This can lead to double taxation of the profits generated by the group or a group company.

Cross-border work

It is not only companies that may have an international dimension; individuals can also be confronted with international tax issues. For instance in a situation where a person takes a job with a foreign employer and/or carries out work outside the Netherlands. The basic principle in international tax law is that income from employment is taxed where the work is actually being performed. However, there are exceptions to this rule, when tax is levied in the country of residence. A person's tax liability must be determined on the basis of individual circumstances and relevant (double taxation) conventions. Complications may also arise in the sphere of social security. There are regulations within the European Union to prevent double social security taxation of employees in most situations.

MSI

Where international contacts are needed to make the necessary arrangements, we can call on our colleagues at the MSI Global Alliance.

Regular advice

Beyond the overall planning mentioned above, the international team can also provide advice on specific aspects on a regular basis, such as the allocation of losses across the border or otherwise, transfer prices between group companies or business units, contracts with international employees, and so on.

deWaardKramer has an International Practice Group.