Heavenly havens
Article published by Catherine Moye in Financial Times (www.ft.com) on July 19 2008

The phrase "tax haven" conjures a twin image of swimming pools and tedious form filling; of meeting to discuss your financial affairs with a Hawaiian-shirted adviser under a coconut palm. But never before has the package of fiscal inducements that exotic islands offer looked so alluring to wealthy people battered by the current financial markets and looking to shore up their assets in idyllic settings.

Whether it be retirees consolidating their pensions, entrepreneurs looking to establish off-shore companies or individuals on the hunt for centres of low taxation, the market is as international as the destinations. The mobile nature of modern-day business has further liberated high-flyers from key commercial capitals.

"Many people who have made money assume that the only thing to do is to move abroad," says Duncan MacIntyre, head of Coutts Private Office, which manages the needs of the ultra-wealthy. "But often their wants are different to their needs. I had one client who called me from his wardrobe in a hurricane saying 'get me the hell out of here'." And MacIntyre, the majority of whose clients are British, also points out that entrepreneurs are getting younger and the practicalities of living overseas, such as educating children, can be a challenge.

Nevertheless, the lure of fat financial carrots combined with blue seas and pristine beaches is fuelling a market that, for example, allows islands such as Anguilla in the Caribbean to offer luxury houses priced at $36m.

The Caribbean

Of all of the world's low-tax islands, the most winning ledger-lifestyle combinations can be found here. Several islands openly compete for the attentions of the rich: including Anguilla, Bermuda, Barbados, the Bahamas, the Cayman Islands, Grenada, Nevis and the Turks and Caicos.

Although details vary, as a rule of thumb there are no income, capital gains, value added, sales or wealth taxes. Barbados has developed a range of offshore formats. In the Cayman Islands, there are no taxes other than import duties and 7.5 per cent stamp duty on the transfer of real estate.

Barbados will charge 20 per cent tax on any rental income you receive from your property but this is not so in any of the others.

"High-net worth individuals are not only more numerous than ever before, they're more interested in tax havens in exotic locations," says James Hickman of Caxton FX, a specialist currency exchange company.

Those who want to take advantage of personal tax breaks through residency status are generally required to own a home and the islands will apparently go to any lengths to attract investors. Anguilla, Grenada, the Turks and Caicos, the Bahamas and Bermuda are all constructing homes with berths big enough to accommodate the rise in ownership of "super yachts" (over 24 metres long). "Marinas have overtaken golf as the key driver at the top end of the second-homes market," says James Price of estate agency Knight Frank.

Mauritius

Well-situated between India, Africa and Asia, Mauritius was hardly a dot on the second homes map before 2005, when property ownership was opened to foreigners. This attracted a slew of upmarket resort-style developments, such as Villas Valriche and the Banyan Tree group's complex at Corniche Bay. Three years later Mauritius is a fixed star in the second homes firmament. Its favourable tax treaties with more than 30 countries can be combined with its off-shore companies laws to produce very good results. The purchase of a villa allows for residency and qualification for its 15 per cent tax rates. There is no inheritance or capital gains tax.

Seychelles

When the Seychelles offered property ownership to foreigners three years ago the islands became as attractive to investors for their very-few-strings-attached attitude towards tax as their lush setting. There is no income, capital gains or inheritance tax, although rental income is counted as company income and is subject to a progressive tax rate of 25 per cent and up.

Resort developments by leading hotel groups such as the Four Seasons, Banyan Tree and the spa company Per Aquum have underscored the islands' intention to pitch themselves at the upper end of the market.

The Islands of the World development - Dubai

If pearls can be cultured and salmon farmed, "the world" can be sucked from the waters of the Persian Gulf and sold. So believes Nakheel, the property developer offshoot of Dubai's government that is creating the Islands of the World - a 300-island verisimilitude of planet earth just off the country's coast. And while the development carries no extra tax incentives, it hardly needs to, according to Alex Upson at estate agency Cluttons. "Every foreigner in Dubai is attracted by the tax free environment. There are very few who go only for the lifestyle or the job opportunities," he explains.

In essence there are no income or capital taxes in Dubai. It has several double taxation treaties (which prevent people having to pay in both their country of origin and their place of residence) with high-tax countries and is often used in international tax planning by large corporations that have made it their headquarters.

In recent years the country has made great efforts to improve its financial reputation. "You had people turning up with suitcases of money to purchase property and the banks would take it over the counter," says Upson. "You can't do that today. There are strict procedures in place and everything has to have a proper paper trail."

Southern Cyprus

By 2020 an extra 2.3m Britons over the age of 50 (one in five retirees) will have retired abroad, according to research by Alliance and Leicester International. Many of those, like 68-year-old Andy Leck and his wife, Eileen, will be heading to the Mediterranean island of Cyprus.

"The climate was the most important thing attracting us, then the 5 per cent tax on my pension- I was paying 40 per cent back home," says Leck, a former chief executive with a house-building company. "That means I save £40,000 a year by being in Cyprus rather than Britain."

Leck is among those taking advantage of Cyprus's double tax treaties with 33 countries, including most western "high-tax" countries and most central and eastern European states. Nearly 50,000 off-shore companies are registered on the island.

Aware that Cyprus is attractive for retirees, developers the Leptos Group, is directly targeting its Apollo Beach Villas, a beachfront development close to a proposed marina, at this valuable market.

Madeira

Madeira is somehow still redolent of the era of elegant liners calling on route to the southern hemisphere. The island government has a good degree of autonomy from Portugal but most legislation - including tax - is Portuguese. Its 46 double taxation treatiesare very attractive to retirees.

Malta

The "Switzerland of the Mediterranean", Malta lies 100km south of Sicily. It has a population of 400,000, a warm climate and a Westminster-style democracy. As a politically-stable, English-speaking retirement destination, it has experienced a real-estate boom, especially since joining the European Union in 2004. Malta has moderately high internal taxes such as value added tax but offers low tax regimes to companies and individuals.

