Owen, Christopher: Global Survey - October 2016

  • Cayman publishes four bills to strengthen AML regime
    • 9 September 2016, the Cayman Islands government published new legislation intended to maintain adherence to international anti-money laundering standards and prepare Cayman for the Caribbean Financial Action Task Force’s (CFATF) mutual evaluation process in 2017.

      The four Bills are the Monetary Authority (Amendment) Bill 2016, the Non-Profit Organisations Bill 2016, the Auditors Oversight (Amendment) Bill 2016 and the Companies Management (Amendment) Bill 2016.

      The Ministry of Finance said: “In order to continue adhering with international standards, the ministry’s bills are intended to provide for greater powers for law enforcement and regulatory agencies, including their abilities to administer administrative penalties and more effectively cooperate with their international counterparts. Greater clarity is also introduced as to the types of businesses that have a responsibility to adhere to the international standards.”

      The government also published proposed amendments to the Trusts Law and the Property (Miscellaneous Provisions) Law as part of a tidying up exercise to correct long-standing deficiencies and technical errors in the original legislation.

      The most significant of the proposed amendments in the Trusts (Amendment) Bill 2016 will insert express reference to trusts created on or after 11 May 1998 into Sections 6(c) and 8 for the appointment, retirement and discharge of trustees, as well as making provision for the retirement of a trustee where there is no simultaneous appointment of a new trustee.

      An amendment to s14 will allow a settlor of a trust to reserve to himself or to a third party, such as a protector, the power to appoint both trust income and capital. A proposed amendment to s105 will correct a technical defect in relation to the trusteeship of STAR trusts. This will allow a controlled subsidiary to be the trustee of a STAR trust as well as a registered private trust company.

      Seven amendments are proposed to the Property (Miscellaneous Provisions) Law and are contained in the Property (Miscellaneous Provisions) (Amendment) Bill 2016.

  • Cyprus approves revised citizenship scheme
    • 13 September 2016, the Cyprus government approved a revised citizenship-by-investment scheme designed to further encourage investments in the island’s economy by non-Cypriot entrepreneurs and investors.

      The revised scheme abolishes the provision for collective investment of €12 million. This is to be replaced by an individual investment of €2 million and the purchase of a residence worth at least €500,000 plus VAT.

      An applicant's parents are now entitled to apply for citizenship through the same application, provided the parents have also purchased a permanent residence in Cyprus of at least €500,000 plus VAT.

      The investments attached to the application must remain for a minimum of three years, noting however that in order for the Cyprus citizenship to remain valid the permanent residence of at least €500,000 plus VAT must be held indefinitely.

      The new scheme also terminates the provisions for the granting of citizenship to those with fixed bank deposits worth €5 million, to persons whose deposits have been impaired due to the measures implemented after the 15 March 2013 and those who purchased bonds worth €2.5 million.

      Minister of Finance Harris noted that the revision of the scheme aims to encourage real investments that would benefit the economy. The government, he said, wants to attract investors who will chose Cyprus as their basis of residence and economic activity. Investments should be kept for three years and companies in which investments are made should employ at least five Cypriot citizens.

  • Danish revenue buys ‘Panama Papers’ data
    • 29 September 2016, the Danish Tax Authority (SKAT) announced that it had secured information on Danish citizens from the so-called Panama Papers after paying US$900,000 to an anonymous source.

      “We had the opportunity to look through the material before we paid and we’ve received what we were promised,” said SKAT divisional tax chief Jim Sørensen. “The material contains the number of files regarding Danes that we expected, and the quality measures up with the trial documents we obtained beforehand. The next step is to dig deeper and find the people and look into their tax history.”

      Danish Tax Minister Karsten Lauritzen announced earlier in September that the tax agency had been given permission to acquire the data following "broad political support" for the move. Due to the "serious nature and large scale" of the leak, Lauritzen said he agreed, "procurement of information in this case is necessary."

  • EC consults on common EU list of non-cooperative jurisdictions
    • 14 September 2016, the European Commission presented its pre-assessment “scoreboard” of all third country jurisdictions to Member State experts in the Council Code of Conduct Group on Business Taxation, which will decide on the relevant jurisdictions to screen in greater detail against tax good governance criteria.

