Some initial comments……………..

1. International Developments and Trendsin International Taxation Günter Spielmann Executive director, EMEA Tax servicesGrant Thornton International

2. Some initial comments…………….. • There have been recent changes to trusts in Cyprus • A Cyprus trust is a form of SPV • There are many different forms of SPV's in use globally • There are many jurisdictions offering different types of SPV's • There haven been recent significant trends in international tax policy concerning SPV's • We will look at SPV's from a global view in terms of recent international developments and trends in international taxation

3. Should a Multinational use a SPV? As the result of either a direct or indirect investment into host country: • Are there tax incentives available in the host country that defer home country tax and reduce global tax • Are there tax incentives available in the intermediary country that defer home country tax and reduce global tax Home country local co. Host country local co. Intermediary country local co.

4. What is an SPV? • Corporation in a tax favored location • Corporation performing a tax favored function • Often located in tax friendly countries • Other times located in commercial centers • Could serve as a conduit of corporate fund transfers • Could also be used as a repository for corporate funds • Often used to manage the deferral of income in the home country • Often used to manage to global tax rate of a multinational

5. Uses of a SPV SPV as a holding company • The ownership of foreign activities can be centralized in an SPV company which either has offshore operating branches or owns the shares of overseas subsidiaries conducting active trade and business in other countries. • The SPV company would serve as the clearing house for profits from foreign operations, accumulating profits, reinvesting and expanding in new countries, with only concessional rates of tax applying. Shareholder SPV Hold Co Subsidiaries

6. Uses of a SPV SPV as a holding company • Deferral of tax on dividends • Deferral of tax on capital gains • Ability to retain funds offshore @ nil or low tax • Favorable withholding tax on remittance Shareholder SPV Hold Co Subsidiaries

7. Uses of a SPV SPV as lending company • Debt principal loaned from SPC to operating co • Interest deducted @ operating co • Interest subject to w/h tax @ operating co • Debt principal not deductible @ operating co • Debt principal not subject to w/h tax @ operating co • Interest subject to nil/low tax @ SPV • Interest deferred from tax @ shareholder level Shareholder SPV Hold Co Subsidiaries SPV Fin Co loan

8. Uses of a SPV SPV as licensing company • Royalties are deductible by licensee operating co • Royalties subject to w/h tax @ licensee operating co • Royalties subject to nil/low tax @ SPV • Royalties deferred from SPV shareholder tax Shareholder SPV Hold Co Subsidiaries IP Co license

9. Uses of a SPV SPV as administrative company • Performs management functions e.g. HR, Legal, IT etc. • Fees deducted at user entities • Fees subject to nil/low w/h tax • Fees subject to nil/low tax @ SPV • Fees deferred from tax @ shareholder level • Beware of jurisdictions with foreign base services regime Shareholder SPV Hold Co Subsidiaries SPV Admin Co

10. Uses of a SPV SPV as trading company • Purchase of goods from related or 3rd party @ arms length • Goods are sold @ arms length to related or 3rd party • Resale margin parked in SPV • Resale margin deferred from tax @ shareholder level • Beware of CFC jurisdictions with foreign base sales anti-deferral Shareholder SPV Hold Co Subsidiaries SPV Trade Co Sales

11. Uses of a SPV SPV as shipping company • Generally requires foreign flag of convenience • Ship’s profits kept offshore from shareholder through SPV • Some income streams from shipping may violate deferral • Beware of shareholder jurisdictions with foreign base shipping Shareholder SPV Hoco Subsidiaries Ship Co Lease

12. Uses of a SPV Other uses of SPV’s • Offshore banking • Asset protection trusts • Offshore trusts****** • Captive insurance • Offshore mutual funds • Real estate holdings • Free trade zones • E Commerce zones • Technical support call centers *****A popular Cyprus SPV the subject of recent local amendments

13. Where are the most popular SPV locations? • Bahamas • Barbados • Bermuda • BVI • Cayman Islands • Channel Islands • Cook Islands • Cyprus • Gibraltar • Hong Kong • Ireland • Isle of Man • Labuan • Luxembourg • Madeira • Malta • Mauritius • Monaco • Panama • Samoa • Switzerland • Turks & Caicos • Vanuatu

14. What are some trends in international tax policy concerning SPV's? • Controlled Foreign Corporations regimes • Transfer Pricing • Thin Capitalization • Treaty shopping and/or limitation on benefits • Tax transparency reporting • Increased penalties • General Anti Abuse rules • Increased tax authority cooperation • Tax Information Exchange Agreements (TIEA's) • US Model Agreement for FATCA compliance • More countries adopting US FATCA type compliance

15. Thank You Thank You For Your Attention

16. International Developments and Trendsin International Taxation Günter Spielmann Executive director, EMEA Tax servicesGrant Thorntonguenter.spielmann@gti.gt.com