Owen, Christopher: Global Survey - June 2017

  • Australia Budget targets foreign owners of residential property
    • 9 May 2017, the Australian government announced, as part of the 2017 Budget, that it is to introduce a charge on foreign owners of residential property where the property is not occupied or genuinely available on the rental market for at least six months per year.


      Termed as the “annual charge on foreign owners of underutilised residential property”, the new charge will be levied annually and will be equivalent to the relevant foreign investment application fee imposed on the property at the time it was acquired by the foreign investor – at least AUD5,000. A property is considered to be “used” where it is rented out, used as a residence or otherwise occupied.


      This measure is intended to encourage foreign owners of residential property to make their properties available for rent where they are not used as a residence and so increase the number of dwellings available for Australians to live in. It applies to foreign persons who make a foreign investment application for residential property as of 9 May 2017.


      The government is also introducing reforms to reduce the avoidance of capital gains tax in Australia by foreign investors. It will stop foreign and temporary tax residents from claiming the main residence capital gains tax exemption when they sell property in Australia as of 9 May. Foreign and temporary tax residents who hold existing property can continue to claim the exemption until 30 June 2019.


      The foreign resident capital gains tax withholding regime is strengthened by increasing the withholding rate from 10% to 12.5%, as well as reducing the threshold from AUD2 million to AUD750,000. These changes will apply from 1 July 2017.


      The Multinational Anti-Avoidance Law will be extended to ensure corporate structures involving foreign partnerships and foreign trusts will now be subject to the law.

  • BVI FSC given discretion over publication of enforcement actions
    • 1 May 2017, the Financial Services Commission (Amendment) Act 2017 was brought into force to provide the Financial Services Commission (FSC) with the discretion to determine the types of cases where publication of an enforcement action may be restricted. The Amendment is deemed to have come into force on 1 January 2017.


      The FSC would only apply its discretion where an affected licensee or other person makes an application to it seeking confidentiality. If the FSC considers that the nature of the breach or offence giving rise to the enforcement action does not warrant publication, it may elect not to publish the name on the enforcement page of its website or elsewhere.


      If the FSC does decide to publish an enforcement action it will also have the ability to determine the appropriate length of time and specify any conditions it requires to be satisfied before publication is terminated or removed.

  • Cayman Trusts Law revision gazetted  
    • 31 May 2017, the Cayman Islands Trusts Law (2017 Revision), which incorporates the Trusts (Amendment) Law 2016, was gazetted. It is the first full revision of the Cayman Islands Trusts Law since 2011.


      Along with provisions addressing certain powers and the appointment and discharge of trustees, the Amendment Law introduced a number of retrospective provisions with the objective of correcting technical issues in the original legislation.

  • ECJ grants the right to challenge tax information request  

      16 May 2017, the Court of Justice of the European Union (ECJ) held that a taxpayer must be able to argue against the legality of an information order and therefore the court in its home state must also have the power to review the legality of the request.


      In Berlioz Investment Fund SA v Directeur de l'administration des contributions directes (C-682/15), the French tax administration was conducting a review of the tax affairs of French company Cofima. In 2014 it sent a request for information to the Luxembourg tax administration concerning Cofima’s Luxembourg parent company, Berlioz Investment Fund.


      In response to the pursuant request by Luxembourg tax authorities, Berlioz provided all the information sought, except for the names and addresses of its members, the amount of capital held by each member and the percentage of share capital held by each member. This information, it argued, was not foreseeably relevant to the checks being carried out by the French tax administration.


      In 2015, the Luxembourg tax administration imposed an administrative penalty of €250,000. Berlioz then applied to the Luxembourg administrative courts for cancellation of the fine and annulment of the information order. The Administrative Tribunal of Luxembourg reduced the penalty to €150,000 but declined to determine whether the information order was well founded.


      Berlioz appealed, arguing that its right to an effective judicial remedy, as guaranteed by the Charter of Fundamental Rights of the EU, had been infringed. The Administrative Court of Luxembourg referred the matter to the ECJ for a determination, in particular, as to whether it could examine the validity of the information order.


      The ECJ found that the Charter of Fundamental Rights of the EU was applicable because, by imposing a fine on Berlioz, the Luxembourg tax authorities had implemented the EU directive on administrative cooperation in the field of taxation. The national court hearing an action against a fine imposed on a person for failure to comply with an information order must therefore be able to examine the legality of that order to comply with the right to an effective judicial remedy enshrined in the Charter.


