1. Miami Office Waterford Business Park Miami, Florida 33126 (T) 305.671.3179 (F) 305.402.0552 Corporate Office 8130 Lakewood Main St, Suite 208 Bradenton, Florida 34202 (T) 941.361.1147 (F) 941.827.9929 For more information on our services Please contact us at our offices or visit us at our website www.ogleintltax.com Inbound Investments -- Limitation on Treaty Benefits Presented in Berlin, Germany June 27, 2008 Jerry E. Ogle, CPA

3. Miami Office Waterford Business Park Miami, Florida 33126 (T) 305.671.3179 (F) 305.402.0552 Corporate Office 8130 Lakewood Main St, Suite 208 Bradenton, Florida 34202 (T) 941.361.1147 (F) 941.827.9929 For more information on our services Please contact us at our offices or visit us at our website www.ogleintltax.com Agenda Taxation of U.S. Business Operations of a Foreign Corporation a) Forms of doing business b) Engaged in U.S. trade or business c) Effectively connected income d) Permanent establishment Taxation of Income Not Connected with U.S. Business Withholding tax and treaty relief Section 894 Conduit arrangements Branch Profits Tax Qualification for Treaty Benefits

4. Miami Office Waterford Business Park Miami, Florida 33126 (T) 305.671.3179 (F) 305.402.0552 Corporate Office 8130 Lakewood Main St, Suite 208 Bradenton, Florida 34202 (T) 941.361.1147 (F) 941.827.9929 For more information on our services Please contact us at our offices or visit us at our website www.ogleintltax.com Agenda (continued) Limitation on Benefits Residence Qualified persons Derivative benefits clauses Active business clauses Branch profits tax Fiscally Transparent Entities Section 894(c) Domestic reverse hybrid entities Treaty provisions OECD report on partnerships Key Filing Requirements Questions

6. a subsidiary, treated as a corporation for U.S. purposes;

7. an LLC, treated as fiscally transparent;

8. an LLP, treated as fiscally transparent; or

9. a direct investment, treated as a branch.

10. A U.S. subsidiary will be taxed on its earnings under the usual corporate tax rules.

12. The activities must be “considerable, continuous, and regular.”

14. “Fixed or determinable annual or periodical (FDAP) ” income (such as interest, dividends, rents and royalties) is effectively connected with a U.S. trade or business if:

15. the income is derived from assets used in the conduct of such business; or

16. the activities of the business were a material factor in the realization of the income.

18. The business profits attributed to the permanent establishment are those it would make if it were a distinct and separate enterprise.

19. A “permanent establishment” generally includes:

20. a place of management;

21. a branch;

22. an office;

23. a factory;

24. a workshop; or

25. a mine, oil or gas well, or quarry.

27. U.S. treaties generally reduce the withholding rate on dividends to 15%. In cases where the recipient foreign corporation owns at least 10% of the voting power of the company paying the dividends, the rate generally is reduced to 5%. The U.S.-U.K. Treaty reduces the rate to 0% in the case of dividends to parents holding at least 80% of the voting power of the payor.

28. The U.S. also imposes a 30% withholding tax on certain U.S. source interest paid to foreign corporations. The interest withholding tax only applies to interest that does not qualify as “portfolio interest” including:

29. interest on bank loans; and

30. interest on loans from 10% percent shareholders .

33. This is designed to address the issue of “treaty shopping,” i.e., the use or establishment of a company in a jurisdiction with a favorable treaty in order to secure unintended benefits.

34. A conduit arrangement exists when the resident of one country entitled to benefits under the treaty pays all, or substantially all, of the income it receives to a person who is not a resident of either country party to the treaty and the ultimate recipient would not have been entitled to equivalent benefits under its treaty with the source state.

36. A “financing arrangement” is a series of transactions by which one person advances money or property to another person through one or more intermediate entities.

37. Financing transactions include:

38. debt;

39. certain types of redeemable stock; and

41. the participation of the intermediate entity reduces the tax imposed by section 881; and

42. the participation of the intermediate entity is pursuant to a tax avoidance plan and eitherthe intermediate entity is related to the financing entity or financed entity; or the intermediate entity would not have participated in the financing arrangement on substantially the same terms but for the fact that the financing entity engaged in a financing transaction with the intermediate entity.

