Transfer of Registered Office

If emigration taxes imposed by a country have as only purpose to compensate for the awarded benefit, there is in principle little that can be done against this. This is certainly justified. But, in practice, we will often notice that emigration taxes go one or two steps further than this and in such event a discussion on their validity may arise.

Obviously, even the smallest emigration tax will have a dissuasive effect on the company that is subject to the tax. Even if a compensation is charged for the benefits awarded in the past to these companies, we will see that this puts a brake on international transfers of registered offices.

It is a very thin line between what in case law and literature is considered as a correct or excessive compensation.

Link: Fiscal consequences of transfer of registered office to another country 

Transfer Pricing Aspects of BEPS

Transfer pricing is hot. The globalisation and also the rise of multinational enterprises make transfer pricing one of the most important themes on international taxes. Transfer pricing is moreover a key focus of the OECD’s Base Erosion & Profit Shifting (BEPS) project.

In the future, there will be far more emphasis on the substance and the economic behaviour underpinning the transaction in the context of the entire value chain, as opposed to the contractual analysis. The finalised guidelines, which provide for increased levels of TP documentation, will also result in unprecedented levels of transparency.

Overall, it is clear that the BEPS initiative is one of the biggest game-changers in international tax policy in living memory. The impact of the Action Plan will fundamentally change the way multinational organisations engage in international business, related-party dealings and business restructurings in the future.

SlideShare Presentation: Transfer Pricing and BEPS

Transfer pricing policy assessment

Transfer pricing is a key focus of the OECD’s Base Erosion & Profit Shifting (BEPS) project and has been publicly described as a device that may be used by multinational companies and their advisers to avoid paying taxes.

In general, it is important that companies regularly confirm their transfer pricing policies comply with applicable laws and regulations in form and substance, and even more so now, as we enter this period of enhanced scrutiny of transfer pricing.

• Transfer pricing policies: Where are the potentially most vulnerable points (e.g., continuing losses, valuation of transferred intellectual property)?
• Operating structures: Does income reflect economic activity (e.g., use and exploitation of intangibles)?
• International financing and organizational structures: Are the structures sustainable in light of BEPS?

Failure to achieve intended transfer pricing results can also lead to unwanted scrutiny by tax authorities in the context of BEPS. As a result, it is important that your company determine it has appropriate, Operational Transfer Pricing (OTP)-related controls and infrastructure (i.e., resources and enabling technologies) in place to help manage the intercompany process effectively.

State aid: Belgian Carat Tax

Companies in Belgium are subject to a 33.99% tax on profit, meaning companies in competing diamond centres such as Dubai or Hong Kong, taxed at 16.5%, are biting at their heels. After years of discussion between the Antwerp diamond industry and the Belgian Government, in 2015 it was decided to introduce the "Diamond Regime" tax system, pending European Commission approval.

On 29 July 2016, the European Commission announced that the fiscal regime does not constitute State aid, and gave the green light for the "Carat Tax". Implementation of this new tax regime will put an end to complex discussions between the Antwerp diamond industry and tax authorities on the control and valuation of diamond traders' stock.

More information:

https://www.linkedin.com/pulse/state-aid-belgian-carat-tax-dirk-de-wolf?trk=hp-feed-article-title-publish

Belgium's excess profit tax ruling system

On 11 January 2016, the European Commission (EC) again used Tax State Aid arguments to combat tax planning by multinationals when it announced its final decision in the formal state aid investigation into the Belgian 'excess profit rulings'. Under the Belgian 'excess profit' tax scheme,  applicable since 2005, multinationals are permitted in certain circumstances to write down their actual taxable profits by comparison with the hypothetical profit that a stand-alone company would have made in a comparable situation.

The EC concluded that the rulings only benefit multinational groups whilst Belgian companies only active in Belgium could not claim similar benefits. The rulings, therefore, represented a distortion of competition within the EU's Single Market. The EC also concluded that the 'excess profit rulings' constitute illegal state aid and estimated that Belgium needs to recover around 700 million Euro in total from at least 35 multinationals.

Belgium, other Member States, the beneficiaries of the 'excess profit rulings' or other parties who are directly and individually concerned by the decision may challenge it before the EU General Court under Article 263 of the TFEU. Belgium filed its appeal against the decision on 22 March 2016. In the action for annulment, the Belgian Government focused on a number of arguments, which encompass various pleas in law referring to the procedural aspects of the EC investigation and specific arguments given by the EC in the final Decision.