      The Court further noted that such an information order could only be lawful if the requested information was “foreseeably relevant” for the purposes of the tax investigation. Member States were not at liberty to engage in “fishing expeditions” or to request information that was unlikely to be relevant to the tax affairs of the taxpayer concerned. The person to whom an information order was addressed must be entitled to rely in court on the non-compliance of the request for information with the directive and, therefore, on the resulting illegality of the information order.


      The Court added that the authorities of the requested Member State must not confine themselves to a brief and formal verification of the regularity of the request for information but must also satisfy themselves that the information is foreseeably relevant for the purposes of the tax investigation, having regard to the identity of the taxpayer under investigation and the purpose of that investigation.


      Likewise, the ECJ considered that the court in the requested State must be able to review the legality of the request and must have access to the request for information and to any additional information that the authorities of the requested State may have been able to obtain from the authorities of the requesting State. The person to whom the information order is addressed does not have a right of access to the whole of that request but, in order to be given a fair hearing, must have access to key information in the request for information – the identity of the taxpayer concerned and the tax purpose for which the information is sought. The court may provide that person with certain other information if it considers that the key information is not sufficient.

  • EU adopts directive on hybrid mismatches with third countries
    • 29 May 2017, the Council of the European Union adopted a directive to prevent corporate groups from escaping tax by exploiting the mismatches between Member States' and non-EU countries' tax systems (hybrid mismatches). The agreement completes the Anti-Tax Avoidance Directive (ATAD), which ensures that binding and robust anti-abuse measures are applied throughout the Single Market.


      “Our aim here is to tackle one of the main practices that multinational companies have devised to reduce their tax bills”, said Edward Scicluna, minister for finance of Malta, which currently holds the Council presidency. “The directive adds to the rules we adopted last year to tackle the most common forms of tax avoidance. It will also ensure implementation of the OECD's recommendations.”


      The agreement will ensure that companies cannot avoid taxation by abusing mismatches between countries' tax treatment of certain income or entities, even if the mismatches involve third countries. The new rules, which were endorsed by EU ministers in February and subsequently by the European Parliament, will come into force on 1 January 2020, with a longer phasing-in period of 2022 for one provision (Art. 9a).


      Since January 2017, Member States have been obliged to automatically exchange information on financial accounts, as an important step against offshore tax evasion. From July this year, similar transparency rules will apply for tax rulings, while multinationals will have to provide country-by-country reports to tax authorities by the end of the year.


      The Council and the European Parliament are currently negotiating other important proposals to prevent tax abuse, including public country-by-country reporting, stronger Anti-Money Laundering provisions and tighter good governance rules for EU funds.


      In the coming weeks, the Commission will bring forward another new transparency initiative, with a proposal for intermediaries to report cross-border tax planning schemes.

  • EU agrees to mandatory binding arbitration of tax disputes  

      23 May 2017, the EU Economic and Financial Affairs Council (ECOFIN) agreed on a new system for resolving double taxation disputes between Member States and discussed a proposal for a common corporate tax base (CCTB) in the EU.


      Currently taxpayers are permitted to initiate a mutual agreement procedure and Member States are given two years to reach an agreement to resolve a dispute. Under the draft directive, if the mutual agreement procedure fails, there will be a mandatory arbitration mechanism, with clear time limits and an obligation to reach a decision that is binding on the Member States.


      The arbitration will be conducted by an advisory commission, comprised of three to five independent arbitrators and up to two arbitrators appointed by each Member State involved. The arbitrators may not be employees of tax advisory companies or have given tax advice on a professional basis.


      The compromise text allows States to exclude disputes that do not involve double taxation on a case-by-case basis. The agreement also allows for the possibility of setting up a more permanent structure, called a standing committee, to deal with dispute resolution cases if Member States agree.


      The new provisions will apply to complaints submitted after 30 June 2019 on questions relating to tax years beginning on or after 1 January 2018. Member States may, however, agree to apply the directive to complaints related to earlier tax years.


      "This directive is an important part of our plan for strengthening tax certainty and improving the business environment in Europe", said Edward Scicluna, Minister for Finance of Malta, which currently holds the Council presidency.


      The CCTB proposal, which is aimed at reducing the administrative burden of multinational companies, is the first step of an envisaged two-step corporate tax reform. Revamping an earlier 2011 proposal, it establishes a single rulebook for calculating companies' corporate tax liability.