      Eighty-one nations – including the US, China, and India – were identified on the scoreboard as ranking high for risk indicators, suggesting that further scrutiny of these countries’ tax policies may be warranted to determine if they pose a threat to EU member states’ tax bases.

      The screening of the selected countries should begin next January, with a view to having a first EU list of non-cooperative tax jurisdictions before the end of 2017. The aim is to replace the current patchwork of national lists with a common EU list of non-cooperative jurisdictions.

      "The EU takes its international tax good governance commitments seriously,” said Economic Affairs Commissioner Pierre Moscovici. "It is reasonable for us to expect the same from our international partners. We want to have fair and open discussions with our partners on tax issues that concern us all in the global community. The EU list will be our tool to deal with third countries that refuse to play fair."

      The scoreboard categorises countries based on whether a country is sufficiently “economically relevant” to the EU. The Commission assessed the strength of economic ties with the EU, the magnitude of financial activity and stability factors.

      Once the selection indicators identified the jurisdictions which are most economically relevant, the Commission assessed their potential risk level for facilitating tax avoidance using the following risk indicators: transparency and exchange of information; the existence of preferential tax regimes; and no corporate income tax or a zero corporate tax rate.

  • EC warns Poland over automatic exchange of information
    • 29 September 2016, the European Commission requested Poland to fully transpose Council Directive 2014/107/EU on mutual assistance in the area of income and capital taxation, which amends Directive 2011/16/EU on mandatory automatic exchange of information between national tax authorities.

      Member States were required to transpose these rules by 1 January 2016. Poland has not yet informed the Commission of all the necessary measures to fully transpose the Directive into national law. In the absence of a satisfactory response within two months, the Commission may refer Poland to the Court of Justice.

  • EU opens in-depth investigation into Luxembourg’s tax treatment of GDF Suez
    • 19 September 2016, the European Commission opened an in-depth investigation into Luxembourg's tax treatment of the GDF Suez group (now Engie). It said it has concerns that several tax rulings issued by Luxembourg may have given GDF Suez an unfair advantage over other companies, in breach of EU state aid rules.

      Competition Commissioner Margrethe Vestager said: "Financial transactions can be taxed differently depending on the type of transaction, equity or debt – but a single company cannot have the best of two worlds for one and the same transaction. Therefore, we will look carefully at tax rulings issued by Luxembourg to GDF Suez. They seem to contradict national taxation rules and allow GDF Suez to pay less tax than other companies."

      As from September 2008, Luxembourg issued several tax rulings concerning the tax treatment of two similar financial transactions between four companies of the GDF Suez group, all based in Luxembourg. These financial transactions were loans that could be converted into equity and bear zero interest for the lender. One convertible loan was granted in 2009 by LNG Luxembourg (lender) to GDF Suez LNG Supply (borrower); the other in 2011 by Electrabel Invest Luxembourg (lender) to GDF Suez Treasury Management (borrower).

      The Commission considers at this stage that in the tax rulings the two financial transactions are treated both as debt and as equity. This is an inconsistent tax treatment of the same transaction, which appeared to give rise to double non-taxation for both lenders and borrowers on profits arising in Luxembourg.

      The borrowers can significantly reduce their taxable profits in Luxembourg by deducting the (provisioned) interest payments of the transaction as expenses. At the same time, the lenders avoid paying any tax on the profits the transactions generate for them, because Luxembourg tax rules exempt income from equity investments from taxation.

      As a result, the Commission said, a significant proportion of the profits recorded by GDF Suez in Luxembourg through the two arrangements were not taxed at all.

  • FATF publishes assessment on Singapore
    • 27 September 2016, the Financial Action Task Force (FATF) reported that Singapore’s regime for anti-money laundering and for countering the financing of terrorism had undergone “significant reform” since a previous assessment in 2008 and it had a “particularly strong” framework for law enforcement and the supervision of financial institutions.

      However it found that “moderate gaps” remain and the report, based on Singapore’s first assessment since the FATF Standards were enhanced in 2012, said the “nexus between transnational threats, the inherent risks faced by Singapore as one of the world’s largest financial centres, and vulnerabilities within the system” were not sufficiently reflected in Singapore’s risk assessment programme.

