Monthly Archives: June 2016

GGI add firms in Europe and The United States of America

DALDEWOLF – Brussels, Belgium
DALDEWOLF, the blend of two established Brussels law firms DAL & VELDEKENS and DE WOLF & PARTNERS, was created in 2015 (each having served its clients for over 60 years). DALDEWOLF takes pride in offering their clients a modern legal expertise, in Belgian and international markets. Several lawyers hold academic positions and publish in specialised journals.

A major motivation for this merger was the desire to offer services tailored to the needs of technology-driven companies, especially start-ups. DALDEWOLF specialises in technologies (intellectual property and IT law), public procurement, real estate, competition and European law, corporate law and taxation, arbitration and mediation.

Firmly established at the heart of Europe, DALDEWOLF caters to the Belgian and European markets.  Internationally, DALDEWOLF has gained vast experience on African markets, assisting European, US and African clients in various sectors (mining, energy, banking & insurance and telecommunications).

With a multidisciplinary, multilingual staff of 20 associates, 7 assistants and 16 partners, DALDEWOLF assists its clients in many languages including French, Dutch, English, Italian, Spanish, Mandarin Chinese, Lingala and Swahili.

Patrick De WolfContact
Patrick De Wolf

Brussels, Belgium
T: +32 2 627 10 10
F: +32 2 627 10 50



Foulston Siefkin LLP – Wichita, KS, United States

Foulston Siefkin was founded in 1919 by Robert C. Foulston and George L. Siefkin in Wichita, Kansas. Over the past 97 years they have grown steadily, becoming the largest and the leading law firm in Kansas.

With more than 90 attorneys in three Kansas offices, Foulston Siefkin represents a diverse client base ranging from individuals and emerging businesses to Fortune 500 companies. Their representative client base mirrors the Kansas economy in the aerospace, agribusiness, construction, energy, education, financial, health care, manufacturing, retail, real estate, and technology sectors.

With their head office in Wichita and additional offices in suburban Kansas City and Topeka and a combined staff of 128 governed by 60 partners, Foulston Siefkin deal with national and international clients in English, Japanese, and Russian.

Harvey SorensenContact:
Harvey R. Sorensen

Wichita, KS, United States
T: +1 316 267 6371
F: +1 316 267 6345



Richards Rodriguez & Skeith LLP – Austin, TX, United States

Richards Rodriguez & Skeith LLP is an experienced Austin, Texas-based law firm with practical solutions for growing businesses.  The firm represents its business clients in the areas of contract negotiation and drafting, commercial litigation, employment law, patent trademark and copyright law, corporate law, healthcare law, and finance, mergers, and acquisitions.

With additional Central Texas offices in Round Rock and San Marcos, the firm’s 18 partners and 26 professionals assist their clientele in both English and Spanish.

Paul SkeithContact:
Paul Skeith

Austin, TX, United States
T: +1 512 476 0005
F: +1 512 476 1513

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Saving Estate Taxes with an Irrevocable Life Insurance Trust

Saving Estate Taxes

By Robert S. Jacobson, Trust & Estate Planning (TEP) Practice Group

Few people realize that, even though they may have a modest estate, their families may owe hundreds of thousands of dollars in estate taxes because they own a life insurance policy with a death benefit that could exceed the current estate tax exemption of 5.43 million dollars. This is because life insurance proceeds, while not subject to federal income tax, are considered part of your taxable estate and are subject to federal estate tax.

The solution to this possible estate tax problem is to create an irrevocable life insurance trust that will own the life insurance policy and receive the policy proceeds on your death. A properly drafted life insurance trust keeps the insurance proceeds from being taxed in your estate as well as in the estate of your surviving spouse. It also protects the trust beneficiaries from any potential future creditors since the assets are held in trust.

Here are the mechanics of the life insurance trust. You create an irrevocable life insurance trust to be the owner and beneficiary of one or more life insurance policies on your life. You contribute cash to the trust to be used by the trustee to make premium payments on the life insurance policies. If the trust is properly drafted, the contributions you make to the trust for premium payments will qualify for the annual gift tax exclusion, so you won’t have to pay gift tax on the contributions.

The life insurance trust typically provides that during your lifetime both principal and income, at the trustee’s discretion, may be paid to your spouse and descendants. This allows indirect access to the cash surrender value of the life insurance policies owned by the trust, and permits the trust to be terminated if desired despite its being irrevocable. Upon your death, the trust continues for the benefit of your spouse during his or her lifetime.

