US Newsletter Practical US/International Tax Strategies has been publishing a series of articles looking at the use of 'commissionaire' structures in European countries to minimise taxes on exports from the US. This article deals with legal and fiscal aspects of the Swiss commissionaire.
Managing European profit margins is tough. Much of the planning involved necessarily relates to managing foreign tax costs. For sales within the European Union (EU), the use of a network of com-missionaires represents an attractive alternative to the use of traditional buy-sell subsidiaries. Commissionaire arrangements offer a simple and efficient method of transacting high-volume business in a multijurisdictional environment.
All commercial risk, inventory risk, credit risk and currency risk are removed from the local sales company and retained by the principal that sells the goods into that market. This minimizes the amount of profit and of tax generated in the country of sale. When merchandising activities take place in several countries, commissionaire structures are used to direct profit flow to a central base-company location where they may be pooled and netted against the operating losses of all members of the multinational group. This can lower the effective tax rate of the group, especially when profit flows are directed to low-tax countries.
Under Swiss civil law, a commissionaire buys or sells goods or financial instruments in its own name, but for the account of a principal. The commissionaire has no authority to bind the principal. If the commissionaire had the authority to do so, then the principal could be considered to have a permanent establishment in Switzerland. Standard remuneration can consist of a provision plus expense reimbursements, including, among other things, the cost of transportation and storage, but not the cost of personnel.
Tax-news.com and Practical US/International Tax Strategies (at http://www.wtexec.com/pusits.html) have agreed to make the full text of the article available to tax-news.com readers free of charge.
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