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Granville Turner, a director at Turner Little – the corporate services  provider – focuses on the tax and residential status implications for such companies; detailing for IMS StratNews just what impact this has on the tax liabilities for those companies and individuals involved.

Here information is presented in the form of a straightforward  guide. It provides clear details for Non-UK resident shareholders and directors just what requirements need to be met to ensure they are complying with UK government company – as well as individual – residential and taxation status rules!

Determining a company’s residential status

The general rule is that a company is a UK resident if either:

• It is incorporated in the UK, or 
• If the central management and control of its business is in the UK.

Therefore, a UK incorporated company will be defined as a UK resident, irrespective of having foreign directors and shareholders, says Turner. 

When special conditions apply to residency and taxation complexities

To find out more about Non-UK resident shareholders and directors taxation complexities see our guide via our ‘Gold Membership’ at https://www.imsstratnews.com/non-uk-resident-…rs-company-taxes/

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The post Taxation complexities faced by Non-UK resident shareholders – Turner Little appeared first on IMS StratNews | Financial Services.

UK limited liability companies with Non-UK resident shareholders and directors have often had to tip-toe through a range of taxation complexities.

Granville Turner, a director at Turner Little – the corporate services  provider – focuses on the tax and residential status implications for such companies; detailing for IMS StratNews just what impact this has on the tax liabilities for those companies and individuals involved.

Here information is presented in the form of a straightforward  guide. It provides clear details for Non-UK resident shareholders and directors just what requirements need to be met to ensure they are complying with UK government company – as well as individual – residential and taxation status rules!

Determining a company’s residential status

The general rule is that a company is a UK resident if either:

• It is incorporated in the UK, or 
• If the central management and control of its business is in the UK.

Therefore, a UK incorporated company will be defined as a UK resident, irrespective of having foreign directors and shareholders, says Turner. 

When special conditions apply to residency 

However, this resident status can be affected by a double tax treaty. 

A typical treaty provision provides that, for treaty purposes, a company can be treated as a tax resident dependent on where its effective management and control is located.

Turner directs attention to official commentary relating to the OECD model tax treaty (which will apply in most cases, and the Revenue and Courts will follow), which defines the place of effective management and control as:

‘The place where key management and commercial decisions that are necessary for the conduct of the entity’s business are in substance made. The place of effective management will ordinarily be the place where the most senior person or group of persons (for example a board of directors) makes its decisions; the place where the actions to be taken by the entity as a whole are determined; however, no definitive rule can be given and all relevant facts and circumstances must be examined to determine the place of effective management. An entity may have more than one place of management, but it can only have one place of effective management at any one time’.

What exactly does this mean?

• The treaty provision in relation to residency is determined by where all key operational decisions are made by the company’s executives and management: ‘The place of effective management’.
•  This location needs to be where senior figures in the company – primarily the Board of Directors – make those decisions.
• This location also needs to be where company operations mainly take place.
• A caveat or condition exists that states all of the above must be fully investigated before a company qualifies for this treaty provision, despite the overarching rules within the treaty provision.
• Ultimately therefore, if, under this test, a UK resident company is managed from overseas it may be classed as treaty non resident.

In addition:

• Significantly, business may be managed from more than one location, but a company can only have one ‘place of effective management’.

and,

• Importantly, UK tax legislation states that, where this applies, the company is treated as not resident in the UK: Note that this is a special rule – so it means that all `treaty non-resident’ companies are not UK resident for all taxation purposes

The Takeaway

Non-UK resident shareholders and directors: income tax & dividends

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Along with Juan Carlos Torres, investor and chairman of the travel retail group, Dufry, the investment agreement aims at supporting the development of Italian firm Moncler SpA into potentially one of the world’s leading luxury groups.

The two long-term orientated investors acquired their stake in the Italian/French luxury company – seller of high-end outerwear and apparel – via the newly incorporated investment company from Ruffini Partecipazioni called Newco.

Following the exit of Clubsette, Newco will hold a 26.8 percent stake in Moncler.

Clubsette S.r.l. (an investment vehicle controlled by Tamburi Investment Partners) currently owns 14 percent of the corporate capital of Ruffini Partecipazioni. Once Clubsette exits Ruffini Partecipazioni it will receive a 5.1 percent direct equity holding in Moncler, as reimbursement and liquidation of its original.

Chairman and CEO of Moncler, Remo Ruffini, will remain the single largest and controlling quotaholder of Newco – through Ruffini Partecipazioni – and will continue to define and drive Moncler’s plans for future development, the investment company said.

The investment agreement is expected to be effective from 3 August 2016 and includes a shareholders’ agreement to be executed on that closing date by Ruffini Partecipazioni and the Investors as quotaholders of Newco.

Speaking on the acquisition, Head of Europe for Temasek, Tan Chong Lee, said:

“This investment represents Temasek’s largest commitment to an Italian company to date. Italy is home to leading consumer and industrial businesses that [has] considerable export and international growth potential.”

While having been established in Grenoble, France, in 1952, Moncler operates in over 70 countries throughout Italy, EMEA, Asia and the Americas; through a network of mono-brand stores and major exclusive luxury department and multi-brand stores.

Senior Managing Director for Europe and Joint Head of Consumer at Temasek, Luigi Feola said:

“We are pleased to gain exposure to Moncler… We welcome the opportunity to work alongside our partner Remo Ruffini and to support Moncler in the long term as it continues its global expansion.”

Temasek added that it sees opportunities in leading European companies looking to expand and diversify their export markets to growth economies in Asia, Africa and Latin America – unsurprisingly, including those consumer companies where there’s strong appeal around their brands in markets such as China.

Commenting on the new partnership Remo Ruffini said:

“In Temasek and Juan Carlos I have found what I have been seeking as I look toward the future phases of Moncler’s development: committed, supportive, knowledgeable and ambitious strategic partners… they also have strong economic alignment of interest with all of Moncler’s institutional and individual shareholders.” 

The company invests over the long term around the following four key investment themes: growing middle income populations, transforming economies, deepening comparative advantages and emerging champions.

Temasek argues that, by investing in companies that cater to one or more of these themes, it has become a provider of capital that can help companies, at various inflection points of growth, to meet the challenges aligned with its investment themes. It added that the themes also reflect its perspectives on long term trends.

Temasek was incorporated in 1974and has a S$242 bln (Sd) (180 bln usd; 158 bln eur; HK$1.40 trillion (HKd); 125 bln gbp) portfolio at 31 March 2016.

The investment firm’s portfolio covers telecommunications: media & technology; financial services, transportation & industrials, consumer & real estate; life sciences & agriculture and energy & resources.

Temasek’s compounded annualised Total Shareholder Return (TSR) since inception in 1974 is 15 percent in Singapore dollar terms, or 17 percent in US dollar terms. It has had a corporate credit rating of AAA/Aaa since its inaugural credit rating in 2004, by rating agencies S&P Global Ratings and Moody’s Investors Service respectively.

Temasek has offices in Singapore and nine other cities around the world, including London, covering Europe: New York, São Paulo and Mexico City in the Americas. Beijing and Shanghai in China, Mumbai and Chennai in India and Hanoi in Vietnam.

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