Owen, Christopher: Global Survey – May 2020

28 April 2020, the Cayman Islands government gazetted a package of five Bills to establish a registration and licensing regime for virtual asset service provider that is intended to advance the financial technology capabilities of the jurisdiction.

The package – comprising the Virtual Asset (Service Providers) Bill, 2020, Monetary Authority (Amendment) (No.2) Bill 2020, Securities Investment Business (Amendment) Bill 2020, Mutual Funds (Amendment) (No. 2) Bill 2020 and the Stock Exchange Company (Amendment) Bill 2020 – will be presented by the Minister of Financial Services at the next meeting of the Legislative Assembly.

The new regulatory framework will provide for the supervision of persons and entities facilitating virtual asset activities as a business in the Cayman Islands. A virtual asset is “a digital representation of value that can be digitally traded or transferred and can be used for payment or investment purposes but does not include a digital representation of fiat currencies".

The Bill defines virtual asset services as providing one or more of the following services or operations for or on behalf of a natural or legal person:

Exchange between virtual assets and fiat currencies;

-Exchange between one or more other forms of convertible virtual assets;

-Transfer of virtual assets;

-Safekeeping or administration of virtual assets or instruments enabling control over virtual assets; and

-Participation in, and provision of, financial services related to a virtual asset issuance or the sale of a virtual asset.

Under the Bill, a Cayman entity that carries on or proposes to carry on any virtual asset service that is not the provision of virtual asset custody services or the operation of a virtual asset trading platform will be required to register with the Cayman Islands Monetary Authority (CIMA) as a 'registered person'.

Those entities proposing to provide virtual asset custody services or to operate a virtual asset trading platform will be required to apply to CIMA for a virtual asset service licence. CIMA may grant or deny the licence, or it may direct the applicant to apply for a sandbox licence or another licence under a different regulatory law.

A sandbox licence is a temporary licence that can be granted for a period of up to one year and is subject to review at CIMA’s discretion. The regulatory sandbox is intended to facilitate the adoption of innovative technology and delivery methods in financial services.

Financial Services Minister Tara Rivers said: “At a time where innovation is needed to support the economy given the effects of the COVID-19 pandemic on the more traditional economic pillars, this type of regulated FinTech activity will help our financial services industry attract new clients and, in turn, contribute further to government revenue.”

The proposed framework incorporates relevant anti-money laundering, countering the financing of terrorism and counter proliferation financing (AML/CFT/CPF) recommendations adopted in 2019 by the Financial Action Task Force (FATF), and additional measures which seek to regulate virtual asset activities taking place in the jurisdiction.

In addition to the virtual assets-related bills, four other pieces of legislation were gazetted to enhance Cayman’s AML/CFT/CPF regime as the Caribbean FATF, the regional governing body for the FATF, continues its review of the jurisdiction’s legislative and regulatory framework.

The Companies (Amendment) (No.2) Bill, 2020 and Limited Liability Companies (Amendment) (No.2) Bill, 2020 will introduce stricter administrative fines for Cayman’s beneficial ownership regime, and ensure basic regulatory powers are listed on a company register and made available for public inspection. The Trusts (Amendment) Bill 2020 and Banks and Trust Companies (Amendment) Bill, 2020 will provide clarification for individuals conducting trustee services as a business.

Cayman’s technical re-rating by the CFATF is expected to be announced in October, with the FATF’s review and final rating to be completed shortly after.

30 April 2020, the Court of Justice of the European Union (CJEU) ruled in favour of the Italian authorities and against Société Générale on whether the Italian financial transactions tax (FTT) regime was in breach of the free movement of capital.

In Société Générale S.A. v Agenzia delle Entrate – Direzione Regionale Lombardia Ufficio Contenzioso C-565/18, there was a request from the Commissione Tributaria Regionale per la Lombardia for the CJEU to consider whether the FTT was contrary to the freedom to provide services (article 56) or the free movement of capital principle (article 63) of the Treaty on the Functioning of the European Union (TFEU).

The Italian FTT is payable on the transfer of ownership of shares issued by an Italian entity or the transfer of derivative financial instruments that have as underlying assets financial instruments governed by Italian law. FTT is charged at 0.2% on the value of share transfers and is payable by the transferee. For derivatives, the tax is payable by each of the parties to the transaction at a fixed rate, depending on the nature and nominal value of the instrument involved. The tax is due irrespective of where the transaction is concluded, or the place of residence of the contracting parties. The tax is levied by intermediaries involved in the transactions.

