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How New York Courts Provide Broad Support to Parties Engaged in International Arbitration and Litigation

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How New York Courts Provide Broad Support to Parties Engaged in International Arbitration and Litigation

Why is an international tax journal addressing the broad scope of remedies available to parties in foreign litigation or arbitration? The reason is simple. Clients enter transactions, transactions blow-up, and parties sue or can be sued. Even if the parties, the contract, or the dispute at issue have little or no connection to New York, potential documents, assets, or witnesses may be located within the State. If so, New York courts can provide tools (i) to obtain broad information vital to a pending foreign proceeding, (ii) to attach assets to secure an ultimate recovery or incentivize settlement, or (iii) to enforce final judgments or awards, including seizure of assets and other post-judgment remedies. These are important tools to a litigator. Dan J. Schulman, a commercial litigator based in New York, explains all. He has over 35 years of experience managing complex commercial litigations, arbitrations, and appeals in New York, and shares the tools that are available to parties in a litigation.

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Five Reasons Why the Legal Professional Privilege of Belgian Lawyers is Incompatible With the Mandatory Reporting Under D.A.C.6

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Five Reasons Why the Legal Professional Privilege of Belgian Lawyers is Incompatible With the Mandatory Reporting Under D.A.C.6

D.A.C.6 in the E.U. requires Member States to impose a disclosure obligation on intermediaries who advise on, or are involved in, implementing aggressive cross-border arrangements. This poses a conundrum for tax lawyers involved in a transaction because, whatever they do, rights of taxpayers and duties of attorneys to maintain client confidences may be ignored, or significantly cut back. In Belgium, the approach is to ignore Belgian case law that recognizes the obligations of lawyers to keep confidences and forces attorneys to violate various obligations to clients. Not surprisingly, the Belgian Bar Councils and the Belgian Association of Tax Lawyers have challenged the restrictive interpretation of the L.P.P. before national and European courts. Werner Heyvaert, a partner at the Brussels office of AKD Benelux Lawyers, and Vicky Sheikh Mohammad, an associate at the Brussels Office of AKD Benelux Lawyers, explain the five reasons why Belgian implementation of D.A.C.6 is flawed. The case is currently under consideration by the C.J.E.U.

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The Importance of Earnestly Modeling Earnouts: Pitfalls and Planning Relating to the Purchase of a Service Business

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The Importance of Earnestly Modeling Earnouts: Pitfalls and Planning Relating to the Purchase of a Service Business

In representing a taxpayer interested in purchasing a business, it is important for tax counsel to understand, in simple terms, what each party is seeking to accomplish. The tax adviser’s greatest contribution is often simply asking the right questions and then taking the time to think through the structure from different angles in a manner that helps the client reach a decision. In a light-hearted approach to the subject, Andreas Apostolides takes the reader through the various alternatives available in negotiating the purchase and sale of a service business conducted through a tax-transparent entity such as an L.L.C. Some alternatives may work; others may not.

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The Cameco and Glencore Transfer Pricing Cases – Comments on the Common Complications in Commodities Commerce Controversy

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The Cameco and Glencore Transfer Pricing Cases – Comments on the Common Complications in Commodities Commerce Controversy

Two transfer pricing cases, Commissioner of Taxation of the Commonwealth of Australia v Glencore Investment Pty Ltd. in Australia and Cameco Corporation v. Her Majesty The Queen in Canada, address arm’s length transfer pricing methodology for mined minerals during a period of steep increases in spot prices. In each case, the revenue authority challenged the taxpayer’s revision of pricing from the use of fixed prices to adjusted prices that were comparable in methodology to contemporaneous uncontrolled transactions. Each case was decided in favor of the taxpayer. Michael Peggs explains the reasons why the approaches of the tax authorities were rejected. He cautions that the precedential value of the cases may be limited in light of changes made in the 2017 version of the O.E.C.D. Guidelines. One ongoing takeaway from the two cases is that, to settle a transfer pricing dispute, a large multinational company must be prepared to make significant investments in data gathering, executive, time, and cost of litigation.

