COMMERCIAL-LAW REASONS (OTHER THAN TAX) FOR SETTING UP A HEADQUARTER COMPANY: A SOUTH AFRICAN OBSERVATION

A headquarter company is a company within a group of companies which supervises and co-ordinates the administrative activities of the group. Headquarter companies are formed for various tax- and non-tax-related reasons depending on the particular needs of the group in which the headquarter company is formed. In the setting up a headquarter-company consideration is given to various key determinants such as political and investment climate, corporate laws and treasury considerations. Tax reasons include deferring tax on income and capital gains, maximizing credit for foreign taxes and reducing withholding taxes. However, when the decision is taken to interpose a headquarter company between the investor country and the operating subsidiaries’ country, the real economic purposes and benefits are usually non-tax in nature. These include the ability to raise external finance, circumventing the application of exchange controls, protection of assets as well as group reorganization and structural consolidation.

Withholding tax rates on dividends: symmetries versus asymmetries or single- versus multi-rated double tax treaties

Out of all double tax treaties (DTTs) in force in 2012, around 41% are symmetric (single-rated) and 59% are asymmetric (multi-rated), i.e., they prescribe different dividend withholding tax rates depending on the foreign investor’s ownership fraction. The paper investigates the reasons for this phenomenon, namely why some countries in their DTTs prefer homogenous withholding tax rates over separate rates for participation and portfolio dividends. In a theoretical model, I demonstrate why home countries may have an interest in a high withholding tax rate in the host country, even though they do not receive the revenue from this tax. Further, I find confirming evidence that a reason for having multi-rated withholding taxes on dividends is an existing spatial dependence on the rates of the countries’ peers that may be a driving factor for setting multi-rated taxes. Finally, I confirm that the spread itself (i.e., the difference between the portfolio and participation dividends negotiated in the tax treaty) is also affected by the peer countries.

Corporate Tax Integration in Light of Falling Corporate Tax Rates: Using the 1803 British System for Withholding Taxes on Corporate Income as a Model

Tax competition has morphed the corporate tax into a source-based tax with falling rates. Past proposals to integrate corporate taxes with the residence-based personal income tax were rejected because of revenue loss and poorly designed alternatives, but in light of falling tax rates and revenues, integration has become viable. An updated version of the simple and practical 1803 British system would impute corporate income to shareholders and have corporations withhold taxes paid on that income. It would reduce distortions of the current code, including that between domestic and foreign production, could provide more government revenue, and would be more progressive.

Cum-Ex in Concept

This chapter examines the essential features of the cum-ex trade and outlines the ‘base template’ which was the foundation for the later refinement and expansion of the trade. The chapter begins by dealing separately with a number of the individual components that are relevant to the cum-ex trade: it explains the concept of dividend arbitrage, the workings of withholding taxes and tax credits, the distinction between cum-dividend and ex-dividend share sales, the idea of a settlement time lag, the workings of the dividend adjustment mechanism, and the concept of short selling. The discussion then explains how these individual components were assembled and synchronized in order to deliver the basic cum-ex trade.

Personal Tax Planning: Due Diligence Defence to Liability for Unpaid Statutory Remittances

Several potentially onerous liabilities may be imposed on directors outside the provisions of the statute under which their corporation is incorporated or continued. In particular, some of the most common sources of personal liability for directors arise under statutes requiring the corporation to pay employee payroll source deductions (income tax, Canada Pension Plan contributions, and employment insurance premiums), withholding taxes owing by non-residents of Canada, and net goods and services tax and harmonized sales tax remittances. These statutory regimes all have certain features in common, including a statutory due diligence defence. This article examines the state of the law under the objective standard of care first adopted in the tax context by the Federal Court of Appeal in <i>Buckingham</i>. In particular, it examines the principles that guide jurisprudence on the due diligence defence, the factual circumstances that have met with success or failure for appellants, and how the defences apply differently depending on whether a director is an inside or outside director.

The determinants of tax-haven use: evidence from Canada

Purpose The purpose of this paper is to investigate the determinants of tax-haven use of publicly listed Canadian firms. Design/methodology/approach Based on alternative measures of tax havens (TH) and referring to a sample of 235 Canadian firms over the period of 2014–2015, probit-regression analyses are used to examine the determinants of tax-haven use. Findings The authors provide evidence that multinationality, intangible assets, thin capitalization, withholding taxes, equity-based management remuneration and tax fees paid to auditing firms are positively associated with TH use. Furthermore, the authors show that the variable relating to R&D intensity is positively associated with TH use. The authors also document that strong corporate-governance structures are negatively associated with TH use. Research limitations/implications This study is only limited to Canadian firms, so the results may not be generalizable to other countries. Practical implications The results may assist tax watchdogs in their efforts to understand the tax behavior held by Canadian firms. They may also be interesting for tax authorities in planning enforcement activities. Originality/value This study uses a sample from publicly listed financial and non-financial firms. It also uses various lists of TH published by various competent sources (IMF, 2000, 2007; TJN, 2005; OECD, 2012). The findings corroborate the recent media attention about the extensive use of TH by Canadian firms.