      The FATF recommendations included:

      • The comprehensive risk assessment of all types of legal persons to identify money laundering, terrorism financing risks;
      • Development of policy to address those risks ensuring the effective supervision of non-financial companies;
      • The pursuit of more offenders involved in the laundering of foreign proceeds of crime, on top of the current focus of pursuing money mules and shell companies.

      The Singapore government pledged “further steps” to strengthen its regime to fight illicit flows, including pursuing more complex transnational money-laundering cases and more proactive confiscations of criminal proceeds.

      It will enhance the accessibility and transparency of information on beneficial ownership of legal persons, limited liability partnerships and trusts. It will also improve the risk assessment for all legal persons and the non-profit sector, while bolstering supervision of the non-financial sector.

      “The FATF assessment was a useful and important exercise which not only validated Singapore’s areas of strength in combating ML/TF, but also identified areas where there is scope to strengthen the regime further,” said the statement. “Singapore has invested substantial efforts over the years to enhance its AML/CFT regime, and remains fully committed to continue doing so.”

  • Files leaked from Bahamas corporate registry put online
    • 21 September 2016, the International Consortium of Investigative Journalists (ICIJ) published a cache of 1.3 million files leaked from The Bahamas Corporate Registry, which provides names of directors and some owners of more than 175,000 Bahamian companies, trusts and foundations registered between 1990 and early 2016.

      The information was published by in the form of a free online searchable database. The Bahamas government launched an e-services business registration platform at the registrar general's department in January 2016 as a part of an ongoing strategy to improve ease of doing business.  However the ICIJ said the online registry was “often incomplete” and was subject to a fee of at least $10 per search.

      The Attorney General's (AG) office said "all necessary action" would be taken to maintain the requisite data protection. "We take this matter of an unauthorised publication by the ICIJ of data held by the online companies registry very seriously. The Bahamas remains committed to the transparency of its corporate registry," the statement said.

      The leak followed only a week after The Bahamas' financial services sector was attacked for its decision to implement automatic exchange of information (AEOI) for tax purposes under the OECD Common Reporting Standard (CRS) in 2018 through a bilateral approach rather than signing onto a multilateral convention.

      Bahamas Shadow Finance Minister Peter Turnquest told The Nassau Guardian: “We must now reconsider our tax structure as it relates to international financial centre clients as well as domestically. We must look at our immigration policy to ensure we steer clear of the claim of [being a] jurisdiction of convenience, and we must look at our openness to transparency as defined by the OECD and others. We must redefine our value proposition based upon clarity, transparency and compliance today with full anticipation of the next OECD moves,” he said.

  • Former French minister on trial for tax evasion
    • 15 September 2016, the two-week trial of former French budget minister Jerome Cahuzac for tax fraud and money laundering closed in Paris. The verdict is due to be passed down on 8 December.

      Prosecutor Eliane Houlette said she was seeking a three-year prison term for Cahuzac and a two-year prison term for his co-defendant and ex-wife Patricia Menard. She is also seeking a €1.875 million fine against Geneva-based Banque Reyl, which is accused of helping Cahuzac transfer funds from Switzerland to Singapore to avoid detection by French tax authorities, as well as an 18-month suspended jail term for its director Francois Reyl.

      Cahuzac was appointed by French President Hollande to lead the government’s fight against tax evasion and was sponsoring a bill in parliament when press reports emerged about foreign bank accounts emerged in December 2012. He publicly denied the allegations for months, before resigning in April 2013.

      Cahuzac and Menard acknowledged owning undisclosed foreign bank accounts for two decades in Switzerland, Singapore and the Isle of Man. Their undeclared wealth was estimated at €3.5 million in 2013 and they have already paid €2.3 million in back taxes to the French authorities.

  • France cuts penalties for trustee non-disclosure
    • 14 September 2016, the French tax authorities issued a circular to reduce the penalties under the French Tax Code (FTC) imposed on trustees for failure to comply with their reporting obligations.