Jersey and Guernsey

The Channel Islands have numerous low-tax business and personal incentives. What they do not have is guaranteed sun.

"No one really wants to go and live in a freezing tax haven and today people like the excitement of a completely different lifestyle," says David Franks, of European financial advice group Blevins Franks. "But the advantage of a British tax haven (including the Isle of Man) is that at least you can return to the mainland to take care of business or to visit friends and family." Not that, as Franks points out, the UK itself isn't busily flaunting its own tax appeal.

"Britain is incredibly attractive to non-domiciles," he observes. "The government realises that the wealthy create employment and that the economy benefits. They even get more tax - just indirectly."

With people the world over owning two, three or even several overseas homes, the relationship between government fiscal generosity and quality property is likely to become ever more intimate.

This Blog/Web Site ("Blog") does not to provide specific legal advice, it is for educational purposes only. This Blog is made available by the international adviser, lawyer or law firm for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice.

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More information:

http://www.jpa-iac.com/en/
http://www.braxton-co.com/en/
http://www.tax-international.com
http://www.braxton-group.com

Banco de inversión junto a Banca de retail

Si la FED sigue adelante con su idea de obligar a los bancos de inversión a mantener niveles de reservas similares a los de los bancos de retail o comerciales, una buena parte del atractivo de los primeros se esfuma. Independientemente de que estemos o no de acuerdo con esta medida (al fin y al cabo, los bancos de inversión como Goldman Sachs "juegan" en gran parte con su dinero), esto podría provocar fusiones y adquisiciones importantes entre los dos. De esta forma, se absorvería la parte más volátil de los bancos de inversión con la estabilidad, el capital y la capacidad de captar ahorro del banco de retail.

Quizás sea la solución de Merrill Lynch. Si compra un banco comercial con poca exposición a la crisis subprime, podría paliar el mal momento de los mercados de titularización (y, por tanto, su balance), no está claro la financiación a corto que recibe de otros bancos (pues obviamente no se trata de que la división de banca comercial financie a la de inversión; mala práctica que puede explicar la magnitud del riesgo que asumió UBS), pero el modelo de negocio de la banca comercial, grande, aburrido, con depósitos y retornos estables, puede ser una buena contraparte del mundo especulador de la banca de inversión. Quizás sería sólo una solución a corto plazo. El ejemplo de Citibank a mostrado que no es facil combinar diferentes negocios.

Salvador Trinxet, abogado, banquero y Profesor de IESE.

Less regulation in the case of SEC?

U.S. Securities & Exchange Commission member Paul Atkins recently co-wrote an article claiming that enforcement issues are so egregious that the SEC needs to set up an independent review panel. The last time the SEC had one was 36 years ago.

These are excerps from the article:

Financial markets and their regulatory landscape have changed markedly in the past three and a half decades since an independent panel reviewed the SEC's enforcement program. It is time to convene a similar panel to bring the program up to date. The Division of Enforcement of the U.S. Securities Exchange Commission has a proud history and many dedicated attorneys, accountants and other staff. Thirty-six years after its creation, the Enforcement Division is larger, stronger and more visible than anyone at the time could have imagined.

In the 36 years since the Wells Committee set out its recommendations, financial markets have changed tremendously, and corporate scandals have rocked both Wall Street and Main Street. In response, Congress gave the SEC significantly more enforcement authority, much of it penal in nature. The SEC now can impose multimillion-dollar penalties against corporations and individuals, bar individuals from serving as officers and directors of corporations, and prevent professionals such as accountants and securities lawyers from practicing before the SEC. Some believe that in exercising these new punitive powers, the SEC has shifted its focus without adjusting its due process protections along the way. It is time for the commission to convene a new advisory committee, in a spirit similar to that of the Wells Committee, to conduct an independent review of the SEC's enforcement program and to recommend any needed changes to modernize enforcement practices. As the Wells Committee did, this new committee also should examine whether the SEC is taking appropriate steps to protect the rights of defendants and to provide appropriate due process. Although much has changed since the original Wells Committee did its work, the same philosophical and practical concerns exist today. Therefore, the new advisory committee could adopt essentially the same mandate as that of the Wells Committee in 1972.

Among the many issues that would fall under this broad mandate would be the implementation of mechanisms to provide more efficacy, predictability and transparency to the enforcement program. As an agency tasked with enforcing laws and regulations mandating transparency, the SEC itself must provide transparency to the public in its enforcement practices. Predictability and transparency provide for a fair process that respects the rights of all parties involved and ensures adherence to the rule of law.

The SEC is governed by a five-member commission, each of whom is appointed by the president with Senate confirmation. The commission delegates to the career staff investigative authority, but the commission retains the decision by majority vote to issue subpoenas and to sue defendants or settle with them. The most important Wells Committee recommendation was that the enforcement staff should give notice to a prospective defendant of the potential charges to be asserted against him before the enforcement division seeks authority from the commission to sue. This policy change was a key protection of due process, and gave a defendant the ability to defend himself on the basis of facts and the law. Thus, the formal defense submission in response to the notice came to be known as a "Wells Submission." Often, the facts uncovered in investigations indicate that no action should be taken against a potential defendant, or a Wells Submission may be persuasive in arguing against an action. Sometimes, however, institutional and other factors may make it difficult to drop a matter altogether. The ability of the Enforcement Division to recommend that no action be taken in a particular matter based on the facts and law should be encouraged and institutionalized. This will require a re-evaluation of the incentives for bringing actions and obtaining penalties, such as through promotions, awards and public recognition of SEC staff. An evaluation system should focus on rewarding high-quality efforts and professionalism regardless of the outcome of particular actions. In some instances, exercising discretion may not be appropriate. There should not be institutional encouragement for using discretion to formulate theories of liability that overstep the boundaries of existing law.
Standards are set through the legislative process in Congress and through the SEC's rule-making process; it is not the function of the Enforcement Division. Rule making through enforcement violates the fundamental principles of due process that Congress established in the Administrative Procedure Act, which requires regulatory agencies to give notice and seek (and respond to) comment from the public before adopting or changing rules. In the recent past, federal courts have nullified various SEC rule-making attempts because the agency did not follow proper procedure or overstepped its authority in adopting rules.

