Luxembourg Holdco More Tax Fraud by Kpmg

Is KPMG a firm of liars, thieves and murders?

The answer is unequivocally, Yes.

It is a fact, that KPMG has already plead guilty to committing tax fraud and paid massive fines, lies and thievery. It is a fact that KPMG is

continuously fighting lawsuits for accounting fraud, lies and thievery for $100s of millions.

It is a fact that KPMG even lied to the DOJ in crafting their statement of facts to the DOJ, Joseph Loonan KPMG’s Chief Counsel wrote an

email to Joseph Barloon of Skadden Arps (a lackey of Bob Bennett of Skadden) stating that the “statement of facts” given to the DOJ were

false, famously ending his email “freedom is just another word for nothing left to lose” on March 3, 2005.

Clearly the Loonan email (which is public information) proves KPMG to be massive liars and at a minimum a destroyer of lives, the lives

of all those they lied to the DOJ about since once the DOJ gets a hold of you it is ball game over, period, guilty or innocent, the U.S.

criminal justice system is a meat grinder that has no parallel in the universe.

In fact, several studies exist, more fully described below that emphatically state, the rate of suicide is SIGNIFICANTLY higher for anyone

having contact with the U.S. criminal justice system, guilty or innocent.

The study further provides that all that is necessary for someone to kill themselves at a significantly higher rate, is contact or involvement

with someone subject to the degradations provided by the U.S. criminal justice system.

“By RICK NAUERT PHD Senior News Editor Reviewed by John M. Grohol, Psy.D. on February 9, 2011

Men and women who have had contact with the criminal justice system appear to have a significantly higher

rate of suicide than the general population, according to a new study.

And the higher suicide rate occurs even if an individual has never received a jail or prison sentence or a guilty

verdict.

The report is posted online and will appear in the June print issue of Archives of General Psychiatry, one of the

JAMA/Archives journals.”

Keep in mind, the Feds are the ultimate masters of destroying the lives of anyone they deem unworthy (which in the professional context is

usually anyone who has not previously worked for the Feds (check it out the stats don’t lie)). It is perfectly legal for the Feds to say

anything they want in court with the full knowledge that the lying scum in the media will repeat what the Feds say as fact (like Lynnley

Browning of the NYT does). In fact, Jane might be alive today if Browning had one shred of decency or even honesty, but I digress we

know she doesn’t.

Again the Feds can say whatever they want with the one proviso that the Feds must not be absolutely certain what they say is false and then

even if what the Feds say is false, as long as no one can prove the Feds made false statements with bad intent, it is perfectly legal. We all

know the Feds never have bad intent, so in effect, the Feds can say and do whatever they want for the greater good/evil.

Of course all of the above is common knowledge, everyone knows how the system works.

In 2003 a DOJ study, link below, provides that 13% of the people in the U.S. prison system are butt raped and acknowledges in the study

this figure may be low (and several other studies provide that the butt raping that occurs in the U.S. prison system is significantly higher

especially in the higher security prisons or prisons with violent offenders). .

Okay, so it is a given, if you lie to the DOJ like KPMG did, KPMG knew the DOJ would use those lies to have people put in prison where

the probability was extremely high they would be butt raped (almost a certainty if they are locked up in a 100 square foot room with 23

black guys convicted of murder or worse, who hate Jews and are left unattended for days at a time).

See “the Prison Rape Elimination Act (PREA) 2003 states that 13 percent of all inmates have been raped in American prisons and jails}”.

It is also a given based on thousands of studies, see the link the link above, that those subject to the legal system have a significantly greater

chance of committing suicide:

Thus, it is clear when KPMG knowingly lied to the Feds, KPMG would be “causing” its former partners to be butt raped and potentially

“cause” the partners or their loved ones to commit suicide, the government studies all provide for this and everyone knows it.

