facts & figures - de vittori of switzerland
Post on 18-Mar-2016
217 Views
Preview:
DESCRIPTION
TRANSCRIPT
The Austrian Holding Company
Taxation: The Trust
Madeira: recent legislative changes
Rak Free Trade Zone
THE DIGITAL BUSINESS MANAGEMENT MAGAZINE OF DE VITTORI OF SWITZERLANDOctober // November // December 2009
Grow with us!EDITORIAL
It is with great pleasure that I present the quarterly issue of Facts & Figures, produced by De Vittori of Switzerland.
In this edition, we discuss the Ras Al Khaimah Free Trade Zone (Rak FTZ); profit based for international commercial deve-lopments and one of the fastest growing and most cost-effective free trade zones in the UAE. Also, an article written by Giovanna Abate, a colleague from our Lugano branch, illustrates applications and benefits of the Swiss Trust. Finally, an informative article details VAT legislation and explains the changes that will take place on January 1st 2010 regarding the collection of VAT.
In this issue, we bring back news of the economic situation from Switzerland and around the world and we proudly announce a new addition to our group: On January 11th 2010, we will open our Miami office. Our second office in the United States that will work side by side with our office in the Empire Sta-te Building in New York. This new addition will allow us to merge into the Central and South American markets.
In conclusion, we would like to remind you, our loyal readers, that we await your contributions. If you have any suggestions or proposals, please do not hesita-te to write to us. This can help us produce a more interesting and varied magazine.
Alessandro PumiliaEditorial Director
10.
6.
10.
14.
16.
18.
20.
22.16.
TaxationThe Trust
EconomyThe Austrian Holding Company
MadeiraRecent legislative changes
UAERak Free Trade Zone
News from SwitzerlandSwitzerland removed from OECD grey list
News from the worldBusiness Community Urges UK Corporate Tax Review
VAT Changes to vat legislation in the EU
inside this issue
On 1st July 2007, following approval by the Federal Assembly on 20th December 2006 (RU 2007 2849) and ratification
with the Instrument deposited on 26 April 2007, the Hague Convention on the Law Applicable to Trusts and on their
Recognition of 1985 (RS 0.221.371) came into effect in Switzerland.
With its Circular No. 30 of 22 August 2007, the Swiss Fiscal Conference then outlined the rules for the taxation applica-
ble to this legal institution.
But what exactly is a trust and what are the characteristics that make it particularly appropriate for estate planning
and asset protection purposes?
Art. 2 of the Hague Convention reads as follows: “the term trust refers to the legal relationships created – inter vivos
or on death [mortis causa] – by a person, the settlor, when assets have been placed under the control of a trustee
for the benefit of a beneficiary or for a specified purpose”. In other words, this means that the legal relationship arises
when the person creating it (settlor) transfers, on the basis of a constituent deed (trust deed), certain assets to one or
more persons (trustees) with the specific duty of administering these assets for the benefit of the beneficiaries or for a
specified purpose.
According to Art. 2 of the Hague Convention, the trust also has the following characteristics:- the trust assets constitute a separate fund and are not a part of the trustee’s own estate;
- title to the trust assets stands in the name of the trustee or in the name of another person on behalf of the trustee;
- the trustee has the power and the duty, in respect of which he is accountable, to manage, employ or dispose of
the assets in accordance with the terms of the trust and the special duties imposed upon him by law.
The transferred assets thus do not become a part of the trustee’s own estate, and he/she has only the “formal
ownership” (title in law) thereof, but exercises de facto powers deriving from the right of ownership. The institution of
the trust makes it possible to divide the ownership of an asset between two sets of owners: the beneficiaries, with be-
neficiary ownership and an equitable estate (title in equity) and the trustees, with trust-ownership and a legal estate
(title in law), which allows them to use the assets only for the exclusive benefit of the beneficiaries.
Fundamentals
7.
SettlorThe person who creates a trust
inter vivos or mortis causa.
ProtectorA natural or legal person that
the settlor may name to oversee the correct
performance of the duties of the trustee.
Letter of WishesA non-binding declaration of intent with which the settlor communicates his will and dispositions to the trustee.
Trust DeedA binding document setting forth the instructions for the administration and preservation
of the trust assets for the benefit of the beneficiaries.
BeneficiaryThe person who enjoys the benefits of the trust. The settlor may name as beneficiary
him/herself or any other natural or legal person. Title in equity to the trust assets stands in the name of the beneficiary, who is the beneficial owner thereof.
TrusteeThe natural person [individual] or legal person [corporate body] to whom or to which certain assets are transferred for administration
and management in accordance with the instructions given by the settlor. Title in law to the trust assets stands in the name of the
trustee.
Tax-related Considerations
The Hague Convention does not
affect the internal national system of
the contracting States, which there-
fore establish autonomously the tax
treatment of trusts.
