France To Apply VAT To Yacht Charter Services

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The European Committee for Professional Yachting has announced that it has received notice from the French tax authority that pleasure yachting charter arrangements will be newly subject to value-added tax from July 15, 2013.

The announcement follows the European Commission's decision to send a formal request to French authorities in November 2012 requiring that the nation revoke a value-added tax exemption offered on the charter of yachts used for pleasure boating purposes.

In its reasoned opinion, the Commission explained that Article 148 of the VAT Directive allows member states to offer a VAT exemption for certain transactions concerning vessels. However, this exemption does not apply to luxury boats used by individuals for recreational purposes.

This was confirmed by the European Court of Justice in a case in December 2010, involving Bacino Charter Company SA. The court determined that a VAT exemption may only be granted in circumstances where a vessel is chartered for use on the high seas, for the purposes of commercial, industrial or fishing activities, but not recreational purposes.

France intends to offer a 50 percent VAT reduction to chartering arrangements impacted by the ruling, bringing them within the French VAT net but subjecting them to VAT at a rate of 9.8 percent, rather than the headline rate of 19.6 percent. Further guidance on this matter is expected from French tax authorities in due course.

In the interim, the French tax authority has released "BOI-VAT-FIELD-30-30-30-10-20130625," providing preliminary guidance on the intended changes.

Canada To Introduce Rules On Offshore Income

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The Canadian Government has announced the introduction of tougher foreign income declaration requirements, as part of its crackdown on international tax evasion and so-called "aggressive” tax avoidance.

Under plans announced in Finance Minister Jim Flaherty’s latest Budget, Canadians holding overseas property costing over CAD100,000 (USD95,220) will have to provide additional information to the Canada Revenue Agency (CRA). Starting from the 2013 taxation year, they must use a revised Foreign Income Verification Statement (Form T1135) to state which foreign institution or entity holds funds for them outside of Canada. They must additionally hand over details of the specific country to which the foreign property relates, along with information on the income generated from that property.

The CRA is keen to stress that failure to report any income from domestic or foreign sources is illegal, and that it will actively pursue cases of non-compliance. The Budget also proposed a three-year extension to the reassessment period for a tax year in cases of improper, late, or non-filing.

Launching the new T115, Parliamentary Secretary Cathy McLeod said: "The strengthened reporting requirements are just one example of the actions being taken by our Government to crack down on tax cheats. These measures are great news for hardworking Canadians who pay their fair share and bad news for those who may seek to cheat the system."

Carole Presseault, Vice President of Government and Regulatory Affairs at the Certified General Accounts Association of Canada, commented: "We are pleased to see the Government taking action on this important issue. Increased reporting requirements of large offshore assets will help to ensure that all Canadians are operating on a level playing field when it comes to their taxes. Our members support the fight against tax evasion, as it hurts all Canadians by reducing government revenue that other law abiding taxpayers are required to make up, and providing an unfair advantage to those seeking to cheat the system."

The Government is also seeking the mandatory reporting to the CRA of international electronic fund transfers over CAD10,000. This requirement will be coupled with reforms to the judicial process that will allow the CRA to obtain information from third parties, including banks. It is investing CAD30m in these, and other, initiatives.

Bulgaria Promises Action On Offshore Companies

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Bulgaria's Minister of Finance Petar Chobanov has said that he supports legislative changes to ensure the transparency of offshore companies, although he cautioned that such companies should not be stigmatized. He further promised that information about Bulgarians with offshore companies would be made public "if and when" he received it, and he explained that he would be taking part in a discussion about offshore companies at an upcoming ECOFIN meeting.

It was recently reported that Chobanov intended to raise the issue of offshore Bulgarian-owned companies with his Cypriot counterpart.

Chobanov made the comments during a media interview about managing Bulgaria's budget. Noting that Bulgaria’s GDP was down by BGN1.5bn (USD1bn), he explained that there were currently no plans to revise the budget, but that expenditure would be optimized. He said that he was working with current revenue administration teams, but that he would consider making replacements depending on performance.

He also called for an end to the "administrative extortion" of businesses, and warned that the business environment needed to be "stimulated." In particular, he said a proposal for a minimum wage needed to be judged against possible negative effects on competitiveness.

Isle Of Man Signs TIEA With Botswana

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The Isle of Man signed a Tax Information Exchange Agreement (TIEA) with Botswana on June 14, 2013.

This is the Isle of Man’s 28th TIEA and its 38th agreement that meets the OECD international standard on tax co-operation and transparency.

