WELCOME TO OUR WEBINAR Foreign Tax Update Focus on Europe & Latin America

Transcription

1 WELCOME TO OUR WEBINAR Foreign Tax Update Focus on Europe & Latin America Friday, November 20, :00 to 1:30 p.m. EST If you cannot hear us speaking, please make sure you have called the teleconference number below. The audio portion is available via conference call. It is not broadcast through your computer. US participants: Outside the US: *This webinar is offered for informational purposes only, and the content should not be construed as legal advice on any matter.

2 Introduction of speakers speakers John Guarin Project Manager Latin American Desk Paulus Merks European Desk Guest speakers Luiz Dardes Brazilian Desk Miguel Valdes President Latin American Tax & Legal Network LATAXNET Resident Partner Chicago Office Machado Associados Jose Manuel Trueba Ortiz, Sosa, Ysusi & Cia SC Juan Manuel Soria Tax Partner Mitrani, Caballero, Rossa Alba, Francia & Ruiz Moreno Adrian Rodriguez Tax Partner Lewin & Wills Foreign Tax Update November 20,

3 Chat feature John Guarin Project Manager Latin American Desk Webinar participants may ask questions via the chat feature on your screen. If we are unable to respond to your question during the presentation, someone will follow-up with you via as soon as possible following the program. Foreign Tax Update November 20,

4 Foreign tax update - agenda Foreign Tax Update Agenda John Guarin Project Manager Latin American Desk I. Europe II. Latin America Brazil Mexico Argentina Colombia Rest of the Region Foreign Tax Update November 20,

5 Europe 1. European tax developments with regard to IP 2. Recent actions by the European Commission Paulus Merks European Desk 3. Recent case by the European Court of Justice on Consolidated Tax Groups 4. Netherlands' tax proposals Foreign Tax Update November 20,

6 Europe European tax developments with regard to IP Race to the bottom? Paulus Merks European Desk - Dutch (former) IP regime (10%) per Belgian IP regime per Luxembourg IP regime per New Irish IP regime per Irish royalty free license - New Dutch IP regime (Innovation Box 5%) per Reverse Hybrid CV - Swiss regime Foreign Tax Update November 20,

7 Europe European Commission - State aid: Commission closes investigation into Hungarian intra-group interest taxation Paulus Merks European Desk - Commission refers the United Kingdom to the ECJ over improper implementation of the Marks & Spencer judgment on cross-border loss relief - Commission refers Spain and Portugal to the ECJ on exit-taxes on companies Foreign Tax Update November 20,

8 Europe The European Court of Justice on Consolidated Tax Groups (a.o.): - Case C-446/03, Marks & Spencer judgment on crossborder loss relief Paulus Merks European Desk - Case C-418/07, Papillon - Case C-337/08, X Holding BV, Conclusion Advocate- General J. Kokott, 19 November 2009 Foreign Tax Update November 20,

9 Europe / Netherlands New corporate tax law per 2011 (?): - Group financing measure - Enhancement participation exemption (2010) - Anti-interest stripping rules Paulus Merks European Desk Dutch budget 2010: - Participation exemption and other tax measures: the Subject-to-Tax Test, the Asset Test and the Reintroduction of the Motive Test - Election for 3 year loss carry back period - Innovation box - Dividend withholding tax: Norway, Iceland Foreign Tax Update November 20,

10 Main Taxes Luiz Dardes Brazilian Desk Federal Corporate Income Tax (IRPJ + CSLL) Turnover Tax (PIS + COFINS) Excise Tax (IPI) Social Security (INSS) Withholding Income Tax (IRRF) Financial Transactions Tax (IOF) State Value Added Tax (ICMS) Vehicle Title Tax (IPVA) Real Estate Transfer Tax (ITBI) Municipal Services Tax (ISS) Real Estate Title Tax (IPTU) Foreign Tax Update November 20,

11 Summary of key points Ruling on Delaware as tax haven IOF tax increase Luiz Dardes Brazilian Desk Focus on tax audits ICMS relief through State severance credits Foreign Tax Update November 20,

