GGI add firms in Europe and The United States of America

bws Graf Kanitz GmbH – Freiburg, Germany
bws Graf Kanitz is a group of consulting, auditing and tax firms with offices in Freiburg and Endingen. The group assist their clients in a multitude of disciplines, both nationally and internationally, including business, auditing, tax, management consultancy.

bws Graf Kanitz practice international tax law, auditing, due diligence investigation, business succession, company valuation and transaction consulting. The International Tax Desk offers support in all matters of cross-border tax issues such as transfer pricing, the relocation of business functions, engagement with foreign subsidiary companies or special VAT issues.

With a multilingual, multidiscipline staff of 6 auditors, 10 tax advisors and a total of 70 dedicated employees bws Graf Kanitz have the ability to serve their clients in German, English and French.

 

Olga Ottstadt

Contact
Olga Ottstadt

Freiburg, Germany
T: +49 761 3836 163
F: +49 761 3836 136
E: olga.ottstadt@bwsgk.de
W: http://www.bwsgk.de

 


Westleton Drake – Zurich, Switzerland

Founded in London in 2009, Westleton Drake is a tax advisory firm with offices in London, Zurich and Geneva. Westleton Drake specialises in international tax planning and compliance for individuals, corporations, partnerships and trusts with a United States focus, both inbound and outbound. Their clients are drawn from all over the world with the common denominator being that they have some kind of United States tax compliance or advisory need.

Westleton Drake seeks to ensure an integrated and coordinated approach to a client’s needs with an emphasis on clearly articulated practical solutions, technical expertise and quality service delivered by a highly skilled team of professionals. Westleton Drake is happy to act as a member of a team of advisors in multiple countries in order to best serve the clients needs.

In the three offices combined, Westleton Drake have a staff of over 51, managed by 4 partners.

 

Paul Bolland

Contact:
Paul Bolland

Zurich, Switzerland
T: +41 43 333 0013
E: paul.bolland@westletondrake.ch
W: http://www.westletondrake.com

 


Rosenfield & Company – Orlando, FL, United States
Rosenfield & Company, PLLC is a full-service CPA firm that has been providing superior accounting services to targeted industries since 1996. They are firm believers that the key ingredient to success is high quality staff forging strong relationships with clients and business partners such as Banks, Finance and Insurance Companies, Attorneys and other Strategic Alliance Partners.

Rosenfield & Company offer traditional accounting services such as attestation, tax and consulting. In addition, they also provide customised solutions to complex issues like cost segregation studies, merger/acquisition services, litigation support, operational and internal control reviews, LIFO and other tax accounting applications, business valuations, succession planning, inventory management, risk advisory services, multi-state taxation and banking & finance services.

With a professional staff of 22 mentored by 4 partners, the firm serve their national and international clientele in a variety of languages, including English, Russian and Spanish.

 

Ken Rosenfield

Contact:
Ken Rosenfield

Orlando, FL, United States
T: +1 407 985 2585
E: ken@rosenfieldandco.com
W: http://www.rosenfieldandco.com

Book Review: Learning to Succeed

Learning to Succeed

Rethinking Corporate Education in a World of Unrelenting Change

Frequent market shifts…The rapid pace of technological change…We’re all familiar with the old saying, “the only constant is change,” but this has never been as true for business as it is today – nor have the penalties for companies who fail to learn and adapt been as high. Learning to Succeed insists that an integrated model for corporate education – one that links development programs with strategic goals – is critical to building agile and resilient learning organizations that will survive in our fast-evolving business landscape. Companies need to continually assess where they need to go in relation to where they are now – and use training to bridge the gap. As these new education initiatives are designed to advance concrete corporate goals, participants become active learners. Instead of merely listening to lectures – they work on strategic plans and action projects tied to key objectives. Learning is reinforced and ROI is optimized. For companies ready to embrace what it means to be a learning organization, to welcome the CLO to the C-Suite, to tightly and continuously weave strategy and learning into the fabric of their businesses, the opportunities are limitless. Complete with practical guidelines and illuminating case studies, this pioneering book puts them on the path to long-term success.

