GLOBAL TAX WEEKLY ISSUE 95 | SEPTEMBER 4, 2014 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 Using the unrivalled worldwide multi-lingual research Alongside the news analyses are a wealth capabilities of leading law and tax publisher Wolters of feature articles each week covering key Kluwer and its new acquisition BSI (The Lowtax current topics in depth, written by a team of Network), CCH publishes Global Tax Weekly –– A senior international tax and legal experts and Closer Look (GTW) as an indispensable up-to-the- supplemented by commentative topical news minute guide to today's shifting tax landscape for all analyses. Supporting features include a round-up tax practitioners and international fi nance executives. of tax treaty developments, a report on important new judgments, a calendar of upcoming tax Topicality, thoroughness and relevance are our conferences, and “The Jester's Column,” a light- watchwords: BSI's network of expert local researchers hearted but merciless commentary on the week's covers 130 countries and provides input to a US/UK tax events. team of editors outputting 100 tax news stories a week. GTW highlights 20 of these stories each week Read Global Tax Weekly –– A Closer Look in under a series of useful headings, including industry printable PDF form, on your iPad or online through sectors (e.g. manufacturing), subjects (e.g. transfer Intelliconnect, and you'll be a step ahead of your pricing) and regions (e.g. asia-pacifi c). world on Monday morning! GLOBAL TAX WEEKLY ISSUE 95 | SEPTEMBER 4, 2014 a closer look CONTENTS FEATURED ARTICLES IRS Issues Final Regulations On Material Th e New Double Taxation Agreement Between Advisor Penalties Cyprus And Guernsey Mark D. Allison, Caplin & Drysdale 5 Philippos Aristotelous and Stavros Supashis, Andreas Neocleous & Co LLC 27 Classifi cation Of Th e Canadian TFSA For US Tax Purposes Topical News Briefi ng: High Tax Versus Max Reed, White & Case LLP 7 Low Tax Th e Global Tax Weekly Editorial Team 32 Th e BEPS Project And Th e UK's Competitive Tax Policy: Friends Or Foes? Ukraine Tax Authority Transfer Pricing David Klass and Sally Fildes, Gide Loyrette Nouel 15 Update Svitlana Musienko, Partner, Head of Tax, Topical News Briefi ng: Extracting Taxes Dmytro Donets, Senior Associate, and Th e Global Tax Weekly Editorial Team 19 Dmytro Rylonvikov, DLA Piper 34 Taxation In France: Hollande At A Crossroads EU Joint Transfer Pricing Forum Reaches Stuart Gray, Senior Editor, Global Tax Weekly 20 Agreement On Th e Acceptance Of Compensating Adjustments Dr. Sven-Eric Bärsch, LL.B and Dr. Sven Kluge, Flick Gocke Schaumburg, Bonn 36 NEWS ROUND-UP International Tax Planning 39 Mining 42 Burger King Under Democratic Grill Over Inversion Plan Newmont To Resume Indonesian Operations After Tax Deal China's SAT Investigates Transfer Pricing UK Mining Companies Get Transitional Relief Under IRS Sets Out Transfer Pricing Guidance Priorities New Reporting Requirements Regional Focus: Europe 45 International Financial Centers 52 Spain Claims Loss Of EUR1bn To Gibraltar Tax Regime Shanghai FTZ Issues Further Development Plans Tax Reforms Boosted Employment, Noonan Says Singapore's High Compliance Level Sustains New French Economy Minister Appointed Tax Collections After Austerity Row Seychelles Commits To Share Tax Info With G5 Austrian FM Quits Over Tax Reform Disagreements Hong Kong Relaxes Restrictions For REITs Portugal Plans New Tax On Digital Devices Swiss Federal Council Rejects 'Basic Income' Proposals Bulgarian Finance Minister Warns On Budget TAX TREATY ROUND-UP 57 48 VAT, GST, Sales Tax CONFERENCE CALENDAR 59 Israeli Central Bank Calls For Fiscal Restraint IN THE COURTS 76 Greece Pressured To Adopt Simpler VAT Regime THE JESTER'S COLUMN: 79 Singapore Finalizes Changes To GST Law Amendments Th e unacceptable face of tax journalism Zambia To Relax VAT Rule On Exports For article guidelines and submissions, contact [email protected] FEATURED ARTICLES ISSUE 95 | SEPTEMBER 4, 2014 IRS Issues Final Regulations On Material Advisor Penalties by Mark D. Allison, Caplin & Drysdale Mark D. Allison is a Member in Caplin & Drys- dale's New York Offi ce. He can be reached at mal- [email protected] , Tel. + 1 212 379 6060 On July 30, 2014, the Internal Revenue Service