Members of Ruchelman P.L.L.C. contribute to publications throughout the world and the Firm’s monthly tax journal, Insights.
In his article entitled “D.A.C.6 in Ireland – Key Features of the Administrative Guidance,” Martin Phelan of Simmons & Simmons, Dublin, addresses the rules that apply to “cross-border arrangements” that will be reportable if one or more relevant “Hallmarks” are applicable. His F.A.Q.’s allow the reader to focus easily on the most important issues and answers.
Read MoreIn her article entitled “D.A.C.6 Implementation in Cyprus,” Nairy Merheje, of Der Arakelian-Merheje LLC in Nicosia, explains how Cyprus intends to overcome these challenges so that the Cyprus government can target and capture potentially aggressive tax planning arrangements resulting in tax base erosion of one or more E.U. Member States.
Read MoreThe concept of a “tax home” is somewhat difficult to explain to persons resident outside the U.S. It has its origin in case law involving taxpayers who work at a temporary location for a finite, but long, period of time. Could the taxpayer deduct living costs incurred in the temporary location when the assignment bears a resemblance to a business trip, albeit for a much longer period of time. From there, it morphed into a requirement for U.S. expats wishing to claim the benefit of the foreign earned income exclusion and its companion provision, the housing deduction. In the case of a pilot who flies between a rotation of airports, and in many instances, between a rotation of countries, what test is used to determine the pilot’s tax home? Is it where the pilot happens to be at any time as is the rule for an itinerant worker? Is it where the pilot lives with his family? Is it the starting place for an outbound journey? Is it another place? Gianluca Mazzoni, who holds an S.J.D. ‘20 and L.L.M. ’16 from the University of Michigan Law School, analyzes Cutting v. Commr., a case involving a pilot. The article address the terms “bona fide resident” and “place of abode,” each of which has a meaning for expats claiming the benefits mentioned above.
Read MoreThe Corporate Transparency Act (“C.T.A.”) was signed into law during the waning days of the Trump Administration. When effective, the C.T.A. will require businesses to disclose Beneficial Owner information to FinCEN at the time of company formation and when material changes are made in a subsequent year. Roxana Diaz, Corporate Administrator in the Miami Office of Corpag Registered Agents (USA), Inc., answers the eleven most important questions that affect persons incorporating a business and the professionals providing advice or assistance in the incorporation process.
Read MoreThe French Trust Register was introduced in December 2013 by a law enacted to stop tax fraud and serious economic and financial crimes. In October 2016, the French Constitutional Court ruled that public access to the Trust Register was unconstitutional. In the period since that decision, French authorities have issued two rulings allowing a broad class of persons to gain access to trust data. including tax officers, customs officials, professionals having compliance duties to combat money laundering and terrorist financing, journalists, and N.G.O.’s. Dimitar Hadjiveltchev, Partner, Adea Meidani, Counsel, and Loïc Soubeyran-Viotto, Associate, all of CMS Francis Lefebvre Avocats in Paris, address recent events regarding French tax treatment of foreign trusts and beneficiaries. They begin with the trust register – who must report, what must be reported and who have access – and move on to explain the myriad of taxes that may be imposed on trusts, settlors, and beneficiaries including income tax on distributions, inheritance and gift taxes, and real estate wealth tax.
Read MoreAt midnight on the December 31, 2020, the U.K. left the E.U., having secured a Free Trade Agreement (“F.T.A.”). The farewell headline grabber in the drawn-out departure process relates to D.A.C. 6, the Mandatory Disclosure Reporting (“M.D.R.”) rule that applies to Intermediaries. Beginning in 2021, the only reporting that will be required in the U.K. will involve the Category D Hallmark. It applies to fact patterns that are designed to hide ownership. Here, reporting will be required to maintain the integrity of the O.E.C.D. M.D.R. Gary Ashford, a Partner (non-lawyer) of Harbottle and Lewis L.L.P., London, explains the Category D Hallmark and the ongoing reporting requirements that apply to U.K.-based intermediaries after Brexit.
Read MoreIn a post B.E.P.S. world, tax transparency is a mantra among stakeholders in government, media, and nongovernmental organizations. The taxpayer may own the funds, but the stakeholders wish to ensure that a chunk of the funds are spent as they deem appropriate. In this environment, governments have a stake in obtaining information on where taxpayers hold their funds and exchanges of information between governments has become a regular occurrence. In the European Union, questions arise as to whether an information request violates a taxpayer’s fundamental rights, and in the event of a fishing expedition, whether the taxpayer has an effective remedy. In a recent decision issued by the E.C.J., the court held that financial institutions holding information have rights to intervene, but not taxpayers must wait until a tax authority assesses tax. Werner Heyvaert, a partner in the Brussels Office of AKD Benelux Lawyers and Vicky Sheikh Mohammad, an associate in the Brussels Office of AKD Benelux Lawyers, explain the rationale of the court and question the validity of its conclusion.