Société Générale, the taxpayer, argued that the FTT was not in line with EU law because it could discourage foreign investors from investing in derivative financial instruments that involved assets governed by Italian law and because it resulted in administrative and reporting obligations in Italy in addition to those applicable in the state(s) of residence of the contracting parties.

The CJEU found that the Italian FTT affected only transactions involving the issuance of securities by Italian companies and the amount of the tax liability did not depend on the place where the transaction was concluded or the state of residence of the parties involved. It depended only on the amount of the transaction and the type of instrument.

Consequently, the CJEU found that domestic and cross-border transactions were treated in the same way and that in terms of the objective of the tax – guaranteeing that entities conducting financial transactions involving such instruments contribute to government expenditure – residents and non-residents were in a comparable situation.

Where a different treatment applied to derivatives of which the underlying shares are governed by Italian law, or the law of another EU member state, there would be a disadvantageous treatment of cross-border situations. However, this could not be considered an infringement of EU law because it would qualify only as a ‘disparity’. Such a disparity could only be resolved by harmonisation and EU member states were not obliged unilaterally to adapt their legislation to the legal systems of other EU member states.

28 April 2020, Colombia became the 37th member of the OECD having finally completed its domestic procedures for ratification of the OECD Convention and deposited its instrument of accession. It will be the third member from the Latin America and Caribbean region to join, following Mexico and Chile. A fourth, Costa Rica, is entering the final stages of its accession process.

Colombia’s accession process that began in 2013 and OECD members formally invited it to join the organisation in May 2018, following a five-year accession process during which it underwent in-depth reviews by 23 OECD Committees and introduced major reforms to align its legislation, policies and practices to OECD standards.

Secretary-General Angel Gurría said, “We are delighted to welcome Colombia as the 37th member of the OECD. Colombia’s accession is tangible proof of our commitment to bring together countries who strive for the highest standards in global public policy in order to improve the well-being and quality of life of their citizens... The accession process has offered Colombia the opportunity to address major policy issues and challenges multilaterally and to learn from the experiences of fellow OECD countries.”

30 April 2020, the European Commission decided to extend the scope of an ongoing in-depth investigation into Inter IKEA's tax treatment in the Netherlands, which was initially opened on 18 December 2017.

The investigation concerns two tax rulings in favour of Inter Ikea's Dutch subsidiary, Inter IKEA Systems, granted by the Netherlands in 2006 and in 2011.

In relation to the 2011 tax ruling, the 2017 Commission opening decision provisionally concluded that the transfer price of the IKEA intellectual property (IP) rights may be too high, enabling Inter IKEA Systems to pay less tax and giving them an unfair advantage over other companies, in breach of EU State aid rules.

Following the opening of the in-depth investigation, some of the facts and assumptions underlying the 2011 tax ruling have changed. In particular, Inter IKEA Systems has started to amortise the IKEA IP rights. The Dutch tax authorities confirmed the deduction of such amortisation in their annual tax assessments of Inter IKEA Systems' tax returns.

The Commission has extended the scope of its investigation to the annual tax assessments in order to examine whether the deduction of the amortisation of the IKEA IP rights provided an advantage to Inter IKEA Systems, in breach of EU State aid rules.

The non-confidential versions of the decisions will be made available under the case number SA.46470 in the State Aid Register on the Commission's competition website once any confidentiality issues have been resolved.

24 April 2020, the European Commission confirmed that current rules permit EU countries to block coronavirus aid from going to companies based in ‘tax havens’.

It followed announcements by Poland, Denmark and France that they planned to bar companies that are based, or have subsidiaries, in tax havens from receiving bailouts linked to economic hardship brought about by the coronavirus.

However, member states must also comply with EU rules on the free movement of capital, which state they “cannot exclude companies from aid schemes on the basis of headquarters or tax residency in a different EU country”.

“It is up to Member States to decide if they wish to grant State aid and to design measures in line with EU rules and their policy objectives, such as to prevent fraud and tax evasion or aggressive avoidance,” a European Commission spokeswoman said.

“Member States can introduce additional criteria, such as the exclusion of companies operating in certain specific sectors, companies based in tax havens (as defined by the relevant EU legislation) and companies with a long-term debt with the national tax authority,” the spokeswoman said.

Polish Prime Minister Mateusz Morawiecki said on 8 April that bailout funds would only go to “large companies” who “pay taxes in Poland, not in tax havens”. Denmark followed suit. "Companies based on tax havens in accordance with EU guidelines cannot receive compensation," said the Finance Ministry. Denmark will link its definition for tax havens to the EU list of non-cooperative jurisdictions for tax purposes..

