There are plenty of webs that talk about so called well-known Swiss trust companies. Are they really so well-known?

From what we could see after a little research, webs that praise the advantages of Swiss Trust Companies mostly have something to do with companies incorporating or selling services.

However, are they really as good as they seem?

There are many other opinions that say:

-          Such companies do not exist. A Swiss trust company is a normal Swiss company (Ltd. or LLP) that is doing trust business in Switzerland and therefore even needs a license for that.

-          A Swiss Trust Company is a dormant Swiss corporation (SA/AG) that has been purchased from its original owner and reinstated.

-          Swiss Trust Company is a normal Swiss company (SA/AG) incorporated with bearer shares or not. This type of companies is taxed at normal tax rate (federal, cantonal, municipal) or special one depending on the circumstances.

You won´t find any mention of Swiss trust companies in any of the official sources (e.g. Swiss tax authorities, companies house, etc). The official government web-site says:

Possible legal forms

For reasons of commercial security, the Swiss law provides only a limited number of legal forms that businesses can take, and the opportunity to modify the internal structure of each is also limited.

The Code of Obligations sets out the possible legal forms. For the exercise of business activities, the following are the main corporate forms:

• Sole proprietorships

• General partnerships

• Limited partnerships

• Companies limited by shares (AG)

• Limited liability companies (GmbH)

Unfortunately, not much information on Swiss law is available in English as most legislative acts are either in French or German.

From what it appears so far, these companies are rather “ordinary” companies in which the nominee shareholding structure is used.

They should not be confused with Trust arrangements that are commonly found in Common Law jurisdictions and that were also recognized in Switzerland by the ratification in 2007 of the Hague Convention on the Law Applicable to Trusts. Trusts in this sense are not separate legal entities and are not subject to tax due to this lack of legal personality.

If a company has more than one approval or only a portion of its capital investments are approved, its effective tax rate is the result of a weighted combination of the applicable rates.

This Law provides that upon application to the Investment Center of the Ministry of Industry, Commerce and Employment of the State of Israel, the “Investment Center”, a proposed capital investment in eligible capital expenditures may be designated as an Approved Enterprise.

Each certificate of approval for an Approved Enterprise relates to a specific investment program delineated both by its financial scope, including its capital sources, and by its physical characteristics, such as the equipment to be purchased and utilized under the program. The tax benefits derived from any certificate of approval relate only to taxable income derived from growth in manufacturing revenues attributable to the specific Approved Enterprise.

Taxable income of a company derived from an Approved Enterprise is subject to tax at the maximum rate of 25% for the benefit period. This period is ordinarily 7 years, beginning with the year in which the Approved Enterprise first generates taxable income, and is limited to 12 years from when production begins or 14 years from the date of approval, whichever is earlier. A company owning an Approved Enterprise may elect to receive an alternative package of benefits, which allows the company to receive tax exemptions.

Under the alternative package, the company’s undistributed income derived from an Approved Enterprise will be exempt from tax for a period of between 2 and 10 years from the first year of taxable income, depending on the geographic location of the Approved Enterprise within Israel, and the company will be eligible for the tax benefits under the Investment Law for the remainder of the benefit period.

The benefits available to an Approved Enterprise are conditional upon compliance with the conditions stipulated in the Investment Law and related regulations and the criteria described in the specific certificate of approval. If a company violates these conditions, in whole or in part, it would be required to refund the amount of tax benefits and any grants received plus an amount linked to the Israeli consumer price index and interest.

On April 1, 2005, amendment No. 60 to the Investment Law became effective (“Amendment No. 60″) and has changed several provisions of the Investment Law, mainly in respect of the alternative package. Amendment No. 60 sets forth the scope of enterprises which may qualify as a Beneficiary Enterprise – under Amendment No. 60, the designation is Beneficiary Enterprise rather than Approved Enterprise – by setting forth criteria for qualification of a company. Additionally, Amendment No. 60 determined that companies operating under the alternative package no longer require Investment Center approval in order to qualify for tax benefits. Instead, this position will be incorporated as part of the regular tax audits of the Israeli Tax Authorities (the “ITA”).