Your spouse is given certain beneficial interests in the trust, such as the right to income and eligibility to receive principal. On the death of your spouse, the trust assets are paid outright to, or held in further trust for the benefit of, your descendants, tax free.

If you own a life insurance policy with a significant death benefit, an irrevocable life insurance trust may be of substantial benefit to you.

Robert Jacobson

GGI member firm

Kutchins, Robbins & Diamond, Ltd. (KRD)

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

Chicago, IL USA

Robert S. Jacobson


T: +1 847 240 1040



Employment law implications of Britain leaving the EU

Merrill April

By Merrill April, member of the GGI Labour Law Practice Group

With the EU Referendum just a few weeks away, a YouGov survey has claimed that the British public are split down the middle – 40% of voters were planning on voting to leave, and 42% to remain a part of the EU.

With the prospect of ‘Brexit’ still significant at this stage, Memery Crystal’s head of employment Merrill April held a webinar for GGI’s labour law practice group on the employment law implications of Britain leaving the EU, both for the United Kingdom and for the rest of Europe. Below, we outline some of the main points from the discussion:

  • Currently, UK employment law is a combination of domestic legislation pre-dating membership in the EU, and European law enforced and upheld by the British courts. Judgments from the ECJ influence the interpretation of EU-derived UK law and have strongly influenced the direction of UK law as a result.
    • Should the UK vote to leave the EU, this would serve as a 2-year notice of our exit. This is intended to create a smooth transition.
  • Some of the significant regulations that could be affected include:
    • Transfer of Undertakings (Protection of Employment) Regulations 1981 (“TUPE”)
    • Discrimination Legislation
    • Working Time Regulations
    • Collective Consultation Rules
    • Agency Workers
    • Aspects of Health and Safety Law
  • Given that the UK has adopted and integrated the majority of EU employment law into its own domestic law, it is unlikely that there will be significant changes if the Leave campaign is successful.
  • However, if the UK does become independent, there is no guarantee it will continue to match EU regulations, so if the government assumed a deregulatory agenda this could have significant impact on social employment rights.


GGI member firm

Memery Crystal

Law Firm

London, UK

Merrill April




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New German Constitutional Court decision on “Treaty Override”

International Taxation Practice Group

By Bernhard Schwechel

Bernard Schwechel

In a decision in December 2015, the German Federal Constitutional Court confirmed the practice of treaty override in tax law. “Treaty override” described the procedure whereby the German legislator adopts a law which violates a prior international treaty (often a treaty on double taxation). The German Federal Fiscal Court (Bundesfinanzhof) had doubts about the constitutionality of this practice. It was convinced that a recent amendment to the Income Tax Act, which is incompatible with a German-Turkish dual taxation treaty of 1985, is unconstitutional for this very reason.

If in a pending judicial proceeding, a German court is convinced that a legal provision, which it needs to apply to resolve the case under scrutiny, is unconstitutional, that court must stay the proceeding and pose a “reference question” on the law’s constitutionality to the Federal Constitutional Court. This ensures that the Constitutional Court remains the only body with the right to declare a law unconstitutional. The court thus retains its status as a hallmark of the concentrated system of constitutional control in Germany.

This judicial proceeding is available only for questions of constitutionality, not for questions of compatibility with international law. This worked, because the courts involved in fact “translated” the question of the relationship between international law and domestic law into a constitutional law question of the separation of power and of constitutional principles: rule of law versus democracy.

The German Federal Fiscal Court deemed treaty override unconstitutional, saying that it is a violation of the rule of law and of the German constitutional declaration on the primacy of international law.

The Constitutional Court did not share this view. It opined that the constitutional principle of democracy (which includes the principle of discontinuity of parliament following elections) demands that the German Parliament is free to change its mind and to make or amend a law even if this violates an international treaty which had been ratified by a previous Parliament. Also, the constitutional declaration on the primacy of international law does not have the legal effect to render statutes which violate international law at the same time (and for that reason) unconstitutional. Put differently, this commitment does not create a constitutional obligation to comply with international treaties “unconditionally”, since the constitution does not prohibit Germany as a state from violating international law. The Basic Law “does not renounce the sovereignty which lies in the last say of the German constitution” (note that the Court, as set out in the Görgülü Decision of 2004, ascribes “sovereignty” to the constitution, not to the state).

The constitutional requirement to interpret statutes in conformity with international law does not require a “schematic parallelism of the internal legal order with international law”, but also a “maximal adoption of substantive value judgments” – and only “to the extent that this is compatible […] with the precepts of the Basic Law”.