They were joined by France when French Finance Minister Bruno Le Maire said that companies either registered in tax havens or controlling subsidiaries in them were ineligible for France's €110 billion rescue package. "If a company has its tax headquarters or subsidiaries in a tax haven, I want to say with great force, it will not be able to benefit from state financial aid," Le Maire said.

30 April 2020, the European Commission adopted a proposal for a temporary and targeted derogation from the rules governing European Companies (SEs) and European Cooperative Societies (SCEs) in respect of the holding of general meetings.

A ‘European Company’ is a type of public limited-liability company, whose status allows to run its business in different European countries using a single set of rules. However, the confinement and social distancing measures applying in the EU in response to the coronavirus crisis make it difficult for SEs and SCEs to meet a legal requirement to organise their general meetings within six months of the end of their financial year.

The temporary derogation from EU rules will permit SEs and the SCEs to hold their general meetings within 12 months of the end of the financial year, but no later than 31 December 2020.

Commissioner for Justice Didier Reynders and Commissioner for Internal Market Thierry Breton said: “Member States have granted national companies a temporary extension of the time limits to organise their general meetings. We must bear in mind that European Companies and the European Cooperative Societies face similar organisational difficulties. This is why the Commission proposed temporary derogation to help them live up to their legal obligations and weather this acute crisis.”

The proposal for Council Regulation will require swift adoption by the Council after the consent of the European Parliament in order to become law, and provide legal certainty.

1 April 2020, the Eastern Caribbean Supreme Court in the Court of Appeal has affirmed that a BVI court may not grant free-standing freezing orders in support of foreign proceedings if it does not have jurisdiction over a foreign defendant.

In Convoy Collateral Ltd v Broad Idea International Ltd BVIHCMAP2016/0030, the appellant Convoy Collateral Ltd was a company incorporated in Hong Kong. The first respondent, Broad Idea International Ltd was a company incorporated in the BVI. The second respondent, Dr Cho Kwai Chee Roy, was a Hong Kong resident who owns 50.1% of the issued shares in Broad Idea.

In February 2018, Convoy commenced proceedings against Cho in the High Court of Hong Kong claiming substantial damages. On 2 February 2018, Convoy applied ex parte in the Commercial Court of the BVI, for freezing orders against Cho and Broad Idea in support of the proceedings in Hong Kong and for permission to serve Cho outside the jurisdiction. This was done to freeze all dealings with Cho’s shares in Broad Idea so that they would be available to satisfy any money judgment awarded to Convoy in the Hong Kong proceedings.

On 9 February 2018, Chivers J granted the orders sought. Following adjournments of Convoy’s application to continue the freezing order, Cho applied to set aside the orders and for a declaration that the court should not have exercised jurisdiction over him.

The set-aside application was heard by Adderley J, who found that the court did not have power to grant an order permitting service outside the jurisdiction of a freestanding injunction in support of foreign proceedings on a person who was not subject to the territorial jurisdiction of the court. Convoy then appealed.

Broadly, the appeal raised three issues: whether the court had jurisdiction to authorise service of an application for freestanding injunctive relief on a person outside jurisdiction pursuant to rule7.3(2) of the Civil Procedure Rules, 2000 (CPR); the sufficiency of reasons given by the learned judge to support his findings in the court below; and the interpretation of rule 7.3(2) of the CPR. Cho filed a counter-notice of appeal seeking to uphold the judge’s decision on grounds not dealt with by Adderley J.

Dismissing the appeal and allowing the counter-notice, the Court of Appeal held that:

-The power to serve a claim form outside the jurisdiction seeking relief was contained in rule7.3(2)(b) of the CPR. However, rule7.3(2)(b) did not confer extra-territorial jurisdiction on the court to authorise the service of a document on a foreigner outside of the jurisdiction where there is no substantive claim against the foreigner within the jurisdiction. The presence of assets within the jurisdiction was not a sufficient basis to give the court power under rule 7.3(2)(b) to serve a foreigner outside the jurisdiction. Accordingly, the lower court had not erred in finding that the court did not have jurisdiction to grant free standing injunctive relief in the circumstances of this case. Rule7.3(2)(b) of the Civil Procedure Rules 2000 applied; Mercedes-Benz AG v Leiduck [1996] 1 AC 284 applied;

-The learned judge gave ample reasons for his decision to set aside the ex parte freezing injunction and service out order made by Chivers J on 9 February 2018. Flannery v Halifax Estate Agencies  Ltd [2000] 1 WLR 377 applied; English v Emery Rheimbold & Strict Ltd [2002] 1 WLR 2409 applied.

