THE 2018 BUDGETOn 29th October, 2018 The Rt. Hon. Philip Hammond MP delivered the 2018 Budget. From the following links you may viewItemised Overview of the 2018 Budget
29 November 2017, the San Francisco District Court ruled that crypto-currency trading platform Coinbase must disclose identifying information concerning 14,355 customers, which have accounted for nearly 9 million transactions.
In US v Coinbase 17-01431, the investigation began after the IRS searched its electronic filings and discovered that only 802 people had declared bitcoin-related losses or gains in 2015. During the three years covered by the IRS demand, the price of bitcoin rose from $13 to over $1,100. It exceeded $10,000 in December.
The order, which covers transactions between 2013 and 2015, came after a prolonged legal dispute that began when the IRS demanded that Coinbase provide detailed personal information for more than a million customer accounts.
The IRS subsequently limited its demand to accounts that conducted bitcoin transactions – either exchanging bitcoin for dollars, or sending or receiving coins from another bitcoin user – worth $20,000 or more.
Coinbase claimed that even the narrower IRS request represented an illegal imposition, but the court disagreed. “The summons as narrowed by the Court serves the IRS’s legitimate purpose of investigating Coinbase account holders who may not have paid federal taxes on their virtual currency profits,” said US District Judge Jacqueline Corley.
The ruling only covers a three-year period and is limited to Coinbase and bitcoin. While bitcoin is the most popular digital currency, there are now many others in a market that is now worth over $200 billion dollars. Coinbase is also just one of numerous exchanges for purchasing bitcoin and other currencies.
The Court refused to order the exchange to provide certain personal information, including passport information or third-party communications.
In March 2014 the IRS issued a notice ruling that virtual currencies such as bitcoin are to be treated as property rather than as fiat currency for tax purposes.
US Court grants IRS request for limited Coinbase user data
4 December 2017, the Irish government announced that it had agreed with Apple to start collecting the €13 billion in unpaid taxes demanded by the European Commission in a ruling issued in August 2016. In October, the Commission referred the Irish government to the European Court of Justice over its failure to implement an order to collect the tax.
The Commission investigation concluded that Apple had received illegal state aid after it effectively paid 1% tax on its European profits in 2003, falling to about 0.005% in 2014. EU competition commissioner Margrethe Vestager concluded that Ireland had given Apple "selective treatment" enabling it to "pay substantially less tax than other businesses over many years."
Both Apple and the Irish government are appealing the ruling. The Irish government has said it profoundly disagrees with the Commission's analysis of the case. It has lodged an application in the General Court of the European Union for the Commission's decision to be annulled.
The Irish Finance Ministry said: "These sums will be placed into an escrow fund with the proceeds being released only when there has been a final determination in the European Courts over the validity of the Commission's Decision."
Irish finance minister Paschal Donohoe said: “We have now reached agreement with Apple in relation to the principles and operation of the escrow fund. We expect the money will begin to be transmitted into the account from Apple across the first quarter of next year.”
On 15 December, the General Court of the EU rejected an application by the US government to intervene in the Apple State aid case, concluding that the US did not have a sufficient interest in the result of the case under EU law. The court had previously granted applications to intervene from Ireland and the EFTA Surveillance Authority.
The US argued that it should also be allowed to intervene because US tax revenues would be affected and because the decision could harm bilateral tax treaty negotiations with EU member states, as well as efforts to develop transfer pricing rules within the OECD framework. The US also argued it could assist the court in understanding US tax law.
However, the court concluded that none of these arguments were sufficient to establish under EU law that the US was directly affected by the contested decision or that it has a particular interest in the result of the case.
According to the court, the US did not prove its tax revenue would be reduced and did not provide evidence of any direct link between the contested decision and the development of OECD transfer pricing rules or EU tax treaty negotiations. It further noted that it must resolve the present case on the basis of EU law and not the basis of US tax law.
The US's request for leave to intervene was lodged with the General Court last April. The European Commission raised objections to the application in May.
