UPDATE ON INTERNATIONAL PLANNING ISSUES CYPRUS
Citizenship by investment: Cyprus and elsewhere
The news from Brussels and tax after Brexit
[ TIMOTHY LYONS QC ]
THE ESTABLISHMENT of the European Customs Union
in 1968 was a very significant step. It has an internal and external aspect. So too does direct tax policy. The internal aspect of the direct tax policy includes the Anti-Tax Avoidance Directive, containing a general anti- avoidance rule and other things. The policy aims at transparency, including the automatic exchange tax rulings, so as to avoid state aid. Terms of settlement of litigation can be exchanged, for the same reason. There are provisions relating to tax avoidance and enablers. The Code of Conduct in Business Taxation (the ‘CCTB’) was first promoted in 2011: it provides for consolidation and apportionment, which deal with such matters as transfer pricing. It aims to tax profits where they arise. This is an easy statement, but not a simple concept. There is also a new directive on resolution of tax treaty disputes and a proposal to deal with hybrid mismatches. The external strategy for effective taxation involves listing countries that do not have good tax governance – transparency, exchange of information, absence of state aid. ‘Fairness’ in tax competition requires no harmful tax measures and compliance with the CCBT (presently under review), which is hostile to uncontrolled tax competition. The Apple litigation relating to state aid shows that the European Union accepts territoriality but requires an arm’s-length transfer pricing provision in each country’s law. As can be seen, the internal aspect has important external implications.
Member states of the EU have control over their own citizenship, even though it confers EU rights
[ CHRISTIAN KÄLIN ]
THERE IS ALWAYS A HIGH DEMAND for investment migration, which has an organisation of its
own – the Investment Migration Council. There is a long tradition of awarding citizenship to the rich or deserving – in ancient Rome, in England, in France and elsewhere. Investors seeking citizenship are prepared to accept lower returns and greater risk. Member states of the EU have control over their own citizenship, even though it confers EU rights. In Europe, citizens by investment make up only 0.01% of the more than 800,000 total number of new citizens each year. There are arguments in favour and against such programmes, but well-run programmes undoubtedly have a beneficial effect. Cyprus requires an investment of €2m but has a processing time of as little as three months. It is thought that the EU does not favour citizenship by investment, but nevertheless approved the first such programme in Malta. There are five programmes in the Caribbean. Montenegro and other countries are following, and more countries are expected to introduce such programmes in the future.
International families with US members [ BETH TRACTENBERG ]
THE KEY TO SUCCESSFUL TAX PLANNING for families with US family members is co-operation between advisers in the jurisdictions concerned. It is presently unclear whether President
Trump will succeed in abolishing estate tax, but we have to focus on the present situation. Estate tax, gift tax and generation-skipping tax apply to citizens and domiciled persons on their worldwide assets. Non-resident individuals are subject to transfer tax only on US-sited assets, and US Treasuries are treated as not sired in the United States: non-residents should buy US real property through a trust or foreign company. Citizens and domiciliaries get a $5.49m exemption from gift and estate tax taken together; non-resident aliens a mere $60,000 at death only. The full marital tax exemption applies only if the surviving party is a citizen; a special kind of trust (a ‘QDOT’) can be used to defer tax. Problems in this area can be ameliorated by life insurance. Trusts are widely used in the United States. The revocable grantor trust settled by a non-US
person and holding non-US assets is effectively free of US taxes. A similar exemption is enjoyed where the NRI settlor retains a life interest. Where the grantor is Canadian-resident, it is best to fund the trust from his estate to avoid double taxation.
THE ITPA GREEN BOOK 2018
www.itpa.org
025
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114 |
Page 115 |
Page 116