      The presidency confirmed its intention to continue discussions on new elements of the proposal, and that an appropriate degree of flexibility should be provided for. A separate proposal on tax consolidation (CCCTB) will be considered without delay once the CCTB rulebook has been agreed.


      The Council will require unanimity to adopt the directive, after consulting the European Parliament

  • EU Court rules on French surtax on distribution of dividends from EU subsidiaries  

      17 May 2017, the Court of Justice of the European Union (CJEU) ruled that, in the case of dividends distributed by a French company from a redistribution of dividends received from its EU subsidiaries, France’s 3% surtax on profit distributions violated the EU parent-subsidiary directive (PSD) because it resulted in double taxation.


      The case, C-365/316, arose from a dispute between the French Ministre des Finances et des Comptes public and the Association Française des Entreprises Privées (AFEP), joined by 17 undertakings. At issue was the compatibility of 235 ter ZCA of the French Code Général des Impôts with article 4 of the PSD.


      The surtax, which is levied on the distributing company at the time of the distribution and calculated on the gross amount of the dividend, was introduced in 2012. However there is no mechanism under French tax law to avoid a multiple levying of the surtax where dividends are distributed up a chain of companies. In June 2016, the French Administrative Supreme Court requested a preliminary ruling from the CJEU on whether the surtax was compatible with the PSD.


      The CJEU found that, given the 5% charge for deemed taxable expenses under the French participation exemption regime, the addition of the 3% surtax on the same dividends exceeded the maximum ceiling of 5% taxation permitted under the PSD. The court held that, under these circumstances, the 3% surtax created double taxation at the level of the parent company, which is in breach of the PSD.


      The ECJ also noted that it was irrelevant whether or not the tax measure was classified as corporation tax because article 4 of the PSD did not make its application subject to any tax in particular. Moreover, the distinction that the taxable event was the receipt of profits distributed by a subsidiary to its parent company or the redistribution was irrelevant because article 4 of the PSD provides that the Member State of the parent company and the Member State of the permanent establishment are to “refrain from taxing such profits”.

  • Google pays €306 million to settle tax dispute In Italy
    • 4 May 2017, Google announced it had agreed to pay an additional €306 million to settle a dispute with Agenzia delle Entrate, Italy’s tax agency, over the tax it had paid for the years between 2002 and 2015. Google was under investigation for booking income generated in Italy through a unit based in Ireland.


      Agenzia delle Entrate said the bulk of the settlement related to an investigation by the tax police and prosecutors in Milan into the US tech firm’s tax position between 2009 and 2013. It also included small amounts relating to 2014 and 2015, as well as an older dispute dating back to the years between 2002 and 2006. According to company filings, Google paid €2.2 million in Italian taxes in 2014.


      The Italian tax office said the amount that Google would pay was referenced to both the Google Italy and Google Ireland units. It also said a process would be initiated to ensure that Google paid the correct taxation in Italy in the future.


      The value of Google settlement was just below the €318 million paid by Apple in December 2015. Prosecutors in Milan have also launched a formal investigation into Amazon to determine whether the US-based online retailer underpaid €130 million in tax for a five-year period ending in 2015.


      Google agreed to pay £130 million in back taxes to the UK in 2016 but it remains in dispute with other European tax agencies. Its office in France and Spain were both raided by tax inspectors last year.

  • Lebanon and Kuwait sign the Multilateral Convention
    • 5 and 12 May 2017, Kuwait and Lebanon signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters respectively. Their signatures bring the total number to of signatories to the Convention to 111.


      The Convention provides for all forms of administrative assistance in tax matters: exchange of information on request, spontaneous exchange, automatic exchange, tax examinations abroad, simultaneous tax examinations and assistance in tax collection.


      It also serves as the primary instrument for implementing the Standard for Automatic Exchange of Financial Account Information in Tax Matters developed by the OECD and G20 countries. The Convention will enable both countries to fulfil their commitment to begin the first of such exchanges by 2018.


      The Convention can further be used to implement the transparency measures of the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project such as the automatic exchange of Country-by-Country reports under Action 13 as well as the sharing of rulings under Action 5 of the BEPS Project. The Convention is also a powerful tool in the fight against illicit financial flows.


