It appears that effective and consistent financing of the operations of the research and development Cross-border or in the interest of the purchaser. The application of tax contracts in this area can lead to significant savings and should always be taken into account. Indeed, tax treaties can be considered as a leg in a three-legged stool that supports an informed corporate tax structure, the other stools being applicable national codes (such as IRS rules) and national tax-related court decisions. In this example, tax treaties are a unique element, as the “pillar of the tax treaty” is the only one in which several countries participate. It should be noted, however, that tax treaties generally contain provisions that limit benefits that are often overlooked. As a general rule, tax treaties only deal with taxation at the federal level. It is always important to keep in mind the tax impact of each transaction, as it can be very different from the federal processing, particularly with respect to cross-border transactions. This contribution deals with a particular situation – that of a company that benefits from a tax treaty for the financing of a cross-border acquisition. This may seem close, but it is an important issue for many multinational organizations. Cross-border acquisitions remain a very popular way to achieve business growth.
2019 was the fourth-highest year in volume of ATMs, with a value of $3.8 trillion worth of orders announced worldwide, despite the economic uncertainties caused by Brexit and the trade war between the United States and China. Tax agreements are a critical part of the global economy. More than 3,000 bilateral tax treaties are in force, most of which are based on models of the Organization for Economic Co-operation and Development and the United Nations. These are essentially agreements between two countries that allow individuals and businesses to avoid double taxation of income. To illustrate how, in some situations, a tax treaty can help a multinational organization reduce the cost of financing a cross-border acquisition – and highlight certain contractual restrictions – let`s look at a common scenario. In addition to social security benefits, virtually all workers are covered by a conventional occupational pension scheme. The four main occupational pension schemes are: ITP (private sector employee pension scheme), SAF/LO (private sector employee pension scheme), PA-03 (public sector workers` pension scheme) and KAP-KL (municipal sector workers` pension scheme). Contributions to occupational pension plans are paid by employers. However, a small number of workers, most often small business owners and family members, are not covered by collective agreements. These employers often organize individual occupational pension plans to which they levy contributions.
These contributions are treated for tax purposes in the same way as conventional occupational pension plans, provided they meet the requirements for pension plans that are subject to tax, which is generally the case. It is also possible that employers in the contract sector may organize this type of individual occupational pension schemes alongside conventional occupational pension plans.