As far as Switzerland is concerned,
Circular No. 30 states that, on the
basis of the rules of Swiss tax law, no
provision exists under which the trust
may be subject to taxation as an
autonomous entity. As the trust does
not have legal capacity, it cannot
be the owner of an estate (Circular
No. 30 of 22 August 2007; Art. 2.1 and
4.1) . The question must therefore be
considered in relation to how the
trustee, the protector, the settlor and
the beneficiary are subject to taxa-
tion. The trustee and the protector,
as such, are not subject to taxation.
The trustee has merely the power of
administration of the assets in the
exclusive interest of the beneficiari-
es, but he/she may not dispose fully
thereof. The protector has no rights
to the assets of the trust and merely
performs a supervisory role in relation
to the performance of the duties
established by the settlor. For the
trustee and the protector what must
be recorded and declared to the
Tax Administration are the fees and
remunerations that they receive.
The assets and proceeds of the trust
are attributed either to the settlor or
to the beneficiary, who are therefore
subject to taxation. However, for a
correct interpretation of their tax
liabilities, it is necessary to examine
the economic consequences of the
different types of trust that can be
constituted. For tax treatment purpo-
ses, it is in fact decisive for defining
whether the settlor divests himself
definitively of the assets transferred
to the trust or whether he may still
have access to them in the future,
regardless of the denomination of
the trust.
The main types of trust are listed
below together with their tax-related
implications.
- Revocable trustThis kind of trust allows the settlor
to reserve for him/herself the right
to revoke the trust and to recover
the ownership of the transferred
assets, thus not divesting him/herself
thereof in a substantial and definitive
manner. The trust is considered to
be transparent: its constitution does
not entail the impoverishment of the
estate of one owner contextually
with the enrichment of the estate of
another. Consequently, the assets
must continue to be declared and
are subject to taxation in the name
of the settlor.
As far as distributions to the bene-
ficiaries are concerned, we are
confronted with a gift, not subject to
income tax, but to gift tax, at rates
that are fixed at cantonal level.
On liquidation, if the assets return
to the settlor, no taxes are levied; if
instead the assets are distributed to
the beneficiaries, we are confron-
ted with a gift, to which the above
observations apply.
- Irrevocable fixed interest trustThe settlor divests himself definitely
of the assets transferred to the trust
and may not reacquire the owner-
ship thereof. The beneficiary and
his/her rights are stated in the deed
constituting the trust, excluding
discretionary powers for the trustee
in the choice of the beneficiaries of
the assets and income of the trust.
The beneficiary may therefore be
compared to a usufructuary, hence
the attribution to the beneficiary
for tax purposes of the assets and
proceeds of the trust.
The act of constitution of the trust
is considered to be a gift on the
part of the settlor to the beneficia-
ry, equal to the capital of the trust,
subject to cantonal tax.
When distributions are made, the
proceeds received by the benefi-
ciary definitively and those on which
he/she has acquired a legal claim
are subject to the tax on wealth,
which is levied on the part of the
trust assets received. If this part
cannot be determined, the income
may be capitalized. The distribution
of capital gains and the contribu-
ted capital of the trust are instead
exempt from taxation. The trust
capital may be distributed only after
TRUST
the distribution of all the incomes
therefrom.
For liquidation, see the notes on
distributions.
- Irrevocable discretionary trustThe settlor identifies potential bene-
ficiaries, leaving to the trustee the
possibility of choosing from among
them those who may claim the be-
nefit. Therefore, the beneficiaries do
not have immediately any right to
the assets, but only the expectation
of a right, and are thus not taxed on
the wealth of the assets of the trust.
The tax treatment of the trust varies
depending upon whether the settlor
is domiciled in Switzerland or not at
the time when the trust is constitu-
ted. In the first case, the assets and
the income from wealth continue to
be attributed to the settlor, and the
treatment is therefore the same as
for a revocable trust.
If instead the settlor is domiciled
abroad, the assets of the trust may
not be attributed either to the settlor
or to the beneficiaries and the act
of constitution of the trust and of
transfer of the assets to the trust is
considered to be a gift on the part
of the settlor equal to the amount of
the wealth of the trust.
The beneficiaries are subject to tax
only when their right to obtain the
distribution of the incomes deriving
from the trust comes into existence.
The long-lasting structure of the trust
means that the contributed capital
may be distributed only after the
distribution of the proceeds. If the
wealth of the trust is not attributed
to the beneficiaries for tax purposes,
the distribution may not be exem-
pted wholly or in part from taxation
as private profit of the beneficiaries.
For liquidation, see the notes on
distributions.
