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Formation of tax haven entities

 

"At various stages of the development of the Polycon Group, tax haven operations may have been considered and have perhaps been dismissed. However, because Mr Holmes does not consider he is obtaining good tax advice if he does not have at least one tax haven company within his group, he considers establishing Baskerville Assurance Company in a tax haven which acts as a captive insurance company for all of the subsidiaries within the group."

 

Although only one form of tax haven operation, the captive insurance company, has been highlighted in this example, there are many different functions, which may be administered by a tax haven company within a group such as the Polycon Group. As far as captives themselves are concerned, many countries have introduced restrictions affecting their usefulness in tax planning, and these should be fully understood.

 

The tax haven company must be effectively managed within the tax haven, otherwise its residence may be determined as within the tax jurisdiction of Country A or another high-tax regime. Thus, Baskerville Assurance Company must be managed, by a team in Country O experienced in insurance matters, and the insurance premiums must represent arms-Iength premiums that would be charged by a third party in respect of such risks. Where a high tax jurisdiction has legislation which apportions the accumulated income of "tax haven" companies to domestic shareholders, it is important to know which countries are considered to be tax havens, and which countries may escape the apportionment rules.



Date: 2015-01-29; view: 1029


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