Munich 1984 meeting

Meeting Summary
  • Banking Services and International Tax PlanningGilbert McCabe
    • Magnetic character-reading was introduced into banking in the 1950’s. The 1960’s saw the introduction of automated teller systems. Further technological development has greatly increased the potential for efficient execution of transactions; a global payment system operated electronically seems now to be on the horizon. Equally important is the dissemination of information – about exchange rates, inflation rates, market prices and so on. The volatility of these figures has grown substantially in recent years and information about money is becoming almost as valuable as money itself.

      Technological progress has now always been matched by increased efficiency – notably in the field of money transmission. But “home banking” is making rapid strides: the ability of the customer to move funds from one financial institution to another, to change currencies, to consolidate credit lines is little more than a year away in some OECD countries. Automated transfer systems are now operative in the US, UK and Japan: their great merit, from the customer’s point of view, is that the payee gets same-day value; whereas manual systems involve a one-say or as much as a three-day gap between debit and credit.

      Customers may get a better service from their bank if they familiarise themselves with the bank’s procedures and indeed establish a personal relationship with one or more individuals in the operational department of the bank.

      When making a loan matched by a deposit, it will generally be bank policy to provide for offset and to match currency and maturity dates. The cost to the customer should be lower if the matched funds are not required to be shown on the bank’s balance sheet. On large transactions, the charge may be as low as 0.25%. The deposit is commonly made in a developed country; where the funds are required for use in a developing country, it will generally be prudent to arrange the borrowing through a local bank or branch.

      The tax planner expects from his bank rapid and enthusiastic services of a number of kinds; he should be prepared to go to different institutions for different services.

  • Banking Services and International Tax PlanningGilbert McCabe
    • Magnetic character-reading was introduced into banking in the 1950’s. The 1960’s saw the introduction of automated teller systems. Further technological development has greatly increased the potential for efficient execution of transactions; a global payment system operated electronically seems now to be on the horizon. Equally important is the dissemination of information – about exchange rates, inflation rates, market prices and so on. The volatility of these figures has grown substantially in recent years and information about money is becoming almost as valuable as money itself.
      Technological progress has now always been matched by increased efficiency – notably in the field of money transmission. But “home banking” is making rapid strides: the ability of the customer to move funds from one financial institution to another, to change currencies, to consolidate credit lines is little more than a year away in some OECD countries. Automated transfer systems are now operative in the US, UK and Japan: their great merit, from the customer’s point of view, is that the payee gets same-day value; whereas manual systems involve a one-say or as much as a three-day gap between debit and credit.

      Customers may get a better service from their bank if they familiarise themselves with the bank’s procedures and indeed establish a personal relationship with one or more individuals in the operational department of the bank.

      When making a loan matched by a deposit, it will generally be bank policy to provide for offset and to match currency and maturity dates. The cost to the customer should be lower if the matched funds are not required to be shown on the bank’s balance sheet. On large transactions, the charge may be as low as 0.25%. The deposit is commonly made in a developed country; where the funds are required for use in a developing country, it will generally be prudent to arrange the borrowing through a local bank or branch.

      The tax planner expects from his bank rapid and enthusiastic services of a number of kinds; he should be prepared to go to different institutions for different services.

  • Current Developments in the British Islands: A Review of the Guernsey SeminarLouis Triay
    • Gibraltar, Guernsey, Jersey and the Isle of Man are all taxing jurisdictions; they each govern themselves, though the UK Government is responsible for their defence and foreign affairs. They have no exchange controls; if exchange control were re-introduced in the UK, it would probably apply to the Channel Islands and the Isle of Man, but no to Gibraltar. The economics of the Islands depend largely on tourism and the provision of financial services.

      A Gibraltar company owned by non-residents may register as an Exempt Company and thereby be free of local tax, upon payment of an annual fee of £200/225. This facility is now extended to companies registered elsewhere; the annual fee is £300. Charges of shareholding need to be reported to the Financial Secretary in Gibraltar; this does not apply to changes in guarantors of Hybrid companies (companies limited by guarantee and having a share capital), nor does it apply to changes of beneficiaries under trusts, even though the shares of the Exempt Company are trust property.

      A similar Exempt Company is about to be introduced in the Isle of Man. Unlike Gibraltar, the Isle of Man does not permit an offshore bank to qualify as an Exempt Company.

      Gibraltar has recently made provision for Qualifying Companies; these are companies which pay tax at the rate of 27% (or 2% on income not remitted to Gibraltar) instead of the standard rate of 40%.

      Non-resident companies may be formed in all the islands. In the Channel Islands, the shares of the company must be held by non-resident; the annual “corporation tax” is £300. The Manx equivalent is the Registration Tax Company. These may well be largely superceded by the Exempt Company. Gibraltar also permits the incorporation of non-resident companies; the only annual fee is £5, but there is the additional cost of satisfying the tax authorities that no tax is chargeable.

      Trusts may be established in all the Islands. Guernsey has no written trust law; trust laws of the English type are in force in the Isle of Man and Gibraltar; a new trust law is now in force in Jersey. In Guernsey and Jersey, income may be accumulated throughout the perpetuity period; the accumulation period has recently been changed in Gibraltar. Foreign income received by trustees for the benefit of non-resident beneficiaries is exempt from tax in Gibraltar by statute; the other Islands follow a similar practice in other Island – Guernsey and Jersey extending the exception to bank interest wherever arising.

      Gibraltar, Jersey and Guernsey have made provision for the incorporation of captive insurance companies; the Assurance Companies Ordinance in Gibraltar is in course of revision, and new regulatory legislation is expected in Guernsey. The Act in the Isle of Man provides for the issue of a licence by Gibraltar or the Isle of Man; in Guernsey it must be a tax-paying company.

      A Mutual Fund may take the form of a company; in the Islands it generally takes the form of a unit trust. Tax exemption is available to both forms.

