Understanding the Changes in the Expat Tax Regime in Netherlands

With proposals to amend the Dutch expat tax regime, the Dutch State Secretary for Finance announced that changes would be made to the ‘30% ruling regime’ for expatriate employees in the Netherlands. The amended regime will entitle qualifying expats to a net tax allowance of up to 30% of their total remuneration and the changes are expected to come into effect in 2012. Expatriate employees in Netherlands, working on a temporary basis can avail of “the 30% ruling regime”, resulting in a 30% tax free employment income in their hands. This provision was introduced by the Dutch Government to compensate them for specific expatriate costs.

On 20 September 2011 the Dutch Government presented the 2012 Tax Plan, which includes proposals to amend the Dutch expat tax regime. The amended regime will entitle qualifying expats to a net tax allowance of up to 30% of their total remuneration. The changes are expected to enter into force as per 1 January 2012.

The current conditions for application of the ruling are:

For a non-resident taxpayer hired abroad by an employer resident in the Netherlands:

• The employer must be obliged to withhold wage tax;
• The employee must possess specific expertise which is not easily available in the Dutch domestic labor market;
• Specific expertise is determined by a combination of the following conditions:
• 
  (i)The employee's level of education;
• 
  (ii)The net salary range with regard to the employment in the Netherlands compared to that in the expatriate's country of origin; and
• 
  (iii)The employees must meet the required work experience with respect to the specific employment. If the expatriate possesses experience of at least 2.5 years in a comparable employment, the experience criteria are deemed to have been met.

If the condition (iii) is not met, they could still qualify for the 30% ruling, if conditions (i) and (ii) are met.

Duration
The duration of the 30% ruling regime is of 120 months, which commences from the date of employment in Netherlands. This time period could be reduced if employment or stay in the Netherlands has been terminated within a period of 15 years before the start of the new employment and provided the employee was appointed or residing in the Netherlands 10 years prior to being hired.

Proposed Changes

• Expertise - the employee needs to possess specific expertise, which has limited availability in the domestic labor market; will be deemed to be met if the employee earns a minimum salary;
• Time Period - the period which is taken into account for a reduction of the duration of the 30%-ruling will be increased from 10 to 25 years;
• Place of residence - Employees living within 150 km from the Dutch border are no longer entitled to the ruling;
• Education - Younger employees, who started work after undertaking Ph.D. studies in the Netherlands, can apply for the 30% ruling.

The minimum salary required to meet the special skills criterion under the 30%-ruling is set at EUR 50,619.
Expatriate taxation is very important for any international business expansion, and any kind of neglect could cost the company a heavy price. As the expat tax system varies in each country, taking the help of an expert will help in understanding the system of a country and avoid any unnecessary expenditure. A professional business consultant can provide the necessary guidance on tax equalization expat, etc.  and ensure that your international business project a successful one.

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The Essentials to Consider Before Expanding Your Business to Ireland

The well-developed infrastructure combined with competitive operating costs, low corporate taxes and financial incentives make it one of the most lucrative places in Europe for foreign investment. Being an abiding member of the EU and having an economy expanding at a regular rate, Ireland is one of the most preferred locations for business in Europe. Having favorable tax environment, competitive operating costs, a productive, well-educated and versatile workforce, and a well-developed infrastructure with outstanding support services, the Irish government has a made it an attractive place to expand your business.

Understanding the economic climate
With financial incentives in the form of tax credits for investors and good infrastructure, Ireland has a thriving economy. It has a contemporary economy with a growth that is averaging at six percent.  Agriculture used to be the most important sector in Ireland, but this has now been overshadowed by industry and services. Mainly because of its size, exports in Ireland are a major part of the economy that is dominated by foreign multinationals. The exports now account for almost three quarters of the national output. The best potential for growth are in Chemicals and pharmaceuticals/ biopharmaceuticals, E-commerce, Information and communications technology, Software, Internationally traded services, including financial services, Medical devices, Construction, Energy, Environment , Food and drink, Healthcare, Transport  etc

Government Incentives
From an incentive regime to a single low-rate, the taxation policy for businesses is presently being changed. Ireland has a single low-rate tax on trading income of 12.5 percent, following discussions with the European Commission.  This rate applies to income from all business activity and creates many new opportunities for foreign businesses. Incentives are also available to inward investors in the form of tax incentives and financial aid. Financial assistance is administered by various government agencies. Grants are obtainable for manufacturing and internationally traded services, with the IDA having the capacity to offer monetary aid in the form of capital and employment grants for new business.

