- 34 - 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,Page: Previous 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 Next
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