Category: Tax

Mossack Fonseca on Powerful US Congressman Proposes Massive Tax Overhaul

House of Representatives Ways and Means Committee Chairman Kevin Brady (R – Texas) has disclosed that, under his leadership, the Committee will immediately draft US international tax reform legislation, while laying the framework for more comprehensive tax reform in 2017.

On February 12, 2016, Mr. Brady delivered the keynote address at the Tax Council Policy Institute’s 17th Annual Tax Policy & Practice Symposium, and confirmed that, “in the months ahead and beyond, the Ways and Means Committee will be the center of the tax reform discussion and debate. … The code we have is too costly, complex and unfair. It is abundantly clear that now is the time to overhaul our tax system from top to bottom”.

Chairman Brady’s proposed changes include:

  • Making the tax code simpler, fairer, and flatter
  • Replacing the current world-wide tax system with a permanent, modern territorial-type system
  • Closing loopholes, eliminating special rules and limiting deductions, exclusions and credits
  • Providing businesses both large and small with a competitive tax system, including a fair and competitive tax rate
  • Encouraging businesses to locate their operations in the United States rather than incentivizing (effectively) the shift of jobs overseas

Mr. Brady confirmed that the Committee will move forward immediately to draft international tax reform legislation – “as we plan for that finish line in 2017, developments in the global environment demand our immediate attention.”

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Mossack Fonseca: Structures Onshore and Midshore

Specialized structures in selected jurisdictions are gaining more ground as business transactions become more complex and regulated.

Onshore and midshore jurisdictions offer our clients a wide variety of benefits for asset holding, estate planning, trading and many other services. They comply with annual reporting and payment of taxes at different rates and frequencies, depending on the jurisdiction and are ideal in the use of double tax treaties.

We can assist the client in the incorporation of onshore and midshore companies in jurisdictions such as the Netherlands, New Zealand and Malta, among others.

Established in 1977, the Mossack Fonseca Group is a leading global company which provides comprehensive legal, trust and accounting services.

With over 500 staff members across every continent, the Mossack Fonseca Group provides excellent services based on more than 35 years of experience. As part of its added value, the Group offers personal advice and a world-class online experience through a virtual Client Portal which is available 24 hours a day. Our web-based Client Information Portal application allows clients to reserve companies online, verify the status of companies, and pay invoices, in addition to other transactions.

Mossack Fonseca on Mauritius: Exchange of Information Delayed 1 Year

A 15 January 2016 press release from the Mauritius Revenue Authority (MRA) announced the delay of the Organization for Economic Cooperation and Development’s (OECD) Common Reporting Standard (CRS) exchanges of information for tax purposes until September 2018. Originally, the exchanges were slated to begin in September 2017.

The MRA also confirmed that the requirement for Mauritian financial institutions to apply due diligence procedures to record the tax residence of clients opening new accounts will take effect from 1 January 2017. The CRS, unlike FATCA, requires information based upon tax residency, not citizenship.

Established in 1977, the Mossack Fonseca Group is a leading global company which provides comprehensive legal, trust and accounting services.

With over 500 staff members across every continent, the Mossack Fonseca Group provides excellent services based on more than 35 years of experience. As part of its added value, the Group offers personal advice and a world-class online experience through a virtual Client Portal which is available 24 hours a day. Our web-based Client Information Portal application allows clients to reserve companies online, verify the status of companies, and pay invoices, in addition to other transactions.

Our service and research-oriented professionals specialize in trust services, wealth management, international business structures, and commercial law, among other areas.

Mossack Fonseca: Switzerland Agrees to AEOI with Five More Territories

Switzerland has signed joint declarations to automatically exchange tax information (AEOI) with Jersey, Guernsey, the Isle of Man, Iceland, and Norway, reports lowtax.net.

The Swiss Federal Council said that data collection will commence in 2017 and the first exchanges will take place in 2018. The exchanges will be based on the standards set out in the Multilateral Competent Authority Agreement on the Automatic Exchange of Financial Account Information (MCAA).

The bilateral declarations specify that the jurisdictions are satisfied with the confidentiality rules provided for in the other jurisdiction with regard to tax. The Council said that countries have also established regulatory procedures that allow taxpayers to regularize their tax affairs on favourable terms. The Council added that Iceland and Norway have reiterated their intention to hold talks on market access for Swiss financial services providers.

Switzerland’s Federal Department of Finance will now hold consultations on the implementation of the declarations. The corresponding federal decrees will then be submitted to Parliament for approval.

Switzerland has signed a similar joint declaration with Australia, and an automatic exchange of information agreement has been concluded with the European Union.

Mossack Fonseca EU Taxes: EP Resolution Targets Multinationals

On November 25, 2015, the European Parliament (EP) approved a resolution to make corporate taxes “fairer across Europe”. The resolution calls on EU member states to “agree on mandatory country-by-country reporting by multinationals of profits and taxes, a common consolidated corporate tax base (CCCTB), common definitions for tax terms, and more transparency and accountability with regard to their national tax rulings for companies”, a press release issued by the EP said.