Murder is defined in Webster’s as “the crime of unlawfully killing a person”. Kill is defined in Webster’s as “ to deprive of life : cause the death of”’ . We all know lying to the Feds is unlawful, right? Therefore, KPMG knew when it lied to the Feds, KPMG would be causing the death of those being lied about or their loved ones (all of the prison studies on suicide and rape are common knowledge) and the butt raping of those actually incarcerated. Thus KPMG knew when it lied to the Feds, KPMG would be killing people and committing the act of murder since lying to the Feds is unlawful, thus, KPMG is a firm of murders at least according to Webster’s.

I will say it again, if you work at KPMG or do business with KPMG if anything goes wrong, to save itself, KPMG will lie, steal and kill to save itself, it is really that simple. The other thing you can be sure of, any transaction you engage with KPMG is likely fraudulent, either tax or audit, I can take any financial statement audited by KPMG and find the Fraud in 5 minutes. In fact, even if the transaction is not fraudulent, KPMG will lie and say the transaction is fraudulent to save itself if it has other issues just like any low life murdering crack dealer would (of course, you may meet the low life crack dealer in prison by the time KPMG is done with you). Beware, KPMG is a firm of liars, thieves and murderers. Let me be absolutely clear, nothing in this post is untrue and no one is being threatened, the only thing any of you dopes have to fear is KPMG itself (and the U.S. Government when KPMG gets done lying to the Feds about you). Luxembourg Holding Companies Luxembourg Holding Companies/ MORE FRAUD BY KPMG

LuluzeLuxembourg tax opportunities

for US investors

Houston, 4 November 2010

International Corporate Tax

Luc Alexandre

Senior Manager, KPMG Tax Luxembourg

Today’s agenda

I. Overview

II. Typical structures

I. Holding

II. Financing

III. Licensing

IV. Trading

2

I. Overview

Overview Luxembourg country facts

•At the heart of Europe and founding member of the European Union (member since 1951)

•A renowned international financial centre

4

Overview Luxembourg country facts

5

Overview A favourable tax environment

Statutory tax rate:28.59% in 2010

28.80% in 2011

Possible to maintain the ETR to a minimum for any type of activity through tax planning

Favorable IP tax regime:

• Effective tax rate of 5.72% for royalty income

• A tax ruling is in principle not required

Advance tax ruling system to secure upfront the tax treatment of transactions (prompt and

flexible tax authorities – written confirmation is obtained within 2 to 6 weeks): pragmatic

approach

No capital / stamp duties

Extensive network of tax treaties that helps reduce/eliminate withholding taxes on foreign

income receipts

• Almost 60 treaties currently in force incl. Mexico, Brazil, HK, etc.

• 14 treaties currently in negotiation

6

Overview A favourable tax environment (Cont’d)

No withholding tax on royalties, interest & liquidation proceeds (in principle)

No withholding tax on dividends paid to US corporations (subject to conditions)

Luxembourg participation exemption (incoming dividend and capital gain exempt)

No or minor taxation upon exit or refinancing strategy

Access to EU Directives (Parent/Subsidiary, Interest/Royalties, and Merger Directives)

No CFC rules

Bilateral Investment Treaties

7

Overview Hot topics in Luxembourg

Increase in aggregate corporate tax rate: from 28.59% (2010) to 28.80% (2011)

Transfer pricing studies for newly established back-to-back financing entities

Minimum flat tax of EUR 1,500 for corporate entities (SOPARFIs)

• Of which financial assets (including transferable securities, receivables, bank deposit etc.)

exceed 90% of their total assets;

• That do not perform activities subject to a business license or approval of supervisory authority;

• in fiscal unity cases only applicable once at the level of the integrating Luxembourg parent

company or permanent establishment;

• But not before 2012

8

II. Typical structures

Typical structures : Holding

EU subsidiaries or “high-taxed” non-EU subsidiaries

Benefits

• Full exemption on incoming dividends and capital gains

(participation exemption regime):

• 10% ownership or acquisition price of EUR 1.2m

(dividends) / EUR 6m (capital gains)