Luxembourg publishes draft laws for Beneficial Ownership registers
6 December 2017, the Luxembourg government published two draft laws to implement new transparency measures required under the EU’s Fourth Anti-Money Laundering Directive 2015/849 (AMLD 4) to create central registers of beneficial owners (BOs).
Draft law No. 7217 provides for a central register of beneficial owners of Luxembourg legal entities (companies, partnerships, etc.) under the authority of the Minister of Justice, and Draft law No. 7216 provides for a central register of beneficial owners of fiduciary arrangements under the authority of the Administration de l’Enregistrement et des Domaines (AED).
All Luxembourg commercial companies as well as any other legal entities registered with the trade and companies’ register fall within the scope of the draft law and are required to obtain and hold adequate, accurate and up-to-date information on their BOs at their registered office. This information must be uploaded into the central register – Registre des bénéficiaires effectifs (REBECO) – maintained by the Luxembourg trade and companies’ register.
Existing entities will have up to six months after the entry into force of the law to register the relevant information with the REBECO. The information must include the identity of the BO, date and place of birth, nationality and private or professional address of residence as well as the BO’s nature and extent of beneficial interests held in the relevant entity.
The register of fiduciary arrangements – Registre des Fiducies – is subject to a similar regime. Fiduciary agents subject to any express fiduciary arrangements governed by Luxembourg law that generate tax consequences must obtain, hold, keep up-to-date and upload information in the central Registre des Fiducies. The information must include the identity of the principal, the fiduciary agent, the protector (if any), the beneficiaries or class of beneficiaries and any other natural person exercising effective control over the fiduciary arrangement.
Direct (electronic) access to the register will be limited to Luxembourg national competent public authorities, as well as to professionals that need to comply with laws and regulations on money laundering and terrorism prevention. For the wider public, only persons and organisations that can demonstrate a legitimate interest based on a reasoned request addressed to the administrator will be able to gain access to the register.
The national competent public authorities will be permitted to exchange all relevant information in the context of the performance of their duties as provided by the draft law and the AML Luxembourg law.
New Zealand introduces Bill to counter BEPS strategies
6 December 2017, the New Zealand government introduced the Taxation (Neutralising Base Erosion and Profit Shifting) Bill, which includes new initiatives and significant amendments to existing law in respect taxing international business. The Bill’s proposals generally have application for income years beginning on or after 1 July 2018.
The proposed measures in the Bill are intended to prevent multinational enterprises (MNEs) from using:
· Artificially high interest rates on loans from related parties to shift profits out of New Zealand (interest limitation rules);
· Artificial arrangements to avoid having a taxable presence (a permanent establishment) in New Zealand;
· Transfer pricing payments to shift profits into their offshore group members in a manner that does not reflect the actual economic activities undertaken in New Zealand and offshore; and
· Hybrid and branch mismatches that exploit differences between countries’ tax rules to achieve an advantageous tax position.
In addition, the Bill proposes strengthening Inland Revenue’s powers to investigate large MNEs – those with at least EUR €750 million of global revenues – that do not cooperate with a tax investigation.
Jersey ratifies OECD’s Multilateral Instrument
15 December 2017, Jersey became only the third jurisdiction worldwide, after Austria and the Isle of Man, to have completed domestic ratification of the OECD’s Multilateral Instrument (MLI). The MLI, which enables countries to modify existing bilateral tax agreements to implement base erosion and profit shifting (BEPS) measures, will enter into effect once ratified by five jurisdictions in total.
Jersey became a BEPS Associate and Member of the BEPS Inclusive Framework at its inaugural meeting on 16 June 2016 and was also among the first jurisdictions to sign the MLI in Paris on 7 June 2017. Tax treaty-related measures that may be implemented through the MLI include those on hybrid mismatch arrangements, treaty abuse, permanent establishment, and mutual agreement procedures, including agreed minimum standards to counter treaty abuse and to improve dispute resolution and an optional provision on mandatory binding arbitration.
Minister for External Relations, Senator Sir Philip Bailhache, said: “Our ratification brings the MLI’s entry into force one step closer. I am delighted that Jersey is one of the founding five signatories of the MLI. This is further confirmation of the important role that we continue to play in helping to develop and implement international standards in tax good governance.”
