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NEWSLETTER

JUNE 2014

ARGENTINA: Buenos Aires, Córdoba, Mendoza, Rosario, Salta, Tucumán. CHILE: Santiago de Chile, Punta Arenas , Talca. GERMANY: Frankfurt, Garmisch- Partenkirchen, Gerlingen, Leipzig, Leonberg, Munich, Rottenburg, Stuttgart, Tübingen, Waldshut-Tiengen. MEXICO: Aguascalientes, Cancún, Chihuahua, Ciudad Juarez, El Paso/ Texas/ USA, Estado de México, Guadalajara, León, México D.F., Monterrey, Querétaro. PORTUGAL: Lisbon, Porto. SPAIN: A Coruña, Alicante, Barcelona, Bilbao, Cartagena, Las Palmas de Gran Canarias, Madrid, Málaga, Murcia, Palma de Mallorca, Seville, Valencia, Valladolid, Vigo, Zaragoza. THE NETHERLANDS: Amersfoort, Amsterdam. URUGUAY: Montevideo.

INDEX ANDORRA. Special regime in Corporate Income GREECE. Granting residence permits to non-EU citizens in applicable for international holdings Greece ARGENTINA. Penal tax regime. Public accountant outreach MEXICO. Tax treatment of the income by sale of shares from THE NETHERLANDS. VAT does not have to affect a non-Mexican resident company to a resident company your cash flow! ISRAEL. Bitcoin - a Financial-Digital Revolution in the Banking COLOMBIA. Colombia and the free agreement with Sector European Union ITALY. Registration for VAT purposes in Italy of non- BRAZIL. Compliance in Light of New Brazilian Anti- established taxable persons Corruption Law LUXEMBOURG. Luxembourg (Special) Limited Partnership in CYPRUS. Cyprus Investment Firm (CIF): A good vehicle into the framework of the Alternative Investment Fund Managers the European Investment Arena Directive (AIFMD) SERBIA. in Serbia: A Taxing Issue SPAIN. Income obtained in Spain without a permanent ECUADOR. The Retirement pensions’ tax burden establishment. Tax rates INDIA.The Indian Companies Act 2013 - A Paradigm Shift URUGUAY. Nominative shares: more anonymous than bearer GERMANY. Holiday homes in Spain - a potential tax trap ones?

“The content of this newsletter has been written or gathered by AUREN and its representatives, for informational purposes only. It is not intended to be and is not considered to be legal advice, nor as a proposal for any type of legal transaction. Legal advice of any nature should be sought from legal counsel. For further advice please contact local office.”

Special regime in Corporate applicable for international holdings ANDORRA

During the last few years, the Andorran Government has been working into Which kinds of Andorran entities are the elaboration of a new tax system, in order to make it compatible with able to apply the special regime? those in force in most countries in the European Union and worldwide. The Based on the provisions of the Andorran main aim of this new tax regulation is to allow Andorra to be a signing part Corporate Income , they are entitled to in Tax Treaties to avoid with other countries. request the application of this special tax regime, those entities constituted in the legal form of In this regard, in May of this year, the Personal Corporate Income Tax Law establishes a Limited Company which only can carry out the Income Tax Law came into force and the special tax regime which applies to those activity consisting in managing and investing into Andorran Government has completed the entities that have as its only activity the the share capital of foreign entities. procedure began with the objective of creation acquirement of non-resident’s entities of a new and homogeneous tax system. shares, in order to maximize its financial Please bear in mind that there is another income. material requirement that has to be fulfilled in The signature of Tax Treaties to avoid order to apply this special tax regime, which double taxation is one of the most popular The Andorran Corporate Income Tax Law is that all the shares acquired by the Andorran tools used by countries to promote the foresees which benefits are applicable to this entities which opt for this special tax regime internationalization of its local companies kind of entities and, at the same time, it details must be registered shares. and to promote the national investments into all the requirements that should be fulfilled foreign entities. However, there are other tax in order to apply the abovementioned special What does the special regime consist? mechanisms aimed at strengthen the national tax regime. companies investments into companies non- This special regime consists in an exemption, residents in Andorra. Please bear in mind that the requirements for Corporate Income Tax purposes, of all established by the Andorran legislation must incomes derived from the main activity of In this regard, in order to promote the be fulfilled at all in order to could apply such these kinds of entities. That means that the financial investments abroad, the Andorran special regime. income received by those entities which apply

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this special tax regime will not be taxed by How to apply this special tax regime? The Company would not be allowed to apply the Andorran Corporate Income Tax. In this this special tax regime until the Andorran Tax regard, it is important to bear in mind that Lastly, it is important to highlight that Authorities grants its application. they are just allowed to apply this special the entities that are interested into apply regime those entities that only carry out the this special tax regime should request activity abovementioned. its application before the Andorran Tax Authorities. To these effects, the Company In case the tax payer develops other kind should fulfill the corresponding Form in order Oriol Valls of activities, the special tax regimen will be to prove and to inform that it fulfill with [email protected] not applicable and the income obtained by the requirements foreseen by the Andorran Andorra the tax payer should be taxed by the general Corporate Income Tax Law. Member of: Corporate Income Tax regime (which general is 10%).

Penal tax regime. Public accountant outreach (Joint resolution of the Argentine federation of professional councils of economic science and the argentine federation of graduates in economic science)

ARGENTINA

The Penal Tax Regime of Law 23771 was replaced by Law 24769, with To review selectively the issue of invoices or all the amendments established in Laws 25292, 25826, 26874 and equivalent documents. 26063. Law 25874 replaced Article 15 of Law 24769. Finally, Law 26735 To apply proceedings with the intention of discovering misrepresentations in order to established amendments to the PENAL TAX REGIME. hide, modify, conceal or to not reveal the actual situation of the entity. In order to analyze the subjects, liabilities Accountant, which should be highlighted for To verify that the elements and the data used and punishments it is necessary to become the purpose of this work. These functions are: in the preparation of affidavits presented acquainted with the text present in Article 15. during the audited practice are the result of External auditor of financial statements. the audited information. Said text reads: Corporate statutory auditory. To check that the inputs and withholdings Technical consultant or advisor for or on the personnel payroll are reasonable He who knowingly: pensions. and that, from the analysis of related Tax liquidator (for example: preparation of accounts such as the ones referred to as a) Rules, informs, attests, authorizes o certifies affidavits based on information provided by remunerations for services, third-party acts of law, balances, financial statements the user of the professional services). tasks, hired services, fees, etc., there exists or documentation so as to facilitate the Services outsourcing (payroll liquidation, no unreported personnel. accomplishment of the violations covered book-keeping, delivery of management To apply proceedings with the intent of in this law, shall be liable to, in addition to services, etc.). identifying if there exists any expenditure the corresponding punishments for their for which no receipt is provided. complicity in the act, the punishment of special We shall only limit ourselves to the description To verify the enforceability of the provisions disqualification for a period consisting of twice of the tasks that should be carried out by the which could force the entity to act as the time of the sentence. external auditor for the purpose of discovering perception or withholding agent and to verify irregularities. if the corresponding affidavits are provided. b) Agrees with two or more people the To review the regular deposit of withheld or accomplishment of any of the crimes included The tasks carried out by external auditors received tax money and withheld inputs and in this law, shall be punished with a minimum generally are: External auditory, Limited review contributions. of FOUR (4) years of prison. auditory, Special certificates and reports, which In case of equity insolvency or doubts about are covered in RT 7, Auditory rules. RT 37, the ability of the entity of continuing with its c) Takes part in an organization or association which replaces RT 7 includes a wider range operations, the professional should evaluate consisting of three or more people that is of services, but we will not use it because its if the entity can be considered as a “going usually aimed at committing any of the crimes effective date is the 1st of July 2014 and the concern” and its effect on the evaluation included in the present law, shall be punished Federation has not replaced said agreement yet. criteria. with prison during periods of THREE (3) years We shall now mention the work schedule To check that the tax benefits of the entity, and SIX (6) months to TEN (10) years. In the suggested by the FACPCE: such as exemptions, breaks, refunds, salvages, case of the boss or the planner, the minimum returns or subsidies, are a product of the punishment is FIVE (5) years of prison. To identify accurately the accounting records reasonable application of legal provisions. of the entity and the samples selected as (Article replaced with Article 1 of Ley N° 25.874 evidence. To evaluate the reasonableness of the values Sign Off: 1/22/2004). To identify the existence of criteria assigned to the importation and exportation differences or interpretation issues of tax operations. The Resolution issued by the FACPCE or pension rules between the auditor and To obtain the written confirmation from the describes the main functions of a Public the entity’s management. main operational officer of the entity and