• 12 months holding period

• “Subject to tax” requirement (except for EU subsidiairies)

No Luxembourg withholding tax on dividends paid to USCo under

domestic rules

In principle, no foreign withholding tax on incoming dividends

from EU/non-EU subsidiaries pursuant to EU Directive and tax

treaties

Other Considerations

• Luxembourg tax clearance

• Luxembourg substance requirements

USCo

LuxCo

EU / non-EU

Dividends

•

•

Dividends Capital gains


Luxembourg

Benefits

• Upon disposal of participations in OpCos to LuxCo2,

crystallisation of write-downs into permanent tax losses at the

level of LuxCo1

• The tax losses of LuxCo1 becoming permanent, may be used

against income deriving from e.g. financing, trading… activities

• Losses at the level of OpCos remain tax deductible



• Change of control at OpCos level

11

Utilisation of tax losses in

LuxCo2

USCo

LuxCo1

OpCos

OpCos


“Low-taxed” non-EU subsidiaries (tax havens)

Benefits

• No or low taxation on incoming dividends and capital gains from

“low-taxed” subsidiaries (e.g. Tax havens) that do not benefit from

the Luxembourg participation exemption regime

• No Luxembourg withholding tax on the accrual (or payment) of

yield on TPECs (Tracking Preferred Equity Certificates)

Tax analysis

• TPECs are a hybrid and are treated as debt for Luxembourg tax

purposes – accrual yield treated as tax deductible interest

expense

• TPECs bear (i) a fixed interest rate equal to 0.1% of the nominal

value of the TPECs and (ii) a variable interest rate calculated as

99% of LuxCo’s net income

• LuxCo taxed on margin between the dividends/capital gains and

the yield on TPECs – effective taxation can be as low as 0.3%



• For US purposes, TPECs are treated as equity under certain

conditions – as long as the yield is accrued but not paid there is

no taxation in the US (no Luxembourg requirement to pay the

yield before exit)

USCo

LuxCo

ow-taxed non-EU

TPECs Dividends

Dividends

Capital gains

L


Utilisation of foreign tax treaty PE losses

Background

The tax rate applicable to income realised by a LuxCo in

Luxembourg, should be determined as if LuxCo’s worldwide

(i.e. domestic & foreign) income were subject to tax in

Luxembourg (Circular on article 134 of Luxembourg Income

Tax Law).

This applies to the extent that foreign income is realised in a

tax treaty country

13

•

Foreign •

tax treaty PE

USCo

LuxCo


Utilisation of foreign tax treaty PE losses (Cont’d)

Example (simplified)

Assumptions

Luxembourg profit/(loss):

Foreign PE profit/(loss):

Step 1

Worldwide profit/(loss):

Tax rate computed thereon: Foreign

tax treaty PE Step 2

Luxembourg income:

Step 3

Luxembourg income:

Applicable tax rate (see step 1):

Luxembourg corporate tax due:

USCo

LuxCo

100 million

(120 million) (20 million)

0% (due to

negative result) 100 million 100 million

0%

-

14

structures : Holding

Foreign tax credit

Benefits

• USCo is in excess of FTC carry forward and incurs an important

annual interest expense. USCo apportions interest expense using

an asset method (Treas. Reg. 1.861 – 9T)

• USCo subscribes to PECs issued by LuxCo and contributes its

foreign subsidiaries to LuxCo (Sect 351)

• Reduction of interest expense to be apportioned to foreign source

and increasing USCo’s FTC limitation

• From US tax point of view, PECs treated as equity, not subject to

US tax until repatriation

• Luxembourg participation exemption on OpCos dividends, capital

gains, liquidation proceeds at the level of LuxCo.