The U.S. General Accountability Office in 2007 strongly criticized the Enforcement Division for not promptly closing investigations at their conclusion. When the commission or its staff determines that an investigation should be closed or action is not warranted, the agency should promptly send a closing letter, not only to those who have made a Wells Submission but also to any significant nonparty who has been involved in the investigation. The advisory committee also should consider bolstering the Wells Submission process by permitting a proposed defendant to appear before the commission to oppose the initiation of an enforcement proceeding. Although it would be both unnecessary and unmanageable to allow such an "oral Wells Submission" in every matter, it may be beneficial to both the commission and proposed defendants for the commission to have a discretionary avenue to hear from proposed defendants prior to taking action, particularly in complex cases or those in which character assessment is important. A review of the enforcement process would not be complete without a review of the costs to parties responding to an investigation. The SEC must ensure that its investigations and enforcement actions do not impose unnecessary costs. Overly broad subpoenas or document or interview requests add to a responding entity's costs--and not every responding entity becomes a defendant. Compliance with notices to preserve--and subsequent requests to produce--electronic data, including e-mails, voice mails and server backup tapes, is undeniably burdensome and can be very expensive.

It is critical for the SEC to have certain electronic data, but preservation notices and requests for their production are often generic and extend well beyond the boundaries of an existing investigation. The new advisory committee should recommend ways to minimize costs while still ensuring that the SEC can get the information it needs for its investigations. With respect to enforcement policies, the advisory committee should examine the usage, effects, amount and appropriateness of corporate penalties in financial fraud cases, to determine if they are consistent with the SEC's mission to protect investors; maintain fair, orderly and efficient capital markets; and facilitate capital formation.

When evaluating the use of penalties against issuers of securities in financial fraud cases, the advisory committee should, for example, ask, Do penalties protect investors? Do they harm or benefit shareholders? Is the circularity of "Fair Fund" penalty distributions (the company pays--meaning, in effect, the shareholders pay--a penalty, which is put into a fund and then distributed to the company's shareholders) consistent with ensuring fair, orderly and efficient capital markets? Is capital formation impeded by the threat of large, unpredictable issuer penalties? Do we create a moral hazard if we permit officers of companies to agree to a large corporate penalty to avoid or soften actions against culpable individuals? Are individuals deterred from wrongdoing if they expect that shareholders will pay the penalties for the misconduct? And, most important, does the prospect of large issuer penalties and the inevitable press coverage cause the SEC to misallocate resources to use the government's power to pursue weaker cases to the detriment of other types of enforcement actions?.

But thigs may are not giving the reason to Mr. Atkins. The SEC is getting into the act as well with its “emergency order” restricting short trading — not in general, but specifically in the shares in Fannie Mae and Freddie Mac, both of whom are protectorates of the federal government anyway. The SEC’s supposed target is “unlawful manipulation,” which is illegal.

All this in a not very serious maner. Normally in a functioning democracy, lawmakers and federal agencies craft rules through a deliberative process, and those rules apply prospectively across the board. When the government acts through orders rather than legislation or established administrative procedurees to identify emergencies and bogey men, and then seeks to outlaw their practices with hastily drafted decrees — well, that’s when the market makers, who depend on freedom and the established rule of law, should start to worry.

Paul S. Atkins is a commissioner at the U.S. Securities and Exchange Commission. Bradley J. Bondi is legal counsel and policy adviser to Commissioner Atkins. Their article is extracted from “Evaluating the Mission: A Critical Review Of The History And Evolution Of The SEC Enforcement Program,” first published in the Fordham Journal of Corporate and Financial Law.

This Blog/Web Site ("Blog") does not to provide specific legal advice, it is for educational purposes only. This Blog is made available by the international adviser, lawyer or law firm for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice.

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Lack of preparedness for the European Payment Services Directive

A recent IAMTN survey of money service businesses shows a serious lack of preparedness for the implementation of the European Payment Services Directive which comes into force in November 2009 - just 16 months away. Despite the fact that the Payment Services Directive which will impact on all those financial services providing money transfer facilities, IAMTN survey shows that companies have not got to grips with the changes which will impact on their business. The IAMTN response is similar to a survey put out by PSE Consulting exclusively to banks.

Addressing a conference organized by Sidley Austin on the European Payments Services Directive, Lady Olga Maitland, CEO, IAMTN said "Our findings are worrying for the money service sector. Most companies we found have chosen to ignore the changes or make any preparation at all - despite being only 16 months away from the deadline. Bearing in mind that the PSD will have a beneficial effect on the money service sector; giving them a level playing field with banks in Europe - and a great opportunity for both themselves and their customers, it is interesting to note how little attention has been paid to changes which will undoubtedly change the way they operate. "Indeed we found, as indeed did PSE in their survey, that the vast majority of businesses and banks are light years away from preparedness. This will cause massive last minute problems for them."

The Payment Services Directive was approved by the European Parliament in December 2007. Charlie McCreevy, the European Commissioner for Internal Markets and Services, described its objectives as 'generating more competition' providing a simple, harmonized set of rule and ensuring a high level of consumer protection." The PSD will have a revolutionary effect on the legal framework between banks and their customers setting stringent rules for information disclosure, conduct of business rules and service provision. It addition it introduces a new lightly regulated licensed entity called a 'Payments Institution' which may allow non-banks ie. Money service businesses etc to join the bankers' payment schemes and associations across the European Union. It could be said that the money service sector and banks are into new territory. They are unused to implementing prescriptive legislation from the EU. As a consequence smaller institutions appear to be unaware of the potential impact of the PSD on their customers and operations.

