News & Publications

NOWHERE TO HIDE

A 2012 book entitled Offshore Apocalypse – The Collapse of the Tax Haven Industry, written by a team of tax-law academics, auditors, compliance officers and lawyers, describes in detail the drawn out demise of the offshore tax haven. For decades, offshore companies enabled business to be conducted globally away from prying eyes, including tax authorities. Though technically legal, these structures were often suspected to be conduits for money laundering and tax evasion, their activities and the identities of the company owners hidden behind a wall of secrecy provided by the laws of the offshore jurisdiction.

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INTERNATIONAL TAX UPDATE

In our year-end newsletter we cover two recent tax cases and two notable developments in tax policies. In terms of geographies our topics span from China through Delaware in the US to the United Arab Emirate of Ras al-Khaimah (‘RAK’). These stories are a remarkable sign of how tax policies of countries of diverse economic, political and cultural background go in the same direction. Enhanced tax transparency and enforcement of ever stringent tax laws put an end to “traditional” offshore tax planning sooner than we ever thought.

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BEPS AS AN OPPORTUNITY

Not everybody is a musician who walks with a violin. Imagine you go on stage with a shiny Stradivarius and cannot even correctly hold it in your hands. Surely not the best moment of your life. Many can find themselves in a similarly unpleasant situation when their respective tax authorities start asking questions about the complex corporate structures or offshore vehicles they hold, which look good on paper but hardly accomplish what they are supposed to. As advocated by the associates of BBD for many years already, these instruments prove to be useless unless operated according to the latest standards. Recent developments of the BEPS project give some hints as to how.

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GCC BASED SHIPPING COMPANY LITIGATED IN THE U.S. FOR TAX NON-COMPLIANCE

The Bahrain-based support vessel company Adams Offshore W.L.L. is currently being litigated in the U.S. for allegedly not reporting $45.57 million of U.S.-source income.…

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THE SHANGHAI FREE TRADE ZONE – A NEW COMPETITOR FOR HONG KONG AND SINGAPORE ARISING?

The China (Shanghai) Pilot Free Trade Zone (SFTZ) is the country’s most significant milestone in terms of economic policy since the Shenzhen Special Economic Zone was established in 1980 and China joined the WTO in 2001. The SFTZ is expected to lead to broader financial and economic reforms for the entire country…

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AMENDENT TO THE BAHRAIN-CHINA DOUBLE TAX TREATY

Bahrain and China have recently amended their 2002 double tax treaty (DTT)[1] by a protocol signed on 16 September 2013. The protocol will enter into force on the 30th day after the exchange of ratification[2] and will apply to income derived during the taxable years beginning on or after the first day of January following its entry into force.
This technical brief provides an overview of the most important amendments to the treaty…

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INVESTING INTO CHINA – THE IMPORTANCE OF SUBSTANCE

As part of the global trend, countries in the Asia-Pacific region are intensifying their review and adjustments on tax arrangements that are considered abusive or artificial. In China, the enforcement of anti-avoidance rules, in particular, against non-resident enterprises is one of the main priorities of PRC tax authorities in the past few years. The main focus is on combating tax avoidance and treaty shopping. As further outlined below, Chinese revenue authorities are focusing on those structures that lack substance and business purpose. The Anti-Avoidance…

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TAX CRIMES AS A PREDICATE OFFENCE FOR MONEY LAUNDERING

In its 2012 recommendations, Financial Action Task Force (FATF) included serious tax crimes in the list of predicate offences to money laundering. By making serious tax crimes a predicate offence to money laundering, the FATF hopes to remove potential obstacles for international cooperation between law enforcement and tax authorities in the area of tax evasion. Member countries of FATF need to transpose these frameworks into law, and will be required to cooperate with other countries to make these laws enforceable. Here we look at the Singapore…

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GARRON FAMILY TRUST CASE – TAX RESIDENCE OF TRUSTS

Tax residence of trusts – Applying the central management and control test to trusts Background Tax residence is, in most Double Tax Treaties (DTT) and model treaties, established on the basis of the central management and control test that has generally not been applied to trusts earlier. Under prior practice the residence of a trust was by and large linked to the residence of the trustee (being legally entitled to the income of the trust). In a recent case Canadian courts…

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THE INDOFOOD CASE – CONDUIT COMPANIES AND BENEFICIAL OWNERSHIP

Conduit arrangements have widely been applied to access Double Tax Treaty (DTT) benefits. Recent trends show that conduits with limited substance, decision making rights and powers over incomes earned would likely fail the residence and/or the so-called beneficial owner tests. The case Indofood, an Indonesian trading group wished to raise funds by issuing bonds on the international money markets. In order to reduce the Indonesian domestic withholding tax (WHT) rate of 20%…

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