Tag: Low tax jurisdiction

Preferential Tax Regimes - Harmful Tax Practices

Preferential Tax Regimes – Harmful Tax Practices

On 13 November 2018, the Inclusive Framework on BEPS approved updates to the results of reviews of preferential tax regimes conducted in connection with BEPS Action 5. The data below presents the conclusions of the work on regime reviews. The results are a consolidated update of the regimes reported in Harmful Tax Practices – 2017 Progress Report on Preferential Regimes. Countries with harmfull tax practices – preferential tax regimes – are defined based on the following factors: Where no or low effective tax rates (or negotiable tax rates or bases) are imposed on income from highly mobile assets and activities Where the low tax regime is ring-fenced (separated) from the domestic economy Where there is no transparancy and no exchange of information with other jurisdictions, eg. secrecy provisions Where there is no requirement of substantial economic activities/substance The Inclusive Framework on BEPS has decided to resume the application of the substantial activities requirement for no or only nominal tax jurisdictions ... Continue to full case
Netherlands vs X B.V., November 2018, Supreme Court, Case No 17/03918

Netherlands vs X B.V., November 2018, Supreme Court, Case No 17/03918

Company X B.V. held all the shares in the Irish company A. The Tax Agency in the Netherlands claimed that the Irish company A qualified as a “low-taxed investment participation”. The court agreed, as company A was not subject to a taxation of 10 per cent or more in Ireland. The Tax Agency also claimed that X B.V.’s profit should include a hidden dividend due to company A’s providing an interest-free loan to another associated Irish company E. The court agreed. Irish company E had benefited from the interest-free loan and this benefit should be regarded as a dividend distribution. It was then claimed by company X B.V, that the tax treaty between the Netherlands and Ireland did not permit including hidden dividends in X’s profit. The Supreme Court disagreed and found that the hidden dividend falls within the scope of the term “dividends” in article 8 of the tax treaty. Click here for translation ECLI-NL-HR-2018-2034 ... Continue to full case
Pharma and Tax Avoidance, Report from Oxfam

Pharma and Tax Avoidance, Report from Oxfam

New Oxfam research shows that four pharmaceutical corporations — Abbott, Johnson & Johnson, Merck, and Pfizer — systematically allocate super profits in overseas tax havens. In eight advanced economies, pharmaceutical profits averaged 7 percent, while in seven developing countries they averaged 5 percent. In comparison, profits margins averaged 31 percent in countries with low or no corporate tax rates – Belgium, Ireland, Netherlands and Singapore. The report exposes how pharmaceutical corporations uses sophisticated tax planning to avoid taxes. cr-prescription-for-poverty-pharma-180918-en ... Continue to full case
Major US MNE's in Ireland

Major US MNE’s in Ireland

Major US MNE’s with regional Headquarters in Ireland for European business activities. The corporation tax rate in Ireland is only 12.5%. However to further sweeten the deal for MNE’s, Ireland has been known to offer special tax deals to MNE’s resulting in much lower effective tax rates. Ireland provides MNEs with both low tax centers for European activities and conduit holding companies serving as hubs for transferring profits and capital to low tax jurisdictions such as Cyprus and Bermuda. Especially MNEs within the IT sector have been known to use a combination of subsidiaries in Ireland, Luxembourg, the Netherlands, and Bermuda to reduce their taxes (“Double Duch Irish sandwich”). Ireland has been involved in investigations concerning corporate taxes in both the EU and US. An investigation of Apple discovered that two of the company’s Irish subsidiaries were not classified as tax residents in the U.S. nor Ireland, despite being incorporated in Ireland. Ireland offers low tax, many tax treaties, low ... Continue to full case
Canada vs Loblaw Financial Holdings Inc., September 2018, Tax Court of Canada, Case No 2018 TCC 182

Canada vs Loblaw Financial Holdings Inc., September 2018, Tax Court of Canada, Case No 2018 TCC 182

In this case the Tax Court found that Canadian grocery chain Loblaw using an offshore banking affiliate in a low tax jurisdiction – Barbados – to manage groups investments did not constituted tax avoidance. However, the court’s interpretation of a technical provision in the Canadian legislation had the consequence that Loblaw would nonetheless have to pay $368 million in taxes and penalties. It has later been stated that Loblaw will appeal the decision of the Tax Court. Canada-vs-Loblaw-2018-TCC-182 ... Continue to full case
EU blacklist of non-cooperative tax jurisdictions