While the major international institutions expect to be ready by November 1st, 2009, substantial concerns have appeared for the lack of readiness by smaller banks - let alone the money service businesses. "What was interesting in our survey were those who did NOT respond when it was in their interests for their businesses to take advantage of the new opportunities. Lack of awareness of the changes ahead, like it or not, have not hit them. Among those who did respond, they had a moderate understanding of the changes. Most felt that the impact would be modest. Interestingly it was the small and medium sized businesses who felt that the PSD would be implemented on time. The major institutions did not."

The Majority of respondents to our questionnaire who are more aware than most, admitted they have not yet made any effort to prepare for the changes. Others are keeping their heads down and waiting for the implementation by national governments. Only 11% had made an impact assessment and of that only 7% had agreed a budget for implementation. The others had not got started. As a result they had not consulted with third party providers who would also be involved, ie. The software companies, agency banks, agents and so on. For those who had given some thought, they felt that the greatest effort will fall on adjusting the IT, and updating the terms and conditions. Interestingly we should recall the Capgemini World Payments Report 2007 who also lamented lack of preparedness. But in addition they pointed out that the greatest beneficiaries would be the card sector. They anticipated that by 2012 44% of all non-cash transactions in Europe will be via cards - to the point that Europe needs a 'any card at any terminal solution. Costs. Most believe it will not be that bad.

Banks though are fearful. According to PSE Consulting over 40% of banks surveyed believe that implementation will cost them more than 10m Euros and almost 25% believe it will cost over 50mEuros. Significantly nearly 60% of the banks surveyed do not believe there will be any benefits. Broadly though there is a positive feel about the opportunities. Indeed 61% in the IAMTN survey said there would be a revenue benefit. If there is a wind of change, it will affect the banks the most, who face highly competitive, agile and innovative money service business competition."

This Blog/Web Site ("Blog") does not to provide specific legal advice, it is for educational purposes only. This Blog is made available by the international adviser, lawyer or law firm for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice.

The Blog does not constitute legal advice and is not a substitute for competent legal advice from a licensed attorney in your state. Any comment posted on the Blog can be read by any Blog visitor; do not post confidential or sensitive information. Any links from another site to the Blog are beyond the control of us.

By using this blog site you understand that there is no attorney client relationship between you and the Blog.

The Blog should not be used as a substitute for competent legal advice from a licensed professional adviser or lawyer in your country.

Our firm and do not convey their approval, support or any relationship to any site or organization. The use of this Blog does not implicitly or explicitly convey any warranties or representations as to the accuracy of the information contained herein.

This Blog has created this privacy statement in order to demonstrate our firm commitment to privacy. The following discloses the information gathering and dissemination practices for this Blog.

This Blog takes your privacy very seriously. Our customers told us they want to see clear, easy-to-read information about our privacy commitments and policies. We have made our privacy policies easier to find and easier to read. And we're listening. We welcome your questions and feedback on our privacy policies, and invite you to contact us with your thoughts.

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• We will protect your privacy and keep your personal information safe. We use powerful encryption and other security safeguards to protect customer data, when available.
• We will not sell your personal information to anyone, for any purpose. Period.
• We will fully disclose our privacy policies in plain language, and make our policies easily accessible to you.
• We will notify you of any revisions to our privacy policy, in advance. No surprises.
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This Privacy Policy identifies and describes the way This Blog uses and protects the information we collect about visitors. All use of this Blog is subject to this Privacy Policy.

Use of Location Information
• When your wireless device is on, it sends periodic signals to the nearest cell site. We use that information to provide your wireless services;
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• We collect information about your activity on this Blog for a number of purposes using technologies such as cookies, Web beacons, widgets and server log files.
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We collect different types of personal and other information based on your use of our products and services and our business relationship with you. Some examples include:
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http://www.tax-international.com
http://www.braxton-group.com

Rentas del trabajo con Convenio

El art. 15 Modelo OCDE, que regula el trabajo dependiente, atribuye la potestad de tributación, a diferencia de lo que ocurre en las actividades profesionales, al Estado donde el "empleo se ejerce efectivamente" (donde el trabajador permanece físicamente), el Estado de la fuente, aunque sea residente en otro Estado. Sólo estará gravado e en el Estado de residencia si se dan las siguientes condiciones cumulativas:

a) El empleado permanece en ese Estado más de 183 días durante el año fiscal,
b) Las remuneraciones se pagan por o en nombre de un empleador que no es residente del otro Estado, y
c) Las remuneraciones no se soportan por un E.P. o una base fija que el empleador tiene en el otro Estado.

Por tanto, los rendimientos del trabajo satisfechos por una empresa española a un residente de un Estado con Convenio con España, por trabajos realizados en su Estado de residencia, sólo pueden tributar en ese Estado, estando exentos en España.

Cuando los rendimientos se perciban por un no residente por un empleo ejercido en España, los mismos se someten a gravamen en España. No obstante, el derecho de imposición lo tendrá el Estado de residencia (quedando exentos en España) si se dan, como se ha dicho antes, conjuntamente las siguientes circunstancias:

a) No se permanece en España más de 183 días durante el año fiscal considerado.

b) Las remuneraciones que se perciben se pagan por o en nombre de un empleador que no es residente en España.

c) Las remuneraciones que se perciben no se soportan por un establecimiento permanente o una base fija que la persona empleadora tenga en España.

No se aplica este art. 15 en el caso de Artistas y Deportistas, Pensionistas, funcionarios y por participaciónes de Consejeros. Mediando Convenio, las participaciones, dietas de asistencia y otras retribuciones similares que un residente de un Estado con el que España tenga suscrito Convenio de Doble Imposición obtenga como miembro de un Consejo de Administración de una empresa española pueden someterse a tributación en España al tipo general del 24%, desde 1-1-2007

En cambio, si un consultor ofrece servicios continuados, con un sueldo, se considerarán sus remuneraciones sujetos a este art. 15, según una célebre sentencia danesa.

Retención por rentas de trabajo
Si una empresa española satisface rendimientos del trabajo a un empleado suyo que reside permanentemente en otro Estado con Convenio, por ejemplo Alemania, en principio no tendrá que retenerle. Por un lado, en general, en los Convenios se establece que esas remuneraciones sólo pueden someterse a imposición en el Estado de residencia, si se dan los requisitos mencionados antes.