On 20 December, Curaçao became the latest jurisdiction to join the MLI via a communication from the Kingdom of the Netherlands to the OECD. A provisional list of reservations and notifications for Curaçao has been provided and a definitive version will be deposited with the OECD at the time of the deposit of the instrument of ratification of the Kingdom of the Netherlands.
Now covering 72 jurisdictions and over 1,100 treaties, the OECD is organising a second signing ceremony for the MLI in the margins of the Inclusive Framework on BEPS meeting on 24 January.
Appleby sues Guardian and the BBC over ‘Paradise Papers’ leak
18 December 2017, offshore law firm Appleby launched breach of confidence proceedings against The Guardian and the BBC. Appleby is seeking damages for the disclosure of confidential legal documents and has also demanded that The Guardian and the BBC disclose any of the six million Appleby documents that formed the basis of its Paradise Papers’ investigation.
The documents were leaked to the German newspaper Süddeutsche Zeitung, which shared them with a US-based organisation, the International Consortium of Investigative Journalists (ICIJ). The ICIJ coordinated the Paradise Papers project, which included 380 journalists from 96 media organisations across 67 countries. The consortium included the New York Times, Le Monde, the ABC in Australia and CBC News in Canada.
Appleby said the documents were stolen in a cyber-hack and there was no public interest in the stories published about it and its clients. It has brought legal action against only The Guardian and the BBC, both UK-based media organisations.
Appleby said: “Our overwhelming responsibility is to our clients and our own colleagues who have had their private and confidential information taken in what was a criminal act. We need to know firstly which of their – and our – documents were taken.
“We would want to explain in detail to our clients and our colleagues the extent to which their confidentiality has been attacked. Despite repeated requests the journalists have failed to provide to us copies of the stolen documents they claim to have seen. For this reason, Appleby is obliged to take legal action in order to ascertain what information has been stolen.”
The Guardian said it intended to defend the legal action. “We will be defending ourselves vigorously against this claim as we believe our reporting was responsible and a matter of legitimate public interest,” it said in a statement.
A BBC spokesperson said: “The BBC will strongly defend its role and conduct in the Paradise Papers project. Our serious and responsible journalism is resulting in revelations which are clearly of the highest public interest and has revealed matters which would otherwise have remained secret. Already we are seeing authorities taking action as a consequence.”
Hong Kong ratifies tax treaty with Belarus
30 November 2017, the Hong Kong government announced that the Comprehensive Avoidance of Double Taxation Agreement (CDTA) with Belarus, signed in January 2017, had entered into force following ratification. It will come into effect in Hong Kong for any year of assessment beginning on or after 1 April 2018.
Under the treaty, Belarus' withholding tax rate for Hong Kong residents on dividends, interest and royalties will be capped at 5%. It also has includes an article on exchange of information. It is the 36th CDTA that Hong Kong has signed with its trading partners.
CDTAs with Latvia and Pakistan, signed in April 2016 and February 2017 respectively, also entered into force on 24 November 2017 following ratification and will come into effect in Hong Kong for any year of assessment beginning on or after 1 April 2018.
Facebook to drop Irish tax arrangements
12 December 2017, social media giant Facebook announced that it will move to a “local selling structure” in countries where it has an office to support sales to local advertisers. As a result non-US revenues from large advertisers will no longer be booked to its international headquarters in Dublin, but will be recorded by the local company in the countries in which they are earned. It will also pay the taxes on those revenues in those countries, and not in Ireland.
The US firm shifted its international business operations to Ireland in 2010. Dave Wehner, the group's Chief Financial Officer, said: "We believe that moving to a local selling structure will provide more transparency to governments and policy makers around the world who have called for greater visibility over the revenue associated with locally supported sales in their countries."
"It is our expectation that we will make this change in countries where we have a local office supporting advertisers in that country. That said, each country is unique, and we want to make sure we get this change right. This is a large undertaking that will require significant resources to implement around the world. We will roll out new systems and invoicing as quickly as possible to ensure a seamless transition to our new structure. We plan to implement this change throughout 2018, with the goal of completing all offices by the first half of 2019."