Ultimately treaty override is lawful and constitutional, independently of the option of denouncing the treaty first. Withdrawal can only be brought about by the executive branch, and Parliament cannot compel the government to do so. Also, from the perspective of the affected tax payer, denunciation of the double taxation treaty is not necessarily the better option.

In another case on 11 December 2013, the German Federal Fiscal Court submitted a question to the Federal Constitutional Court as to whether the treaty override provision (article 50d (10) of the Income Tax Act) is unconstitutional. This issue is relevant for many inbound German investments as foreign investors often organise their German investments in the legal form of a German commercial partnership.

Germany’s national tax law requalifies interest income paid by a German commercial partnership to its domestic or foreign partner as commercial income. The same requalification is applied for the purpose of interpreting and applying a tax treaty between Germany and the partner’s country of residence. The German tax authorities feel permitted to levy income tax on this interest income based on article 7 of the OECD Model Tax Treaty. Without this requalification set out in German national tax law, interest income would be subject to tax in the partner’s country of residence instead of in Germany.

The aforementioned German requalification of interest income to commercial income formally began as the German tax authorities’ interpretation of the tax treaties. It has, however, become a treaty override issue, because in earlier cases the German Federal Fiscal Court decided that the interpretation used to requalify interest income was unacceptable. The introduced provision shall be applicable with retroactive effect to all open cases. The interpretation of the German tax authorities and the new provision will lead to double taxation, since in the majority of cases, the partner’s country of residence will also see legal grounds on which to tax the interest income as defined under Article 11 of the OECD Model Tax Treaty. The allocation of taxation rights does not just affect interest, but also any kind of remuneration that a partner receives from its partnership (e.g. royalty fees).

In the opinion of the Federal Fiscal Court, overriding bilateral treaty provisions that have been negotiated between two contracting states in order to reallocate taxation rights is an unconstitutional breach of international law. For this reason, the German Federal Constitutional Court was asked to decide on this issue. It is the first time the Federal Constitutional Court has been involved in issues relating to treaty override. Therefore, at this time, it is unclear how it will decide. Affected taxpayers should monitor future developments closely and cases should be kept open with the German tax authorities with reference to the case pending before the Federal Constitutional Court.

This case is still pending but in light of the aforementioned decision we expect that the Federal Constitutional Court will decide in the same direction: that article 50d of the German Income Tax Act is in accordance with the German constitution.

Therefore, the fundamental decision of the Federal Constitutional Court is likely to open the door for further additional tax provisions introduced by the German Bundestag, however with a focus on increasing the German Ministry of Finance’s budget without affecting tax treaties.


GGI member firm

FACT GmbH -Steuerberatungsgesellschaft, Wirtschaftsprüfungsgesellschaft

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

Kassel, Germany

Bernhard Schwechel




Reverse charge extended to sales of PCs, tablets and game consoles

Indirect Taxes Practice Group

By Prof Stefano Loconte and Gabriella Antonaci

Prof Stefano Loonte Gabriella Antonaci

Italian Legislative Decree No. 24 of 11 February 2016 (hereinafter the “Decree”) entered into force on May 2nd 2016 and brought about a particularly rapid proceeding to allow EU States to apply the reverse charge method when tax inspections reveal the occurrence of sudden and massive fraud in relation to specific business transactions.

In particular, the Decree amended the heading of Art. 17 of Presidential Decree (DPR) No. 663/1972 from “taxable person” to “tax payer” in order to identify more precisely the person who has to pay the tax due.

In accepting EU Directive No. 2013/43/UE, the Decree also amends the list of operations to which Member States may apply the reverse charge method for the payment of VAT, on a pilot basis until 31 December 2018. The reverse charge has been extended to the sales of game consoles, PCs, tablets and laptops (lett. c), as well as to integrated circuit devices such as microprocessors and central processing units, transferred prior to their installation in products for the end user.

Instead the sales of (i) mobile phone components and accessories (lett. b); (ii) personal computers and their components and accessories (lett. c); (iii) stone materials and products directly derived from quarries and mines (lett. d); (iv) goods made to hypermarkets, supermarket and food discounts (lett. d – quinquies) were deleted from Art. 17, Paragraph 4 of Presidential Decree (DPR) No. 633/1972. These provisions had been erased because they were not authorised by the EU.

The Decree confirmed the power of the Ministry of Economics and Finance to identify further operations subject to reverse charge by other Decrees. In this regard, it was explained that they should be included among those listed in articles 199 and 199-bis of EU Directive No. 2006/112.