-The learned judge’s interpretation of rule7.3(2) of the CPR was consistent with the decided cases and there was no need for him to resort to a purposive construction of the rule in an attempt to show that it permitted service of an application for freestanding injunctive relief on a person outside the jurisdiction. Further, the Court could not on the basis of “practicality” construe rule7.3(2) of the CPR to allow service outside the jurisdiction for freestanding injunctions. This was a matter for the lawmakers, not the courts. Mercedes-Benz AG v Leiduck [1996] 1 AC 284 applied.

The full judgment can be accessed at https://www.eccourts.org/convoy-collateral-ltd-v-broad-idea-international-limited/

25 April 2020, Chancellor Angela Merkel announced that Germany would seek to impose a financial transactions tax, minimum tax rates and an EU-wide healthcare system on member nations during its upcoming six-month presidency of the bloc.

Speaking during her weekly video podcast, Merkel said her country’s presidency, which begins on 1 July, would be “clearly dominated by the issue of combating the pandemic and its consequences”.

She said this would include promoting a European health care system for all member states, a financial transaction tax, minimum tax rates and a joint carbon emissions trading scheme for planes and ships.

6 April 2020, the Global Forum on Transparency and Exchange of Information for Tax Purposes published eight new peer review reports assessing compliance with the international standard on transparency and exchange of information on request (EOIR).

These reports evaluate jurisdictions against the updated standard which requires beneficial ownership information of all relevant legal entities and arrangements, in line with the definition used by the Financial Action Task Force Recommendations.

The eight new reports related to jurisdictions with very diverse EOIR practice, from Liberia, which received only two requests, to Switzerland that received thousands from multiple partners during the three years of practice under review. The results were equally contrasted, with some jurisdictions struggling to implement their legislation on transparency.

Three jurisdictions – Brunei Darussalam, Macau (China) and Switzerland – received an overall rating of ‘Largely Compliant’ for their second round peer reviews. These ratings confirmed those issued after the first round of assessment (2010 to 2016). Specific achievements and recommendations included:

-Brunei Darussalam had taken significant steps to align with the international standard by abolishing the International Business Company (offshore) regime, as well as expanding its network of EOIR relationships extensively by becoming a party to Multilateral Convention on Mutual Administrative Assistance on Tax Matters. Further improvements were required to ensure the availability of beneficial ownership and reliable accounting information in all cases.

-Macau (China) had made a number of improvements since the previous review in 2013, including the abolition of bearer shares. The Multilateral Convention now applied in Macau, which greatly expanded its number of EOI partners. The main deficiencies identified in the 2020 peer review concerned the availability of ownership and accounting information.

-Switzerland had managed to address a number of deficiencies identified in its last review in 2016, including improving its exchange of information process and doubling the number of staff working in the Exchange of Information Unit. Switzerland should now ensure that notification and appeal procedures did not unduly prevent or delay an effective exchange of information. The preservation of confidentiality of the information received when processing requests should also be further scrutinised. A total of 3,252 individual requests, eight group requests and 16 bulk requests were dealt with during the assessment period.

The OECD downgraded its overall rating for Barbados and the Seychelles from ‘Largely Compliant’ to ‘Partially Compliant’ since their last reviews, highlighting some significant deficiencies:

-Barbados’ legal and regulatory framework was in line with the standard overall, including concerning the availability of beneficial ownership information. However practical implementation of the relevant rules remained a challenge.

-The main concerns identified for the Seychelles were in respect of the overall effectiveness of supervision and enforcement activities to ensure the availability and access to information in practice, especially in its offshore sector. Some 88% of the requests for accounting information and 62% of the requests for beneficial ownership information had not been answered in the three years reviewed. The report made a number of recommendation to improve both the legal framework and its practical implementation.

Three jurisdictions – Liberia, Peru and Tunisia – were undergoing their first full peer reviews in respect of their legal frameworks. The resulting reports rated Liberia as ‘Partially Compliant’, while Peru and Tunisia both obtained a ‘Largely Compliant’ rating. Specific findings and recommendations included:

-Liberia’s progress in complying with the international standard despite an extremely challenging economic environment was noted. Important deficiencies in the supervision and enforcement of the newly introduced legal requirements of maintaining ownership and accounting information in line with the international standard were highlighted. Liberia had limited experience in handling requests so far, having received only two requests during the review period and sought information in three cases. The procedural handling of requests was not fully in line with the international standard on confidentiality. Despite recent rectifications to the procedure, close monitoring will be necessary.