The TIEA was signed by Botswana’s High Commissioner to the United Kingdom, Roy W Blackbeard, and by Manx Treasury Minister, Eddie Teare, at a ceremony held in London on June 14, 2013.

Minister Teare said, “The signing of this agreement is an important step in building closer relations between Botswana and the Isle of Man. Botswana is a Member of the Southern African Development Community (SADC), and this agreement is the first TIEA between the Isle of Man and a SADC country. The Isle of Man is negotiating TIEAs with six other SADC countries, and through these agreements the Island continues to support the OECD’s Global Forum commitment to sharing expertise and best practice on tax transparency and information exchange with developing nations.”

Last month the Isle of Man Finance Ministry confirmed that its Tax Information Exchange Agreement (TIEA) with Argentina had entered into force.

Y20 proposes an international tax regime to fight offshores

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Introducing taxes on offshore transactions would require establishing an international tax regime, Ksenia Yudaeva, Chief of the Presidential Experts Directorate and the Russian G20 Sherpa told a Y20 meeting held on the margins of the 17th St. Petersburg International Economic Forum (taking place on June 20-22).

If just one country introduced a special tax regime, it would find itself at a disadvantage and might even see inbound financial flows dry up, Yudaeva explained.

An international regime for taxation of transactions to divert capital into offshore jurisdictions must, therefore, be created.

Y20 leaders had earlier presented their proposals for G20, including a tax on offshore capital transactions as part of international financial system reform.

Tax legislation and fighting offshores will be among the key items on the agenda for the G20 summit in St. Petersburg in September 2013. 

The three-day Youth 20 (Y20) Summit held under Russia's G20 presidency on the eve of the 17th St. Petersburg International Economic Forum (SPIEF) has opened earlier on Thursday.

According to the organizers, 106 young delegates from G20 member countries and six special guests of the Russian chair - Brunei, Spain, Kazakhstan, Senegal, Singapore and Ethiopia – convened at the Lenexpo Exhibition Complex.

Business carried out by Cyprus banks no different from elsewhere, MONEYVAL says

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 The business carried out in Cyprus banks is not intrinsically different from international business carried out in other jurisdictions, a special assessment of the effectiveness of customer due diligence measures in Cyprus’ banking sector by MONEYVAL says.
 In its assessment the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), notes that it conducted the assessment after being invited to do so in March by Eurogroup Working Group President Thomas Wieser. This was agreed between Cyprus and its Eurogroup partners “as part of the preparations for an adjustment programme that would underpin the assistance” agreed to be granted to the country.
 “This evaluation is unique as no other jurisdiction has hitherto submitted to such an exceptional and focused Anti-Money Laundering and Combating Financing of Terrorism (AML/CFT) evaluation covering the effectiveness of one part only of its AML/CFT system”, the assessment points out.
 In general, it is noted, “the banks interviewed demonstrated high standards of knowledge and experience of AML/CFT issues, an intelligent awareness of the reputational risks they face and a broad commitment to implementing the customer due diligence requirements set out in the law and in subsidiary regulations issued by the Central Bank of Cyprus”.
 Implementation of customer due diligence measures as described by the banks appeared strong under most headings.
 At the same time the assessment finds that “all banks have procedures in place to determine the identity of the beneficial owner controlling the customer”.
 In the conclusions part of the assessment MONEYVAL notes that “overall, it was concluded that while the business carried out in Cyprus is not intrinsically different from international business carried out in other jurisdictions”. At the same time, however it warns that “the magnitude of the business and the combination of various features which are characteristic of the Cypriot regime may raise the degree of cumulative risk to a level that is difficult to manage”. 

It is highlighted that the Cypriot authorities have taken a range of legislative measures, in line with Financial Action Task Force (FATF) and EU standards, to minimize the risk of abuse for ML/FT purposes.
 “Basically sound preventive requirements have been in place for several years at the levels of customer identification, identification of beneficial owner, record-keeping and reporting of suspicious activities”, the assessment says.
 It was further noted that “the banks have systems in place to monitor high risk business on an ongoing basis”.
 MONEYVAL experts conducted their assessment through interviews. The team selected 13 of the 41 banks, a much larger sample than usual, as it is noted. The banks interviewed represented 71% of the deposits and 76% of the loans in the banking sector. It included the 7 largest banks operating as at December 31, 2012.
 The assessment proceeds to make a series of recommendations mainly focusing on further enhancing procedures in place for monitoring high risk international business.