      The Lebanon and Turkey have also signed the CRS Multilateral Competent Authority Agreement‎ (CRS MCAA), re-confirming their commitments to implement the automatic exchange of financial account information under the OECD/G20 Common Reporting Standard (CRS) in time to commence exchanges in 2018. Their signatures bring the total number of signatories to 89.


      On 29 May, Bahamas Minister of Finance Kevin Turnquest sent a letter to the OECD to formally communicate the government’s decision to sign the CRS MCAA. Turnquest said: “Front and centre in our considerations was the need to mitigate any ‘blacklist’. That would be devastating to our financial services industry. We’re prepared to do whatever’s required to demonstrate to our peers that we’re a well-regulated and compliant jurisdiction.”


      "We very much welcome that The Bahamas has now officially expressed a strong interest in joining the Convention. Signing and ratifying the Convention will be a very significant step forward in implementing its commitment to tax transparency and effective exchange of information, in particular under the OECD/G20 Common Reporting Standard", said Pascal Saint-Amans, Director of the OECD’s Centre for Tax Policy and Administration.

  • OECD launches facility to disclose CRS avoidance schemes
    • 5 May 2017, the OECD launched a disclosure facility on its Automatic Exchange Portal to allow interested parties to notify any potential schemes to circumvent its new Common Reporting Standard (CRS).


      The facility to disclose CRS avoidance schemes is part of a three-step process that the OECD has implemented to address schemes that purport to avoid reporting under the CRS. As part of this process, all actual or perceived loopholes that are identified are systematically analysed in order to decide on appropriate courses of action.


      There is also a broader scope of financial institutions required to report financial information and the scope of account holders subject to reporting. It also requires that jurisdictions, as part of their effective implementation of the CRS, put in place anti-abuse rules to prevent any practices intended to circumvent the reporting and due diligence procedures.


      The three-step process complements the ongoing peer reviews carried out by the Global Forum on Tax Transparency and Exchange of Information for Tax Purposes to ensure the effective implementation of the CRS in all jurisdictions.


      The OECD also reported that over 1,800 bilateral relationships are now in place around the world, most of them based on the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (CRS MCAA), with the additional of 500 bilateral automatic exchange relationships involving over 60 jurisdictions that are committed to exchanging information automatically pursuant to the CRS, starting in 2017.


      A further activation round is scheduled to take place in July 2017 which will allow the remaining jurisdictions to nominate the partners with which they will undertake automatic exchanges. The next update on the latest bilateral exchange relationships will be published before the summer break, with updates to follow on a periodic basis. In total, 100 jurisdictions have agreed to start automatically exchanging financial account information in September 2017 and 2018, under the CRS.

  • OECD releases automatic exchange relationships for CbC reporting
    • 4 May 2017, the OECD announced that more than 700 automatic exchange relationships have now been established among jurisdictions committed to exchanging Country-by-Country (CbC) Reports in accordance with Action 13 of the Base Erosion and Profit Shifting (BEPS) initiative as of 2018, including those between EU Member States under EU Council Directive 2016/881/EU.


      The relationships were established through activations of automatic exchange relationships under the Multilateral Competent Authority Agreement on the Exchange of CbC Reports (CbC MCAA). Further jurisdictions will nominate partners in the coming months.


      Some jurisdictions also continue to work towards agreeing bilateral competent authority agreements for the automatic exchange of CbC Reports with specific partners under double tax treaties or Tax Information Exchange Agreements.


      The full list of automatic exchange relationships that are now in place is available, together with an update on the implementation of the domestic legal framework for CbC Reporting in jurisdictions; on jurisdictions that will permit surrogate filing and voluntary parent surrogate filing; and on steps that are being taken to address concerns about local filing being applied before the end of 2017.

  • OECD switches four jurisdictions to CRS reporting list for 2018
    • 15 May 2017, the OECD secretariat withdrew Barbados, Curacao, Niue and Trinidad and Tobago from its list of reportable jurisdictions under the OECD Common Reporting Standard (CRS) with a reporting deadline of 31 May. They have all been moved to the list of reportable jurisdictions for 2018.


      The following are now the reportable jurisdictions for the 2017 reporting year, in respect of 2016 reportable accounts: Austria, Argentina, Belgium, Bulgaria, Colombia, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Greenland, Guernsey, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Jersey, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mexico, Montserrat, Netherlands, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovakia, Slovenia, South Africa, Spain, Sweden, and the UK.

