Owen, Christopher: Global Survey Supplement - April 2016

  • 31 countries agree to automatic sharing of country-by-country information
    • 27 January 2016, 31 countries signed the OECD’s Multilateral Competent Authority Agreement (MCAA) for the automatic exchange of country-by-country reports (CbC). The signing ceremony marked an important milestone towards implementation of the OECD/G20 BEPS Project and a significant increase in cross-border cooperation on tax matters.

      The MCAA is intended to enable consistent and swift implementation of new transfer pricing reporting standards developed under Action 13 of the BEPS Action Plan by ensuring that tax administrations obtain a complete understanding of the way multinational enterprises (MNEs) structure their operations.

      “CbC Reporting will have an immediate impact in boosting international co-operation on tax issues, by enhancing the transparency of multinational enterprises’ operations,” said OECD Secretary-General Angel Gurría. “Under this multilateral agreement, information will be exchanged between tax administrations, giving them a single, global picture on the key indicators of multinational businesses. This is a much-needed tool towards the goal of ensuring that companies pay their fair share of tax, and would not have been possible without the BEPS Project.”

      The G20 leaders endorsed a wide-ranging BEPS package last November, which set out 15 key actions to reform the international tax framework and ensure that profits are reported where economic activities are carried out and value created. The focus has now shifted to designing and implementing an inclusive framework for tackling BEPS.

      The CbC Reporting Implementation Package consists of: model legislation that can be used by countries to require the ultimate parent entity of an MNE group to file the CbC Report in its jurisdiction of residence; and three model Competent Authority Agreements to facilitate implementation of the exchange of CbC Reports, based on:

      • Multilateral Convention on Administrative Assistance in Tax Matters;
      • Bilateral double tax treaties; and
      • Tax Information Exchange Agreements (TIEAs).

      The CbC MCAA sets out the rules and procedures for the competent authorities of jurisdictions implementing BEPS Action 13 to automatically exchange CbC Reports prepared by the reporting entity of an MNE Group and filed on an annual basis with the tax authorities of the jurisdiction of tax residence of that entity with the tax authorities of all jurisdictions in which the MNE Group operates.

      The tax administrations where a company operates will get aggregate information annually, starting with 2016 accounts, relating to the global allocation of income and taxes paid, together with other indicators of the location of economic activity within the MNE group. It will also cover information about which entities do business in a particular jurisdiction and the business activities each entity engages in. First exchanges will start in 2017-2018 on 2016 information.

      The 31 countries to sign the CbC MCAA were: Australia, Austria, Belgium, Chile, Costa Rica, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Japan, Liechtenstein, Luxembourg, Malaysia, Mexico, the Netherlands, Nigeria, Norway, Poland, Portugal, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland and the UK.

  • Australian Tax Office pursues Swiss accounts
    • 27 January 2016, the Australian Taxation Office (ATO) has stepped up investigations into Australians taxpayers with Swiss bank accounts as a result of the amendment to its tax treaty with Switzerland at the end of 2014, according to a report in The Australian.

      Some of the cases involving Australians are worth more than $100 million and the ATO has made further requests for information. The ATO is also investigating at least 100 Australians with Swiss bank accounts after a new tranche of leaks from a European bank was handed to Australia by a foreign government, with ATO investigators travelling to Switzerland last year.

      As part of 100 tax information exchange agreements in place with other countries, the ATO engaged in a total of 519 exchanges of information in 2014-15. It made 284 “outgoing exchanges” to other countries and 235 “incoming” requests in the past year, resulting in total tax liabilities of $255 million.

      The ATO further handed over details of 30,000 financial accounts of Americans and Australians worth more than $5 billion to the US IRS under the Foreign Account Tax Compliance Act (FATCA). It is expecting a similar volume in 2016.

  • Barbados Stock Exchange launches International Securities Market
    • 15 March 2016, the Barbados Stock Exchange (BSE) formally launched an International Securities Market (ISM), which will operate as a separate market with distinct rules that apply to membership, trading, clearing and settlement and listing of securities.

      The ISM was created to accommodate the needs of a wide range of international businesses and is intended to attract issuers from both Barbados and international markets that may otherwise be listed and traded on other exchanges.

      The fees for listing on the ISM are lower than those for larger exchanges in North America and Europe – providing affordable access to public markets for small and mid-sized firms that may otherwise be unable to sustain a public listing.

      Barbados has created a comprehensive governance and regulatory framework that includes the BSE, the Central Bank and the Financial Services Commission. This is designed, said the BSE, to be much more rigorous than many other offshore financial jurisdictions yet without the burdensome requirements of the larger exchanges.

  • Bermuda amends Perpetuities and Accumulations Act
    • 11 December 2016, the Perpetuities and Accumulations Amendment Act 2015, which introduces a streamlined procedure for trustees seeking to remove or alter a perpetuity period or similar limitation on duration for pre-2009 Bermuda trusts or trusts originally established in other jurisdictions, was brought into effect.

      Under the Perpetuities and Accumulations Act 2009, Bermuda abolished the Rule Against Perpetuities for all trusts established after 1 August 2009. However it continued to apply to Bermuda law trusts established prior to that date and to any trusts, whenever established, that owned real property situated in Bermuda. The Rule also generally continued to apply to trusts established after 1 August 2009 that are created under a foreign law that applies a perpetuity limitation.

      Under Section 4 of the 2009 Act, trustees could apply to the Bermuda Courts to alter the application of the Rule to pre-2009 trusts through Section 47 of the Trustee Act 1975. The new Amendment Act creates an express jurisdiction to make application to the Bermuda Courts, which is intended to provide a simplified and more cost effective process.

  • Brazil sets dates for offshore asset amnesty
    • 15 March 2016, the Brazilian Federal Revenue Bureau (RFB) published a resolution in the official gazette stating that the Regime Especial de Regularização Cambial e Tributária (RERCT), a voluntary disclosure programme enacted on 13 January, will operate from 4 April to 31 October 2016.

      Under the RERCT, all Brazilian individuals or legal entities that were resident or domiciled in Brazil on 31 December 2014 can voluntarily declare previously undisclosed goods or titles of any kind, provided they were legally obtained in the first place, in return for a one-off tax charge and penalty. They can also amend inaccurate or incomplete previous disclosures without being prosecuted.

      Applicants must provide the RFB with a single declaration setting out detailed descriptions of the relevant assets in possession before 31 December 2014 with an indication of their value in Brazilian real (BRL). If the value exceeds BRL100,000, the participation of a financial institution is required.

      A one-off capital gains tax charge of 15% will be levied on the value of the reported assets, together with a penalty of the same amount. The payment will be considered a definitive settlement of the tax debt, and taxpayers who have already paid something towards their tax obligations will not be reimbursed.

      Both a trust's settlor and its beneficiaries may participate in RERCT – even if the trust's funds have not yet been distributed. With regard to offshore holding companies, information regarding the company's shareholders, directors, as well as its direct and indirect investments may be disclosed under the amnesty programme.

      When the bill was approved in the Senate late last year, government officials estimated it could raise 11 billion real (US$2.74 billion) in revenue.

  • Brazil’s offshore tax amnesty signed into law
    • 13 January 2016, President Dilma Rousseff signed into law a bill to allow taxpayers with undisclosed offshore assets to voluntarily declare and regularise their tax affairs without facing criminal prosecution and in return for a one-off tax charge and penalty.

      The Special Regime for Exchange and Tax Regularisation (RERCT) applies to individuals or legal entities that were resident or domiciled in Brazil on 31 December 2014 that voluntarily declare previously undisclosed goods or titles of any kind, provided they were legally obtained in the first place. Inaccurate or incomplete previous disclosures can also be rectified without prosecution.

      A one-off income tax charge of 15% will be levied on the value of the reported assets, together with a 15% penalty – a reduction from the 17.5% rates proposed when the law was first tabled in July 2015. The special regime will close 210 days after the date of the law's enactment.

  • Cayman Islands firms plead guilty in US Federal Court
    • 9 March 2016, two Cayman Island financial institutions pleaded guilty to charges of conspiring with many of their US taxpayer-clients to hide more than $130 million in offshore accounts from the US Internal Revenue Service (IRS) and to evade US taxes on the income earned in those accounts.  It was the first conviction of a non-Swiss financial institution for tax evasion conspiracy in the US.

      Cayman National Securities (CNS) and Cayman National Trust Co. (CNT), both affiliates of Cayman National Corporation, which provided investment brokerage and trust management services to individuals and entities within and outside the Cayman Islands, entered their guilty pleas under plea agreements requiring the companies to, among other things, produce account files of non-compliant US taxpayers who maintained accounts and pay a total of $6 million in financial penalties.

      According to the court documents, from at least 2001 through to 2011, CNS and CNT, which are both located in Grand Cayman and organised under the laws of the Cayman Islands, opened, and/or encouraged many US taxpayer-clients to open accounts held in the name of sham Caymanian companies and trusts, assisting them to conceal their beneficial ownership of the accounts. CNS and CNT treated these structures as the account holders and allowed the US beneficial owners of the accounts to trade in US securities in contravention of CNS’s obligations under its Qualified Intermediary Agreement (QI) with the IRS.

      After learning about the investigation of Swiss bank UBS, in or about 2008, for assisting US taxpayers to evade their US tax obligations, CNS and CNT continued to knowingly maintain undeclared accounts for US taxpayer-clients and did not begin to engage in any significant remedial efforts with respect to those accounts until 2011 and 2012.

      At their high-water mark in 2009, CNS and CNT had approximately $137 million in assets under management relating to undeclared accounts held by US taxpayer-clients. From 2001 through 2011, CNS and CNT earned more than $3.4 million in gross revenues from the undeclared US taxpayer accounts that they maintained.

