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Bulletin 39Printable Version
TAX POLICY: Most preferential tax regimes now abolished, says OECD
Most of the world’s financial centres have kept their promises to abolish preferential tax regimes in 2018, says the OECD in its latest review of harmful tax practices. Only seven regimes are still recognised as ‘harmful’ or ‘potentially harmful’ by encouraging profit-shifting.
BRITISH VIRGIN ISLANDS: Economic substance legislation passed in good time
The BVI’s Economic Substance (Companies and Limited Partnerships) Act 2018 concluded its passage through the House of Assembly on 19 December, and came into force on 1 January. It is intended to address the European Union’s concerns over economic substance and keep the BVI off the next edition of the EU blacklist of non-cooperative jurisdictions, now being compiled. Existing legal entities have until 30 June 2019 to comply.
NETHERLANDS: Extended blacklist includes Jersey and Guernsey
It is reported that the Dutch finance ministry has issued a new blacklist of 16 low-tax jurisdictions, which include Guernsey and Jersey. Companies based in listed jurisdictions will have to pay an extra 20.5 per cent withholding tax on interest and royalties received from the Netherlands from 2021.
EUROPE: Luxembourg and Ireland face court over 4AMLD failures
It has emerged that the European Commission has referred Luxembourg to the European Court of Justice (ECJ) for not completely implementing the EU Fourth Anti-Money Laundering Directive (4AMLD), almost 18 months after the 26 June 2017 deadline. The Commission proposes that the ECJ charges a lump sum and daily penalties until Luxembourg takes appropriate action. Two other Member States are at the stage of court referrals (Romania and Ireland), one is on hold (Greece), nine at the stage of Reasoned Opinions, and eight at the stage of letters of formal notice for delaying 4AMLD, while the EU has already adopted a Fifth Anti-Money Laundering Directive.
EUROPE: Anti-avoidance directive now in force
The EU Anti-Tax Avoidance Directive (ATAD) came into force on 1 January, aiming to eliminate the most common corporate tax avoidance practices. All Member States must now apply new legally binding anti-abuse measures that target the main forms of tax avoidance by profit-shifting.
AUTOMATIC EXCHANGE OF INFORMATION: Costs of EU’s exchange procedures wipe out additional tax revenues
Several EU Member States make virtually no use of taxpayer account information they receive from other European jurisdictions under the automatic exchange of information rules, according to a European Commission report. Moreover, even for those that do use it, the costs of operating the system are so high that the only real benefit to their tax authorities is its deterrent effect on taxpayers, not additional tax revenues.
EUROPE: Commission proposes removal of veto in common tax policy
The European Commission is consulting on proposals to allow EU tax policy decisions to be reached by qualified majority voting, rather than requiring unanimous agreement by all Member States. The insistence on unanimity has enabled some smaller Member States to veto tax directives that they feel will disadvantage them, and the proposal is likely to meet strong opposition from various governments when it is tabled at the EU leaders’ summit next May. The consultation period ended on 17 January 2019.
IRELAND: Investigations bring in over half a billion in unpaid tax
Compliance interventions by the Irish Revenue Authority netted EUR572.6 million of unpaid tax in 2018, according to its latest report.
CORPORATE TAXATION: Google moved final few billions with ‘Double Irish’ technique
US technology giant Google moved nearly EUR20 billion of international royalties’ revenue into a Bermudan subsidiary in 2017, according to financial reports filed by its Dutch subsidiary, Google Netherlands Holdings BV. The so-called Double Irish, Dutch Sandwich strategy used by Google for profit shifting is still allowed by Ireland, but will be phased out next year.
ITALY: Seven per cent tax rate pitched to attract retired migrants
Italy’s 2019 Budget introduces a new tax regime encouraging retired foreign persons to take residence in certain areas of the country. As from 1 January 2019, those receiving pensions can elect to pay a 7 per cent flat-rate tax on all their foreign-sourced income and gains – not just their pension income – as well as being exempted from wealth taxes on foreign assets.
UK: Opportunity to disclose tax avoidance by profit diversion
HM Revenue & Customs has announced a Profit Diversion Compliance Facility (PDCF), allowing multinational enterprises to disclose their use of cross-border arrangements to artificially reduce their UK profits, including arrangements targeted by the diverted profits tax (DPT) legislation. HMRC will also be issuing warning letters to certain businesses assessed as high risk, advising them to use the PDCF and consider registering for the Compliance Facility if they have outstanding liabilities for diverted profits.
NETHERLANDS: Full details of extended ‘blacklist’ of non-cooperative jurisdictions
Expert analysis is now available regarding the ‘blacklist’ of 16 low-tax jurisdictions published by the Dutch finance ministry at the end of 2018. The list is a consequence of new rules on taxation of controlled foreign companies (CFCs), triggered by the EU Anti-Tax Avoidance Directive for tax years starting on or after 1 January 2019. They require a higher tax rate on undistributed passive income derived from a CFC in the Cayman Islands, the Bahamas, Bermuda, the British Virgin Islands, Guernsey, the Isle of Man, Jersey, Turks & Caicos Islands, Belize, Anguilla, Bahrain, Kuwait, Qatar, Saudi Arabia, Vanuatu and the United Arabic Emirates, as well as the five others on the EU list of non-cooperative countries.
UK CORPORATE TAXATION: ‘Concerted investigations’ into multinational tax avoidance will follow disclosure opportunity
Much professional comment has appeared on the new opportunity being offered to multinational companies to disclose dubious cross-border tax arrangements, especially those regarding intellectual property assets. Multinationals that take advantage of HMRC’s Profit Diversion Compliance Facility will receive lower penalties, and will be less at risk of a criminal investigation.
BENEFICIAL OWNERSHIP: British Overseas Territories’ public registers deadline slips to 2023
Britain’s Overseas Territories will not be forced to establish public registries of company beneficial ownership until 2023 at the earliest, rather than the 2020 deadline demanded by members of the UK parliament last May, it has emerged.