Owen, Christopher: Global Survey – August 2021

Archive
  • 130 countries endorse OECD framework for international tax reform
    • 1 July 2021, the OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS) secured agreement but not unanimous consensus on key aspects for adopting new international tax rules, including a global minimum tax of at least 15% and new rules for allocating taxing rights between nations.

      The two-pillar package aims to ensure that large Multinational Enterprises (MNEs) pay tax where they operate and earn profits. Only nine of the Inclusive Framework’s 139 participating nations did not sign onto the agreement: Barbados, Estonia, Hungary, Ireland, Kenya, Nigeria, Peru, St Vincent & the Grenadines and Sri Lanka. Peru and St Vincent & the Grenadines subsequently endorsed the agreement.

      Pillar One is intended to ensure a fairer distribution of profits by re-allocating some taxing rights over MNEs from their home countries to the markets where they have business activities and earn profits, regardless of whether firms have a physical presence there.

      It would apply to the largest MNEs, including digital companies, with a global turnover over €20 billion (USD23.6 billion) and profitability above 10%. The agreement excludes “Extractives and Regulated Financial Services” from the scope. Subject to successful implementation and a seven-year review, the threshold would be reduced to €10 billion.

      For in-scope MNEs, a new ‘special purpose nexus’ rule would apply in a jurisdiction to the extent the entity derives at least €1 million (USD1.18 million) in revenue from the jurisdiction. This threshold is lowered to €250,000 (USD296,000) for smaller jurisdictions with GDP lower than €40 billion (USD47 billion).

      The reallocation of an in-scope company’s profits to market jurisdictions would apply to “between 20-30% of residual profit defined as profit in excess of 10% of revenue”.

      The OECD estimates that taxing rights on more than USD100 billion of profit are expected to be reallocated to market jurisdictions each year. Under the agreement, the new allocation rules would be coordinated with “the removal of all Digital Service Taxes and other relevant similar measures on all companies.”

      Pillar Two seeks to put a floor on competition over corporate income tax, through the introduction of a global minimum corporate income tax rate of at least 15% for MNEs with global revenue of €750 million (approx. USD888 million) or more. According to OECD estimates, this would generate around USD150 billion in additional global tax revenues annually.

      Under the agreement, global anti-base erosion (GloBE) rules would enable nations to impose “top-up tax” on a parent entity with respect to income incurred by a subsidiary in a low-tax jurisdiction (‘income inclusion’ rule) or to deny associated deductions (‘undertaxed payments’ rule).

      A carve-out from the GloBE rules would “exclude an amount of income that is at least 5% (in the transition period of five years, at least 7.5%) of the carrying value of tangible assets and payroll”.

      According to the statement, the signing nations intend for the global minimum tax to have “a limited impact on MNEs carrying out real economic activities with substance”. The agreement contemplates continued discussions on the “direct link between the global minimum effective tax rate and the carve-outs”.

      The agreement states that implementing laws for the minimum tax should be adopted in 2022 for the tax to take effect in 2023.

      “After years of intense work and negotiations, this historic package will ensure that large multinational companies pay their fair share of tax everywhere,” OECD Secretary-General Mathias Cormann said. “This package does not eliminate tax competition, as it should not, but it does set multilaterally agreed limitations on it. It also accommodates the various interests across the negotiating table, including those of small economies and developing jurisdictions. It is in everyone’s interest that we reach a final agreement among all Inclusive Framework Members as scheduled later this year.”

      Participants in the negotiation have set a timeline for conclusion of the negotiations, which includes an October 2021 deadline for finalising the remaining technical work on the two-pillar approach, as well as a plan for effective implementation in 2023.

      G20 Finance Ministers and Central Bank Governors, in a communique issued following its meeting on 10 July, broadly endorsed the Inclusive Framework statement with respect to adopting a global minimum tax of at least 15% and new rules on allocating taxing rights.

      The communique also called for a detailed implementation plan to be developed before the next G20 finance ministers’ meeting in October and invited the seven Inclusive Framework members that had not joined the agreement to do so.

      The Communiqué of the Finance Ministers and Central Bank Governors meeting can be accessed at https://www.g20.org/wp-content/uploads/2021/07/Communique-Third-G20-FMCBG-meeting-9-10-July-2021.pdf

  • BVI brings new Trustee, Probates and Data Protection laws into force
    • 9 July 2021, the British Virgin Islands government brought the Trustee (Amendment) Act 2021, the Probates (Resealing) Act 2021 and the Data Protection Act 2021 into force on the same day.

      The Trustee (Amendment) Act 2021 is based on recommendations made by the Trust and Succession Law Review Committee and introduces a number of new and updated provisions into the BVI Trustee Act 1961, which include:

      - Empowering the High Court to vary the terms of a trust, including the dispositive provisions, without the consent of adult beneficiaries if the High Court considers the variation to be expedient in the circumstances.

      - Introducing statutory rules permitting the High Court to set aside the flawed exercise of a fiduciary power, preserving in BVI law what has become known as the rule in Re Hastings Bass in the way that it was formulated prior to the UK Supreme Court decisions in Pitt v Holt and Re Futter.

      - Strengthening the existing ‘firewall provisions protecting BVI trusts from attacks based on foreign laws, including claims brought under forced heirship regimes or arising as a result of a personal relationship with a ‘person internal to the trust relationship’.

      - Increasing the powers that a settlor may reserve in a trust instrument, without invalidating the trust or preventing the trust taking effect according to its terms.

      - Introducing new trustee record-keeping obligations in line with current international regulatory standards.

      The Probate (Resealing) Act 2021 extends the number of jurisdictions whose grants of probate or letters of administration may be resealed by the BVI courts to 67, including all Commonwealth countries and territories, as well as the Hong Kong SAR and the US. Previously it was only possible to reseal grants issued in a very limited number of jurisdictions – the UK, Canada, Australia, New Zealand and the British Overseas Territories.

      The Act applies to the grant of probate or letters of administration, whether issued before or after the it came into force. It also empowers the High Court to require the giving of security in respect of the payment of debts due from the estate of a deceased person to persons residing in the BVI before resealing any grant of probate or letters of administration.

      The Data Protection Act 2021 is the first piece of specific data protection legislation to be introduced in the BVI and is intended to provide a regime that is equivalent to the UK and European Union, in particular the EU’s General Data Protection Regulation (GDPR).