12 Ruling on Delaware Decision issued by revenue service at the request of a taxpayer to obtain the service s interpretation of tax statutes Luiz Dardes Brazilian Desk Tax favorable jurisdiction: concept created under Law nr. 9,430/96 as an entity in a jurisdiction that exempt income from tax or when taxing it, does it at a rate of 20% or lower Law nr. 11,727/08 broadened the concept of tax favorable jurisdiction and introduced the concept of tax privileged jurisdiction Tax favorable jurisdiction would include jurisdictions that do not allow access to information on corporate organization, ownership of shares or the disclosure of the ultimate beneficiary of income attributable to foreign residents Foreign Tax Update November 20,

13 Ruling on Delaware (continued) Tax privileged jurisdiction is associated with one or more of the following characteristics: (a jurisdiction that) does not impose tax on income or when doing so at the rate of 20% or lower Luiz Dardes Brazilian Desk (a jurisdiction that) grants an advantage of tax nature to a foreign resident party without requiring the realization of economically substantive activities conditioned to the non-realization of economically substantive activities (a jurisdiction that) does not tax foreign earned income or when doing so does it at the rate of 20% or lower (a jurisdiction that) does not allow the access to information related to the corporate organization, ownership of shares or the identification of the ultimate beneficiary of income attributable to foreign residents Foreign Tax Update November 20,

14 Ruling on Delaware (continued) Luiz Dardes Brazilian Desk The revenue service further concludes that an LLC in Delaware should be treated as a tax favorable jurisdiction and/or tax privileged regime because: the corporate income tax rate does not exceed 15% there is income tax exemption for companies carrying out activities outside the State s territory without being subject to income tax, LLCs in Delaware can (i) own shares of foreign companies, (ii) set up bank accounts outside the US territory, (iii) own real estate outside the US territory and (iv) are exempt from disclosing information related to corporate organization and their shareholders (Although not cited in the ruling) a tax haven entity is subject to higher WHT (25% instead of 15%) The list of tax haven entities has not been amended to include Delaware Ruling is not binding but denotes the services interpretation likely to be used for audits Foreign Tax Update November 20,

15 IOF tax on foreign investors Presidential Decree nr. 6,983/09 increased the IOF tax (tax on financial transactions including credit, insurance, foreign exchange and gold) Luiz Dardes Brazilian Desk Levied at 2% rate on fx transactions for inflow of funds by foreign investors in the financial and capital markets outflow/return is zero rated Aimed at mitigating the free-fall of the dollar towards the Brazilian real Rates can be changed through presidential decree with immediate effect Foreign Tax Update November 20,

16 New trend in tax audits Revenue service has advertised new focus on highprofile tax planning transactions Goal is to target transactions and industries rather than profiling taxpayers Luiz Dardes Brazilian Desk Likely transactions include those resulting from mergers and acquisitions, large corporate reorganizations, use of off-shore structures New focus is reaction to fall in tax revenues as result of economic crisis and is an attempt at discouraging the use of legitimate tax planning protected under Federal Constitution Foreign Tax Update November 20,

17 ICMS relief State severance credits Luiz Dardes Brazilian Desk Past-due State severance credits that can be used to: Pay for recurring ICMS tax liability; and As guarantee for ICMS or other State tax liability under litigation (lien) Credits result from litigation on salary adjustments by public employees against the State (hence their severance nature) Past-due status: credits are means of payment for taxes (Const Amdt 30/00) Sao Paulo State owes approximately R$ 6bi in alimony credits (other States include Minas Gerais and Rio Grande do Sul) Requires assignment of credit by the original creditor (public employee or association) Foreign Tax Update November 20,

18 Mexico Jose Manuel Trueba Tax Partner Ortiz, Sosa, Ysusi & Cia SC Tax reform approved by Congress Date of application Corporate income tax Rates: - Increases to 30% for FY 2010 to % for 2013 and 28% as of FY2014 Tax consolidation regime Limitation on exercises Payment of deferred tax (April 2010) Amendments to Maquiladora regime R&D tax credits repeal Foreign Tax Update November 20,

19 Mexico Jose Manuel Trueba Tax Partner Ortiz, Sosa, Ysusi & Cia SC Value Added Tax (VAT) Rates: Increases from 15 to 16% (borders zone from 10 to 11%) Tax on cash deposits Rate increased to 3% Tax free allowance reduced from Mx 25k to Mx 15k Tax Authority powers Foreign Tax Update November 20,