      Of the Islands, the Isle of Man and Gibraltar have the merit of permitting local management and control and the formation of Hybrid companies. Jersey has proved popular for the establishment of unit trusts. But the facilities offered by the four Islands are broadly similar.

  • Current Developments in the British Islands: A Review of the Guernsey SeminarLouis Triay
    • Gibraltar, Guernsey, Jersey and the Isle of Man are all taxing jurisdictions; they each govern themselves, though the UK Government is responsible for their defence and foreign affairs. They have no exchange controls; if exchange control were re-introduced in the UK, it would probably apply to the Channel Islands and the Isle of Man, but no to Gibraltar. The economics of the Islands depend largely on tourism and the provision of financial services.
      A Gibraltar company owned by non-residents may register as an Exempt Company and thereby be free of local tax, upon payment of an annual fee of £200/225. This facility is now extended to companies registered elsewhere; the annual fee is £300. Charges of shareholding need to be reported to the Financial Secretary in Gibraltar; this does not apply to changes in guarantors of Hybrid companies (companies limited by guarantee and having a share capital), nor does it apply to changes of beneficiaries under trusts, even though the shares of the Exempt Company are trust property.

      A similar Exempt Company is about to be introduced in the Isle of Man. Unlike Gibraltar, the Isle of Man does not permit an offshore bank to qualify as an Exempt Company.

      Gibraltar has recently made provision for Qualifying Companies; these are companies which pay tax at the rate of 27% (or 2% on income not remitted to Gibraltar) instead of the standard rate of 40%.

      Non-resident companies may be formed in all the islands. In the Channel Islands, the shares of the company must be held by non-resident; the annual “corporation tax” is £300. The Manx equivalent is the Registration Tax Company. These may well be largely superceded by the Exempt Company. Gibraltar also permits the incorporation of non-resident companies; the only annual fee is £5, but there is the additional cost of satisfying the tax authorities that no tax is chargeable.

      Trusts may be established in all the Islands. Guernsey has no written trust law; trust laws of the English type are in force in the Isle of Man and Gibraltar; a new trust law is now in force in Jersey. In Guernsey and Jersey, income may be accumulated throughout the perpetuity period; the accumulation period has recently been changed in Gibraltar. Foreign income received by trustees for the benefit of non-resident beneficiaries is exempt from tax in Gibraltar by statute; the other Islands follow a similar practice in other Island – Guernsey and Jersey extending the exception to bank interest wherever arising.

      Gibraltar, Jersey and Guernsey have made provision for the incorporation of captive insurance companies; the Assurance Companies Ordinance in Gibraltar is in course of revision, and new regulatory legislation is expected in Guernsey. The Act in the Isle of Man provides for the issue of a licence by Gibraltar or the Isle of Man; in Guernsey it must be a tax-paying company.

      A Mutual Fund may take the form of a company; in the Islands it generally takes the form of a unit trust. Tax exemption is available to both forms.

      Of the Islands, the Isle of Man and Gibraltar have the merit of permitting local management and control and the formation of Hybrid companies. Jersey has proved popular for the establishment of unit trusts. But the facilities offered by the four Islands are broadly similar.

  • Doing Business in High-Tax JurisdictionsHuw Griffith
    • The country in which a business is based will generally be determined by commercial rather than tax considerations. Where that base is (or can be) one where a low rate of tax applies, it is evidently desirable, when trading in other jurisdictions, to reduce as far as possible the taxes payable there. The company may be able to avoid a “permanent establishment” or rely on the protection of a tax treaty if challenged by the tax authorities abroad. (Even better, of course, is never to come to the attention of the foreign authorities in the first place.)

      Care should always be taken that, for example, a subsidiary which provides a negotiating service or other facility for its parent should not be treated as a permanent establishment of the parent. Words like “branch” and “office” should be used with care. In the UK, a good deal of importance is attached to where contracts are signed. The rules of the jurisdictions concerned are to be considered carefully.

  • Doing Business in High-Tax JurisdictionsHuw Griffith
    • The country in which a business is based will generally be determined by commercial rather than tax considerations. Where that base is (or can be) one where a low rate of tax applies, it is evidently desirable, when trading in other jurisdictions, to reduce as far as possible the taxes payable there. The company may be able to avoid a “permanent establishment” or rely on the protection of a tax treaty if challenged by the tax authorities abroad. (Even better, of course, is never to come to the attention of the foreign authorities in the first place.)
      Care should always be taken that, for example, a subsidiary which provides a negotiating service or other facility for its parent should not be treated as a permanent establishment of the parent. Words like “branch” and “office” should be used with care. In the UK, a good deal of importance is attached to where contracts are signed. The rules of the jurisdictions concerned are to be considered carefully.

  • Drafting Trust InstrumentsJohn Reynolds
    • A typical trust structure comes into existence when a settlor resident and domiciled in a high-tax country establishes a trust in a tax haven and the trustees form a trading company in Panama and an investment company in Cayman.

      Trust instruments are commonly over-long; the power of investment may be succinctly stated, but a power to delegate and a power to omit to exercise a power should be included. If the avoidance of future exchange control is one of the objects of establishing a trust, trustees and companies resident in the former Sterling Area should preferably be avoided.

      Provision is often made for a change of trustee in the event of political or other emergency: power to change the trustee may be conferred eg on the Protector, or the change may be automatic on the happening of specified events, or dual trustees or a standby trust may be utilised. Provisions to this effect are notoriously difficult to draft.

      It is the usual practice to choose for the proper law of the settlement that of the domicil of the original trustee. Provision is often made for a change of the proper law; whether such a provision is effective is doubtful, though it is clear that the place of administration can be effectively changed and a transfer of trust assets to another settlement may be authorised, even though the law of the other settlement may not be the same. The new Trust Law in Jersey makes express provision for the proper law of the Jersey trust to be changes.

