Dear All,
A new message from Luis Henrique:
"Dear All, Please be informed that I have recently joined the tax practice group of Barbosa, Müssnich & Aragão Advogados, São Paulo office – Brazil. My email address here is: lhc@bmatax.com.br Cheers, Luis Henrique"
3/15/12
LL.M. in European and transglobal business law
Please be aware of a new LLM course in Portugal that may interest you and/or your (tax) friends and colleagues.
You may check here an overview of the program or click here to go in more detail through the full information about the LLM, the faculty and the University of Minho.
The LLM in European and transglobal business law is coordinated by PhD João Sérgio Ribeiro and counts with the participation of, among others, some of our fellow ITC lecturers (e.g. Kees van Raad, Wim Wijnen and Dhaval Sanghavi).
Cheers!
3/13/12
European Holding Regimes 2012
Dear All,
Should this be of use to you, please check here the companison between some relevant holding regimes applicable in EU jurisdictions.
Cheers!
Should this be of use to you, please check here the companison between some relevant holding regimes applicable in EU jurisdictions.
Cheers!
2/10/12
Brazil’s Controlled Foreign Company Regime in Question
Dear all,
Paola has recently published an article on Brazil’s Controlled Foreign Company Regime. Should you be interested in this topic, please check the Bulletin for International Taxation, Volume 66 - Number 2 - 2012 or just send us an e-mail and the article will be forwarded to you!
Cheers!
11/25/11
Help request!
Message from Fernanda:
Hey guys,
If some of you receive documents that approach in a practical way
intra-group financial transactions, mainly currency swaps and cash
pooling, could you please send it to me in the email:
fernanda.a.rubim@gmail.com or fernanda.antunesrubim@
Thanks,
Valeu!
Nanda
Hey guys,
If some of you receive documents that approach in a practical way
intra-group financial transactions, mainly currency swaps and cash
pooling, could you please send it to me in the email:
fernanda.a.rubim@gmail.com or fernanda.antunesrubim@
Thanks,
Valeu!
Nanda
11/21/11
Help request!
Question by Andrés:
Is anyone aware of a domestic legislation where the indirect sale of shares issued by a resident company is subject to CIT?
Example: A (resident in country A) sales shares issued by B (resident in country B) which is the 100% owner of shares issued by C (resident in country C). In some countries, country C may tax such sale of shares as an indirect sales of shares issued by a C.
I am doing a presentation about this new regime in Peru and I think it would be a good idea if I mention some examples of foreing legislations about this topic.
If you may help, please contact Andrés at andres.ramirez@itc-leiden.nl or andresrgs@gmail.com.
If you may help, please contact Andrés at andres.ramirez@itc-leiden.nl or andresrgs@gmail.com.
10/26/11
The Meaning of ‘Liable to Tax’ and the OECD Reports: Interaction and Ambiguous Interpretation
