Tivot Sandwich: Difference between revisions

Companies that are capital intensive, i.e. That use a lot of machinery and physical property etc., can take advantage of a third layer of the Tivot Sandwich. The holding company can own all of the property, plant and equipment of the child company. The child company then rents the PPE from the holding company. This is incurred as an expense which lowers the taxable income and thus lowers the taxation paid. Again, capital gains from selling the PPE go to the holding company. Depreciation and impairment of the assets is recognised on the holding company's income state as an expense, lowering the holding company's taxable income, further lowering its effective tax rate. Coupled with the fact that the Tivot tax rates are so low. At this point the holding company is paying next to nothing in taxes.

===Fourth layer===

 

This fourth layer has some challenges. Trusts are limited into the payments that they can make to beneficiaries. A trustee cannot also be a beneficiary. Thus, this layer is used by investors as a way of preventing their dependants (usually their children) from spending all the money when they die and they place the family's assets under a trusted person. Investors who are willing to forego the benefits of the income generated by the trust may find trusts useful as a barrier against taxes, but the fourth layer is only advisable for investors with dependants or who want their money to support a charitable cause.