EPAM hosted a client seminar dedicated to tax jurisdictions of Luxembourg and Kingdom of the Netherlands on 22 March 2012 in Moscow.

The seminar, organised by EPAM in association with De Brauw Blackstone Westbroek (Netherlands) and Arendt & Medernach (Luxembourg), brought together more than 50 representatives of leading Russian and international companies. The seminar focused on the opportunities of using tax advantages in the jurisdictions of the Netherlands and Luxembourg to locate holding companies and plan investments.

Igor Schikow, Head of Tax Practice at EPAM, delivered the opening speech. Igor highlighted the significance of holding companies in organising business and tax planning. In practice, holdings are used both to invest foreign capital in Russia (inbound investments) and by Russian major businesses to structure their investments abroad. For instance, holdings can be used in foreign jurisdictions to participate in joint ventures with foreign partners or to acquire business in a foreign country. The choice of a country to locate a holding specifically depends on the tax regime effective in the respective jurisdiction. What tax parameters are most significant and how they correlate with the tasks, which holding companies face, and income, which is typical for holdings, has been discussed in detail in the initial speech. Specifically, it was discussed how operational and non-operational income is taxed, the possibility to carry forward and consolidate losses with profits and tax implications at the investment repatriation stage.

In their joint presentation, Alain Goebel, Partner at Arendt & Medernach, and Paul Sleurink, Partner at De Brauw Blackstone Westbroek, compared the tax systems of the Netherlands and Luxembourg as most significant and frequently used jurisdictions to create holding companies and SPVs in the Western Europe. The experts gave examples of structuring inbound and outbound investments, where Netherlands and Luxembourg holding structures helped avoid double or disproportionate taxation under certain conditions. It was of special interest to learn of the so-called hybrid financing, which helps gain additional tax optimisation when disinvesting capital from a Luxembourg holding into another jurisdiction.

Additionally to holding companies, both jurisdictions offer exceptionally favourable environment to create special purpose vehicles, e.g. to finance day-to-day operations within industrial and financial groups and manage special assets, e.g. intellectual property or copyright.

The central topic of the seminar was to identify borders of permitted tax planning and the need to have economically significant reasons to organise holding structures.

The presentations were followed by a questions and answers session.