      Are trustees empowered to pay taxes? It may well be that foreign tax claims will become enforceable, but if the claim cannot be enforced, the trustees can be in something of a dilemma. Their overriding duty is to act in the interest of the beneficiaries and the question in each case needs to be answered in the light of that general principle. Forced heirship rules commonly give rise to problems, but these are often capable of solution by an inter-vivas transfer made under the law of a common law jurisdiction.

      The inclusion of a Protector or Guardian may be useful. His powers should not be such that he becomes a trustee, nor so extensive that the administration of the trust becomes cumbersome.

      The Bartlett case illustrates the danger to trustees if they fail to oversee the affairs of a company whose shares are included in the trust fund. It is a fraud on a power to exercise it so that the exercise benefits a person who is not a beneficiary.

      The draftsmen will be wise to include in any trust instrument a power to amend and a power to re-settle.

  • Drafting Trust InstrumentsJohn Reynolds
    • A typical trust structure comes into existence when a settlor resident and domiciled in a high-tax country establishes a trust in a tax haven and the trustees form a trading company in Panama and an investment company in Cayman.
      Trust instruments are commonly over-long; the power of investment may be succinctly stated, but a power to delegate and a power to omit to exercise a power should be included. If the avoidance of future exchange control is one of the objects of establishing a trust, trustees and companies resident in the former Sterling Area should preferably be avoided.

      Provision is often made for a change of trustee in the event of political or other emergency: power to change the trustee may be conferred eg on the Protector, or the change may be automatic on the happening of specified events, or dual trustees or a standby trust may be utilised. Provisions to this effect are notoriously difficult to draft.

      It is the usual practice to choose for the proper law of the settlement that of the domicil of the original trustee. Provision is often made for a change of the proper law; whether such a provision is effective is doubtful, though it is clear that the place of administration can be effectively changed and a transfer of trust assets to another settlement may be authorised, even though the law of the other settlement may not be the same. The new Trust Law in Jersey makes express provision for the proper law of the Jersey trust to be changes.

      Are trustees empowered to pay taxes? It may well be that foreign tax claims will become enforceable, but if the claim cannot be enforced, the trustees can be in something of a dilemma. Their overriding duty is to act in the interest of the beneficiaries and the question in each case needs to be answered in the light of that general principle. Forced heirship rules commonly give rise to problems, but these are often capable of solution by an inter-vivas transfer made under the law of a common law jurisdiction.

      The inclusion of a Protector or Guardian may be useful. His powers should not be such that he becomes a trustee, nor so extensive that the administration of the trust becomes cumbersome.

      The Bartlett case illustrates the danger to trustees if they fail to oversee the affairs of a company whose shares are included in the trust fund. It is a fraud on a power to exercise it so that the exercise benefits a person who is not a beneficiary.

      The draftsmen will be wise to include in any trust instrument a power to amend and a power to re-settle.

  • Foreign Investment in US Real Estate: The FIRPTA RegulationsMarshall Langer
    • The Foreign investment in Real Property Tax Act (“FIRPTA”) took effect from 18th June 1980. Before this enactment, foreigners normally acquired US property through a foreign corporation, largely with a view to avoiding any possible estate tax or gift tax. German investors commonly used a form of partnership and Canadian investors a Canadian company, but most other investors used a Netherlands Antilles company. One effect of the use of a Netherlands Antilles company was that capital gains tax on the sale of the property was avoided.

      The purpose of FIRPTA is to tax gains on disposal of US real property. The tax is extended to disposals of interests in domestic companies holding US real property. The tax does not extend to disposals of interests in foreign companies holding US real property, but in such cases a potential liability to tax remains, because the purchaser of the shares is required to take the seller’s cost basis as his cost basis for the shares.

      By the section 897 letter (i) election, a foreign corporation entitled to non-discrimination under a treaty is entitled to be treated, for FIRPTA purposes, as domestic corporation. (Such treatment does not affect the company’s position as regards other US taxes.) The maximum Federal capital gains tax rate is now 20% for individuals and 28% for corporations. By first making an (i) election and then electing for treatment under the 1-year liquidation procedure, the Federal capital gains tax to be suffered by the individual shareholder of the electing foreign corporation can be reduced to 20%, and State income tax on the capital gain may be eliminated.

      Both domestic and foreign corporations can postpone recognition of a capital gain by a “like-kind” exchange of property.

      On the death of a shareholder in a company, his shares have a new cost basis to his heirs. If the company makes the (i) election and the shares are sold at a price equal to the new cost basis, no tax liability will arise.

      A treaty (whether a tax treaty or a treaty of friendship, commerce and navigation) providing for non-discriminatory treatment is a pre-requisite of the company’s ability to make an (i) election. It is thought that a Netherlands Antilles company with active income will qualify; if it has merely passive income, it may well not quality under tax treaty but should qualify under the friendship commerce and navigation treaty.

  • Foreign Investment in US Real Estate: The FIRPTA RegulationsMarshall Langer
    • The Foreign investment in Real Property Tax Act (“FIRPTA”) took effect from 18th June 1980. Before this enactment, foreigners normally acquired US property through a foreign corporation, largely with a view to avoiding any possible estate tax or gift tax. German investors commonly used a form of partnership and Canadian investors a Canadian company, but most other investors used a Netherlands Antilles company. One effect of the use of a Netherlands Antilles company was that capital gains tax on the sale of the property was avoided.
      The purpose of FIRPTA is to tax gains on disposal of US real property. The tax is extended to disposals of interests in domestic companies holding US real property. The tax does not extend to disposals of interests in foreign companies holding US real property, but in such cases a potential liability to tax remains, because the purchaser of the shares is required to take the seller’s cost basis as his cost basis for the shares.

