Taxation

The international tax evolution and fractional taxation

By Prof Robert Anthony, Anthony & Cie

BEPS (Base erosion and profit shifting) has become the in word following on from transfer pricing. It is on the tip of every tax professional’s tongue While international prosperity reigned, governments were not so concerned about losing tax revenue. However, premeditated aggressive tax planning triggered famous tax cases as well as new domestic anti-avoidance legislation. This was because of the industrialised use of famous high profile tax planners charging percentage fees for finding loopholes in legislation.

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Taxation

Treaty Override: New German Constitutional Court decision

By Bernhard Schwechel, FACT GmbH Steuerberatungsgesellschaft, Wirtschaftsprüfungsgesellschaft

In a decision in December 2015, the German Federal Constitutional Court confirmed the practice of treaty override in tax law. “Treaty override” described the procedure whereby the German legislator adopts a law which violates a prior international treaty (often a treaty on double taxation).

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Taxation

Italy: Horizontal tax consolidation

By Lodovico Comploj and Martin Lechner, Pichler Dejori Comploj & Partner

In order to prevent an infringement of the European principles of non-discrimination and freedom of establishment, the Italian government introduced important changes to the domestic tax consolidation rules.

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Taxation

German regulation on international partnership investments

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.

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Taxation

Outbound payments under close scrutiny by the Chinese tax authority

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.

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Tax News Luxembourg

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.

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Taxation

International Tax and Royalties

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.

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Taxation

Italy introduces the branch exemption regime

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.

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Taxation

Disput Resolution arising out of Base Erosion and Profit Sharing

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.

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