With regard to the refund of withhol-ding tax, Circular No. 30 establishes that the trust may not apply for such refund, as it has no legal personality. The following options therefore exist:
- in the case of a revocable trust, the
right to apply for the refund of the
withholding tax pertains to the settlor
if the trust assets and wealth are
taxable in his name;
- in the case of an irrevocable fixed
trust the right to apply for the refund
of the withholding tax may pertain
to the beneficiary if the latter has a
right of enjoyment and is domiciled
in Switzerland;
- in the case of an irrevocable
discretionary trust, there is no way
to obtain a refund. However, if the
settlor is domiciled in Switzerland at
the time when the trust is constituted
and there has been no impoveri-
shment of the estate of one owner
contextually with the enrichment of
the estate of another, the income
of the trust is considered to pertain
to the trustee, and the rules for the
revocable trust are applicable to
the refund.
As regards Conventions against double taxation, their provisions are applicable in the case that the settlor or the beneficiaries are resident in Switzerland and that the income is attributable to them. In the case that Switzerland is the State of origin, if the application for refund of the withholding tax is made by a trust of another State, the Swiss Tax Administration checks whether this trust may be considered a “resident person” for tax purposes in virtue of the applicable foreign legislation and whether it is subject to taxa-tion. If the answer is affirmative, the foreign trust may benefit from the provisions of the Conventions.
Source:
Giovanna Abate (Fdv Group)
If you found this subject interesting
and would like to go into the matter
in greater depth, please do not
hesitate to contact us:
info@devittori.com
TRUST
9.
Austria
At the gateway between West and
East, Austria is a perfect hub for ma-
king tax efficiently investments into
foreign countries. Every Austrian cor-
porate entity like a GmbH (company
with limited liability) or AG (stock
corporation) as well as permanent
establishments of European corpora-
te entities in Austria can benefit from
the Austrian Holding Tax Regime.
Domestic HoldingIntercompany dividends paid
between two Austrian companies
are tax exempt in the hands of the
receiving Austrian company. Capital
gains arising from the sale of shares
in an Austrian corporation held by
another Austrian corporation are
taxable and are due to the stan-
dard flat corporate tax of 25 %. This
percentage is also applicable to any
other income achieved by an Au-
strian GmbH, unless tax exemptions
according to the Austrian Income
Tax Act are granted. Furthermore
almost all tax treaties foresee that in-
come resulting from foreign perma-
nent establishments are tax exempt
in Austria. Nevertheless foreign losses
can be deducted from the domestic
Austrian tax base.
Foreign HoldingsProvided that the Austrian company
holds at least 10 % of the shares of
a foreign corporate entity, which is
comparable to an Austrian GmbH,
for at least one year, any dividends
received by the Austrian company
and any capital gains resulting
from the sale of the shares of the
foreign corporation are tax exempt
in Austria.
Austria does not apply any CFC-
legislation or thin capitalization rules
or debt-equityratios so that Austrian
corporations can leverage the
acquisition of foreign shareholdings.
Interest is fully tax deductible and
can compensate any other income
which is achieved by the Austrian
corporation.
shareholdings of less than 10 % in
other corporations
Dividends are tax exempt if resulting
from rental income.
Dividends are tax exempt even if
the foreign subsidiary does not pay
taxes.
Any other income achieved by the
foreign subsidiary is seen as active
income (even if no tax is levied lo-
cally) and therefore leads to tax-free
dividends and tax-free capital gains
for the Austrian parent company.
Also rental income, achieved by
foreign subsidiaries is seen as active
income. Furthermore please keep in
mind, that if the foreign subsidiary is
achieving dividend income and is
paying this income as dividends to
the Austrian company again this is
active income. When the foreign
subsidiary acts as a “management
holding” this income achieved is
seen as active income by the
Austrian tax authorities. A “manage-
ment holding” is a company which
manages shareholdings for the
Austrian company and is controlling
these shareholdings.
Hybrid Structures It is also possible to use Austrian
corporations for hybrid structures.
The tax exemption for income does
not only include dividends and
capital gains but also any type of
profit related income an Austrian
corporation achieves either from
domestic source or foreign source. If
an Austrian company does not have
a direct shareholding in a foreign
entity but grants a loan to that fo-
reign entity, the interest paid to the
Austrian company is tax exempt and
seen as a kind of dividend income,
provided that the interest is profit
related and the Austrian company is
No withholding tax on interest paid to foreign lenders.
The Austrian “Check-The-Box” System As mentioned above the general
rule in Austria is, that foreign source
dividends and capital gains resulting
from the sale of foreign participa-
tions are tax exempt in the hands of
the receiving Austrian corporation.
Nevertheless the Austrian corpora-
tion can make capital gains taxable
if it wishes to do so. The Austrian
company just has to “check-the-
box” in its tax return and can select
for which participation any capital
gains resulting from a sale should
be taxable. This does not have any
impact on the dividends received,
they stay tax exempt. This might be
a helpful tool for those shareholders,
which can use an underlying tax
credit in their home country.