      Trustees of a trust with any connection to France are under a duty to report the trust's financial affairs to the tax authority every year. This includes the value and nature of all the trust’s assets, and the names of beneficiaries and other associated persons. Penalties for non-disclosure or late disclosure were set at 12.5% of the trust's total assets or at least €20,000.

      Following the decision of the Constitutional Court on 22 July 2016 to cancel the 5% penalty in relation to failure to disclose foreign bank accounts, the French tax authority has reduced the maximum fine for trustees who fail to comply with filing requirements. The €20,000 minimum fine remains but the maximum fines are reduced to:

      • 75% if the funds were received through a transfer on death, or if the funds were placed in trust by the settlor not tax resident in France;

      7.5% if the funds were placed in trust by a settlor tax resident in France.

  • G20 leaders endorse new international standard for tax transparency
    • 5 September 2016, G20 leaders meeting at the Hangzhou Summit reiterated their call for all relevant countries, including all financial centres and jurisdictions, that have not yet committed to implementing the standard of automatic exchange of information to do so without delay and by 2018 at the latest, as well as to sign and ratify the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.

      In a communiqué, G20 leaders further endorsed the OECD proposals on the objective criteria to identify non-cooperative jurisdictions with respect to tax transparency and asked the OECD to report back to the finance ministers and central bank governors by June 2017 on the progress made by jurisdictions on tax transparency, and on how the Global Forum will manage the country review process in response to supplementary review requests of countries.

      It called on the OECD to prepare, by the July 2017 G20 Leaders’ Summit, a list of those jurisdictions that “have not yet sufficiently progressed toward a satisfactory level of implementation of the agreed international standards on tax transparency”. Defensive measures will be considered against listed jurisdictions.

      The leaders further called on the FATF and the OECD Global Forum to make initial proposals by the G20 Finance Ministers and Central Bank Governors Meeting in October on ways to improve the implementation of the international standards on transparency, including on the availability of beneficial ownership information of legal persons and legal arrangements, and its international exchange.

      The leaders reaffirmed the importance advancing cooperation on the OECD/G20 base erosion and profits shifting (BEPS) plan, and welcomed the establishment of the G20/OECD inclusive framework on BEPS and its first meeting in Kyoto.

      “We support a timely, consistent and widespread implementation of the BEPS package and call upon all relevant and interested countries and jurisdictions that have not yet committed to the BEPS package to do so and join the framework on an equal footing,” the communiqué said.

  • HMRC collects £3 billion through accelerated payment notices
    • 5 September 2016, Financial Secretary to the Treasury Jane Ellison announced that HMRC has collected £3 billion through accelerated payment notices (APNs), which oblige taxpayers to pay disputed tax bills immediately while their tax affairs are investigated by HMRC.

      HMRC has issued 60,000 accelerated payment notices (APNs) since the new rules were introduced in 2014. Under the scheme, a taxpayer with an outstanding tax bill has 90 days once an APN is received to pay up or make representation to HMRC if they consider the notice incorrect.

      Jennie Granger, HMRC director general for enforcement and compliance, said: “Accelerated payment notices are at the forefront of the government’s drive to tackle tax avoidance schemes. Recipients must pay the tax owed within 90 days, changing the economics of tax avoidance.

  • HMRC opens Worldwide Disclosure Facility
    • 5 September 2016, HMRC launched the Worldwide Disclosure Facility (WDF), an online portal to enable taxpayers to correct past irregularities in their tax affairs by disclosing a UK tax liability that relates wholly or in part to an offshore issue.

      The new facility follows closure of all other disclosure opportunities at the end of 2015, including the widely used Liechtenstein Disclosure Facility (LDF). The WDF is described as “the last chance” before tough new sanctions are applied, including higher penalties, ‘naming and shaming’ and a risk of criminal investigation.

      The WDF offers no special terms, which represents a significant change of approach from previous HMRC offshore facilities, which offered beneficial terms to encourage taxpayers to make disclosure. Those using the WDF will pay the tax in full, with interest on top, with a minimum penalty of 30% of the tax due. This is higher than previous disclosure facilities such as the LDF, which offered a capped 10% and 20% penalty. Taxpayers could still face criminal prosecution. The quality of the information disclosed will be taken into consideration

      However by 30 September 2018, HMRC will be receiving Common Reporting Standard (CRS) data from around 100 countries, which will allow them to identify and pursue those who have not come forward to regularise their affairs. It will also receive data from registers of beneficial ownership.

