SoftBank cuts Japan tax bill to zero with Arm transfer to Vision Fund

TOKYO — SoftBank Group paid no tax in Japan last year thanks to a series of complex paper transactions to transfer a stake in its U.K. chip designing …

TOKYO — SoftBank Group paid no tax in Japan last year thanks to a series of complex paper transactions to transfer a stake in its U.K. chip designing subsidiary Arm Holdings to the near $100 billion Vision Fund.

The world’s biggest tech investor accumulated tax benefits worth billions of dollars from the reshuffling of its Arm assets just before its year end, drawing the attention of tax authorities who launched an investigation into the transactions. As reported by Nikkei in June, authorities found no wrong-doing but SoftBank was forced to revise its tax filings after they demanded that some of the tax losses recorded on the transactions should be booked at a later date.

The actual savings are hard to quantify. But based on SoftBank’s effective statutory income tax rate of about 31% in the fiscal year to March 2018, and on declared tax losses of 2 trillion yen as a result of the transactions, the theoretical tax savings potentially totaled more than 600 billion yen. The group recorded a consolidated net profit that year of more than 1 trillion yen.

News that the company, which last month launched a second $100 billion Vision Fund, has cut its tax bill to zero thanks to loopholes in Japanese tax rules is likely to fuel calls for tighter regulations. The taxation of large multinational companies has become a global issue with the Organization for Economic Cooperation and Development estimating that some $240 billion is lost every year in tax revenues due to legal tax avoidance.

SoftBank said it “carried out appropriate procedures in accordance with the tax law.” The transactions were “intended to realize an optimum capital relationship in overseas operations.”.

The transactions involved the restructuring of its ownership of Arm Holdings, acquired for 24.3 billion pounds ($31 billion) in September 2016, in a bid to satisfy commitments to the Vision Fund worth $8.2 billion.

Arm’s value largely resided in an operating subsidiary, Arm Limited. On March 23, 2018, the parent Arm Holdings, now renamed SVF Holdco, transferred 75% of its shares in Arm Limited as a dividend in kind to SoftBank, according to U.K. filings and people familiar with the matter.

Under Japanese tax law, 95% of dividends from overseas subsidiaries are exempt from tax. That meant SoftBank paid little tax for the transfer of Arm Limited shares.

On the same day, SoftBank transferred about 78% of SVF Holdco — which now only held 25% of Arm Limited — to entities including the Vision Fund. The remaining stake was transferred at a later date.

As a result of the dividend payout, the market value of the Arm parent was some 2 trillion yen less than the book value, resulting in a “transfer” loss under Japanese accounting rules, people familiar with the matter said. The loss was only partially offset by income generated elsewhere. As a result, SoftBank was able to offset the remaining losses against any tax due for the year ended March 2018.

It is not clear how much of the tax loss was used in the year to March 2018. Tax losses can also be used to offset income in subsequent reporting years.

Analysts said the transactions highlighted vulnerabilities in Japanese tax law, such as a lack of flexibility on adjusting book value. Even though a big chunk of Arm Holdings’ value was shifted to another SoftBank entity, the book value at the time of acquisition had to be maintained. When the remaining Arm stake was transferred to the Vision Fund, the difference between the book value and the market value was recorded as a loss.

“The current law does not have provisions that require the book value of [Arm Holdings] to be adjusted appropriately,” said Norimasa Yamada, tax specialist at Ampersand, the accountancy firm. “As a result, an inappropriate transfer loss was produced.”

This is not the first time SoftBank and its group companies have run into a tussle with tax authorities. In 2009, SoftBank affiliate Yahoo Japan bought data center operator SoftBank IDC Solutions from SoftBank. SoftBank IDC losses were used to offset Yahoo profits but the Tokyo Regional Tax Bureau rejected the move. It ordered SoftBank to pay back taxes. Yahoo contested the decision but eventually lost the case in a Supreme Court ruling.

SoftBank has maintained that like many multinational corporations, tax planning is part of doing business. The conglomerate has historically been hungry for cash to make its huge bets in the telecommunications and IT sectors. It is currently on a spending spree buying stakes in the world’s leading technology companies through the Vision Fund, which is managed by SoftBank subsidiaries and in which it is a major investor.