      “Today’s convictions make clear that our focus is not on any one bank, insurance company or asset management firm, or even any one country,” said Acting Deputy Assistant Attorney General Goldberg of the Justice Department’s Tax Division. “The Department and IRS are following the money across the globe – there are no safe havens for US citizens engaged in tax evasion or those actively assisting them.”

      Bermuda-based Bank of N.T. Butterfield & Son has made provision for the payment of US$4.8 million, recorded during its financial year, which ended 31 December 2015, against the possibility that it could be required to make a settlement payment as the result of an ongoing US federal investigation into tax evasion.

      In November 2013, the US Attorney’s Office for the Southern District of New York issued “John Doe summonses” to five US financial institutions which had correspondent bank relationships with Butterfield Bank or its affiliates in the Bahamas, Barbados, the Cayman Islands, Guernsey, Hong Kong, Malta, Switzerland and the UK.

  • Cyprus and Ukraine sign tax treaty Protocol
    • 11 December 2015, Cyprus and Ukraine signed a protocol to their existing tax treaty, which entered into force on 1 January 2014. The protocol, when ratified by both countries, will enter into force no earlier than 1 January 2019 when the current treaty expires.

      The protocol includes a “most favoured nation” clause in respect of taxes on interest, dividends, royalties and capital gains, ensuring that Cyprus is treated no less favourably than any of Ukraine's treaty partners.

      The existing withholding tax of 15% on dividends paid by Ukrainian companies to Cypriot shareholders is reduced to 5% if the beneficial owner owns more than 20% of the share capital of the company paying the dividend or has invested more than €100,000 in shares. Under the protocol, the lower rate will apply only if both conditions are satisfied. The rate of withholding tax on interest paid by a Ukrainian debtor to a beneficial owner in Cyprus will also be increased from 2% to 5%.

      The treaty provides that capital gains derived from movable property – including shares in property-rich companies, whose assets principally comprise immovable property – are taxable only in the country of residence of the person making the disposal. Under the protocol, gains on shares in property-rich companies will also be taxable in the country in which the immovable property is located.

  • Cyprus to amend IP tax regime
    • 30 December 2016, the Ministry of Finance announced that the Intellectual Property tax regime would be amended to incorporate the recommendations of the OECD Action Plan against Base Erosion and Profit Shifting (BEPS), which were issued on 5 October 2015, as well as the conclusions of the ECOFIN Council adopted on 8 December 2015.

      The approach of the OECD’s Action 5 requires the existence of material activity (the so-called nexus approach), which includes the clear interconnection between the rights that create the income and the activity that contributes to that income.

      The Cypriot authorities intend to amend the Intellectual Property legal framework in line with the provisions of Action 5 by 1 July 2016. The amendment will provide for the maximum transitional arrangements that are included within the revised framework.

  • DFSA introduces changes to the Collective Investment Rules
    • 1 February 2016, the Dubai Financial Services Authority (DFSA), the regulator of the Dubai International Financial Centre (DIFC), brought changes to the regime for Collective Investment Funds into force.

      The Rules for Property Funds have been amended to simplify the current regime and realign it with international standards. Key changes are to the valuation and Related Person transaction requirements, as well as amendments to the borrowing limits, investment restrictions and custody requirements for these Funds.

      The DFSA has also introduced a framework for the regulation of Money Market Funds (MMFs), which follows recommendations by the Financial Stability Board (FSB) and the International Organisation of Securities Commission (IOSCO). The Rules define what structure an MMF can have, and set out specific requirements for the liquidity, credit quality and other features of allowable investments for MMFs and Islamic MMFs.

      DFSA Chief Executive Ian Johnston, said: “The DFSA continues to work with stakeholders to improve the regulatory environment. These new Rules provide clarity and certainty to fund managers and give greater flexibility to those operating Property Funds.”

  • EC adopts Directive on exchange on cross-border tax rulings
    • 8 December 2015, the European Council adopted a new directive that will require EU member states to exchange information automatically on advance cross-border tax rulings and advance pricing arrangements (APAs) as from 1 January 2017. Member states receiving the information will be able to request further information where appropriate.

      The Commission will be able to develop a secure central directory, where the information exchanged would be stored. The directory will be accessible to all member states and, to the extent that it is required for monitoring the correct implementation of the directive, to the Commission.

      The text amends directive 2011/16/EU on administrative cooperation in the field of taxation, which sets out practical arrangements for exchanging information. Member states will be required to transpose the new rules into national law before the end of 2016.

      Concerning rulings issued before 1 January 2017, the following rules will apply:

      • If advance cross-border rulings and advance pricing arrangements are issued, amended or renewed between 1 January 2012 and 31 December 2013, such communication shall take place under the condition that they are still valid on 1 January 2014;
      • If advance cross-border rulings and advance pricing arrangements are issued, amended or renewed between 1 January 2014 and 31 December 2016, such communication shall take place irrespectively of whether they are still valid or not;
      • Member states will have the possibility (not an obligation) to exclude from information exchange advance tax rulings and pricing arrangements issued to companies with an annual net turnover of less than €40 million at a group level, if such advance cross-border rulings and advance pricing arrangements were issued, amended or renewed before 1 April 2016. However, this exemption will not apply to companies conducting mainly financial or investment activities.

      The directive is in line with developments within the OECD and its work on tax base erosion and profit shifting. The Commission proposed the directive as part of a package of measures in March 2015. The Council reached political agreement on the directive on 6 October 2015. The European Parliament gave its opinion on 27 October 2015.

  • EC presents Action Plan against terrorist financing
    • 2 February 2016, the European Commission presented an Action Plan against terrorism financing, which includes amendments to the fourth Anti-Money Laundering (AML) Directive that went into effect in June 2015. The EC aims to complete all actions under the plan by the end of 2017.

      The Action Plan is intended to trace terrorists through financial movements and prevent them from moving funds or other assets; and to disrupt the sources of revenue used by terrorist organisations by targeting their capacity to raise funds.

      The proposed amendments to the fourth AML Directive include:

      • Introducing a list of compulsory checks (due diligence measures) for financial institutions to carry out, to target countries identified as having strategic deficiencies in their national anti-money laundering and terrorist financing regimes;
      • Widening the scope of information accessible by the financial intelligence units (FIUs);
      • Centralising national bank and payment registers or retrieval systems in all member states to give the FIU’s easier and faster access to information on the holders of bank and payment accounts;
      • Bringing virtual currency exchange platforms within scope; and
      • Lowering thresholds for identification and widening customer verification requirements in relation to “anonymous pre-paid instruments”, such as pre-paid cards, in addition to criminalising money laundering and creating a common definition of money laundering offenses and sanctions across the EU.

      The EC called on EU member states to commit to implementing the fourth AML Directive by the end of 2016 rather than by June 2017.

  • EC proceeds with common property regime for international couples
    • 2 March 2016, the European Commission adopted proposals to clarify the rules applicable to property regimes for international married couples or registered partnerships. The Commission is proceeding with 17 Member States through an enhanced cooperation since it was not possible to reach unanimity among all 28 Member States.

      The proposals, originally brought forward in 2011, will establish clear rules in cases of divorce or death and bring an end to parallel and possibly conflicting proceedings in various Member States on property or bank accounts. Specifically, they will:

      Clarify which national court is competent to help them manage their property or distribute it between them in case of divorce, separation or death (jurisdiction rules);

      Clarify which law shall apply when the laws of several countries could potentially apply to the case (rules on applicable law);

      Facilitate the recognition and enforcement of a judgment in one Member State on property matters given in another Member State.

      There are currently around 16 million international couples in the EU. Out of the 2.4 million new marriages in 2007, 13% (310,000) had an international element. Similarly, 41,000 of the 211,000 registered partnerships in the EU in 2007 had an international dimension. Parallel legal proceedings in different countries, complex cases and the resulting legal fees cost an estimated €1.1 billion a year.

      EU Justice Commissioner Vera Jourová said: “The new proposed rules will bring legal clarity and ease the complicated process of dividing up joint assets no matter where they are located. This will facilitate the lives of the couples concerned and help them save around €400 million a year of extra costs. Today we pave the way for those Member States willing to go forward with this important initiative."

      At a meeting of EU Council of Ministers last December, only 17 of the 28 EU member states were prepared to accept the code – France, Germany, Spain, Portugal, Italy, the Netherlands, Austria, Belgium, Greece, Luxembourg, the Czech Republic, Bulgaria, Finland, Sweden, Croatia, Slovenia and Malta.

      They have agreed to implement an “enhanced cooperation” process, which allows a group of at least nine member states to implement measures if all 28 Member States fail to reach agreement, to implement the new regime. The remaining 11 member states will continue to apply their national law and keep the right to join if and when they want.

  • EU and Monaco initial new tax transparency agreement
    • 22 February 2016, the European Union initialed an agreement with Monaco for the automatic exchange of information on their residents' financial accounts from 2018. Formal signature of the agreement will take place when authorised by the European Council.

      Under the agreement, Monaco and EU member states will begin collecting, from 1 January 2017, the names, addresses, tax identification numbers and date of birth of residents with accounts in the other jurisdiction, along with other financial information such as account balances. This information will then be exchanged automatically from 2018.

      The European Commission said the procedure set out in the agreement complies with the new standard on the automatic exchange of information developed by the OECD and G20. The EU signed similar agreements with Switzerland on 27 May 2015, Liechtenstein on 28 October 2015, San Marino on 8 December 2015 and Andorra on 12 February 2016.

      Monaco's Finance and Economy Minister Jean Castellini said: "The initialing of this agreement constitutes a further example of the policy implemented by Monaco to combat international tax avoidance and evasion, as part of its commitment to conclude agreements which respect international standards developed by both the European Union and the OECD Global Forum, in terms of the exchange of information."

  • EU approves tax compliance agreements with Liechtenstein and Switzerland
    • 8 December 2015, the European Council approved the conclusion of agreements with Liechtenstein and Switzerland for automatic exchange with EU member states information on the financial accounts of each other's residents.

