Increase in globalization and foreign trade in the last century led to aggressive tax planning. Though these planning measures are legitimate, they are designed for shifting profits to low tax jurisdictions. There is a number of measured to deal with this tax abuse. In particular, some jurisdictions apply controlled foreign corporation (CFC) rules.
Historically, the CFC concepts were created to help prevent tax evasion achieved by setting up offshore companies in tax havens, such as Bermuda and the Cayman Islands. Increasingly countries have developed CFC legislation to counter perceived overseas abuses enveloped in a low tax overseas entity.
The aim of CFC rules is to prevent or obstruct the creation of structures used by companies, especially domestic multinationals, for pure avoidance of domestic tax liability. CFC rules are designed to prevent profit shifting without penalizing foreign subsidiaries engaged in legitimate business practices.
A controlled foreign corporation is a corporate entity that is registered and conducts business in a different jurisdiction or country than the residency of the controlling owners. A company that qualifies as a CFC generally has its...
Non-discrimination articles have been used in tax treaties over a number of years, they are designed to place non-discrimination requirements on the source country rather than on the residence state.
There may arise cases where a country provides favourable treatment to its nationals and discriminates against foreigners. To circumvent such cases tax treaties provide a clause which restricts contracting states from offering discriminatory treatment to foreign nationals as compared to its nationals.
The article on non-discrimination is the tool employed by tax treaties to express and achieve this very fundamental principle of taxation and to prevent unfair taxation as distinct from preventing double taxation.
As mentioned in General remarks to the Commentary to Article 24 of the OECD Model Tax Convention on Income and on Capital (2017) (the OECD MTC): This Article deals with the elimination of tax discrimination in certain precise circumstances.
Discrimination means unequal treatment in situations which are identical or similar. Article 24 of the OECD MTC deals with non-discrimination provisions; nationality non-discrimination, permanent establishment non-discrimination,...
In September 2017, a significant event for financial institutions around the world took place - the first automatic exchange of information for tax purposes in accordance with the CRS (Common Reporting Standard). The source of information exchange were banks, as well as other financial institutions (pension funds, investment and insurance companies, etc.). The second large group of countries is also joining the process of automatic information exchange in 2018.
CRS provides for an annual automatic exchange of tax information between Member States of the Multilateral Cooperation Convention between the competent authorities on automatic information exchange under the CRS (MCAA Convention).
The exchange of information on accounts of legal entities and natural persons will be made automatically, annually and on the principle of residency (in contrast to the FATCA law, which uses the principle of citizenship).
The essence of the exchange is that banks collect information on financial activities on corporate accounts of the companies, individual accounts of natural persons, private funds and trusts, and then transfer it to the tax authorities of their country, which send this...
Back in the first quarter of 2018, namely on February 19, 2018, a draft of advisory document was published on the official website of the Organization for Economic Cooperation and Development (OECD), which called on all interested parties to join the discussion on the OECD strategy for combating the loopholes on using the Common Reporting Standard (CRS, Single standard of tax information exchange) in the “citizenship by the investment” (CBI - granting citizenship in exchange for investments) and “residence by the investment” (RBI - granting a residence permit in exchange for investments). To date, more than 70 jurisdictions in the world offer these schemes.
On April 17, 2018, a 96-page document was published on the OECD website (PUBLIC INPUT RECEIVED ON MISUSE OF RESIDENCE BY INVESTMENT SCHEMES TO CIRCUMVENT THE COMMON REPORTING STANDARD), which, in fact, summarized the first results of the discussion and the contents of the official letters to the organization. More than 20 structures were the speakers, including:
AFME office in London (Association of Financial Markets in Europe, it brings together the largest agents in the capital markets in the region);
Taking into account an extremely unstable tax legislation of Ukraine, more and more business owners are thinking about tax planning for their enterprise or holding. Tax planning is the process of choosing the most optimal form of taxation and reducing the tax burden on business by using certain methods.
Methods of tax planning for business
The methods or ways by which tax planning is implemented can be conditionally divided into:
The main principle of these methods is that they should not go beyond the legal field, that is, their implementation is carried out exclusively within the framework of the current legislation.
However, not everyone can clearly see the line between the tax optimization, tax minimization, tax avoidance and tax evasion. Many people, implementing tax planning, are guided precisely by the tax avoidance, which has a very fine line with such a concept as tax evasion. And this, in turn, often leads to problems with fiscal authorities and in some cases ends with additional charges, fines, and sometimes criminal cases.
It should be noted that tax planning is widely used throughout the world...
