AUSTRALIA INVESTMENT MANAGEMENT REGIME: DRAFT LEGISLATION TO IMPLEMENT ELEMENT 3 FINALLY RELEASED
By Anshu Maharaj and Jock McCormack
Australia’s investment management regime (IMR) reforms, initially proposed by the Australian Financial Centre Forum in the Johnson Report in 2009 and the Board of Taxation in 2011, are designed to attract greater foreign investment to Australia and allow Australian fund managers to actively market their financial services globally, thereby promoting Australia as a regional financial services centre.
The exposure draft legislation and the relevant explanatory memorandum were released by the Australian government this month for public consultation to implement the final/Element 3 of the IMR reforms as well as amend some parts of the existing regime.
Generally, Element 3 of the IMR exempts Australian sourced capital and income gains realised by a widely held foreign fund in respect of portfolio Australian investments from Australian tax. Further, a foreign investor that engages an independent Australian fund manager to invest in portfolio Australian investments will also disregard Australian sourced capital and income gains realised in respect of those investments.
Find out more.
TAX REFORM DEBATE UNDER WAY ON CAPITOL HILL
By Evan Migdail
As Congress heads into its two-week Easter recess, the chairmen of the tax writing committees have provided greater detail regarding their plans for tax reform.
House Ways and Means Committee Chairman Paul Ryan (R-WI) has indicated his intention to proceed with the first phase of reform legislation in the coming months, addressing business and international taxation. Although the chairman is willing to consider tax reform in phases, he has expressed concern that an approach that first tackles international and corporate reform, grounded on a reduction in the corporate rate to no more than 25 percent, by itself will disadvantage the 80 percent or so of American businesses that are taxed at the individual level and that would otherwise remain subject to effective rates exceeding forty percent. The chairman has made clear, however, that a key principle he will follow in pursuing tax reform in phases is that each phase must be consistent and compatible with a plan to eventually reform the tax system comprehensively.
Meanwhile, in the Senate, Finance Committee Chairman Orrin Hatch (R-UT) stated earlier this week that “my goal is to introduce [a tax reform bill] and mark it up in committee this year. I get asked all the time about whether I expect this process to yield results. So, let me make one thing clear here today: this is not an exercise. This isn’t just for show. My only goal when it comes to tax reform is to make new law.”
Hatch convened five working groups in February with a mandate to report back with their recommendations for reform, and, if possible, legislative language, by the end of May. Chairman Hatch and his ranking member, Ron Wyden (D-OR), will determine where there are areas of consensus within the committee from these reports and will decide how to proceed with a reform plan.
Notably, the key players in the reform effort want to move efficiently and avoid duplication. This process appears to be moving ahead rapidly.
Find out more.
SWITZERLAND INTRODUCES CORPORATE TAX REFORM III
AIMING TO MAINTAIN ITS GLOBAL COMPETITIVENESS: 6 KEY POINTS
By Michael Hardgrove and Hans-Jürg Schmid*
Anticipating ongoing pressure from the European Union and the OECD, Switzerland has launched a draft corporate tax reform, called CTR III, focusing on increasing the competitiveness of Switzerland as a global corporate center.
Switzerland is already favored by multinationals thanks to its attractive combination of stability, location, efficiency and technology, as well as its continuing commitment to a business-favorable tax system.
Find out more about CTR III’s measures.
POTENTIAL REFUND OF SWEDISH WITHHOLDING TAX:
OPPORTUNITY FOR US RICS
By Erik Björkeson and Emelie Coleman
Back in 2012, the Swedish Administrative Court of Appeal concluded that Sweden’s withholding tax rules are not compatible with EC law when Swedish withholding tax is levied on dividend payments to a Luxembourg SICAV fund.
Recently, it was made clear that a US regulated investment company is comparable with a Swedish investment fund, meaning that the Swedish withholding tax rules discriminate against US RICs when applying the EC law. Hence, from this ruling it follows that US RICs are also entitled to a refund of Swedish withholding tax levied on dividend payments.
Find out more.
