Amsterdam Conference 2020

Chairman: Milton Grundy
11-13 March

Meeting Summary
  • ATAD 2 and other News from Brussels – Timothy Lyons
    • The Commission’s programme includes the introduction of digital tax, a common corporate tax base, fraud-proof VAT and internal majority voting.  In the Starbucks case, the ECJ decided that the ruling given by the Dutch tax authorities was not state aid, but it decided the contrary in the Fiat case.  The cases confirm that Commission is entitled to see that the state aid rules are applied.  ATAD 2 deals with hybrid mismatches involving third countries.  The EU is moving towards a definitive VAT regime.  The EU is progressing towards a global role – see for example, in relation to dispute resolution in the WTO.

  • Bitcoin and other cryptocurrencies – the new Swiss number account? – Niklas Schmidt
    • Bitcoin is a currency and a payment system.  There is an “address” for deposits and a “secret key” for withdrawals – together a “wallet”.  A “blockchain” is an account.  Its starting point was a paper in 2008 by a mysterious Satoshi Nakamoto. Like fiat money, Bitcoin has no intrinsic value, but it is issued by a decentralised network, where the money supply is determined by an algorithm, it makes everyone his own bank, cannot be confiscated, is not confined by national borders.  There is a limit of 21 million Bitcoin, of which about 87% have been issued.   A Bitcoin transaction is irreversible.  Bitcoins can be bought or lost.  The price varies.  It is so useful in many ways, it may be expected to survive.

  • Current Trends in International Tax Planning – Barry Larking
    • “Substance” is currently the crucial consideration in international tax planning structures.  Those without substance suffer many disadvantages.  Equity holding companies may not require much substance, but its subsidiaries do – e.g. in compliance with CFC, BEPS or GILTI rules.  A lower standard of substance requirement applies to asset management companies – e.g. in Italy, China.  Group finance and licensing companies need to have the people on the ground – see recent rules in Luxembourg, Cyprus, but a safe harbour exemption is available for back-to-back structure.  Treaty benefit may be conditional on adequate substance.

      For Dutch withholding tax, the substance of the recipient may be taken into account, but the substance safe harbour rules are being changed – e.g. to allow tax authorities to deny WHT benefits even If the substance rules are complied with.

      Will substance continue to play such a key role in international taxation – e.g. as a result of the discussions on international tax reform?

  • Tax Liability Insurance – Dean Andrews
    • M&A Insurance is an umbrella, covering known liabilities (tax, IP, legislation) and unknown liabilities (warranty and indemnity insurance).  The policy can cover tax liability and costs, typically for a seven year period.  There may be an excess liability, provision for grossing-up, as well as the tax exposure and costs.  Insurance is used in buying and selling a business, as well as liabilities of fund managers, personal tax matters, running a business or liquidation.  Insurance awareness, increased experience and expansions of jurisdictions covered have contributed to the recent growth of this kind of insurance.  By 2019, there was more than £1.7 bn capacity.

      There are about 15 tax insurers in Europe, mostly in London.  The US, Australia, Hong Kong and Singapore have brokers working in this field.  From the initial call from client to the broker to commencement of underwriting taken about ten business days.  The future may see insurance cover for risks outside M&A, increased global coverage, falling rates, a value driver for parties to M&A transactions, use as a more traditional insurance product and further increases in insurance appetite.  In a typical case, the risk was that a sale at a low value may be treated as tax avoidance.

  • Taxation of the Digital Economy – Charles Marais
    • New ways in which profits are created in digital world are not covered by recent tax rules – for nexus, profit allocations.  The OECD is looking for a consensus solution.  Automated and standardised digital services and consumer-facing business will be affected: dispute resolutions, thresholds, exemptions are yet to be determined.  Profits may be allocated to market jurisdictions.  The EU has not yet agreed to implement an EU-wide digital tax.  The UK digital services tax has 1st April starting date.  It will be a serious burden on digital providers, which are not profitable.  A global corporate tax rate is under discussion, called Global Anti-Base Erosion (“GloBE”).  It would involve income inclusion, deemed withholding tax.  All this will mean more tax for market jurisdictions.

  • The Wyoming Statutory Foundation – Paolo Panico
    • Foundation legislation has been passed in Switzerland, St Kitts, Bahamas, Gibraltar, Abu Dhabi, New Hampshire, Cayman, Dubai and now Wyoming.

      In Wyoming, the Statutory Foundation is a corporate body with a board of directors.  It permits retention of rights and powers, by the grantor, but not by his heirs or creditors.  Unlike trustees, directors have no personal liability.  Beneficiaries have no equitable interest in foundation assets and have limited rights to information.  The Foundation can issue securities.  As in Liechtenstein, there must be at least one beneficiary.  Little information is available to the public.  It is considered that for tax purposes a Foundation should be treated as a trust, so that where powers are retained by the grantor it will be treated as a grantor trust.  If the court and the control tests are met, then it will be treated as a foreign trust.  In either case, it will be taxable only on its US-source income, though whether or not it is entitled to treaty benefit is not yet clear.

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