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Lawyer's Blogs by tag #Double taxation

Judicial double taxation as a result of conflict of connecting factors which are commonly used by States to establish jurisdiction to tax the profits of multinational enterprises

Published:   02.10.2018 | blog

The main connecting factors which are commonly used by States to establish jurisdiction to tax the profits of multinational enterprises are “residence” and “source”, which are linked to concepts of “nationality” and “territoriality” used in public international law. Notions of residence and source are recognized by both OECD and UN and are reflected in their tax treaty models. Under residence approach, a state imposes its taxing rights of legal entity or individual based on its relation to the person who derives income. Under source principle, a state assess legal entity or individual to tax based on its relation to assets that generate income. All the states use source principle to levy taxes on income generated within state’s territory. Some states invoke residence/nationality principle and thus tax their citizens and residential companies on their worldwide income (the USA, Russia, Finland, etc.). Some states adopted only territorial principle (Hong Kong SAR, Singapore, Malaysia, Panama, Costa Rica, etc.). However, and most of states utilize both principles. State practice in determining place of residence comprises two main tests: place of...

Nature and purposes of double taxation agreements and the issues of interpretation to which they may give rise

Published:   02.10.2018 | blog

Double Taxation Agreements (DTAs) are predominantly bilateral in nature. They are concluded on international level under international public law and thus on international level guarantee that they will become a part of domestic law of contracting states after their ratification. There are two ways how contracting states incorporate DTAs into their domestic legislation: Direct effect incorporation does not require any additional legal procedures, and DTA automatically becomes a part of domestic legislation right after its ratification (the USA, France, Switzerland, Luxemburg). In some jurisdictions a legislative act is required (Austria). Indirect effect incorporation needs special legislation for incorporation of DTA into its domestic law system (the UK, India). DTAs override domestic legislation, they prevail over internal laws and regulations. There are three main models of DTAs: The US Model Treaty (updated in 2016) is used by the USA in negotiations with other states, with inclusion of citizenship and focus on limitation of benefits. The UN Model Treaty (updated in 2017) is used by developing countries, allocates more taxing rights for source countries. ...

Analysis of exchange of tax information and investment in exchange for citizenship, taking into account the first results of the discussion organized by the OECD

Published:   24.05.2018 | blog

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); Italian...

New EU Directive to Resolve Double Taxation Disputes Has Been Adopted

Published:   09.11.2017 | blog

The existing European mechanisms for arbitration resolution of tax disputes on double taxation, prescribed in tax agreements and in accordance with the EU Arbitration Convention, do not always result in effective resolution of tax disputes. The recent monitoring carried out by the Council of the European Union revealed certain shortcomings, especially in relation to accessibility of dispute resolution mechanisms, as well as the length and effective conclusion of the procedure. According to the European Commission, the estimated figure of tax disputes on double taxation in the EU is about 900, with approximately 10.5 billion euros at stake. In this regard, on October 10 this year, the EU Council approved the Directive to resolve tax disputes (hereinafter - the Directive). The directive is aimed at changing the current situation, when the scope for mandatory arbitration in dispute resolution is limited to the issues of transfer pricing adjustments and the profit distribution of related persons. Thus, legal persons and natural persons will be able to resolve all disputes related to the interpretation and application of agreements that provide for the elimination of double taxation...

Future changes in the Convention between Ukraine and Cyprus on avoidance of double taxation

Published:   29.09.2016 | blog

The Ukrainian parliament is currently being finalized for submission to the discussion of the draft law on ratification of the Protocol amending the Convention between the Government of Ukraine and the Government of the Republic of Cyprus for the avoidance of double taxation and prevention of tax evasion on income tax. This Protocol provides for changes in the taxation of dividends, interest on loans, as well as the alienation of the property income. With regard to dividends, the top rate will be reduced from 15 to 10%. But lower tax rate - 5% survive only if ownership of at least 20% of the capital of a legal entity. But how exactly a person - remains a mystery, as in the original text of the Protocol stated "Partnership About", ie the "Partnership", while the bill "Partnership About" translated as "Society". As such, this provision leaves room for corruption because it allows you to abuse the tax authority in determining the rate that must be applied by the payer. The rate of taxation of interest on loans increased from 2% to 5%. Changes are also proposed concerning the taxation of income from the alienation of shares and corporate rights. Unfortunately, due to the incorrect...