-Peru’s review showed important progress in establishing the obligation for all relevant entities and arrangements to report beneficial ownership information to the country’s tax administration. It had expanded considerably the number of jurisdictions with which it can exchange information by becoming party to the Multilateral Convention. The practical exchange of information on request was nevertheless still hindered by some delays.

-Tunisia had enhanced the availability of the information since the first review of its legal framework in 2016, in particular by establishing a National Register of Enterprises that included a beneficial owner’s register, and by strengthening its Anti-Money Laundering law. These improvements were recent and would be monitored to ensure an effective implementation. Tunisia also had to ensure the effectiveness of the new practical procedure for obtaining banking information. A total of 194 requests had been answered during the three years period under review. Although progress had been made after the assessment period, recurrent issues with delays in answering were noted.

The Global Forum is the leading multilateral body mandated to ensure that jurisdictions around the world adhere to and effectively implement both the standard of transparency and exchange of information on request and the standard of automatic exchange of information. In addition to its monitoring and peer review processes, the Forum also runs an extensive technical assistance programme to support its members in implementing the standards and help tax authorities make the best use of cross-border information sharing channels.

8 April 2020, the England & Wales High Court (EWHC) discharged three unexplained wealth orders (UWOs) and related interim freezing orders (IFOs) that were secured by the National Crime Agency (NCA) against London residential properties valued at £80 million.

In NCA v Baker and ors [2020] EWHC 822 (Admin), the UWOs related to three London homes, two of which were beneficially owned by Dariga Nazarbayeva, the daughter of former President of Kazakhstan Nursultan Nazarbayev and former wife of late Kazakh businessman and politician Rakhat Aliyev, and one by their son together Nurali Aliyev.

Nazarbayeva and Aliyev were the ultimate beneficial owners (UBOs) but the registered owners or co-owners of each property were Panamanian or Curaçaoan private Foundations that had received the properties by transfer from BVI companies in 2013. Andrew Baker, a solicitor and the first respondent in the case, was president of the two of the Panama-based Foundations.

UWOs require a person who is suspected of involvement in or association with serious criminality to explain the origin of assets that appear to be disproportionate to their known income. This power applies also in respect of politicians or officials from outside the European Economic Area (EEA), or those associated with them – Politically Exposed Persons (PEPs).

Failure to provide a full response to a UWO gives rise to a presumption that the property is recoverable, in order to assist any subsequent civil recovery action. A person can also be convicted of a criminal offence, if they make false or misleading statements in response to a UWO.

The NCA’s case was that it suspected all three properties had been acquired as a means of laundering the proceeds of unlawful conduct by Rakhat Aliyev, who died in prison in Austria in 2015. The UWOs demanded an explanation of the source of the funds used to purchase the properties.

The court held, however, that the NCA’s argument was not supported by the facts. In light of the extensive information provided by the respondents, it was Dariga Nazarbayeva and Nurali Aliyev who were the founders of the respective foundations and the source of the money used to purchase the properties.

In this case the properties had been transferred from the BVI companies to the Foundations to limit exposure to a new residential property tax. The court decided that the use of private and complex offshore corporate structures did not in and of itself provide a basis for believing that they were being used for money laundering.

The structure of Panamanian Foundation was such that the effective control over it and its assets is vested in the founder and the Foundation Council, not the president. This meant that, in selecting Baker, the president of the Panamanian Foundation and a solicitor, as the respondent, the NCA was wrong in law.

In granting the applications to discharge the orders, Lang J said: “I am not satisfied that there are reasonable grounds for suspecting that the PEP or serious crime requirement is met… After carefully considering the Respondents’ submissions, I am not persuaded that there was material non-disclosure at the ex parte hearing... However, I do accept that the NCA case which was presented at the ex parte hearing was flawed by inadequate investigation into some obvious lines of enquiry... Furthermore, I consider that the NCA failed to carry out a fair-minded evaluation of the new information provided by the UBOs and Respondents under cover of the letter of 9 August, in particular, in relation to the evidence of purchase on behalf of the UBOs, the absence of any link between Rakhat Aliyev and the three foundations,

The NCA said it intends to appeal against the decision. “These hearings will establish the case law on which future judgments will be based, so it is vital that we get this right,” said NCA Director General Graeme Biggar. “Unexplained wealth orders are new legislation and we always expected there would be significant legal challenge over their use.”

