In the practice of international tax avoidance, there are many ingenious ways for multinational taxpayers to avoid taxes, which are hard to prevent. The more detailed the tax laws of the countries concerned, the more means they have, and the more subtle they are. No matter how many tricks are used, the purpose is whether the source of taxpayers or taxpayers can be transferred between tax jurisdictions in different countries. Multinational corporations (legal persons crossing taxpayers) can be identified as citizens or residents according to different tax jurisdictions, which are collectively referred to as human elements here; The object of taxation also refers to the income or income generated by capital investment, labor remuneration or goods exchange, which are collectively referred to as material elements here. The movement of the two will form a method of tax avoidance.
First, tax avoidance through the flow of people.
Before analyzing the change of the domicile of multinational companies, we should first understand the standards of determining the citizenship and resident status of corporate in various countries, and then analyze the possible tax avoidance behavior according to this standard. For corporate citizens, corporate taxpayers have unlimited tax obligations; For taxpayers of corporate resident companies, resident companies can take some technical measures to avoid becoming resident taxpayers.
1) Some shareholders do not participate in management activities, and their shares are separated from the power that affects the management, and only their financial rights are reserved. 2) Avoid registering companies in countries with high taxes, preferably in international tax havens or countries that offer more tax incentives. 3) Choose non-residents as management roles. 4) Do not hold shareholders' meetings or management decision-making meetings in high-tax countries, and make various meeting reports outside these countries. The minutes of foreign meetings must include important business decisions and detailed information made abroad. 5) Avoid sending telephone calls or other telecommunication instructions from countries with high taxes. 6) For temporary or urgent transactions, establish a separate service company, pay taxes according to certain profits, and avoid paying taxes in full.
The purpose of tax avoidance in the relocation of company residence is to determine where the residence of the company or relevant institution is, mainly based on where the control and management department of the company or institution is. For example, a company registered in France can be a resident company in China, and a French company registered in China can be a resident company in France. It can be seen that a company can be regarded as a resident company within the tax jurisdiction of other countries, and it should not prevent the company's home country from treating it as a resident company. Therefore, one of the core of evading the tax obligation by changing the domicile is to eliminate all the actual features that make the home country or the country where the behavior takes place become the place of control and management, and realize the nihility of the company's domicile.
For example, France Swire Steel Co., Ltd. avoids having a residence in the UK and becomes a British taxpayer by the following means: 1) British shareholders in the company are not allowed to participate in management activities, and their shares are separated from those that affect and control the management power of the company. They only enjoy the right to receive dividends and participate in dividends. 2) Choose non-British residents to do management work, such as managers and board members. 3) The board of directors or shareholders' meeting will not be held in the UK, and all meetings, materials and reports related to the company will be held outside the territory of the UK, and the documents will not be kept in the UK. 4) Issuing instructions and orders by British telegraph, telecommunications and other relevant means. 5) In order to meet the special needs such as transactions attached to emergencies, the company has set up a separate service company in the UK and paid corporate tax according to the approved profit rate, so as not to cause extreme hatred from the British government. Facts have proved that these practices of France Sforr Steel Co., Ltd. are very correct and effective. It is reported that during the period from 1973 to 1985, the company successfully evaded the British tax payable of 81370,000 US dollars.
In the process of using the company's domicile to change tax avoidance, it can also be done through mailbox or intermediate operation. Mailbox companies refer to those companies that have only legal organizational forms and have completed legal registration procedures in their countries of residence. All the activities that these companies should nominally engage in are carried out by companies or branches in other countries. These companies or branches are legal organizations and entities located in countries with investment tax incentives and rewards, or those companies and entities that deliberately create book losses in the hope that future annual profits can offset each other. They often not only enjoy various tax benefits in name, but also have other ways to transfer their income. The intermediate operation is not the same as the mailbox company. It is to set up a central institution between the source of income and the ultimate recipient or beneficiary. The company's organization is usually located in a tax haven, a free port, or a country with certain tax incentives. When the income or profit of the center accumulates to a certain extent and scale, it can be used for reinvestment or other purposes. The tax avoidance function of intermediary companies is mainly reflected in obtaining dividends, interest, real estate and securities. For countries with tax treaties, the intermediate operation method is more important.
Second, tax avoidance through people's illiquidity.
People's immovability means that transnational taxpayers do not leave their original country of residence, but change their resident status in other ways to avoid their unlimited tax payment obligations in high-tax countries, or formally separate their income or property from themselves to avoid paying taxes on this part of their income or property in their country of residence.
