Owen, Christopher: Global Survey - April 2017

27 March 2017, the Australian Parliament approved a new Diverted Profits Tax (DPT), which is designed to “encourage greater compliance by large multinational enterprises with their tax obligations in Australia, including with Australia's transfer pricing rules.”

The DPT will apply at a penalty tax rate of 40%, from 1 July 2017, and will be inserted into the existing general anti-avoidance rules in Part IVA of the Income Tax Assessment Act 1936. The rules will apply where it is reasonable to conclude that a scheme was carried out for a principal purpose, or for more than one principal purpose, of obtaining the relevant tax benefit.

The DPT will apply in respect of a significant global entity – a member of a group whose annual global income is at least A$1 billion – operating in Australia where, based on information available to the Commissioner, it is reasonable to conclude that profits have been artificially diverted from Australia.

The DPT will not apply if the sum of the Australian turnover of the relevant taxpayer, and the Australian turnover of any other Australian entities that are part of the same significant global group, does not exceed A$25 million.

The federal government said the DPT was expected to raise about $100 million in revenue a year from 2018-19. The Australia Taxation Office (ATO) currently has audits under way with a number of multinationals, including Apple, BHP Billiton, Chevron and Crown, which could realise up to an estimated $2 billion in revenue.

The ATO released, on 30 March, a draft taxation ruling setting out the ATO’s view on when a foreign incorporated company is considered an Australian tax resident under the central management and control test. Comments are to be submitted by 12 May.

31 March 2017, the BVI Administrative Court held that statutory requests and notices issued for the mutual exchange of information should be subject to the same principles of fairness as any other decision or act made by a functionary of a public body, which cannot be eclipsed by a duty of confidentiality.

In Quiver Inc. & Friar Tuck Ltd. v International Tax Authority, two BVI companies were granted leave to challenge the issue by the BVI International Tax Authority (ITA) of Notices under section 5(1) of the Mutual Legal Assistance (Tax Matters) Act 2003 to produce information for the purpose of the BVI complying with a request from another state under a tax information exchange agreement (TIEA).

It was the ITA’s practice not to provide the recipient of such a Notice with information in respect of the underlying request – the requesting state, the nature of the underlying investigation, the taxpayer involved, the tax period concerned or the applicable foreign tax laws. It was argued on behalf of the companies that this denied them the basic right of procedural fairness and was unfair and unconstitutional.

The BVI Administrative Court found there was at common law a duty of procedural fairness to which public bodies like the ITA are subject, particularly when exercising functions with a power of compulsion. This required that the ITA furnish the companies with sufficient information to enable them to determine whether the Notices were lawfully issued or were liable to challenge and susceptible to being quashed.

In agreeing with the companies’ submissions, Ellis J. expressly rejected the ITA’s argument that the duty of confidentiality to which they it is subject prevails over common law rights of procedural fairness. He made an order of mandamus requiring that the ITA disclose to the companies sufficient information about the request to enable them to assess whether or not the requests were valid.

16 March 2017, the Conseil Constitutionnel ruled that the uncapped 12.5% (5% prior to 8 December 2013) penalty on trust assets provided for under Article 1736 IV bis of the French tax code for each failure to comply with trust reporting obligations was disproportionate and therefore unconstitutional.

The decision takes effect as of the date of publication, which means that it applies to all cases in progress but not to court decisions or tax settlements that have already been finalised.

However it held that the minimum fixed penalty of €20,000 for each failure to comply with the French trust reporting requirements before 31 December 2016 (€10,000 prior to 8 December 2013) was both constitutional and proportionate to the anti-tax avoidance objective of French trust reporting rules.

Under new legislation passed on 29 December 2016, trustees remain subject to annual and event-based reporting requirements in France when either the trustee, the settlor or one of the beneficiaries of a trust, are French tax residents or if any of the assets or rights placed in the trust are located in France.