Taking the help of an expert
While expanding business overseas, it is always good do a thorough market research. Although Ireland is one of the easier countries to expand into, taking the help of an expert can no doubt make things much smoother. A reliable partner can offer specialist expertise advice on the overall operational, administrational and executive aspects of your business, be it legal, HR, Payroll, international accounting or expat tax advice.

Also read on -  sas compliance, expatriate tax advice

Expanding Your Business to Switzerland? What you need to know

Switzerland has almost been forced to build its wealth on foreign trade as it has really has no resources, but only has a limited surface area. The Swiss economic policy is based on the principle of free trade and industry guaranteed by the Federal Constitution, with low import duties and only a few import quotas. Most Swiss manufacturers are dependant on foreign markets to make investments in research and development worthwhile.

Is it viable to expand to Switzerland?
Switzerland has a sophisticated and amenable business culture and wealthy, discerning populace. There are many business opportunities here for companies that are interested in expanding business overseas. Switzerland has a high export rate when compared to other countries, in terms of the percentage of GDP. As it has a small domestic market, there is a large dependence on foreign markets.

Economic Overview
Switzerland has the second highest European rating after Ireland in the Index of Economic Freedom (2008). The World Economic Forum's Global Competitiveness Report currently ranks Switzerland's economy as the second most competitive in the world. It has private sector economy and low tax rates by Western standards, and when compared to the other developed economies, the overall taxation here is the lowest.

The main business opportunities and important cities here
Switzerland is one of the world’s largest per capita food importers, with sectors growing in convenience foods, ethnic foods and organic foods. It also maintains a leading position in medical and pharmaceutical products. Switzerland is home to many highly skilled 2nd, 3rd and 4th tier suppliers, mainly to the German but also to other multinational automotive companies or manufacturers, and importance in going green coming from many states and governments now, eco friendly and organic chemicals are a growing industry here. Zurich, Bern, Geneva, Basle, Lausanne are some of the main cities worth considering when expanding here.

The challenges a foreign investor may face
With regard to the institutional framework and economic environment, Switzerland still faces some challenges. There could also be challenges in the other forms like trade barriers in certain sectors, lack of mutual recognition of foreign standards, a half-heartedly liberalized domestic goods market, and still far too many difficulties in hiring qualified foreign labor, etc. It could also include bureaucracy in the public sector too.


Taking adequate measures to overcome the challenges
Before expanding you business to Switzerland, it is necessary to research your chosen location, your target audience and potential growth of your chosen market. Business etiquette in Switzerland is the key to building the right kind of relationships. And this can be achieved by taking the help of a reliable business partner. You can find global expertise on all areas of business, be it HR, legal, finance, international financial accounting or regulatory filings. With large investments involved, you want to opt for best when choosing expert who can guide you in your international expansion. Your business can be made a success.

Read More on - international accounting services

Key Elements to Consider Before Expanding to Luxemburg

Being one of the richest cities in the world, Luxembourg is home to the European Investment Bank and is and is an attractive place to consider for a business expansion. What attracts entrepreneurs who are interested expanding here are its high-income, stable economy and low unemployment and inflation. Luxemburg is also a founding member of EU, NATO and UN, and has a highly developed economy with one of the highest GDP per capita in the world. Although the majority of the country’s output is accounted by the banking and financial services, there is a tremendous reliance on international trade, mainly due to the size of the country.

The main areas and cities for Business
The main areas for growth in business opportunities are finance, consumer goods, technologies, media technologies, etc. A well planned and researched business plan can help a business to obtain credit from a bank in Luxemburg. There is also a participation fund for small to medium sized enterprises (SME) and the self employed who are interested in getting finance for their business. Due to the size of the country, Luxemburg does not have too many cities, although there are a few like just a few Luxembourg, Esch-Alzette, Differdange, Dudelange, Echternach, which are good locations to conduct your business.