In order to apply the reverse charge method to further operations other than those set out under articles 199, 199 bis and ter of EU Directive No. 2006/112, it was also explained that the release of a special measure of exception by EU bodies was necessary.


Moreover, Italian Law No. 208 of 28 December 2015, (the so-called Italian Stability Law 2016) added letter a-quater to Art. 17 of Presidential Decree (DPR) No. 633/1972 provided that the reverse charge is also applied to the provisions of services by the members of consortia to consortia that, as suppliers of the Public Administration, apply VAT in a split payment regime.

This provision aims to reduce the negative financial effects for Public Administration suppliers which, following the entry into force of split payment, have found themselves in a constant creditor position against tax authorities.

The new reverse charge only applies to consortia of cooperatives of production and work, those of artisans, the consortium companies, and ordinary consortia of competitors. The rule does not apply to temporary groups of companies and organisations participating in a network agreement (the Italian (“contratto di rete”).

This new type of reverse charge will be applicable when the EU Council releases a special authorisation.

Furthermore, Legislative Decree No. 158 of 24 September 2015 has mitigated the penalty regime previously in force regarding the violations of reverse charge, with reference to the sanction notice that has not become definitive in the meantime, as at the date of entry into force of this law (1 January 2017, whereas the 2016 Italian Stability Law was established one year earlier with an effective date as of 1 January 2016).

In particular, the Decree has completely rewritten Art. 6, Paragraph bis of Legislative Decree No. 471/1997, also introducing new paragraphs 9 bis 1, 9-bis 2 and 9-bis 3.

Under this new sanctioning system, if VAT has mistakenly been paid where the requirements for the application of the reverse charge apply (under Art. 6, Paragraph 9 bis 1 of Legislative Decree No. 471/1997) a sanction amounting to between EUR 250 and EUR 10,000 is levied. The assignee/buyer and the assignor/lender are both liable for payment. The assignee or buyer may deduct VAT if it has been mistakenly paid. Previously, the sanction was equal to 3% of the tax with a minimum amount of EUR 258.00. If the error is due to tax avoidance or tax fraud, a sanction of between 90% and 180% of the tax applies. In this regard, the burden of proof is on the tax authority.

Conversely, if the reverse charge method has been mistakenly applied where it does not apply, a sanction of between EUR 250 and EUR 10,000 is applied (under Art. 6 Paragraph 9 bis 2 of Legislative Decree No. 471/1997). The assignor/lender and the assignee/buyer are both liable for payment. The assignee or buyer may deduct VAT mistakenly applied through the reverse charge method, but if the mistake is due to evasion or tax fraud by the assignor/lender, a sanction of between 90% and 180% of the tax applies. Previously the sanction was equal to 3% of the tax with a minimum amount of EUR 258.00.

Finally, if the buyer does not apply the reverse charge, a sanction of between EUR 500.00 and EUR 20,000.00 is applied. Even if the transaction does not result from accounting, a sanction of between 5% and 10% of taxable income is raised, with a minimum amount of EUR 1,000.00. Previously, the sanction was between 100% and 200% of taxable income, with a minimum of EUR 258.


GGI member firm

Loconte & Partners

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

Bari, Italy

Prof Stefano Loconte


Gabriella Antonaci





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Why focus on Global Mobility?

global mobility 1

By Huub Kapel

The answer is simple. In order to retain business from existing local clients and to attract new business from foreign clients, an understanding of the tax, social security, accounting and legal issues associated with the assignment of the (first) employee is key. Should the (first) assignment be successful, more business is likely to follow. In a market that is ruled by the Big 4, the multi-disciplinary character of GGI provides unique business opportunities.

In today’s world, organisations are exploring international business opportunities more than ever before. They may be searching for new distribution markets, or reducing operational expenses or production costs. Nowadays, global mobility is seen as a critical means of deploying and developing talent that increasingly pursues international career opportunities, and will therefore become more integrated into strategic recruitment and talent mobility processes.

Furthermore, global mobility policies are normally reviewed every two years to ensure they are up to date with market prices, competitive in their industry and providing sufficient support to meet employee and their families’ needs. Software tools and data analytics are used to help mobility programs run smoother, more cost-effectively and provide better service but also just to know who is where in case of evacuation. In short, global mobility is on the rise.