      The agreements upgrade 2004 agreements that ensured that Liechtenstein and Switzerland applied measures equivalent to those in an EU directive on the taxation of savings income. The EU-Switzerland agreement was signed on 27 May 2015 and the EU-Liechtenstein agreement on 28 October 2015. The Council also approved the signing of a similar taxation agreement with San Marino.

  • EU Member States reach political agreement on country-by-country reporting
    • 8 March 2016, EU Economic and Financial Affairs ministers agreed to introduce automatic exchange of tax-related financial information for multinational companies that operate cross-border in the EU. The proposal is a key part of the Anti-Tax Avoidance Package adopted by the European Commission on 28 January 2016. Final adoption by the Council is expected in May.

      The directive will transpose the OECD recommendation on country-by-country reporting (BEPS action 13) into a legally binding EU instrument. It covers multinationals with a total consolidated group revenue of at least €750 million. Whilst this would cover only 10 to 15% of multinational enterprise groups, these groups hold 90% of corporate revenues.

      Under the rules, multinational groups will have to provide certain, tax-related information on an annual basis for each tax jurisdiction in which they do business. The information includes: the amount of revenue, the profit or loss before income tax, the income tax paid and accrued, the number of employees, the stated capital, the retained earnings and the tangible assets of the group.

      The parent company will provide this information to the tax authorities of its country of establishment in Europe, where applicable; otherwise, EU-based subsidiaries will be obliged to request that information from their parent company. Member States will also be required to share the information with the other Member States concerned.

      The Commission will regularly receive the information it needs to monitor the implementation of the new rules and to ensure that Member States are complying with their responsibilities. Member States will have 12 months to transpose the new rules into national law after its entry into force, which is expected for spring 2016.

      Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, said: "The automatic exchange of information on country-by-country reports will provide national authorities with the necessary insight to combat aggressive tax planning structures. After the agreement reached October last year on tax rulings, this is another important signal that the EU is ready to deliver on our common goal of fair and effective taxation."

      However tax justice campaigners have criticised the draft bill because reporting will only be made compulsory for tax jurisdictions “within the EU”. Data for companies doing business in the EU but with operations outside the bloc will not have to be disclosed. As a result, they claim, multinational businesses with a subsidiary in jurisdictions such as Switzerland could still shift profits abroad and avoid paying taxes in the country where they do business.

  • European Commission presents new measures against corporate tax avoidance
    • 28 January 2016, the European Commission published new proposals to tackle corporate tax avoidance. The “Anti-Tax Avoidance Package” calls on Member States to take a stronger and more coordinated stance against companies that seek to avoid paying their fair share of tax and to implement the international standards against base erosion and profit shifting (BEPS).

      The key features of the new proposals, which are intended to combat aggressive tax planning, boost transparency between Member States and ensure fairer competition for all businesses in the Single Market, include:

      • Legally-binding measures to block the most common methods used by companies to avoid paying tax;
      • A recommendation to Member States on how to prevent tax treaty abuse;
      • A proposal for Member States to share tax-related information on multinationals operating in the EU;
      • Actions to promote tax good governance internationally;
      • A new EU process for listing third countries that refuse to play fair.

      Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, said: "Today we are taking a major step towards creating a level-playing field for all our businesses, for fair and effective taxation for all Europeans."

      The two legislative proposals in the Package will be submitted to the European Parliament for consultation and to the Council for adoption. The Council and Parliament should also endorse the tax treaties recommendation, which Member States should follow when revising their tax treaties. Member States should also formally agree on the new External Strategy and decide on how to take it forward as quickly as possible once endorsed by the European Parliament.

      Major initiatives put forward by the Commission in 2015 to boost tax transparency and reform corporate taxation are making progress: the proposal for transparency on tax rulings was agreed by Member States in only seven months and a number of other substantial corporate tax reforms have been launched. The Commission said it would continue its campaign for corporate tax reform throughout 2016, with important proposals such as the re-launch of the Common Consolidated Corporate Tax Base (CCCTB).

  • European Parliament passes resolution on aggressive corporate tax planning
    • 16 December 2015, the European Parliament approved a resolution setting out the legal steps needed to improve corporate tax transparency, coordination and EU-wide policy convergence. The move to counter aggressive corporate tax planning and evasion by multinationals in Europe was triggered by the November 2014 “Luxleaks” revelations. The EU Commission will have to respond to every legal recommendation, even if it does not submit a legislative proposal.

      “This report shows the determination of both the European Parliament and the people of Europe to see real legislative change to prevent companies jumping across borders to reduce their tax bills to almost zero. The 'Luxleaks' scandal showed how much these corporations have been getting away with,” said co-rapporteur Anneliese Dodds.

      The recommended legal steps build on the work of Parliament’s Special Committee on Tax Rulings, whose recommendations were approved at the 26 November plenary session. MEPs ask the Commission, inter alia, to:

      • Table a proposal for country-by-country reporting on profit, tax and subsidies by June 2016;
      • Table a proposal for introducing a "Fair Tax Payer" label;
      • Introduce a Common Tax Base (CCTB) as a first step, which later on should be consolidated as well (CCCTB);
      • Table a proposal for a common European Tax Identification Number;
      • Table a proposal for legal protection of whistle-blowers;
      • Improve cross-border taxation dispute resolution mechanisms;
      • Table a proposal for a new mechanism whereby member states should inform each other if they intend to introduce a new allowance, relief, exception, incentive, etc. that may affect the tax base of others;
      • Estimate the corporate tax gap (corporate taxes owed minus what has been paid);
      • Strengthen the mandate and improve transparency of the Council Code of Conduct Working Group on Business Taxation;
      • Provide guidelines regarding “patent boxes” so as to ensure they are not harmful;
      • Come up with common definitions for "permanent establishment" and "economic substance" so as to ensure that profits are taxed where value is generated;
      • Come up with an EU definition of "tax haven" and counter-measures for those who use them; and
      • Improve the transfer-pricing framework in the EU.

      The Commission has three months to respond to the recommendations, either with a legislative proposal or with an explanation for not doing so. Parliament has agreed on a new six-month mandate for the Special Committee on Tax Rulings, which includes close monitoring of the legal initiatives related to corporate taxation and further fact-finding. The new committee will also follow up on on-going work by international institutions, including the OECD and G20.

  • EU’s Vestager denies penalising US firms or international tax policy
    • 11 February 2016, US Treasury Secretary Jack Lew called on the European Union to reconsider its ongoing state aid investigations into multinational companies, which he said were creating “disturbing precedents” and appeared to be targeting US companies disproportionately.

      In a letter to European Commission President Jean-Claude Juncker and Competition Commissioner Margrethe Vestager, Lew wrote: "While we recognise that state aid is a longstanding concept, pursuing civil investigations – predominantly against US companies – under this new interpretation creates disturbing international tax policy precedents … We respectfully urge you to reconsider this approach."

      The Commission has argued that the preferential tax treatments offered to large US companies constitute a form of illegal “state aid”. Luxembourg and the Netherlands have already been ordered to recoup €20 to €30 million in back taxes from Fiat and Starbucks respectively, while Belgium was ordered to recover about €700 million from at least 35 companies, including Anheuser-Busch InBev, BP and BASF.

      The Commission is further investigating tax deals involving Apple and McDonald's, while Amazon and Google, amongst many others, are also under scrutiny.

      Vestager, responding to Lew in a letter sent on 29 February, said her investigations were not intended to challenge the US tax system or bilateral tax agreements. Vestager said just a handful of US companies had had to repay illegal state aid out of about 170 cases since 1999.

      "The Commission is using a combination of its tools, namely legislative action and enforcement of EU state aid rules, with the aim of establishing fair tax competition within the European Union," Vestager wrote. "The Commission has the duty to ensure that these rules are applied in a non-discriminatory manner by excluding preferential treatment in any form that constitutes incompatible state aid. This does not put into question the US taxation system or go against double taxation treaties concluded by EU member states."

  • Florida appeal court upholds award to Robert Rauschenberg estate trustees
    • 6 January 2016, the District Court of Appeal of Florida held that a USD24.6 million award granted to three trustees who administered the estate of the late US artist Robert Rauschenberg had been properly calculated by a lower court.

      Rauschenberg’s estate was structured such that the Rauschenberg Foundation was the primary beneficiary of the Robert Rauschenberg Revocable Trust. The trustees – Darryl Pottorf, Bennet Grutman and Bill Goldston, respectively Rauschenberg's executor, business partner and accountant – oversaw the trust for several years after Rauschenberg's death in 2008 while its assets were being transferred to the foundation. During that time, it was claimed that the value of the trust's assets rose from about $600 million to $2.18 billion.

      The trust documents did not include any indication as to trustee remuneration and the dispute arose as to the method to be used to calculate their fees. The trustees claimed they were owed $51 million to $55 million because of the nature of their work and the vast increase in the value of the assets. Representatives of the Foundation, however, argued that, based on an hourly rate, the three were only entitled to $375,000.

      Judge Rosman, in the Circuit Court for Lee County in August 2014, chose to follow the principles regarding reasonable compensation set out in West Coast Hospital Ass'n v. Florida National Bank (1958). These include considering the amount of capital and income received and disbursed by the trustee, the success or failure of the administration of the trustee, unusual skills or experience which the trustee in question may have brought to their work, the fidelity or disloyalty displayed by the trustee, and the amount of risk and responsibility assumed, among others.

      Judge Rosman found that the trustees' accomplishments on behalf of the trust had been substantial and that they had made "very good decisions and rendered very good service". As the trustees had already split USD8 million in fees among themselves, he ordered that they were entitled to another USD16.4 million, totalling USD24.6 million.

      The Second District Court of Appeal unanimously agreed. "The court's findings regarding those factors and the reasonable fee amount are supported by the evidence presented at trial," wrote Judge Morris Silberman.