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Domestic Trust – Does Yours Satisfy the Court Test?

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Domestic Trust – Does Yours Satisfy the Court Test?

In comparison to tax laws in many countries, where the tax residence of a trust may depend on the residence of the trustee or the relevant law for the trust, U.S. tax law provides that the residence of a trust is dependent on two factors. All trusts no matter where formed are considered to be foreign trusts unless two tests are met, causing the trust to be considered a domestic trust. The first is a court test, under which a U.S. court is able to exercise primary supervision over trust administration. The second is a control test, under which U.S. persons control all substantial trust decisions. Nina Krauthamer and Galia Antebi point out that while the tax law is clear, applicable trust law – not tax law – may contain hidden risk regarding the court test. Comments to Section 108 of the Uniform Probate Code and Uniform Trust Code provide that the identification of a trust’s principal place of administration will ordinarily determine which the court that has primary jurisdiction over the trust. Advisers representing foreign families should be mindful because facts change and unknown facts may exist. Officers of a privately held trust company may live and carry out their duties outside the U.S. or an individual trustee may move outside the U.S. Where either fact exists, a U.S. domestic trust may find that it has become a U.S. foreign trust. The result may not be pretty.

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Taxation of Foreign Pensions in Ireland – Walking the Tricky Tightrope

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Taxation of Foreign Pensions in Ireland – Walking the Tricky Tightrope

As more individuals relocate to Ireland, the taxation of assets brought with them takes on importance once Irish tax residence is established. Of special concern are pension products that individuals accumulate while living and working outside of Ireland. The taxation of lump sum payments from foreign pensions is a complex affair. Under Irish law, most foreign pensions schemes are considered nonqualifying overseas pension plans. Consequently, lump sum payments from such pension plans should not be taxable in Ireland because no domestic legislation exists to tax lump sums. Lisa Cantillon, a Director in the Dublin office of KTA, explains all, but cautions that the Irish Revenue have a different view, notwithstanding the absence of statutory support.

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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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Swiss Update on Trust Regulation and Taxation

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Swiss Update on Trust Regulation and Taxation

Trusts have been of great importance to advisors all over the world. Even though trusts are mostly found in common law systems, several civil law jurisdictions have implemented the concept of trusts. To date, there is no such thing as a Swiss trust or Swiss trust law. However, Switzerland recognizes the concept of a trust. In their article, Peter von Burg, a partner at Burckhardt Ltd. in Zürich, and Matthias Gartenmann, a Swiss tax lawyer based in Zürich, provide an overview of taxation of trusts in Switzerland. One interesting aspect addressed in the article relates to Swiss administrative assistance in tax matters when the targets of the inquiry are a trust and its beneficiaries.

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Taxation in India and the U.S.: Stages in the Life of a U.S. Owned Indian Company

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Taxation in India and the U.S.: Stages in the Life of a U.S. Owned Indian Company

When a U.S. corporation expands its operations to India and forms an Indian subsidiary, tax issues need to be addressed in both countries at various points in time – when the investment is first made, as profits are generated, as funds are repatriated, and when the investment is sold. In their comprehensive article, Sanjay Sanghvi, a partner of Khaitan & Co., Mumbai, Raghav Jumar Baja, a principal associate of Khaitan & Co., Mumbai, Stanley C. Ruchelman and Neha Rastogi explain all facets of tax planning in both countries at each stage of the investment and do so in an integrated way.

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Clarity on Recharacterization of Carried Interests

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Clarity on Recharacterization of Carried Interests

· Earlier this year, the I.R.S. issued final regulations providing guidance on Code §1061, which recharacterizes certain long-term capital gains as short-term gains for holders of partnership interests entitled to carried interests. The provision impacts fund managers of alternative investments, such as private equity and hedge funds, who receive carried interests. When gains are derived through a carried interest, they are treated as long-term capital gains only when the carried interest is held for 36 months and one day, significantly longer than the 12 months and one day ordinarily required. In her article written while an extern at Ruchelman P.L.L.C., Susan F. Robinson explains how the final regulations address two workarounds that were widely proposed to circumvent the lengthened holding period and cautions that the policy debate on carried interests may not be over.

