ECJ: A tax system designed in such a way that offshore companies avoid taxation constitutes a State aid scheme that is incompatible with the internal market

Posted on November 17, 2011 by CraigAird
XING

ECJ press release 120/11 dated 15 Nov. 2011 http://curia.europa.eu/

“A tax system designed in such a way that offshore companies avoid taxation constitutes a State aid scheme that is incompatible with the internal market”

The Court has therefore set aside the judgment of the General Court and upheld the Commission’s decision not to authorise the United Kingdom to implement the reform of Gibraltar corporate tax proposed in 2002

In August 2002 the United Kingdom notified the Commission of the Government of Gibraltar’s proposed reform of corporate tax.[1] That reform included in particular the repeal of the former tax system and the imposition of three taxes applicable to all Gibraltar companies, namely a companies registration fee, a payroll tax and a business property occupation tax (‘BPOT’), with a cap on liability to payroll tax and BPOT of 15% of profits.

In 2004, the Commission decided[2] that the proposals notified for the reform of the system of corporate taxation in Gibraltar constituted a scheme of State aid that was incompatible with the internal market and accordingly that those proposals could not be implemented. The Commission found that three aspects of the tax reform were materially selective: (1) the requirement that a company must make a profit before it becomes liable to payroll tax and BPOT, since that requirement would favour companies which make no profit; (2) the cap limiting liability to payroll tax and BPOT to 15% of profits, since that cap would favour companies which, for the tax year in question, have profits that are low in relation to their number of employees and their occupation of business property; and (3) the payroll tax and BPOT, since those two taxes would inherently favour offshore companies which have no real physical presence in Gibraltar and which as a consequence do not incur corporate tax. It also found that the proposed reform was regionally selective since it provided for a system under which companies in Gibraltar would be taxed, in general, at a lower rate than those in the United Kingdom. Continue reading →

Posted in International Tax | Tagged , | Leave a comment

Blog moving to new domain

Posted on November 17, 2011 by CraigAird
XING

As part of my cooperation with BIZ | LAW (www.biz-law.de) my blog will be moving to a new domain in the near future. I’ll post when the move is complete.

Posted in General | Tagged | Leave a comment

FBAR Guidance for Former Employees with Signature Authority of Accounts of Former Employer

Posted on November 17, 2011 by CraigAird
XING

FinCEN Notice 2011-3

The Financial Crimes Enforcement Network (FinCEN) issued guidance related to reporting requirements for Reports of Foreign Bank and Financial Accounts (FBARs) with respect to former employees who had signature authority over, but no financial interest in, a foreign financial account of a former employer during a reportable calendar year. Continue reading →

Posted in International Tax | Tagged | Leave a comment

German Tax Court Refuses to Extend ECJ Precedents to U.S. Residents

Posted on August 22, 2011 by CraigAird
XING

In a recent case involving an American lawyer who was subject to limited taxation in Germany as a non-resident, Germany’s Federal Fiscal Court (“BFH”) held that the anti-discrimination clauses contained in the U.S-Germany tax and friendship treaties could not be applied to receive the same tax treatment as that accorded to other non-residents who were citizens of EU countries. (BFH decision dated 30 March 2011 and published 15 June 2011 – I R 63/10; link to decision http://bit.ly/nC7Azm (in German)).

At issue was whether the taxpayer would be subject to tax in Germany with respect to his gross German-source income at a flat 25% rate or whether he could apply a 2003 decision from the European Court of Justice (“ECJ”), Gerritse, which had held that this form of taxation violated European freedoms when applied to non-residents in situations where resident taxpayers would be subject to tax with respect to their net income at graduated rates (ECJ judgment C-234/01 date 12 June 2003).

Ultimately the BFH ruled that treating a U.S. resident differently than a resident of the EU did not constitute discrimination under either the tax treaty or the friendship treaty as the difference in treatment was based on residency and not on nationality. The court noted that a German citizen resident in the U.S. would have been taxed in exactly the same manner as the taxpayer in the case at hand.

Although the direct impact of the decision is limited as German law has since changed to provide for net income taxation under the same circumstances, the decision does signal the BFH’s unwillingness to extend decisions of the ECJ to U.S. residents.

