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Tax corner
19 December 2006
Do you really own your income?
The Indofood vs JPMorgan case earlier this year raised big questions about the use of conduit entities for asset ownership in securities finance. Richard Collier and Neil Dobson of PricewaterhouseCoopers report.
Indofood International Finance vs JPMorgan Chase London earlier this year involved an Indonesian company that had set up a Mauritius funding vehicle to issue bonds to foreign investors. Had it issued the bonds itself, the Indonesian company would have had to deduct withholding tax at 20% from interest, whereas if the Mauritius company issued the bonds and on-lent the proceeds to the Indonesian company, interest could be paid from Indonesia to the Mauritius company subject to only 10% withholding under the Indonesian-Mauritian double tax treaty, and the Mauritius company could pay interest to bondholders free of withholding tax.
The Indonesian-Mauritian double tax treaty was subsequently terminated. The issuer sought to redeem the bonds at par under a material tax...
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