As of 31 December, a penalty of 80% of the tax avoided in respect of assets and rights in trust applies in the case of failure to comply with French trust reporting obligations. This penalty cannot be lower than €20,000 and is exclusive of the €20,000 fixed penalty provided for by Article 1736 paragraph IV bis of the French tax code.

18 March 2017, Finance Ministers and Central Bank Governors of the world’s 20 largest economies (G20) said they remained committed to a timely, consistent and widespread implementation of the Base Erosion and Profit Shifting (BEPS) package at their meeting in Baden-Baden, Germany.

In the official communiqué, they said they welcomed the growing membership of the Inclusive Framework on BEPS and encouraged all relevant and interested countries and jurisdictions to join. They asked the OECD to report back on the progress of BEPS implementation, including on all the four minimum standards, by the Leaders Summit in July 2017.

“We look forward to the first signing round on 7 June 2017 of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS and to the first automatic exchange of financial account information under the OECD Common Reporting Standard (CRS), which will commence in September 2017,” it said.

They also called on all jurisdictions to sign and ratify the multilateral Convention on Mutual Administrative Assistance in Tax Matters and urged all relevant jurisdictions, including financial centres which have not yet done so, to commit without delay to implementing the CRS and to take all necessary actions, including putting in place domestic legislation, in order to start exchanges under the CRS at the latest by September 2018.

“Furthermore, we look forward to the OECD's preparation of a list by the Leaders Summit in July 2017 of those jurisdictions that have not yet sufficiently progressed towards a satisfactory level of implementation of the agreed international standards on tax transparency. Defensive measures will be considered against listed jurisdictions,” said the communiqué.

“As an important tool in our fight against corruption, tax evasion, terrorist financing and money laundering, we will advance transparency of legal persons and legal arrangements via the effective implementation of international standards and the availability of beneficial ownership information in the domestic and cross-border context. In this regard, we welcome the work by the Financial Action Task Force (FATF) and the Global Forum on Transparency and Exchange of Information for Tax Purposes. We look forward to a progress report from the OECD on its work in complementary tax areas relating to beneficial ownership by the time of the Leaders Summit in July 2017.”

31 March 2017, a Bill to permit the establishment of Private Foundations in Gibraltar was passed by Parliament together with the consequential amendments to the Income Tax (2010) Act. The legislation will provide a long-awaited framework for the establishment of foundations in Gibraltar.

A foundation is an entity with a separate legal personality. The foundation charter and foundation rules establish the foundation, set out its purposes and rules for its administration and provide details of the beneficiaries and guardian. Details of the foundation are filed at Companies House in Gibraltar, which is to maintain a Register of Foundations.

The founder provides the initial assets, as an irrevocable endowment, and may reserve certain powers ­­– to appoint or remove the guardian or councillors, or to amend the constitution of the foundation. The foundation council manages the foundation and makes distributions to the beneficiaries. It must include a Gibraltar resident company that is licensed as a professional trustee in Gibraltar.

Beneficiaries may be either enfranchised or disenfranchised. Enfranchised beneficiaries are entitled to copies of the accounts and other documents relating to a foundation. A guardian may be appointed to provide protection for the beneficiaries. In certain cases, for example, if there are no designated beneficiaries, or more than 50 beneficiaries, a guardian is required to be appointed

Books of account with respect to monies received and expended and the assets and liabilities of the foundation must be kept for five years. Financial statements, including a profit and loss account, a balance sheet, and a report made by the councillors, are to be filed annually at Companies House.

The rate of tax is 10%, which will be charged on profits or gains accrued or derived in Gibraltar from any trade, profession or vocation. The beneficiaries of a foundation who are ordinarily resident in Gibraltar will be taxed in Gibraltar on distributions received from the foundation, the use of assets owned, used or leased by the foundation, or any loan received from it.

Minister for Commerce Albert Isola said: “Our research tells us that there is international demand for this product and our ability to serve clients with this legislation continues to promote our financial services industry very positively.”

16 March 2017, the Hong Kong SAR government signed competent authority agreements (CAAs) with six existing tax treaty partners – Belgium, Canada, Guernsey, the Netherlands, Italy and Mexico – to provide for the automatic exchange of financial account information (AEOI).