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Final Regulations for Withholding on Foreign Partners’ Transfers of Specified Partnership Interests – Construct, Exceptions, and Reporting

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Final Regulations for Withholding on Foreign Partners’ Transfers of Specified Partnership Interests – Construct, Exceptions, and Reporting

For U.S. tax purposes, gain or loss upon a sale or exchange of property is generally sourced based on the tax home of the seller. For a foreign person investing in a partnership conducting a U.S. trade or business, the source rules change. A foreign partner that sells an investment in a U.S. partnership operating in the U.S. will be subject to tax on the portion of the gain deemed to be effectively connected with a U.S. trade or business. This change stems from Code §864(c)(4), which recharacterizes a sale of a partnership interest as an indirect sale of partnership assets, resulting in gain to the selling foreign partner. Under Code §1446(f), withholding tax of 10% applies to the seller’s amount realized. Andreas A. Apostolides and Nina Krauthamer take a deep dive in the I.R.S. regulations issued in late 2020. A must read for advisers to foreign partners in partnerships with U.S. fixed offices and U.S. trades or businesses.

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Beauty is in the Eye of the Taxpayer

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Beauty is in the Eye of the Taxpayer

As a counterpoint to the view in Europe regarding tax competition, the view in the U.S. is that tax competition is an acceptable policy to influence a multinational corporation to locate operations in a particular State. In his article written while an extern at Ruchelman P.L.L.C., Corey L. Gibbs looks at policies adopted by the State of Alabama pointing out that U.S. citizens and residents are “voting with their feet,” when relocating to States that impose lower taxes. In Europe, there may be a duty to pay tax, in the U.S. there is a right to carry on one’s affairs in a way that results in the lowest tax possible.

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The 15 Most Important Questions That Should Be Asked When Estate Planning for a Foreign Parent with U.S. Children

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The 15 Most Important Questions That Should Be Asked When Estate Planning for a Foreign Parent with U.S. Children

· U.S. estate tax planning is said to be among the most complicated aspect of tax planning because of the numerous moving parts and the changing needs and objectives of the family. The exercise becomes complicated when the client is not a U.S. person, but the heirs live in the U.S. and have started families in the U.S. For an estate planner with a focus on domestic clients, the customary tools may not work. It is easy to know what you know, but not always easy to know what you don’t know. Neha Rastogi and Stanley C. Ruchelman ask and answer 15 questions that highlight the favorable and unfavorable provisions of U.S. tax law affecting nonresident, non-citizen individuals having U.S. persons as heirs.

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Tax Competition Between Member States of the European Union – An Academic View

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Tax Competition Between Member States of the European Union – An Academic View

In May, the European Commission lost its second case in the E.U. General Court when Amazon’s tax arrangement in Luxembourg was found to be onside as to rules prohibiting illegal state aid among Member States. A companion case was issued the same day in which the penalty asserted by the European Commission was upheld. These cases bring the Commission’s record before the Court to two wins and three losses, with three cases in progress. For those readers asking why Commissioner Vestager continues to bring these cases, the answer is explained by Professor Pietro Boria, of Sapienza University of Rome. A new electorate has arisen in Europe that is multinational in its scope and led by a governing body answerable to all Member States. Parochial interests that existed through the end of the 20th Century no longer control. Tax policy is no longer the realm of national governments.