More information:

https://www.linkedin.com/pulse/state-aid-belgian-excess-profit-rulings-dirk-de-wolf?trk=hp-feed-article-title-publish

European Commission proposes public tax transparency rules for multinationals

On 12 April 2016, the European Commission (EC) introduced a legislative proposal on public reporting requirements for large multinational enterprises (MNEs), being multinational groups with a consolidated turnover exceeding 750 million EUR.  The so-called Country-by-Country Reporting (CbCR) will force large multinational enterprises to publish country specific profits and tax payments.

The current efforts for changes in the EU tax policy are directly linked to the OECD project on Base Erosion and Profit Shifting (BEPS). Among the 15 action points of BEPS, transparency plays a central role. Action point 13 - 'Transfer Pricing Documentation and Country-by-Country Reporting' - addresses the issue of more transparency explicitly. A first step by the EC refers to the so-called "Anti-Tax Avoidance Package".

In its Anti-Tax Avoidance Package, released in January 2016, the EC already indicated it was looking at the issue of public CbCR. The current legislative proposal to introduce public CbCR is published only a few weeks after the Council of the European Union reached political agreement on non-public CbCR to national tax authorities of the EU Member States. It is yet another EU initiative aimed at enhancing transparency and public scrutiny on corporate income tax affairs of MNEs.

CbCR is seen as a powerful tool to fight profit shifting by MNEs. They shall be obliged to provide financial figures such as the net turnover (including that with related parties), profit/loss before tax and number of employees as well as the nature of the enterprise's activity, the amount of accumulated earnings and the current year corporate income tax accrued and corporate income tax paid (differences between amounts of tax paid and tax accrued at group level must be explained). However, for legal reasons the CbCR will be limited to EU countries while for the rest of the world only aggregated figures will be provided.

The EC proposal goes further than OECD BEPS Action 13 requirements regarding the disclosure of information to tax authorities. This report must be published and made accessible on the corporate website in at least one of the official languages of the EU and filed with the appropriate business register.

Neutralising the Effects of Hybrid Mismatch Arrangements

The final report recommended that changes be made both to domestic law and the OECD Model Tax Convention in order to neutralize the effects of hybrid mismatch arrangements, which necessarily exploit differences in tax treatment of a single entity or instrument under the laws of two or more tax jurisdictions to achieve double non-taxation including long-term deferral.

Part 1 of the report for Action 2 basically recommends the linking of rules that align the tax treatment of an instrument or entity with the tax treatment in the counterparty jurisdiction but otherwise do not disturb commercial outcomes. Also, Part 2 aims to ensure that hybrid instruments and entities do not abuse the treaty benefits and will not prevent the application of the changes in domestic law as recommended in Part 1.

https://www.linkedin.com/pulse/beps-action-plan-2-hybrid-mismatch-arrangements-dirk-de-wolf?trk=hp-feed-article-title-publish

The Action Plan is clearly ambitious in scope and timing and some actions will be easier to implement than others, yet there is broad political support for at least some change to the international tax system.

ECOFIN reaches political agreement on CbCR

On 8 March 2016, the Council of the European Union (ECOFIN) reached a political agreement on the European Commission's proposal to implement country-by-country reporting (CbCR) to local tax administration, as well as the exchange of the reports between them.

The agreement is, however, still subject to the scrutiny of the UK parliament. This is a first step towards adoption of the European Commission's proposal, which was included in its Anti-Tax Avoidance Package published on 28 January 2016.

 

http://dirkdewolf.blogspot.be/2016/02/launch-of-anti-tax-avoidance-package.html

 

The agreement entails the mandatory exchange of tax-related financial information rules which will apply to multinational companies operating cross-border in the European Union. After the implementation, all Member States will have all the necessary financial information in order to protect their tax bases by addressing the companies that try to avoid paying their so-called 'fair share' of taxes in the country where their profits originate from.

 

http://europa.eu/rapid/press-release_IP-16-663_en.htm

 

The CbCR rules are seen as a necessary complement to the OECD guidelines on BEPS.