Author Rachel Galea
Supervisor Bruno da Silva and Rita Szudoczky
Table of Contents
List of Abbreviations
Executive Summary
Main Findings
1. Introduction
2. Consequences of the Inconclusive Meaning of ‘Liable to Tax’ in Art. 4.1 of the OECD Model
2.1. What is Liability to Tax?
2.2. Defining ‘Liable to Tax’ in the OECD Model
2.3. The Rippling Effect of ‘Liable to Tax’
3. Fiscally Transparent Entities and the Interaction with ‘Liable to Tax’
3.1. An Introduction to Attribution of Income
3.2. Entity Classification
3.3. Attribution of Income through the work of an Active OECD
4. Access to Treaty Benefits under the OECD Reports
4.1. The OECD Partnership Report
4.2. Other OECD Reports
5. Issues and Possible Solutions
5.1. Barriers to Claiming Tax Treaty Benefits
5.2. Additional Issues
6. Conclusion
Bibliography
Table 1: Documents
Table 2: Double Taxation Conventions
Table 3: Cases and Decisions
Executive Summary
This paper aims at delving into the concept of ‘liable to tax’ under Art. 4. 1 of the OECD Model as well as how such a concept is to be defined when applied to other types of entities such as partnerships, REITs, CIVs and also SWFs. The concept of liability to tax under the OECD Model does not come with an exhaustive definition of the term as a consequence of which ‘liable to tax’ has been, since its insertion in the Model, interpreted and analysed by several tax authors to such an extent that no one conclusive meaning of the term exists. The importance of understanding what is really meant by liability to tax lies in the fact that, whether or not a person has been deemed ‘a resident of a Contracting State’ depends on whether such person has been held to be ‘liable to tax’ in that State. this result has an effect on access to treaty benefits. Without being ‘liable to tax’ a person cannot be considered ‘a resident of a Contracting State’, such person cannot in turn be regarded as a resident recipient of a flow of income under Art. 1 of the OECD Model, and the final result being, no access to treaty benefits. The aim of the paper is to show the effect which liability to tax has on claiming treaty benefits by looking to the OECD Model itself as well as to the Partnership Report and other reports which have also been issued by the OECD concerning REITs, CIVs and SWFs.
The introductory chapter outlines the scope of the paper and brings to light the problems which exist in the area of liability to tax. In order to fully understand these problems one must first grasp what ‘liable to tax’ really means. The second chapter deals with exactly this – it aims at setting a basis on which further arguments and issues can be analysed; it sets the foundation as to what liability to tax is by comparing it to ‘subject to tax’ as well as trying to see what the OECD intended ‘liable to tax’ to mean. This second chapter also divides the meaning of ‘liable to tax’ into separate units in order to show the effect which different interpretations and different meanings given by different jurisdictions can have when seen from an international point of view.
The introductory chapter outlines the scope of the paper and brings to light the problems which exist in the area of liability to tax. In order to fully understand these problems one must first grasp what ‘liable to tax’ really means. The second chapter deals with exactly this – it aims at setting a basis on which further arguments and issues can be analysed; it sets the foundation as to what liability to tax is by comparing it to ‘subject to tax’ as well as trying to see what the OECD intended ‘liable to tax’ to mean. This second chapter also divides the meaning of ‘liable to tax’ into separate units in order to show the effect which different interpretations and different meanings given by different jurisdictions can have when seen from an international point of view.
Lack of liability to tax of a transparent entity can lead to the attribution of income to other persons, being the persons who are behind such entity, in order to ensure that no claim for treaty benefits is lost on behalf of such persons. The third chapter of the paper discusses the interaction of liability to tax with the attribution of income which stems from having entities classified differently under the domestic law of the State wherein they are established. States could treat entities differently in that some could treat them as fiscally transparent and other States could see them as taxable units, although it must be borne in mind that the level of fiscal transparency could differ from one jurisdiction to another. This difference in classification causes conflicts of attribution and this is where the rules set-out in the OECD Partnership Report come in.
The Partnership Report has been developed by the CFA to cover all sorts of possible attributions of income which are also solved in the report in such a way so as to ensure that when States are faced with fiscally transparent entities and also with problems of attribution of income, treaty benefits are granted nonetheless on legitimate grounds. This granting of treaty benefits is illustrated through a series of cases and also through case law where it can immediately be noticed that the Court is determined to grant treaty benefits and hence is not tolerant to denying benefits on unreasonable grounds. The fourth chapter analyses the REIT Report, the CIV Report and the SWF Report in order to determine the tax treatment of these entities as well as the application of the general rules set out in the Partnership Report, such as ‘source State follows attribution rules of residence State’, to these financial entities.
