Le magazine du trésorier - n°73 - 1er trimestre 2011 - (Page 22)

FORUM OF ADVERTISERS Luxembourg – an attractive location for multinational cash-pooling For many multinational companies or groups (MNCs), multinational cash-pooling has become a core component of their global cash management strategy. The key drivers which make multinational cashpooling interesting for MNC’s treasury functions are in most instances: Improved, real-time visibility on the MNC’s global cash position enabling an enhanced group wide cash forecasting Reduction of external debt through a more efficient (re)allocation of cash available with the MNC Obtain an improved credit rating through a centralized net cash position Get access to better placement conditions for excess cash balances. G G G G of tax draw-backs depends to a large extent on the design of the cash-pooling solution and the locations where the cash-pool leader and the cash-pool members are established. SIMPLIFIED EXAMPLE OF A MULTINATIONAL CASH-POOL The following examples provide an overview, why Luxembourg may constitute an attractive location to establish a multinational cash-pooling. ments made by pool-members established within the EU may be exempt from WHT based on the EU interest and royalty directive. In addition, Luxembourg has an extensive double tax treaty network providing at least for a reduced WHT on interest payments to aLuxembourg company. Finally, interest paid out of Luxembourg, for instance by the Luxembourg poolleader to the pool-members should be exempt from WHT, based on Luxembourg domestic rules. WITHHOLDING TAXES ON INTEREST PAYMENTS Interest expenses paid in the frame of a cash-pool may be subject to withholding tax (WHT), ranging depending on the country of source from 5% to 35% of the interest paid. If WHT is applied, this generally leads to an immediate cash outflow. If WHT is, in addition, neither recoverable nor creditable, it will constitute a final cost and reduce the income earned by the recipient. This would negatively impact on the overall efficiency of the cash-pool. By establishing the pool-leader in Luxembourg, interest pay- LIMITED DEDUCTIBILITY OF INTEREST EXPENSES Another inefficiency may arise within a cash-pooling if the deductibility of interest expenses paid by the poolleader to pool-members, or vice versa, were limited for income tax purposes, whereas the corresponding income realized by the pool-members (or the pool-leader) would be taxable for the full amount. Even though in most cases, taxes are not the original driver to implement a multinational cash-pooling, they may considerably impact on its overall efficiency. Thus, the overall efficiency of a multinational cash-pooling is notably impacted by tax drawbacks such as withholding taxes on interest payments, limited deductibility of interest expenses, transfer pricing requirements, but also antiavoidance rules and controlled foreign company (CFC) legislation restricting tax planning opportunities, as well as stamp duties and registration taxes.The actual impact 22

Table des matières de la publication Le magazine du trésorier - n°73 - 1er trimestre 2011

Surcouv
Couverture
Sommaire
EDITORIAL - Patching of IFRS 9, reason to worry?
FINANCIAL HIGHLIGHTS
INTERVIEW - Patrick Wallerand,
FOCUS
FORUM OF ADVERTISERS
CORPORATE FINANCE - 15 minutes with QlikTech
TREASURERS' ASSOCIATIONS
NEWS

Le magazine du trésorier - n°73 - 1er trimestre 2011