People's non-mobile tax avoidance can be divided into two situations: one is to move out of the residence falsely, and the other is not to move out of the residence.
The so-called false move out of residence means that legally speaking, multinational taxpayers have moved out of high-tax countries, but in fact they have not obtained residence anywhere else. A multinational taxpayer in a high-tax country, even if he is actually a resident of the country, can reduce or even exempt his international tax obligations as long as there is enough evidence to prove that he is not a resident of the country.
The so-called residence does not move out of the high-tax country, which means that transnational taxpayers have not legally moved out of the high-tax country, but have established trust property or other trust relationships in other low-tax countries to avoid paying taxes. Transnational taxpayers transfer their income or property through trust, and transfer their own property to the trustee for custody and management, thus separating taxpayers from their property or income, thus eliminating some contact factors between people and things in legal form, but making the separated property or income still protected by law. So that the client no longer needs to pay property tax and income tax on this part of the property and its income, and can effectively avoid his tax obligation in the country of residence, because the tax obligation has been transferred from the client to the trustee, and the tax borne by the trustee will eventually be transferred to the client, but if the client chooses the trustee in a low-tax country, its overall tax revenue will inevitably decrease. For example, LaVida Bridge Company in New Zealand transferred 70% of its annual profits to a trust company in the Bahamas in order to avoid its own income tax. Because the Bahamas is a world-famous free port and tax haven, the tax rate is 35%-50% lower than that of New Zealand. Therefore, New Zealand LaVida Bridge Company can effectively avoid taxes of $3 million to $4.7 million per year.
Third, use logistics to avoid tax.
In international tax avoidance, capital, goods or services are as important as people flow, but they are slightly better in some aspects. This is because the flow of people is too obvious and it is easy to become the main target of anti-tax avoidance measures in high-tax countries. In contrast, in some tax avoidance activities, the flow of funds, goods and services is more hidden, and the benefits are sometimes better than those generated by the flow of people. But the specific means of things flowing are relatively more complicated.
1. Set up a permanent institution engaged in tax-free activities to transfer goods. A multinational enterprise often needs to establish many foreign permanent institutions, some of which specialize in tax-free business activities. When the countries where some permanent establishments are located have no tax exemption provisions for permanent establishments at all, goods that need to be stored or processed can be transferred to permanent establishments with tax exemption activities to achieve the purpose of tax avoidance.
2. Use permanent institutions to transfer property. Multinational companies should always consider and weigh the different taxes in the countries where the transfer-out institutions and the transfer-in institutions are located, as well as the different evaluation and calculation methods of business property, and make use of the transfer of business property between permanent institutions to minimize the current or future tax obligations.
3. Use permanent institutions to lease virtual property. Multinational companies use taxes different from those in the country where the permanent establishment is located, and artificially transfer expenses through fictitious property lessors to achieve the purpose of tax avoidance.
4, the use of permanent institutions to transfer services. The headquarters and permanent institutions of multinational corporations, or permanent institutions, often provide each other with labor fees that are not deducted according to regulations, such as technical service fees and advertising fees. Because these transferred labor expenditures are not allowed to be deducted from the income of the transferred institutions, when such labor expenditures are transferred from high-tax countries to low-tax countries, they can be used by the transfer institutions in high-tax countries to realize tax avoidance.
5, the use of permanent institutions to transfer management fees. It is a complicated problem to what extent foreign permanent institutions participate in management activities, how much management expenses they should bear and how much profits they should share. Some countries' bilateral tax treaties have specific provisions on this. Some stipulate a fixed profit-sharing ratio, while others stipulate that the profit-sharing ratio is determined according to the degree of participation of permanent institutions in management activities. But in any case, it is easy to be used by international tax evaders. For the former, there should be an appropriate allocation standard of management expenses, while for the latter, an appropriate scale of participation in management should be found.
6. Loss of use of the permanent establishment. Multinational companies make full use of different policies or regulations in different countries to treat enterprise losses, so that the permanent institutions in the most favorable countries suffer losses at the most favorable time, thus achieving the purpose of tax avoidance.
In addition, multinational enterprises can also use exchange rate changes between permanent institutions to avoid taxes. The overseas permanent institutions of multinational enterprises often settle accounts in different currencies. Because the exchange rate often fluctuates violently, there will be artificial results in the calculation of profit and loss of permanent institutions, which will become an effective means of tax avoidance.
The common tax avoidance methods of multinational companies mentioned above are often combined in real life to achieve maximum tax avoidance. As long as we understand the above methods, it is not difficult to identify the ways in which they may appear in various combinations.