Case Studies

Re-structuring the family trust

Warren’s family, had previously used a family trust to hold their assets but with many countries now taxing trusts unfavourably, they wished to look for an alternative means by which each family member could hold their interests. With the advent of the OECD tax changes (BEPS) they restructured their family business establishing a holding company in a jurisdiction with territorial taxation, ensuring they had both staff and an office to substantiate a presence there.

The holding company corporate structure had multiple share classes and it established a group pension. The multiple share classes facilitated similar succession tax planning to the trust whilst by ensuring that each family member had a role in the family business, this permitted them to join the new company’s pension. The double tax treaty agreements with the new company’s jurisdiction and Europe will then permit a more favourable tax treatment of dividends and also for some family members, a more favourable means of taking income.

Foreign investment in Spanish real estate

John had recently sold his business in Thailand and with some of the proceeds wanted to invest in distressed Spanish residential properties, develop and then sell them. He had set-up a Spanish company owned by himself and lent the money to the Spanish company. He was surprised to discover he was liable to Spanish wealth tax on the value of his Spanish assets including the loans. He also discovered as he was not tax resident in a jurisdiction which had a tax treaty with Spain, the profits he made on the real estate were taxable both at the Spanish company rate of 25% and subsequently there was a withholding tax of 24% when they were paid out to him.

His affairs were re-structured to include the setting up of a holding company which he then worked for; the holding company then acquired the Spanish company to mitigate the withholding and wealth taxes. To reduce the Spanish business profit tax, he then established an investment fund to finance the property acquisitions, whose interest charge was a tax deductible expense for the Spanish company. .

Moving back to Australia

Bryan was living in Vietnam, where over the past 15 year period he had established a successful consultancy business and wanted to move back to Australia with his wife and young children. He intended to keep his BVI holding company with its banking in Hong Kong and set-up an Australian subsidiary. The Australian company would contract with the Vietnam Company and in turn the Australian company would pay him and his wife a salary, whilst the holding company would pay him a dividend from the profits generated in Vietnam.

Working with a multi-national accounting firm, we reviewed both the tax leakage for the dividends and the transfer pricing risks between Vietnam and Australia of the management fees. We recommended establishing a new holding company and selling his intellectual property to it, with the consideration paid by instalments over a 10 year period. By effecting the transaction prior to moving to Australia and re-charactering it as a series of capital repayments with interest, we significantly reduced his tax exposure from the amounts to be received from the Vietnam business.

Re-structuring a South African business

Harry owns an import export in South Africa. The business has changed over the past few years and now it imports goods from Asia to its different clients across Africa.

With most trades in USD and with South Africa’s exchange controls we established a holding company with an operating company in Mauritius. The operating company has both staff and management located there, in order to have substance and to handle all the non-South African business, avoiding the difficulties of the South African currency exchange, whilst retaining the profit overseas. By setting up an online automated process to ensure instructions are not ‘given’ by management in South Africa, we mitigated the risks of having central control and management there. The holding company structure has facilitated other investments outside of South Africa.