• Terms/conditions of PEC (term of years, fixed interest, etc.) to

confirm hybrid treatment (US: equity / Lux: debt)

15

PECs

Typical

US

USCo

LuxCo

OpCos


Background

• Existing HavenCo will re-domicile to Luxembourg

Benefits

• Access to EU Directives, extensive tax planning

opportunities, absence of CFC rules

• Tax capital for dividend distribution free of Luxembourg

withholding tax

16

HavenCo LuxCo

GroupCos GroupCos

Typical structures : Holding & Financing

Luxembourg holding/financing company (CPECs)

Benefits

• Taxation on a small margin in Luxembourg

• No Luxembourg withholding tax on accrual (or payment) of yield on

CPECs (Convertible Preferred Equity Certificates)

• Due to the hybrid nature of CPECs, USCo can push debt down to the

ForeignSubs to obtain local country interest expense deduction without

incurring any additional US taxable income CPECs A CPECs B

Tax analysis

• CPECs are a hybrid and are treated as debt for Luxembourg tax

purposes – accrual yield treated as tax deductible interest expense

• Taxable margin between 3bp and 25bp

Loans Shares



• For US purposes, CPECs are treated as equity under certain conditions

– as long as the yield is accrued but not paid there is no taxation in the

US

• When financing activities are combined with holding activities in

Luxembourg, there is no effective taxation in most cases as the interest

expenses on the tranche of CPECs relating to the acquisition of shares

(CPECs A) allows to offset the taxable margin left on the back-to-back

financing activity. In this case, recapture should apply except in case of

liquidation (disposal) of ForeignSubs

USCo

LuxCo

ForeignSubs

Typical structures : Financing

Luxembourg back-to-back hybrid

Benefits

• Luxembourg participation exemption on OpCos’ dividends, capital

gains and liquidation proceeds at the level of LuxCo

• From US point of view, PECs treated as equity, not subject to US

tax until repatriation

• Interest income taxes on a margin in Luxembourg

• No Luxembourg withholding tax on dividends (subject to

conditions) paid to USCo



• Terms/conditions of PEC (term of years, fixed interest, etc.) to

confirm hybrid treatment (US: equity / Lux: debt)

18

PECs

Loan

USCo

LuxCo

OpCos


OpCos financing using reverse hybrid entities

Benefits

Interest deduction in OpCos with no corresponding pick up in the US

(deferral) or in Luxembourg

No withholding tax on interest (i) paid by OpCos to LuxCo (tax treaty,

EU Directive) and (ii) from LuxCo to Lux SNC/SCS

Small net margin left in LuxCo on financing activity

No withholding tax on dividends paid to LuxCo (tax treaty, EU

Directive)

Participation exemption on dividends, capital gains, liquidation

proceeds from OpCos

No withholding tax on dividends paid by LuxCo and Lux SNC/SCS

(subject to conditions)

Dividends and interest received by Lux SNC/SCS can be lent through

LuxCo (facility agreement)

Lux SNC/SCS has legal body (checkable)

One single holding and financing structure and cost reduction

No anti-debt creation rule

Points of attention

• Luxembourg tax clearance.

19

•

•

•

•

•

•

Lux SNC/SCS

Loan

LuxCo

USCo

OpCos

• Loan

•

•

•


UK LLP: Same country exception

Summary of Tax Consequences

• UK OpCo deducts interest paid to LuxCo

• UK – Lux tax treaty eliminates UK withholding tax

• Interest paid by UK OpCo qualifies for same country exception

(since LuxCo is disregarded)

• Minimum fully taxable margin left in Luxembourg

• No Luxembourg withholding tax on interest paid to UK LLP (under

Luxembourg domestic law)

Benefits

• Interest deduction in UK; no corresponding UK . Deferral of US

taxes

• Only minimal tax in Luxembourg, which should be creditable



•Can use Scottish Partnership instead of UK LLP

• UK thin capitalization, worldwide debt cap and transfer pricing

rules 20

UK financing using

Equity

UK LLP

Loan Loan

LuxCo

USCo

UK OpCo


Canada financing using Can LP: Same country exception

Summary of Tax Consequences

• Can Opco deducts interest paid to Can LP

• Interest subject to 10% Canadian withholding tax under Canada –

Luxembourg tax treaty

• Interest paid by Can OpCo qualifies for same country exception

• Minimum fully taxable margin left in Luxembourg

Benefits

• Net tax savings in Canada (interest deduction, less 10%

withholding tax); no corresponding US taxes

• Only minimal Luxembourg tax



• Canadian thin cap limitation (2:1)

