Tax planning in the group
Tax planning within the group and for restructurings, start-ups and acquisitions
Group tax rates, minimum taxation, DEMPE, BEPS and the future
We read it again and again in the press: Amazon, Starbucks, Mircosoft and other US corporations hardly pay any tax. The corporate tax rate is low because resourceful tax experts have found legal loopholes. As a rule, companies hold valuable patents that are located in countries with no or low taxes (tax havens). They charge high license fees to the operating companies in the other countries in which the products are sold. As a result, the operating companies have hardly any profits and the patent-holding companies pay hardly any taxes. This is referred to as BEPS (Base Erosion and Profit Shifting), i.e. the erosion of the tax base and the shifting of profits to other countries.
The OECD and the countries with high taxes are doing a lot to prevent these tax tactics. For example, there are various BEPS action plans, global minimum taxation rules and the DEMPE concept. The aim of these regulations is to ensure that the tax base is allocated to the countries in which the actual value creation takes place. The key DEMPE functions include development, enhancement, maintenance, protection and exploitation.
This complicates the work of those responsible for taxes in corporate groups. In order to maintain an overview of what applies in which country, you need local tax experts who are also familiar with cross-border issues. We are here to help and would be delighted to assist you.
Use legal tax arrangements - plan profit transfers
However, no matter how hard the tax authorities try, there will always be legal tax arrangements that allow internationally active companies in particular to save taxes. One of the tasks of the tax experts at Benefitax is to recognize and exploit these. In this way, you can reduce your group tax rate.
However, we also see it as our task to warn our clients if they have chosen aggressive tax arrangements that may work abroad but probably not in Germany or if the recognition of tax arrangements in Germany depends on conditions that may not or not yet be fulfilled.
When calculating the tax expense in existing group structures or comparing the group tax rate before and after changes to the group structure, you will find that we are the right people to talk to. If new units are to be added or existing units eliminated, you should know in advance where and how you should make these changes in a tax-optimized manner.
When planning profit transfers to shareholders, you can ask us to check which method is the most tax-efficient. Be it through profit distributions / dividends, interest on loans, license payments for patents or rights, fees for management services or technical services.
Are withholding taxes due?
We will inform you in advance whether withholding tax will be withheld and whether or how you do not have to pay it under certain circumstances, whether you can get it back or have it offset. Before selling assets, real estate or companies, let us inform you about the tax consequences such as taxes on the sale proceeds. We can also provide you with competent support in matters relating to foreign tax law and double taxation agreements.
The withholding tax regulations in India are particularly problematic.
Indian companies have to withhold up to 21.84% from the invoice amounts of German companies without an Indian permanent establishment. That hurts. It should therefore be checked whether this tax must be withheld at all, can be partially refunded under the DTA or can be allocated to an Indian permanent establishment.
We and our international cooperation partners know the regulations of many countries to prevent tax abuse so that you do not fall into the trap. Be it CFC (Controlled Foreign Corporations) regulations, shareholder debt financing, interest barriers or transfer pricing.
Internationally informed: for your tax planning
When obtaining information, we use various sources that are not freely available on the Internet. As a rule, these are tax programs and databases specially licensed for us. These are updated on an ongoing basis. We work according to the dual control principle (at least two tax consultants are involved). As a general rule, we also consult a tax expert in the country in question as a safeguard. Above all about GGI we have excellent contacts with tax experts all over the world.
This ensures that we do everything right and recognize future developments in good time.
There are tax-saving models that promise a lot – but ultimately cost the user a lot of money, because:
- Why spend a lot of money setting up a particular structure that will no longer work next year because the tax laws will change?
You have to recognize this early on. - What is the point of using a holding company in a tax haven that does not meet the necessary substance requirements to be recognized for tax purposes in Germany?
- Why should you earn income in a low-tax country if there is no double taxation agreement with that country and all income has to be taxed at a high rate in your home country?
- What good is it if a company sells its products in another country but does not want to pay taxes there and does not realize that it has already established an agent’s permanent establishment (= tax liability) there?
Obligation to report or notify tax arrangements
This reporting obligation also applies to so-called intermediaries. This is any person who designs, markets, organizes or makes available for implementation a reportable cross-border arrangement or manages the implementation of such an arrangement. We can therefore also be an intermediary if these conditions apply.
However, due to the special relationship of trust between us as tax advisors and auditors and our clients, we are not permitted to pass on any information from the client relationship to third parties. We are therefore not a reportable intermediary.
Nevertheless, we would like to point out that our clients are not exempt from the duty of disclosure and expressly recommend that you fulfill these obligations.