In May, Yahoo Japan announced that it would buy back its own shares from a wholly-owned subsidiary of SoftBank before issuing new shares to SoftBank Corp, the recently listed mobile arm of SoftBank. While the deal was in effect a sale of Yahoo shares to SoftBank Corp, the two-step process gave SoftBank a major tax benefit as the majority of the proceeds from the buyback were tax exempt.

“It is important to give back to the many people in Japan, and it is also important to contribute to society,” SoftBank founder and CEO Masayoshi Son said during a shareholders’ meeting in June. “On the other hand, investors around the world, according to rules around the world, also save tax legally. While considering the balance between the two sides, we will try to save tax within the legal boundaries.”

SoftBank’s shares were trading at around 5,200 yen on Tuesday, mostly unchanged since Nikkei reported in June 19 that SoftBank had revised its tax return. Investors were unlikely to be overly concerned by the tax investigation, one analyst said. “Its current stock price is more influenced by the external environment” such as the U.S.-China trade battle, said one Japanese equity strategist.

However, the global controversy over corporate taxation could prompt SoftBank to change its approach, another analyst said. The greater scrutiny “might make SoftBank more cautious in how it recognizes gains etc from Vision Fund.”

The latest case could spark debate over current rules. In the past controversy over corporate tax avoidance has prompted change. IBM Japan’s use of share buybacks through a holding company to minimize its tax bills led to reforms that in effect banned such practices inside the country.

SoftBank’s transaction may raise questions over restructuring practices. Western countries have general anti-avoidance rules (GAAR) that allow the tax authorities to react to excessive tax avoidance. “Japan also needs discussions on the introduction of a GAAR, and the conditions for applying such a rule should also be made clear,” said Shigeki Morinobu, chief research officer at the Tokyo Foundation for Policy Research.

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Corporate Tax Software Market Size Outlook 2025: Top Companies, Trends, Growth Factors …

… of companies such as TurboTax Business, Avalara, Vertex, H&R Block, TaxJar, Bloomberg Tax Fixed Assets, inDinero, Corptax and Credit Karma.

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According to this study, over the next five years the Corporate Tax Software market will register a xx% CAGR in terms of revenue, the global market size will reach US$ xx million by 2024, from US$ xx million in 2019.

The Corporate Tax Software market research study focuses on delivering an intensive analysis of this industry, projecting the business vertical to accumulate substantial returns by the end of the anticipated duration, while recording a commendable growth rate over the forecast timeframe. The report elucidates an in-depth outline of this business sphere, including pivotal details with respect to the remuneration currently held by the Corporate Tax Software market. The study also encompasses the industry segmentation in exceptional detail, alongside the various growth opportunities that this vertical is indicative of.

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What does the Corporate Tax Software market study enumerate considering the competitive spectrum of the industry?

  • The research study on the Corporate Tax Software market analysis provides a detailed brief regarding the competitive spectrum of the industry, that is inclusive of companies such as TurboTax Business, Avalara, Vertex, H&R Block, TaxJar, Bloomberg Tax Fixed Assets, inDinero, Corptax and Credit Karma.
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What does the Corporate Tax Software market study enumerate considering the segmentation of the industry?

  • With regards to the product landscape, the report segments the Corporate Tax Software market into Cloud Based and Web Based.
  • Substantial details about the market share accounted for by each product type and the estimated remuneration of the product segment have been mentioned.
  • The report is inclusive of information pertaining to the product consumption and product sales price.
  • In terms of the application landscape, the Corporate Tax Software market study segments the industry into Large Enterprises and SMEs.
  • The reports specifies the market share that each application accounts for and the predicted remuneration of the application segments.

What does the Corporate Tax Software market study enumerate considering the drivers & challenges of the industry?

  • The report elaborates on the driving parameters influencing the commercialization graph of this business space.
  • Alongside, the research study on the Corporate Tax Software market size is also inclusive of the many challenges that this business vertical represents and the impact they may have on the industry trends.
  • Another essential details that the report focuses on is the market concentration ratio over the projected timeline.

