setting up in RoI

by **Jantra** on Tue Oct 11, 2011 9:25 am

If a UK Limco (distributor) has 90% of its turnover with the EU, could it set up a subsidiary in the RoI with all EU orders being routed through the subsidiary? As an example the UK limco could place the orders via a .ie domain website hosted on a server in Ireland which would also be the location of the annual general meeting (and registered office). The questions are as follows:-

Is there anything stopping the transfer between parent and subsidiary being at cost?
Would HMRC view the set up as simply a method of taking profit to a lower tax jurisdiction and if so, what safeguards should the subsidiary put in place to show it is not just de jeure but de facto.
Are there dividend credits associated with dividends from foreign companies back to the UK, whether to limco or natural person?
Would a better structure be for the owner of UK Limco to be owner of subsidiary so the two companies are actually associated rather than parent/subsidiary?

by **Generix** on Tue Oct 11, 2011 11:59 am

Jantra wrote:If a UK Limco (distributor) has 90% of its turnover with the EU, could it set up a subsidiary in the RoI with all EU orders being routed through the subsidiary? As an example the UK limco could place the orders via a .ie domain website hosted on a server in Ireland which would also be the location of the annual general meeting (and registered office). The questions are as follows:-

Is there anything stopping the transfer between parent and subsidiary being at cost?
Would HMRC view the set up as simply a method of taking profit to a lower tax jurisdiction and if so, what safeguards should the subsidiary put in place to show it is not just de jeure but de facto.
Are there dividend credits associated with dividends from foreign companies back to the UK, whether to limco or natural person?
Would a better structure be for the owner of UK Limco to be owner of subsidiary so the two companies are actually associated rather than parent/subsidiary?

What is it selling, goods?

I would assume normal TP rules prevent the transfer between parent and subsidiary being at cost?

by **Jantra** on Tue Oct 11, 2011 12:05 pm

Goods are being sold - would the goods need to actually be held in RoI or could they be shipped from the UK to the EU?

by **Jantra** on Tue Oct 11, 2011 12:12 pm

am I correct in saying that TP rules mean that any transfer has to take place at market value as if trading with a third (unconnected) party?

how about setting up a subsidiary to purchase and sell the goods (and mananges the process from RoI) but the shipping is via the UK warehouse, where the UK limco charges the subsidiary for QA, storage etc?

would such a scheme be workable?

by **Generix** on Tue Oct 11, 2011 4:25 pm

Jantra wrote:am I correct in saying that TP rules mean that any transfer has to take place at market value as if trading with a third (unconnected) party?

how about setting up a subsidiary to purchase and sell the goods (and mananges the process from RoI) but the shipping is via the UK warehouse, where the UK limco charges the subsidiary for QA, storage etc?

would such a scheme be workable?

I'm sure it would be workable commercially, whether or not it would achieve the tax savings you seek is another matter. I am not well versed in TP rules, and am basically only familiar with them as I work in 'tax' - albeit indirect tax, therefore most often I am looking at the VAT and or Duty implications of various transfer pricing scenarios.

From a VAT point of view if ROI co is selling goods from UK then it is likely to need a UK VAT no, although this shouldn't impact your planning.

I'm sure one of the direct tax gurus will comment further.

by **Jantra** on Tue Oct 11, 2011 4:28 pm

Generix wrote:From a VAT point of view if ROI co is selling goods from UK then it is likely to need a UK VAT no, although this shouldn't impact your planning.

even if the goods are purchased and sold in the RoI and simply shipped from the UK

by **Generix** on Wed Oct 12, 2011 1:02 pm

Jantra wrote:
Generix wrote:From a VAT point of view if ROI co is selling goods from UK then it is likely to need a UK VAT no, although this shouldn't impact your planning.

even if the goods are purchased and sold in the RoI and simply shipped from the UK

I don't understand. Purchased and sold in the ROI but shipped from the UK?

How are you buying them and how do they move?

How are you selling them and how do they move?

e.g. I am buying them in the UK and they are being shipped by the supplier to me in ROI. I am selling them to local customers in ROI after I receive them in ROI from my supplier.

by **Jantra** on Wed Oct 12, 2011 3:42 pm

RoI company purchases the goods and holds them in storage in a warehouse, then sells the good and transports to client from the warehouse. the warehouse/distribution centre is in the UK.

the transaction has taken place in the RoI, any UK VAT is payable to HMRC, that is not the issue. The planning is about affecting the CT rate.

the use of the UK warehouse is for QA and so forth. RoI limco would pay the UK limco a fee for providing QA and storage services.

by **Generix** on Wed Oct 12, 2011 4:10 pm

Jantra wrote:RoI company purchases the goods and holds them in storage in a warehouse, then sells the good and transports to client from the warehouse. the warehouse/distribution centre is in the UK.

the transaction has taken place in the RoI, any UK VAT is payable to HMRC, that is not the issue. The planning is about affecting the CT rate.

the use of the UK warehouse is for QA and so forth. RoI limco would pay the UK limco a fee for providing QA and storage services.

Not well versed in direct tax to comment on the direct tax planning side of this.

Obviously the fee between Roico and UKco would have to be evidenced to be at arms length for TP, that is about as far as I can go.