GLOBAL TAX WEEKLY ISSUE 125 | APRIL 2, 2015 a closer look SUBJECTS TRANSFER PRICING INTELLECTUAL PROPERTY VAT, GST AND SALES TAX CORPORATE TAXATION INDIVIDUAL TAXATION REAL ESTATE AND PROPERTY TAXES INTERNATIONAL FISCAL GOVERNANCE BUDGETS COMPLIANCE OFFSHORE SECTORS MANUFACTURING RETAIL/WHOLESALE INSURANCE BANKS/FINANCIAL INSTITUTIONS RESTAURANTS/FOOD SERVICE CONSTRUCTION AEROSPACE ENERGY AUTOMOTIVE MINING AND MINERALS ENTERTAINMENT AND MEDIA OIL AND GAS COUNTRIES AND REGIONS EUROPE AUSTRIA BELGIUM BULGARIA CYPRUS CZECH REPUBLIC DENMARK ESTONIA FINLAND FRANCE GERMANY GREECE HUNGARY IRELAND ITALY LATVIA LITHUANIA LUXEMBOURG MALTA NETHERLANDS POLAND PORTUGAL ROMANIA SLOVAKIA SLOVENIA SPAIN SWEDEN SWITZERLAND UNITED KINGDOM EMERGING MARKETS ARGENTINA BRAZIL CHILE CHINA INDIA ISRAEL MEXICO RUSSIA SOUTH AFRICA SOUTH KOREA TAIWAN VIETNAM CENTRAL AND EASTERN EUROPE ARMENIA AZERBAIJAN BOSNIA CROATIA FAROE ISLANDS GEORGIA KAZAKHSTAN MONTENEGRO NORWAY SERBIA TURKEY UKRAINE UZBEKISTAN ASIA-PAC AUSTRALIA BANGLADESH BRUNEI HONG KONG INDONESIA JAPAN MALAYSIA NEW ZEALAND PAKISTAN PHILIPPINES SINGAPORE THAILAND AMERICAS BOLIVIA CANADA COLOMBIA COSTA RICA ECUADOR EL SALVADOR GUATEMALA PANAMA PERU PUERTO RICO URUGUAY UNITED STATES VENEZUELA MIDDLE EAST ALGERIA BAHRAIN BOTSWANA DUBAI EGYPT ETHIOPIA EQUATORIAL GUINEA IRAQ KUWAIT MOROCCO NIGERIA OMAN QATAR SAUDI ARABIA TUNISIA LOW-TAX JURISDICTIONS ANDORRA ARUBA BAHAMAS BARBADOS BELIZE BERMUDA BRITISH VIRGIN ISLANDS CAYMAN ISLANDS COOK ISLANDS CURACAO GIBRALTAR GUERNSEY ISLE OF MAN JERSEY LABUAN LIECHTENSTEIN MAURITIUS MONACO TURKS AND CAICOS ISLANDS VANUATU GLOBAL TAX WEEKLY a closer look Global Tax Weekly – A Closer Look Combining expert industry thought leadership and team of editors outputting 100 tax news stories a the unrivalled worldwide multi-lingual research week. GTW highlights 20 of these stories each week capabilities of leading law and tax publisher Wolters under a series of useful headings, including industry Kluwer, CCH publishes Global Tax Weekly –– A Closer sectors (e.g. manufacturing), subjects (e.g. transfer Look (GTW) as an indispensable up-to-the minute pricing) and regions (e.g. asia-pacifi c). guide to today's shifting tax landscape for all tax practitioners and international fi nance executives. Alongside the news analyses are a wealth of feature articles each week covering key current topics in Unique contributions from the Big4 and other leading depth, written by a team of senior international tax fi rms provide unparalleled insight into the issues that and legal experts and supplemented by commentative matter, from today’s thought leaders. topical news analyses. Supporting features include a round-up of tax treaty developments, a report on Topicality, thoroughness and relevance are our important new judgments, a calendar of upcoming tax watchwords: CCH's network of expert local researchers conferences, and “The Jester's Column,” a lighthearted covers 130 countries and provides input to a US/UK but merciless commentary on the week's tax events. ©2015 CCH Incorporated and/or its affi liates. All rights reserved. GLOBAL TAX WEEKLY ISSUE 125 | APRIL 2, 2015 a closer look CONTENTS FEATURED ARTICLES Don't Get Snowed In By GATCA Country-By-Country Reporting Is Here Peter Staff ord, DMS Off shore Investment Services 5 Kurt Wulfekuhler, Peters Advisors 22 Capital Gains And Small Business Incorporation Avoiding Pitfalls In Mutual Agreement Procedures Pete Miller, Th e Miller Partnership, Dr. Alexander Voegele and Philip de Homont, Taxation Specialists 11 NERA Economic Consulting 24 Topical News Briefi ng: Indian Government Topical News Briefi ng: CCCTB Back From Announces New GST Push Th e Grave Th e Global Tax Weekly Editorial Team 16 Th e Global Tax Weekly Editorial Team 28 STEP Roundtable Commentary A UK Budget Too Good To Be True? Hawksford 18 Jason Gorringe, Global Tax Weekly 30 NEWS ROUND-UP VAT, GST, Sales Tax 37 European Union 40 India To Table Legislation For GST In April EU MEPs Discuss New Corporate Tax Reform Plans Luxembourg To Tax E-books At Headline VAT Rate Bulgaria Seeks EU Intervention On New Greek Tax EU VAT Ruling Pilot To Run Until 2018 Greece To Face ECJ On Inheritance Tax Rules UK Conservatives Dismiss VAT Hike Claim EC Approves UK Aggregates Levy Exemptions International Trade 43 International Financial Centers 52 China Approves Th ree More Free Trade Zones Changes To Russia's Off shore Law May Benefi t CIs WTO Members Seeking Trade Facilitation Deal By Turks And Caicos Tax Changes Eff ective April 1 December Compliance Corner 55 Tax Reform 45 US Bill To Ban Federal Employment Of Tax Debtors Australia Engages Public On Tax Regime Overhaul South Africa Issues Small Business Tax Guide US House To Vote On Repeal Of Estate Tax Italy Extends Tax Reform Implementation Period TAX TREATY ROUND-UP 57 HMRC Told To Get A Handle On Tax Expenditures CONFERENCE CALENDAR 59 IN THE COURTS 71 Country Focus: Canada 50 THE JESTER'S COLUMN 76 Alberta, Québec Publish 2015 Budgets Th e unacceptable face of tax journalism