Strategy 1: regional tax avoidance law
The regional selection of enterprises' overseas investment must comprehensively analyze many factors such as investment environment, among which tax consideration is an important aspect.
First of all, we should consider whether the host country has preferential tax policies for foreign investment. Many countries, especially developing countries, offer preferential policies of low tax or tax exemption for foreign investment, and income tax is usually the main tax preference. For example, South Korea, Chile, Malaysia, Singapore, Thailand, India and other countries have regulations in this regard.
Second, we should consider whether the host country has any restrictions on the remittance of profits of foreign-funded enterprises. On the one hand, some developing countries attract foreign investment with low income tax or even tax exemption, and at the same time restrict the profit remittance of foreign-funded enterprises, hoping to promote foreign investors to reinvest. Profit remittance includes dividends, interest, license fees and repatriated profits of overseas enterprises. There are different standards for profit remittance in the world, but developing countries are generally stricter than developed countries. There are usually two kinds of restrictions: one is to use administrative policies such as foreign exchange control to restrict; The other is to limit it by using tax policies such as withholding tax rate.
At present, the withholding tax rate varies greatly among countries in the world, so enterprises can't ignore it when choosing investment locations. In addition, since bilateral tax treaties can greatly reduce the withholding tax levied by contracting States, it is also necessary to pay attention to whether the host country and the home country have signed relevant tax treaties.
Enterprises can also use the method of changing the place of registration of enterprises or changing the location of the actual control and management institutions of enterprises to carry out tax avoidance planning. If the host country takes the place of registration as the standard, and this country is a high-tax country, then enterprises can adopt the method of registration in a low-tax country; Similarly, if the location of the actual control and management institution is taken as the standard, then overseas-invested enterprises can adopt the method of transferring the actual control and management institution to a low-tax country.
Enterprises can also avoid tax by establishing permanent institutions. A permanent establishment usually refers to the workplace where enterprises in the home country conduct business activities abroad, and is recognized as a non-resident company by many countries without being taxed. In the actual activities of permanent institutions, bilateral tax treaties signed between many countries stipulate a large number of tax-exempt activities. For example: goods storage, goods procurement, inventory management, advertising, information provision or other auxiliary business activities. Enterprises with overseas investment can legally avoid tax by setting up permanent institutions that can carry out tax exemption activities in countries that have signed bilateral tax treaties with this country.
Strategy 2: organizational form tax avoidance method
After the location of overseas investment is selected, the appropriate enterprise organization form should be determined. Because choosing the right enterprise organization form can also achieve the purpose of reducing tax payment. Overseas investment enterprises mainly have two organizational forms: one is to establish subsidiaries; The second is to establish a branch. A subsidiary is an independent legal person registered and established according to the relevant laws and regulations of the host country, and it is legally subordinate to the head office.
From the tax point of view:
First, we should consider whether overseas investment enterprises can make profits in previous years. Generally speaking, most long-term investment projects will lose money in the past few years. Since most of the losses of branch companies can directly offset the profits of the head office, thus reducing the overall tax burden of the company, it is naturally better to invest abroad in the form of branch companies. In fact, many multinational companies operate in the form of branches until the branches start to make profits, and then try to make subsidiaries.
Second, we should consider whether there is the possibility of double taxation between the home country and the host country if we invest abroad in the form of subsidiaries. Generally speaking, the income tax paid by the branch to the host government can be used to offset the tax of the head office.
Thirdly, we should consider withholding tax on dividends and remitted after-tax profits. In most countries, withholding tax is levied on the remittance of dividends and after-tax profits of subsidiaries, but it is usually not levied on the remittance of dividends and after-tax profits of subsidiaries.
Of course, taking the form of affiliated organizations also has several advantages:
(1) The subsidiary has the status of legal person resident and can enjoy all the benefits provided by the tax treaties signed between the host country and other countries. For example, withholding tax can be reduced or exempted. However, the branch company cannot enjoy it because it has no resident status in the host country.
(2) Subsidiaries can generally enjoy deferred tax benefits. Many developed countries stipulate that before the profits of overseas investment enterprises are repatriated in the form of dividends, the home company may not have to pay income tax on this income. For example, the Enterprise Income Tax Law of the United States has this provision. On the contrary, the income of branches, whether remitted or not, is included in the taxable income of the company.
Therefore, the two forms of subsidiary and branch have their own advantages and disadvantages, and overseas investment enterprises should choose the best one according to the specific situation.
Strategy 3: Tax avoidance law of tax havens
Countries and regions that exempt income and assets from taxes or levy taxes at lower tax rates or implement a large number of preferential tax policies are called international tax havens (also known as international tax havens). International tax havens usually have four distinctive features: first, lower income tax or tax exemption is levied on foreign investors, and lower withholding tax is levied on dividends paid by subsidiaries of multinational companies to their parent companies; Second, it has a good financial environment, such as an efficient communication network and well-trained professionals; Third, political stability; Fourth, the currency is stable and freely convertible with foreign currencies. These characteristics provide the basis and conditions for overseas investment enterprises to plan tax avoidance in tax havens.