      By the section 897 letter (i) election, a foreign corporation entitled to non-discrimination under a treaty is entitled to be treated, for FIRPTA purposes, as domestic corporation. (Such treatment does not affect the company’s position as regards other US taxes.) The maximum Federal capital gains tax rate is now 20% for individuals and 28% for corporations. By first making an (i) election and then electing for treatment under the 1-year liquidation procedure, the Federal capital gains tax to be suffered by the individual shareholder of the electing foreign corporation can be reduced to 20%, and State income tax on the capital gain may be eliminated.

      Both domestic and foreign corporations can postpone recognition of a capital gain by a “like-kind” exchange of property.

      On the death of a shareholder in a company, his shares have a new cost basis to his heirs. If the company makes the (i) election and the shares are sold at a price equal to the new cost basis, no tax liability will arise.

      A treaty (whether a tax treaty or a treaty of friendship, commerce and navigation) providing for non-discriminatory treatment is a pre-requisite of the company’s ability to make an (i) election. It is thought that a Netherlands Antilles company with active income will qualify; if it has merely passive income, it may well not quality under tax treaty but should qualify under the friendship commerce and navigation treaty.

  • Guarantee and Hybrid Companies: Some thoughts on their useCharles Cain (updated 1998)
    • Articles by Patrick Taylor, Paul Matthews and Julian Ghosh in the Offshore Tax Review are essential reading.

      A trust is a relationship recognised by law; it is not created by law. It is a relationship between two persons relating to the disposition of the property: it is identified by a number of rules – by the passing of control of assets in the hands of the trust, by having ascertainable beneficiaries and so on. It is not an entity. The law is to be found in the cases; it is nowhere completely codified. It is not always well understood.

      The use of the guarantee company and of the “hybrid” company (i.e. limited by guarantee and by shares) provides an alternative to the trust, and one which is simpler and more understandable. The constitution of a guarantee company will provide for members’ rights, and may include provision for separate classes and for a deceased member’s rights to pass to his estate.

      In a hybrid company, all members are guarantors but some also have shares. A guarantee or hybrid company may function as a family foundation or a charity. The client may retain control of the assets without running any Rahman risks. They have been used for timeshare resorts. In respect of a hybrid company, rights can be conferred on non-members.

      The interest of a non-member beneficiary is not that of a shareholder nor an interest under a trust. The interest of a guarantee is not a “security” for exchange control purposes: his identity is not public knowledge; the interest is safer than that conferred by a bearer share.

  • Guarantee and Hybrid Companies: Some thoughts on their useCharles Cain
    • Articles by Patrick Taylor, Paul Matthews and Julian Ghosh in the Offshore Tax Review are essential reading.
      A trust is a relationship recognised by law; it is not created by law. It is a relationship between two persons relating to the disposition of the property: it is identified by a number of rules – by the passing of control of assets in the hands of the trust, by having ascertainable beneficiaries and so on. It is not an entity. The law is to be found in the cases; it is nowhere completely codified. It is not always well understood.

      The use of the guarantee company and of the “hybrid” company (i.e. limited by guarantee and by shares) provides an alternative to the trust, and one which is simpler and more understandable. The constitution of a guarantee company will provide for members’ rights, and may include provision for separate classes and for a deceased member’s rights to pass to his estate.

      In a hybrid company, all members are guarantors but some also have shares. A guarantee or hybrid company may function as a family foundation or a charity. The client may retain control of the assets without running any Rahman risks. They have been used for timeshare resorts. In respect of a hybrid company, rights can be conferred on non-members.

      The interest of a non-member beneficiary is not that of a shareholder nor an interest under a trust. The interest of a guarantee is not a “security” for exchange control purposes: his identity is not public knowledge; the interest is safer than that conferred by a bearer share.

  • High-Tax Jurisdictions: The New Tax HavensMilton Grundy (updated 1998)
    • Many high-tax jurisdictions function as tax havens. Individuals will find that many countries – including Canada, Cyprus, the Republic of Ireland and Sri Lanka – offer special incentives to new residents and that a more general incentive is offered by countries which tax on a territorial basis, like Austria, Costa Rica, Hong Kong, Malaysia, Mexico and Singapore. Some Swiss cantons will agree in advance the tax liability of a prospective resident. The U.K. offers non-domiciled individuals the benefits of the “remittance basis” as do Barbados, the British Virgin Islands, Cyprus, Gibraltar, Malaysia, Singapore and the Republic of Ireland.

      Other high-tax jurisdictions offer a zero-tax or low-tax regime for companies owned by non-residents. Antigua, Aruba, Barbados, Belize, the BVI, the Canary Islands, the Cook Islands, Cyprus, Dominica, Gibraltar, Grenada, Hungary, Jordan, Labuan, Lebanon, Liberia, Liechtenstein, Luxembourg, Madeira, Malta, Marshall Islands, Montenegro, Montserrat, Netherlands Antilles, Nevis, Niue, Russia, St. Kitts, St. Vincent, Samoa, Seychelles, Switzerland, Uruguay, USVI and Vanuatu have legislation expressly for this purpose. Those which tax on a territorial or remittance basis offer similar facilities; those which tax by reference to “management and control” may permit the formation of companies which, because they are “resident” elsewhere, pay no tax on their foreign income e.g. Barbados, Grenada, Ireland, Singapore and Swaziland.