Read MoreAs 2020 comes to a close, Subpart F is approaching its 59th anniversary as part of the Internal Revenue Code. During that period of time, various portions have been revised, but by and large, the branch rule has remained untouched. Under that rule, a C.F.C. based in a country that exempts income of a permanent establishment can be treated as two companies where manufacturing takes place in one country and selling activity takes place in a different country. From a U.S. viewpoint, the same abusive tax planning can be undertaken between the head office and the branch as can be undertaken between brother-sister or parent-subsidiary C.F.C.’s. Nonetheless, no taxpayer ever lost a case brought by the I.R.S. until this year. In Whirlpool Financial Corp. v. Commr., Whirlpool Corporation determined that the branch rule regulations were invalid when manufacturing operations were conducted by the branch and selling activities were conducted by the head office. Arguing that the law permitted the loophole because a single corporation conducted the manufacturing operations, Whirlpool became the first U.S. Shareholder to lose a case in which the I.R.S. asserted the application of the branch rule to a manufacturing branch. Gianluca Mazzoni, S.J.D. 2020 and L.L.M.2016 International Tax, University of Michigan Law School, explains the plan that was adopted, the argument presented by the taxpayer, the decision of the court, and the likely issues that will be addressed on appeal.
Read MoreIn late 2019, the I.R.S. proposed regulations modifying rules for determining the source of income from sales of inventory property produced by a taxpayer outside the U.S. and sold within the U.S., or produced by the taxpayer within and sold without the U.S. Final regulations were published in October. The regulations implement changes made by the Tax Cuts and Jobs Act provide guidance under Code §865(e)(2) regarding sales of inventory through a U.S. office or fixed place of business. In her article, Léa Verdy, an attorney admitted to practice in New York and Paris, presents the sourcing rules for sales of inventory before the T.C.J.A, the changes implemented by the T.C.J.A., the guidance offered by the I.R.S., and the consequences of the regulations for taxpayers.
Read MoreRemember when tax planning was an exercise in solving two or three potential issues for a client? Memorandums ran eight pages or so. Those days are long gone, especially when planning for a non-U.S. individual’s purchase of a personal use residence in the U.S. A myriad of issues pop up once the property is identified, so that planning which begins at that time often misses significant tax issues encountered over the period of ownership and beyond. Michael J.A. Karlin, a partner of Karlin & Peebles, L.L.P., Los Angeles, and Stanley C. Ruchelman, address the big-picture issues in an article that exceeds 50 pages. Included are issues that arise leading up to the acquisition, during ownership and occupancy, the time of disposition, and at the conclusion of life. The article is the “go-to” document for tax planners.
Read MoreDAC6, adopted by the European Commission and enacted into law in the U.K., imposes a mandatory obligation on intermediaries, or individual or corporate taxpayers, to make disclosures to H.M.R.C. of certain cross-border arrangements and structures that could be used to avoid or evade tax. It also provides for automatic exchanges of information among E.U. Member States. Intermediaries know a cross-border arrangement is reportable when it meets certain hallmarks. In his article, Gary Ashford, a non-lawyer partner of Harbottle & Lewis, London, explains in plain English all the key terms and obligations. The European Commission has proposed that Member States defer the start date for reporting, however, the U.K. Government has not made any public announcement. This article is timely for those who are intermediaries in a reportable transaction.
Read MoreIn almost every country, the way real estate investments are taxed depends on a wondrous blend of factors, including the status of the owner of the property (individual or corporation), the nature of the asset (residential property, commercial property, land) and the purpose of investment (producing rental income or entrepreneurial profit). Israel is no different. In their article, Anat Shavit, a partner of Fischer Behar Chen Well Orion & Co. in Tel Aviv, and Ofir Fartuk, a senior associate at the same firm summarize the main factors one should take into consideration when contemplating real estate-related investments in Israel.
Read MoreAs a result of a favorable vote last year, T.R.A.F. – the tax reform in Switzerland – came into effect on January 1, 2020. T.R.A.F. was crafted to generate additional revenue for cantons, enhance old age pensions and survivors insurance funding, and reform corporate tax rules. Peter von Berg of Blum&Grob Attorneys at Law in Zurich, Switzerland, identifies the major changes for companies and individuals and provides examples of the effects on various entities.
Read More· For U.S. tax advisers not versed in Dutch labor law, the world of employee rights and employer obligations is a thing to behold. To illustrate, in 2015, the Dutch parliament enacted a law under which an employee in the Netherlands having spent 104 weeks on paid sick leave is entitled to a transition payment if the employment contract was terminated by the employer. However, many employers attempted to avoid the payment by retaining these employees under “dormant contracts,” where the contract remained in force but there was no position available and no pay. New legislation effective April 1, 2020, breaks the deadlock. The transition fee remains in effect, but all or most of the payment is funded on a deferred basis by the Dutch government. Rachida el Johari and Madeleine Molster of Saguire Legal, Amsterdam, the Netherlands, explain how the Compensation Regulation works and propose a winning strategy for employers.