The Foreign Subsidiary As already mentioned we do not
know any CFC-legislation or similar
regulations. Nevertheless it is impor-
tant to know how the income achie-
ved by the foreign subsidiary has
impact on the tax situation in Austria.
Provided that the Austrian corpora-
tion holds shares in a foreign entity
which achieves passive income the
sale of such a participation and
the dividends, paid to the Austrian
company, will be taxable. The mere
holding of such corporations does
not have any tax impact.
The Austrian tax authorities categori-
ze income as passive if the following
income is achieved by the foreign
subsidiary and, at the same time, the
overall tax burden is not more than
15 % of the foreign country:
- Interest income
- Royalty income
- Capital gains achieved by selling
KEY FEATURES OF THE AUSTRIAN HOLDING REGIME
11.
entitled to participate in the liquida-
tion proceeds of the foreign entity.
That does not mean, that there
will be liquidation proceeds, the
corporation just has to have the right
to participate in. Even if the foreign
entity is deducting these payments,
made to the Austrian corporation,
from its own tax base these pay-
ments stay tax-free in the hands of
the Austrian company.
Summary Of The Austria Holding System
- Domestic dividends tax exempt
- Domestic capital gains taxable (25 %)
- Foreign dividends
tax exempt (10 % holding for at
least one year)
- Foreign capital gains
tax exempt (10 % holding for at
least one year)
NO TAX TREATY REQUIRED Dividends from foreign corporations
and capital gains resulting from the
sale of shares in such foreign corpo-
rations are tax exempt, regardless
whether a treaty with this country is
existing or not.
NO CFC LEGISLATION Only dividends received from foreign
companies earning interest income
or royalties are taxable as are ca-
pital gains resulting from the sale of
shares in such companies. The mere
holding of shares in such companies
does not trigger taxes.
Any other dividends or capital gains,
even from off-shore companies, are
tax exempt.
NO DEBT-EQUITY RULESInterest fully deductible, even if ef-
fectively connected with tax exempt
income. NO withholding tax on
interest paid to foreign lenders (e.g.
off-shore company).
NOTIONAL INTEREST DEDUCTION For a foreign shareholder’s loan
notional interest can be deducted
for tax purposes thereby reducing
the tax base.
LOSSES OF FOREIGN SUBSIDIARIES TAX DEDUCTIBLE IN AUSTRIA (GROUP TAXATION) Losses of a foreign
subsidiary can be set off from the
tax base of the Austrian parent
company Condition: shareholding
of more than 50 % in the foreign
subsidiary.
“CHECK THE BOX” SYSTEM Austrian parent companies can
decide for each holding in a foreign
subsidiary whether capital gains
resulting from the sale of such sha-
reholdings shall be tax exempt (as
foreseen by law) or be taxable.
DUAL RESIDENT COMPANIES CAN USE THE AUSTRIAN HOLDING SYSTEM
Conclusion Taking into consideration the far re-
aching tax treaty network of Austria,
which is constantly extended, and
the very liberal tax climate in Austria
there is no doubt about, that Austria
should be considered to be one of
the first choices when planning a
holding company. Not only for this
purpose but also for other internatio-
nal business activities Austria and its
national as well as international tax
law serves as a perfect, stable and
reliable base for economic activities.
SourceErich Baier, MBA, LL.M.
Schwarzenbergstraße 1-3/14a
1010 Vienna, Austria
baier@austrian-taxes.com
“there is no doubt about, that Austria should be considered to be one of the first choices when planning a holding company”
13.
The Decree Law 185/2009, dated
12th of August, reflects the Directi-
ve 2006/46/CE from the European
Parliament and the Council dated
14th of June, adopting measures to
simplify mergers and the split-up regi-
me, which may be essential not only
to the restructure of companies and
to an increase of its competitiveness,
reducing the respective direct admi-
nistrative costs, but also determines
that several procedures should be
undertaken electronically and that
the time for the reply of administrati-
ve entities would be reduced.
Decree Law 186/2009 – Changes to the rules of location of services for VAT purposes
The Decree Law 186/2009, dated
12th of August, reflects the Directives
2008/8/CE (its article number 2) and
2008/9/CE dated 12th of Februa-
ry 2008, as well as the Directive
2008/117/CE dated 16th December
2008, all from the Council, related to
the VAT common system, changing
essentially the rules of location of the
services provided, namely transna-
tional ones. With this Decree Law,
a simplified reimbursement system
for taxpayers who support VAT in
another EU member States, is cre-
ated. Therefore the reimbursement
request is made electronically at
the State where it is established and
must be decided within 4 months,
as long as there are no additional
information requests. Other measu-
res of administrative simplification
where also put in place, for example
the suppression of the obligation to
deliver a summary annual statement
on distance sales.