 

 

France Eyes EUR3bn Cut In Corporate Tax Breaks

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The report underlines the importance of maintaining certain vital tax shelters, however, including the reduced rate of value-added tax (VAT) accorded to the construction industry, and the newly created competitiveness and employment tax credit (CICE).

Furthermore, the report suggests cutting the amount of taxes allocated to the national cinema center to the tune of around EUR150m and reducing levies flowing to the chamber of commerce and industry by approximately EUR400m. The report also proposes that the tax regime applicable for listed real estate investment companies be revised.

Finally, the report underlines the importance of revising existing tax advantages accorded to French overseas departments and reviewing fuel tax breaks. These include the reduced rate of the domestic tax on the consumption of energy products (TICPE) currently benefiting taxis, farmers, and road hauliers in France. A revision of the Livret de Développement Durable (LDD), the tax-free sustainable development savings account, is also recommended.

Each year, an estimated EUR60bn in fiscal aid (subsidies, tax breaks, loans, investments in own capital) is used to support businesses in France. The Government had tasked the mission back in February with analysing the system, and with identifying EUR2bn in savings, namely EUR1bn in 2014 and a further EUR1bn in 2015. The mission has therefore gone beyond its initial remit.

BVI Signs Tax Information Exchange Agreement With Canada

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In demonstrating its commitment to enhancing international relations, the Government of the British Virgin Islands has in place a total of 24 Tax Information Exchange Agreements (TIEAs), having signed its most recent agreement with the Government of Canada on May 21,2013.

The TIEA is based on a model agreement developed by the Organisation for Economic Cooperation and Development (OECD) and will allow exchange of information by request on criminal and other tax matters in accordance with the procedures agreed.

Premier and Minister of Finance, Orlando Smith, signed the agreement with High Commissioner for Canada Gordon Campbell during the TIEA signing ceremony that coincided with the Caribbean Council Reception, at the House of Lords in London.

During his keynote speech at the Caribbean Council Reception, Smith stated that the BVI is unequivocally against tax evasion, fraud, money laundering and any form of illegal activity and therefore supports UK Prime Minister David Cameron’s agenda for the upcoming G8 summit. In doing so, he reminded the audience that included Mr. Mark Simmonds, MP, UK’s Parliamentary Under Secretary of State at the Foreign and Commonwealth Office, that the BVI has always met international regulatory standards.

To date, the BVI has signed TIEAs with Ireland, the Kingdom of the Netherlands, Curacao, St Maarten and Aruba, the United States, the United Kingdom, Australia, New Zealand, France and the Nordic Alliance of Sweden, Norway, Finland, Denmark, Iceland, The Faroes, Greenland, China, India, Germany, Portugal, the Czech Republic and the States of Guernsey.

Manx Tax Agreement With Guernsey Comes Into Force

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The Isle of Man’s Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income with Guernsey will enter into force on July 5, 2013.

The agreement was signed on January 24, 2013 in London between Eddie Teare, the Isle of Man’s Treasury Minister, and Jonathan Le Tocq, Guernsey’s Deputy Chief Minister.

The Isle of Man ratified the agreement at the March 2013 sitting of Tynwald, and the Chief Minister of Guernsey, Deputy Peter Harwood, has now confirmed that Guernsey has completed its own ratification procedures.

Last month the Isle of Man Finance Ministry confirmed that its Tax Information Exchange Agreement (TIEA) with Argentina had entered into force. With that, the Isle of Man had signed 37 agreements which meet the OECD standard. It had concluded ten Double Taxation Agreements and 27 TIEAs.

Cayman Is Prepared To Commit To Multilateral Convention

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The Cayman Islands Government announced on June 10, 2013 that it is prepared to commit to the Convention on Mutual Administrative Assistance in Tax Matters.

It also announced that it has accepted invitations from UK Prime Minister David Cameron to attend two events on June 15, immediately prior to the G8 Meeting, which will be held in Ireland from June 17 to 18.

The Convention on Mutual Administrative Assistance in Tax Matters is an OECD/Council of Europe multilateral agreement. It is designed to combat tax evasion and aggressive tax avoidance, by promoting cooperation among jurisdictions for the exchange of information among relevant authorities for tax and transparency purposes.

"Cayman has engaged in substantive discussions with HM Treasury on the particulars of the convention", said Premier Alden McLaughlin. "We are satisfied that the extension of the convention to our Islands will be done in accordance with the UK's recognition of Cayman's fiscal autonomy, and the well-established principle that countries have the prerogative to set their own tax rates".

