Equipment sale effective tax planning
Effective international tax planning for equipment sales or equipment rental that sometimes includes installation, maintenance, and equipment warranty can significantly increase the profit transfer back home for German companies that are operating globally.
By taking into consideration the advantages of the company’s global operation and combining it with the international tax law ruling, based on the OECD’s interpretation and under the BEPS’s international rules, and in coordination with the local Israeli law, we are offering effective solutions that can maximize the tax-saving and significantly increase the company final profit.
Early planning with the help of our tax and legal professionals with the right attention and focus from the stage of the contract design for the sale of equipment or the machinery with the use of simple tools could have a significant influence on the final result for the German company. In some cases, even if you have contacted us after you already signed a contract, our experts are still able to use the interpretation or revision tools to benefit both parties in the deal.
The transaction: A split transaction or one transaction?
The main consideration is whether one combined transaction supports set tax planning or not. A split transaction divides the sale into two parts:
- The sale of the equipment itself
- The installation, training, and maintenance services that the company provides as part of the sale.
On which soil? The execution of the transaction “on German soil” or “on Israeli soil”, might have a major effect on the structure of the whole transaction, from the tax on service, and duties between countries.
A third-party\third-country: The structure of the German company also has an impact on the consideration, and sometimes by transferring the transaction through a third party or a third country can significantly affect the tax-saving options and to come as an advantage. These cases are unique and require special examination by Allwira & Angel specialists which are specialized in international taxation between German and Israel. These tax plans based on legal tax advice in advance, on the preparation of written opinions that support the tax planning and enable to present it identically to the tax authorities in both countries: Germany and Israel.
The bottom line is that there is no dividend tax and an average reduction of a 5% to 30% tax rate, which not paid to the Israeli tax authority. In other words, more money as a profit to bring back home (to Germany).
Mr. Ofir Angel, CPA
Managing-Partner, Allwira & Angel
International Taxation and Business Development