  • High-Tax Jurisdictions: The New Tax HavensMilton Grundy
    • Many high-tax jurisdictions function as tax havens. Individuals will find that many countries – including Canada, Cyprus, the Republic of Ireland and Sri Lanka – offer special incentives to new residents and that a more general incentive is offered by countries which tax on a territorial basis, like Austria, Costa Rica, Hong Kong, Malaysia, Mexico and Singapore. Some Swiss cantons will agree in advance the tax liability of a prospective resident. The U.K. offers non-domiciled individuals the benefits of the “remittance basis” as do Barbados, the British Virgin Islands, Cyprus, Gibraltar, Malaysia, Singapore and the Republic of Ireland.
      Other high-tax jurisdictions offer a zero-tax or low-tax regime for companies owned by non-residents. Antigua, Aruba, Barbados, Belize, the BVI, the Canary Islands, the Cook Islands, Cyprus, Dominica, Gibraltar, Grenada, Hungary, Jordan, Labuan, Lebanon, Liberia, Liechtenstein, Luxembourg, Madeira, Malta, Marshall Islands, Montenegro, Montserrat, Netherlands Antilles, Nevis, Niue, Russia, St. Kitts, St. Vincent, Samoa, Seychelles, Switzerland, Uruguay, USVI and Vanuatu have legislation expressly for this purpose. Those which tax on a territorial or remittance basis offer similar facilities; those which tax by reference to “management and control” may permit the formation of companies which, because they are “resident” elsewhere, pay no tax on their foreign income e.g. Barbados, Grenada, Ireland, Singapore and Swaziland.

  • International Tax Planning for the German ResidentJack Rudden
    • German tax law makes a distinction between investment income and business income. Income from directly-held investment is generally fully taxed (subject to certain treaty reliefs) but only limited allowance is given for losses. Where the investment is held by a foreign company of which more than 50% is held by German residents and which suffers less than 30% tax, the income is deemed to be distributed to its German resident shareholders. Business income of a foreign branch is generally taxable and losses fully allowable; but if the branch is in a treaty country, the income is exempt from German tax (losses being allowable, but subject to provisions for “recapture” against future profits). The business income of foreign companies is not attributed to their shareholders, but losses of foreign subsidiaries may be set off against the parent’s income in certain circumstances for a period of 5 years, subject to recapture against future profits.

      Capital gains are taxable where the property alienated is business property, where the gain is treated as “speculative” because the asset has been held for less than 6 months (2 years for real estate) or where the asset disposed of is a significant shareholding (more than 25% of the share capital owned during 5 years preceding sale). Treaties sometimes modify these rules as regards gains on real estate.

      In the past, there were numerous tax shelters based on foreign partnerships financed with non-recourse loans. Nowadays, the deductible losses of a German limited partner are limited to the extent of capital at risk. This rule applies also to the “silent partner”, who participates in partnership income and capital gains.

      The resident individual who receives dividends from a foreign company suffers tax on the amount of the dividend, with credit for the tax paid on the dividend but no credit for the tax paid by the company. The corporate investor, by contrast, escapes double taxation: dividends from a holding of 10% or more of a company subject to tax in a treaty country are not charged to German tax, and a parent company may claim tax credit for the taxes paid by its foreign subsidiary; however, double taxation occurs once dividends are paid to the parent company’s shareholders. Either because more than 10% of a foreign but tax paying company is located in a treaty country or is able to claim a credit for the taxes paid by the subsidiary; however, double taxation occurs once dividends are paid to the parent company’s shareowners.

      Partnerships with branches in treaty countries escape double taxation but have the defect of exposing the partner to death duties and requiring a tax return. An entity which is treated by fiscal authorities of the host country as a corporation and by German authorities as a partnership may offer an ideal method of achieving both objectives.

  • International Tax Planning for the German ResidentJack Rudden
    • German tax law makes a distinction between investment income and business income. Income from directly-held investment is generally fully taxed (subject to certain treaty reliefs) but only limited allowance is given for losses. Where the investment is held by a foreign company of which more than 50% is held by German residents and which suffers less than 30% tax, the income is deemed to be distributed to its German resident shareholders. Business income of a foreign branch is generally taxable and losses fully allowable; but if the branch is in a treaty country, the income is exempt from German tax (losses being allowable, but subject to provisions for “recapture” against future profits). The business income of foreign companies is not attributed to their shareholders, but losses of foreign subsidiaries may be set off against the parent’s income in certain circumstances for a period of 5 years, subject to recapture against future profits.
      Capital gains are taxable where the property alienated is business property, where the gain is treated as “speculative” because the asset has been held for less than 6 months (2 years for real estate) or where the asset disposed of is a significant shareholding (more than 25% of the share capital owned during 5 years preceding sale). Treaties sometimes modify these rules as regards gains on real estate.

      In the past, there were numerous tax shelters based on foreign partnerships financed with non-recourse loans. Nowadays, the deductible losses of a German limited partner are limited to the extent of capital at risk. This rule applies also to the “silent partner”, who participates in partnership income and capital gains.

      The resident individual who receives dividends from a foreign company suffers tax on the amount of the dividend, with credit for the tax paid on the dividend but no credit for the tax paid by the company. The corporate investor, by contrast, escapes double taxation: dividends from a holding of 10% or more of a company subject to tax in a treaty country are not charged to German tax, and a parent company may claim tax credit for the taxes paid by its foreign subsidiary; however, double taxation occurs once dividends are paid to the parent company’s shareholders. Either because more than 10% of a foreign but tax paying company is located in a treaty country or is able to claim a credit for the taxes paid by the subsidiary; however, double taxation occurs once dividends are paid to the parent company’s shareowners.

      Partnerships with branches in treaty countries escape double taxation but have the defect of exposing the partner to death duties and requiring a tax return. An entity which is treated by fiscal authorities of the host country as a corporation and by German authorities as a partnership may offer an ideal method of achieving both objectives.

  • Residence in the United States: The Effect of the Tax Reform ActMarshall Langer (updated 1998)
    • The resident alien or citizen pays tax at a rate of up to 50% on all income; he is entitled to tax credit on foreign income; income of controlled foreign corporations and foreign personal holding companies may be attributed to him; he pays capital gains at a rate up to 20% and estate tax at a rate up to 60%.

      The non-resident pays tax at the full rate of “effectively connected” U.S. income; other U.S. income suffers a maximum rate of 30%. But bank interest and interest on short-term Treasury bills are free of tax, and in practice little income tax or estate tax is paid by non-resident aliens.