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Some of the Major Highlights of TOC covers:

Corporate Tax Software Regional Market Analysis

  • Corporate Tax Software Production by Regions
  • Global Corporate Tax Software Production by Regions
  • Global Corporate Tax Software Revenue by Regions
  • Corporate Tax Software Consumption by Regions

Corporate Tax Software Segment Market Analysis (by Type)

  • Global Corporate Tax Software Production by Type
  • Global Corporate Tax Software Revenue by Type
  • Corporate Tax Software Price by Type

Corporate Tax Software Segment Market Analysis (by Application)

  • Global Corporate Tax Software Consumption by Application
  • Global Corporate Tax Software Consumption Market Share by Application (2014-2019)

Corporate Tax Software Major Manufacturers Analysis

  • Corporate Tax Software Production Sites and Area Served
  • Product Introduction, Application and Specification
  • Corporate Tax Software Production, Revenue, Ex-factory Price and Gross Margin (2014-2019)
  • Main Business and Markets Served

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Tax Management Software Market Evolving Industry Trends and Key Insights by 2019 Globally

… RepaidTax, TaxCloud, TaxJar, Scivantage, Outright, Canopy, Credit Karma, Shoeboxed, H&R Block, Drake Software, TaxACT, Beanstalk, ClearTAX, …
Tax Management Software Market Evolving Industry Trends and Key Insights by 2019 Globally

Tax Management Software market research report focuses on Past-Current Size, Price, Trends, Shares, Segment and Forecast 2019-2024 and gives in-depth analysis of past and future six years industry Opportunities, Sales, Revenue, consumption, and Market Growth Analysis.

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Thus the report is exclusively designed in line with essential data in the all-inclusive Tax Management Software, the main ingredients in charge of the interest for its products and leaders. Our best researchers have explored the Tax Management Software report along with the reference of suppliers and data provided by the top players. Following is the list of companies that have offered flexible sources and records to upgrade the view of the related program conditions. Leading players are Avalara, Rethink Solutions, Installed-Mobile, Longview Solution, SureTAX, SAXTAX, TaxSlayer, CrowdReason, Empower, RepaidTax, TaxCloud, TaxJar, Scivantage, Outright, Canopy, Credit Karma, Shoeboxed, H&R Block, Drake Software, TaxACT, Beanstalk, ClearTAX, Exactor, SaaS, Accurate Tax, Paychex, CCH, Taxify, TurboTax and Taxbrain

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Based on type, the global Tax Management Software market can be categorized as follows:

SaaS, Cloud and Installed-Mobile

Installed-PC

Installed-Mobile

Furthermore, we have likewise included the political investigation that comprises the administration rules and guidelines and regional advancement offices. The main aim of this factor is to comprehend the capability of Tax Management Software market in the future. And plan methodologies and speculations likewise to new entrepreneurs, founders, and executives.

Based on application, the global Tax Management Software market can be categorized as follows:

PersonalUse

CommercialUse

The Tax Management Software report gives a detailed estimation of the market through complete assessment, high-quality insights, and authentic predictions dealing with the market size. It relies on tried and tested approaches along with reliance in case of the forecast made available. Thus the detailed analysis of Tax Management Software market serves as a reservoir of study and data for every aspect of the market, particularly with regards to local markets, technology, categories, and use. Even more, in this report, we have considered the geographies like North America, Europe, Asia-Pacific, Latin America, The Middle East and Africa.

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An Aim of Global Tax Management Software Market report are as follows:

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-To provide extensive PEST study for all Tax Management Software regions mentioned in the report

-To outlines major Tax Management Software players regulating the industry together with their SWOT analysis and Tax Management Software market policies

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Corporate Tax Software Market Report 2019-2024 Top Key Players are Avalara, Vertex, H&R Block …

… Market Report 2019-2024 Top Key Players are Avalara, Vertex, H&R Block, TaxJar, Bloomberg Tax Fixed Assets, inDinero, Corptax, Credit Karma.

Orbis Research has introduced its report on the Global Corporate Tax Software Market offers a detailed analytical review of the keyword market. Elaborate research derivatives articulated in the report lends palpable details on pertinent market developments such as market growth rates, revenue generation, and production dynamics. In-depth market analytics documented in the report is aimed to offer readers with ample competitive advantages thereby encouraging market participants in the Global Corporate Tax Software Market to deliver lucrative business decisions favoring sustainable revenue streams in Global Corporate Tax Software Market.

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The key manufacturers covered in this report: Breakdown data in in Chapter 3.