      The objects of the new Act are to safeguard data processed by public bodies and private bodies and to promote transparency and accountability in the processing of personal data. The Act applies to any person who processes or who has control over, or authorises, the processing of any personal data in respect of commercial transactions.

      It further applies to any person established in the BVI that processes personal data or employs or engages any other person to process personal data on their behalf, whether or not in the context of that establishment; or any person that is not established in the BVI but uses equipment in the BVI for processing personal data otherwise than for the purposes of transit through BVI.

      The Act sets out provisions for, among other things, notice and choice, disclosure, security and retention, and establishes data subject rights such as the right of access, rectification and prevention of processing for direct marketing purposes, as well as rights with respect to the processing of sensitive personal data.

      The Act further provides for the establishment of the Office of the Information Commissioner with powers to monitor, investigate and enforce compliance.

  • EU appeals €250 million Amazon state aid ruling
    • 22 July 2021, the European Commission appealed a decision handed down in May by the General Court of the European Union that annulled an order that Luxembourg recoup €250 million (USD295 million) in back taxes from US online retailing giant Amazon. The case will now go to the European Court of Justice, the EU's highest court.

      In its ruling, the General Court said that the Commission had been “incorrect in several respects” in its analysis of the 2017 case and had not been right to argue that the company’s tax bill was artificially reduced as a result of overpricing of a royalty payment.

      In its appeal to the Court of Justice, the Commission said the General Court had “made a number of errors of law in its judgment”. It argues that it should have based its ruling on the profits recorded in Luxembourg by Amazon rather than looking at the US where it holds its intellectual property.

      The commission said in its statement that it was its top priority to make sure that all companies of all sizes “pay their fair share of tax” and the courts had confirmed the principle that member states must determine taxation laws in line with EU state aid rules.

      “If member states give certain multinational companies tax advantages not available to their rivals, this harms fair competition in the European Union in breach of State aid rules,” the Commission added.

       

  • European Commission publishes new AML/CFT legislative proposals
    • 20 July 2021, the European Commission presented a new package of legislative proposals to strengthen the EU’s anti-money laundering and countering terrorism financing (AML/CFT) rules. The aim is to improve the detection of suspicious transactions and activities, and to close loopholes used by criminals to launder illicit proceeds or finance terrorist activities through the financial system.

      The package consists of four legislative proposals:

      -A Regulation establishing a new EU-level Anti-Money Laundering Authority (AMLA).

      -A Regulation to introduce a single EU Rulebook for AML/CFT, including in the areas of Customer Due Diligence and Beneficial Ownership.

      -A sixth Directive on AML/CFT (AMLD6), replacing the existing Directive 2015/849/EU (AMLD4 as amended by AMLD5), containing provisions that will be transposed into national law, such as rules on national supervisors and Financial Intelligence Units in member states.

      -A revision of the 2015 Regulation on Transfers of Funds to trace transfers of crypto assets (Regulation 2015/847/EU).

      The new EU-level Anti-Money Laundering Authority (AMLA) will be the central authority coordinating national authorities to ensure the private sector applies EU rules correctly and consistently. AMLA will also support Financial Intelligence Units (FIUs) to improve their analytical capacity around illicit flows and make financial intelligence a key source for law enforcement agencies. In particular, AMLA will:

      -Establish a single integrated system of AML/CFT supervision across the EU, based on common supervisory methods and convergence of high supervisory standards.

      -Directly supervise some of the riskiest financial institutions that operate in many member states or require immediate action to address imminent risks.

      -Monitor and coordinate national supervisors responsible for other financial entities, as well as coordinate supervisors of non-financial entities.

      -Support cooperation among national FIUs and facilitate coordination and joint analyses between them, to better detect illicit financial flows of a cross-border nature.

      The Single EU Rulebook for AML/CFT will harmonise AML/CFT rules across the EU, including, for example, more detailed rules on Customer Due Diligence, Beneficial Ownership and the powers and task of supervisors and FIUs. Existing national registers of bank accounts will be connected, providing faster access for FIUs to information on bank accounts and safe deposit boxes. The Commission will also provide law enforcement authorities with access to this system, speeding up financial investigations and the recovery of criminal assets in cross-border cases. Access to financial information will be subject to robust safeguards in Directive (EU) 2019/1153 on exchange of financial information.

      At present, only certain categories of crypto-asset service providers are included in the scope of EU AML/CFT rules. The proposed reform will extend these rules to the entire crypto sector, obliging all service providers to conduct due diligence on their customers. The amendments are intended to ensure full traceability of crypto-asset transfers, such as Bitcoin, and allow for prevention and detection of their possible use for money laundering or terrorism financing. In addition, anonymous crypto asset wallets will be prohibited, fully applying EU AML/CFT rules to the crypto sector.

      The Commission also proposed an EU-wide limit of €10,000 on large cash payments to make it harder for criminals to launder dirty money. Limits already exist in about two-thirds of member states, but amounts vary. National limits under €10,000 can remain in place.

      The Commission further reiterated that any country listed by the Financial Action Task Force (FATF) would also be listed by the EU. There will be two EU lists, a ‘black-list’ and a ‘grey-list’, reflecting the FATF listings, and the EU is to apply measures proportionate to the risks posed by the country. The EU will also be able to list countries that are not listed by the FATF, but which are found to pose a threat to the EU's financial system based on an autonomous assessment.

      Commissioner for financial services Mairead McGuinness said: “Money laundering poses a clear and present threat to citizens, democratic institutions, and the financial system. The scale of the problem cannot be underestimated and the loopholes that criminals can exploit need to be closed. Today's package significantly ramps up our efforts to stop dirty money being washed through the financial system. We are increasing coordination and cooperation between authorities in member states and creating a new EU AML authority. These measures will help us protect the integrity of the financial system and the single market.”

      The legislative package will now be discussed by the European Parliament and Council. The Commission said the AMLA should be operational in 2024 but would start its work of direct supervision slightly later, once the new AMLD6 has been transposed and the new regulatory framework has started to apply.

       

  • EWCA holds that HMRC third-party information notices cannot be contested
    • 16 July 2021, the England and Wales Court of Appeal (EWCA) unanimously ruled that the First-tier Tax Tribunal (FTT) had no power to hold an oral inter partes hearing to decide an application by HMRC for a Schedule 36 third-party information notice.

      In Kandore Ltd and others v HMRC [2021] EWCA Civ 1082, HMRC had opened enquiries in 2014 into the tax positions of several companies because it was concerned about cash extractions from the companies. Having not completed these enquiries within three years, the companies applied for closure notices.