Learning to Succeed: Rethinking Corporate Education in a World of Unrelenting Change
by Jason Wingard
Hardcover: 240 pagess
Language: English
ISBN-10: 0814434134
ISBN-13: 978-0814434130

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Breaking Up Is Hard To Do: Why Expatriating from the United States Requires Careful Tax Planning

Trust & Estate Planning

By Sarah B. Sindledecker

Trust & Estate Planning (TEP) Practice Group

Congratulations! Your client has won the “lottery.” In this case, his grand prize is a green card. Before he collects his winnings, there are important U.S. tax consequences for him to consider if circumstances change in the future and his U.S. permanent residency is no longer desirable.

Currently, there are two different U.S. tax regimes which operate simultaneously to penalize U.S. taxpayers, and certain U.S. family members of those U.S. taxpayers, for terminating their U.S. residency. On the U.S. income tax side, there is the “exit tax” regime and, from a U.S. transfer tax perspective, there is the “inheritance tax” charge (collectively, these regimes will be referred to as the “U.S. expatriation tax regimes”). The application of these rules turns on whether the U.S. taxpayer at issue is a “covered expatriate” at the time of his or her expatriation.

A person is an “expatriate” if he or she is a U.S. citizen who relinquished his or her U.S. citizenship at any time or a U.S. permanent resident who relinquished his or her U.S. permanent residency status after maintaining such status for 8 of the last 15 years (also known as a “long-term permanent resident”). A long-term permanent resident may unwittingly expatriate by moving to a jurisdiction with which the United States has an income tax treaty and taking a position that he or she is a resident only of the other jurisdiction under that treaty. Accidental expatriations of this nature are quite common and can occur even if consistent U.S. tax filings are not made contemporaneously.

Once a determination has been made that an expatriation has occurred, the expatriate will be subject to the U.S. expatriation tax regimes only if he or she meets one of several tests (in which case, he or she will be considered a “covered expatriate”). The first of these tests is the “tax liability test” which is met if an expatriate has an average net U.S. income tax liability of greater than US$161,000 (indexed for inflation) for the five taxable years ending prior to the expatriation date. The second test is the “net worth test” which is met if the expatriate’s net worth as of his or her expatriation date is US$2,000,000 or more. The final test is the “tax compliance certification test” which is met if the expatriate fails to certify compliance with his or her U.S. tax obligations for the five years prior to expatriation under penalty of perjury.

If your client is considered a covered expatriate, then under the exit tax regime, he or she will be subject to a mark-to-market U.S. income tax charge on the vast majority of his or her assets worldwide. A covered expatriate is entitled to exclude only US$693,000 (adjusted for inflation) of the gain recognized from the deemed sale. Deferred compensation items, specified tax deferred accounts and interests in nongrantor trusts are subject to a withholding tax regime instead.[i]

In contrast to the exit tax rules, the U.S. inheritance tax charge is a 40% flat tax applicable to U.S. domiciled individuals who receive gifts or bequests at any time from a covered expatriate which exceed US$14,000 (indexed for inflation) during a calendar year. The U.S. inheritance tax charge applies regardless of the amount of time which elapses between a covered expatriate’s date of expatriation and the subsequent gift or bequest. While relief is granted in the form of a credit for any gift or estate taxes paid to a foreign country, the credit may be useful only in certain cases. Additionally, even though the United States has several transfer tax treaties in force, it is unclear that treaty benefits can be claimed with respect to the U.S. inheritance tax charge.

Because only covered expatriates are penalized for exiting the U.S. tax system, planning to avoid this classification can be beneficial. Of particular interest is the net worth test. For clients who are not U.S. citizens and who are already living abroad, outright gifting may be enough to place them below the net worth threshold. Otherwise, more sophisticated trust planning techniques may be needed.

Based upon IRS guidance, a special rule is provided for purposes of determining an individual’s beneficial interest in a trust. All interests in property held by the trust are allocated to the beneficiaries based on all relevant facts and circumstances including historical patterns of distributions. Interests in property that cannot be allocated to the beneficiaries based upon these factors must be allocated under the principles of intestate succession determined by reference to the settlor’s intestacy.

