The Doom of Offshore Tax Planning?

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The Doom of Offshore Tax Planning?. Moderators: Diego Salto & Peter Utterström Panel: Michael Burns, Thijs Clement, Stephan Neidhardt, Michael Silva. AGENDA. 1. Introduction - Diego Salto/Peter Utterström 2. Model use historically - the practioner’s view! Thijs Clement - PowerPoint PPT Presentation

Text of The Doom of Offshore Tax Planning?

  • The Doom of Offshore Tax Planning?Moderators: Diego Salto & Peter UtterstrmPanel: Michael Burns, Thijs Clement, Stephan Neidhardt, Michael Silva

  • AGENDA1. Introduction - Diego Salto/Peter Utterstrm 2. Model use historically - the practioners view! Thijs Clement3.The Obama Tax Bill and transparency - Michael A. Silva The OECD/G20 view on transparency - Stephan Neidhardt The Offshore Perspective - Michael Burns 6. Future outlook restrictions, tools etc.7. Discussion

  • In 1996 money laundering was estimated to be between USD 590Bn to 1,5 TrillionWorld Bank estimates the value of criminal activities, corruption and tax evasion to be between $1 trillion and $1.6 trillion per year OECD estimates that 50% of all cross border trade is made via tax havensIn 2004 US MNEs paid 2,3 % in tax (16 bn on 700 bn of foreign active earnings)In 2006 UK established that 3,5 % of tax payers provide information re offshore accounts.Some statistics

  • Some statistics (cont.)BVI has 19,000 inhabitants but 830 000 companies registeredOne address alone in the Cayman Islands serves as the registered office for > 18 000 companiesAssets equal 1,3 times GDP in Norwegian banks, 2,5 times GDP for the Euro zone. In Cayman Islands the assets total > 700 times the GDP

  • Convenient knowledge:

    CFC Controlled Foreign CorporationDTT Double Tax TreatyFBAR Foreign Bank Account Report (US)LOB Limitation of Benefits QI Qualified IntermediaryTax Haven - ?TIEA Tax Information Exchange AgreementsWhite, Grey, Black List CFC-related lists

  • Tax Havens - The top five secrecy jurisdictionsDelaware, US: The world's top secrecy jurisdiction. Register a company here and no one will ever know. If you have overseas income, it will be tax exempt.Luxembourg: Europe's most powerful investment management centre. It does require company accounts to be publicly available. But in virtually every other category secrecy rules.Switzerland: The traditional home of the opaque bank. For years, it resisted international requests for tax information exchange.Cayman Islands: The Caribbean island has a serious budget crisis. Its leaders take a dim view of having the "good name" of the most powerful hedge fund centre tarnished by accusations.City of London, UK: The International Narcotics Control Strategy Report said last year: "Illicit cash is consolidated in the UK and then moved overseas where it can readily enter the legitimate financial system." It adds: "Drug traffickers and other criminals are able to launder substantial amounts of money in the UK despite improved anti-money laundering measures.

  • With this will tax havens have a future?

  • Having said all this ---. The historical model transaction and its use - the practioners view! Thijs Clement, Van Doorne

  • Example 1Use of (high tax) jurisdictions to establish conduit entities:


  • DiscussionTransfer pricingTreaty application Limitation on Benefits ? Concept of Beneficial Ownership

  • Example 2Use of Hybrid corporate structures to optimise taxation of interestEquityLoan

  • DiscussionQualification legal entities in multiple jurisdictions

  • Example 3Use of Special Tax regimesOP COTOP COFIN COOP COLoan

  • DiscussionJurisdiction of establishment of FinCoTax Haven/Non Tax Haven

  • What Threats do U.S. and OECD Reforms Pose to Global Foreign Direct Investments?Michael A. Silva International Tax Partner Hunton & Williams LLP

  • U.S. ProposalsStop Tax Haven Abuse ActIRS attempts to improve withholdingOverride Check the Box RulesExpansion of U.S. Treat and TIEA NetworkForeign Account Tax Compliance Act of 2009

  • Stop Tax Haven Abuse ActDomesticate foreign companies if managed and controlled from the U.S.Obama Speech Ireland, Bermuda and Netherlands identified as corporate tax havensCayman Island IBCs featured in tax deferral debateQI issues for offshore banks

  • Should U.S. Adopt a Managed and Controlled Test for Offshore Corporations?Section 103 of Stop Tax Haven Abuse Act:. . . Substantially all of the executive officers and senior management of the corporation who exercise day-to-day responsibility for making decisions involving strategic, financial and operational policies of the corporation are located primarily within the United States.