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the officer with the highest rank who is and law Nº 24.769, it is understood that the framed in the profound respect of the law, responsible for the control and accounting accountant, even in the irregular exercise without forgetting the presumption of functions, as evidence that related of their duties, cannot be the author of tax innocence that explicitly arises from our information was collected or requested, and evasion, since this evasion is carried out by Magna Charta. The mere application of not as a substitute for other proceedings the obligor (own or external accountable). presumptions to held criminal liability implies that should be applied on that information. Therefore, neither it is considered that the an excessive and unjustified performance To reflect the compliance of his in the professional is the co-author of the illicit act. that causes an unfortunate frame of lack paperwork, according to the provisions in Only those Economic Science professionals of legal security and professional practice the auditory laws in force. that in the practice of their activities and in instability. To issue the criminal complaint to their performance as advisors, liquidators, the professional, the auditors should have If an irregularity is discovered from the statutory auditors, auditors, etc. verify enough material regarding the participation application of the aforementioned auditory their intentional and personal participation of the public accountant in the illicit acts proceedings, the auditor must ask that the in the illicit act shall be held responsible detected. The professional being limited highest authorities adjust said differences. In in tax criminal matters. The result of the to obtain certain information does not case that the authorities neglect the adjustment application in those cases is the figure of specifically imply them having conducted of the financial statements, the auditor must abetment (primary or secondary). an actual situational analysis of the fact or evaluate, in accordance with the degree of the Furthermore, it must be proven that in that they have reviewed the information; the difference, and compare it against the limit of their actions the objective and subjective scope of their professional work has to be errors tolerated. In case that the differences elements (intentional action) were present specified even with the participation of the exceed said limit, the auditor must express the in the offense charged. That is to say, in the professional disputed. However, if from the situation in his auditory report, quantify the role they performed in the contracting gathered information and after evaluating situation and qualify his assessment. entity they had the intention and will to the information provided by the disputed evade taxes, hence harming Public Treasury. professional, arises his possible participation Other tools that the auditor can use in order As regards the letters of representation, in any illicit act, they have to be judged by the to minimize his liability are: they are no substitute of a proceeding Court of Professional Ethics and Discipline that should have been applied according and/or the Court of Law, as the case may To issue a hiring letter outlining the rights to an agreement among the parties, but be. And this evaluation must be carried out and obligations and the reach of the task for the documentation and evidence that the in the by those who take both parties; professional requested the corresponding the form of administrative law judges, even To receive the Letter of Management signed information. though it is not a duty of those officers who by the highest authorities; It is of the utmost importance that the do not have such capacity to initiate (by To retain the paperwork for the time professional performs their task supporting it in their own will) any investigation thereof. required by the laws in force; their own paperwork, which must maintain full The behavior of the professional to be To obtain a signed copy of the financial professional secret. Article 156 of the Criminal punished by criminal and civil penalties statements; Code establishes: “He who having been needs to have a suitable causal relationship To obtain a copy of the record from the notified, due to his status, profession, job or art, between the reprehensible situation and Directory/Assembly with the approval of about a secret which dissemination may harm, the behavior of the professional. The the financial statements. reveals it without just cause will be punished detection of a crime does not necessarily with a fine of...... and a special disqualification, in imply the intentional participation of Conclusions of the Resolution of the their case, for a period of 6 months to 3 years.” the professional, nor it is valid for the FACPCE A law that discloses the professional secret o AFIP (Federal Administration of Public that forces to reveal it or if it is spread with Revenue) to become the judge, evaluating The Economic Science professional is the consent of the interested party, is not the paperwork of the professionals, that, accountable only for that he could learn a just cause, but there is no secret in that as it has been previously stated, must by working with the technical knowledge case. This situation affirms that the public maintain full professional secret. In case any required for the practice of his profession. accountant has the legal obligation not to justified suspicion exists, the corresponding It should not be understood that if, due to reveal the known issues in the professional accusation must be reported, enabling negligence, he failed to discover omissions practice and, from this standpoint, cannot the professional to claim their legitimate or distortions that he should have be obliged to mention client related facts. defense in court. However, it is broadly discovered by applying, in accordance with The aforementioned article of the Criminal agreed that if having participated in the the circumstances, the auditory proceedings Code takes precedence over Law 11.68318. crime, they are subject to civil and criminal established in the professional laws, which The case of duty to provide information liability. Furthermore, they shall be liable to correspond to the type of service he was about the operations that the professional the punishment according to the Code of entrusted, he is protected or disclosed from performs with third parties (in this case Ethics in force. liability. their client), that is to say, their own trade The public accountant acting in his multiple relation, their fee, which is different from the roles, be it as tax advisor, liquidator, external documentation that the public accountant Ernesto P. Mattos auditor or corporate statutory auditor, acquires from operations between other [email protected] does not have the quality of public officer third parties and the entity. For this AUREN Rosario referred to in Article 77 of the Criminal Law. reason, the professional owns the papers Argentina Therefore, they are not obliged to denounce and they are not part of the commercial the illicit acts of the Tax Criminal Law or any documentation or support documentation other kind of illicit act. of their relationship with their client, which In accordance with the criminal doctrine in fact can be requested. At all times the and the definitions of the Tax Criminal Law revenue service performance hast to be

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Import VAT does not have to affect your cash flow!

