UPDATE ON INTERNATIONAL PLANNING ISSUES LONDON


Mandatory disclosure of tax shelters and tax avoidance schemes: the OECD Initiative


Estate and tax planning for Asian families and their businesses


[ JOE FIELD ]


THE LEGAL SYSTEMS in many Asian countries reflect


their colonial past. Ethnicity is important. The Chinese own businesses everywhere. Japan and Korea (North and South) are single-culture countries; Taiwan, India and Indonesia have cultural differences. Singapore and Hong Kong are multicultural; China is focussing on establishing a single Mandarin culture. Stability in the region is an issue, but economic growth of 5-7% (5.7%) is a reality – no longer primarily based on real property. The UK has been a great magnet for international families. Many wealthy Chinese families are investing in Western countries. The USA and China dominate the billionaire market. With the Chinese, Confucius is still important, but less influential than formerly, and children educated in the West have an influence. For Muslims, Sharia Law is important in determining succession. Death duties are unusual in the region, but have now been introduced in Thailand. The law governing succession gives rise to many problems, including multi- jurisdictional problems – who owns property, are gifts valid, what are the rights of ‘left hand’ families. In Islam, interest is haram. Islamic investing has been developed to overcome this difficulty. In China, wealth is a recent phenomenon and is a learning exercise both for the family and the advisors. Often the principal earner stays in China and members of the family move abroad. The outlook for China is favourable – for Japan and India, less so.


[ NIKLAS SCHMIDT ]


FEBRUARY 2013 saw the BEPS Report, September 2013 the ‘Action Plan’ and October 2015 ‘Mandatory


The OECD recommends the use of scheme reference numbers.


Disclosure Rules’. The rules are required to be clear, not over-burdensome, effective and useful. Eight countries have such a regime: the US, Canada, South Africa, Portugal, Ireland, Israel and Korea. The UK DOTAS regime has driven the large firms out of the market. Both the promoter and the taxpayer may have reporting requirements, e.g. in the US and Canada. ‘Promoter’ can be widely defined. Reportable schemes have defined hallmarks – generic or specific. Generic hallmarks include confidentially, premium or contingent fee, contractual protection and standardised documentation. Specific hallmarks include schemes involving loss generation, leasing, employment, converting income, low-tax jurisdictions, hybrid instruments or book/tax differences. Rules provide for


disclosure of promoter’s details, expected tax benefits and details of all parties. There are time limitations for reporting. Identifying users of a scheme is important. The


OECD recommends the use of scheme reference numbers. There are penalties for non-compliance – monetary and non-monetary. Tax authorities can make use of information collected to make legislative changes, to audit the taxpayers more frequently and to publicise its success.


Being a UK non-resident: the rules and the guidelines


[ RAY MCCANN ]


THE UK now has a statutory residence


test (SRT). Self-assessment requires the individual to decide his residence. The SRT is intended to make the rules clearer, but not essentially different from the earlier regime: physical presence is the important factor. Often a taxpayer’s wish to emigrate is not shared by his wife. The tests look at a connection of ‘ties’. The number of days in the UK and presence of other ties are taken into account. The rules make provisions for exceptional days, transit days, deemed days, and define ‘places to live’. Arrivers are treated more generously than leavers. HMRC is taking a stricter view about claims to be non-domiciled. The rules are to change in April 2017, allowing 15 years’ residence before becoming deemed domiciled for all tax purposes – but with cost rebasing for capital gains tax. The ‘boomerang’ rule is anomalous, and may be changed. HMRC take an aggressive attitude to residence disputes.


The ITPA Green Book 2017 www.itpa.org


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