best way to pay out dividends tax free

[soleil1]

I live in a jurisdiction where dividends are not taxed. My company is based in switzerland and the DTA with my country states that individuals must pay 15% taxes to switzerland and only 5% if its a corporation.

Now i could open a company in my country, have that company own shares of the swiss company and pay dividends through there. It would bring down the tax rate to 5%.

But I see that dividends paid to many other countries have a 0% dividend tax (eg most EU countries). I think liechtenstein would be a possibility for 0 tax but I think setup/running costs are quite high? I vaguely read somewhere that UK does not tax dividend that were sourced abroad. This would make UK the ideal jurisdiction because setup/running costs are very cheap but maybe there are caveats or maybe there are other better options?

Thanks!

 

[antrock333]

How much WHT is paid ist dependent on the corresponding DTA. Here's a list of WHT rates for a dividend payout out of a Swiss corporation: Switzerland - Corporate - Withholding taxes
There are a couple of countries outside of the EU which also provide a reduction to zero (i.e. Georgia).

To achieve low or zero percentage your party needs to be a substantial shareholder. This percentage is also dependent on the DTA.

Please take into account the payee must be a shareholder for at least two years and both companies must be subject to CIT to get the reduced WHT rates for EU members (and UK at least until 2020). Outside of the EU you need to take a look at the corresponding DTA concerning the qualifying minimum age of the relationship.

Also, substance et al rules would apply for the payee not matter where it is situated.

 

[soleil1]

Thanks for the reply. I'm aware of the theory, and the dividend rate between swiss company and the holding company is not the issue.

My question is around paying from the holding company to myself. I want to ensure that the country of the holding company will not apply some taxes.

Georgia as you suggest would not work because there is a 5% withholding tax on dividends.

I know for a fact that a Liechtenstein company would work because there is no dividend tax when the holding company pays dividends to me (both Liechtenstein and my country of residence do not tax dividends). But i think LI company is too expensive + better to be fluent in German. I'm looking for easier solution.

Again, I vaguely remember reading that UK does not apply dividend taxes on foreign sourced dividends received. But is that also the case when the dividends are paid out to a foreigner? Can anyone confirm this? Because UK holding company would be very cheap

Or is there better solution?

 

[antrock333]

UK does not levy WHT on dividends:

There is no requirement to deduct WHT from dividends. Therefore, dividends may always be paid gross, regardless of the terms of the applicable DTT.

IMHO you would still have to prove economic substance for your holding in UK (board meetings, directors with suitable knowledge, qualified employees, annual expenditure, adequate physical offices) or it most probably will inadvertently become tax resident in your current jurisdiction (where you live as main shareholder of the holding).

 

[soleil1]

Thanks for your confirmation Seems like UK holding company is solution

My current jurisdiction shouldn't care because the holding company will have no revenue to tax (dividends are not taxed). It also does not tax foreign sourced revenue so it also does not care about the swiss company.
UK wont care where the holding company is actually based because there is nothing for them to tax in any case.
The only country who might complain is switzerland. But I think worst case they will not accept the holding company as UK and tax it at 5% instead as per DTA with my jurisdiction.

Might be worth taking the risk

 

[CaptK]

The UK is a great place for a holding company especially Gibraltar, IOM Guernsey and Jersey.
Dont over complicate it with multiple jurisdictions. Ensure your structure is right.