      The WDF launch is timed to coincide with the recent announcement of proposed Requirement to Correct (RTC) legislation. Under the proposed legislation due to take effect from April 2017, those who do not put their offshore tax affairs in order by 30 September 2018 will be subject to significantly increased sanctions.

      A failure to correct will create a situation where the taxpayer has committed an additional offence on top of their original non-compliance by not correcting within the window. Under the simpler of HMRC’s proposed options, a standard penalty of 200% of the tax not corrected would apply. Taxpayers could also face a further penalty of up to 10% of the value of offshore assets, and “naming and shaming”, depending on the circumstances.

      Jennie Granger, HMRC director general of enforcement and compliance, said: “We’ve closed old disclosure facilities, increased penalties, and ramped-up our powers to tackle evaders and those that help others evade. Alongside this, international cooperation through global tax transparency is making it easier for us to catch evaders, as we increasingly receive more information about financial assets which people had hoped would remain hidden. Our message couldn’t be clearer: there are no safe havens left for tax evaders and no-one should be in any doubt that the days of hiding money offshore with impunity are gone.”

  • Indian tax amnesty attracts US$10 billion in asset declarations
    • 1 October 2016, Indian Finance Minister Arun Jaitley announced that the Income Declaration Scheme, which allowed taxpayers to report assets previously undeclared to the tax authorities without risk of prosecution, had attracted assets worth Rs652.5 billion (US$9.8 billion).

      The amnesty attracted 64,275 declarations, with the average amount declared standing at Rs10.2 million. A charge of 45% was to be levied on the assets declared under the scheme, which ran from June through September, implying government revenue of Rs294 billion.

      Prime Minister Narendra Modi made reducing tax evasion a key part of his 2014 election manifesto.

  • Indonesian tax amnesty completes successful first phase
    • 30 September 2016, Indonesia's Finance Ministry said more than US$263 billion had already been declared by over 347,000 taxpayers at the end of the first phase of its tax amnesty programme, which opened on 18 July and runs until the end of March 2017.

      The Indonesian government collected about US$7.5 billion in additional tax revenue, or 58.9% of the nine-month programme's full target. However, the repatriation of offshore funds only reached about US$10.5 billion, or 13.6% of the full target by the end of the first phase.

      The amnesty eliminates the taxpayer's principal tax debt, all administrative sanctions and tax crime sanctions if the taxpayer makes a “redemption payment”; The tax tariffs are set at 4% for funds declared between 1 July and 30 September 2016, the first phase, and 2% for funds repatriated in the same period.  The tariffs rise to 6% and 3% respectively in the second phase from 1 October to 31 December 2016, and to 10% and 5% in the third phase from 1 January to 31 March 2017.

      The Finance Ministry said most of the US$263 billion of offshore funds declared so far were in Singapore, followed by the Cayman Islands, Hong Kong, China and the British Virgin Islands.

  • Ireland to appeal EC’s Apple ruling
    • 2 September 2016, the Irish cabinet agreed to appeal against the European Commission's ruling that Ireland granted undue tax benefits of up to €13 billion to US tech giant Apple. Its decision was endorsed by the Irish parliament on 7 September. It will hold the recovery amount in escrow until the case has been concluded.

      The Commission’s investigation concluded that Ireland granted illegal tax benefits to Apple that enabled it to pay substantially less tax than other businesses over many years, which is illegal under European Union state aid rules. It therefore ordered Ireland to recover the illegal aid.

      Speaking after the cabinet meeting, Taoiseach Edna Kenny said: "This is about Ireland, it is about our people, it's about us as a sovereign nation, actually setting out what we consider our appropriate policies".

  • Israeli legal challenge to FATCA defeated
    • 12 September 2016, the Israeli Supreme Court cancelled a temporary injunction and rejected a legal challenge by a group of US-Israeli dual nationals to prevent Israel’s implementation of the US Foreign Account Tax Compliance Act.