  • Foreign buyers must pay surcharge on “additional” UK property purchases
    • 10 December 2015, the UK government confirmed that its new 3% surcharge on the purchase of additional properties will be applied to foreign buyers and non-doms, as well as to UK residents.

      Chancellor George Osborne announced the surcharge as part of his Autumn Statement last November. It raises the top rate of stamp duty land tax (SDLT) to 15% on affected properties as from April 2016. The term “additional properties” explicitly includes second homes as well as residential lets.

      Responding to a question in parliament, Treasury Minister David Gauke said: “Foreign investors and people not domiciled in the UK will be treated in exactly the same way as UK residents under these new rates. If purchasers own another property anywhere else in the world and are purchasing an additional property in England, Wales or Northern Ireland they will be charged under the new rates.”

  • Foreign companies to disclose ownership before buying English property
    • 4 March 2016, the UK Department for Business, Innovation & Skills published a consultation paper entitled “Enhancing Transparency of Beneficial Ownership Information of Foreign Companies Undertaking Certain Economic Activities in the UK”.

      The paper discusses proposals that will apply to non-UK companies purchasing property or participating in public contracting. Its principal aim is to stop the proceeds of corruption and organised crime being laundered through investments in high-value property, particularly in London.

      Over £180 million worth of property in the UK was investigated by UK law enforcement as suspected proceeds of corruption between 2004 and 2014. BIS cites a report by Transparency International claiming that offshore entities owned over 75% of these properties. This, it says, is “believed to be the tip of the iceberg in terms of the scale of the proceeds of corruption invested in UK property through offshore companies”.

      At present, where a non-UK company registers its legal ownership of land in England and Wales, the Land Register shows the name of the company and its territory of incorporation. All companies are also under an obligation to provide their beneficial ownership information to their legal representatives during a property or land purchase as part of the due diligence process but, the government believes that the due diligence requirement does not provide sufficient transparency and can be circumvented by not using legal representatives.

      The paper seeks views on whether rules should be introduced to require non-UK companies to register beneficial ownership information before acquiring UK real estate. In addition, views are sought on whether any such regime should also be applied to existing non-UK companies that already own UK real estate. The paper also discusses potential sanctions for non-compliance.

      The objective is broadly to bring the regime for non-UK companies in line with that in place for domestic entities, which will have to provide information about their beneficial ownership (or Persons with Significant Control) to a publicly available central register by June 2016.

  • G20 finance ministers endorse OECD plan to open BEPS project to all countries
    • 26 February 2016, G20 finance ministers approved, at a meeting in Shanghai, an OECD-developed plan to allow all countries to participate in the implementation of base erosion profit shifting (BEPS) project.

      To participate, countries outside the OECD and G20 would need to pay an annual fee based on their economic circumstances and agree to accept the BEPS minimum standards as follows:

      • Implement the mutual agreement procedure (MAP) in their tax treaties and resolve MAP cases in a timely fashion;
      • Add language to their tax treaties to prevent treaty shopping;
      • Limit benefits of any intellectual property or other preferential tax regime based on an agreed method that requires substantial activity; and
      • Follow the OECD/G20 agreement on country-by-country reporting for transfer pricing.

      Participating countries would then be allowed to work alongside OECD and G20 members on the framework’s mandate, which includes completion of some remaining standard setting work in the area of transfer pricing and tax treaties; review of the implementation of the four minimum standards; ongoing data gathering on the tax challenges of the digital economy; and measuring the impact of BEPS.

      “To ensure a consistent global approach, we endorse the inclusive framework proposed by the OECD for the global implementation of the BEPS project and encourage all relevant and interested non-G20 countries and jurisdictions, which commit to implement the BEPS project, including developing countries, to join in the framework on an equal footing,” said the ministers in a statement.

  • Gibraltar’s Limited Liability Partnerships Act comes into force
    • 24 March 2016, the Gibraltar Limited Liability Partnerships (LLP) Act was brought into force with the gazetting of the Limited Liability Partnerships (Application of Companies Act 2014 and Insolvency Act 2011) Regulations 2016 to regulate the management and winding-up of LLPs.

      An LLP is not legally a partnership. Like a company, an LLP is a corporate body with a continuing legal existence independent of its members. Primarily designed with professional service providers in mind, whose partners may potentially be at risk from the careless or accidental negligence of a colleague, it is also available in respect of any type of trade, profession and occupation.

      Any agreement that may be in place between the members remains confidential between the members and the LLP and no disclosure or registration requirements apply. An LLP is also regarded as fiscally tax transparent and members can undertake management functions without forfeiting their limited liability protection.

      Justice Minister Gilbert Licudi said: “I am delighted that we have been able to complete the framework so as to enable this legislation to come into operation as it adds to the significant work that this government has carried out in recent years to ensure our legislation is current, up to date and fit for purpose in a changing world environment.”

  • Google agrees to pay £130 million in additional UK tax
    • 23 January 2016, US-based Internet giant Google announced that it had agreed with HM Revenue and Customs (HMRC) to pay £130 million in back taxes as part of a settlement covering the period since 2005 in the UK. It will also pay a higher rate of tax in future.

      The agreement followed a multi-year investigation by HMRC into Google’s practice of allocating profits to Ireland, where its European operations are based. Between 2005 and 2013, Google generated revenue of more than £17 billion in the UK, its biggest market outside the US, but based on attributed profits in the UK paid only £52 million in tax.

      Under the settlement, Google confirmed it was to pay £46.2 million in taxes on UK profits of £106 million for the 18 months to June 2015, as well as back taxes and interest owed for the previous decade.

      A spokesperson also indicated a change in policy, stating: “We will now pay tax based on revenue from UK-based advertisers, which reflects the size and scope of our UK business. The way multinational companies are taxed has been debated for many years and the international tax system is changing as a result. This settlement reflects that shift and is in line with recent OECD guidance.”

      An HMRC spokesperson said: "The successful conclusion of HMRC inquiries has secured a substantial result, which means that Google will pay the full tax due in law on profits that belong in the UK. Multinational companies must pay the tax that is due and we do not accept less."

      George Osborne, the UK chancellor, initially labelled the agreement a “major success”, but there has been growing criticism of the firm and the government over the deal. Pressure is also mounting on the European Commission to launch a full state aid investigation into the UK’s tax settlement with Google.

  • Guernsey court refuses to set aside mistake prompting £500,000 tax charge
    • 26 February 2016, Guernsey's Royal Court declined an application that sought to invoke the equitable jurisdiction of the court to set aside the distribution of funds on the grounds of a mistake.

      In the matter of Abacus Global Approved Managed Pension Trust - Emanuel Gresh v RBC Trust Company (Guernsey) Limited and The Commissioners for Her Majesty’s Revenue and Customs (7/2016), the trust beneficiary, Emanuel Gresh, had obtained professional tax advice that a distribution to him from his RBC Guernsey pension fund would be tax-free provided that the distribution was not remitted to the UK. Gresh therefore requested a withdrawal of £1.4 million from the fund. It later transpired that the advice was incorrect and the distribution was subject to a 40% income tax liability in the UK.

      The case was originally brought by Gresh under the rule in Hastings Bass. HMRC’s attempt to intervene for the first time ever in a Hastings Bass case was rejected by the Royal Court in May 2009, but allowed on appeal in September 2009. The case was then effectively stayed whilst Futter v Futter and Pitt v Holt progressed to the Supreme Court in England. Following the outcome of those cases Gresh recast his application as one based on equitable mistake.

      It was agreed that under the law of Guernsey, there is jurisdiction to set aside a voluntary transaction as a result of a mistake and that the principles established by the English Supreme Court in Pitt v Holt, although not binding, would be highly persuasive in Guernsey. It was further agreed that a voluntary disposition made as a result of a mistake was not void, but might be set aside by the Court in the exercise of its discretion.

      The Pitt and Futter rulings restricted the scope of Hastings Bass to cases where allowing the trustee's mistake to stand would be “unconscionable” – that is clearly unjust or unfair. The Court therefore considered the injustice or unfairness of setting aside, or not setting aside, the disposition.

      The Court found that Gresh was the only person to be affected by the mistake, in that he alone would have a tax liability if the mistake were not corrected. In other cases where relief of this nature had been granted by the courts there had been multiple whose interests were also affected. It held that, although the impact on Gresh was undoubtedly severe, it was not “unconscionable” that he should have to retain the proceeds of the distribution made by the trustee to him. It would therefore not be an appropriate exercise of the Court's jurisdiction to set aside the distribution.

  • HMRC raises statutory minimum threshold for offshore tax evasion offence
    • 9 December 2015, HM Revenue & Customs (HMRC) agreed to raise the minimum threshold under its proposed new strict liability criminal offence of offshore tax evasion, from £5,000 to £25,000 of potential tax lost per year.

      It said the move, which followed an industry consultation, would serve to target the offence at only the most significant cases of non-compliance because the offence could only apply to the top 5% of evaders who are currently pursued through civil penalties. It would mean that a higher rate taxpayer would need between £1.25 million and £6.25 million savings in a bank account (if the interest rate was between 1% and 5%) before this offence applied.

      The government also confirmed that the offence would not come into effect until April 2017 at the earliest. The offence will not apply retrospectively but will first apply in respect of the tax year in which the offence is introduced.

      A further full consultation on this offence and accompanying guidance will be held in early 2016, ready for introduction before the OECD international automatic exchange of information begins operating in 2017.


  • HMRC wins accelerated payment judicial review
    • 23 March 2016, the High Court rejected a claim for judicial review of an advance payment notice (APN) issued in respect of a tax avoidance scheme known as Liberty Syndicate 21, which was notifiable to HMRC under the disclosure of tax avoidance schemes (DOTAS) legislation introduced in Finance Bill 2004.

      In Dr Walapu v HMRC [2016] EWHC 658, the claimant who participated in the scheme had made a net business loss for tax purposes of £370,688 between 1 February and 20 March 2008. On that basis, he submitted a tax return on 5 September 2008 claiming entitlement to a repayment of £106,016.74.

