How can companies reasonably avoid taxes when investing overseas?

Overseas investment enterprises can take advantage of the differences in tax laws of various countries or the methods allowed by them, and use various open and legal means to conduct financial arrangements and tax planning, thereby reducing or eliminating tax burdens and increasing overseas investment benefits. Strategy 1: Regional Tax Avoidance Law When choosing a location for overseas investment, a company must comprehensively analyze many factors such as the investment environment, among which tax considerations are an important aspect. First, we must consider whether the host country has preferential tax policies for foreign investment. Many countries, especially developing countries, provide low-tax or tax-free preferential policies for foreign investment. The tax incentives are usually based on income tax incentives. For example: South Korea, Chile, Malaysia, Singapore, Thailand, India and other countries have regulations in this regard. Second, we must consider whether the host country has any restrictions on the remittance of profits of foreign-invested enterprises. Some developing countries, on the one hand, use low income taxes or even tax exemptions to attract foreign investment, and at the same time impose restrictions on the remittance of profits by foreign-invested enterprises, hoping to promote reinvestment by foreign investors. Profit remittances include dividends, interest, license fees and repatriated profits of overseas enterprises. Countries around the world have different standards for profit remittances, but developing countries are generally more strict than developed countries. There are usually two types of restrictive measures: one is to use administrative policies such as foreign exchange controls to restrict; the other is to use tax policies such as withholding tax rates to restrict. Withholding tax rates vary widely across countries around the world, and companies cannot ignore them when choosing where to invest. In addition, since bilateral tax agreements can greatly reduce the withholding taxes levied by contracting countries on each other, it is also necessary to pay attention to whether the host country and the home country have signed relevant tax agreements. Enterprises can also use the method of changing the place of registration or the location of the actual control and management agency of the enterprise to carry out tax avoidance planning. If the host country is based on the place of registration and the country is a high-tax country, then the enterprise can register in a low-tax country; similarly, if the standard is based on the location of the actual control and management agency, then the overseas investment enterprise You can use the method of transferring actual control and management agencies to low-tax countries. Companies can also use the method of establishing a permanent establishment to avoid taxes. A permanent establishment usually refers to the workplace where a home country enterprise conducts business activities abroad. It is recognized as a non-resident company by many countries and is not subject to taxation. In the actual activities of permanent establishments, bilateral tax treaties signed between many countries provide for a large number of tax-exempt activities. For example: goods warehousing, goods purchase, inventory management, advertising, information provision or other auxiliary business activities, etc. Overseas investment enterprises can achieve legal tax avoidance by establishing a permanent establishment that can conduct tax-free activities in a country that has signed a bilateral tax agreement with that country. Strategy 2: Organizational Form Tax Avoidance Law After a company selects a location for overseas investment, it must also determine the appropriate corporate organizational form. Because choosing the appropriate corporate organizational form can also achieve the purpose of reducing tax payments. There are two main organizational forms for overseas investment enterprises: one is to establish subsidiaries; the other is to establish branches. A subsidiary is an independent legal person registered in accordance with the relevant laws and regulations of the host country, while a branch is legally affiliated with the head office. Analysis from a tax perspective: First, we must consider whether the overseas investment enterprise can make profits in the first few years. Generally speaking, most long-term investment projects will suffer losses in the first few years. Since most of the branch's losses can be directly offset against the profits of the head office, thus reducing the company's overall tax burden, it is naturally better to invest overseas in the form of a branch. . In fact, many multinational companies first operate as branches until the branches start to make profits, and then try to turn them into subsidiaries. Second, consider whether there is a possibility of double taxation between the home country and the host country if you invest overseas in the form of a subsidiary. Generally speaking, the income tax paid by the branch to the host country government can be used to offset the tax of the head office. Third, we must consider the withholding tax on the remittance of dividends and after-tax profits. Most countries levy withholding tax on the repatriation of dividends and after-tax profits from subsidiaries, while no withholding tax is usually levied on the repatriation of dividends and after-tax profits from branches. Of course, adopting the organizational form of a subsidiary also has several advantages: (1) The subsidiary has legal resident status and can enjoy all the benefits provided by the tax treaties signed by the host country and other countries. For example: withholding tax can be reduced or reduced. Since the branch does not have resident status in the host country, it cannot enjoy it. (2) Subsidiaries generally can enjoy tax deferral benefits. Many developed countries stipulate that until the profits of overseas investment enterprises are repatriated in the form of dividends, the parent company does not need to pay income tax on this income. For example, the U.S. Corporate Income Tax Act has this provision. On the contrary, the income of branches will be included in the company's taxable income regardless of whether it is repatriated. Therefore, both subsidiary and branch forms have their own advantages and disadvantages, and overseas investment enterprises should choose the best one based on the specific circumstances. Strategy Three: Tax Haven Tax Avoidance Laws Countries and regions that exempt income and assets from taxes or tax them at a lower rate or implement a large number of preferential tax policies are called international tax havens (also known as international tax havens). International tax havens usually have four distinctive characteristics: first, they impose lower income taxes or exemptions on foreign investors, and impose lower withholding taxes on dividends paid by multinational company subsidiaries to the parent company; second, they have a good financial environment. , such as: efficient communication network, well-trained professionals, etc.; third, political stability; fourth, currency stability and freedom of exchange with foreign currencies.