44. whether there is a significant reduction in tax;

45. the intermediate entity’s independent ability to make the advance;

46. the time period between the financing transactions; and

47. whether the transactions are in the ordinary course of business.

49. The branch profits tax is set at 30% of the “dividend equivalent amount” or DEA.

50. The DEA equals the foreign corporation’s effectively connected earnings for the year, (ii) reduced by the increase in its “U.S. net equity” or (iii) increased by the decrease in its “U.S net equity.”

51. In other words, profits that are not reinvested in the U.S. are treated as if they were dividends.

53. For example, under the U.S.-U.K. Treaty, the parties may impose such a tax only on business profits attributable to a permanent establishment that represents the “dividend equivalent amount.”

54. The rate of tax cannot exceed that imposed on dividends under the Treaty.

55. The Treaty also bars the application of the branch profits tax with respect to certain entities including:

56. companies that were engaged in business activities attributable to the permanent establishment prior to October 1, 1998; and

58. Under the U.S.-U.K. Treaty, for example, a resident is defined as “any person who, under the laws of that State, is “liable to tax” therein by reason of his domicile, residence, citizenship, place of management, place of incorporation, or any other criterion of a similar nature.”

60. A detailed reading of this article usually is a critical element in determining the applicability of treaty benefits in inbound investment situations.

61. We will use the LOB provision of the U.S.-U.K Treaty as an example.

62. In order to qualify for treaty benefits, a resident needs to be a “qualified person.”

64. An individual;

65. A qualified governmental entity; or

66. A company if: the principal class of its shares is listed on certain exchanges ; or at least 50% of its shares (by vote and value) are owned directly or indirectly by five or fewer companies whose shares are so traded.

68. certain other qualified persons own directly or indirectly 50% of the shares or beneficial interests (by vote and value); and

69. less than 50% of that person’s gross income is paid to persons who are not residents of either contracting state in the form of deductible payments (excluding arm’s length payments in the ordinary course of business) .

71. at least 95% of its shares are owned, directly or indirectly, seven or fewer “equivalent beneficiaries”; and

72. it satisfies a 50% base erosion test.

73. Generally, an “equivalent beneficiary” is a resident of a country which is part of the EU, EEA or NAFTA if that resident :

74. would be entitled to the benefits of a comprehensive income tax treaty; and

76. such person is engaged in the active conduct of a trade or business in its country of residence; and

77. the income derived from the other jurisdiction is “derived in connection with, or is incidental to, that trade or business.”

78. The trade or business activity conducted by the person in its state of residence must be “substantial” in relation to the trade or business activity in the state where the income arises.

80. If a foreign corporation is subject to the branch profits tax, it will only be eligible for treaty benefits with respect to that tax if (i) the treaty is an income tax treaty and (ii) the foreign corporation is a “qualified resident” of the foreign country.

81. If the foreign corporation is a qualified resident, then the rate of tax will be (i) the rate on branch profits if specified or (ii) the rate specified for dividends.

82. A foreign corporation resident in a foreign country is a “qualified resident” of a foreign country unless:

83. 50% or more (by value) of its stock is owned by individuals who are not residents of that country or the U.S.; or

85. its stock is primarily and regularly traded on an established securities market in the foreign country; or

86. it is wholly owned (directly or indirectly) by another foreign corporation organized in such foreign country and the stock of that corporation is so traded.

87. A corporation resident in a foreign country is treated as a qualified resident if it is wholly owned (directly or indirectly) by a U.S. corporation and the stock of that corporation is publicly traded on an established U.S. securities market.

89. The issues have been amplified by the availability of the “check-the-box” election.

90. The issues are treated under both the Code and under certain provisions of the treaties themselves and their associated explanations.

92. the item is not treated by the foreign country as income of that person;

93. the treaty does not contain a provision addressing the applicability of the treaty in the case of income derived through such a fiscally transparent entity; and

95. The income may be derived either by the entity receiving the income or by the interest holders in the entity.

96. Income is treated as derived by the entity only if it is not fiscally transparent under the laws of the entity’s jurisdiction.

98. A domestic reverse hybrid entity is a U.S. entity that is not fiscally transparent for U.S. purposes, but is fiscally transparent under the laws of the interest holder’s jurisdiction.

99. An example would be a U.S. limited partnership that has elected to be treated as a corporation for U.S. tax purposes.