GERMANY’S SAFE HARBORS TO ITS NOL CARRYOVER
LIMITATION RULES – OR: LET’S MAKE A LAW
By Björn Enders and Andreas Habig
Historically – meaning until the end of 2007 – the German corporate tax law provided for limitation rules on the use of tax-wise net operating loss carryovers of a corporation, where the “loss corporation,” after a change in ownership occurred, carried on its business with predominantly new business assets. The rules were based on the reasoning that the corporation economically was no longer identical to the corporation which incurred the loss. The corporate tax rules in that regard aimed at mimicking the corresponding trade tax rules on the discontinuance of tax-wise net operating loss carryovers.
With the introduction at the start of 2008 of the Corporate Income Tax Act, the law changed. Any reference to a change in the economic business was dropped. The rules henceforth only look at the change in ownership.
Therefore, upon share transfers, mergers and acquisitions, and even intra-group reorganizations, a tax-wise NOL carryover will be partially or entirely discontinued. Any indirect change in ownership for reason of a group-internal restructuring 5 or 10 tiers above the German entity may well result in the German corporation losing all of its NOL carryovers.
By fall 2008, Parliament was already trying to ease the limitation rules on NOL forfeitures in certain cases, and the effort continues. Find out more.
WHAT THE UK BUDGET 2015 SAYS ABOUT CORPORATE TAXATION
By Richard Woolich, Mark Burgess, Paul Rutherford, David Thompson, Neville Wright and Stephen Jones
The UK government has delivered its last budget before the UK general election in May. Many of the measures were, as one might expect so close to an election, focused on personal rather than corporate taxation.
Here is a summary of some of the business-related announcements.
LUXLEAKS – CHALLENGING THE CHALLENGES TO TAX RULINGS
IN THE EU
By Bertold Bär-Bouyssière
The European Commission’s recent state aid crusade against so-called sweet deals in the form of tax rulings may have unwelcome consequences never contemplated by the Commission.
When the six founding members of the European Union drafted the 1957 Treaty of Rome, they established “state aid” rules as a means to subject member state subsidies to the Commission’s control. What they had in mind was, in simple terms, that national governments would be tempted to favor their “national champions,” which could lead to a “subsidy race” and ultimately distort competition within the common market. Hence the need to have an independent arbitrator.
What was designed to ensure a competitive level playing field for companies throughout the single market has turned into a much wider political scheme. It is not the first time that the Commission uses its powers under the competition chapter of the EU Treaty to “discipline” member states unwilling to progress with harmonization of laws.
Find out more.
MORE INTERNATIONAL TAX NEWS FROM DLA PIPER
With the Australian Tax Office’s ever keener focus on international profit shifting, multinationals need to ask themselves: am I affected by Australia’s new transfer pricing rules?
In its latest response to the OECD BEPS initiative, China releases new anti-tax avoidance measures.
In “Luxleaks – the next level,” we report that Luxembourg is bowing to the EU’s determination to disclose the beneficiaries of tax rulings.
Ukraine considers significant changes to its transfer pricing rules.
PLEASE JOIN US FOR THESE TAX EVENTS
THINKING OF INVESTING IN SPAIN?
WHAT YOU NEED TO KNOW AND WHY
This event, live in London, will address the key business factors influencing investment in Spain, including the real estate system, financing for transactions and the impact of the tax regime on your anticipated returns.
The presenters will talk about what's different in the way business is conducted in Spain and what stays the same, as well as what can and cannot be done in the new jurisdiction.
Find out more and register on this page.
WEDNESDAY, 15 APRIL 2015
8:15 a.m. – 9:30 a.m. (UTC)
3 Noble Street
SEIZING OPPORTUNITIES AND ADDRESSING TAX CHALLENGES
A WEBINAR FOR MULTINATIONALS OPERATING IN RUSSIA
Recent changes in Russia’s tax code, as well as other far-reaching legislative changes, will have a significant impact on US multinational corporations with operations and subsidiaries in Russia.
Please join Ruslan Vasutin, Tax Partner in DLA Piper’s St. Petersburg office, for an informative presentation that will address these changes, their direct impact on cross-border operations and opportunities around strategic tax planning for US companies operating in Russia.
Find out more and register on this page.
Wednesday, April 8, 2015
9:00 a.m. – 10:00 a.m. PT
11:00 a.m. – 12:00 p.m. CT
12:00 p.m. – 1:00 p.m. ET
* Hans-Jürg Schmid is a partner with the law firm Walder Wyss Ltd., based in Switerland. Reach him at [email protected]