In September 2014, Hong Kong indicated its support for implementing AEOI on a reciprocal basis with appropriate partners with a view to commencing the first exchanges by the end of 2018. In order to exchange, Hong Kong needs to have or enter into a double tax convention or tax information exchange agreement that allows for AEOI and to sign a CAA with that jurisdiction.

Hong Kong had previously signed CAAs with Japan, Korea and the UK. More agreements are expected in the coming months so that Hong Kong will be able to exchange data with all interested and appropriate partners.

13 March 2017, the First Tier Tribunal (FTT) ruled that HMRC was not bound by an earlier decision regarding the non-UK domicile status of HSBC group chief executive Stuart Gulliver when considering his more recent tax returns.

In Stuart Gulliver and the Commissioners for HMRC [2017] UKFTT 0222, TC05712, Gulliver had applied for a closure notice under s28A of the Taxes 5 Management Act 1970 in respect of an enquiry that HMRC has opened in December 2015 into his tax return for the year 2013-14 to consider whether he was domiciled in the UK.

It was argued for Gulliver that, in March 2003, HMRC had written to Gulliver accepting that a £273,677 transfer he had made to a discretionary trust did not attract inheritance tax, and therefore accepting that although Gulliver had a UK domicile of origin he had acquired a domicile of choice in Hong Kong in 1999.

This meant that HMRC was “stuck with” the consequences of that letter and could not re-examine the question of whether he was domiciled in Hong Kong. Gulliver did not therefore need to answer all 123 questions or provide 33 categories of documents relating to his personal and professional life since 1981 — as requested by HMRC last October — because they were not relevant. However he accepted that it was open to HMRC to ask whether he had lost that domicile of choice and had provided HMRC with documents and information that he considered relevant to that issue.

HMRC argued that it was not “stuck with” the consequences of the letter. The letter did not create a binding contract that stopped it from opening a fresh investigation into Gulliver’s tax domicile for the 2013-2014 year and this meant it was necessary to look back over the whole of his life and make wide-ranging inquiries into domicile.

Judge Jonathan Richards ruled in HMRC’s favour. “HMRC are, in principle, entitled to inquire into the question of whether Mr Gulliver acquired a domicile of choice in Hong Kong … HMRC have not alleged any impropriety on Mr Gulliver’s part: their inquiry is limited to the factual question of whether he was domiciled in the UK for that tax year.”

Even if, in 2003, a court or tribunal had decided that Gulliver had a Hong Kong domicile of choice, or HMRC and Gulliver reached a TMA 1970, s. 54 agreement to this effect, there would have been no impediment to HMRC arguing, in proceedings relating to the 2013-14 tax year, that Gulliver had never acquired a Hong Kong domicile of choice. The FTT could therefore see no reason why HMRC should be precluded from using their powers of enquiry to seek to establish this.

He also pointed out that when Gulliver was in contact with HMRC in 2002 about his return to the UK, he indicated it would be for a specific assignment of only two years, after which he would return to Hong Kong. But he has remained resident in the UK ever since, becoming chief executive in 2011.

31 March 2017, Indonesia's nine-month tax amnesty programme, which opened in July 2016, expired. It attracted a total of 965,983 taxpayers – although fewer than 200,000 participants were newly registered taxpayers – who declared a combined total of IDR 4,865.7 trillion (USD $366 billion). The government collected IDR 114 trillion, below its target of IDR 165 trillion (USD $12.5 billion).

Based on data from Indonesia's Tax Office, about 75% of these funds involved domestic assets. The remainder were undeclared foreign assets, but only IDR 147 trillion were repatriated into the specific investment instruments that were prepared by Indonesian authorities, against the government's target of IDR 1,000 trillion (USD $76 billion).

Singapore accounted for the largest part of declared and repatriated funds under the programme, nearly IDR 85 trillion. Most of these repatriated assets went to domestic deposit accounts, bonds and wealth management funds.