•Fifth Protocol to US-Canada tax treaty

•Can LP: Permanent establishment

21

PECs

LuxCo

Can LP

Loan

USCo

Can OpCo


Cash & treasury management

Benefits

LuxCo taxed on a margin between (i) its net interest income

and (ii) the yield on TPECs – effective taxation approx. 0.3%

No foreign exchange exposure on short-term loans in

multiple currencies in the context of treasury management

and cash pooling activities

No Luxembourg withholding tax on the accrual (or payment)

of yield on TPECs (Tracking Preferred Equity Certificates)



USCo

LuxCo

•

•

• Intra-group short-term

loans out

TPECs

Intra-group

short-term

loans in

Cash pooling

activities


LuxBranch of a Hungarian company

Benefits

• Financing and holding activities can be located at the level of

the LuxBranch including FX and derivatives

• Small Hungarian tax

• Luxembourg effective tax rate approx. 1.2% – 1.5%


LuxBranch • Luxembourg tax clearance

• Substance

Loans

23

USCo

HungCo

GroupCos


Beneficial ownership test

PECs

0% MRPS

LuxCo2 LuxCo2

IB Loan

OpCo OpCo

US branch

IF Loan or

IB Loan

IB Loan

24

USCo USCo

LuxCo1 LuxCo1

Typical structures : Licensing

Luxembourg IP tax regime

Benefits

• 80% exemption is granted for income and gains deriving from a wide

range of qualifying IP assets (software copyrights, patents, trademarks,

domain names, designs & models) resulting in an effective taxation of

approx. 5.72%

• Connected or third party acquisition, or self-developed

• R&D of IP can be carried out in Luxembourg or abroad (e.g. US) by

means of cost-sharing agreement – also Law of 5 June 2009 on

Research, Development and Innovation providing State-backed

financial incentives for R&D activities carried out in Luxembourg

• No capital or stamp duties due on the injection of cash by USCo to

LuxIPCo for incorporation or future financing of the activities

USCo

LuxIPCo

ForeignSubs

IP Licensing

Royalties


TPEC structure for licensing activities

Benefits

• LuxIPCo taxed on a margin equal to the difference between its net

royalty income and the yield on the TPECs – effective taxation between

approx. 0.5% and 1.5%

Tax analysis

• No Luxembourg withholding tax on accrual (or payment) of yield on the

TPECs



USCo

LuxIPCo

ForeignSubs

TPECs

IP

Licensing Royalties


Migration of IP – Lux/Swiss hybrid

Background

• Migration of TaxHavenCo from TaxHaven to Luxembourg

• Immediately thereafter, incorporation by LuxCo of SwissCo

and transfer of IP thereto against a hybrid instrument

• SwissCo performs licensing activities with the IP it owns

against royalty income

Benefits

• Hybrid instrument should qualify as equity for Luxembourg

corporate tax purposes, and as debt in Switzerland

• Income should qualify for the Luxembourg participation

exemption at LuxCo level.

• Expenses should be deductible at Swiss level

Other considerations

• Safe harbour thin cap rules

• Apply to related party debt

• 30% equity for IP


• Arm’s length interest rate

Hybrid

SwissCo

IP

Licensing

IP

USCo USCo

LuxCo TaxHavenCo

27

Typical structures : Trading

Background

• USCo plans to reorganise part of its business, with the

creation of a Luxembourg company, and the migration of

profit from the US to a Luxembourg company

• Currently, most of the Group’s operations, personnel and

intangible value is in the US. Outside the US, its activities are

mainly limited to a Mexican manufacturing plan

Fact pattern

MexBranch • USCo incorporates LuxCo, and contribute the shares in

MexCo to LuxCo against share capital/share premium

• USCo sells existing equipment to LuxCo at book value

• LuxCo enters into service agreements with MexCo, e.g.