Treaty shopping and BEPS action 6

Action 6 (Treaty Abuse) is a key element of the OECD's BEPS Project. Action 6 handles treaty abuse, and in particular, Treaty Shopping, which allegedly is one of the most important BEPS Action plan concerns.

What is the OECD trying to achieve?

Double taxation treaties are agreements between two countries that aim to eliminate the double taxation of income which would otherwise be taxable in both countries under their domestic tax rules. The OECD is concerned that multinational groups may be structuring transactions to take advantage of more favourable treaties (treaty shopping) and/or engaging in tax planning arrangements using treaties in such a way they may result in double non-taxation.

Treaty shopping, i.e., where a person in country A, which is not, in principle, eligible to benefit from a given tax treaty with country B, invests through an entity in country C to benefit from the treaty. More generally, Action 6 intends to prevent the granting of treaty benefits in inappropriate circumstances.

 

Launch of the Anti-Tax Avoidance Package

On 28 January 2016, the European Commission (EC) presented its Anti-Tax Avoidance Package (ATAP) that contains proposed measures to planning, boost tax transparency and create a level playing field for all businesses in the European Union.

 

ATAP consists of seven parts:

• legislative proposals for an Anti-Tax Avoidance Directive (draft ATA Directive);
• legislative proposals for an amendment to Directive 2011/16/EU to coordinate implementation of G20/OECD BEPS country-by-country reporting (CBCR) requirements;
• a proposed 'EC Recommendation' to Member States on the implementation of G20/OECD BEPS recommendations on tax treaty abuse and on permanent establishments;
• a general policy 'Communication' on the ATAP and the proposed way forward;
• a general policy 'Communication' on an EU external strategy for effective taxation;
• an EC Staff Working Document; and
• a study on Aggressive Tax Planning.

Comments:

1. The EC's new proposals to crack down on multinational companies avoiding paying tax in countries they earn their profits won't be enough to fight tax havens, according to NGOs. http://www.euractiv.com/section/euro-finance/news/eu-s-anti-tax-avoidance-package-likely-to-fail-say-ngos/
2. Recommendations on amending tax treaties:
   ° ensure implementation of new PE definition
   ° advice on how to revise tax treaties against abuse
   ° focus on how to do it in EU law compliant way
3. The proposal for an ATA Directive could be seen as a first step toward harmonization in the context of the fight against base erosion and profit shifting. The EC continues to favour the adoption of the CCCTB, despite its rejection by many member states.

31 Countries Signed MCAA To Boost Transparency In International Tax Matters

On 27 January 2016, 31 countries signed the Multilateral Competent Authority Agreement (MCAA), which will bring greater sharing of information in international tax matters. The MCCA provides for the automatic exchange of Country-by-Country reports, enabling tax administrations to obtain a complete understanding of how multinational enterprise operations are structured across the value chain, while ensuring the confidentiality of such information.

‘Country-by-Country reporting will have an immediate impact in boosting international co-operation on tax issues, by enhancing the transparency of multinational enterprises’ operations,’ said OECD Secretary-General Angel Gurría. ‘Under this multilateral agreement, information will be exchanged between tax administrations, giving them a single, global picture on the key indicators of multinational businesses. This is a much-needed tool towards the goal of ensuring that companies pay their fair share of tax, and would not have been possible without the BEPS Project.’

This agreement, which covers BEPS Action 13 (Transfer Pricing Documentation & Country-by-Country Reporting), requires large companies operating in multiple jurisdictions to “report to their country of residence specified information regarding each jurisdiction in which the group operates,” including “revenues, profits, income tax paid, stated capital, accumulated earnings, number of employees, and tangible assets.”

First exchanges will start in 2017-2018 on 2016 information, depending on local implementation of CbC reporting requirements. In case information fails to be exchanged, the Action 13 report provides for alternative filing so that the playing field is levelled – although again this will depend on how the OECD recommendations are implemented in each territory.

Tax rulings and fiscal state aid in the EU

Since June 2013, the European Commission started a sweeping crusade against tax rulings, alleging that companies have received state aid in form of tax relief through tax rulings.

 

"The main reason behind our state aid action is the realization that governments can distort competition in the Single Market not only by granting subsidies but also by offering sweetheart tax deals. In particular, the deals we have identified benefit only a handful of large multinationals that can put enticing investments and job opportunities on the negotiating table. Smaller companies cannot wield the same bargaining power."