3 March 2017, Jersey Chief Minister Ian Gorst signed an agreement with the government of Kenya for the return of over £3 million of stolen assets to Kenya. The Royal Court of Jersey had ordered in February 2016 that the funds be confiscated from Jersey-registered company Windward Trading after it pleaded guilty to four counts of laundering the proceeds of corruption.

The corrupt activities took place in Kenya where Windward's beneficial owner, Samuel Gichuru, is resident. During the period on the indictment, Gichuru was chief executive of Kenya Power and Lighting Company (KPLC), the Kenyan government's electricity utility company.

In June 2011, the Attorney General of Jersey requested the extradition of Samuel Gichuru and Chrysanthus Okemo, the former Kenyan Energy Minister, from Kenya to face money-laundering charges in Jersey in connection with Windward's activities. Extradition proceedings are still ongoing.

Gichuru and Okemo face 53 charges linked to the "commissions" from companies bidding to get contracts with KPLC, which were paid through accounts held by Windward at HSBC Bank and Royal Bank of Scotland International in Jersey. Details of the scheme were first exposed when Gichuru’s wife filed court papers during proceedings for divorce.

Gorst said: "The signing of this agreement conveys a powerful message that both Jersey and Kenya are committed to combatting issues of historic corruption and financial crime. The process is one that has understandably taken some time because of the legal complexities of confiscation and asset sharing. The completion of this agreement is a step towards ensuring these funds are returned to the people of Kenya, where they rightfully belong."

15 March 2017, the “LuxLeaks” whistleblowers were convicted again by the Luxembourg Court of Appeals but with reduced sentences compared to the original trial last June. The leaks prompted the European Union to take urgent action against multinationals avoiding tax in Europe and pressured Luxembourg into accepting a new law that requires EU member states to share tax rulings information.

Antoine Deltour, a former PricewaterhouseCoopers (PwC) employee who leaked documents showing how the company helped multinational companies evade tax in Luxembourg, was given a six-month suspended sentence and fined €1,500. He originally received a 12-month jail term. His colleague Raphael Halet received a €1,000 fine in place of a nine-month prison sentence.

Both Deltour and Halet were convicted of theft of tax rulings and computer fraud but were cleared of trade secret violation. Halet was further convicted of violating professional confidentiality, while Deltour was cleared. Both were ordered to pay a symbolic sum of one euro each to PwC.

Edouard Perrin, an investigative reporter who made two reports for French public television in 2012 and 2013, had his acquittal at the earlier trial confirmed.

6 March 2017, the OECD announced that Malaysia had joined the “Inclusive Framework on BEPS”, a group of countries that have pledged to implement measures aimed at preventing tax avoidance under the OECD/G20 base erosion profit shifting (BEPS) project. Malaysia was the 94th jurisdiction to join the group.

The commitment means that Malaysia has agreed to: adopt BEPS “minimum standards” on tax treaty shopping; implement country-by-country reporting for transfer pricing; limit benefits of any intellectual property or other preferential tax regimes; and fully implement the mutual agreement procedure in its tax treaties.

The British Virgin Islands and Turks and Caicos Islands also joined the inclusive framework on BEPS on 22 March.

3 March 2017, Finance Minister Steven Joyce and Revenue Minister Judith Collins released three consultation papers that propose new measures for taxing multinational companies in line with the OECD base erosion and profit shifting (BEPS) project.

The proposed changes address concerns about multinationals booking profits from New Zealand sales offshore, despite the same sales being driven by New Zealand-based staff. Under the proposal, a non-resident will be deemed to have a New Zealand permanent establishment if they sell goods or services to a person in New Zealand, and have a related entity carrying out activities in New Zealand to bring the sale about.

The proposals also include strengthening transfer-pricing legislation to stop multinational companies using interest payments to shift profits offshore and increasing the Inland Revenue's powers when a company does not cooperate with a tax investigation.

16 March 2017, Panama deposited its instrument of ratification for the Convention on Mutual Administrative Assistance in Tax Matters. It was signed by President Juan Carlos Varela on 22 February and will enter into force on 1 July 2017.

