Monthly Archives: May 2016

Companies invested $221 billion into shell companies last year and investment flows to offshore tax havens such as the Cayman Islands and the British Virgin Islands fell somewhat, to $72 billion, according to the United Nations Conference on Trade and Development reported on May 3, 2016.

The first three quarters of 2015 showed a rise in investment flows to so-called special purpose entities in low-tax jurisdictions, which have little connection to local economies and are often used by international businesses to raise capital, according to this new data from UNCTAD. This could be due to shifting investments to avoid the Common Reporting Standard (CRS) obligation, by re-domicile foreign trusts and entities to countries that do not participate in CRS?

But a massive funds exodus from such companies in the final three months of the year, which is also the biggest quarterly withdrawal in the past 10 years, resulted in the annual total investment to be down from its 2014 level. This report stated that new rules adopted by Luxembourg and the Netherlands regarding transfer pricing, the economic substance of transaction and information exchange may have played a role.
The role of overseas shell companies to defer corporate earnings for U.S. businesses has grown in recent years,. Foreign investment by the U.S. to holding companies in Bermuda, Ireland, Luxembourg, the Netherlands, the U.K. and British islands rose to 59 percent of the US's outbound foreign direct investment last year, compared to about 40 percent a 10 years ago, according to the report.

The $72 billion that flowed into Caribbean financial centers, mostly the Caymans and British Virgin Islands, dropped 8 percent from 2014 levels but was close to the annual figures reported between 2008 and 2012. Countries outside of the U.S. and Europe are an increasingly large source of those dollars, with China and Hong Kong accounting for about 43 percent of the inflows from 2010 to 2014, the data shows. The report comes during the heightened scrutiny from policymakers around the globe regarding as a result of the Huge Leak From the Panamanian Law Firm Mossack Fonseca! also known as the Panama papers which consists of 11.5 million confidential documents publicized earlier this year that highlight how the Panamanian law firm Mossack Fonseca helped thousands of clients set up shell companies over a period of 40 years, ultimately helping to keep assets out of the reach of government scrutiny for tax purposes. Do You Have Undeclared Income  From A Foreign Company  or Trust?        Want to Know if the OVDP Program is Right for You?   Contact the Tax Lawyers at  Marini& Associates, P.A.     for a FREE Tax Consultation at: www.TaxAid.us or www.TaxLaw.ms or Toll Free at 888-8TaxAid (888) 882-9243

The move is the first significant enforcement hiring in more than five years and it is “a good development for our tax system,” Koskinen said in a May 3 internal message to the Internal Revenue Service workforce.

The action is critical after years of job losses throughout the agency and broad funding cuts by Congress, Koskinen told employees. Funding for the IRS is down by more than $900 million since 2010, but its current employees managed to pull off efficiencies that helped make the hiring possible, he said.

 

Contact the Tax Lawyers at 

Marini& Associates, P.A.  

 

for a FREE Tax Consultation

at: www.TaxAid.us or www.TaxLaw.ms or

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Speaking at a April 28,2016 transfer pricing symposium held by the University of San Diego School of Law, Robert Stack, US Treasury Deputy Assistant Secretary (International Tax Affairs) addressed the “gap-year” issue arising from the implementation of CbC reporting in some jurisdictions for tax years beginning on or after 1 January 2016, before US rules have taken effect.

In this context, he stated that the Treasury and IRS are working towards a solution that would allow optional CbC reporting for 2016. Stack noted, however, that more work would be needed to ensure that allowing optional filing for 2016 in the US would be effective in obviating the need for local filing. With that in mind, Stack encouraged US MNCs to engage in the global debate to ensure optional CbC reporting will be enough to protect US MNCs from becoming subject to secondary reporting requirements. 

The OECD recommended that the information required for the master and local files be filed by the MNEs directly with the local tax administrations. On the other hand, the CbC report would be filed in the jurisdiction of the tax residence of the ultimate parent entity and shared between jurisdictions through automatic exchange of information, pursuant to government-to-government mechanisms such as the multilateral Convention on Mutual Administrative Assistance in Tax Matters, bilateral tax treaties, or tax information exchange agreements (TIEAs).

 Have an International Tax Problem? 

 

 

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Marini & Associates, P.A.

 for a FREE Tax Consultation Contact US at

www.TaxAid.us or www.TaxLaw.ms

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