THE NETHERLANDS In these times of recession, cash flow has become a very important item The European VAT Directive provides to companies: customers pay their invoices later, which may result in cash the option to grant a VAT exemption on importation of goods that are intended to flow problems. Also VAT may have a substantial impact on the cash flow be transported to another EU member state position of companies, for instance when importing goods. Proper planning immediately after importation. This does not may offer a solution. apply to goods that will be stored or sold in the EU member state into which is imported. It is true that companies are entitled to a refund them to defer the payment of import VAT However, it is possible to suspend payment of of VAT incurred. Therefore VAT should not have until the moment of filing the VAT return. import duties and VAT if the imported goods an impact on the cash flow position of companies. In this return the same amount of VAT can are stored in in “ warehouse”. This In practice however VAT does affect the cash also be included as input VAT. This effectively facility is available in all EU member states, but flow. This is caused by the fact that several means that no VAT has to be paid to the tax the practical formalities vary per country. In all weeks elapse before actual cash is refunded by authorities. As a result, the cash flow position cases the payment of import duties and VAT is the tax authorities, since the input VAT should of these companies is not affected by VAT on suspended until the goods leave the warehouse. be reported in a monthly or quarterly return the . Although this regulation temporarily suspends which subsequently needs to be processed by the duties and VAT, eventually the amounts the tax authorities. In international situations An article 23 license can be granted to will have to be paid (unless the goods will be things are even worse. Refunds of foreign VAT businesses established in the Netherlands exported to countries outside the EU). can even take more than a year, depending on and also to businesses that are not the EU member(s) involved. established in the Netherlands but have Considering the above one can conclude that appointed a fiscal representative in the since import VAT does not have to be pre- Another impact of VAT on the cash flow of Netherlands. financed, it may be beneficial for companies companies arises when goods are imported in to route the flow of goods through the the EU. Companies that are engaged in such On the basis of information available to us Netherlands. This may offer some planning importing are faced with VAT upon importing we understand that in almost all EU countries possibilities for European companies importing the goods. This VAT can in principle only be VAT has to be paid to the tax authorities at goods from outside the EU. Alternatively, reclaimed in their periodical tax return. The the time goods are imported. If we look at a customs warehouse in other European import VAT therefore has a major impact on our surrounding countries we conclude that countries may provide some relief. their cash flow position. In some member deferring payment of tax can not be applied states facilities have been introduced to defer in almost all countries. In some countries import VAT. the VAT can be deferred, but only under Frans Tempel strict conditions. Only Belgium provided a [email protected] In the Netherlands companies can apply for regulation that is similar to the one in the AUREN Amersfoort a so called ‘article 23’ license, which enables Netherlands. The Netherlands

Colombia and the agreement with European Union COLOMBIA

One of the strategies that Colombia has been implementing to ensure the continued development of its economy is signing trade agreements, especially with countries with a strong and developed economy, such as the United States, South Korea and the European Union. This with the purpose of involving our small, medium and large companies in the new demands of globalization in order to become competent in the international market, increase the foreign direct investment and reduce the unemployment rate.

The European Union is the second largest while in 2012 amounted a worth of trading partner of Colombia after the $ 8.915 million USD dollars (DINERO, 2013). Unites States and the number one regarding These figures indicate that exports remained Foreign Direct Investment (FDI). According constant for 2012 and although in the last ten to the DANE (the Colombian entity for the years the number of exports to these countries calculation of official statistic data) in 2011, has tripled, Colombia has to keep working hard Colombian exports to the EU grew by 76.7% on a strategy of differentiation to become a (DANE, 2013), exporting $ 8,868 million USD, more important trading partner globally.

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Keeping this in mind, Colombian universities list of imports by the European Union in 2011, EXPORTHELP.EUROPA.EU. (2013). are doing research on the profile of European another reason to make a study of the profile Acuerdo Comercial: Colombia Union consumers for the Colombian businessmen to of the European consumer. Once there is a Europea. Recovered May 10th of 2014 have a clearer understanding of the European higher understanding of the major needs or market in order to identify potential business requirements of the Europeans, there we will opportunities that will allow both parties to be able to build stronger and more durable benefit from this . In addition, relationships with all member countries of for Colombia is very important to maintain this the EU and achieve a greater importance as a trade agreement that promises a 1.3% growth trading partner. of the Colombian Gross Domestic Product Sandra Botero (EXPORTHELP.EUROPA.EU, 2013). Also to BIBLIOGRAFY [email protected] deepen this opportunities, Colombia and the DANE. (April, 2013). DANE. Recovered May Colombia EU are currently exploring the possibility to 10th of 2014, from http://www.dane.gov.co/ Member of: remove the VISA requirements for Colombians. DINERO. (January 8th, 2013). DINERO. Recovered May 10th of 2014, from http:// Furthermore, according to EUROSTAT, www.dinero.com/pais/articulo/empezo-tlc- Colombia was the country number 40 in the union-europea/180959

Compliance in Light of New Brazilian Anti-Corruption Law

BRAZIL

Brazil has recently enacted a new anti-corruption law (Law 12,846), which came companies) may also be held jointly liable with the company directly involved in unlawful into force in February 2014 and is comparable to the United States’ Foreign practices, and so can be the foreign companies Corrupt Practices Act and the UK’s Bribery Act. Along with the existing anti- with a subsidiary or office in Brazil. money laundering law of 1998, it is expected to encourage Brazilian companies to ensure good practices and adopt compliance measures in their business. Further consequences to companies that are found guilty of corruption or fraud are the confiscation of assets, suspension of their activities and even compulsory dissolution, in extreme cases.

There are benefits for those who cooperate with the investigation or denounce the involvement of others, which can reduce the penalty in up to two thirds, without affecting the obligation to pay for damages. These benefits apply when the company is the first to collaborate, if the illicit practices have ceased and if the company takes part in every hearing during the investigations.

Compliance has become a major concern of , being applicable, for instance, when a Brazil has come a long way in the course of the companies given the complex legal and regulatory certain act will artificially or fraudulently cause last couple of decades to improve the restraints systems that govern each sector of the economy, lower tax revenues for the government. Some against illegal practices in the corporate and Brazil is a special case, particularly with its of the conducts that are targeted are promising environment. Specific controls over the actions intricate tax, labor and environmental laws and any compensation to public servants, financing of directors and employees, particularly in large strict foreign exchange regulations. For these illicit acts, the use of a legal entity to hide corporations, are becoming a major concern reasons, many companies have realized that unlawful activities or the identity of the true and should be considered by all those willing to the institution of an internal body dedicated beneficiaries, frauds in public bids or contracts set up a presence in the Brazilian market. solely to overlooking compliance with laws and and any obstruction to investigations made by regulations was a necessity. public agents. Nelmir Rosas In fact, under the new law, companies that engage Important rules pertaining to mergers and [email protected] in unlawful activities can now have their penalties acquisitions were introduced in the new anti- Ricardo Thomazinho reduced if they adopt internal compliance corruption law. Liability persists with the [email protected] procedures such as implementing regular audits, successor, to a certain extent, when a company Brazil encouraging the revelation of wrongdoings and performs illicit acts against the Administration: Member of: applying ethical principles in the business. penalties and damages are due up to the amount of the transferred assets, but no other Beyond corruption per se, Law 12,846 represses sanctions are applied, except in case of fraud. any damage to the Administration or public Affiliates (controllers, controlled or sister

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Cyprus Investment Firm (CIF): A good vehicle into the European Investment Arena CYPRUS

The introduction of the Markets in Financial Instruments Directive of the European Union marked a new era in the regulation of investment firms in Europe. Cyprus has implemented the Directive, offering in this way a flexible and reliable entering point into the EU market for both EU firms that require a license and for non-EU firms that wish to have a place of business in the EU.