The chapter before the conclusion highlights the issues which are run into when dealing with liability to tax as well as some possible solutions which could be adopted with respect to such issues. Double non-taxation is one of the main issues together with the various lacunae which exist when it comes to the concept of ‘liable to tax’. There is no argument that the OECD encourages the conclusion of tax treaties so as to have co-operation on an international level for the elimination of double taxation. If one reads the title of the OECD Model as well as the titles of various tax treaties concluded between Contracting States, the words ‘avoidance of double taxation’ feature most of the times. Therefore there is an on-going debate as to whether the aim of a tax treaty is also to ensure the avoidance of both double taxation and double non-taxation. When dealing with transparent entities and conflicts in attribution of income the chances of both double taxation and also of double non-taxation exist however there are authors who argue that double non-taxation is outside the scope of the Model and there are also States which deny treaty benefits when they realise, after the conclusion of a tax treaty, that there is a transaction which is going to result in double non-taxation. Courts have held this to be unacceptable practice which should in turn act as an alert to States to ensure that during treaty negotiations they should provide for such situations.
The concluding part of the paper acknowledges the ambiguity of ‘liable to tax’ and the issues which it brings with it. Moreover, it focuses on some of the remaining issues regarding liability to tax which are to be seen as pointers which Contracting States should bear in mind when negotiating tax treaties. The OECD has emphasised the importance of granting treaty benefits by discussing such entitlement at length in its reports and therefore denying treaty benefits on grounds of failure to fulfil the liability to tax requirement is a very sensitive topic.
The Partnership Report has been developed by the CFA to cover all sorts of possible attributions of income which are also solved in the report in such a way so as to ensure that when States are faced with fiscally transparent entities and also with problems of attribution of income, treaty benefits are granted nonetheless on legitimate grounds. This granting of treaty benefits is illustrated through a series of cases and also through case law where it can immediately be noticed that the Court is determined to grant treaty benefits and hence is not tolerant to denying benefits on unreasonable grounds. The fourth chapter analyses the REIT Report, the CIV Report and the SWF Report in order to determine the tax treatment of these entities as well as the application of the general rules set out in the Partnership Report, such as ‘source State follows attribution rules of residence State’, to these financial entities.
The chapter before the conclusion highlights the issues which are run into when dealing with liability to tax as well as some possible solutions which could be adopted with respect to such issues. Double non-taxation is one of the main issues together with the various lacunae which exist when it comes to the concept of ‘liable to tax’. There is no argument that the OECD encourages the conclusion of tax treaties so as to have co-operation on an international level for the elimination of double taxation. If one reads the title of the OECD Model as well as the titles of various tax treaties concluded between Contracting States, the words ‘avoidance of double taxation’ feature most of the times. Therefore there is an on-going debate as to whether the aim of a tax treaty is also to ensure the avoidance of both double taxation and double non-taxation. When dealing with transparent entities and conflicts in attribution of income the chances of both double taxation and also of double non-taxation exist however there are authors who argue that double non-taxation is outside the scope of the Model and there are also States which deny treaty benefits when they realise, after the conclusion of a tax treaty, that there is a transaction which is going to result in double non-taxation. Courts have held this to be unacceptable practice which should in turn act as an alert to States to ensure that during treaty negotiations they should provide for such situations.
The concluding part of the paper acknowledges the ambiguity of ‘liable to tax’ and the issues which it brings with it. Moreover, it focuses on some of the remaining issues regarding liability to tax which are to be seen as pointers which Contracting States should bear in mind when negotiating tax treaties. The OECD has emphasised the importance of granting treaty benefits by discussing such entitlement at length in its reports and therefore denying treaty benefits on grounds of failure to fulfil the liability to tax requirement is a very sensitive topic.
