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The “Black Listed Countries” and Planning Ideas
Juan Guillermo Ruiz
May 30, 2014
Tax havens
Incorporation of the concept in 2003
Court precedent: No referral to OECD’s list on tax haven jurisdictions
October 7, 2013. Tax haven list
New rules on sanctions to tax haven jurisdictions could be expected
Controlled Foreign Company
No current legal development on the matter
New regulation to come into force is expected
OECD - BEPS
Exchange of information
Growing number of agreement entered into by Colombia
Global Forum on Transparency and exchange of information for tax purposes
OECD - BEPS
New faculties and responsibilities given to Tax Authorities for the collection of taxes due in other jurisdictions
New rules enhancing Tax Authorities capabilities are expected to come into force
Tax haven Colombian criteria
Tax haven list
Implications on investment structures
Implications on contractual structures
Transfer pricing
Effects on the General Anti-Avoidance Rule
Implications on residency of Colombian citizens
• No or nominal tax on the relevant income
• Lack of effective exchange of information
• Lack of transparency
• No substantial activities
Colombia follows the criteria set in the 1998 OECD report
• “In addition to the fore-mentioned criteria, the Colombian Government may have as reference the internationally accepted criteria to determine tax havens”
• OECD, UN and other criteria set by the G20
• Colombia is formally applying to belong to the OECD (campaign launched on October 25, 2013)
Wide room for new principles being developed (Tax Code)
Bla
ck li
st
Grey list
1. Barbados
2. Bermuda
3. United Arab Emirates
4. Kuwait
5. Qatar
6. Guernesey
7. Panama
Tax havens
•1. Anguilla
•2. Antigua and Barbuda
•3. Archipelago of Svalbard
•4. The Territorial Collectivity of
•Saint-Pierre and Miquelon
•5. Commonwealth of Dominica
•6. Commonwealth of the
•Bahamas
•7. Kingdom of Bahrain
•8. Nation of Brunei, the Abode of
•Peace
•9. Independent State of Samoa
•10. Grenada
•11. Hong Kong
•12. Isle of Man
•13. Qeshm Island
•14. Cayman Islands
•15. Cook Islands
Tax havens
•16. Pitcairn, Henderson, Ducie and Oeno Islands
•17. Solomon Islands
•18. British Virgin Islands
•19. Bailiwick of Jersey
•20. Labuan
•21. Macau
•22. Principality of Andorra
•23. Principality of Liechtenstein
•24. Principality of Monaco
•25. Hashemite Kingdom of Jordan
•26. Co-operative Republic of Guyana
•27. Republic of Angola
•28. Republic of Cape Verde
•29. Republic of Cyprus
•30. Republic of the Marshall Islands
Tax havens
•31. Republic of Liberia
•32. Republic of the Maldives
•33. Republic of Mauritius
•34. Republic of Nauru
•35. Republic of Seychelles
•36. Republic of Trinidad and Tobago
•37. Republic of Vanuatu
•38. Republic of Yemen
•39. Lebanese Republic
•40. St. Kitts & Nevis
•41. Saint Vincent and the Grenadines
•42. Saint Helena, Ascension and Tristan da Cunha
•43. St. Lucia
•44. Sultanate of Oman
• Inclusion conditioned to the execution of an exchange of information agreement
• The tax haven list is subject to review after one year of it being enacted
• Chances of subscription of an exchange of information agreement
Panama
Investments (Colombia)
Holding (Tax Haven)
TAX IMPLICATIONS
• Remittance of dividends and profits
• Sale of the Colombian investments
– Applicable tax
– Income tax withholding
Investment structures
Investments
Holding (Tax Haven)
Private Foundation
Investments
Holding (Tax Haven)
Trust
Other Assets
Real Estate
Holding (Tax Haven)
Trust/Private Foundation
Local Trust
Holding (Tax Haven)
Trust/Private Foundation
Local fund
Holding (Tax Haven)
Trust/Private Foundation
Portfolio Investment
Custody account
Investor (Tax Haven)
• Listed shares
• Securities
• Government Bonds
• Investment made through local custody accounts
• Taxation by means of the withholding system
• General withholding rate of 14%
• If the investor is located in a tax haven, the withholding rate would be 25%
• Interests
• Royalties
• Rent payments
• Technical services
• Technical assistance services
• Consultancy services
• Software benefits
• Any other payment
Payments or deposits for any concept
• Conditioned to income tax withholding
• Not applicable to financial operations
• Requires evidencing and supporting of the functions, assets and risks assumed by the service provider
Costs and deductible expenses
Tran
sfer
Pri
cin
g
Payments to tax havens
Individuals, companies, or entities in tax havens.
Related or not
Regardless of their gross equity
Regardless of their gross income
Obligations
Formal
Informative return
Supporting documentation
Substancial
• Operations entered into and between related entities
• Price or consideration differs in more than 25% of the value under market conditions
• Involve any of the following: (i) Special tax regime entity; (ii) Exempt entity; (iii) An entity not subject to tax; (iv) An entity whose applicable tax rate is different from the ordinary one
• Lack of a material clause, person, or act, that may derive in an abusive tax advantage
With two other, there could be a tax abuse
Residents of tax haven jurisdictions are deemed
Colombian residents
Taxation over worldwide income and asset
Eventual double taxation
• Aim: “Full exchange of information on requests in all tax matters without regard to a domestic tax interest requirement or bank secrecy for tax purposes” (OECD – Countering tax evasion)
• Obligations attributed to the Tax Authorities of all member States
• Collection of taxes and other mutual assistance between Tax Authorities