Por otro lado, la Ley del Impuesto sobre la Renta de no Residentes (LIRNR) establece que los rendimientos de trabajo no se consideran rentas obtenidas en territorio español cuando no deriven, directa o indirectamente, de una actividad personal desarrollada en territorio español.

Esta consideración, distinta de renta exenta, implica que se trata de rentas no sujetas al I.R.N.R. y por tanto tampoco están sujetas a retención. Deberá acreditarse, eso si, la condición como contribuyente no residente mediante un certificado de residencia fiscal expedido por las autoridades fiscales del país de residencia.

Trabajadores fronterizos

Los trabajadores fronterizos residentes en Francia y Portugal que pasan diariamente a España a realizar su trabajo, sólo están sometidos a imposición en el Estado del que son residentes respecto a sus retribuciones por dicho trabajo.

Respecto a los trabajadores de Marruecos al no contemplar el Convenio de Doble Imposición ninguna cláusula especial, los rendimientos que obtengan por su trabajo estarán sometidos a tributación en España al tipo general, desde 1-1-2007, del 24% (para devengos hasta 31-12-2006, al 25%).

US Investigations about Tax Haven Banks

on 17 July, the Subcommittee on Investigations of the U.S. Senate Committee on Homeland Security and Governmental Affairs will hold a hearing titled Tax Haven Banks and U. S. Tax Compliance. According to descriptive blurb on the committee web site, “The Permanent Subcommittee on Investigations hearing will examine how financial institutions located in offshore tax havens, including Liechtenstein and Switzerland, may be engaged in banking practices that could facilitate, and in some instances have resulted in, tax evasion and other misconduct by U.S. clients. The hearing will also examine how U.S. domestic and international tax enforcement efforts could be strengthened. The Subcommittee expects to issue a Subcommittee staff report in conjunction with the hearing summarizing its investigative findings. A witness list will be available Monday, July 14, 2008.”

This Blog/Web Site ("Blog") does not to provide specific legal advice, it is for educational purposes only. This Blog is made available by the international adviser, lawyer or law firm for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice.

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Les paradis fiscaux pour la France

A un article de Le Monde, bien qu'ils soient très régulièrement fustigés, les paradis fiscaux sont aujourd'hui tout sauf des places financières marginales. La mondialisation aidant, ils sont devenus l'un des piliers de la finance mondiale et des milliards de milliards de dollars y transitent chaque année.

Tout circule via les paradis fiscaux : de l'argent propre, sale, des sommes provenant de l'évasion fiscale... Et après les avoir laissés prospérer, les grandes puissances économiques s'inquiètent aujourd'hui de leur essor. A la suite des attentats du 11-Septembre, les Etats-Unis ont réalisé que l'argent du terrorisme y avait en partie transité. Ces derniers mois, plusieurs scandales sont aussi venus démontrer comment ces places favorisaient la fraude fiscale à grande échelle, comme au Liechtenstein, où il a été découvert que plus d'un millier d'Occidentaux - dont 200 Français - y avaient placé leur pécule.

La France est un des principaux pourfendeurs de ces places
Officiellement, il n'existe aucune évaluation de la fraude fiscale réalisée aux dépens de la France via les places offshore. Seul le montant total de la fraude sous toutes ses formes est connu : 29 à 40 milliards d'euros, en 2007, selon le Conseil des prélèvements obligatoires. Malgré tout, ces montants astronomiques ont fait de l'Hexagone un des principaux pourfendeurs des paradis fiscaux.

Aujourd'hui, à Bercy, le dossier est encore plus pris à coeur depuis le scandale du Liechtenstein, au mois de février.

Le 2 avril, un rapport sur la lutte contre la fraude et l'évasion fiscale a donc été présenté. Il prévoit notamment de profiter de la présidence française de l'Union européenne, qui a débuté le 1er juillet, pour lancer un projet de plate-forme de lutte contre la fraude à la TVA : Eurofisc. Bercy souhaite aussi, d'ici à la fin de l'année, octroyer aux agents des impôts des pouvoirs de police judiciaire. A l'avenir, ils pourraient ainsi, sous la tutelle d'un juge, être autorisés à effectuer des perquisitions chez les contribuables fraudeurs.

Lors du sommet du G8 d'Hokkaido au Japon, du lundi 7 au mercredi 9 juin, les paradis fiscaux vont faire partie des grands sujets abordés.

Qu'est-ce qu'un paradis fiscal ? L'imaginaire collectif résume volontiers les paradis fiscaux à des îles dorées, dont la fiscalité est au moins aussi attractive que les cocotiers. C'est parfois le cas, mais c'est souvent plus subtil.

Il n'existe pas de définition unique. Christian Chavagneux et Ronen Palan, auteurs des Paradis fiscaux (La Découverte, 2007, 122 pages, 8,50 euros), distinguent dix critères pour identifier ce type de place. Parmi eux : une taxation faible ou nulle pour les non-résidents, un secret bancaire renforcé, des procédures d'enregistrement souples pour les entreprises qui désirent s'y installer... La variété des définitions engendre de facto des listes plus ou moins longues de paradis fiscaux.

Légal ou pas légal ? Instaurer un régime fiscal attractif n'est pas illégal en soi. Ce sont les types de capitaux attirés qui suscitent généralement les critiques ou la suspicion, car une part non négligeable de l'argent circulant dans les paradis fiscaux correspond à de l'évasion fiscale. Dans une moindre mesure, les criminels utilisent aussi ces places pour blanchir les sommes illégalement gagnées.