The full judgment can be accessed at https://www.judiciary.uk/wp-content/uploads/2020/04/Approved-Judgment-NCA-v-Baker-Ors.pdf

16 April 2020, the Inland Revenue Department published Departmental Interpretation and Practice Notes No. 31 (DIPN No.31) setting out the Hong Kong government’s interpretation and practice relating to advance tax rulings. It replaces guidance issued in 2011.

DIPN No. 31 incorporates the legislative changes made by the Inland Revenue (Amendment) (No. 6) Ordinance 2018, which primarily implemented the minimum standards of the OECD/G20 base erosion and profit shifting (BEPS) package, including the spontaneous exchange of tax rulings, provisions for an APA regime and advance rulings.

DIPN No. 31 specifies that Hong Kong’s tax authority will exchange rulings relating to preferential regimes, unilateral advance pricing arrangements or other cross-border unilateral rulings in respect of transfer pricing, permanent establishment rulings and related party conduit rulings.

All such rulings issued on or after 1 April 2016 are required to be exchanged within three months of the date received by a competent authority. Rulings exchanged will be protected under the tax confidentiality provisions in the relevant tax treaty or convention.

Appendix 9 of the revised DIPN No. 31 summarises the jurisdictions with which rulings should be exchanged, while Appendix 8 sets out details of the application fees.

28 April 2020, Indonesia deposited its instrument of ratification for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) with the OECD. It will enter into force for Indonesia on 1 August.

The MLI allows signatories to add new provisions to prevent tax avoidance by multinationals and speed cross-border tax dispute resolution swiftly to existing bilateral tax treaties. With 94 jurisdictions currently covered by the MLI, ratification by Indonesia now brings to 45 the number of jurisdictions which have ratified, accepted or approved it.

21 April 2020, the Treasury Department and IRS issued guidance that provides relief to individuals and businesses affected by travel disruptions arising from the COVID-19 emergency.

The guidance includes the following:

-Revenue Procedure 2020-20, which provides that, under certain circumstances, up to 60 consecutive calendar days of US presence that are presumed to arise from travel disruptions caused by the COVID-19 emergency will not be counted for purposes of determining US tax residency and for purposes of determining whether an individual qualifies for tax treaty benefits for income from personal services performed in the US;

-Revenue Procedure 2020-27, which provides that qualification for exclusions from gross income under IRC section 911 will not be impacted as a result of days spent away from a foreign country due to the COVID-19 emergency based on certain departure dates; and

-A frequently asked questions (FAQs) section sets out that certain US business activities conducted by a non-resident alien or foreign corporation will not be counted for up to 60 consecutive calendar days in determining whether the individual or entity is engaged in a US trade or business or has a US permanent establishment, provided that those activities would not have been conducted in the US but for travel disruptions arising from the COVID-19 emergency.

The IRS said Revenue Procedure 2020-20 would provide relief to certain non-resident individuals who, but for COVID-19 emergency travel disruptions, would not have been in the US long enough during 2020 to be considered resident aliens under the ‘substantial presence test’ or be ineligible for treaty benefits on services income.

It establishes procedures to apply the substantial presence test medical condition exception to exclude up to 60 consecutive days spent in the US during a time period starting on or after 1 February 2020 and on or before 1 April, with the specific start date to be chosen by each individual. It also establishes procedures for an individual to exclude those days of presence in order to claim benefits under an income tax treaty with respect to services income.

The Secretary of the Treasury has determined that the COVID-19 global health emergency is an adverse condition that precludes the normal conduct of business globally. As a result, relief is provided under Rev. Procedure 2020-27 to any individual that reasonably expected to become a ‘qualified individual’ for purposes of claiming the foreign-earned income exclusion under s911 but left the foreign jurisdiction during the period described.

The IRS said it was "continuing to monitor these and other issues related to the COVID-19 emergency”. Updated information about relief would continue to be posted on Coronavirus Tax Relief at https://www.irs.gov/coronavirus-tax-relief-and-economic-impact-payments

16 April 2020, the US Internal Revenue Service announced it was providing an extension of time for Model 1 Intergovernmental Agreement (IGA) jurisdictions under the Foreign Account Tax Compliance Act (FATCA) to submit their data for tax year 2019 from 30 September to 31 December 2020 in response to the COVID-19 virus. Model 1 IGA jurisdictions may also submit tax year 2019 data prior to that date.

The IRS is also providing an extension of time for a Reporting Model 2 Foreign Financial Institution (FFI) or a Participating FFI to file the FATCA Report to the IRS. The filing deadline is extended from 31 March 2020 to 15 July 2020.