100. An item of income paid by a domestic reverse hybrid entity has the character of such item under U.S. law.

102. For example, the U.S.-U.K. Treaty states: “An item of income, profit or gain derived through a person that is fiscally transparent under the laws of either Contracting State shall be considered to be derived by a resident of a Contracting State to the extent that the item is treated for purposes of the taxation law of such Contracting State as the income, profit or gain of a resident.”

104. That report contains the following insightful passage on treaty eligibility:“One broadly based approach would be to recognise as implicit in the structure of the Convention the principle that the source State, in applying the Convention where partnerships are involved, should take into account, as part of the factual context in which the Convention is to be applied, the way in which an item of income arising in its jurisdiction is treated in the jurisdiction of the taxpayer claiming benefits of the treaty as a resident. If that State “flows through” the income to the partner, then the partner should be considered liable to tax and entitled to the benefits of the Convention of the State of which he is a resident. It may be observed, in that respect, that a partner is still to be considered liable to tax on the income which “flows through” to him where, in the State of residence, tax is not imposed on that income by virtue of, e.g., a participation exemption in the case of dividends or the application of the exemption method for the relief of double taxation in the case of income attributable to a permanent establishment. On the other hand, if the income, though allocated to the taxpayer under the laws of the source State, is not similarly allocated for purposes of determining the liability to tax on that item of income in the State of residence of the taxpayer claiming the benefits of the Convention, then the source State should not grant benefits under the Convention. In these latter circumstances, the underlying factual premise on which the allocation of taxing rights is based, that is, that the source State is only obliged to reduce its domestic law claim where the income in question is potentially liable to tax in the hands of a resident of the treaty partner, is simply not present.

105. Miami Office Waterford Business Park Miami, Florida 33126 (T) 305.671.3179 (F) 305.402.0552 Corporate Office 8130 Lakewood Main St, Suite 208 Bradenton, Florida 34202 (T) 941.361.1147 (F) 941.827.9929 For more information on our services Please contact us at our offices or visit us at our website www.ogleintltax.com VII. Key Filing Requirements

106. Biography Jerry E. Ogle , CPA is founder of the firm. He started his career with Deloitte & Touche, LLP. During his tenure at Deloitte, he worked as a tax advisor to various public & private companies. His clients included PepsiCo, Inc. and Interactive Cable Systems, Inc. (Joint Venture that included MCI Communications, Inc., Michael Milken, and Andersen News). He left Deloitte as a Senior Tax Advisor to join his then client PepsiCo, Inc. He joined the Pepsi Team as a Manager of International Tax Planning. During his tenure at Pepsi, he was responsible for working with the financial and business planners to ensure global minimization objectives were met with respect to Pepsi’s expanding and changing business environment. He led significant international planning projects in the UK, Belgium, France, Mexico, and China. He developed strong working relationships with Divisional Presidents and CFOs. He provided guidance to the Divisional Controller’s group on the proper recording of tax expenses and cash flow impacts. Since founding Ogle International Tax Advisors in 2000, he has assisted clients domestically and abroad primarily with U.S. international tax planning. He represents members of the Fortune 500 as well mid-sized regional businesses. His clients include manufacturers, distributors, food processors, developers, resorts, restaurant chains, service providers, and high net worth individuals. Miami Office Waterford Business Park Miami, Florida 33126 (T) 305.671.3179 (F) 305.402.0552 Corporate Office 8130 Lakewood Main St, Suite 208 Bradenton, Florida 34202 (T) 941.361.1147 (F) 941.827.9929 For more information on our services Please contact us at our offices or visit us at our website www.ogleintltax.com

110. Miami Office Waterford Business Park Miami, Florida 33126 (T) 305.671.3179 (F) 305.402.0552 Corporate Office 8130 Lakewood Main St, Suite 208 Bradenton, Florida 34202 (T) 941.361.1147 (F) 941.827.9929 For more information on our services Please contact us at our offices or visit us at our website www.ogleintltax.com Contact Us Corporate Office 8130 Lakewood Main Street, Suite 208 Bradenton, Fl 34202 T: 941.361.1147 F: 941.827.9929 Email:jerry@ogleintltax.com WWW.OGLEINTLTAX.COM Miami Office Waterford Business Park Miami, Fl 33126 T: 305.671.3179 F: 305.402.0552