Administrative Rule 972/2009 – Regulation on issuing Rulings
The Administrative Rule 972/2009,
dated 31st August, regulates the
terms on how the request for a
Ruling from the Tax Administration
should be done, reducing the time
for the Tax Administration to decide
and establishing the procedures to
follow on presenting such requests.
It should be noted that the Tax Ad-
ministration has now 90 days, from
the date of the request, to notify its
decision, a period which can be
reduced to 60 days if the request
is submitted with an urgent nature.
Rulings in Madeira can be obtained
in a fairly quick time, not taking,
in some cases, longer than 2 to 3
weeks.
Source
http://www.newmadeira.com.
MADEIRA: recent legislative changes
15.
De Vittori of Switzerland
Rak Free Trade ZoneEstablished in 2000, Ras Al Khaimah
Free Trade Zone (RAK FTZ) is one of
the fastest growing and most cost-
effective free trade zones in the UAE
and today is home to some 7,000
companies. With the same services
companies enjoy in other centres,
for instance in Dubai, but with lower
costs, the clients of Ras Al Khaimah
Free Trade Zone benefit from a ran-
ge of advantages:
- 100% tax exemption
- 100% foreign ownership
- Transparent laws and regulations
- No restrictions on capital and
profit repatriation
- Strategic location within proximity
to Dubai
- State-of-the art communication
facilities
- Easy access to Ras Al Khaimah
international airport and a sea port
Ras Al Khaimah Free Trade Zone
(RAK FTZ) posted a 14.5 percent
increase in revenue in the second
quarter of 2009, compared to the
same period in 2008. New company
registrations for April–June 2009 clim-
bed to 554, a marked 14.7 percent
increase from last year’s registration
and a further 13.6 percent increase
compared to the first quarter of this
year.
“Our target for 2009 is to have 2,000
new companies by the end of the
year” says Oussama El Omari, CEO
of RAK FTZ. “With 931 companies
already registered in the first half of
2009, we are confident that we will
reach this target. The free zone con-
tinues to attract business in industries
spanning IT, Consulting, Manufactu-
ring and Trading.”
Instead of slowing down due to the
recent global recession and typical
summer business sluggishness, RAK
permanent office space.
Main Benefits- Cost effective solution for new
businesses entering the market
- Flexible desk / office use, based on
client needs
- Serviced by an advanced
telecommunication infrastructure
- Low risk - an ideal way to test the
market
- Upgradeable to conventional
Executive Office
Businesses that want to be registered
in the United Arab Emirates but do
not intend to conduct any substan-
tial business in the country, can opt
for RAK FTZ´s International Registry
Service. This service is particularly
suitable for companies looking to
minimise their overall tax liability,
creating a company with a purely
nominal equity investment, seeking
asset protection or in need of esta-
blishing an exchange control trading
vehicle. This product is available
exclusively through a network of our
registered offshore agents who will
take care of all administrative and
legal matters.
Advantages and Benefits- Absolute privacy, confidentiality
and protection of assets and
information
- 100% foreign ownership
- Ability to maintain bank accounts
in the UAE
- Option for choosing the applicable
economic laws
- Ability to issue multiple classes of
shares, including Restricted Bearer
shares
- Limited liability company
- Minimum one director required
- Ability to own real properties in the
UAE
Source
http://www.rakftz.com/en/
FTZ enjoyed the highest single-month
registrations total since opening, with
211 new companies signing up in
June. El Omari attributes this to the
quality of the products and services
provided by the free trade zone,
especially when it comes to tailoring
custom packages according to
specific client needs.
Breaking down the numbers of the
newly registered companies, 64
percent are trading companies with
warehousing facilities, 26 percent
offer consulting and other services,
seven percent are general trading
firms and three percent are indu-
strial.
Companies from Asia make up 41
percent of the new registrations,
followed by the European Union at
21 percent, the Middle East at 13
percent, the rest of Europe at six
percent and other countries at 19
percent.
For the next five years, RAK Free
Trade Zone’s strategy is to attract
industrial and service companies
that will trigger and aid the deve-
lopment of basic infrastructure and
services in the emirate. RAK FTZ is
encouraging various companies
interested in public-private part-
nerships with the free zone to set
up projects in the airport, seaport,
tourism and education sectors.
RAK FTZ offers offices with lease fa-
cilities that allow to use shared and
networked desks or offices on a time
limited basis. As these services come
with an assigned phone number, pri-
vate email and mail address, license
to operate in the UAE and an entry
visa package. They are an ideal tool
for self-employed businessmen, small
businesses or professionals entering
the UAE market or not requiring a
Ras Al Khaimah Free Trade Zone (RAK FTZ) is home to some 7,000 companies
17.