Whatever the case may be, organisations are aware of the increasingly costly, complex and time-consuming nature of the various legal, tax, social security and legal compliance requirements of a global mobile workforce. Even the OECD action plan on Base Erosion and Profit Shifting (BEPS) addresses the permanent establishment risks associated with globally mobile employees.

Whether it relates to long-term assignments, short-term assignments, “Local Plus” packages, permanent relocations, frequent business travellers or stealth commuters, employers and employees will have to deal with the issues involved

Organisations that find new opportunities in other countries lack both infrastructure and talent on the ground. Many of the initial skills needed therefore come from international assignments or transfers. In spite of this, organisations also expect the (first) assignee to hit the ground running and start adding value immediately and make the international adventure a success as from the start.

This is, however, easier said than done in an expatriate environment. Employees who leave their country to work abroad say goodbye to not only their home, but also family, friends, culture and core values they have grown up in. During the first months abroad, many day-to-day routines appear to be cumbersome. Whether it relates to traffic regulations, local bank jargon, utility issues, health care or local shopping, the new environment can be stressful for the expatriate and their family. It does not take long for an expatriate to realise that the assignment is not an extended holiday.

Organisations are aware of these stress factors and the risks associated with expat assignment. Troubles adjusting can cause issues for individuals, families and companies alike. The burden may lead to poorer work performance, or compel some to leave their positions altogether: neither situation is beneficial to the organisation.

However, by carefully planning and monitoring the process of the (first) assignment, both employer and employee can grow and develop together leading to a successful international expansion of the business.

Planning and monitoring may include:

  • global mobility management
  • design/implementation of global mobility policies
  • international tax planning
  • application for special expat tax regimes
  • international social security planning
  • set-up and implementation of (shadow) payroll
  • preparation of income tax returns
  • mandatory (tax) registration
  • application for work and residence permits
  • preparation of employment contracts/assignment letters
  • preparation of intercompany documents

global mobility 2

This is the recipe for a happy and profitable business environment, which GGI members around the world can provide and from which GGI members around the world can benefit

For more information please contact Huub Kapel, Global Chairperson of the PG Global Mobility Solutions at


GGI member firm

Limes International

Advisory, Fiduciary & Estate Planning, Tax

Valkenburg, The Netherlands

Huub Kapel




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Changes to insolvency laws in Australia

Debt Collection, Restructuring & Insolvency (DCRI Practice Group)

By Andrew Lacey and Danyal Ibrahim

Andrew Lacey Danyal Ibrahim

The Australian Government recently introduced the Insolvency Law Reform Bill 2015 into Parliament.

The reforms are part of a wider government initiative, labelled the ‘National Innovation and Science Agenda’, which are designed to boost innovation and entrepreneurship amongst Australians. While the initiative is still in its embryonic stage, it will undoubtedly result in some deregulation in order to tear down some barriers to entry in the market. By way of example, the Australian Government has already announced new tax incentives for small businesses seeking to “innovate”, while also announcing new funding and promising to make it easier for small businesses to win government contracts.

Amongst the more critical of the proposed reforms are specific protections to individuals aimed at encouraging entrepreneurs and businesses to take greater risks, for instance:

  1. Reducing the standard bankruptcy period for individuals from 3 years down to 1 year; and
  2. Shielding directors from personal liability for insolvent trading if they appoint a professional restructuring adviser to develop a plan to turnaround a company in financial difficulty.

A further important change is the prohibition on certain types of ‘ipso facto’ clauses, an expression used for terms in a contract which permit one party to terminate the contract upon an insolvency event relating to the other. Such terms are common place in commercial contracts in Australia and the proposed reform would prohibit the inclusion of an agreement to be terminated solely due to an insolvency event but only if a company is going through a restructure.

It is intended that such a reform would assist companies in working through financial problems by giving administrators, by way of example, a greater opportunity to keep a company trading while the future of a company is being assessed and determined by creditors.

The bill will reduce the costs associated with administering companies in distress and gives greater investigative powers to the two corporate and insolvency regulators in Australia – the Australian Securities and Investments Commission (‘ASIC’) and the Australian Financial Security Authority (‘AFSA’). There are also calls to align the procedural rules for governing personal (bankruptcy) and corporate (liquidation) insolvency, including the handling of funds, record keeping and audit requirements.

While the Government initiative will not take effect until at least early 2017, it is clear that the Australian Government is less concerned with protecting creditors and more concerned about wider policy objectives such as stimulating economic growth. For lawyers, accountants and business advisors, the challenge will be to ensure that their clients remain protected when engaging in business going forward, including protection against the risk that the other party to a transaction will become insolvent. Reducing the consequences of insolvency, which is essentially what the reforms seek to achieve, is likely to be met with caution by investors.