The Convention allows for exchange of tax information multilaterally on request with the 107 jurisdictions that are signatories and provides a common legal basis for cooperation on tax matters. It is an important pre-condition for delivering on Panama’s commitment to start exchanging Common Reporting Standard information in 2018.

27 March 2017, Singapore signed a Competent Authority Agreement (CAA) on the automatic exchange of information (AEOI) under the Common Reporting Standard (CRS) with France. It followed the signing of CAAs with Denmark on 15 March and with Belgium and Luxembourg on 13 March.

Under the CAA, the Inland Revenue Authority of Singapore (IRAS) will automatically exchange financial account information held in Singapore by the respective tax residents of the reportable jurisdictions with their respective revenue authorities on an annual basis. Likewise, the revenue authorities of those reportable jurisdictions will automatically exchange with IRAS, financial account information held by Singapore tax residents in their respective countries.

The first exchange will take place by September 2018. The first submission required from Singapore-based financial institutions to IRAS is by 31 May 2018 for the calendar year 2017.

14 March 2017, Singapore’s tax treaty with Uruguay, signed on 15 January 2015 to clarify the taxing rights of both countries from cross-border business activities and minimise double taxation, was brought into force.

The agreement sets withholding tax rate on dividends at 5% if the beneficial owner is a company (other than a partnership) holding at least 10% of the company paying the dividends. Withholding on dividends is set at a 10% rate in other cases.

Withholding on interest is generally 10%. Withholding on royalties is 5% if the recipient is the beneficial owner and the royalties are for the use of, or the right to use, any copyright of literacy, artistic or scientific work. In other cases, a withholding tax rate of 10% applies.

13 March 2017, the Swiss Supreme Court published its decision of 13 February permitting the Swiss Federal Tax Agency (SFTA) to comply with a French request for information about a UBS client's bank account – despite the request for legal assistance probably being based on stolen bank client data.

In 2014, the SFTA approved a request for international tax assistance made by the French tax authorities in respect of a number of UBS clients who had banking relationships with UBS in Switzerland that had not been disclosed for French tax purposes.

One of the clients – a French national living in Switzerland – appealed against disclosure on grounds that the evidence was based on a list of 600 client names provided to the French tax authorities by a former marketing agent for UBS in France in 2010. Administrative requests based on improperly gathered evidence, it was argued, were invalid under the Swiss Administrative Tax Assistance Act of 2013.

In 2015, the Swiss Federal Administrative Court accepted the appellant's arguments, ruling that the request infringed the principles of good faith implicit in the double taxation treaty between Switzerland and France. It ordered the SFTA not to comply with the French request. The SFTA appealed to the Swiss Supreme Court.

The Supreme Court stated that the France-Switzerland double tax treaty should be interpreted strictly and that there was no basis for refusing the international request for assistance. The bank data at issue had been “stolen” in France. It did not involve bank employees in Switzerland and the court therefore had to disregard the Swiss Administrative Tax Assistance Act.

10 March 2017, the Swiss parliament approved an exemption from withholding tax for some intragroup interest payments. The amended regulations, which are intended to encourage multinational groups established in Switzerland to carry out targeted financing activities in Switzerland rather than abroad, will enter into force 1 April.

Under the existing system, a Swiss withholding tax of 35% is levied on certain investment income, such as interest on bonds and money market funds. Swiss investors can claim back the withholding tax by declaring the relevant income, but foreign investors can generally only claim back part of the withholding.

The general scope of the new law is to exempt withholding tax on intragroup interest payments in all cases where a Swiss group company provides a guarantee for a bond of a foreign group company belonging to the same group. The exemption is available to companies whose annual accounts are fully consolidated into the consolidated financial statements, or partially consolidated, such as in respect of joint ventures.

The Federal Tax Administration (FTA) said, in the explanatory statement, that if the amount transferred exceeds the equity of the foreign issuer, all amounts transferred in Switzerland would be subject to withholding tax. It said the reform would increase the attractiveness of the Swiss financial market and promote the establishment of headquarter activities.