Taxation in Luxemburg
Taxation in Luxemburg can be quite high. Companies are subject to the Communities Income Tax (IRC). There is also a surcharge of 4 percent that is payable to the unemployment fund. At an average of 7.5 percent, there is a municipal tax that is also levied. Additionally there is a municipal commercial tax (ICC) that is applicable to commercial, industrial, mining, and craft entities established in Luxembourg at a rate of 3 percent. The VAT is the least in the EU, which is at 15 percent.

Challenges Foreign Companies Face
When expanding business overseas it is important to plan ahead and beware of the potential pitfalls. Before expanding your business, it is vital to do a thorough research of the market place. It is not always possible to be prepared gain a complete understanding of the laws of another country and therefore make sure you have a smooth transition. To get advice on the overall operational, administrational and executive aspects of your business, it is best to take the help of a professional. A business expert can give you all the essential help to follow the legal norms and fulfill all regulations in your business expansion right from international financial accounting to regulatory filings to taxation.

Read more on - Expat tax advice  

The After-Effect of Brazil’s Increase in IOF Taxes

The Brazilian government’s latest increase in tax on Financial Transactions (IOF) could affects transfer pricing audit several transactions in the financial and capital markets, including investments in fixed income, investment funds and derivatives transactions.Brazil raised taxes on foreign inflows for the second time in a month this October to halt the appreciations of the local currency and protect exports from what local officials have termed as a “global currency war”.While this increase will boost Brazil’s economy, the change will adversely affect the US.

In a international expansion of an emerging market, investors needed to know about the risks involved in investing in their market segment of choice. The decree (Decree 7,330/10) issued on October 18, 2010further raised the IOF tax to six percent, barely a week after the government first increased the rate from two percent to four percent. Inbound investment in several kinds of financial transactions in Brazil will be impacted. Investors will need to structure their investments differently if they want to minimize their IOF costs. Investors may also look for different forms of investment as they want to minimize the impact of the IOF on their transactions.

The IOF is levied on foreign exchange transactions related to the foreign investment in fixed income transactions, investment funds, including Private Equity Funds (FIP), and the attendance of initial or additional margin requirements in connection with futures transactions carried out within the Brazilian Stock, Commodities and Future Exchange. The new rate is effective from October 19, 2010.

There are exceptions to the IOF rate increase and the below will continue to have a two percent IOF rate:

1. Investments in variable income investments traded on the Brazilian capital markets; and
2. Acquisition of stock or stocks subscriptions in public offerings registered with the Brazilian Securities and Exchange Commission (CVM), or where registration is not mandatory under the CVM regulations, if the issuing companies are still registered with the CVM.  

The subsequent repatriation of a foreign investor’s initial investment (i.e. the exchange of Brazilian currency into foreign currency) remains exempt from the IOF.  

IOF on the below foreign investments remain unchanged:

1. Foreign exchange transactions related to direct investment in Brazilian companies remains subject to a rate of 0.38 percent on the inflow and outflow of cash (e.g., capital increase, capital gains and dividend payments); and
2. Foreign exchange transactions related to international loans which are subject to a zero rate on the inflow and outflow of cash, continues.

Although the IOF tax obviously affects domestic and foreign investors differently, it does maintain a level playing field among foreign investors. The recent developments in the IOF tax should be seen as part of a natural evolution of an emerging market. For those foreign investors who are positioning themselves to profit from this development, the real impact will be in the operations functions supporting the trading, allowing for new competitive advantage to be grasped by those providers able to master the service delivery of these new aspects. Incomplete knowledge about foreign markets can be a real impediment to your company’s international expansion plans. Employing the help of a partner can your organization scale all difficulties and ensure success in your endeavors in any international business expansion

Know more - regulatory filings, eu vat rules

Impact of the UK Budget on your Business

While most businesses are largely supportive of the government's plans to reduce the UK Budget deficit, they are divided on whether the government is doing enough to stimulate enterprise. Almost 64 percent of companies feel that the measures outlined in the UK Budget will have a positive effect on their business, with nearly 28 percent stating that the Budget will have a positive effect on their staffing levels. Reducing corporation tax is a smart move, as an encouraging environment for business is precisely what’s needed to stimulate growth. Here is a snapshot of the UK budget of 2011

Corporation Tax Rates

Effective April 1, 2011, the main rate of Corporation Tax will be reduced to 26% (from 28%) with further yearly reductions of 1% for the next two years till the Corporation Tax rate reaches 23% in 2014 making the U.K. rate the lowest in the G7. Apart from U.K. businesses, the move affects all foreign companies operating in the U.K. via a permanent establishment and boosts U.K.’s appeal as a business destination. The new corporation tax rates also affect international accounting for deferred tax assets and liabilities.