  • Portugal legislates to prohibit bearer shares
    • 3 May 2017, the Portuguese Parliament approved Law 15/2017, which introduced several amendments to the Securities Code and to the Corporate Code, including forbidding the issue and transfer of bearer shares.


      As of 4 May, new shares of Portuguese companies may no longer be issued as bearer shares. All existent bearer shares are to be converted into nominative shares within a six-month interim period.


      After 4 November 2017, it will be no longer possible to transfer bearer shares and holders of bearer shares will not be allowed to participate in the distribution of dividends until such shares have been converted into nominative shares.

  • Proposed changes to Dutch dividend withholding tax regime
    • 16 May 2017, the Dutch Ministry of Finance published a draft Bill for public consultation on proposals to expand the exemption of dividend withholding tax (DWT) to corporate shareholders resident in tax treaty partner countries. The new rules are due to take effect from 1 January 2018.


      The withholding tax exemption is to be expanded for dividends distributed by Dutch companies where their non-resident shareholder is an entity that holds an interest of at least 5% in the Dutch company and resides in any jurisdiction that has concluded a tax treaty including a dividend clause with the Netherlands. It currently only applies if the shareholder is a tax resident in a member state of the European Economic Area (EEA).


      The new DWT exemptions will become subject to a revised anti-abuse test that is in line with the general anti-abuse provision in the EU Parent-Subsidiary Directive. Exemptions will not apply – and distributions will therefore be subject to DWT under domestic law – if:


      • The shares or membership rights are held with the main purpose, or one of the main purposes, to avoid taxation due by another individual or entity; and
      • The holding of the shares or membership rights is part of an artificial arrangement or transaction (or a series of artificial arrangements or composite of transactions), which will be the case if there are no valid business reasons reflecting economic reality.


      Valid business reasons are deemed to be present if the shareholding or membership interest is functionally attributable to a business enterprise at the level of the shareholder or member.


      In the case of a foreign intermediate holding company, valid business reasons will be deemed to be present if the foreign intermediate holding company has “relevant substance”. This includes additional requirements that the holding company incurs salary costs of at least €100,000 in relation to its intermediary holding functions, and that the holding company has office space at its disposal, for at least 24 months, that is used to carry out its intermediary holding functions.


      Profit distributions on qualifying membership rights in cooperatives will be subject to DWT if the actual activities of the cooperative usually consist for more than 70% of holding participations or of group financing activities.

  • Singapore fines Credit Suisse and UOB over 1MDB-related transactions
    • 30 May 2017, the Monetary Authority of Singapore (MAS) imposed financial penalties on Swiss bank Credit Suisse and Singapore-based United Overseas Bank (UOB) of S$700,000 and S$900,000 respectively for multiple breaches of anti-money laundering (AML) requirements and control lapses.


      MAS said it had completed a two-year review of financial institutions involved in transactions related to Malaysia's 1MDB state development fund, which had revealed weaknesses in conducting due diligence on customers and inadequate scrutiny of customers’ transactions and activities. It did not however detect pervasive control weaknesses within these banks.


      MAS directed the banks to appoint independent parties to assess and confirm that rectification measures have been effectively implemented. It has also instructed the management of Credit Suisse and UOB to take disciplinary measures, where appropriate, against errant staff.


      MAS said its supervisory review had uncovered a complex web of transactions involving numerous shell companies and individuals operating in multiple jurisdictions, including the US, Switzerland, Hong Kong, Luxembourg and Malaysia.


      As a result of the investigation, MAS has shut down two merchant banks, BSI Bank and Falcon Bank, for egregious failures of AML controls and improper conduct by senior management. Financial penalties of S$29.1 million in aggregate have been imposed on eight banks  – BSI Bank, Falcon Bank, DBS, UBS, Standard Chartered Bank, Coutts, Credit Suisse and UOB – for various breaches of AML requirements.


      Prohibition Orders (POs), ranging from 10 years to lifetime, have also been issued against four former employees of financial institutions implicated in 1MDB-related transactions. MAS has further notifed three current and former employees of its intention to issue POs against them, ranging from three to six years.


      MAS Managing Director Ravi Menon said: “MAS has enhanced its AML surveillance and taken unprecedented enforcement actions against errant institutions and individuals. Financial institutions have increased their risk awareness and strengthened their AML controls. Our financial industry is in a better position today than it was when the abuses stemming from the 1MDB-related flows took place. The price for keeping our financial centre clean as it grows in size and inter-connectedness is unstinting vigilance.”