If the EP resolution (as it stands) is passed into law by the European Council it would result in the following:

  • Large multinational corporations would have to pay taxes in the countries where most of their financial activities and profits are made
  • Smaller EU economies that offer more competitive corporate tax rates with fewer regulations would stand to lose significant tax revenues as multinationals migrate out of their jurisdictions
  • Jurisdictions outside of the EU would attract multinationals with more favorable tax and regulatory schemes

A Comparison of EU VAT Tax Rates as of 1 January 2015:

Country VAT Tax Rate (%) Country VAT Tax Rate (%)
Luxembourg 17 Lithuania 21
Malta 18 Netherlands 21
Germany 19 Italy 22
Cyprus 19 Slovenia 22
Bulgaria 20 Greece 23
Estonia 20 Ireland 23
France 20 Poland 23
Austria 20 Portugal 23
Slovakia 20 Romania 24
UK 20 Finland 24
Belgium 21 Denmark 25
Czech Republic 21 Croatia 25
Spain 21 Sweden 25
Latvia 21 Hungary 27

Sources: the Malta Independent and the European Parliamentary Research Service

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Mossack Fonseca & Co. – Office Profile

Mossack Fonseca on Panama: Enters Phase II of the OECD Global Forum Review

At the 8th meeting of the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes, held in Barbados on 29-30 October 2015, Panama was officially accepted into Phase 2 of the information exchange peer review process.

The Global Forum peer reviews occur in two Phases: Phase 1 reviews assess the quality of a jurisdiction’s legal and regulatory framework for the exchange of information, while Phase 2 reviews look at the practical implementation of that framework.

Panama’s Foreign Ministry noted that the country’s implementation standards for the exchange of tax information upon request will be assessed, with particular attention to those jurisdictions with which Panama has agreements that allow the exchange of information.

Panama’s Deputy Foreign Minister Luis Miguel Hincapie said “This step reflects the commitment of Panama in this area and the significant progress in updating our legal framework. In a short time we have adapted to the standards of fiscal transparency while at all times defending national interests”. He went on to say that President Juan Carlos Varela, in his recent speech at the General Assembly of the United Nations, announced that Panama, like its major trading partners, is committed to the automatic bilateral exchange of tax information, but with some conditions. The President said the exchanges will have to take into account national circumstances, the international geopolitical environment, and the right of each country to take the necessary measures to ensure that the automatic exchange of information is not misused to impair the competitiveness of some countries for the benefit of others. President Varela proposed that the issues be incorporated into the regular agenda of the United Nations to ensure that they are discussed by the countries on equal terms.

There are now 96 jurisdictions which are committed to making the first exchanges of information in 2017 or 2018. Panama has committed to commence automatic exchanges in 2018.

Mossack Fonseca on Cyprus, Luxembourg & Seychelles: Largely Compliant―OECD

At the October 29-30, 2015 meeting of the Global Forum on Transparency and Exchange of Information for Tax Purposes (part of the OECD), Cyprus, Luxembourg and the Seychelles were lauded for making significant changes to their legal frameworks and practices, each earning an overall rating of “largely compliant”. To achieve a “largely compliant” rating, a jurisdiction can only be deemed by peer reviewers as having (at most) minor shortcomings in the implementation of the 10 essential elements that are rated.

The brief primer below provides an overview of the methods, standards and rating paradigm used by the Global Forum.

Peer Reviews

Peer Reviews are conducted by an assessment team composed of 2 expert assessors provided by peer jurisdictions and co-ordinated by a member of the Global Forum Secretariat. The assessment team’s report is presented to the 30 member Peer Review Group (PRG) and, once approved (by means of consensus) it becomes a report of the PRG which will then be submitted for adoption by the Global Forum.

The Global Forum’s Standards & Rating Paradigm

The Peer Reviews happen in two Phases:

  • Phase 1 is a review of each jurisdiction’s legal and regulatory framework for transparency and the exchange of information for tax purposes
  • Phase 2 involves a survey of the practical implementation of the standards.

The Global Forum breaks down the standards of transparency and exchange of information into 10 essential elements under three broad categories: (A) availability of information; (B) access to information; and (C) exchanging information.

The Global Forum’s 10 Essential Elements of Transparency and Exchange of Information for Tax Purposes:

AVAILABILITY OF INFORMATION

  • A.1. Jurisdictions should ensure that ownership and identity information for all relevant entities and arrangements is available to their competent authorities.
  • A.2. Jurisdictions should ensure that reliable accounting records are kept for all relevant entities and arrangements.
  • A.3. Banking information should be available for all account-holders.

ACCESS TO INFORMATION

  • B.1. Competent authorities should have the power to obtain and provide information that is the subject of a request under an EOI agreement from any person within their territorial jurisdiction who is in possession or control of such information.
  • B.2. The rights and safeguards that apply to persons in the requested jurisdiction should be compatible with effective exchange of information.

EXCHANGING INFORMATION

  • C.1. EOI mechanisms should provide for effective exchange of information.
  • C.2. The jurisdictions’ network of information exchange mechanisms should cover all relevant partners.
  • C.3. The jurisdictions’ mechanisms for exchange of information should have adequate provisions to ensure the confidentiality of information received.
  • C.4. The exchange of information mechanisms should respect the rights and safeguards of taxpayers and third parties.
  • C.5. The jurisdiction should provide information under its network of agreements in a timely manner.