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Tax Engineering

What is a linked company?


Question

What are linked companies?

Answer

A company will be considered as linked when it participates in administration or has at least 50% of the capital or 50% of the rights of another company. The links between two separately registered companies is not illegal but you have to be careful when filing corporate taxes as it can lead to misinterpretation and cause the final beneficiaries problems with their tax agencies. We advise to create correctly the contracts between both companies and make it very clear what activities the companies develop and what is the objective and functions of a linked company. The linked operations between companies may have the objective of reducing the liability or the corporate tax of a master (parent) company established in a high tax jurisdiction. In the event that the company wants to reduce corporate taxes of the parent company, the presentation of illegal or unrealistic expenses linked to another company will be considered as illegal activity.



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