21 March 2017, Switzerland and Pakistan signed a new tax treaty, which will replace the countries’ existing tax treaty and amend the provisions on the taxation of service fees and capital gains resulting from the sale of qualifying participations. The agreement must be ratified by both countries and is not yet in force.

The new treaty also contains an arbitration clause, a provision on the exchange of information, and an anti-abuse provision meeting the minimum standards of the OECD/G20 base erosion profit shifting (BEPS) project.

2 March 2017, Switzerland’s Federal Department of Finance (FDF) announced it had begun work on a new corporate tax reform proposal, which it has named “Tax Proposal 17”. The move followed the rejection of its Corporate Tax Reform III proposal by popular referendum in February.

The aim of the corporate tax reform proposal is to replace Switzerland’s existing preferential tax regimes in line with the latest international tax standards, while seeking to maintain the attractiveness and the competitiveness of Switzerland as a business location.

The rejected Corporate Tax Reform III would have reduced the headline corporate tax rate applicable to all companies and introduced a patent box regime, an R&D super deduction, a notional interest deduction on surplus equity, and tax-neutral treatment of built-in gains upon the relocation of a company to Switzerland with a corresponding step-up in tax basis.

Given the necessity of swift implementation, the timetable for Tax Proposal 17 is short. The FDF aims to submit the new proposal to the Federal Council in June for decision.

20 March 2017, UBS is set to stand trial in France for allegedly assisting clients to evade taxes in France after negotiations between the Swiss bank group and the French prosecutor broke down over the size of the proposed €1.1 billion fine. No date has been set for the trial.

UBS is accused of illicitly soliciting clients on French territory and laundering the proceeds of tax fraud. Last year the French authorities approved a civil settlement procedure requiring that fines be based on the advantage derived from the wrongdoing.

It is understood that UBS was seeking to settle the French investigation for less than the €300 million it paid to resolve a similar case in Germany. The French financial prosecutor sought €1.1 billion, the same amount as the bond posted by UBS in 2014 to cover potential penalties.

“UBS has made clear that the bank disagrees with the allegations, assumptions and legal interpretations being made,” the bank said in a statement. “We will continue to strongly defend ourselves and look forward to a fair proceeding.”

According to the French prosecutor's office (PNF), UBS holds fraudulent money worth around €9.76 billion on behalf of French nationals. In 2009, UBS paid $780 million to avoid prosecution in the US after admitting it had helped thousands of US clients to evade US taxes.

8 March 17, the UK government announced a 25% overseas transfer charge on certain transfers from a UK-registered pension scheme to a qualifying recognised overseas pension scheme (QROPS) and transfers of UK tax-relieved funds to a QROPS made on or after 9 March.

The charge will not apply where the member is resident in the same country as the country in which the QROPS receiving the transfer payment is established or the member is resident in within the European Economic Area (EEA) and the QROPS is established in a country within the EEA.

If the charge is not payable on the original transfer, it can become payable if the member the member ceases to be resident in the same country in which the receiving scheme is established within five full tax years of the transfer. Likewise, the tax charge can be reclaimed if it was paid on the original transfer, but the member's circumstances change within five full tax years.

The charge will also not apply if the QROPS is: set up by an international organisation for the purpose of providing benefits for or in respect of past service as an employee of the organisation and the member is an employee of that international organisation; an overseas public service pension scheme and the member is an employee of an employer that participates in the scheme; and the QROPS is an occupational pension scheme and the member is an employee of a sponsoring employee under the scheme.

Members will be jointly and severally liable for the charge with the scheme administrator, and reportable in the member's self-assessment tax return. QROPS accepting such transfers will need to update their undertakings to HMRC by 13 April 2017 if they wish to continue to be a QROPS.

In future 100% of a foreign pension or lump sum paid to a UK-resident individual will be taxable to the same extent as if it was paid by a registered pension scheme. Temporary non-residence rules will also impose tax charges on foreign pensions received by individuals resident outside the UK for less than 10 tax years.