      HMRC then wrote to the directors and shareholders of the companies and their spouses asking them to provide information voluntarily on their finances. When the individuals refused to provide the information, HMRC advised the companies of its intention to apply to the FTT under FA 2008, Sch. 36, for approval of third-party information notices.

      The companies (taxpayers) and individuals (third parties) then jointly applied to the FTT for directions that would have provided them with: the ability to attend a public hearing of the application; the right to be provided with a summary of HMRCʼs arguments in support of the application; and the ability to make submissions to the FTT as to why the application should not be approved.

      The FTT dismissed the application, holding that it did not have the power to make the directions sought and there was no right for the companies or individuals to attend and make representations at the application hearing. The appellants appealed to the Upper Tribunal (UT).

      The UT agreed with the FTT that Sch. 36 did not grant an opportunity for an inter partes determination of the application. However, it also concluded that there was no absolute bar to the FTT directing that an ex parte hearing be heard in public and the FTT had therefore made an error of law in concluding that it had no such power. Accordingly, it set aside the FTTʼs decision on that point and remade it, although reaching the same conclusion – that the application was to be heard in private.

      The appellants appealed to the EWCA, which agreed with the UT that the FTT did not have any power to allow any participation by the taxpayer or a third party in determining an application by HMRC for approval of a third-party notice under Sch. 36. The legislation provided for HMRC to seek the approval of the FTT for a third-party notice made in the context of their investigation of a taxpayer, but this was in the nature of ‘judicial monitoring’ rather than an adjudication in a dispute between parties to litigation.

      The fact that HMRC had sent 'opportunity letters' to the taxpayers did not imply that the taxpayers had the right to contest them. “The reason for the giving of summary reasons to the taxpayer under Sch. 36 is purely to guard against arbitrary conduct by the tax authority and to provide the context for any application to the FTT for approval of the third-party notice,” said Singh LJ in the judgment.

      Third-party notices were intended to obtain documents and information “without providing an opportunity for those involved in potentially fraudulent or otherwise unlawful arrangements to delay or frustrate the investigation by lengthy or complex adversarial proceedings or otherwise,” said Singh LJ.

      “It is inevitable in many cases, particularly where there are complex arrangements designed to evade tax, that at the investigatory stage it will be difficult, if not impossible, for HMRC to be definitive as to the precise way in which particular documents will establish tax liability. It is also clear that in many cases disclosure of HMRC's emerging analysis and strategy and of sources of information to the taxpayer or those associated with the taxpayer may endanger the investigation by forewarning them,” he said.

      On the issue of whether the UT had erred in law in deciding that HMRCʼs application for approval of the third-party notices should be heard in private, the EWCA concluded that the UT was holding that, for one permitted reason or another, it would not be in the interests of justice in this case for the hearing of HMRCʼs application to be heard in public. It did not rule out the possibility that such a hearing could take place in other cases. The EWCA could see no basis on which to interfere with that decision as it was one that was reasonably open to the UT.

      The full judgment can be accessed at https://www.bailii.org/ew/cases/EWCA/Civ/2021/1082.html

       

  • FATF reviews revised Standards on Virtual Assets and VASPs
    • 5 July 2021, the Financial Action Task Force (FATF) completed a second 12-month review of the implementation of its revised Standards, which placed anti-money laundering and counter-terrorism financing (AML/CFT) requirements on virtual assets and virtual asset service providers (VASPs).

      Out of 128 reporting jurisdictions, 58 advised that they had now implemented the revised FATF Standards, with 52 of these regulating VASPs and six prohibiting the operation of VASPs. However only 35 of the 58 jurisdictions reported that their regime was currently operational.

      In the previous 12-month review, 32 jurisdictions had reported having existing regulations for VASPs, 13 jurisdictions reported having regulations in development, and five jurisdictions indicated the prohibition or potential near future prohibition of VASPs.

      The increase suggested that significant progress had been made, said the FATF, but the remaining 70 jurisdictions had not yet implemented the revised Standards in their national law. Of these, 26 reported that they were in the process of passing the necessary legislation to regulate or prohibit VASPs; 12 jurisdictions reported that they had decided on their approach to VASPs but had not yet commenced the necessary legislative/regulatory process; while 32 jurisdictions reported that they had not yet decided what approach to take for VASPs.

      The FATF said this meant that there was not yet an effective global regime to prevent the misuse of virtual assets and VASPs for AML/CFT purposes. There was evidence that supervision of VASPs and implementation of AML/CFT obligations by VASPs was generally emerging, particularly in the development of technological solutions to enable the implementation of the ‘travel rule’ for VASPs.

      But the lack of implementation of travel rule requirements by jurisdictions was acting as a disincentive to the private sector, particularly VASPs, to invest. Only 10 jurisdictions reported that they were actively enforcing Travel Rule requirements for VASPs. An additional 14 jurisdictions reported that they had introduced Travel Rule regulations but were not yet enforced the requirements. No jurisdictions reported being aware of any VASP that fully complied with all elements of the Travel Rule.

      Since FATF’s first 12-Month Review there had been significant progress in the development of various technologies and tools to enable VASPs to comply with the Travel Rule, but compliance with the Travel Rule continued to be reported as challenging due to “the lack of one unified technology to support it,” according to the FATF report.

      The lack of Travel Rule implementation globally was a major obstacle to effective global AML/CFT mitigation and undermines the effectiveness and impact of the revised FATF Standards. For this, the FATF has indicated that one of its major next steps will be to accelerate the implementation of the Travel Rule globally.

      The report also indicated that a potentially significant amount of virtual assets was being transferred on a peer-to-peer basis (without the use of a VASP) and that these included a higher share of illicit transactions, both in number and USD volume. However, the substantial differences in the data provided by the blockchain analytic companies made analysis of the size of the peer-to-peer sector and its associated ML/TF risk uncertain.

      Going forward, the FATF said its next steps will be to:

      -Accelerate the implementation of the Travel Rule.

      -Finalise the revised FATF Guidance on virtual assets and VASPs by November 2021.

      -Monitor the virtual asset and VASP sector, but not further revise the FATF Standards other than to make a technical amendment regarding proliferation financing.

  • Gibraltar raises Corporate Tax Rate in advance of global minimum tax
    • 20 July 2021, the Gibraltar government announced in the Budget that it plans to raise its corporate tax rate to from 10% to 12.5% in preparation for the expected adoption of a global minimum tax. The new rate will apply to companies’ financial periods beginning after that date.