Les "paradis" se sont souvent dotés d'un régime fiscal avantageux pour développer un territoire sans ressources, sans industrie, et souvent isolé (Bahamas, Andorre...). Pour certains pays comme la Suisse ou Singapour, c'est le résultat d'un pari stratégique qui consiste à baser l'essentiel de leur développement économique sur "l'industrie de la finance".
C
omment sont-ils nés ? Ils sont apparus dans les années 1880, aux Etats-Unis. A l'époque, les Etats du New Jersey et du Delaware jalousaient New York et le Massachusetts qui concentraient la plupart des sièges sociaux des entreprises et enregistraient, en conséquence, de fortes rentrées fiscales. Pour les concurrencer, le New Jersey a instauré une législation plafonnant l'impôt sur les sociétés. En 1898, le Delaware a fait de même. Aujourd'hui, selon MM. Chavagneux et Palan, "la moitié des entreprises américaines cotées en Bourse ont leur siège social dans le Delaware".

Dans les années 1920, suite à des différends commerciaux, des juges britanniques ont considéré qu'une entreprise anglaise installée à l'étranger et faisant affaire hors du Royaume-Uni ne devait pas être assujettie à l'impôt anglais. Le principe de résidence fictive pour raison fiscale a alors de facto été créé. L'instauration par la Suisse, en 1934, d'une loi punissant pénalement la violation du secret bancaire a parachevé les principes qu'imitent aujourd'hui de nombreuses places.
La première vague de création de paradis fiscaux a eu lieu dans les années 1930. C'est à cette époque, par exemple, que se développent le Liechtenstein ou Gibraltar. La deuxième remonte aux années 1960. Leur expansion est allée de pair avec la mondialisation. Le phénomène se poursuit aujourd'hui, particulièrement en Asie, avec l'essor de Singapour, pays devenu une sorte de "Suisse asiatique"...

Pour ou contre les paradis fiscaux ? Depuis 2002, l'Organisation de coopération et de développement économiques (OCDE) a lancé un vaste programme - le Forum mondial pour la fiscalité - visant à instaurer une "équité et une concurrence loyale" en matière fiscale. A terme, le but est d'obliger les paradis fiscaux, par la négociation, à limiter leur "dumping fiscal". Pour de nombreuses associations, comme le réseau Tax Justice, et les grands argentiers de tout bord, les paradis fiscaux constituent - en plus d'un risque criminel - une vaste incitation à l'évasion fiscale, et donc un manque à gagner pour les Etats. Toutefois, la démarche de l'OCDE ne les satisfait pas toujours, car jugée par certains trop "diplomatique".

Pour de nombreux libéraux, l'action de l'OCDE est au contraire une ingérence inacceptable dans les affaires des pays concernés, voire une forme de "néocolonialisme". Ils estiment que la concurrence fiscale est saine et que les paradis fiscaux ne devraient pas être tenus d'amender leur législation. A leurs yeux, le secret bancaire relève du droit au respect de la vie privée. Ils minimisent les aspects criminogènes, et considèrent que les richesses dégagées par les paradis fiscaux sont, à leur manière, des sources de croissance.

Combien pèsent-ils ? Rares sont les données officielles sur le poids économique des paradis fiscaux. Ils communiquent peu sur les flux qui transitent chez eux, et lorsque certains le font, les experts considèrent que leurs données sont peu fiables. Il faut alors s'en remettre aux estimations régulièrement réalisées par la Banque des règlements internationaux (BRI), la Conférence des Nations unies sur le commerce et le développement (Cnuced), des cabinets d'audit ou des chercheurs. Ces études, forcément approximatives, donnent cependant une idée de l'importance des montants financiers en jeu : des milliards de milliards de dollars.
Les poids économiques des paradis fiscaux sont très variables. Certains ont leur spécialité. Les Bahamas sont le domicile privilégié des fonds spécialisés, la Suisse est en tête pour la gestion de fortune...

Peut-on lever leur secret bancaire ? Au nom du "respect de la vie privée", la plupart des paradis fiscaux ont mis en place un secret bancaire renforcé. Les menaces américaines de rétorsion, lancées après les attentats du 11-Septembre, ont toutefois amené la plupart des places offshore à lever leur secret bancaire en cas d'enquêtes pénales (avec plus ou moins de restrictions). Il s'agissait ainsi de disparaître de listes noires internationales, préjudiciables à leur réputation.

Aujourd'hui, l'OCDE incite les paradis fiscaux à signer le plus grand nombre possible de "conventions d'échange de renseignements", accords bilatéraux entre un paradis fiscal et un pays sur les conditions de levée du secret bancaire. Mais certains pays, comme les Bahamas, n'en ont signé qu'une seule, avec les Etats-Unis, leur plus gros client. Même chose pour Monaco avec la France. D'autres ont paraphé quantité de conventions, mais les conditions pour lever le secret bancaire sont très restreintes. Ainsi, Singapour en a signé avec 53 pays, mais n'autorise l'échange de renseignements que si un "intérêt fiscal national" est en jeu. Soit pratiquement jamais.
Les paradis fiscaux continuent donc de recourir à des artifices pour préserver la confidentialité de leur clientèle : c'est la clé de leur succès. Et, dans certains paradis fiscaux comme la Suisse, l'évasion fiscale n'est pas considérée comme un délit. Aussi refusent-ils de communiquer toute information, en cas d'enquêtes fiscales.

Quelle est la position de l'Union européenne ? L'UE a adopté en 2005 une directive imposant l'échange d'informations fiscales entre ses Etats membres. Cependant, une clause permet aux pays le désirant de ne pas s'y soumettre : auquel cas, les fonds déposés par des non-résidents doivent êtres taxés à hauteur de 25 % (35 % à partir de 2011). La plupart des paradis fiscaux européens (Luxembourg, Belgique, Autriche...) ont préféré taxer les revenus de l'épargne plutôt que de lever leur secret bancaire. Le Liechtenstein, qui a adopté ce texte, a en outre réussi à exempter de cette règle toutes ses "fondations", structures opaques sur lesquelles repose l'essentiel de son attractivité.