  • UK Court refuses refund over Swiss Tax Cooperation Agreement payment  
    • 9 May 2017, the High Court ruled that HM Revenue & Customs did not have to refund £57,865 to a UK taxpayer who paid too much tax under the Swiss/UK Tax Cooperation Agreement.


      In Karin Vrang v Commissioners for Her Majesty's Revenue and Customs [2017] EWHC 1055, Vrang was Swedish banker who worked for Credit Suisse in Switzerland between 1988 and 2005, before moving to London. She had amassed an amount of money in several bank accounts in Switzerland, which she intended for use when she would return to Sweden.


      In 2012, the bank alerted her to the need to make a voluntary disclosure to HMRC under the Swiss/UK Tax Cooperation Agreement, which provided for UK resident taxpayers with bank accounts in Switzerland to: authorise the Swiss paying agent to provide details of the Swiss assets to HMRC; or be subject to a one-off payment on 31 May 2013 to clear past unpaid tax liabilities and/or to be subject to a withholding tax between 27% and 48% annually on income and gains for the future from 1 January 2013.


      Vrang failed to respond and a lump sum of £57,865 was duly extracted and paid over to HMRC in 2013. She sought the return of the bulk of the money from HMRC, claiming that only an amount between £1,000 and £7,000 was owed. She said that as a non-dom, she would not have owed any UK tax, except for one year when the income was £212 above a £2,000 threshold.


      HMRC refused the request because the Agreement only provided for repayment where the amount was “wrongly levied” or where HMRC exercised its discretion in “circumstances where keeping the charge in place would cause significant hardship and result in a situation which a court would view as grossly unfair to the individual paying the charge, as a result of actions entirely beyond that person’s control.” It argued that the sum had not been wrongly levied because the extraction from the claimant’s accounts had followed the letter of the Agreement and hardship was not established.


      The judicial review sought to challenge HMRC’s refusal on the grounds that there was no parliamentary authority for the levying of the sum or, if there was legislative authority, that it had been misconstrued in a number of respects by HMRC and that HMRC has not exercised its powers, notably its discretionary powers, lawfully.


      Ouseley J in the Administrative Court held that the payment was not a tax levied by HMRC but a payment from a cooperating authority under an international agreement. The phrase “wrongly levied” in s. 15(3) of the Agreement was “clearly confined to an error in the interpretation or application of the Agreement by the paying agent or the Swiss Tax Authority” and no such error had occurred.


      In respect of the final ground, the Court expressed “considerable sympathy” for the claimant, but held that HMRC had formulated lawfully and rationally a policy on refunds whereby it would exercise its discretion in certain, limited circumstances, which did not apply to the claimant. “It was her fault that the levy was taken because she had failed to deal with perfectly clear correspondence,” said the Court. Vrang said she would seek leave to appeal the judgment.

  • UK Criminal Finances Bill receives Royal Assent  

      27 April 2017, the UK Criminal Finances Act received Royal Assent. It gives law enforcement agencies and partners, further capabilities and powers to recover the proceeds of crime, tackle money laundering, tax evasion and corruption, and combat the financing of terrorism. The government is expected to take all necessary steps to make the new offence effective from September 2017.


      The Act creates “unexplained wealth orders”, which can require those suspected of serious crime or corruption to explain the sources of their wealth, and enables the seizure and forfeiture of proceeds of crime and terrorist money stored in bank accounts, as well as certain personal or moveable items.


      The Act also creates new criminal offences for corporations who fail to prevent their staff from facilitating tax evasion. If an ”associated person” – an employee, agent, contractor or subsidiary – facilitates the evasion of tax of a third party while acting on behalf of a business, then the business – defined as a ”relevant body” – would be at risk of a criminal conviction and unlimited fine if it cannot evidence that it had “reasonable” preventative procedures in place.


      The legislation defines a relevant body as “a body corporate or partnership (wherever incorporated or formed).” Businesses are expected to put in place procedures that are proportionate to the risks they face, using HMRC’s six principles as a guide: risk assessment; proportionality of risk-based prevention procedures; top level commitment; due diligence; communication; and monitoring and review.


      The Act also provides legal protections for the sharing of information between regulated companies and extends the time period granted to law enforcement agencies to investigate suspicious transactions.