COMBATING MONEY LAUNDERING: SWITZERLAND’S EFFORTS RECEIVE INTERNATIONAL RECOGNITIONBern, 27.10.2009 - The Financial Ac-tion Task Force (FATF) has ended its international monitoring with regard to Switzerland under the third round of Mutual Evaluations. The FATF the-reby recognises that Switzerland has made significant progress in streng-thening the systems it has in place to combat money laundering.Recently, Switzerland submitted a
report to the FATF outlining the mea-
sures it has introduced to improve its
system of combating money launde-
ring and terrorist financing since the
last FATF evaluation conducted in
2005. The FATF has acknowledged
these measures which include the
revision of its Anti-Money Laundering
Act and the strengthening of pre-
ventive measures and its structure of
financial market supervision. On 14
October 2009 it therefore decided
to end the international monitoring
of Switzerland introduced within the
scope of the third round of mutual
evaluations conducted on a global
scale (2004 - 2011).
In future Switzerland will only be
subject to a simplified biennial
process. This process requires Swit-
zerland to submit regular reports
on developments in its system of
combating money laundering and
terrorist financing with effect from
October 2011. As such Switzerland
will be among the first countries to
be evaluated under this simplified
process alongside Italy, Norway
and the UK. The FATF nevertheless
observed that shortcomings remain,
particularly regarding the effecti-
veness of the system for reporting
suspicious transactions, transparency
relating to bearer shares as well as
in terms of the measures in place to
implement international standards
on freezing terrorist assets.
PRESIDENT MERZ APPOINTS WORKING GROUP TO PREVENT ANY FURTHER ESCALATION IN RELATIONS WITH ITALY CONCERNING TAXES
Bern, 04.11.2009 - President Merz has appointed an interdepartmental working group made up of represen-tatives from the Federal Department of Finance, the Federal Department of Foreign Affairs and the Federal Department of Economic Affairs in the dispute about tax policy issues with Italy. The working group has the task of drawing up a joint strategy to calm relations concerning tax policies with Italy and to examine certain measures. The objective is to prevent any further escalation in relations with Italy concerning taxes.Against the backdrop of years of
efforts on the part of Switzerland
to find a solution to the unresolved
tax policy issues with Italy and the
unjustified charges made by Italy in
relation to the financial centre in the
Tessin, President Merz took the de-
cision to suspend negotiations with
Italy on the revision of the double ta-
xation agreement (DTA) until further
notice. President Merz informed the
Federal Council in its meeting today
that as a further step, he would ap-
point an interdepartmental working
group with the task of drawing up a
strategy to calm relations with Italy
concerning tax policies and to exa-
mine other measures. The objective
is to prevent any further escalation in
relations between Italy and Switzer-
land in the area of taxes.
SWITZERLAND AND TURKEY INITIAL NEW DOUBLE TAXATION AGREEMENTBern, 04.11.2009 - Switzerland and Turkey have concluded negotiations on extending administrative assi-stance in tax matters in accordance with the OECD standard and on other points. A new double taxation agreement (DTA) was initialled to-day in Bern. The DTA is in line with the parameters decided by the Federal Council.Since the Federal Council decision
of 13 March 2009 on extending
administrative assistance in tax
matters in accordance with Article
26 of the OECD Model Convention,
Switzerland has already negotiated
and initialled fifteen DTAs with the
extended administrative assistance
clause. The agreements with Den-
mark, Luxembourg, France, Norway,
Austria, the United Kingdom, Mexico,
Finland, the Faeroe Islands, the USA
and Qatar have already been sig-
ned. The agreement with Spain also
counts as an agreement which has
been signed. The current DTA with
Spain contains an automatic most-
favoured nation clause, in case
Switzerland should agree to more ex-
tensive provisions on the exchange
of information with another EU mem-
ber state. This clause was activated
with the signing of the DTA with
Denmark in August 2009. Switzerland
has been on the `White List’ of the
OECD since 25 September 2009 and
thereby avoids fiscal discrimination
and being subjected to disadvanta-
ges from the community of states.
The Federal Council will shortly sub-
mit a series of individual dispatches
to the National Council and the
Council of States, in which the
Federal Council requests approval
from parliament of the DTAs which
were signed first. The signing of the
renegotiated and initialled agree-
ments with the Netherlands, Poland
and Japan is envisaged in the next
few weeks.
The renegotiation of the DTAs in part
goes far beyond extending admi-
nistrative assistance in tax matters.
Switzerland not only conducted
negotiations on adapting admini-
strative assistance but also obtai-
ned numerous advantages for the
economy. These include reductions
in withholding tax and zero rates
for dividends, interest and royalty
payments and arbitration clauses to
avoid double taxation. In addition
it was achieved that discrimination
due to administrative assistance
policies up to now was stopped.
This policy will be pursued. Further
negotiations have already been
arranged with other countries.