 

Posted in International Tax | Tagged , , , , , | Leave a comment

New post from Steuerrecht Blog – Does the reorganization clause of Sec. 8c, para. 1a KStG violate Community law?

Posted on August 17, 2011 by CraigAird
XING

From Steuerrecht Blog – Link to the original post: http://bit.ly/rqqClh

Münster Fiscal Court (Finanzgericht): Does the reorganization clause of Sec. 8c, para. 1a Corporate Tax Act (Körperschaftssteuergesetz “KStG”) violate Community law?

15 August 2011 from Michael Kaiser

Münster Fiscal Court decision dated 1 August 2011 – 9 V 357/11 K, G

Press release from the Court:

“The 9th Senate of the Münster Fiscal Court has significant doubts as to whether the so-called reorganization clause of Sec. 8c, para. 1a KStG actually – as the European Commission has determined – is to be viewed as impermissible state aid (Decision dated 1 August 2011, 9 V 357/11 K, G). Accordingly, in the instant case the Fiscal Court has suspended the enforcement of tax assessment notices in which the relevant tax office has not taken losses into account citing Sec. 8c, para. 1 KStG although it is not disputed that the requirements for the reorganisation clause have been met.

Background information: Incorporated entities, such as a GmbH in the instant case – may generally offset profits with unused losses from prior years.  However, in the event equity interests in such an entity are transferred, i.e. there is a change in shareholders, under certain circumstances Sec. 8c, para. 1 KStG prohibits the deduction of prior losses in whole or in part.  However, under Sec. 8c, para. 1a KStG the limitation on the deduction of losses does not apply in cases where the shares were acquired for purposes of reorganizing business operations.  For this reason, Sec. 8c, para. 1 KStG permits the utilization of losses under certain circumstances in cases of a reorganization despite the presence of a “disqualifying” share transfer. Continue reading →

Posted in International Tax | Tagged , , , , | 1 Comment

Federal Ministry of Finance Releases Umsatzsteuer (German VAT) Exchange Rates for July

Posted on August 5, 2011 by CraigAird
XING

From the Steuerrecht blog – The original post may be viewed at http://bit.ly/omcc26.

Updated monthly overview of Umsatzsteuer exchange rates for 2011 have been announced by the Federal Ministry of Finance (“BMF”) in a Circular dated 1 August 2011 – IV D 3 – S 7329/11/10001 (2011/0574557).

The updated monthly overview of VAT exchange rates is published in accordance with Sec. 16, para. 6, 1st sent. German Value Added Tax Act (“UStG”).

Note: the USD exchange rate for July is €1 : $1.4264.

 

Posted in General | Tagged , , , | 1 Comment

German Federal Fiscal Court Rules Distributions to an Atypical Partner Disqualify Tax Group

Posted on July 3, 2011 by CraigAird
XING

In a decision published June 22, 2011 (Ruling dated 31.3.2011, I B 177/10), Germany’s Federal Fiscal Court (BFH) held that a parent and subsidiary failed to qualify as a tax group (Organschaft) for German corporate income and trade tax purposes where the subsidiary transferred a portion of its profits from its foreign permanent establishment (PE) to an atypical silent partner. This transfer caused the group to fail the “entire profits” requirement of a tax group. It was irrelevant that the portion of the profits to be distributed may be exempt from German taxation under a double taxation treaty because such an exemption does not reduce a subsidiary’s actual profits.

As a result of the ruling, profit distributions to the parent were recharacterized as constructive dividends and the loss offsets recharacterized as hidden contributions.

The full text of the ruling may be found under http://www.bundesfinanzhof.de/entscheidungen/entscheidungen-online using the search term “I B 177/10” in the box entitled “Aktenzeichen” (decision only available in German).

 

Posted in International Tax | Tagged , , , | Leave a comment

New Collaboration with the Steuerrecht Blog / Neue Zusammenarbeit mit dem Steuerrecht Blog

Posted on June 28, 2011 by CraigAird
XING

I’m happy to announce a new feature for my blog. In cooperation with the Steurrecht Blog (http://www.steuerrechtblog.de) I’ll be translating and posting English language versions of selected posts from the Steuerrecht Blog. In particular, the posts will relate to developments relevant to cross-border tax and business issues. The translations will include a link back to the original post in German. In this manner I hope to provide additional, useful information to readers of my blog. As always, comments and feedback are always welcome.