The regulatory authority for licensing and monitoring Investment Firms is the Cyprus Securities and Exchange Commission (CySec). After the full application is submitted to CySec, the regulatory authority has the obligation to reply within six months, approving or denying the license. Firms that are eligible to obtain an investment license in Cyprus are Cyprus Firms, Branches of Investment Firms 7..Compliance officer to ensure the application investment purposes, Forex, binary options established in other Member States and third of anti – money laundering procedures and others; a door to the investment field and country investment firms. a “passport” to the provision of those services CIFs, for taxation purposes, are treated as any in the European Union. The basic requirements to obtain a CIF license other Cyprus legal entity. As such, a 12,5% are: is applicable on net profits Over and above the taxation advantages and 1..At least four directors (two executive and realized by the CIF. enhanced tax planning, Cyprus has much more two non-executive),the majority of whom to offer to foreign investors and that is to must be Cyprus residents. These should Indicative tax treatment of a CIF: say the full implementation of the European also satisfy the fit and proper test (sufficient Directives, the flexibility, the business friendly good repute, experience, professional 0% taxation on dividends received from environment, the great number of Double Tax knowledge) other Cyprus companies Treaties and the brilliant support of accounting, 2..A General Manager, who can be one of 0% taxation on dividends received from legal and banking professionals. the executive directors, with satisfactory non-resident companies (provided that knowledge of the activities of the CIF and the easily-met participation exemption must be a Cyprus resident conditions are satisfied) 3..Employees offering investment services 0% taxation on dividend distribution to non- must hold the certificate obtained from the resident shareholders Michalis Zambartas Ministry of Finance and be registered under 0% resulting from the sale [email protected] the public registry of CySec. of securities/titles Myranda Chatzimatthaiou 4. Head offices must be located in Cyprus 0% withholding tax on interest paid to [email protected] 5..Fully staffed office with the necessary residents and non-residents Cyprus equipment and substance Member of: 6..Accounting procedures and financial Cyprus is a highly regarded and popular statements must be audited every year. jurisdiction for obtaining a license for

Transfer Pricing in Serbia: A Taxing Issue

SERBIA

One of the means by which multinationals at- transactions should be priced in accordance .The Comparable Uncontrolled Price (CUP) tribute profit and loss to different countries with the “arm’s length principle”, as described method; before taxation, known as transfer pricing, in Article 9 of the OECD Model Tax convention. .The Resale Price Method; can have a huge effect on a company’s end of .The Cost Plus Method; year figures. Having the appropriate TP docu- A full Transfer Pricing study should include an .The Transactional Net Margin Method mentation in place is a against po- analysis of the associated enterprises and taxpa- (TNMM); and tential noncompliance penalties and adverse yer group, taxpayer’s industry analysis, functio- .The Profit Split Method. tax consequences. nal analysis, selection of the most appropriate TP method, a conclusion and appendices. TP has been around for more than 80 years now in different shapes and forms but effecti- According to the Rulebook published in July vely the first general guidelines were issued by 2013, the general principles of transfer pricing The taxpayer should also choose and adopt the OECD back in 1979. Thereafter the first (TP) in Serbia follow OECD guidelines. The phi- one or a combination of the following pricing great step was what was called a “White Pa- losophy remains the same and intercompany methods:

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per” issued by the US in 1988, which led to the the agenda of all financial authorities. Taxpayers Companies should therefore seek out the right development of detailed and comprehensive should address with careful consideration the expert advice to eliminate tax risks, as well as Transfer Pricing Guidelines (TPG) and ultima- documentation of their related party transac- achieve harmonization of their business struc- tely converted to regulations in 1994. tions. Having appropriate TP documentation in ture with market conditions and TP Regulations. place is in all circumstances a safeguard against TP documentation is to be submitted to the tax potential noncompliance penalties and adverse authorities in Serbia, together with the annual tax tax consequences. return within 180 days of the last date of the tax period. Deadlines in the region vary according to A TP study is more than just a “read and Anastasia Sagianni each country’s Corporate Income Tax Law. write study”, and requires training in me- [email protected] thodology and the obtaining of experience Belgrade Companies in Serbia should realize that TP is in the use of a comparable database such as Member of: one of, if not the, most important tax issue on Amadeus.

The Retirement pensions’ tax burden

ECUADOR

Introduction to the problem Within these incomes, and distanced from the published on the Supplement of the Official Citizens and entrepreneurs who want to remunerations under working relationship Paper 143 of 13 December 2013, to the improve the “pension”, that means the value (salaries and wages); the retirement pensions Employer’s Retirement Found of the that is received or is intended to be received received by someone who has contributed at of Quito, who consulted the following: by people once they reach a certain age least 40 years, and which have been received and which allows them to cover their living by the Government (IESS) are exempted of “If the incomes received by the participants expenses once they are not longer working income taxation; regardless of the amount. or their rightful claimants, coming from their or generating resources, known as “retirement So, the 7th numeral of the 9th article of the retirement pensions or death settlements, are or pension” or “old age pension”; are looking for Internal Tax Regime Law, establishes: are not taxed with the income tax, according to alternatives in private pensions systems in the provisions or taxable event established by the order to improve the pension granted by the “Chapter III Internal Tax Regime Law.” Ecuadorian Institute of Social Security (IESS)1 EXEMPTIONS The Tributary Administration, once it considers The largest amount that someone can receive Art. 9.- Exemptions.- For purposes of determination that the income applies as a as retirement pension in 2014 is $1,870.00 and settlement of income tax, only the following subjective exoneration over the person who incomes are exonerated: pays it, concludes that the values payed by the Improvement of the pensions 7.- Those received by the beneficiaries of the Special Employer’s Retirement Found of the There is an habitude, based on the legitimate Ecuadorian Institute of Social Security, for any kind Municipality of Quito, whose legal nature is a people’s precaution, like investing on private of benefit granted by this entity; the retirement non profitable entity; to any person under the retirement plans in order to improve the employer’s pension under the provisions of the manner of “retirement pension” is taxed with retirement pension offered by the Government, Labour Code; and, those received by the members income tax over the receiver. by giving contributions and savings for of the Army and Police from the ISSFA and ISSPOL; a determinate period of time to private and the pensioners of the Government;” The Tributary Administration answers: institutions; so they can be benefited from an “Replying: Only incomes received by the old age pension to cover living expenses, which Do the retirement pensions that ARE NOT given beneficiaries of the Ecuadorian Institute of Social can be higher when the person doesn’t have the by the IESS pay income tax? Security, the Army Social Security Institute and the old time’s strength and health. National Police Social Security Institute, and those Yes. So that the exemption of taxation is given by the employers under the provisions of the Do the retirement pensions given by the subjective; because it depends on the entity that article 216 of the Labour Code; are exempted of IESS pay income tax? pays the retirement pension, so that if it comes Income Tax payment. The Ecuadorian tax regime applies the from the IESS it is exempt; and, if there exists “minimum exempt” principle to recognise that a complementary pension from the private Therefore, the incomes received by the participants a certain type of incomes, before to enrich a sector, it will be income taxed on the person; or their rightful claimants, coming from the Special person, are used to cover basic living expenses who could pay up to 35% of tax income. Employer’s Retirement Found of the Municipality (health, feeding, dressing, education) which of Quito, non profitable private law entity, are don’t have to be taxed with income tax. The perception of justice and injustice, can’t taxed with Income Tax.” be restricted to an analysis of legal and So, in 2014 the “exempt basic fraction” or constitutional principles of the rule, because released of taxation consists on a net income as many people could realise, a common (income minus expenses) of US $ 10,410.00 financial investment could be conceptualise for natural persons; the deduction of “personal as a retirement pension in order to distract Javier Bustos A. expenses” must be added as well, that means, tax payment, which could justify that only the [email protected] those values that are intended to cover living retirement pension payed by the Government Adolfo Cevallos expenses and are not related with the income would the only exempted. [email protected] taxable activity, and which can reach US $ Ecuador 13,533.00, additional to the exempt fraction. Opinion of the Tributary Administration Member of: Those values can be strengthened under the The Internal Revenue Service answers on conjugal partnership regime. its Notification 917012012OCON001745,

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The Indian Companies Act 2013 - A Paradigm Shift