      Gibraltar was among the 130 countries and territories in the Inclusive Framework on Base Erosion and Profit Shifting (BEPS) that endorsed, on 1 July, the OECD-led twin-pillar plan relating to the taxation of the digital economy, the allocation of taxing rights and the harmonisation of a minimum global corporate tax rate.

      Chief Minister Fabian Picardo told parliament in his Budget Address 2021: “Whilst I understand this will present challenges to this jurisdiction and its model of taxation, I do not believe it is in Gibraltar’s interest to be the outlier that would not sign up to this framework and would seek to resist it … what I believe we need to do is to understand the changes and navigate Gibraltar through reforms safely and securely so that we are left placed in the best position possible.

      “For this reason, I am today announcing an increase in corporation tax in Gibraltar. Any company commencing a financial period after today’s date will now pay corporate tax at 12.5% and not 10%. This means that if the new global agenda prospers, when we are required by the OECD to move to 15% the increase will be less significant,” he said.

       

  • Japan and Switzerland sign tax treaty protocol
    • 16 July 2021, the governments of Japan and Switzerland signed a Protocol to amend the existing double tax agreement Convention, which entered into force in 1971 and was partially amended in 2011. It will enter into force 30 days after ratification.

      The Protocol implements the minimum standards under the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). Specifically, the Protocol amends the Principal Purpose Test (PPT) of Protocol 1 of the current treaty in line with Article 7 of the MLI. It also supplements the provision on the Mutual Agreement Procedure (MAP) in accordance with the minimum standard and introduces the arbitration procedure.

      The article on Business Profits is amended in line with Article 7 of the OECD Model Convention such that profits attributable to a permanent establishment of a foreign enterprise are calculated by recognising internal dealings between a head office and its branches and by applying the arm’s length principle.

      Under the amended treaty, dividends will be subject to a maximum rate of 10%, as under the existing treaty. However, dividend taxation will be exempted in the case of certain companies that are at least 10% owned for 365 days. Previously, a full exemption was only available for a holding of at least 50% for six months and a 5% rate applied to holdings of at least 10% for six months.

      The Protocol also provides a full exemption on interest. Previously, interest was subject to 10% withholding tax unless beneficially owned by the government, financial institutions or recognised pension funds. Royalties will continue to be exempted.

  • Manx Appeal Court orders trustee to reconsider decision not to appoint protector
    • 19 July 2021, the Staff of Government Appeal Division of the High Court of Justice of the Isle of Man set aside an order of the High Court and directed a trustee to reconsider its decision not to appoint a new protector to the trust, despite a request for it to do so by all the adult beneficiaries of the trust.

      In Annaluisa Pesenti Mazzoleni v Summerhill Trust Company (IoM) Ltd. (2021/03 2DS), the appellant Annaluisa Pesenti Mazzoleni was the principal beneficiary of the RR2 Trust, one of four trusts established in the Isle of Man by the settlor, the late Mrs Rosalia Radici Pesenti, in June 1994, each of which was for the benefit of one of her children and his/her heirs. Mrs Pesenti died in 2007.

      The four trusts formed part of the complex ownership structure in respect of a controlling interest in an Italian cement company Italcementi SpA (ITC), through another company known as Italmobiliare SpA (ITM) that is listed on the Milan stock exchange.

      Mrs Pesenti had given a Letter of Wishes to the original trustees stating that that the trust was primarily for the benefit of the appellant, and only after her death for the benefit of her children and, after their death, for the benefit of their descendants. The Letter of Wishes also stated: “Please take note of the fact that I have appointed a protector and that the latter has been granted powers that I could have reserved to myself had I been younger, in order to ensure that my wishes concerning the future of the Trust Foundation are fulfilled.”

      In 2015/2016 ITM transferred its shareholding in ITC to a German company, HeidelbergCement AG, for €1.67 billion. The appellant and her sister Camilla complained that they knew nothing of this proposed sale and, although the Pesenti family retains its control over ITM, the appellant asserts that the company has been transformed from a holding company through which the family controlled and led ITC into an investment company managing a portfolio of shareholdings in a variety of sectors.

      The appellant and her sister commenced proceedings in Italy against a number of family members, companies, trustees and former trustees, and the former protector of the four trusts. The purpose of the proceedings was to claim damages for failure to take into consideration the rights of the Italian plaintiffs as heirs to Mrs Pesenti's succession, together with an invalidity claim attacking the whole structure that she established.

      Italo Lucchini, who had been appointed protector of the four trusts in 1998, resigned in October 2017 when litigation commenced. His nominated successor declined each of the offices. The two remaining individual trustees of the four trusts also resigned in December 2017, leaving Summerhill as the sole trustee.

      In May 2018, the appellant wrote to Summerhill saying that she did so in the place of the settlor and in accordance with her mother's Letter of Wishes. She made it plain that in her view it was appropriate for the trust to have a protector and nominated two possible candidates. Summerhill responded that it was not minded to appoint a protector but would discuss the matter with her further when they next met.

      The appellant and her sister, as beneficiaries of RR2 and RR3 settlements respectively, sought advice. Their advisers suggested that in view of fact that Summerhill, instead of seeking independent legal advice, had appointed an Italian lawyer who had historically represented and continued to represent the parties on the other side of the Italian proceedings, it was essential that a protector should be appointed to ensure that their interests were not prejudiced.

      Summerhill did not accept it was in a position of conflict and indicated that it was not minded to appoint a protector at that time but would continue to keep this under review. In November 2018 all the adult beneficiaries of the trust (and a minor beneficiary represented by his parents) wrote to Summerhill supporting the request of the appellant that a protector be appointed and endorsing the suitability of the appellant's two candidates for the role.

      In January 2019, Summerhill reiterated its position, giving the following reasons in outline:

      -It did not consider there was any need to appoint a protector for either trust at that time. The only substantive reason which had been advanced by the appellant and her sister had been to ensure the provision of financial information, but as that was being provided anyway, it was unnecessary to appoint a protector to the RR2 the RR3 settlements.

      -The four trusts were involved in acrimonious litigation in Italy that had caused conflict within the family and Summerhill did not wish to take any unnecessary steps which might add to those hostilities.

      -The four trusts had considerable inter-relationships of trust assets and in some cases of beneficiaries. Those inter-relationships required some unity of decision-making across the trust structures. With that in mind it would not be desirable for the RR2 and RR3 settlements to have protectors, or different protectors to the other trusts, without good reason.

