Motives of Establishing of New Onshore and Offshore Companies by the Slovak Enterprises in 2014

Abstract

Motives of Establishing of New Onshore and Off shore Companies by the Slovak Enterprises in 2014We contribute to the rare evidence of driving motives of establishing new onshore and off shore companies by analysing the situation in the Slovak Republic in 2014. We analyse fi nancial and ownership data for the Slovak enterprises already included in onshore and off shore business, providing data by corporate service providers on the driving motives and their combination for the Slovak customers in 2014 and the available external data assessing the quality of the Slovak business environment. We present the empirical evidence that the motive of tax benefi ts is ranked as the most important, followed by the anonymity of the UBO, fl exible arrangement of ownership relations, asset protection, asset management and trusteeship and special cases. In the second part of our research we provide empirical evidence on signifi cant areas of the business environment aff ecting the number of newly established onshore and off shore companies by the Slovak enterprises between 2005 and 2014. The indicators assessing the quality of the Slovak business environment are divided into two groups -paying taxes plus doing business and the quality of the legal system in Slovakia. Our research shows that from the fi rst group is insignifi cant only the indicator of time to comply with taxes. On the other side, the perception of corruption and the functionality of the state institutions are evaluated as signifi cant from the second group. Medzi najčastejšie motívy využívania daňových rajov patria daňové úspory. Kategó-ria daní (medzinárodné daňové plánovanie a medzinárodná daňová optimalizácia) je skúmaná z viacerých uhlov. Podľa niektorých autorov (napr. Graham, Tucker, 2006; Dharmapala, 2008;Minnick, Noga, 2010)

International Corporate Structuring of Slovak Companies Using Tax Havens

“…While almost all businesses can secure the anonymity of the ultimate beneficial owner (UBO) regardless of the NACE sector, tax planning and tax optimization in the area of corporate income tax (corporate income tax of legal entities) is technically impossible for some business areas, for example for domestic wholesale and retail, rental property and related activities (e.g. cleaning and guard service), catering, driving schools, the vast majority of handicraft activities and so on (Krištofík et al, 2017). In the following section, we analyse businesses that moved their headquarters to another jurisdiction (creation of an ownership link to a tax haven).…”

“…in the UK, which is often used in tax planning through an extensive network of double taxation treaties (with more than 130 signed double tax treaties). According to one research (Krištofík et al, 2017), the direct equity linkage (ownership link) is employed by approximately 20-30% of Slovak enterprises which operate their business in selected tax havens. As a result, around 14,500 -24,000 Slovak businesses were utilizing tax havens by the end of 2017.…”

“…While these internal factors could be considered quantifiable or even in some cases almost immutable, external factors may change, a factor which is crucial to explain all the reasons for relocating a company's registered offices (Brouwer et al, 2002). Besides all of these factors, a number of other crucial motives for the decision to move the company to another jurisdiction can come onto play, as noted by Krištofík et al (2017) in research based on structured interviews with business executives providing corporate services in the field of international tax planning and the establishment of corporate structures. These motives consist mainly of the anonymity of the ultimate beneficial owner (UBO), the flexible set up of ownership relationships, tax incentives, asset management and individual associated factors (business regulation, central decision-making in multinational companies, etc.)…”

Fiscal Effect of VAT Control Statement - Case Study of the Czech Republic

“…Value added tax can be regarded as a tax acting equally towards all the parties, or more precisely, it is a competition neutral tax in the market environment (Střílková and Široký, 2015). Kristofik et al (2017) mention both the advantages and disadvantages resulting from the value added tax. They state its neutrality, applicability in the context of intracommunity payments, transparency, benefit for the state budget (the VAT collection in the Czech Republic has represented approximately half of the total collection of all taxes in the long run) and its resistance to tax evasion as its positives.…”