This move is, however, consistent with other recent attempts to make Australia more competitive on an international scale, such as the free trade agreements now in place with China, Japan and South Korea.

While it is too early to predict the precise form that the legislation will take, the Government’s commitment to spend $1.1 billion on the project will almost certainly provide a much needed boost in innovation and economic growth for Australia in the coming years.

McCabes was awarded the GGI XLNC award for 2014 as Member Firm of the Year.


GGI member firm


Law Firm

Sydney, Australia

Andrew Lacey


Danyal Ibrahim




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Brexit and its consequences

Professor Robert Anthony’s point of view

Robert AnthonyOn 22 April, during U.S. President Barack Obama’s visit to London, he invited the British to reconsider their position on a possible Brexit and to vote to stay in the European Union. His argument was supported by the conclusions of HM Treasury which recently drafted a 200-page report on the disastrous consequences Brexit would have, with GDP falling by 6% by 2030. The Chancellor of the Exchequer, George Osborne, goes even further, stating that leaving the EU “would be the most extraordinary self-inflicted wound”.

As Principal Partner of an MFO, many people are asking me what my views on a Brexit are. It is clear that after long-standing EU membership, the UK is deeply integrated into the Union. Their domestic legislation is influenced and has been amended in several areas to respect European law. These include employment law, tax and VAT law and a wealth of other legislation. Whilst there are treaties between European countries, European law overrules domestic law and illegal clauses in these treaties. What could happen in the future is that the UK would no longer need to respect European legislation. This would create a massive handicap for the public, as they would no longer have an arbitrator to protect them from overzealous politicians and bureaucrats. Private and public-sector investment abroad would be prejudiced.

The currency, despite not being the euro, would come under pressure from speculation and concerns as to a partial potential collapse of, or exodus from, the city. It has been estimated that sterling will depreciate by around 20% although I personally believe it would be more in the region of 30%. The City of London and Greater London as a whole are at serious risk. One-fifth of London’s population is foreign and there are several hundreds of thousands of French nationals living in the city. Yet some luxury properties are already struggling to find buyers. This will affect the availability of manual labour, often immigrants. Some of the middle classes will be relocated leaving a vacuum thereby reducing general demand of goods and services. Restaurants which have thrived over the years will be short of clients and face financial difficulties if an exodus occurs. Foreign nationals have already had their non-domicile status undermined by tax legislation. The effect of yet another change could take years to recover from. London would stagnate as a result of companies and people leaving the city to relocate abroad. Manufacturing would falter due to a slowdown in demand and the UK risks stagnating or even dipping into recession. The idea that a weaker sterling would boost exports is somewhat outdated. Do not forget that raw materials are often imported as part of the manufacturing process. Many imports would come from a European country at a higher cost! It is also important to not overlook the significance of imports from China, as well as the rest of Asia!

Imported goods would cost more. North Sea oil is not a source of revenue forever, and this revenue is not what it once was. Even with increased oil prices this will not help with imports of other commodities or types of fuel. Increasing unemployment could lead to more physical violence in the streets, thereby encouraging emigration to calmer places and thus accelerating the internal problems.

Finally the French and British armies cooperate closely. What happens to domestic security? What happens to border controls and free circulation within the EU? What happens to employment rights? People may migrate to/from the UK because of their employment status as well as uncertainty for their future. How do governments envisage dealing with this?

In the circumstances, this is not the best time to be selling French property. Prices have been depressed and sterling has been strong. However, for French people repatriating to France, property prices are likely to strengthen and rise in view of the current trends. If sterling loses value, British people will obtain more for their property. It could be argued that the best option is to sell up and repatriate the funds in the UK out of GBP. You could even argue that now is the best time to buy French property. Whilst it is clear that the French property market is recovering, the rest really depends on the UK referendum. I do not have a crystal ball and would not wish to take the responsibility for any decisions made. However, I would recommend seeking independent advice, being careful of any currency risk exposures and buying options to hedge any volatility and exposure.


GGI member firm
Anthony & Cie (MFO)
Fiduciary & Estate Planning, Tax
Sophia Antipolis, France
Prof. Robert Anthony


Imminent amendments to gift tax and inheritance tax in Italy: an urgent call for estate planning

urgent call for estate planning

By Prof Stefano Loconte and Michele Cecchi

A draft bill has been recently introduced to the Italian Parliament which aims to amend the currently levied gift tax and inheritance tax. Although the hearings on the proposed bill have not started yet, it is true that there has been a lot of talk regarding this issue lately, and it is highly foreseeable that in the very near future, a radical change will be applied to the legislation to such an extent that will be considerably detrimental to taxpayers (possibly by means of a sudden intervention by the Government instead of a long discussed reform by Parliament).