It seems clear that only an individual who is a beneficiary of a trust has a beneficial interest that counts for purposes of the net worth test.  Arguably, individuals who were once beneficiaries of a trust but who, at the time of their expatriation, have no beneficial interest have nothing to include with respect to the trust in the determination of their net worth.  Additionally, assuming there is a discretionary trust from which no distributions have been made, the IRS guidance would seem to preclude the settlor from being allocated any interest in the trust. The trust may need to be located in an asset protection jurisdiction for this result, however.

Understanding the potential obstacles which a high-net worth client may face by expatriating will facilitate an advisor’s ability to flag the issues and assist the client with obtaining competent U.S. tax advice. Proper pre-expatriation planning can provide your peripatetic client and his or her U.S. family members with significant U.S. tax savings if and when the time comes for your client to make a clean break from the United States.

 

GGI member firm

Cantor & Webb P.A.

Fiduciary & Estate Planning, Law Firm, Tax

Miami, FL, USA

Sarah B. Sindledecker

E: sarah@cantorwebb.com

W: http://www.cantorwebb.com

[i] A covered expatriate is subject to a 30% gross basis withholding tax when a taxable amount is paid or distributed to him.

 

Diese Fussnote gehört zum Text “Breaking Up Is Hard To Do: Why Expatriating from the United States Requires Careful Tax Planning”

 

 

GGI ITPG Winter Meeting in Barcelona, Spain, 25–28 February 2016

ITPG Winter Meeting

By Oliver Biernat

ITPG winter meetings are always special. In addition to the inspiring lectures of professional international tax experts, delegates always enjoy amazing locations, perfect seated accommodation and delicious food. The winter meeting is, in principle, much more than a technical exchange of knowledge; it represents a meeting for friendships cultivated and maintained over months and years. Delegates came to the winter meeting 2016 from all over the world – including many European countries as well as the USA, Canada, India, Mexico and South Africa. This cosmopolitan atmosphere of friendship and special spirit encouraged creativity. More on that to follow…

This year’s meeting took place in one of the most beautiful cities in Europe – Barcelona. A total of 64 delegates and their 15 guests stayed at the Gallery Hotel, centrally situated close to the gothic heart of the city. It is surrounded by major shopping streets and is near to several must-see landmarks, such as Gaudi’s La Pedrera and the famouslyincomplete Sagrada Familia basilica. Some of the delegates, who had arrived early on Thursday morning, spent the day on a hop-on-hop-off bus and were able to form a first impression of this vibrant city.

Starting with a welcome event at the hotel bar on Thursday evening, old friends were able to catch up and new acquaintances were made. Along with his wife, this year’s host Carlos Frühbeck of Ficesa Treuhand, S.A.P, which is situated just a few minutes’ walk from the hotel, offered us a first impression of the delicious local Catalan cuisine: various tapas dishes, traditionall paella and the fantastic crema catalana, accompanied by local wine.

Friday morning started with words of welcome from me as global ITPG chairman, our host Carlos Frühbeck and GGI Founder and President Claudio Cocca, who gave a short review of the past twenty years and recalled the third GGI conference that took place in 1995 in exactly the same hotel in Barcelona. This year’s meeting had double the number of delegates in comparison with the 1995 edition – what a success story for both GGI and ITPG.

Before the technical part of the meeting started, I presented some topics related to the ITPG.

The technical part started with a presentation concerning the question of how GGI firms can work together on cross border self-disclosure cases (Paul Malin). Ashish Bairagra presented a case study on an international Transfer Pricing (TP) case. After a short overview on the background and the possible TP methods, groups of six members each were formed and given 30 minutes to work on the study, name a speaker and showcase their results. The feedback of the delegates on this workshop was overwhelmingly positive and satisfied their wish for interactivity in small groups.

Before lunch, the venue and host of the ITPG winter meeting 2017 were announced: GGI member Mario Kapp will welcome us to the beautiful Austrian ski resort of Schladming during the first weekend in March 2017. The Special Olympics World Winter Games are to take place here during the same month. In addition to discussing a myriad of tax topics, we will have the opportunity to network and enjoy ourselves on the slopes or during other activities such as visiting a glacier palace, ice skating or riding in a horse-drawn sleigh. A special event will be organised where delegates can enjoy typical Austrian hospitality and “Hüttengaudi” in a mountain hut 1,800 metres above sea level.