EU blacklist of non-cooperative tax jurisdictions

On December 5, 2017, the EU published it’s blacklist of non-cooperative tax jurisdictions (tax havens). 1. American Samoa American Samoa does not apply any automatic exchange of financial information, has not signed and ratified, including through the jurisdiction they are dependent on, the OECD Multilateral Convention on Mutual Administrative Assistance as amended, does not apply the BEPS minimum standards and did not commit to addressing these issues by 31 December 2018. 2. Bahrain Bahrain does not cover all EU Member States for the purpose of automatic exchange of information, has not signed and ratified the OECD Multilateral Convention on Mutual Administrative Assistance as amended, facilitates offshore structures and arrangements aimed at attracting profits without real economic substance, does not apply the BEPS minimum standards and did not commit to addressing these issues by 31 December 2018. 3. Barbados Barbados has a harmful preferential tax regime and did not clearly commit to amending or abolishing it as requested by 31 December ... Continue to full case
Uncovering Low Tax Jurisdictions and Conduit Jurisdictions

Uncovering Low Tax Jurisdictions and Conduit Jurisdictions

By Javier Garcia-Bernardo, Jan Fichtner, Frank W. Takes, & Eelke M. Heemskerk Multinational corporations use highly complex structures of parents and subsidiaries to organize their operations and ownership. Offshore Financial Centers (OFCs) facilitate these structures through low taxation and lenient regulation, but are increasingly under scrutiny, for instance for enabling tax avoidance. Therefore, the identifcation of OFC jurisdictions has become a politicized and contested issue. We introduce a novel data-driven approach for identifying OFCs based on the global corporate ownership network, in which over 98 million firms (nodes) are connected through 71 million ownership relations. This granular firm-level network data uniquely allows identifying both sink-OFCs and conduit-OFCs. Sink-OFCs attract and retain foreign capital while conduit-OFCs are attractive intermediate destinations in the routing of international investments and enable the transfer of capital without taxation. We identify 24 sink-OFCs. In addition, a small set of countries – the Netherlands, the United Kingdom, Ireland, Singapore and Switzerland – canalize the majority of corporate ... Continue to full case
Brazil vs Macopolo, July 2014, Supreme Tax Appeal Court, Case no 9101-001.954

Brazil vs Macopolo, July 2014, Supreme Tax Appeal Court, Case no 9101-001.954

The case involved export transactions carried out by a company domiciled in Brazil, Marcopolo, manufacturing bus bodies (shells) which were sold to subsidiary trading companies domiciled in low tax jurisdictions (Jurisdição com Tributação Favorecida). The trading companies would then resell the bus bodies (shells) to unrelated companies in different countries. The tax authorities argued that the sale of the bus bodies to the intermediary trading companies carried out prior to the sale to the final customers lacked business purpose and economic substance and were therefore a form of abusive tax planning. The Court reached the decision that the transactions had a business purpose and were therefore legally acceptable. Click here for translation Brazil vs M 2014 ... Continue to full case
Colombia vs. Corp, Aug. 2003, The Constitutional Court, Case No. C-690-03

Colombia vs. Corp, Aug. 2003, The Constitutional Court, Case No. C-690-03

The Constitutional Court of Colombia rules as follows: “Article 260-6. Low tax Jurisdictions. Unless proven otherwise, it is presumed that transactions between residents or domiciled in Colombia and residents or domiciled in countries or jurisdictions of lower taxation in the matter of income tax, are transactions between economic related parties or related parties in which the prices and amounts of the considerations are not agreed according to those that would have used independent parties in comparable operations. For the purposes of this article, taxpayers of income tax and complementary taxpayers who carry out the transactions referred to in the preceding paragraph shall comply with the obligations set forth in Articles 260-4 and 260-8 of the Tax Statute. Low Tax jurisdictions are those that are indicated by the Organization for Economic Cooperation and Development, OECD or the National Government .” (…) “Article 260-9. Interpretation. For the interpretation of the provisions of this chapter, the Transfer Pricing Guidelines for Multinational Enterprises and ... Continue to full case