      The distinction between residence and non-residence is therefore of great importance. In the past there has been no fixed rule; from 1st January 1985, there will be an objective test of residence. Provisions to this effect are contained in the different bills now before Congress. It is thought that the House of Representatives version will be enacted in broadly the form of the Tax Reform Act of 1984.

      The new residence test is to apply for income tax (not estate or gift tax); it is to be applied every year, and arriving and departing individuals may establish non-residence for part of year. Enforcement is likely to be more strict: immigration records make available the necessary information, and information returns are required from the individual if he meets the new test.

      A holder of a green card will be a resident, whether or not he is present in the U.S. in the year in question. The residence of others will be ascertained by a “substantial presence test”. A weighted average is to be calculated by reference to presence over a three-year period: the formula permits presence for 121 days a year without resulting in residence. A period of presence of up to 30 days in a year is not to be taken into account in calculating the weighted average, but presence of 183 days in a year results in residence for that year, regardless of the weighted average test. Some special categories are exempt – notably full-time students. Persons present in the U.S. for more than 121 days but less than 183 days will, if they can show that they have a “tax home” elsewhere and a closer connection with another country than with the U.S., be treated as non-resident, but this seems hard to establish. Exemption is made for those who become sick whilst in the U.S.. Parts of day to count as a day, and no account is to be taken of presence before 1985 (except in the case of those resident in 1984 or earlier).

      Very difficult problems seem likely to arise in reconciling the new rules with the provisions of tax treaties, but some amendments are expected in this area before the Bill is enacted.

      The maximum tax rate paid by a resident alien or citizen has since been reduced to less than 40% but actual taxes paid are at least as high as they were before. The residency rules were enacted as I predicted and they have now been in force for more than a decade. An alien who is deemed to be a resident of another treaty country under the tie-breaker rules in that country’s income tax treaty with the U.S. can generally maintain his status as a non-resident alien for purposes of calculating his income tax liability but he has to report his interests in foreign corporations, trusts and bank accounts as though he were a U.S. resident.

  • Residence in the United States: The Effect of the Tax Reform ActMarshall Langer
    • The resident alien or citizen pays tax at a rate of up to 50% on all income; he is entitled to tax credit on foreign income; income of controlled foreign corporations and foreign personal holding companies may be attributed to him; he pays capital gains at a rate up to 20% and estate tax at a rate up to 60%.
      The non-resident pays tax at the full rate of “effectively connected” U.S. income; other U.S. income suffers a maximum rate of 30%. But bank interest and interest on short-term Treasury bills are free of tax, and in practice little income tax or estate tax is paid by non-resident aliens.

      The distinction between residence and non-residence is therefore of great importance. In the past there has been no fixed rule; from 1st January 1985, there will be an objective test of residence. Provisions to this effect are contained in the different bills now before Congress. It is thought that the House of Representatives version will be enacted in broadly the form of the Tax Reform Act of 1984.

      The new residence test is to apply for income tax (not estate or gift tax); it is to be applied every year, and arriving and departing individuals may establish non-residence for part of year. Enforcement is likely to be more strict: immigration records make available the necessary information, and information returns are required from the individual if he meets the new test.

      A holder of a green card will be a resident, whether or not he is present in the U.S. in the year in question. The residence of others will be ascertained by a “substantial presence test”. A weighted average is to be calculated by reference to presence over a three-year period: the formula permits presence for 121 days a year without resulting in residence. A period of presence of up to 30 days in a year is not to be taken into account in calculating the weighted average, but presence of 183 days in a year results in residence for that year, regardless of the weighted average test. Some special categories are exempt – notably full-time students. Persons present in the U.S. for more than 121 days but less than 183 days will, if they can show that they have a “tax home” elsewhere and a closer connection with another country than with the U.S., be treated as non-resident, but this seems hard to establish. Exemption is made for those who become sick whilst in the U.S.. Parts of day to count as a day, and no account is to be taken of presence before 1985 (except in the case of those resident in 1984 or earlier).

      Very difficult problems seem likely to arise in reconciling the new rules with the provisions of tax treaties, but some amendments are expected in this area before the Bill is enacted.

      The maximum tax rate paid by a resident alien or citizen has since been reduced to less than 40% but actual taxes paid are at least as high as they were before. The residency rules were enacted as I predicted and they have now been in force for more than a decade. An alien who is deemed to be a resident of another treaty country under the tie-breaker rules in that country’s income tax treaty with the U.S. can generally maintain his status as a non-resident alien for purposes of calculating his income tax liability but he has to report his interests in foreign corporations, trusts and bank accounts as though he were a U.S. resident.

  • The 1984 US Treasury Department Report on Carribean Tax HavensBarton Udell
    • The first US government report on this topic was the Gordon Report of 1981. This was followed by a Senate Staff Report in 1983. The 1984 report embodies and updates the material relevant to the Caribbean Basin in the earlier reports. Congress enquired into three aspects of the matter – the loss of tax, the connection with narcotics and crime, the counter-measures taken by the Treasury.

      The Report outlines the characteristics of tax havens, and indicates their major uses – uses with no tax motivation, uses of a tax planning nature, those involving loopholes, those relying on unlawful evasion. It notes the possibilities for avoidance of US taxes by use of treaties.

      Tables in the Report show the exceptionally large, and rising, deposits with banks and other entities in the tax havens; the Report draws the conclusion that the figures reflect large-scale illegal activities and that the loss of US revenue cannot be estimated. Investigations and convictions in recent years have revealed numerous connections with Caribbean tax havens and use of companies incorporated there for fraudulent purposes.

      The US Tax Code has recently been extended to include several reporting requirements; the number of IRS International Examiners has been substantially increased. Generally, the Revenue Service has significantly increased its investigations into uses of tax havens.

      US Treasury policy is to take steps to limit the benefits of tax treaties to residents of treaty partner residents; existing treaties have been re-negotiated or terminated; it is not policy to make new treaties with low-tax countries unless they have significant economic relations with the US and unless the potential for abuse is substantially proscribed.