Bahamas signs Multilateral Convention and joins BEPS project
15 December 2017, the Bahamas became the 116th jurisdiction to sign the Multilateral Convention on Mutual Administrative Assistance in Tax Matters and the 110th jurisdiction to join the OECD's base erosion and profit shifting (BEPS) Inclusive Framework.
The Convention is the most powerful instrument for international tax cooperation providing for all forms of administrative assistance in tax matters: exchange of information on request, spontaneous exchange, automatic exchange, tax examinations abroad, simultaneous tax examinations and assistance in tax collection.
The Convention will enable The Bahamas to fulfil its commitment to implement the Standard for Automatic Exchange of Financial Account Information in Tax Matters and begin the first of such exchanges by 2018. It can also be used to implement the transparency measures of the BEPS project such as the automatic exchange of Country-by-Country reports under Action 13 as well as the sharing of rulings under Action 5 of the BEPS Project.
The Bahamas also signed the Multilateral Competent Authority Agreement (MCAA) in the margins of the 14th meeting of the Automatic Exchange of Information Group of the Global Forum on Transparency and Exchange of Information in Tax Matters, which took place on 13-15 December 2017 in San Marino. The MCAA specifies the details of what information will be exchanged and when and has been signed by 97 jurisdictions.
"Signing the Convention is an assertion of the commitment by the Bahamas to protect the integrity of its financial services industry and to effectively implement the OECD's international standards on tax transparency for the automatic exchange of financial account information," said Deputy Prime Minister and Minister of Finance of the Bahamas Peter Turnquest.
"The Bahamas is a well-known leading international financial centre, as such, we will continue to maintain a well-regulated and transparent environment for the provision of international financial services. This week, we have taken major steps to ensure this by also signing the Multilateral Competent Authority Agreement (MCAA), and by joining the Inclusive Framework on Base Erosion Profit Shifting (BEPS)."
UK Prime Minister confirms that Gibraltar covered in Brexit transition
20 December 2017, UK Prime Minister Theresa May told the House of Commons that Gibraltar will not be excluded from any aspect of the UK’s Brexit negotiations after the European Commission appeared to indicate that Spain would have a veto on any transitional arrangements covering the Rock.
Negotiating guidelines for the next phase of the Brexit talks published by the European Commission, which are still subject to negotiation and have yet to be adopted by the European Council, reiterated the Clause 24 Gibraltar veto granted by the EU to Spain last April. This states that after withdrawal, no future agreement between the UK and the EU can be applied to Gibraltar without prior agreement between Spain and the UK.
The Commission’s lead negotiator Michel Barnier said: “We have reproduced in the negotiating guidelines the exact phrase decided upon by the European Council and I can confirm to you that for the transition period, as for the rest, I will work to reach decisions which will be taken by the 27 unanimously and by consensus.
“We, the 27 members, have – and I will say no more on this issue – always worked striving for consensus and unity and to take all decisions within the framework of this consensus and unity and we will continue to do so. Therefore the spirit of April’s guidelines is reaffirmed on this particular point in the document agreed on today.”
Sir Jeffrey Donaldson MP asked the Prime Minister: “In light of the guidelines published this morning, will she give a commitment not to enter into an agreement with the European Union that excludes Gibraltar from the transitional or implementation arrangements and periods?”
May responded: “We and the EU have been clear that Gibraltar is covered by the withdrawal agreement and our Article 50 exit negotiations and … we will be negotiating to ensure that the relationships are there for Gibraltar as well. We are not going to exclude Gibraltar from our negotiations for either the implementation period or the future agreement. I can give the honourable gentleman that assurance.”
Trump signs US Tax Cuts and Jobs Act into law
22 December 2017, US President Donald Trump signed the Tax Cuts and Jobs Act into law. The Act represents the most comprehensive reform to the US tax code in over 30 years and took effect on 1 January 2018.
The Act was passed a second and final time by the House of Representatives on 21 December 21 in a 224-201 vote after both chambers of Congress had earlier approved a compromise version.