      -It considered that it essential that any individual considered for the role of protector should be impartial and independent in relation both to the family and the Italian proceedings in order to avoid any further aggravation within the family. It had to deal fairly with all the beneficiaries. Given the hostile litigation, it was difficult to conceive of an individual who might be regarded by all of Mrs Pesenti's descendants as impartial and independent.

      The letter confirmed that Summerhill would give full transparency as to the assets of the RR2 and RR3 settlements and would give full details of the trust accounts going forward.

      The appellant and her sister applied to the High Court of the Isle of Man seeking relief in the form of a declaration that Summerhill’s decision not to appoint a protector was void and should be set aside and that the trustee's power under Clause 6 of the Fourth Schedule should be exercised as soon as reasonably practicable. Clause 6 stated that: “If at any time there is no protector in office the trustees may by deed appoint a protector.”

      The High Court resolved that the words of Clause 6 were clear and unambiguous. Deemster Christie thought that it inconceivable that a professional would not understand the distinction between the use of the words "may" and "must". It would have been easy to impose on the trustees an imperative power to appoint a protector where there was none in office, but such language had not been included. He also considered that there was nothing in the overall context that suggested that the role of the protector was intended to be self-generating in all circumstances, and it was wrong to assume that the trust deed envisaged there would be a protector at all times.

      The Deemster then turned to the trustee’s decision not to appoint a protector for the time being but keep the matter under review. He found that the trustee had displayed a conscientious and proper approach to the decision-making exercise and concluded that the reasons relied upon by the trustee were relevant reasons. Accordingly, he should not direct the trustee either to exercise the Clause 6 power to appoint a protector or to reconsider the decision that had already been taken. Judgment was handed down on 30 December 2020 and the Appeal Notice filed on 9 February 2021.

      The Appeal Court held that the Deemster was correct to find that the trustee’s power to appoint a protector was not an imperative power and that there was no doubt that the power contained in Clause 6 was a discretionary power. “However,” it said, “as with all discretions which are capable of being reviewed by a court, it is essential that the decision-maker takes into account all relevant considerations and excludes from account all irrelevant considerations – and also, of course, that the decision-maker should reach a conclusion which is not so unreasonable that no reasonable decision-maker in his position could have reached it.”

      In respect of reason 1, it found: “The trustee appeared to have considered the need for the appointment of a protector solely in the context of the provision of financial information to beneficiaries on the basis that was the reason advanced by the appellant and her sister Camilla. In approaching the matter in that way, the trustee was in error. The power to appoint a new protector was a fiduciary power which had to be exercised in the interests of all of the beneficiaries and while the reasons advanced by the appellant were relevant for the trustee to consider, it was for the trustee to review the possible exercise of the power on a wider basis. It should therefore have considered all the various protector powers as contained in the trust deed as to whether it was necessary or desirable that its powers to appoint a new protector should be exercised.”

      In respect of reason 2, it found: “In context, the reason given can only mean that the trustee took into account the wider interests of the whole family, including the branches of the family other than that of the appellant and her issue. Avoiding taking steps which might add to hostilities within the family would be a proper consideration for the trustee if ‘family’ meant only the appellant and her issue. If, however, it meant it would be in the interests of the wider family and not in the interests of the appellant and her issue to avoid such hostilities, the trustee would be taking into account the interests of those who were not beneficiaries in deciding whether or not to exercise the fiduciary power to appoint a new protector.”

      In respect of reason 3, it found: “The present case is one where all the adult beneficiaries of the trust support the attack which the appellant has made on the structure as a whole … That unity amongst the adult beneficiaries is the clearest indication that the inter-relationships are not perceived to be working as far as the trust is concerned, a conclusion which the trustee ought to recognise. When it comes to taking any particular decision, the trustee naturally has to have regard to the interests of the beneficiaries, and only the beneficiaries, in respect of that decision. The validity of the decision will stand or fall by the rationale which leads to it being taken. If unity of itself was the rationale for a particular decision, then one would expect that sooner or later there would come a time when the decision taken would favour the beneficiaries of other trusts but not the beneficiaries of the trust.”

      In respect of reason 4, it found: “It is being suggested that the protector of the trust should be impartial and independent in relation to litigation between the appellant and other members of her family when the appellant is a beneficiary of the trust but the other members of the family are not. It could not be clearer that by giving this reason the trustee has acknowledged that it is taking into account the interests of people who are not beneficiaries of this trust for the purposes of exercising, or not exercising, its fiduciary power to appoint a protector.”

      For all these reasons, the Appeal Court held that the trustee’s decision not to appoint a protector could not stand and it directed it to reconsider. It said it had deliberately gone into some detail as to its reasoning in order to give the trustee guidance in considering again not only whether, but if so whom, to appoint as protector.

      It further warned that, if the trustee’s decision proved unacceptable to the adult beneficiaries of the trust and came back to the court, consideration would then need to be given as to whether the court should make a more direct order for the appointment of a protector.

      “As we have stated,” said the Appeal Court, “the office of protector is frequently a fiduciary office; and in the present case we have no doubt that the power of appointment in the trustees is a fiduciary power and indeed that the powers conferred on the protector are fiduciary powers to be exercised in the interests of the trust's beneficiaries as a whole.”

      The full judgment can be accessed at https://www.judgments.im/content/J2834.htm

  • New OECD country-by-country data shows profit shifting
    • 29 July 2021, the OECD’s annual Corporate Tax Statistics review found that the statutory corporate income tax rate across 111 reviewed jurisdictions had declined from an average of 28.3% in 2000 to 20% in 2021 – a drop of almost 30%.

      Of these jurisdictions reviewed, 94 had lower corporate tax rates in 2021 than in 2000, while 13 jurisdictions’ rates remained unchanged, and only four jurisdictions – Andorra, Hong Kong, the Maldives and Oman – had increased their rates.

      Most of the downward movement in tax rates between 2000 and 2021 was to corporate tax rates equal to or greater than 10% and less than 30%. The number of jurisdictions with tax rates equal to or greater than 20% and less than 30% doubled from 25 jurisdictions to 50 jurisdictions, and the number of jurisdictions with tax rates equal to or greater than 10% and less than 20% more than quadrupled, from seven to 29 jurisdictions.

      Of the jurisdictions that had decreased their rates, 12 had done so by 20 percentage points or more –Aruba, Barbados, Belize, Bosnia and Herzegovina, Bulgaria, Democratic Republic of the Congo, Germany, Guernsey, India, Isle of Man, Jersey and Paraguay. A further 12 of the jurisdictions had no corporate tax regime or a corporate tax rate of zero in 2021.