In the afternoon, Prof. Robert Anthony successfully introduced a new format of speed-networking. A long day of presentations, lectures and activities was closed by the practice group meetings of the “Indirect Taxes” (Steve McCrindle) and “Global Mobility Solutions” (Huub Kapel) PGs, the latter including a panel discussion on expat tax regimes in Spain (Carlos Frühbeck), France (Viviane Moro) and Italy (Matteo Bedogna).

We enjoyed another delicious dinner at the historic “Els Quatre Gats” (The Four Cats). Lots of delicious tapas, lamb, fish, fabulous desserts and great Catalan wines were on offer. For those who still weren’t tired after dinner, there were plenty of bars and night clubs offering the chance to cement friendships, have some more drinks and a little dance.

On Saturday morning, Artur Plutowski started with a cross ITPG survey on CFC regulations. Robert Worthington continued with an update on BEPS Action Plan no. 2 “Hybrid Mismatch Arrangements” and Marios Eliades and Christos Theophilou updated the participants on recent tax changes in Cyprus that make it an attractive location for headquarters, IP companies and funds. Massimiliano Russo presented the newly introduced Patent Box Tax Regime in Italy.

The main topic for the Saturday was applicable to anyone running a business: “Online Marketing for tax experts”, presented by Paul Atkinson, Marketing Manager at Lawrence Grant, UK. In his presentation Paul gave us an impressive overview about what to consider in terms of webpage management. This included which tools to use to optimise your Google ranking, how to deal with social media, how important a company logo is and what you have to do to get your webpage noticed. In line with the delegates’ wish for more interactivity, Paul formed several groups and asked them to set up a marketing strategy on “How to sell ice to the Eskimos”. The presentations afterwards revealed the incredible creativity of the groups. The dancing polar bear “Claudio” who sold “GGIce” will surely remain unforgettable.

Due to a rain shower on Saturday afternoon, the participants could choose between a guided tour on foot through the Barri Gòtic (the city’s Gothic Quarter) or a guided tour inside Gaudi’s striking Sagrada Familia.

Dinner on Saturday evening was at the nearby restaurant Tragaluz. Once again, this will go down as a culinary highlight. A fairly large part of the group continued networking in the Mojito Club until the early morning hours on Sunday.

A small group went on an excursion on Sunday to bodega “Alella”, 20km outside Barcelona. A tour through the wine cellar was followed by a wine tasting session and a delicious lunch.

Thanks again to our friend Carlos Frühbeck and his wife Ines for perfectly hosting this weekend in beautiful Barcelona, to all delegates who shared their knowledge with us and to all participants who made these days so special.

 

GGI member firm

Benefitax GmbH

Advisory, Auditing & Accounting, Corporate Finance, Fiduciary & Estate Planning, Tax

Frankfurt/Main, Germany

Oliver Biernat

E: o.biernat@benefitax.de

W: http://www.benefitax.com/

 

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Italy: domestic tax consolidation between sister companies – horizontal tax consolidation

Lodovico Comploj and Martin Lechner

By Lodovico Comploj and Martin Lechner

International Taxation Practice Group (ITPG)

In order to prevent an infringement of the European principles of non-discrimination and freedom of establishment, the Italian government introduced important changes to the domestic tax consolidation rules.

Starting from the fiscal year 2015, foreign parent companies resident in EU or in countries with an effective information exchange with Italy can consolidate the taxable income and losses of their Italian subsidiary companies without the need for any holding or sub-holding entity in Italy (the parent company must hold more than 50% of the share capital of the consolidated entities).

For the application of the domestic tax consolidation, the foreign parent company has to designate one of the Italian subsidiary companies as a consolidating entity for all Italian companies. This allows for the consolidation of Italian taxable income and losses of the group companies without the need for any holding entity in Italy.

Holding investments in Italian companies directly could also allow the foreign investor to benefit from capital gain provisions set out by most of the bilateral tax treaties concluded by the Italian government, which are much more favourable than the Italian domestic tax rules.