      Israel’s FATCA Model 1 intergovernmental agreement (IGA) with the US was brought into force in July in time for the Israeli Tax Authority to start forwarding data to the IRS on 30 September. The reporting obligations apply to all accounts controlled by US persons, where the total balance exceeds US$50,000. If stopped by the courts, an immediate 30% withholding tax would have been applied to all income from US investments paid to Israeli financial institutions.

      The legal action was filed by the Republicans Overseas Israel, an organisation of expatriate Republican Party supporters, together with Rinat Schreiber, a dual citizen who has an account at Bank Hapoalim. They argued that the IGA would violate key Israeli laws in respect of rights to privacy, property and equal treatment without having a compelling public purpose justification.

      The Israeli Supreme Court issued a temporary injunction on 1 September preventing implementation of the US FATCA law in Israel pending an emergency hearing. The court has now overturned this injunction.

      The three-judge panel said it would elaborate on the reasoning behind its decision “at a later date”, but the Israeli daily newspaper Haaretz quoted Justice Menahem Mazuz as saying: “It is difficult to think about a purpose of a law more worthy than this legislation, which is part of a long series of acts taken over the past 20 years to combat the black market, tax evasion and international crime. All of them require reporting that harms privacy.”

  • Netherlands changes taxation of Dutch Cooperatives
    • 20 September 2016, the Dutch Ministry of Finance announced that dividend withholding tax will be applied to certain Dutch Cooperatives that act as holding companies to bring them into line with private companies (BVs) and public companies (NVs), which attract a 15% withholding tax on dividend payments, subject to domestic exemptions and tax treaty reductions.

      The government intends to abolish this difference but at the same time exempt distributions from dividend tax in cases where shareholders in a holding cooperative, BV or NV, reside in a jurisdiction with a tax treaty with the Netherlands, subject to a minimum 5% holding threshold. These changes are due to be introduced on 1 January 2018.

      The inclusion of holding cooperatives in the scope of the Dutch dividend withholding tax rules could have a significant impact on investment structures into the Netherlands through non-treaty jurisdictions.

  • Singapore and Australia to Share Data to Reduce Tax Evasion
    • 6 September 2016, the Inland Revenue Authority of Singapore (IRAS) and the Australian Taxation Office (ATO) entered into a Competent Authority Agreement on the automatic exchange of financial account information based on the Common Reporting Standard (CRS). They will commence exchange under the CRS by September 2018.

      Under the agreement, IRAS will automatically exchange with the ATO, financial account information of accounts in Singapore held by Australian tax residents while the ATO will automatically exchange with IRAS, financial account information of accounts in Australia held by Singapore tax residents.

      Both jurisdictions are satisfied with the confidentiality rules and data safeguards that are in place in the other jurisdiction to ensure the confidentiality of information exchanged and prevent its unauthorised use. Both jurisdictions will work toward implementing automatic exchange of information with other major financial centres to ensure a level playing field.

  • South Africa extends SVDP by three months to end-June 2017
    • 7 September 2016, Treasury chief director of legal tax design Yanga Mputa announced an extension to the period for submission of applications under the special voluntary disclosure programme (SVDP).

      Originally proposed for a six-month period from 1 October 2016 to the end of March 2017, the SVDP has now been extended by a further three months to the end of June 2017. Tax practitioners had argued that six months was too short a period, given the complexity of the documentation required for the amnesty, which covers both undisclosed income tax and foreign exchange contraventions.

      The Treasury has also accommodated concerns over the inclusion rate. The original proposal was that 50% of the aggregate of all assets held abroad between 1 March 2010 and 28 February 2015 that were wholly or partly derived from undeclared income, be included in taxable income and taxed at normal rates.

      Critics said the 50% was too high and would discourage taxpayers from coming forward. Mputa said the Treasury would recommend to Finance Minister Pravin Gordhan that the inclusion rate be reduced to 4O%.

      However, the Treasury rejected calls for a single valuation date for the offshore assets instead of at the end of each of the five years to end-February 2015, and did not accept a proposal to reset the base cost of the foreign assets for capital gains tax.