The Act provides a reduction in the main rate of US federal corporate tax from 35% to 21% and introduces a form of territorial corporate taxation through the provision of a 100% dividend tax exemption on the foreign income of domestic corporations, provided they own at least 10% of the foreign subsidiary.
However it limits deductions for interest payments to 30% of earnings before interest, tax, depreciation and amortisation between 2018 and 2021, with a lower threshold of 30% of earnings before interest and tax from 2022 onwards.
In addition, there will be a deemed repatriation tax on foreign deferred income of US corporations of 15.5% for cash and 8% for illiquid assets. Small business owners will be able to take advantage of a 20% tax deduction on pass-through business income.
For individual taxpayers, the Act retains a seven-tier income tax regime but five of them have been reduced. The rates start at 10% and rise to 12, 22, 24, 32, 35 and 37% respectively. The highest rate will apply to single individuals whose income exceeds US$500,000 and US$600,000 for joint filers. In addition, the standard deduction for individuals will be increased to USD12,000 for single filers, US$18,000 for heads of household and US$24,000 for joint filers.
The Act retains and expands the deduction for charitable donations but curtails and repeals many others. The mortgage interest deduction is retained for new purchases, subject to a cap of US$750,000 in mortgage debt. Taxpayers will also be able to continue claiming a deduction for a combination of state and local taxes, but only up to a maximum of US$10,000. Such deductions were previously unlimited.
The Act retains the individual alternative minimum tax (AMT), although the exemption limit will be raised. The corporate AMT will be eliminated.
The Act also significantly increases the estate and gift tax exemption amounts such that the estate and gift tax will now be mostly eliminated for all but the wealthiest of all taxpayers. The estate tax rate will still be 40%, but the exemption amount has been doubled to US$10.98 million for individuals and US$21.96 million for married couples. This also applies to gifts.
US Treasury Secretary Steven Mnuchin said he believed the tax cuts would ultimately become revenue neutral over 10 years due to higher growth, but the Treasury is likely to seek more money from Congress to implement the plan.
"We think there will be over US$1 trillion in growth, so I do think this will pay for itself," Mnuchin said, dismissing estimates from the Joint Committee on Taxation that the tax cuts would increase US deficits by US$1.1 trillion to US$1.5 trillion over 10 years.
Mnuchin said that for modelling purposes, the plan assumes 2.9% annual US growth, but "we do think we can get to three percent or higher.”
Bermuda signs CbC agreements with UK and US
OECD releases first Peer Reviews on spontaneous exchange on tax rulings
4 December 2017, the OECD released the first analysis of individual countries' progress in spontaneously exchanging information on tax rulings in accordance with Action 5 of the BEPS package of measures released in October 2015.
The first annual report on the exchange of information on rulings evaluates how 44 countries, including all OECD members and all G20 countries, are implementing one of the four new minimum standards agreed in the OECD/G20 BEPS Project.
To ensure that information on certain tax rulings is exchanged between relevant tax administrations in a timely manner (Action 5), the minimum standard requires tax administrations to spontaneously exchange information on rulings that have been granted to a foreign related party of their resident taxpayer or a permanent establishment which, in the absence of exchange, could give rise to BEPS concerns.
The standard covers rulings such as advance pricing agreements (APAs), permanent establishment rulings, related party conduit rulings, and rulings on preferential regimes. The report said that more than 10,000 tax rulings in the scope of the rules had been issued by the jurisdictions under review and almost 6,500 exchanges of information had taken place up to the end of 2016.
While 16 countries were judged as having adhered to the BEPS standards, there were problems with compliance in the remaining 28, ranging from temporary delays in exchanging the required information to no compliance at all.
The OECD report includes almost 50 country-specific recommendations on issues such as improving the timeliness of the exchange of information, ensuring that all relevant information on the taxpayer's related parties is captured for exchange purposes, and ensuring that exchanges of information are made with respect to preferential tax regimes that apply to income from intellectual property.
ATT President Sentenced to Eight and a Half Years Imprisonment for Tax Fraud
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