gross income derived by the material advisor (75 (IRS) issued fi nal regulations regarding the impo- percent if the failure is intentional). sition of penalties under Internal Revenue Code In cases where there is a failure to disclose more section 6707 against material advisors who fail to than one reportable or listed transaction, a sepa- fi le true, complete or timely disclosure returns with rate section 6707 penalty will be imposed for respect to reportable or listed transactions. Th e ef- each transaction. fective date of the fi nal regulations is July 31, 2014. For purposes of computing the penalty in the case of a listed transaction, the gross income derived Material advisors generally include any advisors from the listed transaction only includes fees who make or provide a tax statement with respect earned in connection with the listed transaction to any reportable or listed transaction, and direct- for which the advisor was a material advisor. ly or indirectly receive certain threshold levels of gross income in connection with such advice. Re- Th e fi nal regulations also modify the factors consid- portable transactions include listed transactions, ered by the IRS for rescission of a material advisor transactions of interest, section 165 loss transac- penalty. Th e fi nal regulations now allow consider- tions, confi dential transactions, and contractual ation of facts and circumstances relating to wheth- protection transactions. er a material advisor's failure to timely fi le Form 8918, Material Advisor Disclosure Statement, was Th e fi nal regulations make several changes to the unintentional. However, if an unintentionally de- proposed regulations that were published in 2008. 1 linquent Form 8918 was fi led either after the IRS Th e changes include: had taken steps to identify the person as a material Th e applicable penalty under section 6707 for advisor or after the taxpayer disclosed a reportable a transaction qualifying as both reportable and transaction on Form 8886, Reportable Transaction listed is limited to a single penalty, which is the Disclosure Statement, such a fi ling will not weigh greater of USD200,000 or 50 percent of the in favor of rescission. 5 Lastly, the fi nal regulations include additional ex- obligations. Th e severe penalties and narrow provi- amples to help clarify the application of the mate- sions for rescission of such penalties require careful rial advisor penalties. planning and awareness of compliance obligations. Attorneys, accountants, fi nancial and investment E NDNOTE consultants, and others advising on reportable or 1 The text of T.D. 9686 is available at https://www. listed transactions should remain conscious of the federalregister.gov/articles/2014/07/31/2014-17932/ applicable gross income thresholds for each type material-advisor-penalty-for-failure-to-furnish- of transaction, as well as the timing of reporting information-regarding-reportable-transactions . 6 FEATURED ARTICLES ISSUE 95 | SEPTEMBER 4, 2014 Classifi cation Of The Canadian TFSA For US Tax Purposes by Max Reed, White & Case LLP Max Reed is a lawyer admitted to the bars of both New York and Ontario. He practices US tax law at White & Case LLP. With Richard Pound, he is the author of A Tax Guide for US Citizens in Canada . Prior to joining White & Case, he clerked for Jus- tices Karen Sharlow and Gilles Letourneau of the Budget, are outlined primarily in section 146.2 of Federal Court of Appeal. the Income Tax Act . 1 As with other common Ca- nadian fi nancial products, the TFSA causes entity Contact: [email protected] , Tel. + 1 212 819 8229 classifi cation issues for the estimated one million US persons in Canada who must report it on their Th is article was previously published in Wolters US tax returns. Most agree that the TFSA does not Kluwer's Tax Topics on August 21, 2014. shelter investment income from US tax. 2 Unlike the registered retirement savings plan ("RRSP"), for Th is article is intended to give general information which the IRS 3 has released Notice 2003-75 classi- on the developments covered, not to serve as legal fying it as a reportable foreign trust under Internal advice related to individual situations or as a legal Revenue Code ("IRC") § 6048 ,4 there is no offi cial opinion.