He noted that committing to the convention is in line with Cayman's extensive network of bilateral exchange of information agreements. This includes commitments to US and UK FATCAs, the European Union Savings Directive, and the G5 pilot on multilateral automatic information exchange.

"We agree with the UK's statement that there is 'no point in dealing with tax evasion in one country, if the problem is simply displaced to another'," the Premier said. "With this in mind, we also agree that there should be equitable adherence, including within the G8 countries, to global tax and transparency standards. This will set the foundation for full and effective participation, by all countries, in the true spirit of these efforts."

EU Commission pushes for wider scope to tax disclosure rules

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The European Commission has today proposed extending the automatic exchange of information between EU member states, claiming that the new requirements will go further than FATCA in tackling tax evasion.

Under the proposal, dividends, capital gains, all other forms of financial income and account balances, would be added to the list of categories which are subject to automatic information exchange within the EU.

Algirdas Šemeta, commissioner for taxation, said that this paves the way for the EU to have the most comprehensive system of automatic information exchange in the world.

"With today's proposal, Member States will be better equipped to assess and collect the taxes they are due, while the EU will be well positioned to push for higher standards of tax good governance globally. It will be another powerful weapon in our arsenal to lead a strong attack against tax evasion."

The measures are timetabled take effect from January 1 2015 by being added to the existing Savings Tax Directive, which already ensure that governments pass tax relevant data of non-resident individuals to the authorities where they reside.

In December 2012, the European Commission presented an Action Plan for a more effective EU response to tax evasion and avoidance and last month the ECOFIN Council welcomed the Action Plan and requested the extension of automatic exchange of information at EU and global level.

Canadian CEOs Oppose Bank Tax

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The Canadian business community has backed the Harper government’s opposition to the special bank tax being proposed by the Obama administration in concert with Japan and some European countries.

In an Internet survey of CEOs and business leaders, undertaken for Canadian Business by COMPAS, respondents concurred with the government’s rejection of a banking tax, with 82% of participants in favour of Flaherty’s proposal for the banks to sell debt that would convert to equity in the event of a crisis.

The survey found that the key reason to oppose the tax is that Canada’s banking system is well run. In the respondents’ view, creating a fund from the special tax to be available for future bailouts could also create what economists call the “moral hazard” of encouraging financial institutions to engage in needless risks.

Canadian bank CEOs also opposed the tax. In their opposition to the tax, bank leaders identified three key factors in causing the financial crisis: the lack of common, accurate standards for measuring the risk associated with complex financial instruments, such as the mortgage investments that were at the centre of the collapse; the fact that banks held low capital reserves; and mediocre skills among risk managers.

Canada’s Finance Minister has definitively ruled out the Canadian application of a global banking tax, stating in late April that bespoke policy responses would be more effective in preventing future banking crises.

In a letter to his G20 counterparts, Flaherty warned against adopting a one-size-fits-all approach, stating that individual policy responses should be geared towards the needs of each country’s financial sector, and he stressed that the Canadian experience of the banking crisis was quite dissimilar to many other economies.

"While some countries may choose to pursue an ex ante systemic risk levy or a tax, I do not believe that this would be an appropriate tool for all countries," Flaherty’s letter stated.

Canada’s unique mortgage market, Flaherty noted at the time, has withstood the financial crisis better than most advanced economies, as its exposure to sub-prime mortgages has been comparatively low, while the US the UK financial markets had high exposure to such investments. It has further been noted that the Canadian mortgage system is state-assured and therefore considerably less risky than other countries’ systems. Flaherty said the Canadian financial industry should not be disadvantaged with the same regulation as is being proposed for other countries where risk levels have been higher.

IMF Evaluation Criticizes Tax Approach In Greek Bailout

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The IMF has published an evaluation of its handling of the first Greek bailout in 2010, in which it admits that it had been "overly reliant on tax increases," and that efforts to check tax evasion and to make the tax burden more equitable had achieved only "limited progress."

The 2010 crisis gave the IMF "exceptional access" to Greece through a Stand-By Arrangement (SBA) program which brought in VAT rate hikes, a new property tax, and higher income taxes, along with efforts to strengthen tax administration and to improve revenue collection. The report explains that tax increases were chosen because they are "quick to take effect" and would face less resistance than spending cuts. However, Greece's deficit was for most part due to increased expenditure in the 2000s, and the IMF now observes that "the large dose of revenue measures in the SBA-supported program can therefore be questioned, particularly since tax changes constituted almost half of the measures targeted for the first two years of the program."