      Although the scheme was notifiable, HMRC paid back before a flag was placed on his record. An enquiry was opened into Dr Walapu's 2008 tax return in February 2009. Six years later, he received an APN to cover the sum repaid as a result of the disputed scheme.

      Dr Walapu had claimed relief against past income tax assessments in his tax return but this claim had not yet been formally assessed. He submitted that the APN required the payment on account of an unassessed tax liability that had not yet accrued.

      The High Court first observed that the 2014 legislation providing for the issue of an APN pursued a legitimate objective, were targeted precisely at the class of persons who engaged in the activity sought to be suppressed, and incorporated a vigorous process whereby the APN was likely to correlate to the actual tax position.

      In respect of the claimant’s arguments, it found that the rules did confer a right of representation since they created a statutory right of consultation, which took effect not before the issue of the APN but before it became effective. There had been no violation of Dr Walapu’s legitimate expectation or of the principle of non-retroactivity.

      In particular, the court rejected the claimant’s contention that HMRC had been inactive following the submission of the return leading the claimant to assume that no APN would be issued. HMRC had made its intention to challenge the scheme very clear from the outset. The new legislation was retroactive only in the sense that it had changed the payment rules, which was justified in the context of its objective of fighting tax avoidance.

      The claimant had not been denied access to a court in breach of the European Convention of Human Rights. A judicial review was available and the claimant could compel HMRC to make an assessment, which would create a right of appeal. There was no deprivation because the monies would be returned if the claimant won the case.

      The scheme had been a “subsequent iteration of the partnership scheme”, which had already been notified. This iteration did not need to be notified but it brought the scheme within DOTAS such that HMRC had had the power to issue an APN.

  • Hong Kong gazettes tax information exchange bill
    • 8 January 2016, the Inland Revenue (Amendment) Bill 2016, which seeks to provide a legal framework for Hong Kong to implement the new international standard for automatic exchange of financial account information in tax matters (AEOI), was gazetted.

      In September 2014, Hong Kong committed that, subject to the passage of local legislation, AEOI would be implemented on a reciprocal basis with appropriate partners which could meet relevant standards on protection of privacy and confidentiality of information exchanged and ensuring proper use of the data exchanged, with a view to commencing the first information exchanges by the end of 2018.

      Under the AEOI standard, a financial institution (FI) is required to identify financial accounts held by tax residents in the jurisdictions with which Hong Kong has entered into an AEOI arrangement. FIs are required to collect the reportable information of these financial accounts, and furnish such information to the Inland Revenue Department (IRD). The IRD will exchange it with the tax authorities of AEOI partner jurisdictions on an annual basis.

      "We intend to conduct AEOI only with our partners with which Hong Kong has signed comprehensive avoidance of double taxation agreements (CDTAs) or tax information exchange agreements (TIEAs), on a bilateral basis. The safeguards for exchange of information under the respective CDTAs and TIEAs will be applicable to information exchanged under the AEOI mode, alongside safeguards under the AEOI Standard," said a Hong Long government spokesman.

      The bill was tabled at the Legislative Council (LegCo) on 20 January. The government has committed to secure its early passage.

  • IRS turns its attentions to Singapore
    • 23 February 2016, the Internal Revenue Service petitioned the US District Court in Miami for an 'third party record-keeper' order to compel Swiss bank UBS to turn over records on an account in Singapore held by a non-compliant US taxpayer.

      The IRS stated that Hsiaw Ching-Ye, who now lives in China, had not filed a US income tax return since 2004, even though he earned income of more than US$100,000 in the US from 2005 until 2007.

      UBS avoided prosecution in the US by paying US$780 million in 2009 after admitting it had assisted US taxpayers to evade their US tax liabilities. As part of the settlement, it also agreed to turn over Swiss account date on US citizens. UBS provided information on Hsiaw’s Swiss account, along with about 4,500 others.

      According to the records obtained, the highest balances on Hsiaw's Swiss account with UBS were US$990,351 in 2001 and US$773,011 in 2002. In March 2002, he requested and received a bank cheque for US$600,066 from his Swiss account. The following month he sent a fax from the bank's office in Hong Kong, advising that he had opened a new account at the UBS branch in Singapore and instructing UBS to transfer the balance of his Swiss account to his Singapore account. UBS transferred US$194,356 to his Singapore account and closed his Swiss account.

      According to court documents, when the IRS contacted Hsiaw he initially denied having any foreign accounts, but later admitted to having the Swiss and Singapore accounts. He allegedly stated that the Singapore account was closed in 2007 and had a balance of US$100,000 at the time.

      In September 2012, UBS provided the IRS with a waiver form which, if executed by Hsiaw, would allow UBS to disclose his Singapore account records. The IRS claimed that it sent the form to Hsiaw but he did not execute it and later refused to speak to the IRS when contacted.

      The IRS served a summons on UBS in 2013 for records of his account in Singapore from 2001 to 2011. The Swiss bank said it could not comply with the IRS summons because "in the absence of a waiver from Mr Hsiaw, it is prohibited by Singapore's bank secrecy laws from disclosing the bank records that relate... to (his) Singapore account." No criminal charges have been brought against Hsiaw.

      The IRS disagreed. It said the interest of the US in combating tax evasion through the use of secret foreign bank accounts substantially outweighs the interest of Singapore in preserving the privacy of bank clients.

      Among the documents sought are foreign bank records, including foreign brokerage or securities account records of monies deposited in the Singapore account that constitute undeclared income, as well as interest, dividends and capital gains earned in the five tax years.

      The US District Court in Miami ordered UBS to attend court in Miami on 31 March to explain why it had refused to provide Hsiaw’s Singapore account records.

  • Julius Baer reaches agreement in principle with US authorities
    • 30 December 2016, Swiss bank Julius Baer announced that it has reached an agreement in principle with the US Attorney’s Office for the Southern District of New York with respect to a comprehensive resolution regarding its legacy US cross-border business. The resolution is subject to final approval by the US Department of Justice (DoJ).

      Based on the terms of the agreement in principle, Julius Baer has taken an additional provision of USD197.25 million to supplement its preliminary provision of USD350 million in June 2015. With the overall provision of USD547.25 million charged in 2015, the group will remain adequately capitalised with a BIS total capital ratio of 18.6% as per 31 October 2015.

      Julius Baer, Switzerland's fourth-largest private bank, said it remains committed to cooperating proactively with the DoJ investigation and has carried out its co-operation in full compliance with applicable Swiss laws and regulations. It anticipates that it will execute a resolution with the DOJ in the first quarter of 2016.

  • Luxembourg announces new tax proposals for 2017
    • 29 February 2016, the Luxembourg government announced a number of tax proposals to be introduced next year, including a corporate tax cut and changes to the personal income tax system. Final proposals will be included in the prime minister’s annual speech on 26 April 2016.

      The corporate income tax rate would be reduced from the current 21% to 19% in 2017 and 18% in 2018. This would reduce the effective tax rate – which includes corporate income tax, municipal business tax and unemployment fund contribution – from 29.22% to 27.08% in 2017 and 26.01% in 2018.

      The use of loss carry-forwards, currently unrestricted, would be limited to 10 years and could be applied to a maximum of 80% of profits. The tax on SOPARFIs will increase from €3,210 to €4,815.

      On the personal income tax side, the government intends to introduce a new maximum 42% tax rate for annual earnings above €200,000 per year in Luxembourg and a 41% rate for annual earnings from €150,000 to €199,000. Withholding tax on interest-based income would be doubled from 10% to 20%.

  • Luxembourg to appeal European Commission’s Fiat decision
    • 4 December 2015, the Luxembourg government announced that it would be appealing the European Commission's decision that a transfer pricing agreement between Fiat Finance and Trade and the Luxembourg tax authorities constituted unlawful State Aid.

      Last October, the Commission found that Luxembourg's agreement with Fiat did not reflect economic reality and granted a selective tax advantage to the company in breach of EU law. It ordered Luxembourg to recover €20m in "unpaid tax" from Fiat.

      The Luxembourg government said the Commission has used unprecedented criteria in establishing the alleged State aid, thereby putting into jeopardy the principle of legal certainty. In particular, it said, the Commission had not established in any way that Fiat received selective advantages within the meaning of article 107 of the Treaty on the Functioning of the EU.

  • Malta received 578 applications for citizenship-by-investment in 2015
    • 8 March 2016, Justice Minister Owen Bonnici told Malta’s parliament that a total of 578 applications for Maltese citizenship had been received last year under the Citizenship-by-Investment programme: 54 had been awarded citizenship.

      Replying to a Parliamentary question, Bonnici said that 476 applicants had submitted all the necessary documents for scrutiny. A total of 147 had been approved, of which 54 had completed procedures and been granted citizenship. A further 102 applicants still needed to submit documents or had been refused.

  • Mauritius to begin automatic exchange in September 2018
    • 15 January 2016, the Mauritius Revenue Authority (MRA) announced that the first exchange of information under the OECD’s new Common Reporting Standard (CRS) would take place in September 2018 – a year later than originally planned.

      Mauritius was among the first 51 jurisdictions – known as the “early adopters” – that signed a multilateral competent authority agreement in October 2014 to automatically exchange on financial account information. These countries committed to start exchanging automatically in 2017.

      In a recent communiqué to stakeholders, the MRA said that the requirement to apply due diligence procedures to record tax residence of clients opening new accounts would now take effect as from 1 January 2017 rather than 1 January 16.

      The MRA also said that, in due course, a technical committee would be convened to discuss and finalise the guidance notes for the implementation of CRS.

  • OECD Global Forum issues 10 new country peer review reports
    • 14 March 2016, the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes published 10 new country peer review reports that assess their frameworks and practices for transparency and exchange of information on request.

