By Klaus Küspert, Munkert & Partner GbR
Despite the forthcoming BEPS discussion and its implications, including some international in nature, I would like to take this opportunity to introduce you to a typical German approach to treaty overriding. Unfortunately, the Federal Constitutional Court of Germany recently accepted such overriding in cases of “white” income derived by German residents from foreign countries. It is very likely that this approach will also cover inbound transactions, as described below.
By Klaus Küspert, Munkert & Partner GbR
By Ricky W. P. Wong, Wong Brothers & Co
In recent years, the Chinese tax authority has intensified its efforts to control outbound inter-group service fees and royalty charges. In July 2014, the State Administration of Taxation (SAT) released an internal circular (“Circular (2014) No. 146”) asking local tax authorities to initiate detailed investigations on all significant outbound service fee payments and royalty charges made by domestic enterprises to their overseas related parties between 2004 and 2013, with a view to identifying avoidance schemes for profit shifting.
By GT Fiduciaires
1. Employee stock option plans: a new reporting requirement for employers
On 28 December 2015, the director of the Luxembourg tax authorities issued Circular L.I.R. n° 104/2bis relating to employee stock option plans. The new circular merely introduces a new reporting requirement. As from 1 January 2016, employers who intend to set up stock option /warrant plans will have to notify the competent tax office in charge of withholdings on employment income at least two months before the implementation date of the plan. The notification shall include a copy of the plan rules as well as a list of the beneficiaries of the above-mentioned plan. Furthermore, for all plans set up prior to 1 January 2016, but for which the grant of options /warrants did not yet take place, employers are obliged to also inform the competent tax office in charge of withholdings on employment income at their earliest convenience.
By Eric Longley & Harold Peterson, Prager Metis International LLC
The text of the OECD Model Tax Convention is closely followed by most international tax treaties. In doing so it provides consistency of approach removing the need for recourse to the competent authority rules where there is a dispute as to interpretation between taxpayers and domestic tax authorities. Even so there are still interpretational issues that can aid and/or trap the unwary or uninitiated.
By Stefano Loconte and Emanuele Tozzi
With effect from 1 January 2016 (for calendar year taxpayers) Italian enterprises with a foreign permanent establishment can opt for the branch exemption regime (Art. 14, Legislative Decree no. 147/2015). Under this optional regime the income attributable to the foreign branch will be treated as tax exempt income in Italy. Of course, in case of a tax loss, it will not be deductible from the taxable income of the head office.
By Aditya Kumar, Ashwani & Associates
Base Erosion in Profit Sharing (BEPS) is a Package, negotiated in just over two years, which includes reports on fifteen “actions” ranging from countering harmful tax practices and treaty shopping to addressing transfer pricing, interest deductibility, and transparency in exploring the tax implications of the digital economy.
By Timothy W. Clarke, Moodys Gartner Tax Law LLP
A trust is an obligation binding the trustee to deal with property for the benefit of one or more beneficiaries. A trust is formed when the settlor conveys property to a trustee to be held and used for the benefit of the beneficiary -- or a settlor indicates an intention to hold property for the benefit of the beneficiary by words or conduct. The terms of a trust are frequently governed by a written declaration or deed conveying the property and describing the obligations imposed on the trustee. In such circumstances there is little question as to the trust’s existence. But in cases involving aggressive tax plans, the tax authorities occasionally challenge the existence of a trust because it is a “sham”.
By Bernhard Schwechel, FACT GmbH
Multinational groups often hold their domestic and foreign sub-subsidiaries by an intermediary holding company, which is resident in a different country (e.g. Luxembourg) to its parent company (Germany). In this case, a tax-optimised profit repatriation from the sub-subsidiaries to their grandparent company depends on the conditions of the double tax treaties (DTA). But often, due to anti-treaty shopping rules, the foreign intermediary holding is not able to benefit from a reduced withholding tax rate stipulated in the DTA.
By José Carreras Benitez, Integroup S.C.
The Mexican economy is and has consistently been growing as a result of the rapid expansion of the middle class due to education and the maturing of Mexico as an economic powerhouse. Companies from Europe and the USA are investing billions of dollars into the Mexican economy. Mexican government knows that global businesses are coming and the Base Erosion and Profit Shifting (BEPS) Action Plan suggestions have been implemented in order to protect the tax system as well as giving same protection to the Mexican partners of the Organisation for Economic Co-operation and Development (OECD). Below is a brief description of one of them:
By Dr Massimiliano Russo, Studio Signori
After a recent debate as to the possible introduction of new tax tools and incentives to attract foreign investments in Italy as well as a long period in which we have seen measures increasing the tax burden for both companies and individuals, this newly introduced legislation on the Patent Box Regime as a tax incentive is most welcome (in the following also referred to as the “incentive”). Unfortunately, as with most the newly introduced legislation in Italy, some aspects have not yet been committed and will be further regulated in future ministerial decrees. The interpretation of the newly introduced rule by tax authorities is also still awaited.
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