A New Era of Global Taxation
“Only death and taxes are inevitable” Benjamin Franklin
“Only death and taxes are inevitable”
Today the famous quotation of B. Franklin, whose portrait looks at us from all hundred US dollar bills, is more relevant for any businessman than ever. The golden age of offshore, bearer shares and strict banking secrecy is coming to an end. With the enacting of the US Foreign Account Tax Compliance Act (FATCA) in 2010, it became clear that a new era of transparency and international exchange of tax data was coming.
The global phenomenon, called “deofshorization” – is a large-scale and comprehensive change aimed at combating tax evasion and aggressive tax planning that affect all business sectors in more than 100 countries.
The main directions are:
- Automatic exchange of tax information between countries;
- Establishment of registers of beneficial (actual) owners of companies and trusts;
- Elimination of preferential treatment for intellectual property (IP) objects, such as IP-Box;
- Amendments to international tax conventions and legislation of individual countries to counteract tax evasion;
- Change of rules and reporting on transfer pricing (control over pricing in transactions between related persons);
- Combating the legalization of illegally obtained incomes and sponsoring terrorism;
- Implementation of regulations on controlled foreign companies (taxation of even undistributed income from foreign companies owned by residents of the country).
“Deofshorization”has achieved current levels thanks to the efforts of the Organization for Economic Cooperation and Development (OECD) with the support of the EU. The Action Plan for Reducing the Tax Base and Moving Profit, better known as the “15 Steps of the BEPS”, and the Single Standard for Automatic Exchange of Financial Account Information (CRS), have been developed by the OECD and are being actively implemented far beyond the EU. In most European countries, it is no longer possible to join the use of special intellectual property regimes, and after the Panama scandal and the joining of Panama, the Bahamas, Saint Vincent and other “classic” offshores to the automatic exchange of tax data, even the biggest skeptics were forced to acknowledge the inevitability of “deofshorization”.
Fortunately, such fundamental changes in the world system take time, and the process is not yet complete. This gives an excellent opportunity for business to understand and accept a new reality, and most importantly – to successfully adapt.
Practice shows that every business is unique, and the only right decision that will adequately meet new challenges is thorough tax planning.
In the arsenal of tax specialists there are many effective solutions that will help to painlessly adapt to the coming changes.
It can be a simple revision of existing contracts, creation of sufficient economic “essence” of companies, introduction of mechanisms for intra-group financing, restructuring of a group, creation of personal holdings or trusts, or even a change in tax residency – nothing is impossible if the work is done by a real professionals.
The SBSB team is ready to take on your problems: assess the existing risks, develop a better solution and implement it.
A new era of world taxation leaves no doubt – taxes will have to be paid by everyone. But why to overpay?