17 April 2020, the Dutch government put out for consultation draft legislation providing for a publicly accessible register containing personal details of ultimate beneficial owners (UBOs) of trusts and similar legal arrangements.

National trust registers are mandated in every EU Member State under the Fifth Anti-Money Laundering Directive (AMLD5), which came into force on 10 January 2020.

The fourth Anti-Money Laundering Directive (AMLD4) placed a requirement for corporates and taxable trusts to obtain and hold information on their beneficial ownership and to register this information with a central national register. This register was accessible to competent authorities, Financial Intelligence Units (FIUs) and obliged entities for CDD purposes.

AMLD5 expands the scope of the beneficial ownership register to include all trusts, regardless of whether they incur a tax consequence, and also to any legal arrangement that is similar to a trust. It also widens access by making the beneficial ownership register publicly available where legitimate interest can be shown and facilitates a higher level of transparency through the interconnection of national registers and information sharing across the EU.

The Dutch draft trust legislation will require trustees and administrators of similar legal arrangements, such as mutual funds, to disclose required information to the Netherlands Chamber of Commerce, which will administer the register. Trusts do not have to be registered in the Netherlands if the trust and its beneficial owners are registered in another EU Member State.

The requirements also apply to certain trustees and administrators resident outside the EU, for example where they have acquired Dutch real estate on behalf of the trust, or entered into a business relationship in the Netherlands on behalf of the trust with an obliged entity. This will include accountants, lawyers, notaries, tax advisors and financial institutions such as banks.

Settlors, trustees, protectors, beneficiaries and potential beneficiaries must be registered as beneficial owners, as well as any other individual who through direct or indirect ownership interest or through other means can ultimately exercise control over the trust. No minimum threshold is set for ownership or control.

Only part of the trust's registered information will be publicly available. This includes the trust's name and type, its date and place of establishment and its purpose; as well as the surname or last name of each beneficiary and their month and year of birth, nationality, country of residence, and the nature and size of their beneficial interest. Beneficial owners can apply to shield public information if their safety is at risk.

Other information about the beneficial owners that must be registered but will not be publicly available includes citizen service numbers or foreign tax identification numbers; full date of birth; country and place of birth; address; a copy of passport or ID; documentation proving their interest; and documentation supporting the information about the trust.

The consultation ended on 15 May and the final version of the legislation is expected to be submitted to parliament in the second half of 2020.

9 April 2020, the OECD published a second batch of stage 2 reports evaluating the progress made by seven jurisdictions in implementing recommendations made in their stage 1 peer review reports under the Action 14 Minimum Standard of the base erosion profit shifting (BEPS) plan.

The Action 14 Minimum Standard seeks to improve the resolution of tax-related disputes between jurisdictions. In particular the use of the mutual agreement procedure (MAP) provided by Article 25 of the OECD Model Tax Convention through which the competent authorities of contracting states may resolve differences or difficulties regarding the interpretation or application of a treaty on a mutually-agreed basis.

The stage 2 monitoring of the seven jurisdictions – Austria, France, Germany, Italy, Liechtenstein, Luxembourg and Sweden – takes into account any developments in the period 1 April 2017 to 30 September 2018 and the MAP statistics are based on years 2016 and 2017.

The OECD said the results from the peer review and peer monitoring process demonstrated positive changes across all seven jurisdictions, although not all showed the same level of progress. Its findings included:

-The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI) had been signed by all seven jurisdictions and been ratified by five, bringing a substantial number of their treaties in line with the standard. Bilateral negotiations were also either ongoing or concluded;

-All jurisdictions now had a documented notification/bilateral consultation process to be applied in cases where an objection was considered as being not justified by their competent authority;

-Austria, Germany, Italy, Luxembourg and Sweden had added more personnel to the competent authority function and/or made or initiated several organisational improvements with a view to handle MAP cases in a more timely, effective and efficient manner;

-Austria, Germany and Sweden had decreased the amount of time needed to close MAP cases and Liechtenstein and Luxembourg met the desired 24-month average timeframe to close MAP cases;

-Austria had introduced legislative changes to ensure that all MAP agreements could be implemented notwithstanding domestic time limits if the treaty does not provide for it, while in five of the other six this was already the case.

-Austria, Germany, Luxembourg and Sweden had updated or clarified issues in their MAP guidance.

Further progress on making dispute resolutions more timely, effective and efficient will become known as other stage 2 monitoring reports are published. The OECD will also continue to publish stage 1 peer review reports in accordance with the Action 14 peer review assessment schedule. Publication of the ninth batch of Action 14 peer reviews is due.