20 Mexico Jose Manuel Trueba Tax Partner Ortiz, Sosa, Ysusi & Cia SC Recommended review Assess financial impact of tax consolidation changes Determine payable deferred tax amount (April 2010) Double tax treaties Mexico Netherlands Tax Treaty protocol Tax audits FY2009 Transfer pricing audits Withholding tax audits Foreign Tax Update November 20,

21 Argentina Juan Manuel Soria Tax Partner Mitrani, Caballero, Rossa Alba, Francia & Ruiz Moreno Expected tax reform (effect on FY2009 and 2010) Loss of congressional support to executive branch Extension of taxes (normally extended on a yearly basis) Credits and debits on bank account tax until Dec 31/11 Minimum presumptive income tax until Dec 30/11 Excise tax (17%) and VAT (increasing the current tax rate of 10.5% to 21%) on certain technological products considered as luxury products Taxing with Personal Assets Tax the deposits in Argentine and foreign currency in Argentine financial entities Foreign Tax Update November 20,

22 Argentina Juan Manuel Soria Tax Partner Mitrani, Caballero, Rossa Alba, Francia & Ruiz Moreno Recommended review Review with treasury status of deposits in Argentine bank account to determine impact of Personal Assets Tax accrual and income tax on interest Review impact of excise and VAT increase on import of technology assets qualified as luxury assets Double tax treaties Tax audits FY 2009 The auditing processes are presently becoming more numerous and specialized Increase in audit activity is almost granted given expiration of asset disclosure amnesty Sectors particularly targeted media, and agro production and exportation Foreign Tax Update November 20,

23 Colombia Adrian Rodriguez Tax Partner Lewin & Wills Expected tax reform (to take effect as of ) Extension of net-worth tax for 4 more years as of Reduction of existing Special Deduction benefit for investment on fixed assets (from 40% of asset value to 30%) Avoidance of concurrence of Free Trade Zones benefit and Special Deduction benefit Recommended review Review net-worth value status before end of FY2009 Speed up execution of fixed assets investment to occur in FY2009 Review status /possibilities of tax stabilization agreement Foreign Tax Update November 20,

24 Colombia Adrian Rodriguez Tax Partner Lewin & Wills Double tax treaties (OECD model) Spain came into force Chile & Switzerland have been approved by Congress and expect Constitutional Court approval Mexico has been signed and presented to congress Other treaties in the pipeline Tax audit activity FY 2009 Transfer pricing audits have become more strict No particular industry or tax payer has been targeted Emphasis on compliance requirements but new TP audit team at DIAN is expected to place more emphasis on substance Foreign Tax Update November 20,

25 Rest of the region general trends Miguel Valdes President Latin American Tax & Legal Network LATAXNET Resident Partner Chicago Office Machado Associados Tax policies Audit processes Tax treaties evolution Impact of political situation in determined jurisdictions Foreign Tax Update November 20,

26 Rest of the region - Venezuela Miguel Valdes President Latin American Tax & Legal Network LATAXNET Resident Partner Chicago Office Machado Associados Venezuela Announced income tax reform following XXI Century s Socialism Policy principles Mandatory internet base filings for special taxpayers Repeal of incentives to petrochemical companies Antinarcotics law contribution (1% profits if >50 employees) Plan Evasion Cero extended from VAT to TP Foreign Tax Update November 20,

27 Rest of the region - proposed John Guarin Project Manager Latin American Desk Costa Rica Free Trade Zone regime reform to comply with WTO mandate Tax on FTZ user income Strategic Sector CIT 0% 2yrs; 6% following 8 years; 15 thereafter Ecuador TP Compliance tax-haven transaction lead to (I) mandatory filing and (II) potential audits Capital flight tax increase from 1 to 2% Guatemala Focus in indirect taxation; mandatory check transactions (USD 1,200 over) audit powers to authorities Foreign Tax Update November 20,

28 Rest of the region - passed John Guarin Project Manager Latin American Desk Panama Tax Adjustment September 2009 Tax on foreign income profits with dividend withholding tax Future comprehensive tax reform (December 2009?) Peru Flat Mandatory fiscal 2007 Tax reform, Exemption reforms as of Exemption on stock exchange transactions come to an end (Capital gains will or 5%) Foreign Tax Update November 20,

29 Foreign Tax Update Friday, November 20, 2009 THANK YOU