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Private Investment Funds in Israel

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Private Investment Funds in Israel

The State of Israel has encouraged foreign investments in Israel for many years. One of its primary tools is the special tax regime applicable to private investment funds. If listed conditions are met, a range of tax benefit benefits are granted to the fund and its investors. These include exemptions from Israeli tax for non-Israeli limited partners with respect to (i) income derived from non-Israeli investments, (ii) capital gains, dividends, and interest form venture capital investments, and (iii) income derived from the realization of Qualified Investments. Anat Shavit, a partner of FBC & Co., Tel Aviv, and Yuval Peled, a senior associate at FBC & Co., Tel Aviv explain the conditions that must be met.

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New Italian Transfer Pricing Regulations Affect Multinational Enterprises

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New Italian Transfer Pricing Regulations Affect Multinational Enterprises

Italian transfer pricing documentation rules were introduced in 2010. The system affords taxpayers the possibility of penalty protection for transfer pricing adjustments, provided that qualifying transfer pricing documentation is maintained by the taxpayer. Late in 2020, new regulations were introduced. The new regulations contain several important changes for multinational enterprises based in Italy or having an Italian member. Marco Valdonio, a partner of Maisto e Associati, Milan, and Mirko Severi, an associate of Maisto e Associati, Milan, explain the principal revisions to the Italian rules. They address the changes that broaden the scope of companies required to maintain a master file, reductions in the scope of the exception to annual filing for certain local members of a foreign-based multinational group, and changes to the content of both the master file and the local file.

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European Union’s New Reporting Obligations for Tax Intermediaries: Key Features of the Belgian Administrative Guidance – D.A.C.6

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European Union’s New Reporting Obligations for Tax Intermediaries: Key Features of the Belgian Administrative Guidance – D.A.C.6

In their article entitled “European Union’s New Reporting Obligations for tax Intermediaries: Key Features of the Belgian Administrative Guidance – D.A.C.6,” Werner Heyvaert and Vicky Sheikh Mohammad of AKD Benelux Lawyers, Belgium, address key features of the Belgian administrative guidance and the list of Frequently Asked Questions recently published by the Belgian Revenue Service.

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Implementation of the Mandatory Disclosure Directive in the Netherlands – D.A.C.6

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Implementation of the Mandatory Disclosure Directive in the Netherlands – D.A.C.6

In his Article entitled “Implementation of the Mandatory Disclosure Directive in the Netherlands – D.A.C.6,” Paul Kraan of Van Campen Liem in Amsterdam, zooms in on a number of aspects and features of D.A.C.6 that are addressed in the Guideline, noting that there may be differences in interpretation between the various Member States with respect to the same provisions of the directive. Some are generic, others focus on specific Categories of Hallmarks such as B, C and E and the main benefit test. The article serves as a guide through a maze of troubling issues for which firm answers may not exist at this time.

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The Implementation of the D.A.C.6 E.U. Directive in Germany

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The Implementation of the D.A.C.6 E.U. Directive in Germany

Because German tax authorities have not yet published the final version of the administrative, commentary by German tax advisers have filled the gap pointing out open issues for which guidance should be provided. In their article for Insights entitled “The Implementation of the D.A.C.6 E.U. Directive in Germany,” Petra Eckl and Felix Schill of GSK Stockmann in Frankfurt, address the relevant issues, including covered taxes, tax arrangements, cross-border element, intermediary, hallmarks, main benefit test, and privilege.

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D.A.C.6 Implementation in Luxembourg – Risk of Multiple Reporting Obligations

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D.A.C.6 Implementation in Luxembourg – Risk of Multiple Reporting Obligations

In their article entitled “D.A.C.6 Implementation in Luxembourg – Risk of Multiple Reporting Obligations Exists,” Sonia Belkhiri and Jiar Al-Zawity of Wilson Associates, International Lawyers, Luxembourg, discuss official guidance to date and caution of the likelihood that exists for double counting reporting mechanisms. Their view is that the limited clarification within the commentaries to the draft law in Luxembourg and the State Council opinion have not been followed by the Luxembourg Government. Practical guidance from the Luxembourg tax authority has not been sufficient.

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