 

February 3, 2015: EU Commission starts proceeding against Belgium's excess profit ruling system

February 25, 2015: "Unhappy Meal" report - EU/US trade unions call for action from EU Commission

May 26, 2015: Amazon introduced a new tax structure in the UK, Germany, Italy and Spain. The Commission said it "will consider changes to the group tax structure, but these changes going forward don't affect any advantages the company may have received in the past."

 

The Commission in October 2015 decided that tax rulings for Fiat in Luxembourg and Starbucks in the Netherlands granted illegal selective tax advantages to the companies in breach of EU state aid rules. The Commission also has ongoing in-depth state aid investigations into tax rulings concerning Apple in Ireland, Amazon in Luxembourg and Belgium's "excess profit" ruling system.

 

More information: https://zwitsersbankgeheim.wordpress.com/2016/01/01/taxation-and-eu-state-aid-law/

 

2015 Global Tax Policy Trends

There is a global trend towards transparency in tax matters and, consequently, transparency may well be the watchword of 2015.

The impact of regulation continues to present a challenge for financial services providers globally. Since the global financial crisis, governments and regulators have been focusing their attention on altering, tightening and clarifying rules to increase confidence in the financial services industry, deter financial crime, provide greater tax transparency and increase tax revenue by reducing evasion. These measures however can have far reaching implications, with changes in one jurisdiction or economic area having the potential to present changes on a global basis. One of the best examples of this is FATCA.

A further challenge awaits financial institutions in the next initiative in global tax transparency - the Common Reporting Standard (CRS) - which comes into effect in January 2016 and is a global initiative compared to the US centric FATCA.

Initiatives seeking increased transparency between taxpayers and tax authorities derive their momentum from a number of factors that include development issues, ideas of fairness, government crackdowns on tax avoidance and advances in technology.

Future tax trends for 2016:

• An increase in the number of disclosure facilities;
• An increased focus on taxation by national tax authorities and international economic bodies, including increased investigations and improved sophistication in the use of data and systems.

Follow-up Special Committee on Tax Rulings

The work of Parliament's Special Committee on Tax Rulings will be continued under a new mandate for six months, starting on 2 December.

 

The Conference of Presidents of political group leaders decided unanimously to create a special committee as a successor to the special committee on tax rulings (TAXE), which saw its final report adopted on Wednesday 25 November. In the resolution which went with the report, Parliament set out its ideas on how to make corporate taxes fairer across Europe and urged EU member states to agree on mandatory country-by-country reporting by multinationals of profits and taxes, a common consolidated corporate tax base, common definitions for tax terms and more transparency and accountability with regard to their national tax rulings for companies.

 

The Committee's work will focus on harmful corporate tax regimes and practices at European and international level.

 

More information:  https://www.linkedin.com/pulse/special-committee-tax-rulings-dirk-de-wolf?trk=mp-author-card

Tax good governance in the world as seen by EU countries

On 12 October 2015, the European Commission pu­blished an update of its list of third country jurisdic­tions that have been identified by EU member states for tax purposes. The update reflects changes in EU member states‘ assessments of third countries‘ tax good governance standards, corrections to national lists and Estonia‘s decision to withdraw all countries from its national list.

 

While the Commission´s ultimate goal, to develop a common EU approach to third countries in the promo­tion tax transparency, good governance and possibly effective taxation standards, is not yet within reach, the Commission is hoping that the list will encourage member states to update their lists more regularly. Annual updates of member states´ lists are planned. Unlike the list published by the Commission on 17 June 2015, the new list avoids giving the impression of an EU list and specific mention of the most-listed countries.

 

The previous list had been criticized for containing outdated information, and for not taking into account the transparency criteria monitored by the OECD Global Forum. The CFE has contributed to the up­date process in the Commission´s multi-stakeholder Platform for Tax Good Governance.

 

More information: http://ec.europa.eu/taxation_customs/taxation/gen_info/good_governance_matters/lists_of_countries/index_en.htm?wtdebug=true

 

 

Implications Of The OECD/G20 Base Erosion And Profit Shifting Project

The Subcommittee on Tax Policy of the House Ways and Means Committee has scheduled a public hearing for December 1, 2015, on the Base Erosion and Profit Shifting Project conducted by the Organization for Economic Cooperation and Development at the request of the Group of Twenty ("OECD/G20 BEPS Project").