Pursuant to the tax treaty, the capital gain resulting from the sale of shares is taxable only in the seller’s country of residence, regardless of the nature of the company whose shares are being sold. Conversely, the application of the participation exemption pursuant to the Italian domestic tax rules is not permitted for the sale of shares in real estate companies.

GGI member firm

Pichler Dejori Comploj & Partner

Auditing & Accounting, Tax

Bolzano, Italy

Lodovico Comploj

E: comploj@pdc-partner.it

Martin Lechner

E: lechner@pdc-partner.it

W: www.pdc-partner.it

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VAT debt in case of arrangement with creditors: new perspectives of the ECJ

Prof Stefano Loconte and Giusy Antonelli

by Prof Stefano Loconte and Giusy Antonelli

Debt Collection, Restructuring & Insolvency (DCRI) Practice Group

Recently the Advocate General of the ECJ expressed an opinion in case C-546/2014, Degano Trasporti, which was favourable to the extinguishment of debts arising from VAT in the case of composition with creditors.

ECJ case law has traditionally prohibited partial payment of VAT debts under the tax settlement procedure and established that this is also applicable in the context of arrangement proposals.

It appears that this position has been justified inter alia on the basis of the ECJ’s interpretation of Article 4(3) TEU and of the present VAT Directive’s predecessor, the Sixth Directive.

The ECJ has observed on several occasions that it follows from the common system of VAT that every Member State is obliged to implement all legislative and administrative measures necessary to ensure collection of all the VAT due in its territory. In that regard, Member States are required to check taxable persons’ returns, accounts and other relevant documents, and to calculate and collect the tax due.

The Advocate General ultimately stated that according to the EU directive on the common system of VAT, there are no obstacles to national rules in allowing an undertaking in financial difficulties to enter into an arrangement with creditors involving liquidation of its assets without offering full payment on the State’s claim in respect of VAT.

Nevertheless, an independent expert has to ascertain that no greater payment of that claim would be obtained in the event of bankruptcy and that the arrangement is validated by a court.

 

GGI member firm

Loconte & Partners, Studio legale e tributario

Advisory, Auditing & Accounting, Corporate Finance, Fiduciary & Estate Planning, Law Firm, Tax

Bari, Italy

Prof Stefano Loconte

E: stefano.loconte@studioloconte.it

Giusy Antonelli

E: giusy.antonelli@studioloconte.it

W: http://www.loconteandpartners.it/en

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12 Simple Steps for Effective Email Marketing

Email Marketing

Business Development & Marketing (BDM) Practice Group | Jim Ries

Source: “The Ultimate List of Marketing Statistics.” HubSpot. Web. 9 Feb. 2016.

Working professionals are sent dozens of emails on a daily basis. With so many emails flooding their inboxes, it can be difficult to grab their attention. Which is why it is of the utmost importance to understand effective email marketing techniques and how to use them to your advantage. Email marketing is a form of direct communication, in which a company delivers a commercial message to a list of people via electronic mail. Here are twelve simple steps for effective email marketing:

