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Tax Planning Vehicle
 

Tax Planning Vehicle

   

This type of company is used for tax planning and structuring, offering to minimize the overall effective taxation.

Main Features

The company pays a low rate of tax (1.5 to 3%) on its profits and situated in a jurisdiction where there are no withholding tax and no capital gains tax. By using the double tax avoidance treaties, it minimizes the overall taxation. Each solution needs to be structured according to the country where business is to be conducted, as well as the resident state of the beneficial owners.

Who is it for?

  • Tax planning
  • Tax Minimisation
  • Repatriation of profits by reducing the tax liabilities

Benefits

  • Low rate of tax (1.5 % or max of 3%)
  • Tax minimisation and planning
  • Avoidance of double taxation
  • Confidential vehicle
  • No capital gains tax
  • No withholding tax on repatriation of profits (dividends)

Proposed Vehicle

  • Mauritius GBC I
  • Seychelles CSL

Taxation

  • Mauritius GBC I - between 0 and 3% tax
  • Seychelles CSL - flat 1.5% tax
  • Only in resident state but at a reduced rate, as per the treaty between the two countries
  • Mauritius Company pays tax at the rate of 15% with a deemed foreign tax credit of 80% which means effectively pays a maximum tax at the rate of 3%. However the recipient company can still claim a credit of 15% as tax suffered.

EXAMPLE OF USING A SEYCHELLES – INDONESIA DTA

(This is merely an example using illustrations and should not be construed as Tax Advice).

Mr Joe Bloke wants to invest some of his private wealth in an Indonesian Private Company. He has contacted OCRA to provide the most tax efficient way to achieve this. OCRA has undertaken to work out a feasible structure to invest into an Indonesian company, outlining the advantage of using a treaty company as opposed to a non-treaty or tax exempt company. OCRA will not get involved in the personal taxation of the promoter.

Existing Solutions

Investment directly in Indonesian Company

BVI or similar company holds 100% investment in Indonesia Company

BVI or any other non-treaty company

Indonesian Company



 

 

 

 

 


 

Direct Investment in Indonesian Company
  USD
Net profit before Tax 500,000
Less Corporate Tax 30% 150,000
Net profit after Tax 350,000
Withholding Tax 20% on dividend 70,000
Net dividend distribution 280,000
Total Tax suffered (150,000 + 70,000) 220,000


Proposed Solutions

Use a Seychelles CSL Company to invest in the Indonesian Company and take advantage of the DTA signed between the two countries.

Seychelles CSL
Company

Indonesian Company
Seychelles CSL Company pays 1.5% of corporate tax on its worldwide profits
Seychelles CSL Company holds 100% investment in Indonesia Company


 

 

 

 

 

 

Investment assuming 100% ownership in a Seychelles CSL
  USD
Net profit before Tax 500,000
Less Corporate Tax 30% 150,000
Net profit after Tax 350,000
Withholding Tax 10% 35,000
Net dividend distribution 315,000
Tax Computation for Seychelles CSL Company
Dividend from Income from Indonesia 315,000
Assume an annual maintenance fees
Including licenses, directors etc
8,000
Net Profit before Tax 307,000
Tax (@1.5%) 4,605
Net Profit after Tax 302,395
Tax suffered (150,000 + 35,000 + 4605) 189,605

With the above example, assuming a turnover of USD 500,000 the difference in tax savings through a BVI company as opposed to a Seychelles company is USD 30,395. Accordingly, the more the turnover increases, the more the savings.

The above illustration has been calculated on the assumption that:

  • Corporate tax in Indonesia is 30%
  • Withholding tax on dividends to non-residents in Indonesia is 20%
  • Withholding tax on dividends to non-residents being a Seychelles CSL company that has access to the DTA with Indonesia is 10%
  • Corporate tax of a Seychelles CSL company is 1.5%
  • Administrative charges for a Seychelles CSL company is USD 8,000

How to Proceed

If you would like to discuss your requirements with one of our consultants,
please contact us.

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