There are roughly three types of international tax havens to choose from:
One is a "pure international tax haven", that is, a country or region that does not levy personal income tax or corporate income tax and general property tax. For example: Bahamas, Cayman Islands, Bermuda, Nauru, New Caledonia, Vanuatu, Turks and Caicos Islands, Andorra and other countries or regions. Foreign investors only need to register locally and pay a certain registration fee, without paying other taxes and fees.
The second type is a "semi-pure international tax haven", that is, a country or region that completely abandons residents' tax jurisdiction and only implements regional tax jurisdiction. In these countries or regions, only the income or property that comes from or exists in the local area is taxed, but not the income and property that comes from or exists outside the country. For example: Hong Kong, Malaysia, Panama, Argentina, Costa Rica, Liberia and other countries or regions.
The third is "special international tax havens", that is, countries or regions that formulate tax laws and collect taxes according to international practices, but provide foreign investors with special preferential tax rates. For example: Canada, Greece, Ireland, Luxembourg, the Netherlands, Britain, the Philippines, Barbados and other countries or regions.
There are several basic skills for tax avoidance planning by using international tax havens:
(1) set up overseas enterprises in "semi-pure international tax havens" or "special international tax havens" to engage in normal production and business activities, so as to enjoy preferential tax reduction and exemption in income and assets.
(2) False tax avoidance agencies. An enterprise can set up a subsidiary in a tax haven, and then sell the goods sold by the home country enterprise to another enterprise, creating the illusion that the goods are sold through the tax haven subsidiary, thus transferring the income of the home country enterprise to the books of the tax haven subsidiary. Subsidiaries established in tax havens are not actually engaged in production and business activities, but fictional institutions specializing in tax avoidance activities, so they are also called listed companies, paper companies, document companies or base companies.
(3) False tax avoidance trust assets. That is to say, a personal holding trust company is established in a tax haven, and then its property is assumed to be the trust property of the tax haven company, because the tax haven implements tax reduction and exemption.
Strategy 4: transfer price tax avoidance method
The internal price adopted by a home country enterprise when trading goods, services or technologies with overseas subsidiaries or overseas subsidiaries is called transfer price. The formulation of transfer price is based on the realization of the company's global strategy and the pursuit of global profit maximization.
The transfer price mainly includes two aspects: first, the transfer price of tangible products, such as the price of equipment, spare parts and raw materials provided by the company; The second is the transfer price of intangible products, such as the technology use fee, loan interest, trademark use fee, commission, management fee and consulting service fee paid by overseas subsidiaries to the home country enterprises or other subsidiaries.
Transfer price can reduce income tax. Because overseas subsidiaries are often located in different countries and regions, and the income tax rates of these countries and regions are different, enterprises can use this difference to transfer profits from countries with high tax rates to countries with low tax rates, thus reducing the tax amount and tariffs of enterprises.
There are two specific strategies for tax avoidance planning by using transfer price:
One strategy is to deliver goods at a lower price and reduce the base for paying tariffs when the home country enterprises trade with overseas subsidiaries or between overseas subsidiaries and overseas subsidiaries. For example, the normal price of a commodity is $65,438+0,000, and 80% of the import tax is paid in country A. If multinational companies conduct internal transactions with a discount of $500, the import tax can be reduced from $800 to $400, thus paying 50% less.
Another strategy is to use the different provisions of regional customs union or related agreements on import tariff rates of different commodities to reduce tariff payment. In order to protect the internal market and promote the circulation of goods in the region, some regional trade groups have formulated preferential tariff policies for internal products. For example, the European Union stipulates that if the goods are produced outside the trade zone, or the price content produced in the trade zone is less than 50%, when the goods are transported from one member state to another, customs duties must be paid. However, if more than 50% of the value of goods is increased in the trade zone, there is no need to pay customs duties for transportation and sales between members of the trade zone. Enterprises with overseas investment can take corresponding tax avoidance measures according to this provision. Focus on tax and foreign exchange management policies related to bonded areas and export processing zones. The main tax policies are as follows: foreign goods are bonded in the port area, and when they leave the port area for domestic sales, they are declared in accordance with the relevant provisions on the import of goods and levied according to the actual state of the goods; Domestic goods entering the port area are regarded as exports, and tax rebates are implemented; Goods transactions between enterprises in the port area are not subject to value-added tax and consumption tax. On the basis of the bonded area, the bonded port area has made a breakthrough in the export tax rebate policy. On the basis of "tax refund upon entry" in bonded logistics parks and export processing zones, bonded port areas have been further expanded to "tax refund upon entry", with a wider scope of tax refund and more benefiting enterprises. There has been a breakthrough in the tax reduction and exemption policy. On the basis of tax refund for enterprises in bonded areas, bonded logistics parks and export processing zones, it is also extended to port construction, and building materials, production equipment and office supplies used in production can enjoy tax reduction and exemption policies.