  • 2009 Tax Treaty Network ExpansionFrance-U.S. ProtocolNew Zealand U.S. Income Tax TreatyMalta-U.S. Income Tax Treaty

  • The OECD / G20 view

    Stephan Neidhardt Walder Wyss & Partners Ltd. Zurich

  • History 2000: OECD identified a large number of Tax HavensOctober 2008: UN Committee of Experts on International Tax Matters Model Tax Convention on Internationally agreed standards for exchange of information and transparency in tax matters November 2008: G20 MeetingApril 2, 2009: OECD Progress Report on the implementation of these standards for 84 jurisdictionsOctober 6, 2009: OECD Issues Background Information Brief

  • The OECD Standards of Transparany and Exchange of InformationBy OECD and non-OECD countries working together in the OECD Global Forum on Transparency and Exchange of Information coming out of: G20 Ministers of Finance Berlin 2004 MeetingXinghe (China) 2005UN Committee of Experts on International Cooperation in Tax Matters October 2008

    Standards Require:

    Exchange of information on request where it is foreseeably relevant to the administration and enforcement of the domestic laws of the treaty partner. No restrictions on exchange caused by bank secrecy or domestic tax interest requirements. Availability of reliable information and powers to obtain it.Respect for taxpayers rights.Strict confidentiality of information exchanged.

  • III. The List

  • How to get on the White List?Countries have to sign 12 agreements on exchange of information that meet the OECD standards

    Jurisdictions with which the agreements have been signed (tax havens do not count)The willingness to continue to sign agreementsThe effectiveness of implementation

  • What is a Tax Haven?CriteriaNo or nominal tax on the relevant incomeLack of effective exchange of informationLack of transparencyNo substantial activities Numbers2000: Over 40 2002: Andorra Monaco Lichtenstein2009: none

  • AustriaBelgiumLuxembourgSwitzerland

    Now: none

    Reservations to Art 26 of the OECD Model Treaty (until recently)

  • Increased disclosure requirements on the part of taxpayers and financial institutions to report transactions involving non-cooperative jurisdictionsWithholding taxes in respect of a wide variety of paymentsDenying deductions in respect of expense payments to payees resident in a non-cooperative jurisdictionReviewing tax treaty policyAsking international institutions and regional development banks to review their investment policies and Giving extra weight to the principals of tax transparency and information exchange when designing bilateral aid programs Proposed Measures against non complying countries:

  • SummaryOECD was very successful in the last nine years. Most success just recently, when Art. 26 of the OECD Model Treaty was accepted by all countries, but now the implementation of the standards has to be supervised by the OECD.

  • The Offshore PerspectiveMichael Burns Appelby

  • IntroductionThe Offshore Perspective:

    Separating spin from realityAll is not lostOpportunity not threatHelps make the world go aroundAn unstoppable force

  • Fact: Tax neutrality, not tax evasion or avoidanceInvestors and their advisors choose offshore financial centres (OFCs) for tax neutrality, not tax evasion or avoidanceOFC entities provide a tax-neutral platform so that investors from several jurisdictions are not subject to additional layers of foreign taxation to those imposed by their home country. Investors remain subject to tax in accordance with the codes of their own jurisdictions

  • Fact: OFC entities required for international businessGlobal financial system needs legal entities to be formed in a stable jurisdiction on a tax-neutral basis

    Multinational companies, investment banks and fund managers are often required to accommodate investors from all over the world

  • Fact: OFCs to play key role in global economic recoveryInvestment funds allow international institutional investors to invest in government and sovereign debtProvide microfinance loan facilities to small businesses in developing countries often with the help of institutions like the World Bank or other national development aid organizations and agencies

  • Fact: OFCs to play key role in global economic recoveryEnable syndicates of international banks to make secured loans to finance power and other infrastructure projects in developing countriesTake part in the U.S. government's TARP and related schemes designed to encourage private investors to buy "toxic assets" from banks to help free up their balance sheets to allow them to recommence lending

  • SummaryOFCs will continue to survive and will continue to serve the purpose of promoting the efficient deployment of international capitalContinuing future for OFCs, as long as they comply with internationally accepted standards of transparency Applebys jurisdictions are all on the White list Choice of jurisdiction largely dependent on the nature of the business to be transacted

  • With all this what is really the future for tax havens?

    The toolbox availabkeAccepted use of tax havensFuture outlook


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