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Copy of Fiscalidade Internacional 2014
A withholding tax, also called a retention tax, is a government requirement for the payer of an item of income to withhold or deduct tax from the payment, and pay that tax to the government.
Taxes withheld may be eligible for a foreign tax credit in the payee's home country, following the International Tax Treaties.
As an example this rule is applied in Brazil on the import of services and payment of interests.
Withholding tax i$$ue
Final Destination
For small entities, this extra cost has a big impact on the results.
$ 2 mill
This is the reason we would like to discuss this problem and suggest how to fix it....
But in some cases, the companies dont accept to receive the net payment, and there are no good explanations for that....
When it happens, the payer company has to gross up the amount to be paid, what increases the tax to be paid...
This should be a normal transaction for also for the intercompany services...
Set clear rules about it on the ICP policy (in line with the tax treaties).
One entity can have an “negative” impact on the cash inflow but the group will save money.
Set KPIs on country or group level to measure the effectiveness of this change in the policy.
Easy way to save money on group level;
Measurable through the KPIs;
Rules already defined on the tax treaties;
Just need to enforce the rules on entities level;