Comment les entreprises les utilisent-ils ? La plupart des banques possèdent des filiales dans les paradis fiscaux, de façon légale. En principe, tous les bénéfices dégagés dans ces places sont donc déclarés à leur pays d'origine. Mais, selon les détracteurs des paradis fiscaux, ces banques, malgré les précautions qu'elles peuvent prendre, contribuent à la circulation de capitaux d'origine douteuse via leurs filiales. De nombreuses grandes entreprises ou fortunes individuelles ont aussi recours aux paradis fiscaux dans le cadre des savants montages juridiques d'optimisation fiscale. Totalement légales, ces pratiques sont cependant très critiquées.

Tax implications in supply arrangements in Latin America

Tax Issues Facing Supply Arrangements in Latin America
08 Jul 2008 12:41 PM

Excerpt from Practical Latin American Tax Strategies by Victor Cabrera, Jose Leiman, And Marc Skaletsky (KPMG LLP).

Over the past decade, many large multinational corporations (MNCs) have been moving their European and Asian operations from a decentralized group of stand alone full-fledged manufacturing and distribution (M&D) subsidiaries towards a “hub-and-spoke” system. Under these arrangements, the hub (the “Principal”) assumes functions and risks from the M&D subsidiaries. This centralization of functions and risks in the Principal hopefully brings a commensurate share of consolidated profits. The conversion of full-fledged M&D subsidiaries to a hub-and-spoke arrangement raises a series of non-tax and tax considerations and associated issues that must be resolved in order to implement the structure successfully.
Given the potential benefits of the hub-and-spoke structure, many MNCs have sought to implement the structure for their Latin American operations. However, when MNCs cast their sights on Latin America, they are quite often faced with a diverse and sprawling network of jurisdictions, each with its own rules and views on the operation of structures within their borders. Many MNCs doing business in Latin America learn that applying the European or Asian hub-and-spoke template to Latin America does not always result in a natural fit. In particular, MNCs that seek to implement a hub-and-spoke arrangement in Latin America must deal with the regional issues described below.
First, the determination of where to locate the Principal is not as easy in Latin America as it is in Europe or Asia. The ideal hub would be located in the region, have a low internal tax rate, and enjoy a strong treaty network. Moreover, to the extent that the MNC is U.S.-based, the potential to defer profits from U.S. tax is preferred. Unfortunately, no country satisfies all these criteria; therefore, MNCs need to optimize the location of the Principal based on their specific facts.
Second, Latin America lacks the economic integration of the European Union. As a result, MNCs operating in Latin America are forced to deal with authorities that take a provincial perspective on revenue collection at the cost of market efficiencies. In considering value-chain reorganizations in the region, MNCs must take into account the peculiarities of each jurisdiction and the current and evolving tax environment in the applicable countries. As with structures throughout other regions, it is important that an underlying business rationale drive the value chain reorganization within Latin America.
A third important factor is the ever increasing aggressiveness of the Latin American tax authorities. This aggressiveness manifests itself in a variety of forms. For example, many tax authorities in the region are attempting to assert “substance over form” principles to challenge structures that they consider “aggressive.” Even if they cannot successfully attack the overall structure, the tax authorities may attempt to draw profits back into their tax nets by asserting that the Principal has a local taxable presence or permanent establishment (PE). As electronic tax filing requirements and information sharing among the authorities increase in the region, the tax authorities have greater tools in their audit arsenals to press these arguments.
The foregoing factors require taxpayers to place their Latin American supply chain structures on a solid footing from a tax perspective. Mitigating unnecessary tax risks and unwelcome local publicity are, needless to say, high on the agenda of every MNC’s senior leadership team. With these considerations in mind, the MNC should ensure that it incorporates the elements described below into any supply chain conversion.
First and foremost, economic substance is an essential component of any supply chain conversion. As previously noted, MNCs must be sensitive to a “substance over form” argument by the Latin American taxing authorities. This means that any restructuring of existing operations should produce substantial operational changes and a corresponding adjustment to the parties’ potential for profits and risk of loss. A prudent MNC contemporaneously documents the business reasons for the restructuring and its anticipated economic impact on the enterprise. Anticipated local tax savings is typically not a valid business reason for local purposes. Moreover, savings generated by lower customs, VAT and payroll taxes will often not be considered an adequate business purpose absent a demonstration that the Principal has assumed substantial business functions and risks. The business reasons supporting the conversion ideally should include both commercial and operational benefits. Contemporaneous documentation of the business reasons behind the restructuring of the value chain is important for the MNC to maintain and will be very important if and when the arrangement is ever challenged by the taxing authorities on audit.
Even a structure with economic substance may, however, have adverse tax consequences if the parties’ new arrangements are not supported by a robust and geographically focused transfer pricing study. For this reason, the migration of functions and risks from local M&D subsidiaries to the Principal must be supported by an analysis demonstrating that the parties’ post-conversion potential for profit and loss is commensurate with their post-conversion functions and risks. Moreover, the analysis should demonstrate that the conversion does not result in a transfer of value from M&D subsidiaries to the Principal. What this means is that any reduction in the M&D subsidiaries potential for profit must be balanced with a commensurate reduction in their risk of loss.
In reducing the M&D subsidiaries’ risk of loss, the MNC should be careful that it does not transform them into agents of the Principal that are guaranteed a return for services, regardless of their performance. If the M&D subsidiaries are viewed as agents of the Principal, the Latin American fiscal authorities may assert that the Principal has created either a PE under the provisions of a bilateral tax treaty, or an internal tax presence or nexus in the absence of a tax treaty.

This Blog/Web Site ("Blog") does not to provide specific legal advice, it is for educational purposes only. This Blog is made available by the international adviser, lawyer or law firm for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice.

The Blog does not constitute legal advice and is not a substitute for competent legal advice from a licensed attorney in your state. Any comment posted on the Blog can be read by any Blog visitor; do not post confidential or sensitive information. Any links from another site to the Blog are beyond the control of us.

By using this blog site you understand that there is no attorney client relationship between you and the Blog.

The Blog should not be used as a substitute for competent legal advice from a licensed professional adviser or lawyer in your country.

