London Conference 2018

Chairman: Milton Grundy
17 - 19 October

Meeting Summary
  • 1. Brexit from an Itpa PerspectiveLaura Inglis
    • The four freedoms will be lost, though some have been embodied in domestic law, as will the right to use overseas losses, the parent-subsidiary Directive, the Interest and Royalties Directive and the general principles of EU law. The VAT procedure on imports and exports will change, as will procedures relating to customs duties and ability to benefit from tax treaties. However, the UK will remain an attractive jurisdiction, anti-avoidance rules are being re-enacted in domestic law, and most tax rules and the HMRC experience will be unchanged. There may be more targeted reliefs and more generous VAT rules.

  • 2. Public Registers: the impact of the 4th and 5th AML DirectivePaolo Panico
    • The 4th AML Directive required a register of beneficial ownership of companies and of beneficiaries of trust governed by local Law. In principle, information about trusts was not to be available to the public, but implementation has been patchy and inconsistent. The 5th Directive introduces some changes. Information on companies is to be available to the public. Trusts administered in a Member State or having real estate or a business relationship in a Member State are affected and information is to be available to persons with a “legitimate interest”.

      Very little information is available in several States in the U.S. Other jurisdictions – Singapore, Guernsey, Cayman Islands. BVI have registers, but information is available only to local governments. A publicly accessible register of companies UK-style is required to be introduced in the British Overseas Territories, but this may meet resistance..

      These developments appear to be contrary to the citizen’s right to privacy. The French court has held that making information about a citizen’s estate is unconstitutional.

      Opposition to the AML Directive has been expressed by several bodies. Perhaps the boundary may be set by the ECJ.

  • 3. UK non-doms: living with the New RegimeMark Davies
    • A UK resident who is not domiciled in any part of the UK is subject to tax on his foreign income only to the extent that it is remitted. There is now an annual remittance basis charge for persons resident after seven years and a deemed domicile after 15 years. “Boomerang Non-domiciled” residents were excluded from the remittance treatment. There was a two-year window for cleansing mixed funds, available until 5th April 2019.  Foreign-source income and capital gains of trusts attributed to non-doms can be sheltered within a “protected trust”. (Gains from non-reporting funds appear not to quality.) There was a re-basing opportunity in 2017.

      There are planning opportunities in cleansing and for new arrivers for 15 years. Favourable tax consequences can follow from using loans to invest, from timing income receipt before becoming resident from loan to a protected trust. There are surprisingly few people claiming non-dom treatment, but the tax take from them is substantial.

  • 4. Permanent Establishments and BEPS. New rules; new opportunities Nicky Gouder
    • “Permanent Establishment” is a familiar concept in tax treaties. Artificially avoiding a PE is the target of BEPS Action Plan 7 – e.g. by commissionaire arrangement, by specific activity exemptions of a preparatory or auxiliary character, by fragmentation, by contract splitting (applying the principal purpose test). In March, the European Commission proposed rules for taxing digital activity (1) taxing a “significant digital presence” and (2) imposing a common system of a digital services tax.

      There has been recent case law – on Formula 1 in India, Google in France, GE Energy Parts in India, a Luxembourg company in Italy and a German company in Denmark. Tax authorities in Italy, UK and Australia are taking steps to combat avoidance of PE.

  • 5. How Tax Authorities treat CRS dataHans-Joachim Jäger
    • FATCA, CRS and exchange of information generate large amount of information about accounts held in one country for a resident of another. The CRS is not a machine for tax reporting: the information it provides is not the same as the income reported by the taxpayers. The authority needs to interpret the data – checking plausibility and consistency, comparing it with the Benford distribution and examining correlations, which throw light on cases which depart from the norm.

      The Incurious software reveals connections. The IRS compares data from many sources to produce a picture of a taxpayer’s position.

  • 6. A Fresh Look at Cayman: the Foundation Companies Act and other developmentsRay Davern
    • The Foundation Companies Law in 2017 was preceded by similar laws in nine other jurisdictions. The trust has provided a very satisfactory wealth management vehicle for many years, onshore and offshore, allowing families to retain a measure of control.

      The trustees’ accountability to trustees cannot be avoided, nor the perpetuity period where relevant. Trustees can always apply to the court for a ruling. A PTC is itself commonly owned by a trust. Beneficiaries may have power to wind up a trust. Trusts are inherently litigious.

      The foundation company is intended to have the advantages of a trust without its shortcomings. It is fundamentally a company: it has limitation of liability; it has objects and a memorandum, but with a prohibition against distribution to shareholders. Its secretary must be a qualified person. It must have an object, not necessarily beneficial to others; it has to carry out its objects. It can give to an outsider the right to become a member. Supervisors may be appointed. It is possible to make provisions in the constitution unalterable and to give the beneficiaries no rights. A wide variety of provisions can be incorporated in the constitution – e.g. in relation to dispute resolution, perpetuity, reserved powers, power of the court etc.

  • 7. The Irish Trust Structure and other Planning OpportunitiesAnne Corrigan
    • The Trustee Act 1893 and the English rules are the foundation of trusts in Ireland. In 2009 a statutory provision introduced a procedure to amend a trust instrument, but it is a better to introduce such a provision in the trust itself. There is now no rule against perpetuities. A protector may be desirable when the settlor comes from a jurisdiction which does not recognise trusts. Trusts have few advantages for Irish residents. A trust settled by a non-resident and non-domiciled settlor, with a professional trustee, is treated as non-resident for capital gains tax. A similar exemption for income tax was omitted from the 1997 consolidation; an offshore investment company or mandating income to foreign beneficiaries or a foreign co-trustee may provide a solution. The Capital Acquisition Tax does not apply if the settlor, beneficiaries and assets are outside Ireland. Non-domiciled individuals are not treated as resident for the first five years. A discretionary trust tax may apply when the settlor is dead, where trust assets are located in Ireland. A charitable trust in Ireland may have advantages over a UK charity after Brexit.

      Ireland has a remittance-basis rule for the non-domiciled, similar to the earlier UK regime. Ireland has Immigrant Investor Programmes, designed to increase employment opportunities.

  • 8. EU Tax Blacklist: is this the future of globalization?Richard Hay
    • The lightly-regulated private capitalism of the Anglo-Saxon world is in contrast to the dirigiste EU. Globalisation is making great changes: the world is economically integrated but politically separated. Globalisation has created prosperity, but inequality remains, especially in sub-Sahara Africa. The OECD made great progress in organising world tax co-operation, but the pressure is now coming from the EU and US and the Level Playing Field has become a goal. FATC and CRS have yielded useful information. The EU blacklist is a list of countries deemed “non-cooperative” for tax purposes: it confers more power on the EU. Transparency and BEPS are criteria easy to satisfy; “Fair Taxation” is more difficult, and quite threatening to the financial centres. “Relevant activities” require “substance”. EU Member States are exempt from evaluation and sanctions. The Blacklist manoeuvre appears to have the purpose of extending unilateral power of the EU. The process adopted in the EU blacklist is likely to change the future course of globalisation.

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