  • TurboTax Business
  • Avalara
  • Vertex
  • H&R Block
  • TaxJar
  • Bloomberg Tax Fixed Assets
  • inDinero
  • Corptax
  • Credit Karma

According to this study, over the next five years the Corporate Tax Software market will register a xx% CAGR in terms of revenue, the global market size will reach US$ xx million by 2024, from US$ xx million in 2019. In particular, this report presents the global revenue market share of key companies in Corporate Tax Software business, shared in Chapter 3.

This report presents a comprehensive overview, market shares and growth opportunities of Corporate Tax Software market by product type, application, key companies and key regions.

This study considers the Corporate Tax Software value generated from the sales of the following segments:

Segmentation by product type: breakdown data from 2014 to 2019 in Section 2.3; and forecast to 2024 in section 10.7.

  • Cloud Based
  • Web Based

Segmentation by application: breakdown data from 2014 to 2019, in Section 2.4; and forecast to 2024 in section 10.8.

  • Large Enterprises
  • SMEs

The report also presents the market competition landscape and a corresponding detailed analysis of the major vendor/manufacturers in the market.

In addition, this report discusses the key drivers influencing market growth, opportunities, the challenges and the risks faced by key players and the market as a whole. It also analyzes key emerging trends and their impact on present and future development.

The report is a complete handbook encompassing major cues on innovative growth strategies instrumented by market forerunners and their eventual implications on holistic growth pattern in Global Corporate Tax Software Market. A thorough analytical review of these winning strategies by market players ensures error-free growth spike, thereby securing their lead amidst staggering competition in Global Corporate Tax Software Market.

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Research objectives

  • To study and analyze the global Corporate Tax Software market size by key regions/countries, product type and application, history data from 2014 to 2018, and forecast to 2024.
  • To understand the structure of Corporate Tax Software market by identifying its various subsegments.
  • Focuses on the key global Corporate Tax Software players, to define, describe and analyze the value, market share, market competition landscape, SWOT analysis and development plans in next few years.
  • To analyze the Corporate Tax Software with respect to individual growth trends, future prospects, and their contribution to the total market.
  • To share detailed information about the key factors influencing the growth of the market (growth potential, opportunities, drivers, industry-specific challenges and risks).
  • To project the size of Corporate Tax Software submarkets, with respect to key regions (along with their respective key countries).
  • To analyze competitive developments such as expansions, agreements, new product launches and acquisitions in the market.
  • To strategically profile the key players and comprehensively analyze their growth strategies.

Table of Contents

2019-2024 Global Corporate Tax Software Market Report (Status and Outlook)

1 Scope of the Report

1.1 Market Introduction

1.2 Research Objectives

1.3 Years Considered

1.4 Market Research Methodology

1.5 Economic Indicators

1.6 Currency Considered

2 Executive Summary

2.1 World Market Overview

2.1.1 Global Corporate Tax Software Market Size 2014-2024

2.1.2 Corporate Tax Software Market Size CAGR by Region

2.2 Corporate Tax Software Segment by Type

2.2.1 Cloud Based

2.2.2 Web Based

2.3 Corporate Tax Software Market Size by Type

2.3.1 Global Corporate Tax Software Market Size Market Share by Type (2014-2019)

2.3.2 Global Corporate Tax Software Market Size Growth Rate by Type (2014-2019)

2.4 Corporate Tax Software Segment by Application

2.4.1 Large Enterprises

2.4.2 SMEs

2.5 Corporate Tax Software Market Size by Application

2.5.1 Global Corporate Tax Software Market Size Market Share by Application (2014-2019)

2.5.2 Global Corporate Tax Software Market Size Growth Rate by Application (2014-2019)

3 Global Corporate Tax Software by Players

3.1 Global Corporate Tax Software Market Size Market Share by Players

3.1.1 Global Corporate Tax Software Market Size by Players (2017-2019)

3.1.2 Global Corporate Tax Software Market Size Market Share by Players (2017-2019)

3.2 Global Corporate Tax S

Continued….

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How Sequoia Capital is trying to avoid taxes on over a billion dollars in Indian investments

By 2013, Sequoia Capital, one of America’s most vaunted venture capital firms, had invested $1.2 billion in more than 75 Indian companies with …

By 2013, Sequoia Capital, one of America’s most vaunted venture capital firms, had invested $1.2 billion in more than 75 Indian companies with combined revenue of more than $3.5 billion, the company wrote that year in a draft memo to potential investors.