INDIA

The recently enacted Companies Act 2013 Rotation of Auditors- A welcome step (the ‘2013 Act’) is a landmark legislation and is likely to have far-reaching consequences on all Overview of significant changes companies operating in India. The 2013 Act is expected to facilitate more business-friendly 1..Listed companies and companies belonging corporate regulations, improve corporate to prescribed class of companies will not governance norms, enhance accountability on appoint or re-appoint the auditor for: the part of corporate and auditors, raise levels of transparency and protect interests of investors, (a) More than two terms of five consecutive particularly small investors and reduce the years, if the auditor is an audit firm number of required Government approvals. (b) More than one term of five consecutive years if the auditor is an individual Major Highlights of The 2013 Act 2..The auditor, who has completed his term, .One Person Company (OPC) - a new vehicle will not be eligible for re-appointment as for individuals for carrying on business with auditor in the same company for five years limited liability from completion of the term. This restriction .Credit rating made mandatory for will also apply to the audit firm, which has acceptance of public deposits common partner(s) with the outgoing audit .2% of average net profits of last 3 years to firm at the time of appointment. be mandatorily spent on Corporate Social Responsibility by certain class of companies 3..The revised Guidelines of Network, issued .Companies to have a uniform financial year by the ICAI, require that where rotation – ending on 31 March each year of firms is prescribed by any regulatory .National Financial Reporting authority, no member firm of the network of chartered accountants. If professional or Authority (NFRA) to be constituted can accept appointment as an auditor in other misconduct is proved, NFRA has the by Central Government to provide for place of any member firm of the network power to make order for: dealing with matters relating to accounting which is retiring. and auditing policies and standards to be (a) Imposing penalty of: followed by companies and their auditors 4..All listed companies, particularly companies, (i) Not less than INR 1 lakh, but which .Restriction placed on provision of specified which have long-term relationship with may extend to five times of the fees non-audit services by an auditor to ensure auditors, need to gear-up for rotation. This received, in case of individuals, and independence and accountability of the auditor will help companies to work closely with (ii) Not less than INR 10 lakh, but which .Mandatory internal audit for prescribed proposed auditors and ensure compliance may extend to ten times of the fees classes of Companies with strict independence requirements received, in case of firms. .At least 1 director of a company shall be upfront. Many global companies have listed a person who has stayed in India for 182 subsidiaries in India. Typically, they prefer (b) Debarring the member or the firm days or more in the previous calendar year. firms, which are part of common network, from engaging himself or itself from practice Existing companies to comply with this as their global auditors. This is expected to as member of the Institute of Chartered provision within 1 year from the date of create some challenging situations Accountants of India for a minimum period of six commencement of 2013 Act. months or for such higher period not exceeding .Listed and prescribed class of companies On contravention of law ten years as may be decided by the NFRA. to have at least 1 woman director. 7..Members or depositors or any class of Existing companies to comply with this 5..Where, in case of audit of a company being them may claim damages or compensation provision within 1 year from the date of conducted by an audit firm, it is proved that or demand any other suitable action from commencement of 2013 Act. the partner or partners of the audit firm or against the auditor including audit firm of .Electronic voting for Board and shareholders has or have acted in a fraudulent manner the company for any improper or misleading meetings Introduced Merger of Indian or abetted or colluded in any fraud by, or in statement made in his audit report or for company with a foreign company Allowed relation to or by, the company or its directors any fraudulent, unlawful or wrongful act or .Person / group of persons holding or officers, the liability, whether civil or conduct. 90% or more equity shares by virtue criminal as provided in this Companies Act, of amalgamation etc. can purchase the 2013 or in any other law for the time being remaining equity shares of the company in force, for such act will be of the partner from minority shareholders or partners concerned of the audit firm and Vivek Agarwal FCA .Provisions relating to class action suits of the firm jointly and severally. [email protected] introduced India .Central Government to establish Serious 6..NFRA may investigate either suo moto or Member of: Fraud Investigation Office for investigation on a reference made to it by the Central of frauds relating to a company Government on matters of professional or other misconduct by any member/firm

8 NEWSLETTER . june 2014

Holiday homes in Spain - a potential tax trap

GERMANY

payment date for taxes on such capital gains Spain and in particular its island Mallorca is a very popular holiday region is (endlessly) postponed. But the liquidation especially among Germans. Buying and owning a holiday home there require of the limited company or the transfer of the a detailed consideration concerning both Spanish and German tax issues. to someone not living in the EU automatically terminate this postponement. Then taxes have to be paid for an act that did Holiday homes in Spain used for both private between the Spanish limited company and its not result in liquidity. purposes and for rent owned by Germans German shareholder according to German obviously have fiscal consequences in Spain; tax law. A hidden distribution of profits can The double between Spain and tax effects in Germany for such real estate be assumed since the free use would not be Germany was changed with effect as of year have to be considered as well. Due to Spanish granted to everybody. It is only granted to the 2013. Art 13 para 2 of the treaty allows Spain tax laws it is often recommended that real sole shareholder and close relatives. The hidden to tax profits of a sale of the shares of such estate is bought not by the individual person distribution of profits results in a limited company. The new rule reflects himself/herself but rather by a Spanish limited of the shareholder in Germany. German tax the OECD Model Convention. Before 2013 company. The sole shareholder is a German authorities apply German tax regulations Germany had the right of taxation of profits. individual person with residence in Germany. although a Spanish limited company is involved. Changes in the double tax treaty also have to As per our understanding, Spanish The hidden distribution of profits has a value of be considered. tax is not applicable, if a person in Germany the potential rental fee for the time spent in the receives the shares in line with the succession. holiday home. Shareholders who own 10% or Spending the vacation in an own home in Spanish would be applicable, if more of a limited company abroad are required Spain is a dream for many people living in a no limited company was implemented. Also the by law to inform the German tax authorities county north of the Alps. Nevertheless in Spanish increase-in-value-tax can be avoided by about owning a limited company abroad. Hidden order to avoid a rude awakening cross-border such a tax structure. Focusing on Spanish tax profit distributions are often revealed in a tax consultation is necessary. Most clients prefer a laws, the implementation of a limited company examination by the tax authorities years later detailed tax consulting rather than unexpected is a good means to avoid Spanish taxes. after the first (but not final) . tax assessments. High interest payments are just one of several German (corporate) income tax is applicable consequences. Holiday homes in Spain are just one example. which does require a closer look: Profits of Cross-border investments for both private the Spanish limited company transferred to Further tax issues can arise when the holiday and business purposes should be discussed the German individual person can be taxed home (= part-time home) becomes the one and examined by consultants in the countries in Germany according to Art. 10 double tax and only home and the (other) German involved in order to avoid tax traps. treaty between Spain and Germany. domicile is abandoned. The German Foreign Transaction/Expatriation Tax Act (AStG) Not only the monetary profits of the limited requires the taxation of potential capital gains Alexander Heese company can be taxed. The use of a holiday (for example: purchase price EUR 200.000,00, [email protected] home itself can have fiscal consequences in value at time of emigration: EUR 300.000,00 AUREN Munich Germany. The use by the sole shareholder – a capital gain of EUR 100.000,00 has to be Germany is often free of charge. He/she does not pay taxed). Such a taxation is mandatory, even if rent to the limited company. This free use the limited company and its sole shareholder basically is a hidden distribution of profits do not get any cash. In most cases the

9 NEWSLETTER . june 2014

Granting residence permits to non-EU citizens in Greece GREECE

A new provision, article 36A in relation to according to (A’180) of Law 4002/2011, with by international conventions is mandatory. The granting of residence permits to non-EU a value of at least €250,000.00 residence permit is issued by the decision of citizens in Greece, has been added to the the General Secretary of the Region. Law 3386/2005 on “Entrance accommodation The permit may be renewed for another five and social integration of non-EU citizens in years if he/she continues to hold the property Conclusion: Greece”. acquired or the contracts mentioned above The new provisions are aimed to attract are still active. and provide facilities to foreign investors, to Under the new provisions of the law, a support the Greek economy. residence permit will be granted for five years The new regulation includes also family for non-EU citizens upon acquiring a visa that members of non-EU citizens. Specifically, are issued by the consulate in the country of a residence permit may be granted to an origin of the non-EU citizen, as long as: individual’s family members, upon request, which will be renewed or terminated (A) They hold personally, or through a legal simultaneously with the sponsor’s residence Antonis Gavrielides entity, shares, that are entirely related to a permit. [email protected] real estate situated in Greece worth at least Greece € 250,000.00; or The new provision for granting of a residence Member of: permit does not establish the right to access (B) They have a contract, of at least ten years to any form of work, and also the relevant according to the Law 1652/1986 as applicable, period (five years) will not be counted for where its value is at least €250,000.00; or granting citizenship.