The program also included structural benchmarks, focusing heavily on fiscal reforms in a number of areas. The report explains that an initial emphasis on changing laws and plans had been "relatively easy to achieve," but that the authorities had only a limited capacity to implement changes, in part due to bureaucratic resistance. Citing the OECD, the report notes factors such as the large size of Greece's informal economy, the complexity of the country's tax system, the large numbers of self-employed workers, and institutional weaknesses.

The program consequently increased its focus on operational details, including "organizational structures, audit practices, and dispute procedures that were leaving large tax debts uncollected." The failure to get higher earners to pay their tax meant there was no "demonstrable improvement in the equity of the tax burden," which risked public support for the programme.

The report acknowledges "notable" failures in relation to the program, including a continuing lack of confidence in the market, the loss of 30 percent of the banking system's deposits, and public debt remaining at such a level that restructuring had to be implemented. It concludes that although the policies adopted were "broadly correct," a number of lessons could be learnt in relation to refining lending policies and frameworks, to taking better account of political economy, and to streamlining the Troika process.

Philippines Insists On Official Receipt Tax Compliance

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It has been announced by the Philippines Bureau of Internal Revenue (BIR) that a revenue regulation, which requires the cancellation of all existing official invoices and receipts (ORs) and the issuance of new ones by July 1, 2013, will be fully implemented and proceed as scheduled.

ORs include all sales invoices, delivery receipts, charge invoices and other commercial receipts of business establishments in the country. Under the Philippines tax code, all taxpayers are required to issue ORs, as proof of income and expense, for each sale of goods and services rendered over the amount of PHP25 (USD0.60). Failure to issue ORs could be the grounds for the suspension of a business and for the BIR to make an additional assessment for income or value added tax.

Commissioner of Internal Revenue Kim Jacinto-Henares said: "Complaints against the new regulation are without any basis since the tax agency issued Revenue Regulation (RR) 18-2012 last year and published it on January 3, 2013, informing everyone that existing receipts will expire on June 30, 2013. We believe that six months is enough preparation for everyone to comply with the requirement."

RR 18-2012 also provides that OR printers must have applied for a new authority to print (ATP) at least 60 days (or April 30, 2013) before the expiry of the old receipts on June 30, and must start issuing the new ORs on July 1, 2013. Previous and expired receipts should to be turned over to the local BIR office.

Henares added that the Bureau of Internal Revenue issued Revenue Memorandum Order on May 2, 2013, to provide for penalties since very few taxpayers were complying with the new RR. Printers applying for their ATPs after April 30 pay a penalty of PHP1,000, while those who apply for authority after June 30 and failed to issue new ORs from July 1, 2013, will pay the maximum penalty of PHP50,000, as provided for in the tax code.

The Bureau of Internal Revenue has given several reasons for the issuance of the new Revenue Regulation. For example, it has become aware of businesses registered with the tax agency that are not really engaged in any other business than to sell ORs to entities who are either engaged in smuggling and/or purchasing goods without receipts, thereby defrauding the government of tax revenues.

In addition, the BIR has found that a significant number of ORs that were printed in the 1970s are still being used and there is a need to clear those up by providing an expiry period, while the regulations are also aimed at reforming the process of issuing ATPs.

Therefore, with the objective of properly implementing and monitoring their compliance, the RR 18-2012 also provides for an online system run by the BIR for the accreditation of printers with ATPs, as well as for the online submission of printers' periodic reports of OR issuance. The agency will have the capability to match and process data and generate a discrepancy report of any dubious entries.

BVI Encourages Homeowners To Use Tax Amnesty

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Government of the British Virgin Islands is reminding property owners that a period of amnesty between June 1 and December 31, 2013 has been instituted to allow property tax payments to be made without penalty to the Inland Revenue Department.

Premier Orlando Smith said "The period of amnesty will allow taxpayers to become current with their property tax arrears, without being charged for the outstanding penalties."

Virgin Islanders pay USD10 per year on the first acre of land or part-acre, and USD3 on each additional acre. Expatriates pay TheUSD50 per year for any land less than half an acre, USD150 per year for any land above half an acre, and USD50 on each additional acre. House tax is charged annually on all privately-owned buildings at the rate of 1.5 percent of assessed value. There is also a 12 percent stamp duty on real estate transactions.