These characteristics provide the basis and conditions for overseas investment enterprises to carry out tax avoidance planning in tax havens. There are roughly three types of international tax havens to choose from: First, "pure international tax havens", that is, countries or regions that do not levy personal income tax or corporate income tax and general property taxes. For example: Bahamas, Cayman Islands, Bermuda, Nauru, New Caledonia, Vanuatu, Turks and Caicos Islands, Andorra and other countries or regions. Foreign investors only need to register with the relevant local authorities and pay a certain registration fee without having to pay other taxes. The second is "semi-pure international tax havens", that is, countries or regions that completely give up their resident tax jurisdiction and only implement regional tax jurisdiction. In such countries or regions, taxes are only levied on income or property that originates or exists locally, but not on income and property that originates or exists abroad. For example: Hong Kong, Malaysia, Panama, Argentina, Costa Rica, Liberia and other countries or regions. The third is "special international tax havens", that is, countries or regions that formulate tax laws and implement taxation in accordance with international practices, but provide special preferential tax rates to foreign investors. For example: Canada, Greece, Ireland, Luxembourg, the Netherlands, the United Kingdom, the Philippines, Barbados and other countries or regions. There are several basic techniques for using international tax havens for tax avoidance planning: (1) Open overseas enterprises in "semi-pure international tax havens" or "special international tax havens" and engage in normal production and business activities, thereby enjoying the benefits of income and assets and other tax breaks. (2) Fictitious tax avoidance institutions. A company can set up a subsidiary in a tax haven, and then sell the goods of the home country company to another company, creating the illusion that the goods are sold through the tax haven subsidiary, thereby transferring the income of the home country company to the books of the tax haven subsidiary. . Subsidiaries established in tax havens are not actually engaged in production and business activities, but are virtual institutions that specialize in tax avoidance activities. Therefore, they are also called listed companies, paper companies, document companies or base companies. (3) Fictitious tax avoidance trust assets. That is, an individual shareholding trust company is established in a tax haven, and then its property is falsely regarded as the trust property of the company in the tax haven, because the tax haven exempts and levies property taxes. Strategy 4: Transfer price tax avoidance law The internal price used when goods, services or technology are traded between a home country enterprise and its overseas subsidiaries, or between overseas subsidiaries and overseas subsidiaries, is called transfer price. The establishment of transfer prices is based on the fundamental goal of realizing the company's global strategy and pursuing global profit maximization. Transfer prices mainly include two aspects: first, the transfer price of tangible products, such as: the price of equipment, parts and raw materials provided to each other within the company; second, the transfer price of intangible products, such as: overseas subsidiaries pay to home country enterprises or Prices of other subsidiaries include technology usage fees, loan interest, trademark usage fees, commission fees, management fees and consulting service fees. Income taxes can be reduced by utilizing transfer prices. Since overseas subsidiaries are often located in different countries and regions, these countries and regions have different income tax rates. Companies can take advantage of this difference to transfer profits from high-tax countries to low-tax countries, thereby reducing the company's tax payments and tariffs. . There are two specific strategies to choose from when planning to use transfer prices to avoid tax: One strategy is to ship goods at a reduced price to reduce tariffs when trading goods between a home country enterprise and an overseas subsidiary or between an overseas subsidiary and an overseas subsidiary. the base. For example: the normal price of a certain commodity is US$1,000, and an 80% import tax is required in country A. If a multinational company conducts internal transactions at a half price of US$500, the import tax can be reduced from US$800 to US$400, thereby reducing the amount of import tax. Pay 50% import duty. Another strategy is to use regional customs unions or relevant agreements to reduce tariffs by stipulating different import tariff rates for different commodities. In order to protect the internal market and promote the circulation of goods within the region, some regional trading groups have formulated preferential tariff policies for internal products. For example, the European Union stipulates that if the goods are produced outside the trade area, or the price content of the goods produced within the trade area is less than 50%, then tariffs must be paid when shipped from one member country to another. However, if more than 50% of the value of the goods is added in the trade area, no tariffs will be paid when transported and sold among the member countries of the trade area. Overseas investment enterprises can adopt corresponding methods to avoid taxes in accordance with this provision. We will focus on enjoying the relevant tax and foreign exchange management policies of bonded zones and export processing zones. The main tax policies are: foreign goods entering the port area are bonded, and goods leaving the port area for domestic sales go through customs declaration procedures in accordance with the relevant regulations on the import of goods, and are levied according to the actual status of the goods; domestic goods entering the port area are regarded as exports, and tax refunds are implemented; enterprises in the port area No value-added tax or consumption tax is levied on goods transactions between the two countries. On the basis of the bonded zone, the bonded port has made a breakthrough in the export tax rebate policy. On the basis of the "entry tax refund" in the bonded logistics park and the export processing zone, the bonded port area has further expanded to "entry tax refund". The scope of tax refund is wider, benefiting enterprises More; There has been a breakthrough in the tax reduction and exemption policy. On the basis of tax refunds for enterprises in bonded zones, bonded logistics parks and export processing zones, it has also been extended to port construction, building materials, production equipment, office supplies, etc. used in production. Enjoy tax exemption policies.