Research and Development (R&D) Tax Credit for Small and Medium Enterprises (SMEs)

The rate of additional deduction for expenditure on R&D for SMEs will be raised from 75% to 100% effective April 1, 2011. This will give an overall deduction of 200% in 2011 and the total deduction will be further increased to 225% in April 2012.The move is particularly beneficial for SMEs with less than 500 employees and either turnover not exceeding € 100 million or total assets not exceeding € 86 million. Additional benefits like abolishing the minimum expenditure limit of £10,000, removal of rule limiting a SME company’s payable R&D tax credit to the amount of PAYE and the National Insurance Contributions (NICs) it pays are also expected to come into effect April 2012.

Taxation of Foreign Branches

U.K. companies can make an irrevocable election for all its foreign branches to be exempt from the U.K. corporation tax on their profits. Any capital gains tax attributable to the foreign branch will also be exempt. However, no relief will be available for foreign branch losses. Thus, a company having losses in the foreign branch may elect to opt out of this option. The exemption is available to companies from accounting periods beginning on or after the date Finance Bill 2011 receives Royal Assent. Companies will need to consider the anti-diversion rules in the legislation to determine if the exemption is attractive to them.

Small Corporation Profits

Effective April 1, 2011, the rate of tax on small corporation profits will be down to 20 per cent from the current 21%.

Entrepreneurs Relief

The lifetime limit for Entrepreneur's Relief from capital gains tax, mainly benefiting serial entrepreneurs, will be doubled to £10 million. Qualifying gains are taxed at reduced rate of capital gains tax of 10%. Any gains in excess of this lifetime limit will be subject to the standard tax of 28%. The measure takes effect April 6, 2011 and is the third consecutive increase to lifetime limit by the government indicating their intentions to encourage investments in the U.K. The limit was set at £2 million in the last budget and increased to £5 million in June 2010.

In a company international expansion, it is best to employ the services of a professional whether it’s surviving an audit, capitalizing on business deductions, or finding tax-friendly ways to run your business, to help reduce your tax obligations. To cut red tape on small businesses, the government announced that the number of small businesses subject to audit would be reduced. The change will allow more U.K. companies to take advantage of the exemption leading to a significant reduction in administrative burden for authorities and cost savings.

As incomplete knowledge about foreign markets can be a real impediment in your international expansion, it is advantageous to have a trusted service provider to assist you in creating an appropriate tax and legal structure to optimize your new operating configuration.

You can have unlimited assistance in your international business expansion, for aligning your tax profile and a good service provider would be focused on providing exceptional assistance.


Know more - international financial accounting, doing business overseas

Simplifying Australia's Transfer Pricing Rules for business reconstruction

Tax authorities around the globe have become more aggressive in the transfer pricing arena. It is important to be informed regarding the introduction of stricter penalties, increased information exchange, increased audit and inspection activity to ensure that expensive penalties can be avoided later. The Australian Taxation Office (ATO) has states there will be a significant increase in the spotlight on transfer pricing over the next four years starting with 2010 in the large taxpayer market (revenue greater than A$250 million). There have been new rules on transfer pricing that has been set by the ATO for business restructuring by multinational enterprises. The ruling defines ‘business restructuring’ as arrangements of multinational enterprises by which functions, assets and /or risks of a business are transferred between jurisdictions.

The rules addressed both simple and complex cases including:

* A  simple transfer of ownership of an intangible asset,

* A  multi-faceted product supply chain restructure, etc.

The ATO requires a documented business case for the restructure explaining its commercial rationale, both from a group perspective and also showing how it affects the Australian entity and to ensure its benefits. Proper documentation evidencing the arrival of an arm’s length price for the restructure and post-restructure arrangements must also be maintained.