      Treasury is considering either a certificate of a refund system for verifying the residential status of any claimant to treaty benefits.

      The collection and analysis of information is regarded by Treasury as an important weapon against improper use of tax havens and the extent of its information-gathering has been hugely increased.

  • The 1984 US Treasury Department Report on Carribean Tax HavensBarton Udell
    • The first US government report on this topic was the Gordon Report of 1981. This was followed by a Senate Staff Report in 1983. The 1984 report embodies and updates the material relevant to the Caribbean Basin in the earlier reports. Congress enquired into three aspects of the matter – the loss of tax, the connection with narcotics and crime, the counter-measures taken by the Treasury.
      The Report outlines the characteristics of tax havens, and indicates their major uses – uses with no tax motivation, uses of a tax planning nature, those involving loopholes, those relying on unlawful evasion. It notes the possibilities for avoidance of US taxes by use of treaties.

      Tables in the Report show the exceptionally large, and rising, deposits with banks and other entities in the tax havens; the Report draws the conclusion that the figures reflect large-scale illegal activities and that the loss of US revenue cannot be estimated. Investigations and convictions in recent years have revealed numerous connections with Caribbean tax havens and use of companies incorporated there for fraudulent purposes.

      The US Tax Code has recently been extended to include several reporting requirements; the number of IRS International Examiners has been substantially increased. Generally, the Revenue Service has significantly increased its investigations into uses of tax havens.

      US Treasury policy is to take steps to limit the benefits of tax treaties to residents of treaty partner residents; existing treaties have been re-negotiated or terminated; it is not policy to make new treaties with low-tax countries unless they have significant economic relations with the US and unless the potential for abuse is substantially proscribed.

      Treasury is considering either a certificate of a refund system for verifying the residential status of any claimant to treaty benefits.

      The collection and analysis of information is regarded by Treasury as an important weapon against improper use of tax havens and the extent of its information-gathering has been hugely increased.

  • US Tax on Multinational Profits: The Present ProposalsAlun Davies
    • The proposed new legislation in the UK has been in preparation since 1981: its purpose is to subject the income of a Controlled Foreign Company (“CFC”) to UK tax. A CFC is a foreign company which pays tax at less than half the UK rate and is “controlled” (as defined) by UK residents. A CFC is deemed to be resident in the UK. The controlling person is not required to volunteer information about the CFC; the Board of Inland Revenue must first make a direction that these provisions apply to the company.

      The UK revenue claim that tax avoidance by UK companies via CFCs is costing £100 million. The figure may be questioned, as may the cost-effectiveness of the tax. Exclusions are made for companies which have an acceptable distribution policy, or which have a genuine presence and trading activity in the foreign jurisdiction, or which have annual profits of less than £20,000, or which are not established with any tax avoidance motive. There is also to be a list of countries, CFCs in which are to be excluded from these provisions. (A provisional list has already been published.) The Revenue have, however, indicated that the list may be changed from time to time.

      An acceptable distribution is 50% of the commercial profits of a trading company or 90% of the income of an investment company. By a recent amendment, the profits attributable to foreign shareholders may not require to be distributed.

      The concept of “exempt activities” is intended to apply to companies with genuine trading presence in a foreign county, but the definitions have been so tightly drawn that many bona-fide trading companies will fail to satisfy these criteria.

      The “motive” exclusion took originally a simpler form: in its present form, the Board require to be satisfied (i) that the company’s activities were carried out for bona-fide commercial reasons and (ii) that there is no significant reduction of UK or such was not its purpose and (iii) no profits taxable in the UK have been “diverted” out of the UK. This last criterion seems extremely difficult to satisfy in practice.

      Broadly, this legislation will see the end of patent-holding companies and similar overseas vehicles unless they meet the acceptable distribution test, but whether the increase in tax collected will be significant is much open to doubt.

  • US Tax on Multinational Profits: The Present ProposalsAlun Davies
    • The proposed new legislation in the UK has been in preparation since 1981: its purpose is to subject the income of a Controlled Foreign Company (“CFC”) to UK tax. A CFC is a foreign company which pays tax at less than half the UK rate and is “controlled” (as defined) by UK residents. A CFC is deemed to be resident in the UK. The controlling person is not required to volunteer information about the CFC; the Board of Inland Revenue must first make a direction that these provisions apply to the company.
      The UK revenue claim that tax avoidance by UK companies via CFCs is costing £100 million. The figure may be questioned, as may the cost-effectiveness of the tax. Exclusions are made for companies which have an acceptable distribution policy, or which have a genuine presence and trading activity in the foreign jurisdiction, or which have annual profits of less than £20,000, or which are not established with any tax avoidance motive. There is also to be a list of countries, CFCs in which are to be excluded from these provisions. (A provisional list has already been published.) The Revenue have, however, indicated that the list may be changed from time to time.

      An acceptable distribution is 50% of the commercial profits of a trading company or 90% of the income of an investment company. By a recent amendment, the profits attributable to foreign shareholders may not require to be distributed.

      The concept of “exempt activities” is intended to apply to companies with genuine trading presence in a foreign county, but the definitions have been so tightly drawn that many bona-fide trading companies will fail to satisfy these criteria.

      The “motive” exclusion took originally a simpler form: in its present form, the Board require to be satisfied (i) that the company’s activities were carried out for bona-fide commercial reasons and (ii) that there is no significant reduction of UK or such was not its purpose and (iii) no profits taxable in the UK have been “diverted” out of the UK. This last criterion seems extremely difficult to satisfy in practice.

      Broadly, this legislation will see the end of patent-holding companies and similar overseas vehicles unless they meet the acceptable distribution test, but whether the increase in tax collected will be significant is much open to doubt.