  1. Determine the goal. The goal serves as the purpose of the email. It is the starting point for the template, type of content and all other technical decisions to follow. Is the email to inform the audience? Then, the main text should be emphasized in a single column template. Is the email inviting the audience to a seminar? The time and location details should be easy to find, as well as the registration link.
  1. Know the target audience. Before starting an email marketing campaign, it is vital to understand who will be on the receiving end. During the email’s creation, the entire focus should center on what is most important to the audience and what would make them want to open the email, let alone read it.
  1. Maintain great lists. At the least, email lists should contain first names, last names and email addresses. It is important to have as many correct email addresses as possible. Not only can a high percentage of bounced messages be frustrating, it can cause the email marketing platform to crash and not deliver the email.
  1. Write an enticing “Email Subject”. Email subjects are often the deciding factor of whether or not a person opens the email. Spark curiosity with an enticing question or in the case of a list like this blog post, use numbers to summarize the content. And most importantly, avoid typing in all capital letters and using symbols. They have a tendency to send the email straight into the receiver’s spam folder.
  1. Personalize the “To” field. Most email marketing platforms have the option to personalize the “To” field. With one quick click, the receiver will now see their name auto populate alongside the salutation.
  1. Brand the email template. The company’s logo and coloring should be fluid throughout the entire email. Do not forget to keep the template clean and simple to read.
  1. Make it mobile friendly. According to HubSpot, 80.8% of users read their email on their mobile devices. This means every email needs to be mobilized for easy reading on the go.
  1. Add a “Call-to-Action” button. Call-to-Action buttons are a great way to declutter emails and make activities like subscribing a quicker, easier process. If the email is for an event, add a “Register Here” button that links the reader to the registration page. In the case of a blog or newsletter, always add a “Subscribe Here” button.
  1. Get creative. Sometimes it is the little, unique additions that make emails stand out from the rest. Personalize the email by taking a photo of the sender’s signature and inserting it into the text. If the email is informative, create an infographic to support it. In some cases, it is even possible to embed a video or an interactive quiz.
  1. Do not forget the social sharing icons. How else are the readers going to share the email? Make it easy for them to share the information on their social networks – that is unless it is an exclusive event invitation.
  1. Schedule at the appropriate send time for the target audience. Is this email going out to restaurant owners? Lunch or dinner time is probably not the best time to reach them. Executives of large companies? Try the before or after hours of their typical work week when they are not busy and in meetings all day.
  1. Analyze the results. 48 hours after the email is sent, review the report and analyze the results to make improvements for the next time around.   Look for open rates of over 20%, click rates of over 2%, and bounce rates of under 2%. If the percentages do not fall in these ranges, try sending the email at a different time or rewriting the “Email Subject” line. After all, not every audience is alike and therefore require different customizations.

Email marketing can be one of the most effective ways to reach a large target audience, as long as time and effort are put into creating the email. With these twelve simple steps, email marketing can change from a daunting task to a fun and worthwhile investment.

Join the GGI Business Development and Marketing (BDM) Practice Group LinkedIn Group here.

 

GGI member firm

Offit Kurman, P.A .

Advisory, Corporate Finance, Fiduciary & Estate Planning, Law Firm

Baltimore, MD, Bethesda, MD, Frederick, MD, Maple Lawn, MD, Owings Mills, MD, Philadelphia, PA, Tysons Corner, VA, USA

Jim Ries

E: jries@offitkurman.com

W: http://www.offitkurman.com

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Intangible Assets

Intangible Assets

By Dr Jorge Marcos García Landa

In Latin America, most legal entities have no idea of what their company is worth, which is detrimental to their own company and the legal entities that comprise it.

Several years ago we were familiar with the concept of “Goodwill”, which simply meant knowing what a company was worth. This concept was recorded in the accounts, mainly comprised all the assets owned by the taxpayer, and referred essentially to its portfolio of clients, its inventories, its accounts receivable and its fixed assets, and the most important thing was the market recognition enjoyed by the company, i.e. that its products were recognised and accepted by its clients.

Regarding the recording of “Goodwill” in the accounts, what we certified public accountants traditionally did was to record it under intangible assets with a payment to the share capital.

The above is purely an accounting matter and has no other effect, including for tax purposes. Our country’s Income Tax Law states that a surplus resulting from a revaluation of assets has no tax effects. We recorded the revaluation surplus in the net worth for financial purposes and sometimes, at the suggestion of legal advisors, the share capital was increased. This capitalisation had no tax effects as, when it was applied, the shares had no tax value. However, a company that records its “Goodwill” under intangible assets while also increasing its share capital provides its shareholders with a financial basis in the event of a national or foreign group seeking to buy the company. The above-mentioned accounting practice was applied at the time according to generally accepted accounting principles which are now completely obsolete.

Since 1988 intangible assets have accounted for 78% of the value of the companies valued by Standard & Poor’s.

In 1991, Citibank granted a loan of MX 480 million to the company BORDEM (a cheese manufacturer), with the latter furnishing its trademark as a guarantee.

 

Below are several concepts which can be considered to be intangible assets:

  • List of clients, distributors, mailing, advertising subscriptions and others.
  • Client database.
  • Sales routes, delivery systems, distribution channels.
  • Customer service capacity, product service support.
  • Registered trademarks, patents, rights and names, and franchises.
  • Agreements (consultancy, sales, licences, royalties).
  • Undertakings (not to compete).
  • Computing systems.
  • Trained personnel, technical expertise, quality systems.
  • Growth expectations, flow of ideas, business.

