Daily Telegraph (UK): Why they decided to move their headquarters to Holland: “Shell maintained this week that "the choice of the Netherlands as the headquarters is natural given the group's history and the businesses already based there". However, it is a little more complicated than that.”(ShellNews.net)
(Filed: 30/10/2004)
Corporation Tax
Shell maintained this week that "the choice of the Netherlands as the headquarters is natural given the group's history and the businesses already based there". However, it is a little more complicated than that.
Bankers say the Dutch government has traditionally behaved pragmatically towards the kinds of tax relief claimed by the energy giant, which is one of the Netherlands' biggest businesses, recouping the revenue through PAYE.
This has allowed Shell to offset the cost of some projects which are not on Dutch soil against its domestic tax bill, effectively cutting Shell's overall corporation tax bill to nil.
In contrast, the UK exchequer has only allowed Shell to claim relief for projects in UK territory such as the North Sea. Otherwise the company has been taxed at the UK's corporation tax rate.
For Shell's directors, moving the HQ to London would have increased the corporate tax bill. This meant that maintaining one head office in the Netherlands was the only sensible choice.
A Shell spokesman said: "Dutch tax residency is beneficial for the group. Maintaining a single headquarters preserves this position. From a tax perspective, the transaction is broadly neutral for the group."
Dividends
Currently, Royal Dutch, which is traded on the Dutch AEX stock market, controls 60pc of the company while investors in Shell Transport & Trading, traded on the stock exchange in London, hold 40pc.
Under Shell's restructuring plans, a holder of one Royal Dutch share will receive two "A" shares in the new company (NewCo). Similarly, a holder of one Shell Transport share receives 0.2874 "B" shares in the NewCo.
Shell had initially planned to have no distinction between the shares so everyone would own the same class of stock, traded on the London Stock Exchange.
However, this plan was vetoed by the Dutch government over concerns that it would lose a healthy tax take from Royal Dutch shareholders.
Analysts estimate that the government makes about €350m a year by charging Royal Dutch shareholders a 15pc withholding tax on dividends (the tax is paid by the company, which holds back 15pc of the dividend payment).
As a result, Shell's advisers proposed the two types of "A" and "B" shares, which are identical apart from the way dividends are paid.
The "A" shares pay "Dutch-sourced" dividends while "B" shares pay "UK-sourced" dividends, so that British shareholders should not have to pay tax to the Dutch government.
However, Shell warned that UK shareholders could still end up paying tax to the Dutch government. The company said: "In the event that it is not possible to pay the 'B' shareholders all of their dividends from UK-sourced income, then the shortfall will be made up with dividends which are Dutch sourced."
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2004/10/30/cnshell130.xml