      Excluding jurisdictions with a tax rate of 0%, the average statutory rate in 2021 was 22.4%. Two jurisdictions had rates higher than 0% but less than 10% – Barbados (5.5%) and Hungary (9%), although Hungary also has a supplemental local business tax that is not based on profits.

      Eighteen jurisdictions had tax rates of 30% or more, with Malta having the highest corporate tax rate at 35% (although, the OECD noted, that Malta offers a refund of up to six-sevenths of corporate income taxes to both resident and non-resident investors through its imputation system).

      New country-by-country reporting information, which aggregated data on 6,000 MNE groups headquartered in 38 jurisdictions, showed that there continues to be a discrepancy between where multinational enterprise (MNE) economic activity occurs and where MNE profits are reported, with a disproportionate amount continuing to be reported in ‘investment hubs’ and ‘zero-tax’ jurisdictions.

      Investment hubs are defined as jurisdictions with total inward foreign direct investment equalling more than 150% of GDP. They include Anguilla, Bahamas, Barbados, Bermuda, British Virgin Islands, Cayman Islands, Cyprus, Gibraltar, Guernsey, Hong Kong, Hungary, Ireland, Isle of Man, Jersey, Liberia, Luxembourg, Malta, Marshall Islands, Mauritius, Mozambique, Netherlands, Singapore, Switzerland and the Turks & Caicos Islands.

      The data showed significant differences in the distribution across jurisdiction groups of employees, tangible assets and profits. For example, high- and middle-income jurisdictions accounted for a higher share of total employees (respectively 32% and 38%) and total tangible assets (respectively 38% and 16%) than of profits (respectively 34% and 13%). In investment hubs, on average, MNEs reported a relatively high share of profits (26%) compared to their share of employees (3%) and tangible assets (14%). High income jurisdictions, middle income jurisdictions and investment hubs accounted for 38%, 23% and 10% of tax accrued, respectively.

      According to the report, the ratio of total revenues to the number of employees was higher in jurisdictions where the CIT rate is zero and in investment hubs. The OECD said that while this may reflect differences in capital intensity or in worker productivity, it may also be an indicator of BEPS.

      The median value of revenues per employee in zero CIT rate jurisdictions was just under USD2.6 million, compared to USD320,000 for jurisdictions with CIT rates lower than 20% and USD285,000 for jurisdictions with CIT rates higher than 20%. In investment hubs, median revenues per employee were USD1.7 million while in high-, middle- and low-income jurisdictions median revenues per employee were USD443,000, USD190,000 and USD171,000 respectively.

      Further, sales, manufacturing and services were found to be the most prevalent activities in high-, middle- and low-income jurisdictions, while in investment hubs the predominant activity was “holding shares”, which also includes other equity instruments. A concentration of holding companies was a risk assessment factor, said the OECD, and could be indicative of certain tax planning structures.

      Finally, the Corporate Tax Statistics database includes information on intellectual property (IP) regimes, which allow income from the exploitation of certain IP assets to be taxed at a lower rate than the standard statutory CIT rate to support R&D activities. The nexus approach of the BEPS Action 5 minimum standard now requires that tax benefits for IP income are made conditional on the extent to which a taxpayer has undertaken the R&D activities that produced the IP asset in the jurisdiction providing the tax benefits.

      IP regimes were found to be either: harmful (because they did not meet the nexus approach); not harmful (when the regime met the nexus approach and other factors in the review process), or potentially harmful (when it had not yet been determined whether a regime met the Action 5 minimum standard).

      Thirty-six regimes were found to be not harmful (of which two were harmful only in respect of a transition issue for a certain period) and one was found to be harmful. Four regimes were in the process of being amended or eliminated because they were not compliant with the BEPS Action 5 minimum standard. Eight regimes were abolished in 2020 and a further three regimes were under review even though it had not yet been determined whether they were in compliance.

      Of the 36 non-harmful IP regimes, all offered benefits to patents, 26 offered benefits to copyrighted software and 11 offered benefits to the third permissible category of assets that are restricted to SMEs. Tax rate reductions for the 36 non-harmful IP regimes ranged from a full exemption from tax to a reduction of about 40% of the standard tax rate.

      Three of the four regimes that were in the process of being amended or eliminated offer a full exemption from taxation for IP income, while the fourth offered a reduction from 28% to 10% for IP income.

  • Nike fails to block formal investigation into Dutch tax rulings
    • 14 July 2021, the General Court of the European Union dismissed an action brought by US sportswear maker Nike against the European Commission’s decision to initiate a formal investigation procedure in respect of tax rulings issued by the Netherlands tax administration. The Commission, it held, had complied with the procedural rules, had not failed to fulfil its obligation to state reasons or made manifest errors of assessment.

      In Nike European Operations Netherlands and Converse Netherlands v Commission (Case T-648/19), the Commission had decided to initiate a formal investigation procedure into rulings issued in 2006, 2010 and 2015 to Nike European Operations Netherlands and in 2010 and 2015 to Converse Netherlands. Both were Dutch subsidiaries of a Dutch holding company, Nike Europe Holding, which was owned by Nike Inc. in the US.

      The tax rulings validated for tax purposes a transfer pricing arrangement, in particular the level of royalties payable by Nike and Converse to other Nike group companies, which were not taxed in the Netherlands, in return for the use of intellectual property rights. The royalties were tax deductible from the taxable revenue of Nike and Converse in the Netherlands.

      According to the Commission’s provisional assessment, those tax rulings conferred a selective advantage in that the corporate income tax for which Nike and Converse were liable in the Netherlands was calculated on the basis of an annual level of profit lower than it would have been if those companies’ intra-group transactions had been priced at arm’s length for tax purposes. In 2019, it decided to open a formal investigation procedure to determine whether there might be any unlawful State aid.

      Nike and Converse asked the General Court to annul the Commission’s decision, alleging breach of its obligation to state reasons, manifest errors of assessment and non-compliance with procedural rights.

      The General Court did not accept any of the arguments put forward and dismissed the action in its entirety. The contested decision contained a clear and unequivocal statement of reasons so the applicants could not complain that the Commission’s reasoning as regards the individual character of the measures at issue was incomplete.