(C) A 10-year lease of hotel accommodations Additional information: or furnished tourist accommodation (houses) In order to obtain a residence permit, a in tourist accommodation complexes passport or other travel document recognised

Tax treatment of the income by sale of shares from a non-Mexican resident company to a resident company MEXICO

Mexican Law establishes income tax obligation shares to another Mexican company is to shares come directly or indirectly more than for payment of that tax on individuals and accumulate this utility to their other income 50% of real property located in the Country. corporations resident in Mexico, over all its for both interim payments to calculate the In such cases, the fee is calculated on 25% of incomes, regardless of the location of the annual tax. the total operation, without any deduction and source of wealth in which they arise, as well as shall be made by the acquirer and aware to the payment of tax for residents abroad regarding Individuals are treated differently, since they Internal Revenue Service, however if the seller, income from source located in Mexico. will have to take the following steps: residing abroad, have a legal representative in Mexico They can choose to apply the tax In the same way Income Tax Law provides 1. The buyer if resident in Mexico or abroad but rate directly on the revenue as long as the that tax revenues are subject obtained by the resident with a in operation is examined by a CPA. sale of shares, being subject to the tax gains Mexico of the total sale of the shares to the realized by the sale thereof seller will retain the same 20%, and paid by Buyer must extend a record retention and the seller to the Tax Administration Service . should be considered that the retention rate They are also the following list which have the 2. The seller must accumulate to their other may vary in accordance with international same treatment of the shares: income on their annual tax the profit on treaties to avoid double taxation. sale of shares, calculate tax and deduct the 1. Equity contribution certificates issued by the payment from the buyer by the seller. The seller will credit in their country national credit. 3. Payment of 20% can be diminished if the withholding tax paid in Mexico 2. Social Parties. operation of share purchase is examined by 3. Contributions in civil societies. a CPA. Juan Antonio Guzmán 4..Ordinary participation certificates issued [email protected], by trusts for shares issued pursuant to the It is important to note that a disposal of AUREN León Foreign Investment Law. shares in which the seller is resident abroad, México is considered a source of wealth in Mexico, Treatment for purposes of this tax profits where such shares are issued by companies earned by a Mexican company in the sale of resident in Mexico or the book value of these

10 NEWSLETTER . june 2014

Bitcoin - a Financial-Digital Revolution in the Banking Sector ISRAEL Recently, internet and financial as a monetary unit. While, according to .Trade between Bitcoin and other virtual worlds are found in the process of decision of the German Ministry of Finance currencies in recent years. Bitcoin is recognized as”private money” and merging and some even consider that the “mining” of such currency considered It must be assumed that in coming years every them to be on a collision course. as a private issuing of currency. This means country will create its own mechanism for They say it will be only a matter that it will be possible to impose tax on part taxation and reporting on trade by Bitcoin and of time until the virtual world will of the currency activities. trade of Bitcoin as a financial tool. take over economic tools of the old economy and will develop Bitcoin, the virtual currency – does it We believe, since most of countries have create a “”?! not yet defined instructions and standards, independent financial tools and all these practical professional issues must instruments. “Tax haven” is a wide-used term for a place be treated the same way we treat any other where it is possible, legally or illegally, to avoid deal conducted on the basis of cash equivalent In general, a virtual currency gains momentum tax payment. Since the basic idea of Bitcoin in accordance with internal instructions of in the world as a digital and decentralized is a confidential currency trade, Bitcoin specific country where a deal was carried out. one. Nowadays, there is no financial institute phenomenon challenge regulators, tax and or central bank which is responsible for governmental authorities, Previously to submitting a report regarding currencies issue and for its exchange course; the deal, Bitcoin should be converted to local but, actually, collaborative internet network The general idea of Bitcoin is that a user has currency according to local law relating to of computers issues in accordance with the a virtual “wallet” that can be accessed from date of the deal and Bitcoin/local currency rules of defined programs which are open and any place in the world via protected access exchange rate. accessible to all. code. The money is not deposited in a certain country or area but exists as confidential and We assume that in order to determine the Bitcoin (https://www.weusecoins.com/en) is only protected information in the internet and can exchange rate it is worthwhile to collect written one of a variety of virtual currencies existing be accessed only by wallet’s owners. proof about sales rate of the currency from a today in the internet but it is considered the No country in the world can claim “ownership” number of popular internet sites dealing with most prevalent and popular. of the “bank” and therefore the state has no the conversion of currency to local currency supervision or control of the bank’s assets or or to a popular currency such as Euro or USD. Bitcoin, the virtual currency – the new client’s assets and accounts. Moreover, we recommend quoting average world of finance exchange rate in order to report about the deal Therefore, the great concern that must bother in terms of local currency. Many governments as well as traditional not only legal authorities but whole community banking around the world feel suspicious about is that the privilege with no regulation may The virtual currency and international revolutionary financial event of the decade. arouse negative or even criminal elements taxation Just like any new phenomenon is initially being while conducting bank transactions and trading met with hesitation, so in this case the same. for illegal purposes. However, authorities’ As mentioned before, Germany was the first About five years after the “invention” of the first concerns refer to reporting loss; supervision country that adopted a positive attitude and Bitcoin (2009), first signs of reference from the and taxation of the normative citizens who recognized Bitcoin as an official currency, as international banking sector appear. Nevertheless, were, until now a subject to the strict control “monetary unit” and as “private money”, most of the comments are negative. It is of the firm banking system. undertook initial efforts to institutionalize its impossible, however, to ignore public opinion and supervision and activity and even published the “wisdom of the crowd” will obviously prevail Bitcoin, the virtual currency – taxation directions in this field. This means that German once again and will force economy to recognize challenges of the new world tax authorities will be able to impose taxes on the innovative financial activity. commercial profits from business activities Tax issues challenge authorities worldwide, connected with Bitcoin. While at the same The federal government of the USA treats but still, their interpretations will set the final time, it seems like German tax authorities negatively to the new invention and recently count and turn into accepted norm. do not intend to impose taxes on private use even began to send an abundance of warnings of Bitcoin or on the possession of Bitcoin for more than a year. However, it seems that to the American public. Nevertheless, a first The main tax issues are: sign of trend change is visible in USA and Germany will impose tax on profits from exchange activity with Bitcoin similar to the derives mainly from the fact that the public .Bitcoin definition - , asset or tax it imposes on capital gains. is trading in increasing volumes of virtual currency; Since the end of 2013, also the Norwegian, currency. .International and national Bitcoin VAT; the US and the British tax authorities released .Bitcoin/local currency exchange rate; official communications addressing the Germany was the first country to display .Bitcoin taxation – as a capital income or problem of virtual currency and taxation. a positive attitude by recognizing the new capital gain? currency. Towards the end of 2013, the federal .Exchange rate differences of Bitcoin at a authorities of Germany announced that the The research department of the European cutoff date, reporting date or exercise date Central Bank (ECB) published that Bitcoin government from now on recognizes Bitcoin and currency conversion;

11 NEWSLETTER . june 2014

constitutes a potential threat to an with countless interesting issues for quality international monetary order. The ECB’s opinion and consultancy for our customers. concern, regarding the loss of control over the The earlier we will understand and deepen money, reflects the fear of the disturbance of our understanding in the field the better we the “international order” of traditional banking will be in a position to supply legal solutions and a publication of this kind reveals, in our for legitimate tax savings to customers and opinion, the massive precedent that was posed companies that are developing in the financial by the use of private money. world of the future.