Source
Federal Department of Finance FDF
Ne
ws fro
m Sw
itzerla
ndSwitzerland
November 2009ITALIAN AMNESTY MAY BREAK EU LAWAccording to a study published by
the European Policy Forum (EPF) au-
thored by an expert in EU legislation,
Advocate Giuseppe Giacomini of
Genoa, the tax amnesty launched
by the Italian government contrave-
nes EU law by breaking rules desig-
ned to maintain a level playing field
in financial markets across Europe.
The study was launched at a press
conference in the European Par-
liament in Brussels which brought
together prominent Italian MEPs
from different political groups.
The study shows that the amnesty
exempts individuals and companies
controlled by them from a range of
offences which continue to apply to
their competitors in Italy and across
the EU.
It also makes unilateral changes
to the VAT system, a European tax
which has pan-European rules which
are infringed by the amnesty, espe-
cially in regards to concealment of
matters from the European Commis-
sion.
The amnesty falls foul of competition
and state aid rules, says Advocate
Giacomini, who calls for a full investi-
gation by the Commission followed
by appropriate action against the
Italian government.
He says the way in which the am-
nesty is constructed also makes it
likely to contravene EU anti-money
laundering legislation.
The amnesty is due to expire on
December 15 but it has been sugge-
sted that it might be extended until
mid-2010.
EPF President Graham Mather said:
“Countries with high taxes but serious
fiscal deficits may be tempted in
current conditions to reach for the
apparently attractive technique of
a tax amnesty. This study, however,
clearly demonstrates the need for
caution. Amnesties can seriously cut
across Europe’s level playing field,
break Community law, and discomfit
and disadvantage other states. They
may also generate a profound sense
of unfairness among taxpayers,
with unpredictable but potentially
negative consequences for legisla-
tors. Let us hope that these lessons
are learned in the debate which has
been triggered by the latest Italian
amnesty.
November 2009GERMANY’S SCHÄUBLE RULES OUT NEW TAX SYSTEM BEFORE 2013 Germany’s freshly appointed Finan-
ce Minister Wolfgang Schäuble has
ruled out the possibility of a funda-
mental reform of the country’s tax
system until the end of the current
legislative period. Determined to
honour the pledges contained in the
recent coalition agreement, Schäu-
ble has confirmed government plans
to carry out a limited tax reform
programme from January 1, 2010
of around 1% of gross domestic
product, suggesting that this is both
economically right and justifiable. He
has also made known his intention
to strive towards implementing
additional tax reductions of around
EUR20bn in 2011, provided that this is
possible to legislate.
November 2009AUSTRALIA’S TAX REVENUE RISE LAGS BEHIND ECONOMIC GROWTHThe 2009-10 Mid-Year Economic
and Fiscal Outlook (MYEFO), while
predicting higher Australian growth
than expected, also pointed to a
lag before tax revenues catch up
with budgetary forecasts. Australia’s
Treasurer, Wayne Swan, announcing
the MYEFO’s release, suggested that
despite the improved outlook, the
economy is expected to continue
to operate below capacity for
some time and unemployment is
still expected to rise, with a drag
on domestic incomes and business
investment.
November 2009CAYMAN SIGNS TIEA WITH THE NETHERLANDS ANTILLES The Cayman Islands signed a Tax
Information Exchange Agreement
(TIEA) with the Netherlands Antilles
on October 29, 2009, whilst atten-
ding the Caribbean Financial Action
Task Force (CFATF) plenary, held in
Curacao. The agreement, which is
Cayman’s fourteenth, was signed on
behalf of the Cayman Islands by the
Cayman Attorney General, Samuel
Bulgin. Commenting on the signing
of the agreement, Bulgin stated:
“This signing represents the Cayman
Islands’ continued commitment to
OECD standards for transparency
and exchange of information on tax
matters. It will commemorate the
beginning of what I am sure will be
a mutually-rewarding relationship
between the Cayman Islands and
the Netherlands Antilles.” According
to the Cayman government, nego-
tiations have also been completed
with a number of other countries,
including Aruba, Australia, Canada,
Germany, Italy and Mexico and it
is anticipated that agreements will
be signed before the end of 2009.
Negotiations are also currently on-
going with a further ten jurisdictions:
Argentina, Belgium, China, Czech
Republic, India, Japan, Korea, Portu-
gal, Spain and South Africa.
Source
Low tax netNe
ws
from
the
wo
rldWorldN
ew
s fro
m th
e w
orld
21.
17.
Previously, businesses had to forward
a number of documents and all
original invoices usually by mail to
each VAT Authority. This procedure
will be replaced by an electronic
process, ensuring a quicker process
and refunds to claimants.
