December 04, 2024

Recent Developments to Combat Tax Avoidance in Germany

December 04, 2024/ Ruchelman P.L.L.C.

“Paper is patient.” This is a common German saying, typically used to highlight the sluggishness of processes and plans of all kinds. However, paper can also catch up with you or even take you by surprise in a way that may be embarrassing or worse when your name pops up in leaked information relating to offshore accounts. Jurisdictions with preferential tax regimes are under the scrutiny of tax and investigative authorities in Germany. This affects multinational corporations, family offices, entrepreneurial families, and wealthy private individuals who invest their assets internationally in a diversified and international manner. Dr. Marco Ottenwälder, a partner in the Frankfurt Office of Andersen Tax, and his colleague, Andreas Gesel, a senior associate of the firm, explain recent measures taken in Germany to combat tax avoidance and follow up with recent practical experience. The tax authorities are aggressive, exit tax has a wider scope than might be commonly expected, and unhappy events occur for individuals and associated companies stemming from arrival in Germany and also departure. Not a pretty sight.

October 03, 2023

Changes Announced to Dutch Entity Classification Rules and Tax Regimes for Funds

October 03, 2023/ Ruchelman P.L.L.C.

In the Netherlands, the third Tuesday in September, known as Princes’ Day, marks the opening of the new parliamentary year. The budget for the coming year is announced, including an accompanying Tax Plan. The 2024 Tax Plan was presented by the sitting Dutch government, which is merely a caretaker until a new coalition is formed in November. This year, the Tax Plan contains provisions that will have a significant impact on businesses and financial institutions, particularly in relation to Dutch investment institutions. One major goal is to simplify the tax characterization of various entities to eliminate the opportunity of planning through hybrid entities. The distinction between open and closed C.V.’s is eliminated. The possibility of planning for an F.G.R. to be opaque or transparent is mostly eliminated, but for those F.G.R.’s that adopt the redemption method as the exclusive means of disinvesting in a fund. Where transparent, an F.G.R. will not be eligible to benefit from the V.B.I. regime for collective investment vehicles and its 0% rate of tax. Paul Kraan, a tax partner at Van Campen Liem in Amsterdam, explains all, and advises that the general consensus in the Netherlands is that the legislative process should continue, having been subject to public consultation previously.

March 28, 2023

A.T.A.D.3 and How to Deal With Uncertainty in its Interpretation: A Quantitative Approach

March 28, 2023/ Ruchelman P.L.L.C.

A.T.A.D.3 adds a layer of complexity to an increasingly complex tax world. To illustrate, the rules under the Unshell Directive appear clear, but are nothing short of ambiguous. Moreover, certain elements of the A.T.A.D.3 analysis depend heavily on the facts and circumstances of the case, which often are not binary. Many questions are raised, and the answers affect the way operations will be carried out. Is an entity affected by A.T.A.D.3? What is A.T.A.D.3’s expected impact on a structure? Should an entity report as a shell entity in its tax return? Can a position be improved and is it worthwhile to do so? Firm answers do not come easily and nuanced responses by advisers often mean one thing to the adviser and another thing to the client. In their article, Stephan Kraan and Mark van Casteren, Partners in Huygens Quantitative Tax Consulting, Amsterdam, suggest that the proper approach involves quantitative analysis rather than qualitative advice. The goal is to adopt a statistical approach to evaluate potential results based on probability. At that point, rational decisions can be made by management and advisers. It is a fascinating read.

March 30, 2022

Use it or Lose it: The Future of Shell Entities in the E.U.

March 30, 2022/ Ruchelman P.L.L.C.

Shortly before Christmas, the European Commission published a proposal for a directive laying down rules to prevent the misuse of shell entities for improper tax purposes. The “Unshell Directive” applies to any company or other “undertaking,” regardless of its legal form that (i) is considered tax resident in an E.U. Member State and (ii) is eligible to receive a tax residency certificate. Targeted by the Unshell Directive are entities that have the following characteristics: (a) they lack real economic activities, (b) they are involved in certain cross-border arrangements forming a scheme to avoid and evade taxes, and (c) they allow their beneficial owners or parent company to access a tax advantage. Paul Kraan, a tax partner at Van Campen Liem in Amsterdam, explains the general exemptions, the gateway indicators, the reporting obligations, the presumptions, and potential rebuttals in this attack on certain special purpose vehicles.

January 28, 2019

2019 Welcomes New Finnish Interest Deduction Limitations

January 28, 2019/ Ruchelman P.L.L.C.

Changes to the Finnish interest barrier regime have come into effect in 2019. They have been expected since 2016, when the E.U. released its Anti-Tax Avoidance Directive (“A.T.A.D.”), which sets forth the minimum standards for interest deduction restrictions within the E.U. The limitations affect E.B.I.T.D.A.-based rules (i.e., addressing earnings before interest, tax, depreciation, and amortization) adopted in 2014, which include the specific interest barrier rule affecting the deductibility of intra-group interest payments. Antti Lehtimaja and Sanna Lindqvist of Krogerus Ltd., Helsinki, explain the key elements of the new restrictions, including some considerations regarding the impact on Finnish taxpayers and investments in Finland.

October 31, 2018

Dutch Corporate Tax Reform: Dividend Tax Remains, A.T.A.D. Arrives, and Tax Rates Drop

October 31, 2018/ Ruchelman P.L.L.C.

Across the globe, the landscape for international tax is in a constant state of change. Nowhere is this more evident than in the Netherlands. On the third Tuesday of September, a repeal of the dividend withholding tax was announced. Within a month, it was withdrawn. Paul Kraan, a partner of Van Campen Liem in Amsterdam, discusses the remaining tax proposals presented by the Dutch government on the eve of the third Tuesday of September. These include provisions related to A.T.A.D. 1, such as G.A.A.R., an exit tax for corporations, a C.F.C. anti-abuse rule, and a cap on the deductibility of net interest expense. Also discussed is an existing unilateral exemption from withholding tax on cross-border dividend payments in (i) the context of an income tax treaty and (ii) the presence of economic substance for the direct or indirect shareholder. This exemption is likely to remain in the law.

September 26, 2018

Hybrid Mismatches: Where U.S. Tax Law and A.T.A.D. Meet

September 26, 2018/ Ruchelman P.L.L.C.

When U.S. tax planners attend foreign conferences, it is not uncommon to hear pointed barbs that the U.S. is an outlier when it comes to rules enforcing “best practices” on global business transactions. However, when it comes to reverse hybrids and hybrid mismatches, the rules are not all that different on both sides of the Atlantic. Fanny Karaman and Beate Erwin compare approaches taken by ATAD 2 with U.S. tax law after the Tax Cuts and Jobs Act.