The application of treaties to income payments in stock-lending transactions: a study with particular reference to the Netherlands-US Treaty
Author Paola Violin
Supervisor Joanna Wheeler
Table of Contents
List of Abbreviations
1.3. Characterization of income payments in stock-lending transactions
1.4. Description of relevant provisions and characteristics of domestic tax systems of the countries selected
1.5. Cross-border aspects and issues of income payments in stock-lending transactions
2. The parties involved in a cross-border stock-lending transaction
2.1. The Distributing Company (distributing dividends)
2.2. The Borrower (receiving the dividends and paying substitute dividends)
2.3. The Lender (receiving substitute dividends)
3. Payment of dividends
3.1. Tax treaty treatment applicable with reference to the OECD Model
3.2. Tax treaty treatment applicable with reference to the Netherlands-US Treaty
4. Payment of substitute dividends
4.1. Characterization of substitute dividends
4.2. Tax treaty treatment applicable with reference to the OECD Model
4.3. Tax treaty treatment applicable with reference to the Netherlands-US Treaty
4.4. Deductibility of substitute dividends
5. Practical analysis of transactions involving the Netherlands-US Treaty: description, mismatches and comparison with the OECD Model
5.1. General remarks
5.2. Distributing Company and Borrower in the NL; Lender in the US
5.3. Distributing Company and Lender in the NL; Borrower in the US
5.4. Distributing Company and Borrower in the US; Lender in the NL
5.5. Distributing Company and Lender in the US; Borrower in the NL
6. Conclusion
Appendix: Relevant tax treaty provisions
Bibliography
Executive Summary
Supervisor Joanna Wheeler
Table of Contents
List of Abbreviations
Executive Summary
Main Findings
1. Introduction
1.1. The aim and structure of the Paper
1.2. Description of stock-lending transactions1.1. The aim and structure of the Paper
1.3. Characterization of income payments in stock-lending transactions
1.4. Description of relevant provisions and characteristics of domestic tax systems of the countries selected
1.5. Cross-border aspects and issues of income payments in stock-lending transactions
2. The parties involved in a cross-border stock-lending transaction
2.1. The Distributing Company (distributing dividends)
2.2. The Borrower (receiving the dividends and paying substitute dividends)
2.3. The Lender (receiving substitute dividends)
3. Payment of dividends
3.1. Tax treaty treatment applicable with reference to the OECD Model
3.2. Tax treaty treatment applicable with reference to the Netherlands-US Treaty
4. Payment of substitute dividends
4.1. Characterization of substitute dividends
4.2. Tax treaty treatment applicable with reference to the OECD Model
4.3. Tax treaty treatment applicable with reference to the Netherlands-US Treaty
4.4. Deductibility of substitute dividends
5. Practical analysis of transactions involving the Netherlands-US Treaty: description, mismatches and comparison with the OECD Model
5.1. General remarks
5.2. Distributing Company and Borrower in the NL; Lender in the US
5.3. Distributing Company and Lender in the NL; Borrower in the US
5.4. Distributing Company and Borrower in the US; Lender in the NL
5.5. Distributing Company and Lender in the US; Borrower in the NL
6. Conclusion
Appendix: Relevant tax treaty provisions
Bibliography
Executive Summary
This Paper analyses the relevant cross-border and tax treaty aspects regarding the distribution of dividends and payment of substitute dividends in connection with a stock-lending agreement in an international scenario, based on both the OECD Model and the Netherlands-US Treaty. The aim of the analysis is to discover the extent to which domestic laws and tax treaties are capable of providing a consistent and equitable tax treatment to such transactions, which is in accordance with acceptable policy objectives. As it is useful to see what countries have actually done in their real treaties to deal with transactions of this type and whether that solves the issues and mismatches raised, the Netherlands-US Treaty has been selected as a practical example to support the analysis. The results of the investigation conducted are structured as follows.
The Paper starts by explaining the main characteristics of stock-lending transactions, the characterization of income payments in these transactions, the relevant provisions of the domestic law of the countries selected (Netherlands and US), based on the premise that treaty concepts and implications cannot be analysed regardless of domestic law, and the cross-border aspects of income payments in stock-lending transactions.