Until recently, offshore companies have been actively used by the Ukrainian entrepreneurs in international trade to reduce the tax burden and keep business confidentiality. We will consider in this blog whether the situation has changed in the conditions of global deoffshorization, and in particular, tightening of the Ukrainian legislation.
The field of trade has always been the simplest and most popular for offshore applications. One of the main goals of using offshore schemes in export-import transactions was to regulate the customs value of the goods, and, accordingly, the company’s trading profits. Offshore companies in such schemes were used as intermediaries between the seller and the buyer for the understatement of the value of goods during the export and overstatement - upon import.
However, the process of deoffshorization has reached our country. The provisions for the control of transfer pricing started working in the Ukrainian legislation. The Cabinet of Ministers has approved and periodically reviews the list of the countries with preferential taxation (it includes both classic offshores and jurisdictions, the income tax rate for the companies which have 5 or more...
Recently, the Internet is full of information that 2018 is the latest year when it is possible to purchase a vehicle that has been used for “preferential excise tax”.
As it is known, from 01.08.2016, the Law of Ukraine of May 31, No. 1389-19 on the stimulation and development of the market of second-hand vehicles, came into force. This law is valid until December 31, 2018 and provides for a significant reduction in excise tax rates for the import of used cars, subject to special conditions and restrictions.
We, in turn, are talking about the acquisition of a non-used and completely new car, using a ready-made business tool - a non-resident company.
The starting point of our acquisition is, in fact, the choice of a vehicle. In this case, the higher the cost of the car (its class), the more significant the saving will be.
So, in stages:
Choice of a vehicle. There are many online resources where you can have a great time choosing a vehicle. As an example, here is www.lexus.com. On this site, you can easily find the model you are interested in and choose the equipment that suits your needs. Perhaps, it will be necessary to enter the so-called postal code to search for the...
The partner of Finance Business Service Yuri Krasilnikov and tax disputes specialist Rolan Bondarets attended the V International Tax Forum, which took place on April 13, 2018. In this blog, we will tell how the event was held, what issues were most actively discussed by the participants, what points were voiced by the speakers, as well as share our own thoughts. The speakers were the representatives of business, representatives of the legislative, executive and judicial branches, as well as the specialists in the field of taxation. Many interesting and topical issues for Ukraine were discussed within the Forum.
At the beginning of the event, Algirdas Shemeta - the business ombudsman in Ukraine - recalled the reasons that led to the appearance of the BEPS (Base Erosion and Profit Shifting) plan and its essence. “Overoffshorization” of the world business became the catalyst of the world economic crisis of 2008-2009. This prompted the OECD to identify the main causes of the crisis, as well as to discover and develop the methods for its prevention in the future. In fact, BEPS has emerged as a protective mechanism to prevent tax evasion, which essence is that companies must be...
As we noted earlier, pursuant to the Law of Ukraine No. 2245-VII of 07.12.2017 “On Amendments to the Tax Code of Ukraine and certain legislative acts of Ukraine to ensure the balance of budget revenues in 2018”, the Cabinet of Ministers of Ukraine adopted Resolution No. 117 of 21.02.2018, which approved: “The procedure for suspension of registration of the tax invoice/calculation adjustment in the Unified Register of Tax Invoices”, “The organization of work of the commissions that decide to register a tax invoice/calculation adjustment in the Unified Register of Tax Invoices or refusal in such registration”, “Procedure for considering complaints against the decisions of the commissions that decide to register a tax invoice/calculation adjustment in the Unified Register of Tax Invoices or refuse to register them”.
If the basic algorithm for suspending the registration of tax invoices and calculation adjustments (TI/CA) has remained almost unchanged, then the order of their “unlocking” has undergone significant changes. We will figure out what exactly has been changed, and whether this will simplify the life of the taxpayers.
As before, the taxpayer will be...
In 2018, Estonia’s taxation system has been subjected to a number of changes. Here are the most significant of them:
A considerable leap in the registration threshold as a payer of sales tax from EUR 16,000 to EUR 40,000.
Reduction of the tax benefit on regularly paid dividends from 20% to 14%. For the first time, a reduced rate can be applied for dividend payments in the next year, taking into account that in 2018, the corresponding tax was levied at a rate of 20%. The benefit does not apply to the dividends received and already taxed. It also does not apply to the loans that are taxed as a hidden profit distribution. In 2019, the dividend amount will be taxed at a reduced rate, corresponding to one third of the dividends paid in the previous year. In 2020, this benefit will be applicable to the amount of dividends corresponding to one third of the dividends paid in 2019-2020, and in 2021 - to the amount equivalent to the average value of the dividends paid for the previous three years.
Introduction of new obligations for commercial organizations that issue loans to their stockholder, shareholder or member. We remind you that a commercial association pays...