25 March 2020, Russian President Vladimir Putin announced that a 15% withholding tax would be imposed on outbound dividend and interest payments to foreign recipients. It was part of a package of emergency measures to support the public and businesses during the coronavirus outbreak.

A 15% rate currently exists for dividends paid to jurisdictions with which Russia has no double taxation agreements (DTAs). Payments to entities in tax treaty partner countries are generally taxable at reduced rates of 5% or 10%. Russia has over 80 DTAs, but none with countries traditionally characterised as tax havens.

Putin said: “If any of our foreign partners do not accept our proposals, Russia will unilaterally withdraw from those agreements. And we will begin with those countries through which significant resources of Russian origin pass, as having the greatest impact on our country.”

According to a subsequent advisory from the Russian Finance Ministry, the planned increase in the withholding tax rate for income in the form of dividends and interest will only apply to so-called “conduit jurisdictions” in which companies are set up specifically for the purpose of applying reduced tax rates provided for in DTAs.

Although not yet specified, the measure will likely to affect Cyprus in particular, and also Luxembourg, Switzerland and the Netherlands. The changes are expected to come into effect on 1 January 2021 and will not apply to income paid from the Russian Federation in 2020. They will not affect interest income payable on Eurobond loans, bond loans of Russian companies or loans made by foreign banks.

15 April 2020, Westminster Magistrates’ Court granted an Account Freezing Order (AFO) under the Proceeds of Crime Act 2002 in respect of 25 bank accounts holding more than €1.9 million following a two-year investigation, led by the Metropolitan Police’s Economic Crime Unit, into suspected money laundering by members of an Italian organised crime network.

The investigation found that dozens of front companies had been opened in the UK using company service providers in order to hide the true origin and destination of the funds. False identities were used, gathered from amongst others a dead man and a victim of identity theft, to obtain business banking facilities with a major bank.

These accounts were then used to perform transactions where millions of euros were laundered from Europe to the UK accounts, and then paid back to Italian accounts – a technique known as ‘layering’.

The application was made under Section 303Z14 of the Proceeds of Crime Act (POCA) 2002. AFOs were created after the introduction of the Criminal Finances Act 2017, which made amendments to POCA 2002. The total amount seized was €1,952,950.58.

Detective Superintendent Nick Stevens, of the Met's Economic Crime Command, said: “It shows that the Met will use all the investigative and legislative tools available to us to seize ill-gotten gains, and stop proceeds of crime becoming sources of income and wealth.”

10 March 2020, the Upper Tribunal (UT) held that the First-tier Tribunal (FTT) was entitled to find that the appellants could not rely on the exemption that the purpose of avoiding liability to tax was not the purpose of arrangements. Relief under the UK/Mauritius tax treaty was not available to the appellants and the appeal was dismissed.

In Andrew Davies & Others v HMRC [2020] UKUT 67 (TCC), the taxpayer appellants took out life policies with a Bermudian provider. The policies owned the shares in a company, which completed on a purchase of a property. The company continued to undertake similar property transactions and its profits were subject to tax in Mauritius.

The appellants transacted through an offshore company to avoid UK tax being paid on the income generated by the property development. Mauritius was specifically chosen because of the favourable terms of the UK/Mauritius double taxation agreement.

The appellants did not dispute, either before the FTT or UT, the application in principle of the transfer of assets abroad (TOAA) legislation to the arrangements but they argued they could rely on the exemption in s. 741(a) ICTA 1988 (now condition A in s. 739, ITA 2007) that the arrangements were not for the purpose of tax avoidance but were for bona fide commercial purposes – a property development trade and the provision of pension arrangements.

In their evidence to the FTT the appellants acknowledged that the transactions were ‘tax efficient’ but they said it was never put to them that the motive was tax avoidance. The failure to put that allegation in cross-examination meant that there was no evidence on which the FTT could make a finding that one of the purposes of the transactions was tax avoidance.

The UT disagreed. Written submissions on behalf of HMRC showed that the appellants were cross-examined on the purposes behind the transactions taking the form in which they did. The UT therefore concluded that the FTT was entitled to make the findings of fact which it made and the UT rejected this ground of appeal.

The UT also rejected the appellantʼs second ground of appeal that the FTT did not give them the benefit of the exemption in s. 741, concluding that the FTT had not made any error of principle and had reached a decision that was open to it. Relief under the UK/Mauritius double tax treaty was also not available to appellants. The appeal was dismissed.