The Senate Committee on Finance has scheduled a public hearing on December 1, 2015, titled "International Tax: OECD BEPS and EU State Aid." This document, prepared by the staff of the Joint Committee on Taxation, provides background on the OECD/G20 BEPS Project, an overview of its findings and recommendations, and a discussion of its potential implications for U.S. tax policy.

More information: https://www.jct.gov/publications.html?func=startdown&id=4853

FATCA & CRS - Belgian Bill of Law

As of 2017, the Belgian fiscal authorities will be able to acquire an almost complete overview of the revenues generated and deposited by Belgians in other countries who are member of the European Union.

On 13 November, the Belgian Government introduced a bill of law implementing the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS). The bill has still to be discussed, potentially amended and then adopted in committee and plenary session before being enacted.

 

The bill of law covers simultaneously FATCA and CRS (the latter being implemented pursuant to both the OECD/Council of Europe Multilateral Convention and the Directive on administrative cooperation in the field of taxation, as amended by Directive 2014/107/EU), provides further details and introduces new obligations and penalties.

 

More information: https://www.linkedin.com/pulse/belgian-bill-law-implementing-fatca-crs-dirk-de-wolf?trk=hp-feed-article-title-like

 

Savings taxation directive repealed

On November 10, the European Council repealed Directive 2003/48/EC on the taxation of savings income.

Brief Background

 

The 2003 EUSD, which originally came into effect on 1 July 2005, was introduced as an European approach to attacking banking secrecy. It provides a mechanism whereby EU Member States automatically exchange information about interest earned in one Member State by a resident of another Member State. Only Belgium, Luxembourg and Austria were entitled, during a transitional period, to levy a withholding tax at a rate of, currently, 35% in place of information exchange. Belgium switched, in January 2010, to the automatic exchange of information. From 1 January 2015, Luxembourg will apply the automatic exchange of information on interest payments made by a paying agent established in Luxembourg to individuals resident in another Member State. The first information exchange will take place in early 2016 with respect to interest payments made in 2015.

Although the legal scope of the EUSD does not extend outside the EU, certain jurisdictions, such as Switzerland, Jersey, Guernsey and the Isle of Man, have agreed to put in place legislation that supports the aims of the EUSD with bilateral agreements with all EU Member States. The EU savings agreements with Switzerland introduced equivalent measures, based around Switzerland paying agents withholding tax of 35% from certain payments to EU residents, with that tax  being (mostly) transferred to the Member States of residence of the taxpayer and being (fully) available as a credit or repayment in that Member State upon full declaration of the income by the taxpayer. To avoid the withholding tax, the account holder has an option of disclosure to the Tax administration of his Member State.

Amended EUSD

Since 2009, on the basis of a proposal presented by the European Commission in November 2008, the EU has broadly agreed on enhancements that need to be made to strengthen the EUSD, mainly by extending its product scope, adding rules for identifying the owners of interest and dealing with artificial or tax exempt intermediary structures. On April 15, 2014 the Council Directive 2014/48/EU of 24 March 2014, amending Directive 2003/48/EC on taxation of savings income in the form of interest payments was published. In addition to the wider range of financial products (this would include life insurance contracts, as well as a broader coverage of investment funds), the amended EUSD will also extend the scope of the savings tax rules to payments made to a significantly broader range of entities such as trusts and foundations.

The proposed amendments were approved by the European Council on 24 March 2014 with the adoption of Directive 2014/48/EU. Member States were now required to adopt the laws, regulations and administrative provisions necessary to comply with the amended EUSD by January 1, 2016. The automatic exchange of information concerning income from securities and life insurances, and concerning the interest payments to entities and legal arrangements would be effective as of January 1, 2017.

EUSD Repealed

The EUSD was repealed following the introduction of a series of measures aimed at preventing tax evasion, and because of developments that are to usher in automatic tax information exchange. In December 2014, the Council adopted Directive 2014/107/EU, which brings interest, dividends, gross proceeds from the sale of financial assets and other income, and account balances within the scope of the automatic exchange of information between Member States. The Directive provides for the implementation of the single global standard on the automatic exchange of information developed by the OECD. It will enter into force on January 1, 2016 and Member States will begin exchanging the information required by the end of September 2017. Austria will apply the Directive a year later than other EU Member States.

