Download International Tax Avoidance

International Tax Avoidance
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Introduction.
Conduit companies.
Base companies.
Hybrid entities
Hybrid financial instruments
Judicial doctrines
General anti avoidance rules
Specific anti avoidance rules
Double tax treaty measures.
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International Tax Avoidance
Introduction,
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OECD model convention article 1,
OECD documents,
CFC FIF regimes,
Thin capitalisation rules,
Transfer pricing rules
Tax evasion,
Tax avoidance.
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International Tax Avoidance
Introduction cont,
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temporary vs. permanent saving
substantive vs. formal planning
transfer of a tax subject
transfer of a tax object
DTA vs. non - DTA
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International Tax Avoidance
Conduit companies,
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Inter posed entity
name plate company
local infrastructure
Common examples
New Zealand case Europa Oil.
Base companies,
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undertake real activity
•financial
services
•asset management
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EXAMPLE ONE.
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International Tax Avoidance
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Hybrid entities
An entity which is characterized as
transparent in one jurisdiction (eg a
partnership) and non transparent in the
other jurisdiction (eg a company)
• Opportunities for tax arbitrage because:
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one country treats the same entity as non
transparent and taxes it, AND at the same time
the other country treats it as transparent and
does NOT tax it.
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EXAMPLE TWO.
EXAMPLE THREE.
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International Tax Avoidance
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Hybrid financial instruments
An instrument with economic characteristics
that are inconsistent with the classification
implied by their legal form
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Usually contain elements of equity and debt
which means the advantages of both types of
finance can be combined in the same
instrument.
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Common examples are:
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Mandatory convertible notes,
• optional convertible notes,
• redeemable preference shares.
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EXAMPLE FOUR.
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International Tax Avoidance
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Judicial doctrines
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Civil law countries: Abuse of law
Common law countries: Substance
over form
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United States:
Step transaction doctrine,
• Business purpose test.
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International Tax Avoidance
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General anti avoidance rules
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Australia,
Canada,
New Zealand,
South Africa,
United kingdom,
United States.
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International Tax Avoidance
Specific anti avoidance rules
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Residence definition.
CFC rules,
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control.
designated jurisdiction,
effective tax rate,
specified types of income,
active income exemption,
Country examples,
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France,
Germany,
United Kingdom,
United States
Relationship with DTAs.
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International Tax Avoidance
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Specific anti avoidance rules
Thin capitalisation rules.
Country examples
Canada.
• France,
• Germany,
• United States
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Relationship with DTAs.
Anti Debt creation rules
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International Tax Avoidance
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Double tax treaty measures
Beneficial owner.
OECD Commentary Art. 10, 11, 12.
• Case law
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Netherland,
• France,
• United Kingdom
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International Tax Avoidance
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Double tax treaty measures
limitation on benefits
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look through
subject to tax approach
Channel approach
Bona Fide approach
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active trade business test
Exclusion approach.
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International Tax Avoidance
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Double tax treaty measures
Residence definition
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Objective arithmetic test.
Subjective facts
Corporate residence
tax exclusion approach
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International Tax Avoidance
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Harmful tax competition
Tax havens
1998 OECD report
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followed EU code of conduct
recommendations
2001 OECD guide lines
Mid 2007 only 3 uncooperative tax
havens
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