Costs on which VAT is reclaimed will
have to be classified in accordance
with the following categories:
1.Fuel2.Hiring of means of transport3.Expenditure on means of transport (other than 1. and 2. above)4.Road tolls and road usage charges5.Travel expenses such as taxi fares, public transport fares etc 6.Accommodation7.Food, drink and restaurant services8.Admissions to fairs and exhibitions 9.Expenditure on luxuries, amusement and entertainment 10.Other
In addition, applicants must include,
if applicable, details of their deduc-
tible VAT method of calculation in
the country of establishment. Tax
Authorities will be required to pro-
cess claims within a stipulated time
period. If exceeded, they will have
to pay interest to the claimants on
overdue refunds.
Reporting obligations and listings Additional filing requirements will be
introduced as of 1 January 2010 for
businesses rendering services within
the EU. Businesses that supply basic
rule services to businesses in other
EU countries will have to periodically
report these services by submitting
a listing electronically to their Tax
Authority (Form VIES Il listings). These
services must be broken down by
value and by VAT number for each
service recipient. VIES Il forms need
to be submitted on a monthly basis;
in addition, quarterly VAT returns
need also be submitted.
HOW DO THE CHANGES AFFECT CYPRUS COMPANIESCompanies already registered for VAT purposes
Cha
nge
s To V
AT Le
gisla
tion In The
EU
A NUMBER OF EU VAT RULES WILL CHANGE WITH EFFECT FROM 1 JANUARY 2010. THE MOST SIGNIFICANT CHANGES RELATE TO:
1.The rules for determining the place where a service is supplied and which country can therefore tax these services (the place of supply’ rules).
2.The refund of foreign (EU) VAT incurred on cross border transactions within the EU (8th Directive).
3.Reporting obligations and listings
Place of supply of services to taxable persons Presently, the place of services is
deemed to be where the service
provider is established for VAT pur-
poses, according to the basic rule.
With effect from 1 January 2010,
the rule on the place of supply of
cross border services will change
as follows: for services provided to
businesses, the new basic rule is
that these services are deemed to
be supplied where the recipient of
these services is established (reverse
charge mechanism).
The service provider will not charge
VAT, but the recipient of services
will have to account for the VAT
payable on the services in their VAT
returns.
General guidelineFor supplies or services to taxa-
ble persons, the general rule with
respect to the supply of services VAT
arises in the place where the reci-
pient is established. Where services
are supplied to non-taxable persons,
the general rule should continue to
be that the place of supply of servi-
ces is the place where the supplier
has established his business.
Refund of foreign (EU) VAT (in terms of the 8th Directive)With effect from 1 January 2010, it
will be easier for EU established bu-
sinesses to reclaim foreign (EU) VAT.
- They are not affected and will
continue to submit VAT returns as
they do now.
- If they receive cross-border services
- whether from EU Member States or
other (third) countries - they need
to account for VAT in terms of the
reverse charge mechanism, as they
do now.
- If they provide cross border services
to businesses in the EU Member
States, these companies need to
submit, on a monthly basis, the VIES Il
submissions as explained above.
Companies providing cross border services to businesses in EU Member States- They will have to register for VAT
purposes.
- They do not have to charge VAT as
long as the recipient is registered for
VAT purposes. In fact, the recipient is
now obliged to account for VAT un-
der the reverse charge mechanism.
- If the recipient is not registered for
VAT services, the Cyprus company
must charge VAT at the prevailing
rate of 15%.
- They are required to submit VIES
Il submissions on a monthly basis.
There is no minimum threshold for
registration.
Companies receiving cross border services from EU Member States or other countries - They will also have to register for
VAT purposes.
- They will need to account for VAT
under the reverse charge mechani-
sm on all services received. Excluded
are property related services, supply
of transport, restaurant services,
hiring of transport etc, both for EU
Member States and other countries.
- There is no minimum threshold for
registration.
Companies providing services to businesses in other countries - These services fall outside the sco-
pe of VAT.
- Consequently, they are exempt
from having to register for VAT.
- They are not required to file VIES Il
forms.
- They may voluntarily register for VAT
in order to claim refunds on local
expenses incurred and provided
accepted by the Cyprus VAT
Authorities.
Companies incurring business rela-ted costs within EU Member States - They are entitled to claim VAT
refund on business related costs
incurred within EU Member States.
- Such VAT refund claim may be
submitted electronically.
- The VAT Authorities in the individual
EU Member States are now required
to process claims within a stipulated
time period.
Source
Oneworld ltd
Nicosia, Cyprus
23.
19.
Published byDe Vittori of Switzerland - Lugano
DirectorAlessandro Pumilia
The information in this brochure is subject to change without notice.Application of the information to specific circumstances requires the advice of professionals who must rely upon their own sources of information before providing advice. The information is intended only as a general guide and is not to be relied upon as the sole basis for any deci-sion without verification from reliable professional sources familiar with the particular circumstances and the applicable laws in force at that time.
DesignGiovanna Capoferri
THE DIGITAL BUSINESS MANAGEMENT MAGAZINE OF DE VITTORI OF SWITZERLANDOctober // November // December 2009
top related