Bitcoin, the virtual currency – the future We recommend to create a virtual “wallet” arena of financial trading and to start getting active in the field –the future is already here! In our opinion, virtual currency trade by Bitcoin and others will turn them into a legitimate currency that cannot be ignored any longer in next few years, for sure. Moreover, the virtual currencies may even become an international Ofir Angel, currency and trading system of the future. [email protected] Therefore, there is no doubt that governments Israel as well as the tax authorities will be have to Member of: accept a virtual currency as a legitimate tool.

In the coming years, the virtual trade will challenge us as the experts in the field,

Registration for VAT purposes in Italy of non-established taxable persons ITALY

Non-established taxable persons (e.g. individuals, registered customers, the non-established .Non-established taxable persons from limited liability companies, partnerships) who person has to register for VAT in Italy. outside the European Union: They have carry out business in Italy without having a .Construction work: If the subcontractor to appoint a tax representative in Italy. permanent establishment in Italy, have to register and the main contractor are non-established for VAT in certain cases, e.g: taxable persons, the main contractor has to Late registration – High penalties register for VAT in Italy (general rule). foreseen by Italian law .Supplying and delivering goods from .Intra-community acquisitions or another Member State to non VAT- importation of goods in Italy or Intra- In case of late VAT registration, the Italian VAT registered customers in Italy. Common community supply or exportation of due from the time that the non-established examples are mail order and internet sales, goods from Italy carried out by a non- taxable person should have registered for VAT this is known as distance selling (Ital: vendite established taxable person. has to be paid to the Italian tax authorities. a distanza). The non-established taxable person has to register for Italian VAT if the It is recommended to verify case-by-case Additionally, in case of late VAT registration, the value of the distance sales is more than whether a VAT registration in Italy is necessary. administrative penalty is equal to 100% 35.000 Euro in a year. of the VAT and further administrative .Supplying and delivering goods within In order to register for VAT purposes in Italy penalties (30% of the VAT) and interests Italy to non VAT-registered customers. the following procedures are applicable: on late payments are due. The Italian tax E.g.: Müller GmbH is established in Germany, law contains some possibilities for reduction buys goods in Venice and sells them to its .Non-established taxable persons from of the penalties, but compared to other non-VAT registered customer in Milan. If the other Member States: they can “directly” Member States the penalties in Italy are very goods are dispatched from Venice to Milan, register for VAT (Ital.: identificazione high. In particular situations of late registration, the non-established German firm has to issue diretta) or appoint a tax representative criminal law rules are applicable. an invoice with Italian VAT. If in this case the (Ital.: rappresentante fiscale). In the first customer is an established taxable person, a case, the non-established taxable person Florian Frei particular reverse charge rule (Art. 17, par. 2, must keep VAT records and is liable for [email protected] Italian Law DPR 633/72) is applicable and the any VAT debts incurred by the business. In Italy Member of: non-established taxable person has not to the second case, the tax representative is issue an invoice with Italian VAT. jointly and severally liable for any VAT debts .Performance of certain services to incurred by the business and he must keep non-VAT registered customers in Italy: VAT records and accounts for Italian VAT on In case of supply of services connected with behalf of the non-established taxable person immovable property performed by a non- he represents. established taxable person to non-VAT

12 NEWSLETTER . june 2014

Luxembourg (Special) Limited Partnership in the framework of the Alternative Investment Fund Managers Directive (AIFMD)

LUXEMBOURG

will be subject to MBT, unless exemptions The Alternative Investment Fund Managers Directive (“AIFMD”) came are available, and the non-resident and into force on 21 July 2011 and EU Member States had to transpose the resident partners will be subject to CIT and framework into national law by 22 July 2013. Luxembourg was one of the first NWT (unless exemptions apply). jurisdictions to transpose the AIFMD into its national law and has attractive Since the ratification of the Bill in July 2013, the features to answer the needs of the alternative investment funds industry. SCS and the SCSp may be fully tax transparent with respect to CIT and NWT provided that: The AIFMD is reshaping the alternative the AIFMD, Luxembourg has reinforced its investment industry legal framework to enhance its attractiveness .The General Partner(s) takes the form of for alternative investment funds and more Luxembourg company(ies) and that they/it The AIFMD arose out to address the concerns particularly in the fields of private equity, hold(s) less than 5% of interest in the SCS/ raised by investors following the 2008 hedge funds and real estate funds. SCSp, the income of the SCS/SCSp will no financial crisis, notably the perceived lack of longer be deemed to be a business income. regulation surrounding alternative investment Hence, Luxembourg has modernized its .The activity of SCS/SCSp is limited to funds (“AIFs”). Therefore, the AIFMD aims limited partnership (“SCS”) regime on 10 private wealth management (which generally to create a comprehensive regulatory and July 2013 through the bill of law n°6471 (“the corresponds to the activity of private supervisory framework for asset managers Bill”) and has introduced the special limited equity and real estate funds), the income wishing to manage AIFs within the EU. The partnership (“SCSp”), the partnership being of the limited partnership should not be directive applies to the managers of alternative considered as the most appropriate structure classified as business income. Consequently, investment funds, including all funds that are to answer the needs of the alternative no permanent establishment should be not regulated under the directive governing investment funds industry. The Bill allows recognized, especially for municipal business undertakings for collective investments in notably for greater legal flexibility as well as tax (“MBT”) purposes. transferable securities (“UCITS”) such as full tax transparency and tax neutrality. The hedge funds, private equity funds, property and VAT exemption applicable to investment fund In addition to its favourable legal framework, commodity funds. management services was broadened and a Luxembourg provides AIFs with resources and specific tax regime for carried interest was sophisticated expertise covering the full range Thus, EU AIFMs, non-EU AIFMs managing introduced. of fund services, including administrators, EU AIFs, and non-EU AIFMs who market transfer agents, custodians, lawyers, auditors. their AIFs in the EU must be registered and The main specificity of the SCSp is that, unlike Moreover, Luxembourg’s know-how continues comply with a set of rules including strict the SCS, it is not vested with legal personality. to develop by attracting varied industry authorization requirements, limits on leverage, The new SCS and SCSp can be compared with experts in key areas such as governance and risk management, valuation, remuneration the Anglo-Saxon Limited Partnership, whose risk management. schemes and transparency requirements. One success mainly lies in the corporate flexibility of the major provisions of the AIFMD is the and tax transparency it provides. Conclusion introduction of a passport allowing managers The AIFMD is more than a reporting or a domiciled in the EU to market EU AIFs they In principle, the SCS is treated as tax compliance directive as it impacts significantly manage to professional investors across the EU. transparent with respects to Luxembourg every actor across the alternative fund corporate income tax (“CIT”) and net worth management. In this context, Luxembourg Luxembourg leverages the AIFMD to tax (“NWT”). Nonetheless, the SCS and or its grasped the opportunity to introduce a more enhance its attractiveness non-resident/resident partners may currently favourable tax regime for limited partnerships be subject to Luxembourg taxation in the in the Bill transposing the AIFMD by providing Luxembourg is recognised as an important following cases: greater transparency in terms of taxation hub for distribution activity in the UCITS regimes. In a nutshell, Luxembourg carries space and the AIFMD is expected to add .In the case where the SCS performs a on being a choice destination for alternative strongly to these flows. Indeed, Luxembourg commercial activity through a permanent managers with the ability to support new has developed a strong track record in the establishment generating business income in products, leveraging strategies and structures. investment fund industry and the country is Luxembourg. The SCS will then be subject to Europe’s largest investment fund centre and municipal business tax (“MBT”), and its non- world’s second largest after the US. resident/resident partners will be subject to (i) CIT on the SCS’s income and (ii) NWT In Luxembourg, the AIFMD has been on SCS’s worth (unless exemptions apply). François Petit implemented in a favourable legal and .If the General Partner of the SCS is a [email protected] regulatory framework for investment funds. Luxembourg company performing an activity Pierre Sookiew Luxembourg has notably a variety of vehicles of a business nature based on its legal form, [email protected] which are well suited to the requirements the whole activity of the SCS will be deemed Member of: imposed by the AIFMD (FCP/SICAV/SCA, to be commercially tainted for Luxembourg SIF regime, SICAR). Besides implementing purposes. Consequently, the SCS