      The Global Forum issued Phase 1 reports on Croatia and Tunisia, which were both assessed to have legal frameworks in place to enable them to move to Phase 2 of the review process, which will assess their exchange of information practices.

      The Global Forum also issued eight new Phase 2 reviews of exchange of information practices –for Botswana, El Salvador, Georgia, Kenya, Mauritania, Nigeria, Niue and Saudi Arabia. It allocated ratings for compliance with the individual elements of the international standard, as well as an overall “Largely Compliant” rating for each jurisdiction.

      The Global Forum has now completed 225 peer reviews and assigned compliance ratings to 94 jurisdictions that have undergone phase two reviews. The first round of reviews for all member jurisdictions will be completed by the end of 2016, as required under a 2009 mandate that governs the peer review process. Three new members joined the Global Forum in 2016 – Guyana, Chad and Maldives.

  • Ontario Court of Appeal allows “late” challenge to a will
    • 8 March 2016, the Court of Appeal of Ontario (CoA) reversed a lower court decision in the disputed estate of Toronto real estate magnate Chaim Neuberger to allow one side of a family to challenge a will involving a $100 million dollar estate where the other side of that family is set to receive substantially under that will.

      In Neuberger v York (ONCA 191), Neuberger, a holocaust survivor, migrated to Canada in the 1940s where he built a successful real estate empire. His long-stated intention was to provide for both his daughters, Edie and Myra, equally on his death. He executed wills in 2004 and 2010.

      In 2004, Neuberger split the company relevant to his estate, Nuberg & Dale Construction (N&D), in two: one part was retained in N&D while the other was transferred to newly created numbered corporation. Neuberger then executed the 2004 will, giving Myra control of N&D and Edie of #179. The residual of any inequity in the stock capital of either business would be set aside, divided into two equal shares and then redistributed to the companies now owned by his daughters.

      In 2010, Neuberger effected an asset freeze which meant the shares for both N&D and #179 were to be held by separate trusts, the beneficiaries being Myra and her children and Edie and her children, respectively. He executed the 2010 will at the same time. Under the new will the capital stock of each company was to be distributed directly to each of the sisters and their families. However Neuberger lent his income back to N&D such that Myra’s company was worth US$13 million more than the company owed by Edie at the time of his death in 2012.

      Edie, and one of her adult sons Adam, challenged the 2010 will as "contrary to Mr. Neuberger's long-stated intention to treat his daughters equally upon his death” because it failed to balance any inequality in the values of the companies. She also claimed that her father lacked capacity at the time the second will was made and it was unclear whether his advisers had explained the effects of the change in the will or had even received direct instructions from him to make these changes.

      The Superior Court of Justice denied Edie's challenge to the will, citing the delay in bringing the challenges, Edie's actions as estate trustee and Adam's lack of independent knowledge of the estate. On appeal, Edie and Adam contended that both these decisions were incorrect. The CoA agreed.

      It found the motion judge erred in dismissing the appellant's challenges on the basis of the equitable doctrines of estoppel by representation and estoppel by convention. In addition, the policy considerations underlying the law of probate did not support estoppel and delay as a bar to challenges to validity. To find otherwise would place estate trustees in untenable positions. The finding that Adam was a “straw man” in the litigation was unsupported by the evidence and could not serve as a bar to challenge given his financial interest in the estate. The order below was set aside.

  • Overseas Territories resist UK demands for beneficial ownership registers
    • 2 December, the British Overseas Territories (OTs) – including the British Virgin Islands, Cayman Islands, Turks and Caicos islands and Bermuda – will not be required to implement central registers of the beneficial ownership of companies registered there, provided that they put "similarly effective" systems in place.

      The political leaders and representatives of the UK and its OTs met as the Joint Ministerial Council (JMC) in London. The UK plans to introduce a central, publicly accessible register of “persons with significant control” of UK companies in June 2016, in line with a commitment made by members of the G8 leading global economies in June 2013.

      It further called for similar registers to be introduced in all its OTs and Crown Dependencies of Jersey, Guernsey and the Isle of Man. Ahead of the JMC, Foreign Office minister James Duddridge stated the UK's explicit requirements as follows:

      • UK law enforcement and tax authorities must be able to access company beneficial ownership information without restriction, subject to relevant safeguards;
      • These competent authorities should be able to quickly identify all companies that a particular beneficial owner has a stake in without needing to submit multiple and repeated requests; and
      • Companies or their beneficial owners must not be alerted to the fact that an investigation is under way.

      However most OTs and the Crown Dependencies had previously indicated they did not want to introduce central registries because they were already in compliance with international standards and, to do so, would put them at a competitive disadvantage with other jurisdictions.

      At the JMC, OTs did not accede either to the UK’s request to create public registers of beneficial ownership or to allow UK and domestic law enforcement and tax authorities be given unrestricted access to information. However, according to the JMC communiqué, there was an agreement to hold beneficial ownership information in their respective jurisdictions via central registers or “similarly effective systems”.

      OTs also agreed to give the “highest priority” to implementation, including through technical dialogue with UK law enforcement authorities on further developing a timely, safe and secure information exchange process. Progress on implementation will be kept under "continuous and close review".

  • RBS settles Coutts prosecution in Germany
    • 9 December 2015, Royal Bank of Scotland agreed to pay €23.8 million to settle claims by German prosecutors that its Swiss Coutts & Co. Ltd. private bank assisted clients to evade tax. The penalty was levied by a Dusseldorf court and was set in proportion to the undeclared assets of German customers the bank handled.

      RBS agreed to sell the international business of Coutts to Switzerland’s Union Bancaire Privee (UBP) last March. It provided an indemnity to protect UBP from the German investigation. The settlement with the German prosecutors is understood to include immunity for any current or former staff.

  • Singapore-UAE tax treaty protocol comes into force
    • 16 March 2016, the Second Protocol amending the double tax treaty between Singapore and the United Arab Emirates entered into force. The revised terms in the Second Protocol, which was signed on 31 October 2014, include increasing the threshold periods to ascertain the presence of a permanent establishment from nine months to 12 months and lower withholding tax rates for dividends and interest income.

      The Protocol reduces the withholding tax rate on dividends to 0% from the current 5% if the recipient is the beneficial owner of the dividends. Currently, no withholding tax is levied on dividends paid by companies resident in Singapore so the 5% withholding tax rate on dividends under the treaty would not apply in Singapore.

      Under the Protocol, the withholding tax rate for interest is reduced to 0% from the current 7% if the recipient is the beneficial owner of the interest. The previous provision offered a zero withholding tax only on interest received by the government of the other contracting state.

      The Protocol also removes payments for “the use of, or the right to use, industrial, commercial or scientific equipment” from the definition of royalties.

  • Spanish soprano receives suspended jail sentence for tax fraud
    • 15 December 2015, Spanish opera singer Montserrat Caballé was given a six-month suspended jail sentence for tax fraud. The sentence was the result of an agreement with prosecutors that avoided the need for a trial. All first convictions resulting in sentences of less than two years are suspended in Spain. She was also fined €326,000.

      Prosecutors claimed that she had earned more than €2 million from a number of recordings and concerts in countries that included Spain, Germany, Switzerland, Italy and Russia in 2010. The singer claimed she was a resident in neighbouring Andorra at the time but, it was alleged, she was actually living in Spain "with the sole objective of not paying taxes to the Spanish state".

      According to court documents, Caballé allegedly signed all her concert contracts through a company registered in Andorra and deposited the income in an Andorran bank account with the aim of "ensuring the treasury did not have knowledge of her income and her true residency in Spain".

      In a brief hearing, the singer ratified an out-of-court agreement in which she admitted that she had avoided paying €508,000 in taxes related to her earnings from 2010. Caballé, who is 82 years old and has avoided public engagements since a stroke in 2012, appeared at the hearing via videolink from her home.

      The singer said that she had been unaware of how her income was being handled for tax purposes, and that she had become confused after a previous adviser had passed away. The governments of Spain and Andorra signed a bilateral Tax Information Exchange Agreement (TIEA) in 2010.

  • St Lucia opens citizenship by investment scheme
    • 1 January 2016, Saint Lucia started accepting applications for its new citizenship by investment programme introduced by the Citizenship by Investment Act (No. 14 of 2015), which came into force on 24 August 2015.

      Under the regulations published on 2 October, the number of successful applications per year will initially be capped at 500 and applicants will be subject to a higher qualifying criteria. This includes a requirement to prove a minimum net worth of US$3 million in addition to making a qualifying minimum investment in either of:

      • The Saint Lucia National Economic Fund (US$200,000);
      • An approved real estate project (US$300,000);
      • An approved enterprise project (US$3.5 million and no less than three permanent jobs);

      A purchase of government bonds (US$500,000 in five-year holding bond).

  • Supreme Court grants charities leave to appeal in inheritance dispute
    • 1 March 2016, the UK Supreme Court granted Blue Cross and others charities permission to appeal from the Court of Appeal Civil Division in a case relating to an inheritance dispute.

      In Ilott v The Blue Cross and Others (UKSC 2015/0203), the majority of the deceased estate of Melita Jackson (£486,000) was left to three charities (the appellants) in a will. The will made no provision for the deceased's only child, Mrs Ilott (the respondent), after the mother and daughter had become estranged many years before and their attempts at reconciliation had failed. Jackson left a letter with her will expressly confirming her desire to exclude her daughter and instructing her lawyers to continue to challenge any claim Ilott made on the money.

      Ilott made an application under the Inheritance (Provision for Family and Dependants) Act 1975 for reasonable financial provision from her late mother's estate. She was initially awarded £50,000 on the basis that her mother had not left reasonable provision for her maintenance.

      She appealed and, in July 2015, the Court of Appeal increased the award to £163,000 to enable her to purchase her housing association home, together with the reasonable costs of the purchase and payments up to a maximum of £20,000 structured in a way that would allow Ilott to preserve her state benefits. The charities appealed to the Supreme Court.