      The Act further extends disclosure orders to cover money laundering and terrorist finance investigations and extends the existing civil recovery regime in the Proceeds of Crime Act to allow for the recovery of the proceeds of gross human rights abuses or violations overseas.

  • UK High Court orders £453 million divorce payout
    • 12 May 2017, the High Court’s family division ordered a Russian-born billionaire to pay his estranged wife £453 million. The judgment was released after a private hearing last December. It is believed to be the highest divorce award ordered by a judge in Britain.


      The couple married in Moscow in 1993 before moving to London in the same year. Both were given indefinite leave to stay in the UK. The husband worked in London as an oil and gas trader. Nearly five years ago he sold his shares in a Russian company for $1.3 billion. The wife, who became a British citizen more than 15 years ago, brought up the couple’s two boys as well as helping to care for the husband’s child from his first marriage. Their two children are now grown up.


      The wife issued her divorce petition in England in October 2013. Her husband responded by issuing his own petition in Moscow and initially applied for the English proceedings to be stayed on grounds of forum non conveniens – he later withdrew the latter application and submitted to English jurisdiction.


      In AAZ v BBZ (2016 EWHC 3234 Fam), the wife's case was that the total net marital wealth in the case was £1.092 billion, including assets held in a Bermudian discretionary trust. She contended that the entire wealth was matrimonial and should be subject to the sharing principle. The husband gave evidence that the bulk of the assets identified belonged to a Panamanian company that was itself held within the Bermuda trust. However, the trustee of this trust was a Cyprus-registered company of which the husband was the sole director. Both the Panamanian and the Cypriot companies were joined in the court proceedings but neither gave any evidence.


      The husband claimed that under the “special contribution” principle, he should be allowed to keep the majority of the assets. He also claimed, without producing evidence, that he already owned substantial assets before the marriage; that the marriage in practice ended in 1999 because of the wife's adultery, despite their later reconciliation; and that the assets were not his but the trust's.


      Delivering his judgment, Haddon-Cave J said the husband had: “asserted in his statement of issues that he made a special or stellar contribution to the wealth creation which would justify a departure from a 50:50 division of the assets in his favour. However, save for explaining the difficulties of doing business in Russia and the legal problems he encountered with a large multi-national company in holding onto his Russian company shares, he did not explain in his statements precisely why he could be said to have made a ‘stellar’ contribution.”


      Haddon-Cave J said the husband had also not provided proof that he was wealthy before the marriage. The husband was not represented and had failed to attend any hearings, in breach of various orders. He had made a “sudden decision . . . to no longer contest proceedings” for reasons that were unclear.


      Granting the wife's claim, Haddon-Cave J described her as a “hands-on” mother who made an equal contribution to the 20-year marriage. He awarded her 41.5% of the “marital assets” of just over £1 billion. The court ordered that the couple’s identity be concealed.

  • US taxpayer pleads guilty to $1.3m oil royalties’ evasion
    • 26 May 2017, a Texas woman pleaded guilty to conspiring to defraud the US by using offshore accounts in Panama to conceal more than $1.3 million in royalty income that she earned from oil wells.


      According to information provided to the court, Joyce Meads admitted to filing false individual income tax returns from 1997 to 2009. She conspired with offshore promoters to disguise this income, setting up nominee companies in Delaware and Panama in the name of W.G. Holdings Corporation and transferring her interest in the oil wells to the nominee entity in Delaware.


      Her monthly royalty checks were issued to W.G. Holdings and sent to a Miami post office box where they were picked up, couriered to Panama and deposited into her nominee accounts. Meads repatriated funds by disguising them as scholarships or loans from W.G. Holdings to herself. She later transferred the funds to bank accounts in her own name or her mother’s name.


      Meads admitted that she caused a tax loss of more than $250,000. Two of the promoters who assisted Meads, Marc Harris of The Harris Organisation, Republic of Panama, and Boyce Griffin of Offshore Management Alliance Ltd., Republic of Panama, have also been convicted of conspiracy and other charges and were previously sentenced to prison.


      “For more than a decade, Joyce Meads attempted to conceal her income from the Internal Revenue Service (IRS) by assigning it to a nominee entity and stashing it offshore,” said Acting Deputy Assistant Attorney General Goldberg. “As today’s plea makes clear – the days of safely hiding your money offshore are over.”


      Meads faces a statutory maximum sentence of five years in prison, a period of supervised release, restitution and monetary penalties.

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