  • Use of Tax Treaties with German-speaking Countries: Germany, Austria and SwitzerlandHenry Conston
    • The US treaties with Switzerland, Austria and Germany are all old: exchange of instruments of ratification of the new Germany/US Estate and gift tax treaty is still awaited. In the absence of modern treaties, US domestic legislation has to some extent overridden treaty provisions – eg in taxing former US citizens, and (from 1985) under FIRPTA. But the treaties with German-speaking countries are in urgent need of revision.

      The present US treaty provides for lower rates of withholding tax on dividends. US investors must apply for refund of dividend withholding tax; currently, German investors obtain the reduced US rate automatically, but the US may fall in line with the German procedure.

      Real property income is taxable in the source country; election may be made to be taxed on a net basis. Holding US real estate through Netherlands Antilles companies has proved an expensive mistake for German residents.

      The Swiss/US treaty has the usual provision for exchange of information, but the information which the Swiss are willing to provide is limited to that relating to fraud or a criminal offence.

      Traditionally, a German investor would use a US corporation to operate a US business: the corporation pays 46% on its profits; the dividends suffer 15% US withholding tax and are liable to German tax. The corporate investor holding at least 10% of the shares of its US subsidiary does not pay German tax on dividends from the US subsidiary. The German shareholder may postpone his German tax liability indefinitely by having the German corporation distribute only its domestic income. Moreover, the double tax may be reduced by substituting debt for equity, though this can be done only to a limited extent.

      If the German investor is a partner in a US partnership, he is not liable to German income tax on his share of the partnership profit, nor to German wealth tax on its value. But he is fully exposed to US taxes – income tax at Federal and state levels on the profits, gift and estate tax on the assets. The most favourable result may be achieved with a limited partnership – the partnership having sufficient characteristics of a corporation to be taxed in the US as a corporation, but nevertheless treated in Germany as a partnership. The interest on a partner’s loan to such a partnership may be allowed as a deduction in the US, but be free of tax in Germany.

      The US investor doing business in Germany through a German company suffers 36% income tax together with trade tax at the corporate level and 15% withholding tax on dividends. The individual investor obtains credit only for the withholding tax, but the corporate investor has credit for the corporate tax also.

      A US partner in a German limited partnership is subject to full German and US taxation on partnership profits, but can substantially eliminate US tax liability by use of his foreign tax credit.

  • Use of Tax Treaties with German-speaking Countries: Germany, Austria and SwitzerlandHenry Conston
    • The US treaties with Switzerland, Austria and Germany are all old: exchange of instruments of ratification of the new Germany/US Estate and gift tax treaty is still awaited. In the absence of modern treaties, US domestic legislation has to some extent overridden treaty provisions – eg in taxing former US citizens, and (from 1985) under FIRPTA. But the treaties with German-speaking countries are in urgent need of revision.
      The present US treaty provides for lower rates of withholding tax on dividends. US investors must apply for refund of dividend withholding tax; currently, German investors obtain the reduced US rate automatically, but the US may fall in line with the German procedure.

      Real property income is taxable in the source country; election may be made to be taxed on a net basis. Holding US real estate through Netherlands Antilles companies has proved an expensive mistake for German residents.

      The Swiss/US treaty has the usual provision for exchange of information, but the information which the Swiss are willing to provide is limited to that relating to fraud or a criminal offence.

      Traditionally, a German investor would use a US corporation to operate a US business: the corporation pays 46% on its profits; the dividends suffer 15% US withholding tax and are liable to German tax. The corporate investor holding at least 10% of the shares of its US subsidiary does not pay German tax on dividends from the US subsidiary. The German shareholder may postpone his German tax liability indefinitely by having the German corporation distribute only its domestic income. Moreover, the double tax may be reduced by substituting debt for equity, though this can be done only to a limited extent.

      If the German investor is a partner in a US partnership, he is not liable to German income tax on his share of the partnership profit, nor to German wealth tax on its value. But he is fully exposed to US taxes – income tax at Federal and state levels on the profits, gift and estate tax on the assets. The most favourable result may be achieved with a limited partnership – the partnership having sufficient characteristics of a corporation to be taxed in the US as a corporation, but nevertheless treated in Germany as a partnership. The interest on a partner’s loan to such a partnership may be allowed as a deduction in the US, but be free of tax in Germany.

      The US investor doing business in Germany through a German company suffers 36% income tax together with trade tax at the corporate level and 15% withholding tax on dividends. The individual investor obtains credit only for the withholding tax, but the corporate investor has credit for the corporate tax also.

      A US partner in a German limited partnership is subject to full German and US taxation on partnership profits, but can substantially eliminate US tax liability by use of his foreign tax credit.

yeezy boost 350 oxford tan adidas yeezy 350 boost oxford tan release date moonrock yeezy 350 boost legit real fake adidas yezzy boost 350 pirate black moonrock restocking yeezy boost 350 moonrock raffle yeezy boost 350 moonrock 331592665172 is the adidas yeezy boost 350 turtle dove releasing again yeezy boost 350 turtle dove AQ4832 fse 082415 p se yeezy boost 350 adidas yeezy 350 boost where to buy yeezy boost 350 v2 black white adidas yeezy boost 350 pirate black adidas yeezy boost 350 v2 black white adidas yeezy boost 350 v2 blackwhite reservations open december 15 confirmed app buy black friday yeezy boost 350 v2 yeezy boost 350 v2 black white adidas yeezy boost 350 v2 official images adidas yeezy boost 350 v2 restock info adidas yeezy boost 350 v2 beluga solar red adidas yeezy boost 350 v2 beluga launches tomorrow news.23913.html yeezy boost 350 v2 black white release date adidas yeezy yeezy boost 350 v2 bw raffle store list for the black white adidas yeezy boost 350 v2 release news.26285.html adidas yeezy boost 350 v2 black white release procedure announced news.26233.html yeezy boost 350 v2 black white raffle