The Silicon Valley institution, an early investor in the likes of Apple and Google, made those Indian investments via a complex corporate structure based offshore in Mauritius, according to hundreds of leaked documents reviewed by Quartz that are known collectively as the Mauritius Leaks. Sequoia used that structure to legally avoid US and Indian taxes, says Reuven Avi-Yonah, a leading tax law professor at the University of Michigan, who inspected some of the files at Quartz’s request.

The files were among 200,000 documents from offshore law firm Conyers Dill & Pearman’s former Mauritian branch, which were anonymously leaked to the International Consortium of Investigative Journalists (ICIJ), and shared with international media partners, including Quartz. A tiny former French and British colony in the Indian Ocean, Mauritius sells itself as a “gateway” to India and Africa for multinationals, offering extremely low tax rates and tax treaties with dozens of mostly poor countries.

The leaked Sequoia documents offer a rare detailed look at how global companies use venues around the world—even far-flung islands like Mauritius—to get the most favorable tax treatment for their activities. This is not a new trend, and an analysis of the documents doesn’t suggest that Sequoia did anything illegal. But the details reveal the contortions some companies go through to leverage loopholes that lower what they or their investors pay in taxes.

Chart from TheAtlas.com

Developing countries such as India have long campaigned against Western multinationals making handsome profits in their own countries while paying as little as possible in taxes. The Tax Justice Network, a research and advocacy group, estimates that multinationals shifting profits to tax havens costs the world’s governments more than $500 billion per year, with poorer countries losing the most as a percentage of GDP. Efforts to close loopholes in the global tax system have historically foundered due to US opposition, but India is leading dozens of developing countries—which are generally more dependent on corporate taxes—in an effort to force multinationals to pay more tax in the countries where they make their money.

Indian law enforcement has leveled its gaze at Sequoia’s operations in recent years. In 2016, authorities raided the company’s offices in Bengaluru as part of a tax evasion investigation into Vasan Healthcare, one of Sequoia’s portfolio companies. Sequoia said a few days before the raid that it was cooperating with the probe. India’s Income Tax Department is now prosecuting Vasan in several cases in a special court for economic offenses. Two years later, Bloomberg reported that authorities were examining whether Sequoia had helped launder money for the son of India’s former finance minister by buying shares in Vasan from him at a premium. Both father and son are reportedly facing trial in New Delhi, but it’s unclear if Sequoia will feature in the case.

Sequoia hired Conyers’ law firm to advise on its Mauritian entities. The related documents, dated between 2012 and 2014, don’t show how much money the structures saved Sequoia, but they reveal at least two cases that seem engineered for tax avoidance, according to Avi-Yonah. Alongside Conyers, they employed lawyers at prominent tech law firm Goodwin Procter and accountants at Big 4 giant PwC. The leaked documents show no indication that Sequoia had any full-time staff permanently based in Mauritius.

Sequoia’s US investors include retirement funds and university endowments, on whose behalf it ultimately dodges these taxes. It’s unclear, however, who Sequoia India’s main beneficiaries are. The biggest Sequoia India shareholders listed in the Mauritius Leaks are a handful of anonymously-owned firms all registered at the same PO Box in the Cayman Islands.

A Sequoia India spokesperson told Quartz in a statement that it is common practice for Indian private equity and venture capital industry to be “domiciled” in Mauritius.

“Sequoia India holds itself to a high bar for compliance with respect to tax and other regulations, and has consistently sought expert, internationally recognized legal and tax counsel over the years to ensure its funds operate within financial and legal regulations,” the spokesperson said.

Case one: The “Singapore Mirror”

In 2010, Sequoia became one of the first two investors in Druva, a cloud security startup based in western India. So far it looks like an excellent investment: By 2019, the firm was a Californian unicorn, headquartered in Sunnyvale. It raised a round of $130 million this year to put its valuation north of $1 billion.

Druva, it turns out, had actually been registered in the tax haven of Singapore for many years, according to a 2013 email chain involving Sequoia India’s then-finance controller R Narayanan, Druva’s then-vice president for finance Robert Mally, and their lawyers and accountants. To move the firm from India, Druva restructured itself through a complex process into a new Singaporean firm, and then set up an exact mirror of the original company’s ownership setup. Sequoia’s portion of those shares was signed over to two of its Mauritian firms rather than its Indian investment vehicle, meaning they avoided Indian capital gains tax, according to Avi-Yonah.