      In granting leave to appeal, the Supreme Court said the issues at stake would relate to whether the Court of Appeal was wrong to set aside the award made at first instance on the respondent's claim under the Inheritance (Provision for Family and Dependants) Act 1975. Further whether the Court of Appeal erred in its approach to the "maintenance" standard under the 1975 Act or was wrong to structure an award under the 1975 Act in a way that allowed the respondent the preserve her entitlement to state benefits.

  • Swiss court denies Dutch request for bank details
    • 21 March 2016, the Swiss Federal Administrative Court ruled that no administrative assistance should be extended to Dutch tax authorities in respect of a “group request” made in July 2015, following an appeal by a Dutch client of UBS bank.

      In 2015 the Dutch tax authorities had submitted a request to the Swiss Federal Tax Administration for UBS banking details on the basis of the 2010 double tax treaty (DTT) that between Switzerland and the Netherlands. The court viewed it as a “fishing” attempt.

      Following the closure of its voluntary disclosure programme, the Dutch tax authorities sought to obtain the names of persons with outstanding tax liabilities who did not participate. It therefore submitted a group assistance request to the Swiss Federal Tax Administration (SFTA), under the 2010 double tax treaty protocol, concerning unnamed UBS clients that had not proved their tax compliance. In February 2016, the Dutch tax authorities submitted a practically identical group request for Credit Suisse clients.

      The SFTA approved the group request but an affected bank client filed an appeal with the Swiss Federal Administrative Court. The Swiss Federal Administrative Court upheld this appeal on the grounds that the treaty protocol explicitly stated that the taxable person must be mentioned by name in order for the requesting country to receive administrative assistance. The decision may be appealed to the Swiss Federal Court.

      A group request may be acceptable under the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters, which Switzerland signed in October 2013 and was ratified in Parliament in December 2015. It is expected to enter into force on 1 January 2017 and makes provision for the three forms of information exchange: upon request, spontaneous and automatic. Under article 18, the name of the taxpayer is required to be mentioned only “where appropriate”. The OECD Convention provides for a retroactive effect going back three years for intentional tax offences subject to prosecution under the criminal laws of the applicant country.

  • Swiss-French tax treaty protocol enters into force
    • 30 March 2016, a protocol amending the 1966 double tax treaty with respect to taxes on income and capital between Switzerland and France came into force. It was signed on 25 June 2014. The treaty is now fully in line with the current international standard on the exchange of information on request.

      Taxpayers for whom France submits an individual administrative assistance request can now be identified by elements other than their name and address. These requests may be considered for tax periods starting from 1 January 2010.

      The agreement will also enable Switzerland to respond to group requests from France. Such requests are admitted for events that occurred on or after 1 February 2013, the date on which the Federal Act on International Administrative Assistance in Tax Matters came into force.

  • Swiss-Liechtenstein tax treaty approved
    • 8 March 2016, the Swiss National Council and the Liechtenstein government have approved a new double tax treaty, which will replace a 1995 agreement. It is expected to enter into force in early 2017.

      The tax treaty reduces Swiss withholding tax on interest for Liechtenstein residents to zero. Zero withholding tax will also apply to dividends from significant holdings in corporate groups and to dividends paid to pension funds in Liechtenstein. Swiss withholding tax on portfolio dividends and dividends paid to natural persons would be reduced from 35% to 15%. The agreement also addresses the tax treatment of cross-border commuters.

  • Swiss Office of Justice agrees to assist US investigation into Venezuela
    • 25 March 2016, Switzerland's Federal Office of Justice (FOJ) confirmed it had agreed to provide the US authorities with records from at least 18 banks relating to Venezuela's state oil company PDVSA as part of a widening money laundering and corruption investigation.

      US authorities say they have traced over $1 billion to a conspiracy involving a Venezuelan who allegedly paid bribes to obtain contracts from PDVSA. They are separately investing representatives of Venezuelan energy company Derwick Associates, which has done business with PDVSA.

      The request to Switzerland came from two agencies. The Department of Justice’s fraud section filed a Mutual Legal Assistance Treaty request, or MLAT, for records from eight banks related to the case. In addition, US Attorney for the Southern District of New York Preet Bharara has sought records from 18 banks.

  • Swiss Senate votes to permit automatic exchange of tax information
    • 2 December 2015, the Swiss Senate followed the House of Representatives by approving a legal framework for the automatic exchange of tax information. Only four senators, all from the conservative right Swiss People’s Party, voted against the measure, which paves the way for an end to bank secrecy.

      Currently, Switzerland sends data about account holders to foreign governments and institutions upon request only. However, the new legal framework will enable such information to flow automatically to certain countries, among them Australia and the 28 European Union nations, with which Switzerland has already concluded automatic exchange agreements.

      Switzerland has already signed a similar information exchange deal with the United States through a bilateral Intergovernmental Agreement under the Foreign Account Tax Compliance Act (FATCA).

      Those agreements make up part of Switzerland’s commitment to share foreign clients’ account data with other countries by 2018 as part of a new global Common Reporting Standard designed by the OECD. Agreements with individual countries will have to be ratified separately by parliament, but the Swiss Senate’s decision creates the legal framework for their acceptance.

  • Switzerland agrees AEOI with British crown dependencies
    • 20 January 2016, Switzerland signed joint declarations on the introduction of the automatic exchange of information (AEOI) in tax matters on a reciprocal basis with the British crown dependencies of Jersey, Guernsey and the Isle of Man, as well as with Iceland and Norway.

      The AEOI will be implemented based on the OECD Multilateral Competent Authority Agreement on the Automatic Exchange of Financial Account Information (MCAA). Switzerland and these countries intend to start collecting data in accordance with the global AEOI standard in 2017 and to start transmitting data in 2018, after the necessary legal basis has been created.

      The joint declarations meet the criteria set by the Swiss Federal Council in the negotiation mandates of 8 October 2014. Aside from the EU and the US, the negotiations initially concern countries with which there are close economic ties and which provide their taxpayers with sufficient scope for regularisation. Switzerland has already signed a similar joint declaration with Australia as well as concluding an agreement on AEOI with the EU. It further signed a joint declaration with Japan on 29 January.

      The joint declarations specify that each jurisdiction is satisfied with the confidentiality rules provided for in the other jurisdiction with regard to tax. Furthermore, these countries have prepared scope for regularisation for their taxpayers.

      The Federal Council authorised the Federal Department of Finance (FDF) to initiate a consultation on introducing the AEOI with the other countries following the signing of the declarations with the various countries. They will then be submitted to Parliament for approval.

  • Switzerland signs AEOI agreement with Canada
    • 5 February 2016, Switzerland signed a joint declaration on the introduction of the automatic exchange of information (AEOI) in tax matters on a reciprocal basis with Canada. The two countries intend to start collecting data in accordance with the global AEOI standard in 2017 and first transmit data in 2018, after the necessary legal framework has been created in both countries.

      AEOI with Canada will be implemented based on the Multilateral Competent Authority Agreement on the Automatic Exchange of Financial Account Information (MCAA). The MCAA is based on the international standard for the exchange of information developed by the OECD.

      The Federal Council authorised the Federal Department of Finance (FDF) to initiate a consultation and the corresponding federal decrees must be submitted to Parliament for approval. Switzerland has signed similar declarations with the EU, Australia, the British crown dependencies of Jersey, Guernsey and the Isle of Man, as well as Iceland, Norway and Japan.

  • UK and Uruguay sign double tax treaty
    • 4 March 2016, the UK and Uruguay signed a treaty to avoid double taxation and prevent fiscal evasion related to taxes on income and on capital. Both countries had previously signed a tax information exchange agreement in 2013.

      UK Ambassador Ben Lyster-Binns said: “This is an important agreement for the UK because Latin America is a region in which we haven’t had as many agreements as we would like. I hope this sets a precedent for future negotiations with other countries.”

  • UK Budget tax changes heralds a further clampdown on avoidance
    • 16 March 2016, UK Chancellor George Osborne presented a Budget containing reductions to capital gains and corporation tax, changes to Stamp duty land tax (SDLT), some clarification on the new non-dom system and a further clampdown on avoidance.

      The applicable rate of CGT for all gains realised as of 6 April 2016 will be reduced from 28% to 20% for higher rate taxpayers and from 18% to 10% for basic rate taxpayers, though these lower rates will not apply to gains on residential property and carried interest.

      Corporation tax, which had already been scheduled to fall to 18% from 1 April 2020, will now reduce to 17% from that date. The current rate is 20%.

      The additional 3% SDLT charge for the purchase of second homes, first announced in the 2015 Autumn Statement, was confirmed. The government also brought the SDLT regime for non-residential and mixed-use property into line with that for residential property by changing from flat rate charge to a system based on value – 2% between £150,000 and £250,000, and 5% above – with immediate effect.

      It was clarified in the Budget that there will be automatic rebasing of offshore assets for those non-domiciled taxpayers who will be treated as deemed domiciled for income and capital gains, as well as inheritance tax purposes, under the new rules on 6 April 2017. Also included was a reference to a “transitional provision with regards to offshore funds to provide certainty on how amounts remitted to the UK will be taxed”. The legislation in respect of reforming the non-dom system, and associated transitional measures, will be contained in Finance Bill 2017.

      The Chancellor confirmed that there are to be enhanced civil penalties targeting offshore evaders, which will be determined by reference to the amount on which tax has not been paid. Alongside this, civil penalties, together with naming and shaming, will be introduced targeting those who enable offshore evasion. He also confirmed the introduction of a new criminal offence, aimed at the most serious cases of offshore evasion, under which liability will not depend on HMRC proving intention on the part of the taxpayer. In addition there is to be a new requirement to correct offshore non-compliance.

