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Whether your objective is "Location Optimized Commerce on the Internet" (LOCI), residence of your Intellectual Property or just location optimized commerce, the following material is intended as a check list and as a step by step process to achieve your objective through the Span-Hansa Group.
- Testing for Compliance
- Qualifying your Venture
- Obtaining Span-Hansa Group Experience
- Implementation Planning
Before you proceed with these pages, you should have determined that locating your venture in another jurisdiction makes good business sense. To reach that determination you should:
Testing for Compliance
- Complete our Project Review Summary and discuss the eleven elements with us.
- Allow us to guide you on international costs and budgets then integrate these into your business plan to ensure that your stage of development, scale, risk, and costs are consistent with your expectations for an internationally run business.
- Read as much as you can on the elements of international planning including our Web pages on e-commerce , International Business and Tax , Frequently Asked Questions.
- Talk with at least two companies which have successfully operated an international tax structure and then talk with two which have failed or been disappointed.
- Obtain the support of your existing domestic accountants and lawyers as well as any partners, senior staff or shareholders who may be affected.
Having completed those steps and engaged in preliminary discussion with us by email, you should now be able to apply some tests to make the following preliminary assessments:
Qualifying Your Venture
- Can the new business perform the following essential tasks in the new location:
- inviting buyers to consider its goods or services,
- receiving offers to purchase from those buyers,
- undertake contract negotiations,
- formally accepting contracts,
- transferring title to the buyer.
These tasks favor businesses which are involved in e-commerce because so many of these events take place within a computer or Web server. Hence our paradigm of "Location Optimized Commerce on the Internet" (LOCI). Other non-Internet businesses may also qualify.
- Will the essential ingredients of "mind, management and control" and "substance" be provided by residents of the new location and will their offices be "suitably equipped".
- Are there rules in your current residence that would cause income to be attributed back to your current location regardless.
- Whether your beneficial or direct ownership interest in the new business adheres to the strict rules and reporting requirements which most countries apply to foreign controlled affiliates and property.
- Whether transfer pricing rules, treaties, or other regulations such as withholding tax, minimum capitalization, exchange control, etc. in the parent/owners jurisdiction or the new location, prevent the new business from achieving the advantages sought.
- Whether the business case and tax advantages support the cost and operational burdens of a new foreign location.
Let us assume you have now qualified your venture and want to proceed. The following are some of the alternative structures that may be available to you depending upon the circumstances:
How can the Span-Hansa Group be a part of your plans? To determine this we must each perform extensive due diligence on the venture, on each other, and on any other parties involved. Please see our Participation Criteria
- Establish a new business in the LOCI location with direct shareholdings elsewhere.
- Own the LOCI location company as a subsidiary of your current business.
- License a new LOCI location company to do your business in international territories.
- Sell the asset/business to the new LOCI location company.
- Consider the formation of a public company in the LOCI location.
Obtaining Span-Hansa Group Experience
When we are all in accord, your commitment to a budget and a retainer is required. This payment can be submitted by credit card or wire transfer after completing the Questionnaire and payment form below.
Now that we are all committed to the success of this venture, and as is the case with most commerce; "time is of the essence".
Some of the information required to finalize the structures will include: (this is especially important if the business has already begun operations in another jurisdiction)
Typical follow-on steps would then include:
- Current valuation of the asset/business to be transferred or licensed to the new location.
- Who currently owns what; percentage interests, specific values, and documentation.
- What transactions (e.g. sale of product) have already occurred, amounts and detail.
- Any other relevant contractual relationships e.g. licenses, distributorships, developers.
- Cash flows, order dates, proceeds, commissions, interest payments, fees, other.
- Analysis of what is to be marketed (will withholding tax apply, i.e. is it a license or sale of a product).
- Previous Tax Filings for the existing business or the parent.
- Financial statements or projections.
If you feel that you are ready to begin, we would be pleased to hear from you for more detailed planning information and due diligence. Please email us.
- Formation of the LOCI company; choosing bankers, auditors, directors, officers, brokers.
- Capitalizing the LOCI company and establish shareholdings.
- Any base asset, idea, intellectual property already in existence must be transferred under agreement at fair market value. If this value equals the actual cost, no capital gain on exit would be realized.
- The LOCI company would enter into contracts with the parent/affiliate for services, development, etc., for example a Barbadian subsidiary might enter into a contract, and pay, using its capital or revenues, the Canadian parent to develop or improve the subsidiary's products. The resulting intellectual property would therefore be owned by the LOCI company and be able to be exploited from that favorable location.
- Regular payments and reporting of progress on the intellectual property development would have to take place between the companies.
- "Mind and Management" and "substance" would have to be demonstrated in the LOCI entity.
- "Active business" must be conducted by the LOCI company involving such elements of any transaction as "offer and acceptance" occurring in the LOCI jurisdiction.
- Treaty rules, numbers of employees, and substance issues need to be adhered to and audited regularly by legal and accounting tax counsel to ensure conformity and to recognize any changes in the law over time.
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