Medieval Attractions N.V - Page 87

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               Forsyth responded to a request from Santandreu in an                   
          October 8, 1986, letter that summarized the reasons C&L was                 
          recommending the changes to the Medieval Times corporate                    
          structure.  C&L stated that the problems with the current                   
          structure were that a 30-percent withholding tax would apply to             
          royalty payments from MTNV and MANV and that a 30-percent branch            
          profits tax would apply on earnings and interest deemed                     
          distributed by the existing Netherlands Antilles companies to               
          nonresidents.  C&L’s recommendation included transferring                   
          existing operations and real estate to U.S. corporations owned by           
          Dutch holding companies that would in turn be owned by the                  
          existing Netherlands Antilles companies.  The recommendation also           
          included borrowing in the United States to the maximum extent               
          possible through mortgage loans and working capital to maximize             
          tax benefits, with the funds used to pay dividends and/or reduce            
          capital prior to implementation of the reorganization and prior             
          to the effective date of the new tax act.  The result would be to           
          reduce the tax rates for interest from 30 percent to 8.7 percent,           
          for royalties from 30 percent to 2.94 percent, and for dividends            
          from 53.8 percent to 43.9 percent.                                          
               The October 8, 1986, letter also included a list of things             
          to do to implement the plan, which included determining the                 
          entity to own the intangibles (trademarks, copyrights, etc.) and            
          completing licensing agreements; implementing a borrowing                   
          strategy; and targeting a completion date of December 31, 1986,             




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