The second section provides an overview of the tax position of the parties involved in a stock-lending transaction both generally and under the domestic laws of the countries selected, indicating the corresponding tax consequences applicable to dividends and substitute dividends, as these elements are capable of indicating whether the taxation resulting from the application of tax treaties is consistent or not.
Section three elaborates on the tax treaty treatment applicable to dividends distributed during the term of a stock-lending agreement, according to both the OECD Model and the Netherlands-US Treaty. It focuses on the applicability and potential reduction of WHT to such payments, as well as the corresponding relief, based on the definition of dividends under article 10 of both documents and the beneficial ownership requirement. The section discusses the meaning of the term ‘beneficial owner’ in the OECD Model and the implications of the different approaches for the taxation of stock-lending transactions, as well as the Dutch negative definition of beneficial owner and the implications of the special provision contained in paragraph VI of the Memorandum.
Section four presents the tax treaty treatment applicable to substitute dividends, explaining their characterization under domestic law and tax treaties in general; the taxation under the OECD Model and the Netherlands-US Treaty, with special reference to the domestic law of the countries selected and paragraph VI of the Memorandum; as well as the deductibility of such payments for the Borrower.
Further, section five analyses hypothetical stock-lending transactions with different cross-border flows of income, describing the tax treatment applicable, potential problems and solutions. In order to arrive to such results, the section describes the tax provisions of domestic laws of the countries selected, the impacts of the application of the Netherlands-US Treaty, as well as draws a comparison with the outcome resulting from the application of the OECD Model to a similar hypothetical transaction.
Finally, the conclusion summarizes the results of the studies conducted, indicating that undesirable tax consequences do arise from the simultaneous application of different approaches applicable to the taxation of cross-border stock-lending transactions and that states are encouraged to deal with them in their real treaties.
10/25/11
Welcome to ITC Network 2010-11!
Dear all,
This blog was prepared with the main goal of enhancing the exchange of interesting information among ourselves and, on the other and to allow us to keep in touch. At this initial stage not all of you were granted 'administration rights' but the purpose is that everyone is given the opportunity to manage posts and contribute for the development of the blog.
The main objectives of the blog may be summarized as follows:
You may find some examples of the posts we may include in our blog. If you have similar information, please send it so that it is uploaded into the blog. For this purpose, please include in the e-mail the title, the wording for the post and the link for any document/website you require.
Last but not least, please send us any comments and suggestions to improve our blog!
Cheers,
Blog Administrator
This blog was prepared with the main goal of enhancing the exchange of interesting information among ourselves and, on the other and to allow us to keep in touch. At this initial stage not all of you were granted 'administration rights' but the purpose is that everyone is given the opportunity to manage posts and contribute for the development of the blog.
The main objectives of the blog may be summarized as follows:
- Create a selected stream of information (e.g. tags will be allocated to Tax News, Papers and Articles, Work Opportunities, Tax Events, Network and Social Events)
- Provide updated contact details (a page will be updated as our contact details change)
- Improve networking and cross-selling (e.g. all contributors may include in Our professional links the link for their law firms, companies and accounting firms; new articles may be referred to in posts and tagged as Papers and Articles)
You may find some examples of the posts we may include in our blog. If you have similar information, please send it so that it is uploaded into the blog. For this purpose, please include in the e-mail the title, the wording for the post and the link for any document/website you require.
Last but not least, please send us any comments and suggestions to improve our blog!
Cheers,
Blog Administrator
10/24/11
ITC Christmas Dinner 2011
Dear All,
This year the ITC Christmas Dinner will take place on December 2nd (Friday). This is a nice opportunity for us to meet again,, in case you are available to come.
If you are willing to come, please don't forget to send an e-mail to Mike and/or Kate so that they keep a place for you!
Cheers,
This year the ITC Christmas Dinner will take place on December 2nd (Friday). This is a nice opportunity for us to meet again,, in case you are available to come.
If you are willing to come, please don't forget to send an e-mail to Mike and/or Kate so that they keep a place for you!
Cheers,
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