      A special regime will be applied to taxpayers that are identified as “serial avoiders” – including those who regularly use tax avoidance schemes that are defeated. Sanctions will include naming and shaming and restricting access to certain reliefs and exemptions. The Chancellor also confirmed that a penalty of 60% of the tax due would be levied in any case countered under the General Anti-Abuse Rule (GAAR).

      In addition, the Bill contains a number of targeted anti-avoidance measures. It introduces new rules to address hybrid mismatch arrangements and ensure that payments for the use of intellectual property based overseas are subject to tax. It further proposes that profits from the development of UK property are always subject to UK tax.

      Parliament approved the Budget on 22 March after the Chancellor was forced to shelve planned cuts to disability benefits. The government also won a series of votes on specific Budget resolutions, including the cut in CGT. Remaining Budget measures will be brought forward in the Finance Bill and other legislation.

  • UK publishes draft anti-hybrid rules
    • 9 December 2015, HM Revenue & Customs published draft legislation to neutralise the tax effect of hybrid mismatch arrangements in accordance with the recommendations of Action 2 of the G20/OECD Base Erosion and Profit Shifting (BEPS) project. It is designed to defeat aggressive tax planning by multinational companies.

      UK resident companies, and non-resident companies carrying on a trade in the UK through a permanent establishment, are chargeable to corporation tax on their profits. The computation of those profits is, on the issue of a relevant notice, subject to anti-arbitrage legislation set out in Part 6 of Taxation (International and Other Provisions) Act 2010 (TIOPA).

      The proposed new measure neutralises the tax mismatch created by the hybrid arrangement by changing the tax treatment of either the payment or the receipt, depending on the circumstances. The rules are designed to work whether both the countries affected by a cross-border hybrid arrangement have introduced the OECD rules, or just one. This measure deals with mismatches in two ways, described as a “primary response” and a ‘”secondary response”.

      In the case of double deductions, the primary response is to deny a deduction to the parent company. If this does not occur because the tax law in the country in which the parent company is resident does not provide for this, the secondary response is to deny the deduction to the hybrid entity.

      In the case of deduction/non-inclusion, the primary response is to deny a deduction to the payer. If this does not occur, the secondary response is to bring the receipt into charge for the recipient.

      The effect of this change is that hybrid mismatch outcomes involving hybrid entities and financial instruments will be countered through the primary response, which is a disallowance of deductions where the UK is the payer jurisdiction in respect of a deduction/non-inclusion mismatch. Where the UK is the payee jurisdiction, and the primary response has not been applied in another jurisdiction, then the UK will bring the receipt into charge.

      Legislation will be introduced in Finance Bill 2016 to substitute Part 6A for Part 6 of TIOPA 2010. The measure applies to payments made on or after 1 January 2017 involving hybrid entities or instruments that give rise to a hybrid mismatch outcome.

  • US announces final Swiss Bank Programme Category 2 resolution
    • 27 January 2016, the US Department of Justice announced that it reached its final non-prosecution agreement under Category 2 of the Swiss Bank Programme, with HSZH Verwaltungs AG (HSZH). The department had executed agreements with 80 banks since 30 March 2015, when it announced the first Swiss Bank Program non-prosecution agreement with BSI SA, and had imposed a total of more than US$1.36 billion in penalties. Every bank in the programme is also required to cooperate in any related criminal or civil proceedings through 2016 and beyond.

      US Attorney General Loretta Lynch said: “Through this initiative, we have uncovered those who help facilitate evasion schemes and those who hide funds in secret offshore accounts. We have improved our ability to return tax dollars to the United States. And we have pursued investigations into banks and individuals. I would like to thank the Swiss government for their cooperation in this effort, and I look forward to continuing our work together to root out fraud and corruption wherever it is found.”

      The DoJ said completion of the agreements under Category 2 of the Swiss Bank Programme represented a substantial milestone in its efforts to combat offshore tax evasion and it remained committed to holding financial institutions, professionals and individual taxpayers accountable for their respective roles in concealing foreign accounts and assets, and evading US tax obligations.

      The Swiss Bank Programme, which was announced on 29 August 2013, was designed to provide a path for Swiss banks to resolve potential criminal liabilities in the US. Swiss banks eligible to enter the programme were required to advise the department by 31 December 2013, that they had reason to believe that they had committed tax-related criminal offences in connection with undeclared US-related accounts. Banks already under criminal investigation related to their Swiss-banking activities – Category 1 banks – and all individuals were expressly excluded from the programme.

      Under the programme, banks eligible for a non-prosecution agreement are required to:

      • Make a complete disclosure of their cross-border activities;
      • Provide detailed information on an account-by-account basis for accounts in which US taxpayers have a direct or indirect interest;
      • Cooperate in treaty requests for account information;
      • Provide detailed information as to other banks that transferred funds into secret accounts or that accepted funds when secret accounts were closed;
      • Agree to close accounts of accountholders who fail to come into compliance with US reporting obligations; and
      • Pay appropriate penalties.

      HSZH Verwaltungs AG, the final Category 2 Swiss bank to reach a non-prosecution agreement, was previously known as Hyposwiss Privatbank AG. During the period since 1 August 2008, HSZH held a total of 605 US-related accounts, both declared and undeclared, with an aggregate peak of approximately $1.12 billion in assets under management. HSZH agreed to pay a penalty of $49.757 million.

      Earlier in January, Union Bancaire Privée (UBP) and Leodan Privatbank AG (Leodan) also reached resolutions with the DoJ. During the period since 1 August 2008, UBP held and managed approximately 2,919 US-related accounts, which included both declared and undeclared accounts, with aggregate peak of assets under management of $4.895 billion. However, 1,282 of the 2,919 US-related accounts were acquired through the acquisitions of other banks, including ABN AMRO, and bank assets. UBP agreed to pay a penalty of $187.8 million.

      During the period since 1 August 2008, Leodan held a total of 44 US-related accounts, which included both declared and undeclared accounts, with an aggregate peak of approximately $59.42 million in assets under management. Leodan agreed to pay a penalty of $500,000.

      “Today’s resolution with HSZH Verwaltungs AG brings to a close this phase of DoJ’s Swiss Bank Programme,” said acting Deputy Commissioner International David Horton of the IRS Large Business & International Division. “The comprehensive success of this programme sends a powerful message to those who might think they can evade their tax obligations by going offshore. A whole sector of financial institutions, 80 banks in all, has been held accountable for aiding the use of secret accounts and circumventing US law. In addition to the more than US$1.3 billion in penalties from these resolutions, more than 54,000 taxpayers have come forward to the IRS to pay more than $8 billion in taxes, interest and penalties.”

  • US commits to reciprocity with India on FATCA information exchange
    • 3 March 2016, the Indian Finance Ministry said it had received a written commitment from the US that it would move towards full reciprocity under the intergovernmental agreement (IGA) between the two states for financial information exchange under the US Foreign Account Tax Compliance Act (FATCA).

      The IGA between India and US, signed last July as part of FATCA implementation, requires Indian financial institutions to provide necessary information to Indian tax authorities, which will then be transmitted to the US automatically. The rules prescribe reporting requirements on a staggered basis starting from 2014, and reporting of all details prescribed from 2017 onwards.

      "We should look at FATCA as a very special case. It's a law which is made in US, it's a law which is imposed by US on the rest of the world. It’s exchange of information which is not fully reciprocal, yet India and other countries around the world have had to sign those agreements," said Department of Revenue Joint Secretary Akhilesh Ranjan.

      "It is an inequitable system, I agree with you. We have already received some information from US about Indian taxpayers. We have also received written commitment that they will move towards full reciprocity," he added.

  • US Swiss Bank Programme nets $1 billion in penalties
    • 23 December 2015, the Department of Justice announced it had reached agreements with 75 Swiss banks, imposed penalties in excess of $1 billion and secured “voluminous and detailed information regarding the illegal conduct of financial institutions, professionals and accountholders around the world”.

      The announcement followed the conclusion of non-prosecution agreements with four more Swiss banks – Bank J. Safra Sarasin AG, Coutts & Co Ltd, Gonet & Cie and Banque Cantonal du Valais – under the department’s Swiss Bank Programme. These banks collectively will pay penalties of more than $178 million.

      According to the terms of the non-prosecution agreements, each bank agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared US accounts and pay a penalty in return for the department’s agreement not to prosecute these banks for tax-related criminal offenses.

      Safra Sarasin had 1,275 US-related accounts with an aggregate maximum value of approximately $2.2 billion since 1 August 2008. Safra Sarasin will pay a penalty of $85.809 million.

      Coutts held and managed 1,337 US-related accounts, which included both declared and undeclared accounts, with a peak of assets under management of approximately $2.1 billion since 1 August 2008.  Coutts will pay a penalty of $78.484 million.

      Gonet, which held 150 US-related accounts with an aggregate maximum balance of approximately $254.5 million, will pay a penalty of $11.454 million, while BC Valais, which maintained 185 US-related accounts with a maximum aggregate value of approximately $72 million, will pay a penalty of $2.311 million.

      The Swiss Bank Programme provides a path for Swiss banks to resolve potential criminal liabilities in the US. Swiss banks eligible to enter the programme were required to advise the department by 31 December 2013, that they had reason to believe that they had committed tax-related criminal offences in connection with undeclared US-related accounts. Banks already under criminal investigation related to their Swiss banking activities and all individuals were expressly excluded from the programme.

      Under the terms of the programme, each bank mitigated its penalty by encouraging US accountholders to come into compliance with their US tax and disclosure obligations. While US accountholders at these banks who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Programme, the price of such disclosure has increased to a penalty equal to 50% of the high value of the accounts.

      “The end of the year does not signal the end to our enforcement efforts to bring to justice those who would circumvent our nation’s tax laws by hiding their money overseas,” said Chief Richard Weber of IRS Criminal Investigation. “In fact, with the wealth of information gathered from the Swiss Bank Programme, we have already begun to track those individuals who think they are above the law and continue to hide their money offshore.”

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