Exchange of Shares Cross-Border Outside EU
We provided full tax and legal structuring advise for our client in an exchange of shares transaction where a corporate entity incorporated and fully operating outside EU established a limited liability company in its jurisdiction to acquire 100% of the shares in a Finnish limited liability company from its shareholders, all none resident in the EU, and where the established acquiring entity would issue shares to said shareholders as consideration against shares in the Finnish entity, whereafter the shareholders would hold 100% of the newly established entity which would in turn hold 100% of shares in the Finnish target entity.
Exchange of Shares Cross-Border Outside EU
We provided full tax and legal structuring advise for our client in an exchange of shares transaction where a corporate entity incorporated and fully operating outside EU established a limited liability company in its jurisdiction to acquire 100% of the shares in a Finnish limited liability company from its shareholders, all none resident in the EU, and where the established acquiring entity would issue shares to said shareholders as consideration against shares in the Finnish entity, whereafter the shareholders would hold 100% of the newly established entity which would in turn hold 100% of shares in the Finnish target entity.
Exchange of Shares Cross-Border Outside EU
We provided full tax and legal structuring advise for our client in an exchange of shares transaction where a corporate entity incorporated and fully operating outside EU established a limited liability company in its jurisdiction to acquire 100% of the shares in a Finnish limited liability company from its shareholders, all none resident in the EU, and where the established acquiring entity would issue shares to said shareholders as consideration against shares in the Finnish entity, whereafter the shareholders would hold 100% of the newly established entity which would in turn hold 100% of shares in the Finnish target entity.
Generally, transactions similar to the exchange of shares carried out are in practice widely used as feasible options for various re-structuring purposes, and they are specifically legislated in the Finnish tax legislation as income tax neutral transactions when completed in accordance with law. Here the specific features to consider in international tax law setting were the facts that neither the newly established acquiring entity nor the shareholders involved were tax resident in the EU. So, there were various non-EU tax issues to be covered in connection with the transaction as well prior to execution.
Generally, transactions similar to the exchange of shares carried out are in practice widely used as feasible options for various re-structuring purposes, and they are specifically legislated in the Finnish tax legislation as income tax neutral transactions when completed in accordance with law. Here the specific features to consider in international tax law setting were the facts that neither the newly established acquiring entity nor the shareholders involved were tax resident in the EU. So, there were various non-EU tax issues to be covered in connection with the transaction as well prior to execution.
In terms of the Finnish target entity, since as a consequence of the exchange of shares the ownership of the company would change 100%, its right to carry forward tax losses in Finland was forfeited, and accordingly an exemption order was to be applied for from the Finnish Tax Administration for the right to utilize the losses despite the change in the ownership.
We had to consider also the fact that acquired shares in the Finnish target would constitute assets in the balance sheet of non-EU acquiring entity and therefore it was to be considered whether the shares acquired would be booked in the acquiring entity’s accounting either at the value equaling the value of the shares in the Finnish entity when held by the shareholders prior to the exchange of shares, at the value equaling FMV (= step-up in value) as specifically assessed under the local laws in transactions like the one at hand, or at some other value as applicable under the local laws.
We had to further consider the taxation of the shareholders whether the exchange of shares was taxable in the country of tax residence of any given shareholder. As none of the shareholders were tax resident in Finland/the EU, there were no tax consequences for shareholders in Finland based on the transaction.
Finally, we reviewed the scope of DAC 6 Directive with regard to the exchange of shares carried out, and came to a conclusion whereby the hallmarks listed therein would not apply with regard to the exchange of shares transaction discussed.
Generally, transactions similar to the exchange of shares carried out are in practice widely used as feasible options for various re-structuring purposes, and they are specifically legislated in the Finnish tax legislation as income tax neutral transactions when completed in accordance with law. Here the specific features to consider in international tax law setting were the facts that neither the newly established acquiring entity nor the shareholders involved were tax resident in the EU. So, there were various non-EU tax issues to be covered in connection with the transaction as well prior to execution.