Canada Begins 2015 With Budget Surplus For article guidelines and submissions, contact [email protected] © 2015 CCH Incorporated and its affi liates. All rights reserved. FEATURED ARTICLES ISSUE 125 | APRIL 2, 2015 Don't Get Snowed In By GATCA by Peter Staff ord, DMS Off shore Investment Services Peter Staff ord, a Cayman Islands attorney-at-law, is a Director and Global Co-Lead of the International Tax Compliance Group of DMS Off shore Investment Services. Contact: pstaff ord@dmsoff shore.com , Tel. + 1 345 749 2489 Th is article discusses the preparatory and precau- tionary steps that reporting fi nancial institutions Introduction should take not only to comply with GATCA, but Off shore investment entities in the Cayman Is- also to safeguard against potential regulatory inves- lands and many other international fi nancial cen- tigation or enforcement action arising from the tax ters should now start turning their attention to status of their account holders. compliance with the Common Reporting Stan- dard ("CRS") promulgated by GATCA – Global Th e US Foreign Account Tax Compliance Act FATCA. Th ey must document all account holders ("FATCA") is now gaining considerable momen- existing on December 31, 2015, with the exception tum since FATCA came fully into eff ect on Janu- of entities with an account balance or value not ex- ary 1, 2015. US withholding agents and non-US ceeding USD250,000. Th ere is no de minimis ex- investment entities, depositories, custodial institu- ception for individual account holders. tions and other Participating Foreign Financial In- stitutions ("PFFIs") and Reporting Financial Insti- By late 2017, tax authorities in over 50 jurisdic- tutions ("RFIs") are scrambling to prepare for the tions – in addition to the US and UK – will be en- fi rst automatic exchange of information ("AEOI"). titled to information on accounts and certain indi- Th is will intensify next year when the scope of re- rect interests held by any residents in those off shore portable accounts and information becomes much investment entities. Th at number nearly doubles broader. AEOI will become an avalanche in 2017 one year later. Th e CRS sets the scene for unprec- when reporting and exchange of information under edented international collaboration on compliance the OECD's GATCA takes eff ect. Th is will repre- and enforcement of domestic income tax law. Off - sent an unprecedented change in tax authorities' shore investment entities should consider making ability to tackle off shore tax evasion. Th e change new GATCA disclosures and other arrangements in volume of cross border tax information requests with that end in mind. will then probably curve up like a hockey stick. 5 What will the fi nancial services industry look like income made to Non-Participating Financial In- then? It is inevitable that some account holders, fi - stitutions ("NPFIs") and to "recalcitrant" account nancial institutions and jurisdictions will feel frost holders that do not cooperate with the due dili- bitten and others could fi nd themselves buried gence requirements. As of March 1, 2015, the IRS deep in an icy drift with little breathing room. How had issued 156,276 Global Intermediary Identifi - many and where will they be? Are there practical le- cation Numbers ("GIINs") to FFIs registered on gal precautions that FFIs and their account holders the FATCA FFI Registration System. Registration should take now to avoid being "snowed in"? is required to establish an FFI's commitment to comply with its obligations under the FFI Agree- FATCA's "Carrot And Stick" ment and FATCA or its jurisdiction's Model 1 IGA FATCA is designed to stop American tax evasion and domestic IGA-enabling regulations. Th e GIIN on their foreign accounts by requiring Foreign Fi- protects FFIs from being treated as an NPFI and nancial Institutions ("FFIs") to report on those ac- being subject to FATCA withholding tax, report- counts either directly to the IRS or indirectly via ing, and/or account closure. their domestic tax authority. FATCA was intro- duced in the United States as Chapter 4 of the In- GATCA: Same Carrot, Diff erent Stick ternal Revenue Code and US Treasury Regulations. GATCA and FATCA off er the same "carrot," re- Th e US Treasury's "carrot-and-stick" approach has ciprocal exchange of information. Th is is appealing proven quite eff ective in gaining other countries' because most countries impose individual income and FFIs' cooperation on FATCA. tax and corporate tax on the worldwide income of their residents and companies. Th e global averag- Th e "carrot" is the US promise of reciprocal ex- es are 31.4 percent and 23.6 percent, respectively. change of information with those countries with Th ese numbers are quite consistent across Africa, which it enters into a Reciprocal Model 1 Intergov- the Americas, Asia, Europe, and Oceania. 1 Before ernmental Agreement ("IGA") with the US. Th ere addressing GATCA's stick, it is worth considering are now 118 jurisdictions in various stages of ne- how GATCA is constituted.