The Budget contained two minor amendments to the changes to the taxation of non-doms, which were first announced by George Osborne in 2015. From 6 April 2017. If the value of a shareholding in a non-UK company that is attributable to underlying UK residential property is less than 5% – it was previously 1% – of the total value of the company, the new rules bringing such companies within the scope of IHT will not apply.

In the two tax years following 6 April 2017 non-doms will have an opportunity to segregate any offshore cash funds that currently represent a mixture of capital, income and gains into these component parts. Previously this was only to apply to mixed funds containing income and capital gains arising after 6 April 2008.

Chancellor Phillip Hammond said £140 billion had been raised in tackling tax avoidance, evasion and non-compliance since 2010. He reaffirmed the government’s commitment to introducing penalties for “enablers” of tax avoidance schemes that are later defeated by HMRC, which will come into force in July 2017. The taxpayers' “reasonable care” defence of having relied on non-independent professional advice will also be removed. He further announced new rules to prevent promoters of tax avoidance schemes circumventing disclosure rules by reorganising their businesses – either by sharing control of a promoting business or putting a person or persons between themselves and the promoting business.

Following a review by the Public Accounts Committee, HMRC is to issue guidance to employers that make payments for “image rights” under separate contractual arrangements to employment income to improve the clarity of the existing rules.

15 March 2017, the UK Supreme Court reaffirmed the general principle of testamentary freedom in unanimously setting aside a Court of Appeal decision to award an estranged daughter about a third of her late mother’s £486,000 estate, which had all been explicitly left to three animal charities.

In Ilott v The Blue Cross and others 2017 UKSC 17, Heather Ilott's mother, Melita Jackson, drafted her will and a letter of wishes, to ensure that Ilott would not receive anything from her estate. The two had been estranged for many years and Jackson had provided no financial support after their estrangement.

Following Jackson's death in 2004, Ilott made a claim against her mother's estate under the Inheritance (Provision for Family and Dependants) Act 1975, which allows a court to grant a deceased person's children an award for 'reasonable financial provision' from the estate. Ilott's claim was opposed by the three charities named in her will.

At first instance in 2007, the County court awarded her £50,000 on the grounds that her mother had acted in an “unreasonable, capricious and harsh” way. Ilott appealed this amount as too low, and there followed two further hearings in which the award was first struck out entirely and then reinstated.

In July 2015, the case reached the Court of Appeal, which decided that sum was insufficient and increased it to £143,000 to buy a property with a cash sum of £20,000 to provide additional income. It overturned the first instance decision on grounds that the district judge had limited the award unfairly by reference to Ilott’s limited means and living expenses, and that he had failed properly to investigate the effect of the award on her benefits entitlement. The three charities appealed, arguing that Ilott's award should be reduced to the original £50,000.

The Supreme Court unanimously set aside the appeal court’s decision, holding that the district judge had not made any of the errors identified. He had considered all the factors set out in s3 of the 1975 Act and had been entitled to take into account the nature of the relationship between Jackson and Ilott. Further, he had addressed the impact on Ilott's benefits, and decided that much of the £50,000 award could have been spent on essential household improvements, which fell within the provision of maintenance of daily living, and would have avoided Ilott retaining sufficient capital to disqualify her from means-tested state benefits.

The Supreme Court was critical of the 1975 Act's wording, noting that it gives no guidance as to the weight of the factors to be taken into account in deciding whether an adult child is deserving or undeserving of reasonable maintenance. The judgment stated: 'It may be less obvious, but is also true, that the circumstances of the relationship between the deceased and the claimant may affect what is the just order to make. Sometimes the relationship will have been such that the only reasonable provision is the maximum which the estate can afford; in other situations, the provision which it is reasonable to make will, because of the distance of the relationship, or perhaps because of the conduct of one or other of the parties, be to meet only part of the needs of the claimant.”

