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Singapore: Tax on Disposal of Foreign Assets

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Singapore: Tax on Disposal of Foreign Assets

During the summer, the Singapore Ministry of Finance released a proposal calling for the imposition of tax on the receipt in Singapore of proceeds of gains arising from the sale or disposal of foreign assets. When effective in 2024, the proposal will align Singapore law to guidance on economic substance prepared by the E.U. C.O.C.G. Unless prescribed or excepted, the proposal applies to all companies and limited liability partnerships resident in Singapore. In his article, Sanjay Iyer, the founder of Silicon Advisers, based in Singapore, explains the workings of the tax, including (i) entities that are within scope, (ii) entities that are not within scope, (iii) the definition of foreign assets, (iv) the circumstances in which proceeds are considered to be received in Singapore, and (vi) the ability to use losses from the sale of foreign assets to reduce the amount of foreign gain that is taxed on remittance to Singapore.

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Canada and the U.S. – Two Countries, One Border, Divergent Rules on Wealth Transfers

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Canada and the U.S. – Two Countries, One Border, Divergent Rules on Wealth Transfers

Canadians and Americans share many things in common. Common language, one border, a love for teams in the National Hockey League, a slew of dual citizen individuals in Canada and Canadian residents in the U.S., and a common history up to the time of the American Revolution. But many differences exist, nonetheless. To illustrate, when wealth is transferred, the U.S. imposes gift and estate taxes based on value. Canada imposes capital gains tax. The U.S. imposes income taxes on global income based on citizenship as well as residence. Canada imposes income tax on global income based only on residence. Canada imposes departure taxes when any resident leaves the country to establish a residence elsewhere. The U.S. imposes departure tax only when citizenship is renounced, or when a long-term green card holder relinquishes his or her green card. These differences trigger several tax traps, many of which can be avoided by unique provisions in the Canada-U.S. Income Tax Treaty. But the treaty is not perfect. In his article, Andreas Apostolides explains the taxation rules for wealth transfers in both countries, the applicable provisions in the income tax treaty designed to be helpful, and most importantly, a solution that is followed by many Canadian tax advisers when the treaty fails to provide a solution for disparities in adjusted cost basis for certain assets received as a gift or a bequest.

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Planning for Nonresident Investment in French Real Estate – The Choice of Company Matters

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Planning for Nonresident Investment in French Real Estate – The Choice of Company Matters

Among wealthy Europeans, it is common for those who are not French to own a secondary residence in France, and to do so through a company. Two recurring questions are posed to a French tax adviser representing a non-French client. Should the company be French or foreign? Should the company be subject to corporate tax or not? Sophie Borenstein, a Partner in the Paris office of Klein Wenner explains the variables that must be considered when providing answers. Some work in one set of circumstances and others work in other circumstances. Good advice must be tailored to the anticipated use of the property.

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Transfer of Business Contracts – I.R.S. Disagrees with Greenteam, No Capital Gains Without a Fight

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Transfer of Business Contracts – I.R.S. Disagrees with Greenteam, No Capital Gains Without a Fight

In an Action on Decision (“A.O.D.”) published in late 2019, the I.R.S. announced its nonacquiescence to the Tax Court’s decision in Greenteam Materials Recovery Facility v. Commr.  The case involved Code §1253, the provision that standardizes the rules under which payments that are incident to the transfer of a franchise, trademark, or trade name may or may not be properly treated as capital gains.  The case was decided in the taxpayer’s favor because the taxpayer’s agreement avoided all the terms that would otherwise cause the sales proceeds to be characterized as ordinary income.  The nonacquiescence means that the I.R.S. will not follow the holding in cases appealable in Circuit Courts of Appeals other than the 9th Circuit.  The I.R.S. position is that the assets were limited-term contracts to provide services under fixed-term arrangements and looked more like a sale of future income than the sale of an appreciated asset.  Lisa Marie Singh and Stanley C. Ruchelman discuss the case and the nonacquiescence, cautioning that a franchise contract that cannot appreciate over time because the payments are fixed in amount or in scope of service is not an appreciating asset in the eyes of the I.R.S.

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Alta Energy Affirms Treaty Benefits: A Canadian Case Study for Applying the M.L.I.

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Alta Energy Affirms Treaty Benefits: A Canadian Case Study for Applying the M.L.I.

As part of its attack on B.E.P.S., the O.E.C.D. published its Multilateral Instrument, a device that revised more than 1,200 income tax treaties. One of the provisions of the M.L.I. targets treaty shopping by the adoption of, among other things, a principal purpose test ("P.P.T."). In simple terms, the P.P.T. disallows a treaty benefit when a principal purpose of a transaction is to obtain that benefit. Transactions in accordance with the object and purpose of the provisions of a treaty are not affected by the P.P.T. Many North American tax advisers know that the P.P.T. is based on a provision of Canadian law known as the General Anti-Avoidance Rule or G.A.A.R. A recent decision of the Tax Court of Canada addresses the application of G.A.A.R. to a cross-border tax plan set up by a U.S. financial institution designed specifically to obtain enhanced Canadian tax benefits by rechanneling a U.S. investment in Canada into a U.S. investment into Luxembourg that was then invested into Canada. The Canada Revenue Agency ("C.R.A.") attacked the Luxembourg company's entitlement to treaty benefits relying heavily on G.A.A.R. Kristy J. Balkwill and Benjamin Mann of Miller Thomson L.L.P., Toronto, explain the decision and its potential impact on the P.P.T. The case has been appealed by C.R.A.