Our firm and do not convey their approval, support or any relationship to any site or organization. The use of this Blog does not implicitly or explicitly convey any warranties or representations as to the accuracy of the information contained herein.

This Blog has created this privacy statement in order to demonstrate our firm commitment to privacy. The following discloses the information gathering and dissemination practices for this Blog.

This Blog takes your privacy very seriously. Our customers told us they want to see clear, easy-to-read information about our privacy commitments and policies. We have made our privacy policies easier to find and easier to read. And we're listening. We welcome your questions and feedback on our privacy policies, and invite you to contact us with your thoughts.

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Our privacy commitments are fundamental to the way we do business every day. These apply to everyone who has a relationship with this Blog and visitors.
• We will protect your privacy and keep your personal information safe. We use powerful encryption and other security safeguards to protect customer data, when available.
• We will not sell your personal information to anyone, for any purpose. Period.
• We will fully disclose our privacy policies in plain language, and make our policies easily accessible to you.
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This Privacy Policy identifies and describes the way This Blog uses and protects the information we collect about visitors. All use of this Blog is subject to this Privacy Policy.

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• When your wireless device is on, it sends periodic signals to the nearest cell site. We use that information to provide your wireless services;
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http://www.jpa-iac.com/en/
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http://www.tax-international.com/
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UK HMRC lost in a case about European "tax havens"

The UK government has lost a court battle of 6 years against Vodafone, in a failled effort to prevent companies using European tax havens. A UK judge ruled that Vodafone does not have to pay extra corporation tax on a Luxembourg-based subsidiary.

The UK HMRC has the right to appeal the decision, and if success for Vodafone, the ruling is likely to be closely watched by many other major multinational businesses with overseas subsidiaries, which are waiting the end of the case.

In an article about the case from The Guardian, it is remembered that the case centres around the Controlled Foreign Companies (CFC) legislation introduced in 1988 to try to claw back tax from companies with overseas businesses.

In the article, it was also remembered that two years ago the European court of justice ruled in a case involving Cadbury Schweppes that the legislation is restrictive and can only be justified where subsidiaries are set up artificially to gain a tax advantage. Today's high court judgment relates to the question of the compatibility of the CFC legislation with EU law rather than the facts of the Vodafone case. The judge said that as a result of the Cadbury ruling that no charge could be imposed on Vodafone, or any other company in the same position, under the 1988 legislation and parliament needs to rectify the situation with a new set of rules.

"In my judgement, the CFC legislation must be disapplied so that, pending amending legislation or executive action, no charge can be imposed on a company such as Vodafone under the CFC legislation".

"It seems to me that all UK taxpayers, including Vodafone, were and are entitled to be told by legislation, of which the meaning is plain, what the tax consequences for them will be if they decide to incorporate a controlled foreign company in a (EU) member state."

Vodafone Investments Luxembourg Sarl (VIL) was set up in 2000 as a vehicle for the holding of investments, and it is resident for tax purposes in Luxembourg.

Tax issues in Latinoamerican business reorganization

30 Jun 2008 12:24 PM
Excerpt from Practical Latin American Tax Strategies by John A. Salerno and Julian R. Vasquez (PricewaterhouseCoopers LLP)
Multinationals considering the reorganization of their group legal entity or operational structures in Latin America need to be cognizant of the potential income tax implications related to the sale or transfer of shares or other equity interests in their affiliates.

While most companies are keenly aware of the tax implications relating to the sale of a direct or indirect subsidiary to a third party, many do not realize that an intra-group transfer of shares in connection with, for example, the formation of a regional holding company structure or post-deal integration planning, may also trigger tax in certain Latin American countries. Absent tax treaty protection the tax cost of the transfer of shares can be quite high.

In some cases the relevant taxable “transfer” is not so evident, and may occur, for example, as a result of the liquidation of a nonresident shareholder of a Latin American company. Domestic law or tax treaty-based strategies often exist to minimize or eliminate the local country income tax burden on capital gains. Thus, particularly in the case of transactions with related parties, slight modifications of a transactional structure may, in certain cases, yield a more favorable tax results.
Brazil

Private Companies

Gains recognized in connection with the sale or transfer of shares of a Brazilian privately-held company by one nonresident to another are generally subject to capital gains tax at a 15% rate. This rate is increased to 25% to the extent that the seller (or transferor) is located in a tax haven jurisdiction.

The gain is subject to Brazilian tax even when both seller/transferor and buyer/transferee are nonresidents of Brazil. Unlike Argentina, Brazilian law imposes the obligation to pay the Brazilian capital gains tax on the buyer's (or transferee's) representative domiciled in Brazil (note that foreign shareholders of Brazilian companies are required to have a Brazilian-domiciled representative, in addition to being registered before the local Revenue Service).

Capital gains generally correspond to the positive difference between (i) the amount for which the shares are sold/transferred (i.e., the selling price), and (ii) the amount at which those shares are registered in the name of the seller (transferor) with the Brazilian Central Bank. In the case of the sale/transfer of shares that were previously acquired from other parties, there may be grounds to sustain that the acquisition price should be used in lieu of the amount registered with the Brazilian Central Bank as foreign capital.

Tax treaties generally do not provide relief from income taxes imposed on capital gains recognized by nonresidents (except for the Brazil-Japan treaty, which exempts capital gains from Brazilian tax). Certain tax planning, however, may be available to mitigate taxes on capital gains.

Publicly-Traded Companies
Capital gains recognized by foreign investors in connection with the sale of Brazilian publicly-traded shares are subject to Brazilian tax at a 0% or 15% rate as follows:.

- 0% when the foreign investor is not located in a tax haven jurisdiction and the investment was originally made in accordance with Resolution 2689 (which provides for special foreign investment accounts that may only be used by the foreign investor in the acquisition of certain regulated investments, such as the shares of Brazilian companies listed with the Brazilian SEC).

- 15% in all other cases.

Other Taxes

No other Brazilian taxes should apply on the transfer of shares/interests in local entities.