 

Definitions established in the financial system and in Mexican legislation

Intangible assets allow an asset to be enjoyed for a limited period of time shorter than the duration of the legal entity.

Deferred expenses are considered to be intangible assets which allow for the enjoyment or exploitation of assets which are to be deducted as an investment.

Mexican legislation permits the investment and, in specific cases, the amortisation of deferred assets.

One section of our country’s Income Tax Law defines deferred assets as follows:

“These are assets represented by property or rights which make it possible to reduce operating costs, improve the quality or acceptance of a product, use, enjoy or exploit an asset, for a limited period of time shorter than the duration of the legal entity.”

In our country these intangible assets are amortised at an annual rate of 15%. Through accounting and legal procedures, the amount in question may be deductible, thus reducing the basis of assessment.

 

Valuation

In order to determine what the value of the intangible assets is, the services of a public commercial broker, registered with the National Register of Securities and Intermediaries, are employed. The broker carries out a valuation and issues a report on the value of the intangible assets so that they can be recorded in the accounts in accordance with the International Financial Reporting Standards (IFRS).

 

Accounting records

On the basis of the above-mentioned valuation and following the holding of shareholders’ meetings where the shareholders decide to capitalise the outcome of the valuation, the accounting records show the following:

Intangible assets                                       $

Net worth                                                  $

 

CONCLUSIONS:

It is imperative that all companies acknowledge their intangible assets and thereby present their financial statements in a more reliable manner as, by doing so, they increase their assets and, therefore, their share capital, all of which will serve as a basis for the possible securing of credit, for improving their relationship with customers and suppliers, for public and private bidding, and for the sale of companies, among other such benefits.

 

 

GGI member firm

Corporativo García Landa, S.C.

Advisory, Auditing & Accounting, Law Firm, Tax

Mexico City, Mexico

Dr Jorge Marcos García Landa

E: jmgarcia@garcialanda.com.mx

W: http://www.garcialanda.com.mx

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German regulation on international partnership investments

Klaus Küspert

By Klaus Küspert

Despite the forthcoming BEPS discussion and its implications, including some international in nature, I would like to take this opportunity to introduce you to a typical German approach to treaty overriding. Unfortunately, the Federal Constitutional Court of Germany recently accepted such overriding in cases of “white” income derived by German residents from foreign countries. It is very likely that this approach will also cover inbound transactions, as described below.

After the German Federal Finance Court decided that income from corporate investments held by foreign taxpayers is only taxable under treaty law in the investor’s home country, even if those investments are part of a German partnership which is passive but deemed to be active, the German authorities formed a special provision via the legislative body to cover the exodus of taxes derived from the aforementioned schemes.

This provision refers to section 50 (i) (2) of the Fiscal Code of Germany. In our experience, such paragraphs do not normally bode well. In this case, it contains a valid example of treaty override and tax clauses working in combination.

In effect, the new law stipulates that all partnerships qualifying under the above law as of June 29 2013 are fully taxed if investments are sold or the partnership is restructured by a merger, change of ownership or being part of a donation or a transfer upon decease. Consequently, restructuring processes would be taxed even in cases not deemed as taxable under German law, even if the transaction involved would not end up in a loss of German jurisdiction to impose taxes on this subject. However, inbound cases are still the target of a change in this law. Besides, the authorities have doubts as to the conformity with EEC law if non-resident-related outside and resident-related inside transactions are taxed differently.

As the income tax code was not changed during 2014 or 2015, the authorities took over and issued various regulations on this matter. Most recently, they presented an updated version on 21 December 2015. Regulations completed around Christmas time are are intended to bear fruit before the start of a new tax year. However, in most cases they have nothing to do with glory and greatness.

In the case in question, the regulation uses a lot of words to outline exceptions from exceptions. Exceptions are made for transactions within partnerships covered by section 50 (i) if Germany fully recovers its taxation rights after the transaction. Unfortunately, this does not apply if a non-resident (limited) partner exchanges his interest in the partnership against a corporate investment. It is highly disputed whether such a rule may violate EEC law as in this transaction hidden reserves are doubled within the corporate vehicle and the shares issued in exchange for partnership interest.