Marwen Ben Mustapha / inkyfada / ICIJ

The whole setup is a “pretty aggressive” case of tax avoidance, Avi-Yonah says. “It’s pretty clear that the mirror has no reason to exist but to avoid Indian tax,” he said. “It’s a pure shell. That’s pretty clear from the way the documents are crafted also—there’s nothing happening in Singapore, as usual.” A Druva email to its lawyers states that the move to Singapore was made for “business reasons” rather than tax reasons, but Druva’s own statements seem to confirm Avi-Yonah’s thesis that they did not have an active presence in Singapore at the time. Druva announced this year that it was opening a “new office” in Singapore as part of a “rapid expansion” in the Asia Pacific region. A spokesperson for Druva declined to comment on this article.

However, the move to Singapore raised the specter of being taxed in the United States. The US government considers any firm with more than 50% American ownership to be a US company for tax purposes. With Druva seemingly raising more funds from America, there was a risk it could surpass that 50% mark and investors could be liable for US taxes. So Sequoia wanted to transfer its shares back to its original Indian investment vehicle. (It’s unclear why this would have a different level of US ownership, but Narayanan wrote that they were transferring the funds back so that the Singapore restructuring could “be considered a tax free transaction in the hands of US investors.”)

As Sequoia’s lawyers prepared to draw up an agreement for one of its companies to buy the Druva shares from another one of its companies, the accountants stepped in. When Sequoia checked with PwC’s India office, they said there was a risk that New Delhi might want to tax any share purchase agreement, and recommended they transfer them as a gift. It’s unclear if, or how, the transaction was eventually made—the email chain ends with Narayanan checking with Conyers if the gift would comply with Mauritian law. PwC declined to comment on this piece.

The actors involved are clear that the machinations taking place after the company had moved to Singapore were aimed at avoiding tax. “We would need PWC to confirm that this outcome would maintain the reorganization as a non-taxable transaction,” Mally wrote at the beginning of the lengthy email chain. “Further, we would need confirmation that the transfer/sale of shares between the above entities would not be a material taxable event.” Narayanan later explained to two Sequoia colleagues: “This is primarily being done to ensure the Druva restructure does not result in it becoming taxable” for Sequoia India’s limited partners.

Conyers declined to comment on confidential client communications, but noted that it “strictly adheres to the laws of all the jurisdictions in which we operate and complies with legally applicable standards issued by internationally recognised bodies.” Mally and Naryanan didn’t respond to requests for comment.

Case two: The canceled loan

It was December 2012. US president Barack Obama had just been re-elected, dashing hopes that George W. Bush’s tax cuts would be renewed after expiring at the end of the year. Sequoia decided to get ahead of expected tax code changes by booking outstanding income before 2013 started.

On Dec. 18, its Mauritian lawyer received an email titled “Urgent: Sequoia MFC [loan] acceleration.” “Sequoia would like to engage in some minor restructuring of certain obligations with respect to one of the India funds for US tax reasons,” wrote Brian McDaniel, then a Hong Kong-based lawyer at Goodwin Procter. It’s not clear exactly which changes they were expecting to the US tax law.

The request: to cancel a $1.67 million loan agreement made between two of Sequoia’s Mauritian companies. Though not made explicit in the emails, Avi-Yonah says the most likely reason for the original loan was to avoid Indian taxes. The loan, he suggests, was never really a loan, but a dividend in loan’s clothing.

Avi-Yonah says multinationals have often used a loan-dividend scheme to avoid taxes. This is how it works, he said: A company makes a nice profit in a foreign subsidiary like India, and it wants to pay some of that money to investors. “The problem is that if they just declare a dividend, it would be subject to a 15% withholding tax [in India] according to their treaty, so you don’t want to do that. So you set up a loan,” he said. Then the company can cancel the loan, and the shareholders never repay the money. The Indian authorities would look at the document, see it’s a loan and not tax it. The US, however, recognizes these kinds of loans as dividends and taxes them. That means the company would need to cancel the loan agreement at the most tax-efficient time—seemingly in this case, just before taxes are hiked.