After being reintroduced in the Italian legal system in 2006, gift tax applied to gifts made during a donor’s life and on transfers upon death is (presently) considerably lower than in most countries.

As far as inter vivos gifts are concerned, if the donor and/or the recipient are Italian residents at the time of the gift, the gift tax is always levied, regardless of whether assets or rights are located abroad, and whether the gift is performed by way of a deed executed abroad.

In relation to transfers on death, inheritance tax is levied on any transferred asset or right, whether or not the transferred assets and rights are located in Italy or abroad, if the deceased is resident in Italy at the time of his / her death.

The tax base of both of the levies is constituted by the value of the transferred assets or rights. The tax rate currently applicable to transfers both inter vivos and on death varies in relation to the kinship between the donor and the donee or between the deceased and the heir or legatee:

  1. transfers to the spouse or lineal relatives are taxed at 4%;
  2. transfers to relatives in collateral line up to the fourth degree, to lineal relatives in law up to the fourth degree and to relatives in law in collateral line up to the third degree are taxed at 6%;
  • transfers to other unrelated subjects are taxed at 8%.

For the sake of clarity, Italian law defines “lineal relatives” as individuals who descend from one another (e.g. father-son), while “relatives in collateral line” share one ancestor (e.g. the father or the grandfather) but do not descend one from the other (e.g. siblings or cousins).

In order to calculate the degree of “lineal relation” you have to count each individual up to the common ancestor (albeit without counting the common ancestor).

In order to calculate the degree of “relation in collateral line” you have to count each generation upwards to the common ancestor (albeit once again without counting the common ancestor) and then descending from him/her.

“Relation in law” refers to the legal relationships between a spouse and the other spouse’s relatives.

The degree of “relation in law” is the same degree of “relation” which links one of the spouses (e.g. father-in-law and son-in-law are first degree relatives-in-law because the spouse is a first degree relative of her father). Furthermore, relatives-in-law can be lineal or collateral: the former if the relatives of the spouse are linear relatives, the latter if the relatives of the spouse are collateral relatives.

Specific thresholds are then provided for transfers benefiting certain classes of individuals:

  1. the spouse or lineal relatives of the transferor are taxed on the net value exceeding EUR 1 million for each transferee;
  2. siblings of the transferor are taxed on the net value exceeding EUR 100,000 for each transferee;
  • transferees with serious disabilities are taxed on the net value exceeding EUR 1.5 million for each transferee, regardless their ties with the transferor .

Transfers inter vivos and on death which are in favour of the State and other local authorities, public bodies, political parties, foundations, legally recognized associations and other non-profit entities whose purpose are exclusively of public interest, are exempt from the above.

The proposed reform will likely increase the tax rate to 7% for the spouse or lineal relatives of the transferor, to 8% for siblings, to 10% for relatives in collateral line up to the fourth degree, for lineal relatives in law up to the fourth degree and for relatives in law in collateral line up to the third degree, to 15% for other unrelated subjects. It is worth underlining that each of these percentages would then be tripled for transfers over EUR 5 million.

Furthermore, the threshold for the spouse or lineal relatives of the transferor will be reduced to EUR 500,000.

As if all the above were not enough, the tax burden is set to increase even more in the foreseeable future where real estate is transferred: in such cases, the tax base of gift tax and inheritance tax is the cadastral revenue multiplied by the relevant coefficients; concurrently with the reform of gift tax and inheritance tax, the Italian Legislator is also performing a comprehensive review of the Land Registry, which will in turn lead to an overall increase in cadastral revenues. The latter reform will therefore also have a very direct and negative impact on the gift tax and inheritance tax burden.

In light of such concerning developments, you can see why practitioners with Italian resident clients and/or those with interest in Italian assets are best advised to suggest taking urgent, even immediate, action to mitigate (future) liabilities by freezing the current lower taxation levels immediately. It’s now or never!