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India Budget 2018-19

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India Budget 2018-19

The Indian government announced its plans for the 2018–2019 budget year.  It is the last full budget before the 2019 Parliamentary elections and the first budget following the implementation of the landmark national G.S.T. regime.  Tax is reduced to 25% for domestic companies generating income of approximately $40 million or less.  The definition of the term “business connection,” the equivalent of a P.E. under domestic law, is broadened to cover agents having and habitually concluding contracts and circumstances where a nonresident has a significant economic presence.  A 10% tax is imposed on certain stock market gains.  Incentives are given to international financial services companies in the form tax exemptions for certain gains.  These and other provisions are explored by Jairaj Purandare of JPM Advisors Pvt Ltd, Mumbai, India.

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Foreign Partner Not Subject to U.S. Tax on Gain from Redemption of U.S. Partnership Interest

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Foreign Partner Not Subject to U.S. Tax on Gain from Redemption of U.S. Partnership Interest

Hurray!  After three years, the U.S. Tax Court ruled that gain from the sale of a partnership interest or the receipt of a liquidating distribution by a retiring partner is not subject to U.S. income tax even though the partnership conducts business in the U.S.  Neha Rastogi, Elizabeth V. Zanet, and Nina Krauthamer explain the reasoning behind the decision and the magnitude of the defeat for the I.R.S. Unless the case is reversed on appeal, the decision invalidates the I.R.S. position announced in Rev. Rul 91-32.

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Foreign Tax Credit May Not Be Available for Gains Derived Outside the U.S.

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Foreign Tax Credit May Not Be Available for Gains Derived Outside the U.S.

Merely because a foreign country imposes an income tax and the tax is creditable does not mean that effective relief from double taxation is available.  The U.S. retains the first right to tax income and gains that are domestic in character, and the income or gain on which the foreign tax is imposed must be categorized as foreign for relief to be provided.  Kenneth Lobo and Galia Antebi focus on this issue and advise that advance planning will be required.

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India Budget 2017-18

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India Budget 2017-18

Provisions in Budget 2017-18 announced by the Finance Minister that relate to infrastructure, the financial sector, accountability, prudent fiscal management, and tax administration reflect a view that times are changing in India.  The government appears to remain steadfast in its efforts to bring the Indian tax and regulatory environment up to global standards.  Jairaj Purandare of JPM Advisors Pvt Ltd, Mumbai, explains the focus of the budget

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The End of the Negotiation: Protocol to India-Mauritius Tax Treaty Finally Released

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After several years of negotiations, a new protocol to the Mauritius-India Income Tax Treaty has been agreed between the parties.  In a nutshell, India benefits from amended provisions that are in line with other bilateral treaties, while Mauritius benefits from the adoption of grandfathering provisions regarding capital gains from the disposition of certain shares.  Investors in both countries will benefit from greater certainty in taxing outcomes.  Anurag Jain and Parul Jain of Attorneys BMR & Associates L.L.P., Gurgaon, address the highlights of the new provisions.

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The Meanderings of the Taxation of U.K. Real Estate: Where Are We Going?

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For those who are considering the acquisition of U.K. real property for personal use, an unhappy surprise awaits. The U.K. government is actively waging a tax campaign against structures commonly used for these acquisitions and referred to derisively as “Enveloped Dwellings.” Increased stamp duty on land transactions, annual tax on Enveloped Dwellings and related capital gains charges, and extended scope of inheritance tax take the sizzle out of high-value purchases. Naomi Lawton of Memery Crystal L.L.P., London ruminates on this puzzling development.

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Mylan's Opposition to the I.R.S. – No Substantial Rights

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Last month, Christine Long analyzed the basis of the I.R.S. motion for summary judgment in Mylan Inc. v. Commr., a case addressing whether a license that relinquishes all substantial rights in a patent is the equivalent of a sale, so that basis can be recovered and capital losses can reduce the resulting capital gain. This month, she analyzes the taxpayer’s opposition to the motion. In addition to the existence of material questions of fact that were ignored by the I.R.S., the taxpayer argues economic substance in support of its position and evaluates the rights that were transferred and those that were retained.

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I.R.S. Argues Mylan's Contract is a License of Drug Rights – Not a Sale

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The question of the proper treatment of a contract transferring exclusive rights to the use of a patent – as a sale or a license – is one that has been addressed many times in U.S. jurisprudence.  It has recently popped up again in a case before the U.S. Tax Court involving the generic pharmaceutical giant Mylan Inc., a company that has been the subject of much negative publicity arising from its inversion and subsequent re-immersion as a U.S. domestic company. In September, the I.R.S. filed a memorandum in support of a motion for summary judgment. We explain the basis for the I.R.S. position and comment on its merits.

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