Generally, transactions similar to the exchange of shares carried out are in practice widely used as feasible options for various re-structuring purposes, and they are specifically legislated in the Finnish tax legislation as income tax neutral transactions when completed in accordance with law. Here the specific features to consider in international tax law setting were the facts that neither the newly established acquiring entity nor the shareholders involved were tax resident in the EU. So, there were various non-EU tax issues to be covered in connection with the transaction as well prior to execution.
In terms of the Finnish target entity, since as a consequence of the exchange of shares the ownership of the company would change 100%, its right to carry forward tax losses in Finland was forfeited, and accordingly an exemption order was to be applied for from the Finnish Tax Administration for the right to utilize the losses despite the change in the ownership.
We had to consider also the fact that acquired shares in the Finnish target would constitute assets in the balance sheet of non-EU acquiring entity and therefore it was to be considered whether the shares acquired would be booked in the acquiring entity’s accounting either at the value equaling the value of the shares in the Finnish entity when held by the shareholders prior to the exchange of shares, at the value equaling FMV (= step-up in value) as specifically assessed under the local laws in transactions like the one at hand, or at some other value as applicable under the local laws.
We had to further consider the taxation of the shareholders whether the exchange of shares was taxable in the country of tax residence of any given shareholder. As none of the shareholders were tax resident in Finland/the EU, there were no tax consequences for shareholders in Finland based on the transaction.
Finally, we reviewed the scope of DAC 6 Directive with regard to the exchange of shares carried out, and came to a conclusion whereby the hallmarks listed therein would not apply with regard to the exchange of shares transaction discussed.
Generally, transactions similar to the exchange of shares carried out are in practice widely used as feasible options for various re-structuring purposes, and they are specifically legislated in the Finnish tax legislation as income tax neutral transactions when completed in accordance with law. Here the specific features to consider in international tax law setting were the facts that neither the newly established acquiring entity nor the shareholders involved were tax resident in the EU. So, there were various non-EU tax issues to be covered in connection with the transaction as well prior to execution.
Generally, transactions similar to the exchange of shares carried out are in practice widely used as feasible options for various re-structuring purposes, and they are specifically legislated in the Finnish tax legislation as income tax neutral transactions when completed in accordance with law. Here the specific features to consider in international tax law setting were the facts that neither the newly established acquiring entity nor the shareholders involved were tax resident in the EU. So, there were various non-EU tax issues to be covered in connection with the transaction as well prior to execution.
In terms of the Finnish target entity, since as a consequence of the exchange of shares the ownership of the company would change 100%, its right to carry forward tax losses in Finland was forfeited, and accordingly an exemption order was to be applied for from the Finnish Tax Administration for the right to utilize the losses despite the change in the ownership.
We had to consider also the fact that acquired shares in the Finnish target would constitute assets in the balance sheet of non-EU acquiring entity and therefore it was to be considered whether the shares acquired would be booked in the acquiring entity’s accounting either at the value equaling the value of the shares in the Finnish entity when held by the shareholders prior to the exchange of shares, at the value equaling FMV (= step-up in value) as specifically assessed under the local laws in transactions like the one at hand, or at some other value as applicable under the local laws.
We had to further consider the taxation of the shareholders whether the exchange of shares was taxable in the country of tax residence of any given shareholder. As none of the shareholders were tax resident in Finland/the EU, there were no tax consequences for shareholders in Finland based on the transaction.
Finally, we reviewed the scope of DAC 6 Directive with regard to the exchange of shares carried out, and came to a conclusion whereby the hallmarks listed therein would not apply with regard to the exchange of shares transaction discussed.
Bernhardinkatu 5 A 5
00130 Helsinki, Finland
+358 40 523 2020
office@weckstromattorneys.com
© 2024 Weckström Attorneys Ltd.
Bernhardinkatu 5 A 5
00130 Helsinki, Finland
+358 40 523 2020
office@weckstromattorneys.com
© 2024 Weckström Attorneys Ltd.