•MexPlant agrees to make available personnel to LuxCo to

work under the control of the latter

•A plant manager, controller... will perform their services

under the supervision, direction and control of LuxCo and

shall be granted authority to represent and act on behalf of

the latter in Mexico

28

Maquiladora structure

Sale of

equipment at

book value

Services

agreements

USCo

LuxCo

MexCo


Luxembourg tax treatment

The sale of the Mexican assets to LuxCo should be made at

book value. However, if the fair market value of the assets

exceeds the book value, the difference should be considered

non-taxable informal capital contribution at the level of LuxCo

As a result of the activities realised by LuxCo in Mexico

through the secondment and services agreements, LuxCo

has a permanent establishment in Mexico within the meaning

of the Luxembourg – Mexico double tax treaty

An arm’s length margin of 8% – 12% of the costs (i.e.

operating charges incurred in connection with the activities of

the head-office, but not current or future interest expenses

accrued on debt attributable to the holding or financing

activities of LuxCo) in connection with the head-office’s

commercial activity should be left at the level of the latter and

fully taxable in Luxembourg, leading to a very low ETR in

Luxembourg.

29

equipment at

book value

Services

agreements

USCo

LuxCo

MexCo

•

MexBranch

•

Maquiladora structure (Cont’d) Sale of

•


Background

LuxCo is incorporated to acquire carbon dioxyde emission

allownces (also called Carbon Credits), for resale on public

markets

LuxCo to be financed 99% with CPECs and 1% with equity

Benefits

CPECs to be considered debt for Luxembourg corporate tax and

net wealth tax purposes.

Yield due under the CPECs to qualify as interest (and in principle

free of Luxembourg withholding tax)

Minimum net taxable margin to be left in Luxembourg, measured

on the total outstanding annual average outstanding principal

amount of CPECs.

Other considerations


30

Carbon Trading

Funds

1% equity

LuxCo

•

99% CPECs

•

Purchase from

third parties CO2 emission

allowances

•

•

Resale

•


Trading structure – Assumption of risks

TPECs

CV

NL BV Risk assumption agreement

TPECs

LuxCo

31

USCo USCo

LuxCo

OpCos OpCos

Typical structures : Trading and Forex

Background

• A notional deduction at LuxBranch level to offset

interest income by LuxCo on its loan portfolio under the

fiscal unity regime

• LuxBranch and LuxCo file a fiscal unity

Benefits

• Net wealth tax computed at LuxBranch and LuxCo

levels

• Arm’s length margin

• Currency gain/losses effectively neutralised

• Withholding tax at ForeignCo level may be reduced

where tax treaty applies

Other consideration


32

LuxBranch / LuxCo

LuxBranch

0% PEC

Foreign

currency loans

ForeignCo

USCo

LuxCo

Contact Details

Luc Alexandre

Senior Manager

Tel: ++352 22 51 51 – 5464

Mobile: ++352 621 87 – 5464

E-Mail: [email protected]

10, rue Antoine Jans

L-1820 LUXEMBOURG

33

mailto:[email protected]



Disclaimer

• This presentation provides for several tax planning ideas that may be implemented via Luxembourg.

• Even though the information given in this presentation reflects the tax treatment as experienced in

implemented structures, the facts and circumstances of certain cases need to be analysed

beforehand.

• As regards the tax treatment in foreign jurisdictions, our description should be understood as purely

indicative. Should a restructuring be envisaged, the foreign tax treatment would have to be analysed

by foreign tax advisors.

• The Luxembourg tax treatment of a structure has to be confirmed by the Luxembourg tax authorities

– a common practice in Luxembourg with respect to important restructurings.

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Luxembourg Holdco More Tax Fraud by Kpmg

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