Tax Planning Strategies

Abstract

The East-Asian market has become increasingly interesting in the past years for investors from Europe and the United States. Direct investment from Germany to the fifteen territories has almost increased tenfold within the last 15 years (see Deutsche Bundesbank (1989–2007)). For the United States, the numbers show a similar trend as investments are six times as high as they were as 15 years ago (see Bureau of Economic Analyses (1989–2007)). One reason certainly is the exploitation of Asian-Pacific markets which amount to one third of worldwide GDP. Since tax policies play a great role in choosing a location for investment, tax planning strategies for multinationals have to be considered for investments in the Asia-Pacific region. The main interest of a parent company is to face a low tax burden on foreign profits and on their repatriation. Instruments to achieve such objectives are for example the location decision, the decision of financing and the establishment of holding structures. The first two topics have been covered in Chap. 3 of this study and will not be examined in great detail in this chapter. Since tax planning strategies differ between countries using the exemption or the credit method in order to avoid double taxation, they have to be developed separately in the cases of Germany and the United States. Strategies for German multinationals will first be looked at, followed by strategies for US multinationals. The underlying structure for the investment is shown in Fig. 5.1.