Restructuring financing vehicle

Unwinding back to back loans

The Issue

We were approached by a foreign advisor in relation to a Cypriot financing structure created a number of years ago.

The structure included a BVI entity, Cypriot holding and financing companies and underlying foreign subsidiaries.

Effectively, the structure was created to own the foreign subsidiaries and finance their operations. The financing was historically structured in the form of back to back loans routed via the Cyprus companies. Although this was a working structure in the past, today it creates various tax risks as foreign tax authorities can deny the reduced treaty withholding tax rates by arguing that the financing company is merely a conduit.

The Solution

Having analyzed the options available, we advised the client to take advantage of the Cypriot NID provisions. We carried out a restructuring step plan and recalculated the range of the annual tax liability that could incur via the NID provisions. Once this was accepted by the client, we carried out the restructuring plan and assisted the Cypriot legal counsel to carry out the necessary steps.

Outcome

The restructuring resulted in a tax efficient structure while at the same time minimizing beneficial ownership and other tax risks.

Contact Us

Should your circumstances resemble the above, we are at your disposal to assist you and discuss your own case.

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