GGI member firm

Loconte & Partners

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

Bari, Italy

Prof Stefano Loconte


Michele Cecchi




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The OECD’s New Transfer Pricing Documentation Guidelines: Master File, Local File, and Country-by-Country Report

know the rules

By Kurt C. Wulfekuhler

Globalization has produced tremendous gains for the world’s economies through increased trade and foreign direct investment leading to greater employment and innovation. Multinational enterprises (“MNEs”) have also become more integrated and globalization has helped them reduce their tax burdens by shifting profits to low-tax jurisdictions through transactions with related parties. Concerned that this so-called base erosion and profit shifting (“BEPS”) poses a serious risk to tax revenues, tax sovereignty, and tax fairness; the Group of Twenty (“G20”) and the Organisation for Economic Co-operation and Development (“OECD”) developed an Action Plan on Base Erosion and Profit Shifting (“Action Plan”).

Central to the Action Plan is aligning transfer pricing outcomes with value creation. That is, transactions between members of a multinational group should result in an allocation of profit that is aligned with the economic activity that produced the profit. To evaluate whether taxpayers’ transfer pricing outcomes are aligned with value creation, the OECD developed a three-tiered approach to transfer pricing documentation, consisting of:

  1. Master file;
  2. Local file; and
  3. Country-by-Country (“CbC”) Report.

Because the CbC Report has garnered the greatest attention and because it should help direct the rest of an MNE’s transfer pricing documentation, we begin our discussion there.

Country-by-Country Report

The CbC Report will contain important group information not generally available in the past to all tax administrations where the MNE operates. it is required for enterprises with consolidated global revenues equal to or exceeding EUR 750 million. The CbC Report requirement will be effective for fiscal years beginning on or after January 1, 2016. It is to be filed with the tax administration for the group’s parent company. It comprises two tables: (1) an overview of the allocation of revenue, income, taxes, and other financial measures by tax jurisdiction; and (2) a list of all the constituent entities of the MNE group and their main business activities.

Master File

The master file provides a high-level overview of the group. It includes information on the MNE’s legal-entity organizational structure, business, intangibles, intragroup financing, and financial and tax positions including tax rulings.

The master file is also the taxpayer’s opportunity to explain the results of the CbC Report. It can describe how the allocation of income is aligned with how the business operates globally, how transfer prices are set, and how intangibles are developed, owned, and exploited. It is imperative to get this part of the documentation right so that the taxpayer can support the resulting allocation of income within the group.

Local File

The local file contains specific information for a particular country. It includes a description of the local entity, its business and business strategy, any business restructurings or transfers of intangibles, and key competitors. It also includes descriptions of the material controlled transactions, intercompany agreements, all of the economic analysis supporting the arm’s-length nature of the controlled transactions, and copies of any advance pricing agreements or other tax rulings relating to those transactions to which the local tax jurisdiction is not a party.

Conclusion and Recommendations

The new OECD documentation guidelines mark a new chapter in transfer pricing disclosure and transparency. Tax administrations will now have access to financial and other information on entities outside of their jurisdiction. And the amount of information required in the transfer pricing master file and local files has generally been expanded.

Transparency, however, is likely here to stay so it is important for MNEs to adapt to the new regime. There are even some benefits for taxpayers from the new guidelines. For one, they help standardize local transfer pricing documentation. Understanding different local requirements has been a considerable challenge has resulted in a compliance burden through the need to engage different service providers in each jurisdiction. For sure, local jurisdictions will still have their own idiosyncrasies but completing a master file and local file will go far to meet local requirements.

A useful strategy for addressing the new transfer pricing documentation guidelines could include the following steps:

  1. Prepare a CbC Report. Even if the group’s sales do not meet the threshold for requiring the CbC Report, it is an important exercise for developing the master file.
  2. Evaluate risks. From the CbC Report identify any areas that are not consistent with the group’s transfer pricing policies and/or substance and modify accordingly.
  3. Develop the master file. Make sure the master file agrees with other public information about the group’s business and profit drivers (for example, Form 10-K business description). Be sure that the narrative in the master file supports the information in the CbC Report.
  4. Prepare the local files. Develop a local file for each relevant jurisdiction based on the material controlled transactions within the group.
  5. Translate as needed. Prepare the master file and local files in the global language of the group. That way, all documentation can be reviewed, understood, and confirmed by the tax function within the head office. The documentation can be translated (for example, by a translation agency) where it needs to be presented in the local language.

Following these steps will help produce transfer pricing documentation that is consistent globally and presents the MNE’s transfer pricing in the best possible light.


GGI member firm

Economics Partners, LLC

Corporate Finance

Bala Cynwyd, PA, Denver, CO, Mendham, NJ, Washington, DC, USA

Kurt C. Wulfekühler




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