Transfer pricing issues continue to be an important focus for multinational enterprises (“MNEs”) and tax authorities. This post summarizes some of the significant developments in Canada that have arisen so far in 2016 and what to look forward to in the coming months. In particular, we highlight a decision of the Federal Court of Appeal, Canada’s implementation of the OECD Base Erosion and Profit Shifting (BEPS) Action Plan and some significant transfer pricing cases that are working their way through the Tax Court of Canada. Continue Reading
For many years, both the Canada Revenue Agency (CRA) and Her Majesty’s Revenue and Customs (HMRC) have treated limited liability companies (LLC) formed under Delaware law as hybrid entities, in that a LLC has been “opaque” for the purposes of domestic tax law despite being generally disregarded or treated as a partnership for United States tax purposes.
Hybrid entities, including LLCs, are due to be somewhat of a hot topic next month because, as part of its Base Erosion and Profit Shifting (BEPS) project, the OECD is due to present its recommendations to the G20 Finance Minister in relation to “Action 2: Neutralizing the effects of hybrid mismatch arrangements”. However, over the summer the United Kingdom Supreme Court has stepped into the fray in its decision in Anson v. Commissioners for Her Majesty’s Revenue and Customs ( UKSC 44).
This decision emphasizes that entity classification for international tax purposes is highly dependent on the facts and the governing law applicable to the entity, despite guidance from tax authorities that prefers to apply a “one size fits all” approach. As discussed below, the Anson decision may create renewed interest and support for taking a tax position that diverges from the traditional opaque characterisation of a US LLC.
On March 16, 2015, The Bank of Israel issued an anti-tax evasion directive aimed at avoiding Israeli financial institutions being used by foreign taxpayers to move assets and income offshore, out of reach of the tax authorities of their countries of residence. Israel may now obtain bank information on accounts opened by non-residents and it will begin the process of exchanging tax information with other countries, such as Canada, in 2017.
The directive stipulates that Israeli banks must require their foreign clients to provide them with a declaration containing the following information:
- the customer’s country of residence for tax purposes;
- confirmation from the client that his or her aggregate investments and assets have been reported to the tax authorities of the resident jurisdiction (e.g., Canada) or, alternatively, a declaration to the effect that he or she has initiated a voluntary disclosure procedure in the resident jurisdiction; and
- a waiver from the taxpayer pursuant to which Israeli banks would be allowed to provide confidential bank account information to non-Israeli tax authorities
Israel may disclose the identity of their non-resident clients and report the funds held in their accounts to the tax authorities of their respective countries of residence
Le 16 mars dernier, la Banque d’Israël a émis une directive ayant pour objet de contrer l’évasion fiscale internationale et d’éviter que les institutions financières israéliennes ne soient utilisées par certains contribuables étrangers afin de réduire indûment leur fardeau fiscal dans leur pays de résidence.
Cette directive prévoit notamment que les banques israéliennes devront obtenir de leurs clients étrangers une déclaration contenant :
- Le pays de résidence fiscale du client;
- Une attestation du client à l’effet qu’il a déclaré l’ensemble des investissements et avoirs qu’il détient auprès de l’institution financière israélienne visée aux autorités fiscales de son pays de résidence, ou, alternativement, une déclaration du client à l’effet qu’il a entamé un processus de divulgation volontaire dans son pays de résidence; et
- Une décharge du contribuable relativement à la confidentialité de ses informations financières vis-à-vis des autorités fiscales de son pays de résidence.
En d’autres termes, les banques israéliennes s’autorisent à communiquer l’information relative à leurs clients étrangers aux autorités fiscales de leur pays de résidence. Continue Reading