      The Commission did not fail to fulfil its obligation to state reasons by failing to set out reasons as to whether an aid scheme exists in the present case. The statement of reasons for the contested decision, in respect of the examination of the selectivity of the measures at issue, did not contain any internal inconsistency. Likewise, the Commission satisfied its obligation to state reasons for assessing the comparability of Nike’s situation with that of other undertakings.

      Turning to the argument in respect of manifest errors of assessment and incorrect assessment of the selective nature of the measures at issue, the Court noted that it was for the Commission to compare the taxable profit of the beneficiary with the position, as it would be if the normal tax rules under Netherlands law were applied, of an undertaking in a factually comparable situation, carrying on its activities in conditions of free competition.

      Having regard to the difficulties inherent in such an analysis, the initiation of the formal investigation procedure could not reasonably be challenged. Moreover, the conditions giving rise to a provisional presumption as to the selectivity of the measures at issue were satisfied in the present case.

      According to the applicants, it was not until the publication of an investigation by an international consortium of journalists in November 2017 and the ensuing political pressure that the Commission sent several further requests for information to the Netherlands and decided to target Nike unfairly. In their view, the Commission should have extended its preliminary examination to include the situation of companies to whom some 98 tax rulings like those of Nike were addressed, or the situation of some 700 companies that were using a company structure like that of Nike.

      The Court said the aim of initiating the formal investigation procedure was to enable the Commission to obtain all the views it needed to adopt a definitive decision. It found that the Commission had satisfied its obligation to initiate the formal investigation procedure when there were serious difficulties, and that it did so without making manifest errors of assessment.

      The failure to extend the preliminary examination to include identification of a possible aid scheme from which the tax rulings at issue may have been derived could not be accepted for the purposes of annulment of the contested decision. The Commission was entitled to treat a measure as being individual aid without being obliged to verify beforehand and as a matter of priority whether that measure may have been derived from such a scheme.

      Lastly, the Court found that the Commission had carried out its provisional assessment of the measures at issue in a diligent and impartial manner, and that it had not breached the principle of good administration. The same applied to the alleged breach of the principle of equal treatment.

      The Court noted that the decision to initiate the formal investigation procedure ended the preliminary examination stage. Accordingly, the Commission’s assessment of the measures at issue was not definitive and might evolve during the formal procedure for obtaining additional information from the Netherlands and any interested parties.

      “Nike is subject to and rigorously ensures that it complies with all the same tax laws as other companies operating in the Netherlands,” the company said in a statement. “We believe the European Commission’s investigation is without merit.”

      The full decision can be accessed at https://curia.europa.eu/juris/document/document.jsf?text=&docid=244131&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=406326

       

  • OECD issues BEPS Action 14 peer review assessments for eight countries
    • 26 July 2021, the OECD issued the latest Stage 2 peer review assessments against the minimum standard for BEPS Action 14 to improve the resolution of tax-related disputes between jurisdictions in respect of Argentina, Chile, Colombia, Croatia, India, Latvia, Lithuania and South Africa.

      The Stage 2 reports evaluate the progress made by these eight jurisdictions in implementing any recommendations resulting from their Stage 1 peer review. The OECD said the results demonstrated positive changes across all eight, although not all had showed the same level of progress.

      All eight jurisdictions had now signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) and five – Chile, Croatia, India, Latvia and Lithuania – had also ratified it, bringing a substantial number of their treaties in line with the Action 14 minimum standard. There were also bilateral negotiations either ongoing or concluded.

      Colombia, India, Lithuania and South Africa had put in place a documented bilateral notification/consultation process that could be applied in cases where an objection was considered as being not justified by their competent authority.

      Colombia, Croatia, India and Lithuania had added more personnel to the competent authority function and/or had made organisational improvements with a view to handle Mutual Agreement Procedure (MAP) cases in a more timely, effective and efficient manner. Argentina, Chile, Latvia and Lithuania had closed MAP cases within the target average time of 24 months. Croatia and India had also seen a slight reduction in the time needed to close MAP cases.

      Colombia had introduced legislative changes to ensure that MAP agreements could always be implemented notwithstanding domestic time limits, while this was already possible in Argentina, Croatia, Latvia and Lithuania. Colombia, Croatia, India, Lithuania and South Africa had issued or updated their MAP guidance.

      The OECD will continue to publish Stage 2 peer review reports in batches in accordance with the Action 14 peer review assessment schedule. In total, 82 Stage 1 peer review reports and 61 Stage 1 and Stage 2 peer monitoring reports have now been finalised and published, with the seventh batch of Stage 2 reports to be released in a few months.

       

  • Russia introduces personal foundations for managing property and business
    • 1 July 2021, President Vladimir Putin signed draft law No. 1172284-7 to amend Part 1 and Pt 3 of the Civil Code of the Russian Federation to enable the establishment of personal foundations – both living (inter vivos) and post-mortem (testamentary) – for managing property and businesses in Russia. The law will enter into force on 1 March 2022.

      According to the explanatory section, the introduction of personal foundations for the purpose of ringfencing and effectively managing specific property in accordance with the objectives designated by the founder will help to preserve business operations and assets following a founder’s death.

      The value of property transferred when establishing a personal foundation may not be less than RUB100 million (circa USD 1.4 million) based on an assessment of its market value. This includes cash, investment portfolios, real estate, business assets and other property.

      Property transferred to a foundation will then be owned by the personal foundation and will not be included in the estate of the founder and does not constitute marital property. The founder bears subsidiary liability for the financial obligations of the foundation for three years from the date of establishment, and the foundation for the obligations of the founder. Such liability may be extended by a court to five years in exceptional cases.

      A founder has the right to determine who will administer his/her assets during his/her lifetime and after his/her death and designate the objectives for which the foundation’s funds will be used, including how and to whom the foundation will make payments.

      A personal foundation will be entitled to engage in business activities in line with the objectives set down in the personal foundation’s charter provided that such activities are necessary for the achievement of the foundation’s objectives. The personal foundation may also establish or participate in companies.

      A foundation can be managed by a wide range of persons. The executive body may contain trusted advisors and/or legal entities of the founder, but not the founder him/herself or the beneficiaries. The founder can, however, be included in a supervisory board and his/her approval can be required for transactions defined in the charter documents of the foundation.

      The founder may also adjust the charter, terms and internal documents of the private foundation during his or her lifetime. For additional control it is also possible to create a supervisory body, like a trust protector.