Es freut mich sehr, eine neue Zusammenarbeit mit dem Steuerrecht-Blog (http://www.steuerrechtblog.de) anzukündigen. Ich werde einzelne der Posts vom Steuerrecht-Blog ins Englische übersetzen und hier zur Verfügung stellen. Insbesondere werden sich die Posts auf Entwicklungen mit Relevanz zu grenzüberschreitenden steuerrechtlichen und wirtschaftlichen Themen beschäftigen. Die übersetzen Posts werden mit einem Link zu den originalen Posts versehen werden. Auf diese Weise hoffe ich den Lesern sinnvolle Information zur Verfügung zu stellen. Wie immer, freue ich mich auf Ihre Comments und Feedback.

 

Posted in General | Tagged | 1 Comment

Up, up and away – International tax in the cloud / Ab in die Wolke – Cloud Computing aus steuerrechtlicher Hinsicht

Posted on June 20, 2011 by CraigAird
XING

Up, up and away – International tax in the Cloud

I recently participated in an interesting webinar on international tax issues connected with cloud-based computing services. Outsourcing computing capacity to third-party service providers will continue to gain in importance as companies look to increase productivity and decrease costs. However, from a U.S. standpoint, the tax treatment of cloud-based computing services remains unclear.

Here are some takeaways from the webinar:

The two key issues are characterization and sourcing.

Characterization: The most recent regulations on computer programs were issued in 1998 and provide little guidance in relation to cloud-based computing services. Applying definitional provisions in the Internal Revenue code, the use of computing services or programs from a remote provider will most likely be characterized as a service.

Sourcing: The characterization issue drives the sourcing issue. If remote computing via the cloud is treated as a service, income will generally be sourced where the services are performed. Continue reading →

Posted in International Tax | Tagged , , | Leave a comment

Start of a new chapter / Ein neues Kapitel

Posted on June 10, 2011 by CraigAird
XING

Welcome to my new blog!

Since moving to Dresden a year ago, my primary focus has been on providing translation services within the legal, financial and tax fields. I was admitted as a foreign lawyer to the bar association of Saxony in May and will now start a new chapter in my professional career. In cooperation with local attorney Hendrik Kamp and BIZ | LAW I will now also be offering legal services. BIZ | LAW specializes in providing legal and business advice to foreign and domestic companies operating internationally. I will be able to use my ten years’ experience as a tax and business lawyer to advise American companies with operations in Germany as well as German companies who conduct business in America or with American counterparties.

The purpose of this blog is to provide periodic updates on business and legal issues of interest to companies operating in the U.S. and Germany. Please feel free to enjoy the conversation.

Seitdem ich vor einem Jahr nach Dresden gezogen bin, habe ich mich im Wesentlichen auf die Übersetzung juristischer Texte mit den Schwerpunkten Recht, Finanzen und Steuern konzentriert. Im Mai wurde ich als ausländischer Anwalt in die Rechtsanwaltskammer Sachsen aufgenommen und werde nun ein neues Kapitel im Berufsleben aufschlagen. In Kooperation mit dem Dresdner Rechtsanwalt Hendrik Kamp und BIZ | LAW werde ich nun auch Rechtsberatung anbieten. BIZ | LAW ist spezialisiert auf die juristische und unternehmerische Beratung global tätiger Unternehmen aus dem In- und Ausland. Ich werde meine zehnjährige Berufserfahrung als Anwalt mit den Schwerpunkten Wirtschaft und Steuern einsetzen koennen, vor allem bei der Beratung amerikanischer Unternehmen, die in Deutschland tätig sind oder sein wollen sowie deutscher Unternehmen, die U.S.-amerikanische Vertragspartner haben oder selbst Geschäfte in den USA tätigen wollen.

Ich möchte diesen Blog als ein Forum verwenden, um regelmäßige, kurze Beiträge über interessante wirtschaftliche/steuerrechtliche Themen zu besprechen. Bitte machen Sie mit!

Posted in General | Tagged , | Leave a comment