Transcription as follows:
Hi! And welcome to another Global Private Partners presentation. This one is a short one but is quite important in certain topic of late especially in the US; but we’re bringing it forward here to let you know that in fact, this is something that could be done globally. And that is the topic of Tax Inversion.
So first of all, an overview of tax inversion. Let’s use the US as the example. US parent company corporation has some foreign subsidiaries. So they’re doing business in the US plus in other countries so their foreign subsidiaries are generating revenues, are retaining profits and they generally keep those profits outside of the US because if you repatriate money back into the US to the parent company then there’s a 35% taxation on that.
And of course that’s one of the bigger problems forthe US government sitting there with all these money that they know exist as foreign profits. That works very well with Australia and UK companies as well. An Australian company can have foreign subsidiaries and those foreign subsidiaries, if they generate profits, they’re earned by the Australian company if as long as you don’t bring the profits back, you retain them overseas then there is no taxation on them, which is quite a key point.
After an inversion, effectively a foreign company now becomes a parent of the US company or the Australian or UK company that also earns foreign subsidiaries. So there’s a sligtly different structure there. The owner is now the foreign company so the taxation on profits becomes whatever the foreign country that the company is in. And you’ll soon see that can easily be countries where the taxation is, say down to 12%, 15%, 17%.
What are the benefits of doing that? Obviously, a reduction in taxation. So if an Australian company is paying 30% company tax, and it gets quite or becomes a subsidiary of a Singapore company, there’s only 17% tax on profits.
It’s a little more complicated. Simpler if you’re the owner but complicated slightly from an accountancy perspective. Singapore only taxes you on income earned in Singapore or money that’s retained and goes through Singapore so with a little bit of structuring, you set things up where you’re retaining your profits of your Singapore company in another country and not bring it back in Australia then you end up paying no tax in Singapore or in that other country and little tax in Australia. Same with Hong Kong and vice versa.
Generally, a little bit of help is required to set that up. Once it’s setup, it effectively ensures a huge tax reduction in Australia and little to no tax in Singapore and Hong Kong. Of course, there’s a huge reduction in the regulatory burdens that increasing the Australia, the UK, the western countries is starting to plonk on companies – all the paperwork that has to be filled in. In this case, you will still have your strain but it becomes effectively a subsidiary or branch office of the foreign company. Does it pay GST? Yes it does, if it’s still doing the selling of products and it’s still paying GST, it still has to fall with all the rest but it effectively you’re reducing your company taxation. And of course, foreign companies, Singapore, Hong Kong especially much more seen on the global stage. So if you were to launch on to other markets then doing it from Singapore and Hong Kong is completely legitimate. Australia can be seen to be a little bit of a back hoarder.
I guess the flow is relatively simple. You, the Australian company, purchase a foreign company and then merge those companies and nominate that foreign company as the parent. Now, we have a slight twist to that, that we will talk about in a little bit, allows you to do it the other way, which makes it somewhat simpler.
Begin the whole end goal is that you end up having a parent company and the Australian company becomes a branch office or a subsidiary company. Therefore, the corporate taxation perspective is more to the parent company.
Now considerations in the US has been a big outcry as to companies that are becoming non-patriotic. They live in America and say go into Ireland. A lot of pharmaceutical companies have been doing that. So there’s been a bit of a backlash for big companies on that public image side. Again, if your company is known publicly then that may be a consideration generally. Companies aren’t that well-known it makes no difference whatsoever.
The shareholders structure. If you’re gonna do a buyout of your own company in Australia or in Asian region and not understanding how the shareholder structure works, if you’re got a complicated shareholder structure then things might get slightly more complicated but I’m sure can be done. Ultimately you’re running the company to order, to benefit the shareholders and this certainly benefits the shareholders.
There’s quite a lot of benefits if you, the owner, have considered to relocate. If you wanted to stay living in the US rather than living and expanding in Singapore and Hong Kong. There’s some big benefits there. Again, that’s not impossible to do if you want to stay living in your current location but you need to set charter waters to what they call the control fund corporations legislation, which is applicable in all countries – and legislation is actually different in all countries.
Is this right for you? One, it’s 100% legal as per normal. We do have, because we run a private equity, we can facilitate a buy-out option where we in fact do everything I just described in reverse, where we correct the company, the overseas company, and we get it to buy your company out. So that’s very clearly you’re buying out the shareholders and therefore, you’re % shareholding this now to the foreign company so that’s perfect for branch of the situation.
Is this ideal for companies intellectual-based offerings? If you sell IP-based software, training, and anything of that nature – methodology, consulting, and this is perfect if you have clients outside of your home country or could have, if you have services that could be delivered outside of your home country then this is perfect.
The profit that’s gonna be retained in the overseas company, do you have the ability to use that profit? Yes, absolutely you do. That’s one of the keys is that you can still use the profit in a number of ways that we, as a company will provide advise to you – how to use it and how to access it or the rest of it to make the best of it. But that’s the whole idea; you’re reducing your local taxation obligation.
WE would always tell you on a consultation that you, in fact, should pay local tax but you don’t need to overpay them because frankly, they’re not really spending it that well that you wanna overpay. So the whole idea is to reduce it to a nice degree and then be able to use the money that will now be located somewhere else.
Global Private Partners – we do this for a living, we help you establish whatever correct structures are. We have a business office function, which can act as your office overseas, your management team overseas. We do immigration of people, relocation, help them move and become citizens of the world effectively.
We do have a private equity arm, that is involved in funding buyouts with companies. We have a business acceleration arm, which we provide. We buy a small piece of your business in order to help you do certain things that accelerate you, making changes and give you hopefully, a much higher exit when required. We can introduce you to capital and we have a private circle group called G128, which is a mastermind group of business owners that meets quarterly. If any of these is something of interest, please give us a call or email firstname.lastname@example.org and we look forward to having a chat.