It is assumed that the German legislation will take over and change section 50 (i) of the Fiscal Code in the near future. Foreign investors using German partnerships as a vehicle should be careful. Rulings are difficult to achieve, especially if the final version of the code is still pending. In practice, a German partnership model for inbound investments with corporate background is vague and not advisable for the time being. This conclusion may not be amusing but its background can be explained.

The story goes that God created the Earth in seven days. Well, on the eighth day, he called in a consultant who told him that some evil was necessary so as to make all humans aware of what they have. For this reason, on the eighth day, God created German tax legislation. We deal with its consequences of every day. I hope that the GGI tax community will join me in making all efforts necessary to avoid further damage to this system. This will help you too, in your respective countries, as such “day eight” scenarios no doubt exist in other countries, territories and communities. Together, we can be stronger in our fight against treaty override and similar attacks delivered by tax authorities.

 

GGI member firm

Munkert & Partner GbR

Advisory, Auditing & Accounting, Tax, Corporate Finance, Fiduciary & Estate Planning, Law Firm

Nuremberg, Germany

Klaus Küspert

E: k.kuespert@munkert.de

W: www.munkert.de

 

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Outbound payments under close scrutiny by the Chinese tax authority

Currency

By Ricky W. P. Wong

In recent years, the Chinese tax authority has intensified its efforts to control outbound inter-group service fees and royalty charges.

In July 2014, the State Administration of Taxation (SAT) released an internal circular (“Circular (2014) No. 146”) asking local tax authorities to initiate detailed investigations on all significant outbound service fee payments and royalty charges made by domestic enterprises to their overseas related parties between 2004 and 2013, with a view to identifying avoidance schemes for profit shifting.

In March 2015, the SAT issued a “Public Notice Regarding Certain Corporate Income Tax Matters on Outbound Payments to Overseas Related Parties” (“Notice [2015] No. 16”). In the Notice, the SAT re-affirmed that service fees and royalty charges paid to overseas related parties must be in compliance with the “arm’s length principle”. The Notice mirrors the position expressed in Circular (2014) No. 146, and formalises the SAT’s position with regard to outbound payments of service fees and royalty charges from transfer pricing perspectives. The Notice allows the Chinese tax authority to request a domestic enterprise to submit supporting evidence including relevant agreements, grounds, pricing details, etc., pertaining to an outbound payment. If the authority considers that the payment is not in accordance with the arm’s length principle, it can make special tax adjustments by retroactively denying tax deduction of the payment within 10 years.

In brief, the following types of inter-group payments, as indicated in the Notice, are not tax deductible:

  1. Fees paid to overseas related parties with no business substance
  2. Fees paid to overseas related parties that undertake no substantial functions or assume no business and commercial risks
  3. Fees paid to overseas related parties for services:
  • irrelevant to the functions and risks borne by the domestic enterprise, or irrelevant to the operations of the domestic enterprise
  • connected with controlling, administering and monitoring the domestic enterprise so as to secure the investment interests of the overseas investors
  • for activities that the domestic enterprise has already performed by itself or purchased from third parties
  • not specifically required although the domestic enterprise may benefit incidentally from being part of the group
  • already compensated as part of other related party payments
  • which do not produce direct or indirect economic benefits to the domestic enterprise
  1. Royalties paid to overseas related parties that merely own the legal rights of the relevant intangible assets but have made no contribution to the value creation of the intangible assets

Notice [2015] No. 16 indicated the SAT’s intention to implement anti-avoidance measures based on the BEPS action plan. Foreign companies having subsidiaries or associates in China should pay special attention to the requirements of the Notice, and assess the authenticity and reasonability of the outbound service and royalty payments previously received from them. In addition, they should consider putting a sustainable action plan in place for inter-group charges, including sufficient and plausible transfer pricing documentation.

 

GGI member firm

Wong Brothers & Co.,

Certified Public Accountants

Advisory, Auditing & Accounting, Corporate Finance, Fiduciary & Estate Planning, Tax

Hong Kong

Ricky W. P. Wong

E: rickywong@wongbros.com.hk

W: www.wongbros.com.hk

 

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