13 NEWSLETTER . june 2014

Income obtained in Spain What are the different tax rates that apply to without a permanent income obtained without a permanent establishment. Tax rates establishment by non-resident income taxpayers? SPAIN

.As a general rule (see table). .Work incomes of individuals who do not reside in Spanish territory, provided they are not income tax payers, who lend their services in Year of return Up to 31-12- 2007-2011 2012-2014 Spanish Diplomatic Missions and Consular Representations abroad, 2006 if the the specific norms of the International Treaties to which Spain belongs are not applicable. They will be taxed by 8%. Tax rate 25 % 24 % 24.75 % .Incomes resulting from reinsurance operations, 1.5%. .Maritime or air navigation entities resident abroad, whose ships or .Wages perceived by individuals not residing in Spanish territory by aircrafts touch Spanish territory, 4%. virtue of a fixed-term contract for seasonal workers, according to .Capital gains derived from the transfer or reimbursement of shares what has been established in the labour law, 2% (effective as of the or holdings representing the capital or assets of collective inves- 1st of January 2002). tment institutions are taxed at the applicable rate of the year in .Dividends and other earnings derived from the stake in funds of an which the income was accrued (see table). organisation. The tax rate depends on the year of return (see table).

Year of 2003-2006 2007-2009 2010-2011 2012-2014 Year of 2003-2006 2007-2009 2010-2011 2012-2014 return return Tax rate 15 % 18 % 19 % 21 % Tax rate 15 % 18 % 19 % 21 %

.Interest and other earnings obtained by assignment of own capital to others. The tax rate depends on the year of return (see table).

Year of 2003-2006 2007-2009 2010-2011 2012-2014 return Tax rate 15 % 18 % 19 % 21 %

.Pensions and other similar services perceived by individuals who non- residents in Spanish territory any who is the person who has gene- rated the law to its perception. They will be taxed according to the following scale.

(Until Rate --- Euros Remaining Applicable 31/12/2006) pension --- Up rate --- Percen- annual pension to Euros tage Amount --- Up .Other capital gains that are stated when transfering assets; the tax to Euros rate varies according to the year of return (see table). 0.00 0.00 9,616.19 8 % 9,616.19 769.30 5,409.11 30 % Year of 2003-2006 2007-2009 2010-2011 2012- return 2014 15,025.30 2,392.03 and over 40 % Tax rate 35 % 18 % 19 % 21 %

(From Rate --- Euros Remaining Applicable .Royalties between associate companies, paid to a company resident 1/1/2007) pension --- Up rate --- Percen- in an EU Member State or to permanent establishment of said com- annual pension to Euros tage pany in another EU Member State, 10%, provided that certain requi- Amount --- Up rements are fulfilled (effective from 1 January 2005 and until 30 June to Euros 2011; as of 1 July 2011 it becomes a case for exemption). 0.00 0 12,000 8 % 12,000 960 6,700 30 % José Luis Galipienso 18,700 2,970 and over 40 % [email protected] AUREN Barcelona Spain

14 NEWSLETTER . june 2014

Nominative shares: more anonymous than bearer ones?

URUGUAY

Nearly two years of the entry into force of the law Nº 18.930 and having expired the deadlines to regularize the situations of those societies that were in the dilemma regarding nominating their shares or keeping them bearer, today it could be said that in general terms companies have adapted to the new legal requirements.

Nowadays, nominative shares have gained the Tax Code, which is approximately equiva- greater relevance to some investors, and the lent to dollars 24.500. fear that used to exist regarding the registra- tion of the ownership of the shares has been Apart from that, holders cannot receive divi- moved to bearer shares. This insecurity per- dends, profits or remaining in case of liquida- sists even with the obligation to maintain “ban- tion of the society, and in case of perceiving king secrecy” to all information that the Cen- it, they will be punished with a fine up to the tral Bank of Uruguay (CBU) has and that arise amount improperly distributed. Without pre- from the communication of the ownership of judice to pecuniary responsibility that can co- the bearer share. rrespond to the issuing entity, and its legal and voluntary representatives. Those corporations that are still in the dile- mma weather continuing with bearer shares In conclusion, this new record of the CBU or switching to nominative shares, should take makes a lot of people think weather it is really into account that from May 1st, 2013 all bearer convenient a company with bearer shares or company shares should be registered to the one with nominative shares. CBU. The procedure laid down in article 17 of the law Nº 18.930 continues in force by which Also remember that from January 1st of the societies which opt for the nomination can use current year, the sale of bearer shares is taxed it, since it offers a more agile and economic by, Income Tax non-residents and Personal system. Once the society has complied with Income Tax, as well as the sale of nominative the procedure of nomination of shares, it shall shares. communicate the unsubscription of the regis- try made to the CBU and the Directorate Ge- The question then is the following: nominative neral of Taxes so as the latter takes cognizance or bearer shares? Everything suggests that the of the fact that the shares became nominative. trend will be towards the former, since there are no benefits from a fiscal point of view, and For those companies that have not complied the fact of having to identify the holders to the with this requirement, the last April 2nd the CBU, makes the holding of nominative shares Directorate General of Taxes dictated the most “anonymous” than the holding of bearer resolution No. 1176/014, which establishes a shares. special term to comply with this communica- tion by paying a minimum fine. Fernando Salazar

[email protected] It is important to notice that those societies AUREN Montevideo which have not notified CBU the shareholders Uruguay of the proprietors of the bearer shares, it can be done by each holder personally for his par- ticipation in each society.

Besides, it must be taken into account that the breach of communication causes sanctions for both society and holders of the shares.

One of the most serious sanctions for the en- tity is the suspension of the Certificate that proves the company is current with tax obli- gations.

Furthermore, there is a fine which amount will be up to one hundred times the maximum va- lue of the fine for contravention established in

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