Press release: http://www.consilium.europa.eu/en/press/press-releases/2015/11/10-savings-taxation-directive-repealed/

 

 

Belgian fight against tax evasion

As a reminder, the international automatic exchange of financial account information is considered by most countries as particularly efficient in the fight against tax evasion and international tax fraud and is becoming the new global standard (considering the US FATCA legislation, the OECD Common Reporting Standard).

- The Belgian Council of Ministers has approved a draft bill. The draft bill aims at implementing the automatic exchange of information of financial account information between Belgium and cooperating jurisdictions provided for in various legal instruments such as the Directive on Administrative Cooperation as amended on 9 December 2014. The draft bill mainly focuses on the transfer of information from Belgian Financial Institutions to the Belgian competent authority, so that the latter can comply with its obligations towards foreign jurisdictions.

 

- A new measure regarding fiscal amnesty will be introduced in 2016.

- Cayman Tax (Look-through taxation)

The 'Cayman tax' is named after the Cayman Islands and it is presented as the instrument to hit high net worth individuals who had been able to legally escape taxation by parking their wealth in trusts, foundations or offshore companies. Since Belgium does not have any wealth tax or capital gains tax for individuals, the Cayman tax must shift some of the tax burden from employment to wealth.

 

The draft bill containing the Cayman tax was approved by Parliament on 24 July 2015 and the bill of 10 August 2015 ("the Bill") was published in the Belgian official Gazette on 18 August 2015. The Bill provides that the Cayman Tax will apply to income received, attributed or made payable by legal arrangements as of 1st January 2015, so with retroactive effect.

In essence, if Belgium based individuals have parked assets abroad with lowly taxed foreign legal structures (lacking any relevant business substance), the structure will be considered transparent for Belgium personal tax purposes and the Belgium based individual will be directly taxed on the income earned by foreign legal structure.

- In 2017 and 2018, the Belgian tax authorities will focus even more on combating tax fraud.

 

First non-US group request

The Swiss tax office (FTA) has agreed to a request from the Netherlands to hand over information about Dutch nationals with accounts at the biggest banking group in Switzerland, UBS. This is the first time the FTA has accepted a group request from a country other than the United States. The request is made possible by the revised Federal Act on International Administrative Assistance instead of requiring specific client names.

 

The request

 

The request target Dutch nationals who have had more than 1500 EUR on their accounts over the past two years and did not reply to a letter from the Swiss authorities about potential illicit savings. The request is extremely broad and smells like a 'fishing expedition': too vague. The Netherlands basis its claim on a tax treaty (2011) with Switzerland on the exchange of tax information. But in that tax treaty nothing is settled on the group requests.

 

The tax treaty

 

On November 9, 2011, the tax treaty between the Netherlands and Switzerland, that was signed in February 2010, entered into force. It will apply to tax years and tax periods that commence on or after January 1, 2012. Consequently, Switzerland agreed to exchange information in tax matters if so requested; a stance that also applies to its relations with the Netherlands. This exchange of information not only relates to the application of the tax treaty, but also to requests for information regarding the tax levied on the taxpayer. Switzerland may no longer use banking secrecy as a ground for refusal once the treaty enters into force. Fishing expeditions are not permitted, and the treaty countries are also not required to automatically or spontaneously exchange information. The new provision for the exchange of information will apply to requests made on or after November 9, 2011. These requests must concern information relating to facts arising after February 28, 2010. The Netherlands and the Swiss authorities signed an additional agreement at the end of October 2011. To receive information, the Dutch Revenue does not necessarily have to know the name of the party or bank in question. Other data, for example a bank account number, are sufficient for a request for information to be made. The additional agreement also applies as of November 9, 2011.

 

This case raises the question of whether other states will start to hand in group requests as well. There are a total of 27 states which have a double tax treaty with an administrative assistance clause which permits group requests.

 

Press release: Bund will UBS-Kundendaten nach Holland liefern http://www.handelszeitung.ch/unternehmen/bund-will-ubs-kundendaten-nach-holland-liefern-913504