Read MoreOne of the most significant outcomes of the B.E.P.S. Project is the signing of the multilateral instrument (“M.L.I.”) in 2017. The O.E.C.D. initiated the B.E.P.S. Project in 2013 with a view to curtail tax avoidance. The M.L.I. addresses B.E.P.S. concerns in thousands of bilateral tax treaties through one common treaty. India has been at the forefront of implementing B.E.P.S. measures, and India’s covered tax treaties will need to be read with the M.L.I. from April 1, 2020. Sakate Khaitan of Khaitan Legal Associates, Mumbai, India, and Abbas Jaorawala, a chartered accountant and consultant to that firm, explain India’s positions on various provisions of the M.L.I. for those engaged in trade or investment opportunities relating to India.
Read MoreFor decades, the German Real Estate Transfer Tax Act ("gRETT Act") has imposed a transaction tax on the sale of real estate in Germany. In recent years, the tax has applied to the sale of shares that indirectly transfer real estate located in Germany. When initially enacted, a sale of all shares was taxable under the gRETT Act. In the year 2000, the triggering percentage was reduced to 95%. Last year, proposed legislation would have reduced the triggering percentage to 90%, but the draft bill was never enacted. In 2020, the triggering percentage may be reduced to as low as 75% or some other percentage whenever new legislation is adopted. Exactly what constitutes an indirect sale of German real estate is surprisingly broad, and unlike comparable taxes in other countries, the sales need not be related nor contemporaneous. In recent years, a populist clamor has arisen to broaden the scope of indirect transfers subject to the tax. Michael Schmidt of Schmidt Taxlaw, Frankfurt am Main, Germany, explains how and when the tax is imposed under current law and how it may be modified in the coming months.
Read MoreHow does a country adopt a law to tax the income of an entity that generally is not recognized under local law? In Portugal, there is room for improvement. The 2014 reform of the Portuguese Personal Income Tax ("P.I.T.") Code introduced certain taxing provisions that specifically address "fiduciary structures," the Portuguese term for trusts. Two separate categories of payments were established for purposes of imposing tax. Under the first category, all amounts paid or made available to a Portuguese tax resident are taxable. This includes capital distributions. Under the second category, gains realized by the taxpayer who formed the fiduciary structure are taxed at the time of a final distribution incident to the structure’s liquidation, unwinding, or termination. Other beneficiaries can receive liquidation distributions without suffering any tax. João Luís Araújo and Álvaro Silveira de Meneses of Telles Advogados, Porto and Lisbon, Portugal, suggest that solid arguments support the view that certain distributions should be seen as outside the scope of the P.I.T. Code, including (i) distributions of trust capital to the settlor during the ongoing existence of a trust and (ii) distributions to non-settlors that are akin to gifts.
Read MoreWhile tax rules generally appear to be similar in India and the U.S., several divergent provisions in the domestic law of each country produce adverse consequences for those who are not well-advised. The prime example involves the taxation of gains from the sale of shares of an Indian company by a U.S. person: India sources the gain based on the residence of the target while the U.S. sources the gain based on the residence of the seller. No relief from double taxation is provided, notwithstanding the capital gains and relief from double taxation articles in the U.S.-India income tax treaty. The result is tax that can be as high as 43.8% of the gain. Rahul Jain and Sanjay Sanghvi of Khaitan & Co., Mumbai, India, along with Neha Rastogi and Stanley C. Ruchelman explain the problem and, more importantly, suggest a path forward for U.S. individuals realizing sizable gains.
Read MoreNew U.K. tax rules are being introduced from April 2020 to make businesses liable for determining the employment tax status of contractors who work through personal service companies (“P.S.C.’s”). These outsourcing arrangements have had a devastating effect on tax collections and funding for National Insurance, the U.K. version of Social Security. The goal of the new rules is to make customers of P.S.C.’s liable for collecting wage withholding tax and National Insurance contributions that are not collected by the P.S.C. when the worker of the P.S.C. would otherwise be properly characterized for U.K. tax purposes as an employee of the customer of the P.S.C. under tests published by H.M.R.C. Any company involved in the P.S.C. arrangement may have inchoate liability for payments of wage withholding tax and National Insurance. Penny Simmons, of Pinsent Masons LLP, London, explains the scope of the exposure and expounds on procedures that should be adopted in advance of the April 2020 effective date.
Read MoreIn an age of multilateral agreements to exchange information and other agreements to cooperate in the collection of taxes of another country, many people are unaware of the “revenue rule.” This common law doctrine allows courts to decline entertaining suits to collect tax or enforce foreign tax judgments. In their article, Sunita Doobay of Blaney McMurtry L.L.P., Toronto, and Stanley C. Ruchelman explore (i) the general development of the revenue rule, (ii) its extension to North America, (iii) the applicable provisions of the Canada-U.S. Income Tax Treaty allowing for assistance in the collection of tax and exchange of information, (iv) one U.S. wire fraud case involving evasion of foreign import duties, and (v) several recent cases in the U.S. where taxpayers raised creative arguments to attack the validity of treaty provisions, but to no avail.
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