      Regarding the treatment of trusts, the Treasury clarified that beneficiaries and other participants in offshore trusts may participate in the SVDP if they elect to deem to have the trust’s offshore assets to be held by them.

  • Swiss Supreme Court rules in favour of Dutch information request
    • 13 September 2016, the Swiss Supreme Court ruled that a request from the Netherlands for information on Dutch account holders at Swiss banks was valid, overturning the decision of a lower court to refuse the order.

      Last November, the Dutch tax authority requested information about Dutch nationals who had more than €1,500 in their accounts and had not provided the bank with evidence of tax compliance. The Swiss Federal Tax Administration agreed to comply on the basis of the 2010 double tax treaty Protocol between the two countries, but a Dutch client of UBS challenged its decision.

      The Protocol was supplemented by an interpreting Memorandum of Understanding (MoU) in 2011 that allowed for requests to be made without stating the name of a person concerned, provided the requesting state identified the “person under examination or investigation in another manner than by stating its name and address”.

      In March, the Swiss Federal Administrative Court found for the Dutch client, ruling that the request was not permitted under the protocol because it only indicated certain criteria that would identify targeted UBS clients and did not name specific account holders. It found there was no scope for the MoU to broaden the clearly stated requirements. The Dutch tax authority appealed.

      The Federal Supreme Court ruled that the Dutch request was valid. In its summary it explicitly referred to the MoU, stating that the Protocol must be construed so as to allow for information exchange requests without naming a person under investigation, provided always the request in question did not amount to a fishing expedition.

      The French tax authorities have asked Switzerland to hand over client information for some 45,000 bank accounts. UBS said in July that the Swiss authorities had asked it to provide client information following a French request for international administrative assistance in May.

      The demand relates to former and current clients living in France, based on data from 2006 to 2008. According to a report in Le Parisien, the French authorities have already identified 4,782 accounts and are seeking to find the owners of an additional 40,379 accounts. The assets of those listed totalled more than US$11 billion.

  • Switzerland ratifies the OECD Multilateral Convention
    • 26 September 2016, Switzerland ratified the multilateral Convention on Mutual Administrative Assistance in Tax Matters. The Convention, which provides for all forms of administrative assistance in tax matters, will enter into force for Switzerland on 1 January 2017.

      The OECD said ratification reaffirmed Switzerland's commitment to greater tax transparency and marked an important step in implementing the Standard for Automatic Exchange of Financial Account Information in Tax Matters developed by the OECD and G20 countries as well as the automatic exchange of Country-by-Country Reports under the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project.

      Switzerland is committed to implement automatic exchange of financial account information in time to commence exchanges in 2018 and is a signatory of the CRS Multilateral Competent Authority Agreement (CRS MCAA) and the Multilateral Competent Authority Agreement on the Exchange of Country-by-Country Reports (CbC MCAA), which are both based on Article 6 of the Convention.

      Pakistan became the 10th jurisdiction to sign the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters on 14 September. Pakistan is a Member of the BEPS inclusive framework and as such will exchange automatically country-by-country reporting as required by Action 13 of the BEPS package.

  • UK brings in client notification regulations for CRS
    • 30 September 2016, the UK government brought the International Tax Compliance (Client Notification) Regulations 2016 into force, which set out a new obligation on financial institutions and professional advisers to notify certain clients of the information HMRC will receive automatically under the OECD Common Reporting Standard (CRS) from 2017.

      Financial institutions must notify individual account holders who were UK resident for the tax years 2015/16 or 2016/17 and held an account with the institution on 30 September 2016, which was either worth more than US$1 million or held in a participating overseas jurisdiction, including referrals by another financial institution.

      Professional advisers must notify individuals who they have provided with either general personal tax advice or specific offshore tax advice, including referrals to connected overseas advisers to provide such advice.

      Both financial institutions and professional advisers must send these notifications to their specified clients by 31 August 2017.

  • UK government empowered to publish multinationals’ country-by-country reports
    • 5 September 2016, a late amendment to the UK Finance Bill 2016 empowers the government to force UK-based multinational corporations to publish details of their corporation tax payments on a country-by-country (Cubic) basis.

