XT 32A
XT 7
M R G Baker
Legal Dept.
a IMSCO OPZR;r.ZONS LN LIOLLAM ;QW SWITZERLMD
1. TARSCO Ltd has Injected funds into IMASCO 3.V partly as equity but
Maizly as contributed surplus. A It capital duty is ?ayable In
res=ect of both equity and contributed surplus and tu preference for
contr!Jhutad surplus Ls explained by It being sampler transaction
wit!@ lower legal fees. At 31.3.85 the relevant amounts -deres-
D. ri
Capital Stock 17.6 z
Contributed Surplus 408.2 a
2. This =nay Ls then transmitted to the Swiss branch of LVMCO z.v which
onlazda it, together with retained earnings, to subsidiaries of X:4ASCO
Ltd :;eratinq in the U.S. It is important for Canadian tax reasons that
the =cney La lent to an operating company rather than a Joldinq company.
Loans are, therefore, made direct to Urdess and Peoples Drug Stores *to.
3. The tax effect af this roundabout is to procure that income otherwise
taxed 1z the U.S at 461k is 'taxed' in T.MBAT S.V at a rate of
apprzxizately a%.
4. For =* puspose of arriving at the 3% rate in 3, capital duty and the
expenses of the MOM Z.V operation are added In. This is broken down
as d--.Ilows;-
Wtch Tax (Under an agreement with the -Ravenue
10% of the profits of the Swiss branch 3ze taxed
@O@ In. Holland at the full Cprporation Tax rate of
43%). ;:1 4.3
Swiss Federal Tax (:%%x1=u:m 9.3% but in dependent
upon relationship of cap4tal and reserves to
profit, is paid by reference to average 2 years
which fova the basis of tax for the 2 subsequent
years. In an expanding business the tax currently
-aid can be a vary small percentage).
1985/6 average 3.1-
Capital taxes and expenses .6
Wil
Cantonal Taxes - Fribourg I
8.0 r%j
2=0=000 CD
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BAT Industries document for Province of British Columbia 13 April 1999

2
notes
1. The original injection of funds could be done by interest free loan
from Canada. we ware told by Bob Kraniar that this was acceptable to
Min CarAdLan tax authorities. Matthews Glaxos does not accept this.
as believes that it would be attacked. The only benefit from this
route is the &voidance of capitaldutj and he thinks this is
a small price to pay for certainty.
2. As -40 hAve seen the Swiss rate La very low when the business is expanding.
'=Q, OPC02iZa Will be the came when business is contracting. However,
: was assured that it was a simple matter tolliquidats, and *so" th"
tax Consequence.
3. i-..* relevant elcuole tax =*sty is the Dutch/CamadlAn treaty not the
Swi3s/Canadian.
4. Zoans are made in dollars and account&* kept in guilders and dollars.
.he cas, - book in the Swiss branch is kept in Swiss francs but all
tZansactlons are converted into dollars and guLld"s. The Swiss authors
are happy that Guild" accounts are converted into Swiss ftancs at
official rates. 12 monthly rates axe averaged to produce a rate for
translation of the Profit and !4sa Account. Closing rates are used for the
3alance Sheet.
5. .4tapayments of loans give rise to losses and gains an exchange. The Swiss
will ;rant an exemption for foreign exchange gains and losses. If this La
mon obtainal gains would be taxed in Switzerland and because of that 10%
would also be tax" in 3olland.
6. it is necessary to have someone, pa=uumntly resident in both Rolland
and Switzerland. Pez-acnal tax rat" (average) work out at 10% in Rolland
and 30% + in Switzerland.
7. VASCO"a advisers are-.-
in Solland a" Wout Van Dalan
Loyans and Volkmaars
Grotaxorkplain 70
post Dun 2888, 3000 CW Rotterdam
Telex 23643 XVTAX L TelswopLer 010-125339
I" 010-L44422
b) in WS Mr Willard a Taylor
SkO I and Crocatell
125 aroad Street. W.Y 10004
Tel (212) 5sa-4000
a 3A= Shareholding in VMASCO - An afterthought
We would have a problem obtaining dull double tax relief in SATUS for tome
paid by the INA= group even when we have makired that SATT= holds 10%
of ZHU= ordinary shared. This is because U.5 rules only allow the pick
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BAT Industries document for Province of British Columbia 13 April 1999

3
up of underlyLM taXes in respeat of dIV:Ld*=W paid up the dA" down to IL
second time subsidiary. Scins U-3 Ouipazise La the n"CO group 2AY not
quality. Thincinq about this Ud to the CO&ILS&WAM Of the absurdity of
divld,ends flowing to Canada SufferiM U-S withhOldiM tax of 10% (treaty rate)
end tswn dL-,LdapAs r1owing back froin msco to BAM and sufferLog a
Un Canadian -dithboldLng tax rate. It would cbftouslY be tax efficient &Ad
of ba"fit to =4 groqV if we could have the DA= holdim La INUM HOLDX=
I= ratner Wu= La XXMC0 Ltd. Obviously, thaw* wmad be problems to overcONS
both of a tax a=d isgai nature but Lt =nt be worth investigating. I propose
to write a nor. a su"esting that Richard Barker and I do just that.
K mar on
29.7.as
PO
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BAT Industries document for Province of British Columbia 13 April 1999