28 February 2017, the US Treasury Department announced that a Model 1 intergovernmental agreement (IGA) and understanding signed by the US and Saudi Arabia entered into force on February 28. Saudi Arabia has been treated as if it has had an IGA in effect since 30 June 2014.

The Saudi Arabian cabinet formally approved the IGA, which was signed last November, on 6 February. It requires financial institutions to report US Reportable Accounts to the local competent authority, the Saudi Arabian General Authority for Zakat and Tax (GAZT).

Under the IGA, Saudi-based financial institutions will be treated as compliant with FATCA and will not be subject to a 30% withholding tax on US-source income and gross proceeds, provided that they meet the requirements set out in the IGA and implementing regulations.

2 March 2017, US law enforcement officials searched the headquarters of heavy machine manufacturer Caterpillar and two other facilities as part of a tax investigation linked to the firm’s Swiss parts subsidiary, Caterpillar SARL, in Geneva.

In a 2014 report the US Senate permanent subcommittee on investigations said that Caterpillar had adopted “a tax strategy that shifted billions of dollars in profits away from the United States and into Switzerland, where Caterpillar had negotiated an effective corporate tax rate of 4 to 6%.” It claimed that Caterpillar deferred or avoided paying $2.4 billion in US taxes between 2000 and 2012 by shifting more than $8 billion of parts sales to Switzerland.

According to the report, Caterpillar bought parts and resold them to dealers overseas, assigning the profits to the Swiss subsidiary and lowering its US taxes. Caterpillar had no parts warehouses in Switzerland, but 85% or more of profits from Caterpillar's parts sales outside the US were recorded as coming from SARL. By 2008, Caterpillar had shifted 45% of global revenues and 43% of its profits to the Swiss operation, which employed less than one-half of 1% of Caterpillar’s 118,500 employees worldwide.

Caterpillar said, in its 2016 annual report, that it was "vigorously contesting" the IRS demand. "We believe that the relevant transactions complied with applicable tax laws and did not violate judicial doctrines," it stated.

The European Union and OECD have both demanded an end to Switzerland’s “harmful” tax practices but a proposed package of corporate tax reforms were rejected by Swiss voters on 12 February.

3 March 2017, the US Court of Federal Claims rejected a claim from an Irish citizen that US$5.22 million in US tax withheld on gambling winnings of US$17.4 million connected to a 2012 backgammon game in the US should be refunded under the 1997 US-Ireland double tax avoidance treaty.

In John P McManus v The United States RCFC 56, the plaintiff, who claimed citizenship in Ireland but lived in Switzerland, argued that he was entitled to a refund under the US-Ireland tax treaty because, at the time he paid the Irish domicile levy and was therefore a resident of Ireland for the purposes of Article 22 of the tax treaty and exempt from the tax on gambling proceeds.

Introduced in 2010, the domicile levy applies to Irish-domiciled individuals who own property in Ireland valued at more than €5 million, whose worldwide income exceeds €1 million and whose liability for Irish income tax in the relevant tax year was less than €200,000.

Citing Article 4 of the tax treaty, McManus argued that he was a “resident” of Ireland in 2012 because he was “liable to tax” in Ireland “by reason of his domicile”. He also argued that the domicile levy fell into the definition of a “full” and “comprehensive” under the OECD’s Model Tax Convention.

Based on a letter received by the Irish tax authority, Judge Nancy Firestone agreed with the US government’s view that payment of the domicile levy was not in itself sufficient to show that an individual was “resident“ in Ireland for tax purposes. The letter stated, “Payment of the domicile levy does not entitle John P McManus to receive treaty benefits in accordance with the provisions in the Ireland-USA Double Taxation Convention. The domicile levy is not a covered tax for the purposes of this Convention.“

McManus further argued that the US tax on gambling winnings violated the treaty’s non-discrimination clauses, which he argued apply to nationals of the US and Ireland regardless of residence status under the agreement. However, judge Firestone said the plaintiff’s claim in this regard was barred under the Federal Circuit’s doctrine of “substantial variance” because argument had not been presented to the IRS prior to the court hearing.