      The existing Bill contained a provision to oblige multinationals to include Cubic breakdowns in their reports to HMRC and required them to publish a summary of their group tax strategy. However the late amendment, proposed by Labour MP Carolyn Flint, requires multinationals to include the Cubic breakdown in the published tax strategy, if the government so orders.

      Treasury Minister Jane Ellison said it would only use the new power where it was “agreed on a multilateral basis” that it would apply to both UK and non-UK resident groups. On this basis, the government supported the amendment.

  • US proposes new rule for international entrepreneurs
    • 26 August 2016, the US Citizenship and Immigration Services (USCIS) announced that it was proposing a new International Entrepreneur Rule that would allow certain international entrepreneurs to be considered for temporary permission to be in the US in order to start or scale their businesses.

      The proposed rule would allow the Department of Homeland Security (DHS) to use its existing discretionary statutory parole authority for entrepreneurs of start-up entities whose stay in the US would provide a significant public benefit through the substantial and demonstrated potential for rapid business growth and job creation.

      Under the proposed rule, DHS may parole, on a case-by-case basis, eligible entrepreneurs of start-up enterprises:

      • Who have a significant ownership interest in the start-up (at least 15%) and have an active and central role to its operations;
      • Whose start-up was formed in the US within the past three years; and
      • Whose start-up has substantial and demonstrated potential for rapid business growth and job creation, as evidenced by:
        • Receiving significant investment of capital (at least $345,000) from certain qualified US investors with established records of successful investments;
        • Receiving significant awards or grants (at least $100,000) from certain federal, state or local government entities; or
        • Partially satisfying one or both of the above criteria in addition to other reliable and compelling evidence of the start-up entity’s substantial potential for rapid growth and job creation.

      Under the proposed rule, entrepreneurs may be granted an initial stay of up to two years to oversee and grow their start-up entity in the US.  A subsequent request for re-parole (for up to three additional years) would be considered only if the entrepreneur and the start-up entity continue to provide a significant public benefit as evidenced by substantial increases in capital investment, revenue or job creation.

      The notice of proposed rulemaking in the Federal Register invites public comment for 45 days, after which USCIS will address the comments received. The proposed rule would take effect on the date indicated in the final rule as published in the Federal Register.

  • Wildenstein tax trial gets underway in Paris
    • 26 September 2016, the tax evasion trial of international art dealer Guy Wildenstein and his family began in Paris after the presiding judge rejected the defendants’ request for a stay. If granted, the request would have been the second delay in a trial that began in January.

      The family had argued that the criminal trial should be suspended until the questions surrounding the tax treatment of a number of trusts have been settled, whereas the prosecution held the two cases should run in parallel.

      Judge Oliver Geron dismissed the request, saying that a suspension would delay the trial by several years and would infringe the rule that judgments have to be handed down within a reasonable time frame.

      In June, France’s constitutional court overturned a ruling by a lower court that had deemed the combination of criminal procedure and tax evasion trial involving the defendants unconstitutional and in violation of double jeopardy rules.

      The French authorities are demanding about US$620 million in back taxes. Wildenstein, president of Wildenstein & Co. in New York, is accused of underestimating inheritance taxes after his father, Daniel, died in 2001 in France. Prosecutors allege that Wildenstein and his late brother Alec schemed to hide art and assets in trusts based in the Bahamas, Guernsey and the Cayman Islands and then understated the family’s wealth in estate tax returns filed between 2002 and 2008.

      The brothers declared to have inherited only about $60 million in 2001, while the assets in the trusts allegedly include properties in New York, a 30,000-hectare ranch in Kenya, racehorses, a jet and hundreds of valuable paintings and other artworks. While the paintings were held by offshore trusts, prosecutors say, many of them in fact remained in the family’s vaults in Switzerland.

      The case was opened in 2008 after the late Sylvia Wildenstein, Guy Wildenstein’s stepmother, released family documents to the French authorities because she believed she was being cheated out of her inheritance.

      The documents are purported to show that a vast number of artworks had been moved into a Cayman Islands trust, without her knowledge, for the benefit of Guy and Alec Wildenstein. Wildenstein’s lawyer stated that the use of trusts was lawful at the time of their inception and it was not clear that any tax was due.

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