Our attorney at law, tax consultant comments for newspaper "Business News" about the biggest Lithuanian dividend payer

2016-09-21 11:45

Attorney at law of Juridicon Dr Laimonas Marcinkevičius expressed his opinion on newspaper's "Business News" (“Verslo žinios”) publication about one of VP group company – “Franmax”. Mentioned publication analyzes business management situation when company “Franmax”, the biggest Lithuanian dividend payer, was sold twice.

This August was announced that “Vilniaus prekyba”, central VP group company, which control “Maxima” and shopping centers “Akropolis” and “Eurovaistinė” from “Carson S.a.r.l.”, VP group company in Luxemburg, bought “Franmax”. This sell is second during the year and a half period: firstly company was Estonian “Franmax OU” property (now this company is called “Klarus Funds”), later after VP group shareholders disagreements  it was sold to “Carson” in Luxemburg.

“Franmax” activity is the provision of a franchise. Mentioned company owns “Maxima” brand and gets earnings from “Maxima group”. “The creation of franchise company is logic and understandable decision”, - says Dr Laimonas Marcinkevičius – “it is easier to ensure business continuity”. In attorney at law opinion Estonia as jurisdiction was chosen not accidentally. Estonia is both politically and economically stable state, moreover Estonian companies do not pay any tax on undistributed and reinvested profit. As Dr Laimonas Marcinkevičius states owning holding company in Estonia and Luxembourg could promote tax environment and aspiration to fund business by dividends.

Several reasons could lead to that “Franmax” control was returned to Lithuania: firstly, if earlier choosing foreign jurisdiction for holding company could be influenced by tax benefits, now decision could be made by taking into account the legislative changes – measures to fight with international scale income tax evasion. Secondly, economic reason – it became clear that strategic objective expenses is bigger than benefit. Management of such big companies is related with administrative burden and in some cases slower decision making. Thirdly, reputational risk management – in company group agreements is interested both community and tax inspectorate and it also increases the likelihood of various studies and make bad influence for company reputation, therefore at least temporarily was decided not to use any foreign structures.

“All in all, it could be said that “Franmax” control was returned to Lithuania because of management of legal risks, costs reduction, structure simplification, restoration of company group reputation and saving the advantages of holding” – states Dr Laimonas Marcinkevičius.

Full publication could be read in “Verslo žinios” number 117(4573), page 3 and also on the internet.