The ruling focuses on three main types of dealings:

*  a transfer of property

*  a supply of benefit and

* Whether a tax payer, viewed as an independent party, would have a right to  compensation for termination of its existing arrangements

Permanent Establishment issues arising from business restructuring are however not addressed in this ruling. It only applies to the application of the transfer pricing provisions and does not address the application of other provisions in the Australian tax law that may be relevant in the facts and circumstances of a particular business restructuring arrangement.

The rules permit adjustment to a taxpayer’s profits where the conditions of the taxpayer’s commercial or financial relations with an associated enterprise in respect of a business restructuring differ from those which would be made between independent enterprises dealing wholly independently with each other and results in profits not accruing to the taxpayer that would otherwise have accrued.

This Ruling considers situations where such transfers occur between MNE members to implement changes in the MNE’s existing business arrangements or operations. Business restructurings also commonly involve the transfer of the ownership and management of intangibles such as patents, trademarks and brand names.

When doing business overseas, it is advantageous to have a trusted service provider who can provide unlimited assistance in aligning your tax profile and keep you updated with changing transfer pricing regulations and other areas of significance like sas compliance or international financial reporting and other legalities.                            

Know more: International expansion, International accounting

Overcoming the Challenges of Funding a Foreign Operation

According to trading economics, the real GDP growth rate of the US expanded 2.8% in the 4th quarter of 2010, over the previous quarter.  Needless to say, there exists a strong case to pursue opportunities in these markets.  However, as foreign entrepreneurs and investors based outside of these emerging markets look to participate in the rapid expansion, they are faced with the challenging task of pursuing entrepreneurial investments in an unfamiliar environment. The entrepreneur and investor now have the additional complexity of ensuring business models are successfully executed in a completely new context.
Funding foreign operations are never simple. When you set up a corporation, you begin funding operations through paid-up capital. Thereafter, many parent companies fund foreign operations by remitting funds as required. These are recorded as loans in the subsidiary’s books. In a company international expansion, as large investments are involved, good management skills and favorable economic conditions are required to make the endeavor a successful one. It isn’t a problem in most countries but let’s look at some of the different regulations around the globe to give you a sample of the challenges you may face.
China’s Challenges
In China, the subsidiary will not be able to repatriate funds to repay the loan, if u send funds and book them as a loan. The loan needs to be formally registered in time with the Foreign Exchange Bureau, for it to be repatriable. Proper loan documentation between the parties is also strongly advisable as additional support to repatriate funds.
Barriers in Denmark
Denmark is a much easier location than China. However, when you loan funds to your Danish subsidiary, as in most jurisdictions, thin capitalization rules will restrict the deduction of interest charges on loans from foreign group companies. What is special about Denmark is that thin capitalization rules also apply to a branch. Thin capitalization is deemed to exist if the debt-to-equity ratio exceeds 4:1. Thin capitalization rules do not apply if arm’s length terms are substantiated. A properly constructed intercompany agreement and a benchmarking exercise would certainly help the situation.
Navigating Argentina’s Drawbacks
What happens if your subsidiary makes losses? The law requires shareholders to make a further capital contribution, frequently covering the entire loss and a proportion of the original share capital. If the funds are not correctly transmitted, Argentine Central Bank regulations will prevent the funds being allocated to your company. When a cash contribution comes from abroad, a 30% withholding will be made until the relevant local regulator (IGJ) approves the Capital change and registers it. If you fail to complete the formalities with IGJ within a certain timeframe, you must again deposit the amount that they had withheld. In addition, funds sent by a foreign parent to the Argentine Subsidiary without complying with the arm’s length standard, are treated as capital contributions.
Difficulties in Brazil
Capital contributions must be registered in the Central Bank of Brazil (Bacen). Foreign loans must also be registered at Bacen who monitor interest payments. Failure to register the loan would result in Bacen prohibiting repayment in foreign currency and could also trigger issues relating to compliance with Brazilian transfer pricing control rules.
An integrated solution is the only real security, if you are looking at an international expansion. With the professional expertise of a reliable partner, your company can be funded through capital or through loans in the right proportions. Expanding abroad would give your business access to a much bigger, global market. If you want to make your international financial accounting a reality, there’s no better way to do it with the company of experts .You can minimize the risks and maximize your chances of success this way!
Know more - expanding business overseas, sas 70 compliance