In the leaked emails, Sequoia’s lawyers and accountants discuss canceling five other loan agreements in different jurisdictions, though—as in the Mauritius case—they don’t say whether the loans were originally made in place of dividends.

Omri Marian, a tax law expert at the University of California, Irvine, said Sequoia canceling the loan is only “problematic” if it had intended to do this all along. Having reviewed the emails, Marian said he didn’t see any indication that “it was planned from the get-go,” seeming instead to be a response to an expected change in US law.

Offshoring ain’t easy

Such offshore schemes aren’t without their tribulations.

A lengthy 2013 email chain whose only goal was to arrange a meeting was received by four lawyers, three administrators, two accountants, and two other Sequoia officials. The issue: To fulfill both Mauritian law and the company’s statutes, they had to hold both a “substantive” shareholders’ meeting and a “statutory” one.

The year before, many of the same people had received an email with another hitch—one of the Mauritian companies only had $7 to its name. Under Mauritian law, it needed $35,000. They fixed the problem by simply issuing new bonus shares out of Sequoia India’s capital reserves. There are no legal or tax avoidance issues here, but “it seems a very cheap way of satisfying Mauritian authorities that the company is real—to put $35,000 into it given the sums involved [in Sequoia India’s investments],” Avi-Yonah says.

Other areas of Mauritian law proved more nettlesome. When setting up its fourth Indian fund in 2014, Sequoia battled against a Mauritian provision that places extra burdens on companies with more than 99 shareholders. Top officials weren’t pleased. “If this is the best we can do, I guess we will have to go with it,” Sequoia US CFO Marie Klemchuk wrote in one email. She added in another: “If the 99 issue goes away, pls let me know asap as we did not invite probably a dozen+ [limited partners] to keep under this headcount.”

They discussed solving the problem by having investors use special purpose vehicles or by starting a parallel fund, but seemed to eventually settle on a tactic oft-relied upon by multinationals in tax havens: asking the authorities to give them an exemption. The emails show lawyers drafting the request and officials heavily leaning towards sending it, but the correspondence doesn’t show whether it was eventually sent, or if it was granted.

The case is indicative of the “deal with the devil” that jurisdictions make when becoming a tax haven, says Alex Cobham, CEO of the Tax Justice Network, an advocacy group. “You’re agreeing to provide terms that multinational companies or the Big Four accounting firms or major tax law firms are demanding,” he said. “Once you start down that road and attract a certain amount of that business, you’re then much more vulnerable to the next request because you know that any benefits you’re getting can go away just as quickly as they came if you don’t play ball.” He cites major accounting firms persuading Britain to pass a law allowing companies to form as tax-avoiding Limited Liability Partnerships by first getting nearby tax haven Jersey to do so. The UK government then caved at the prospect of big companies decamping to the Channel Islands.

Sequoia doesn’t make any threat to leave Mauritius if the exemption isn’t granted, but an email from McDaniel suggests its lawyers were very much aware of the dynamic. “As a matter of political economy, the authorities have some incentives to show flexibility and grant the exemption,” McDaniel wrote. “Recall that Mauritius gains a great deal by being an offshore financial center and wants to be attractive to global investors.” Both McDaniel and Goodwin didn’t respond to emailed requests for comment.

Required anti-money laundering checks also appeared to frustrate the company. While there’s no evidence in the leaked documents that laundered money passed through Seqouia’s funds, an email from Narayanan suggests it wanted to spend less time on so-called Know Your Customer (KYC) checks. “We are spending way too much effort on collecting KYC and it seems there is no clear thought out rationale on what is to be collected vis-a-vis what is not required,” he wrote in an email to Sequoia’s Mauritian company administrators, as they hurried to set up its fourth Indian fund in 2014.

The email “raises questions on whether multinationals are taking KYC obligations seriously given that it seems this person may be more concerned with meeting arbitrary thresholds than attempting to do effective due diligence on business partners,” said Mark Hays, the anti-money laundering campaign leader at Global Witness, an anti-corruption nonprofit.

Despite the hassles, Sequoia India seems to have been pleased with its offshore lawyers. Narayanan even passed Conyers some business, introducing one of the lawyers via email to a “good friend.”

“[He] was looking for introductions to a nice law firm in Mauritius and I could not think beyond Conyers,” Narayanan wrote.

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