      The beneficiaries of a foundation can be members of a family or another group of persons, other than commercial legal entities. They may receive regular or single distributions depending on the terms set out by the founder but cannot participate in the management of the business transferred into the private foundation. The founder can also be a beneficiary and receive regular payments during his or her lifetime from the foundation he has established. A beneficiary’s rights may not generally be passed to other persons.

      As a rule, the contents of the terms and conditions of the management of the personal foundation and the contents of other bylaws are not subject to public disclosure and are confidential. However, beneficiaries have the right to demand information on the activity of the private foundation and to demand an audit.

      A foundation will pay corporate profits tax and be a tax agent for individual income tax purposes. Payments to the beneficiaries are subject to individual income tax withholding.

  • Singapore and Indonesia revised tax treaty into force
    • 23 July 2021, a revised double tax agreement (DTA) between Singapore and Indonesia was brought into force following ratification by both parties and will be effective as of 1 January 2022. The new treaty, signed in February 2020, will replace the existing DTA between the two countries that has been in effect since 1992.

      The updated DTA lowers the withholding tax rates for royalties and branch profits and provides for tax exemption in the source state for certain capital gains. The withholding tax rates for interest and dividends under the updated DTA will generally remain unchanged. It also incorporates internationally agreed standards to counter treaty abuse.

      The revised treaty is intended to benefit businesses in both Singapore and Indonesia, as well as boost bilateral trade and investment flows between the two countries. Key changes include:

      -Royalties – The maximum withholding tax rate for royalties under Article 12 will be lowered from the existing rate of 15% to the new rates of either: 10% %, for the use of or the right to copyright of literary, artistic or scientific work including cinematograph films, or films or tapes used for radio or television broadcasting, any patent, trademark, design or model, plan, secret formula or process; or 8% for the use of or the right to use, industrial, commercial or scientific equipment, or for information concerning industrial, commercial or scientific experience.

      -Capital gains – The introduction of a new Article 13 will allocate taxing rights on capital gains from the sale of assets and shares in Indonesian private companies to the investor’s country of residence. Capital gains arising from disposals of immovable property and movable business property will be taxed in the state where such property is situated. This means that Singapore resident investors should be relieved from the current 5% tax under Indonesian domestic law on the gross proceeds from the sale of unlisted qualifying equity investments held by a foreign shareholder. There should be no Singapore tax exposure on remittance of capital gains because there is no capital gains tax in Singapore.

      -Branch Profits Tax – Any additional tax that is imposed on the after-tax profits of a permanent establishment (PE) is reduced from 15% to 10%. The reduced tax rate of 10% does not apply to PE profits from production sharing contracts relating to oil and gas, and contract of works for other mining sectors.

      -Anti-Tax Avoidance – The updated DTA introduces anti-avoidance provisions in line with recent updates to the OECD Model contained in the Multilateral Instrument (MLI) under the Base Erosion and Profit Shifting (BEPS) project. These place a greater emphasis on the requirement for substance to claim treaty benefits. Article 22 of the existing DTA only imposed a limitation of relief, which required income from the country of source to be remitted into, or received in, the country of residence for the tax treaty to apply. A new Article 28 provides that a party may not avail treaty benefits in respect of an arrangement or transaction where one of the ‘principal purposes’ of the arrangement or transaction is to obtain that benefit. This is a general anti-abuse rule also known as the Principal Purpose Test (PPT), as set out in the MLI.

      -Exchange of Information – Article 26 on the exchange of information for tax purposes (EOI) has been brought in alignment with the OECD Model and international tax developments by adopting a broader test of ‘foreseeable relevance’ in place of the existing test of ‘necessity’. The scope of Article 26 has also been expanded to cover all information relating to the administration or enforcement of domestic laws concerning all types of taxes, rather than only items covered by the DTA.

  • UK publishes proposals targeting tax avoidance promoters and enablers
    • 20 July 2021, the UK government published a new package of draft measures designed to target the most persistent and determined promoters and enablers of tax avoidance. The consultation on the draft legislation is open until 14 September 2021.

      The proposed legislative changes are designed to clamp down on the supply of tax avoidance arrangements and include:

      -A new power for HMRC to seek freezing orders that would prevent promoters and enablers of tax avoidance schemes from dissipating or hiding their assets before paying the penalties that are charged as a result of them breaching their obligations under the anti-avoidance regimes, such that the funds can be ring-fenced to ensure that they cannot escape the financial consequences of their non-compliance.

      The new legislation would apply to all relevant anti-avoidance penalties under the Promoters of Tax Avoidance Scheme (POTAS), Disclosure of Tax Avoidance Schemes (DOTAS), and Disclosure of Avoidance Schemes for VAT and other Indirect Taxes (DASVOIT) regimes assessed or determined on or after the date of Royal Assent of Finance Bill 2021-22.

      -New rules that would enable HMRC to make a UK entity that facilitates the promotion of tax avoidance by offshore promoters subject to a significant additional penalty – up to the total fees earned by the scheme – in order to deter such entities from facilitating the sale of avoidance schemes in the UK.

      The legislation would apply to any UK entity that incurs a penalty or penalties under POTAS, DOTAS or DASVOIT regimes up to the value of £100,000 on or after the date of Royal Assent. A penalty that gives rise to the additional penalty must relate to arrangements enabled on or after the date of Royal Assent of Finance Bill 2021-22.

      -A new power to enable HMRC to present winding-up petitions to the Court in order to disrupt the business activities of companies who are operating against the public interest by removing them from the market and reducing the harm they cause to taxpayers and the wider economy.

      The legislation would apply to a company involved in promoting or enabling tax avoidance and operating against the public interest on or after the date of Royal Assent of Finance Bill 2021-22. However, any information, non-compliant behaviour or ongoing action by HMRC or any other public or private organisation prior to Royal Assent of Finance Bill 2021-22 could form part of the case to consider winding up action.

      -New legislation that would enable HMRC to name promoters, details of the way they promote tax avoidance and the schemes they promote, at the earliest possible stage, to warn taxpayers of the risks and help those already involved to get out of avoidance.

      The legislation will be effective on or after the date of Royal Assent of Finance Bill 2021-22 applying to those HMRC knows or suspects of being promoters of tax avoidance, including the entities and individuals that control or influence the promoter or others that are part of the promoter structure. It will also apply to individuals and entities that carry out an identifiable role in selling tax avoidance schemes and to individuals that HMRC considers are necessary to name so that the taxpayer understands the arrangements.

      The government announced its plans to take further action against those who promote and market tax avoidance last November and opened a 10-week consultation in March 2021, which closed on 1 June.

       

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