Under Amendment No. 60, the year in which a company elects to commence its tax benefits is designated as the year of election (“Year of Election”). A company may choose its Year of Election by notifying the ITA in its annual tax return or within twelve months after the end of the Year of Election, whichever is earlier, or by requesting a pre-ruling from the ITA no later than six months after the end of the Year of Election. However, the Investment Law provides that terms and benefits included in any letter of approval which was granted prior to the effective date of Amendment No. 60, will remain subject to the provisions of the law as they were on the date of such approval. Therefore, our Israeli subsidiary’s (GuruNet Israel Ltd.) existing Approved Enterprise status will generally not be subject to the provisions of Amendment No. 60, while in order to receive further benefits, it will have to meet Amendment No. 60′s requirements. During 2009, GuruNet Israel Ltd. elected 2008 as the Year of Election under Amendment No. 60, for its second expansion.

GuruNet Israel Ltd. currently has three capital investment programs, two of which were granted Approved Enterprise status under the Investment Law prior to Amendment No. 60, ending December 31, 2009 and December 31, 2014, respectively, and one Beneficiary Enterprise pursuant to Amendment No. 60, ending December 31, 2017.

Qualifying income arising from our Approved Enterprise is tax-free in Israel under the alternative package of benefits described above for a period of 10 years from the first year in which our Israeli subsidiary generates taxable income from such Approved Enterprise, but not later than certain specified periods. We have begun to generate taxable income for purposes of the Investment Law, and we have utilized these tax benefits beginning in 2000. The Investment Law also provides that an Approved Enterprise is entitled to accelerated depreciation on its property and equipment that are included in an approved investment program.

On December 29, 2010 the Israeli parliament approved the Economic Policy Law for 2011-2012, which includes an amendment to the Investment Law (hereinafter – “the Recent Amendment to the Law”). The Recent Amendment to the Law is effective from January 1, 2011 and its provisions will apply to preferred income derived or accrued in 2011 and thereafter by a preferred company, per the definition of these terms in the Recent Amendment to the Law. Companies can choose to not be included in the scope of the Recent Amendment to the Law and to stay in the scope of the law before its amendment until the end of the benefits period. The 2012 tax year is the last year companies can choose as the Year of Election under Amendment No. 60, providing that the minimum qualifying investment, as defined under such amendment, began in 2010.

The Recent Amendment to the Law eliminates the existing tax benefit tracks and introduces two new tax tracks in their place, a preferred enterprise and a special preferred enterprise, which mainly provide a uniform and reduced tax rate for all the company’s income entitled to benefits, such as: for a preferred enterprise – in the 2011-2012 tax years – a tax rate of 10% for Development Area A and of 15% for the rest of the country, in the 2013-2014 tax years – a tax rate of 7% for Development Area A and of 12.5% for the rest of the country, and as from the 2015 tax year – 6% for Development Area A and 12% for the rest of the country. Furthermore, an enterprise that meets the definition of a special preferred enterprise is entitled to benefits for a period of 10 consecutive years and a reduced tax rate of 5% if it is located in Development Area A or of 8% if it is located in a different area.

The Recent Amendment to the Law also provides that no tax will apply to a dividend distributed out of preferred income to a stockholder that is a company, for both the distributing company and the stockholder. A tax rate of 15% shall continue to apply to a dividend distributed out of preferred income to an individual stockholder or foreign resident, subject to double taxation prevention treaties, which means that there is no change from the existing law.

Furthermore, the Recent Amendment to the Law provides relief with respect to tax paid on a dividend received by an Israeli company from profits of an approved/alternative/beneficiary enterprise that accrued in the benefits period according to the version of the law before its amendment, if the company distributing the dividend notifies the tax authorities by June 30, 2015 that it is applying the provisions of the Recent Amendment to the Law and the dividend is distributed after the date of the notice. We are currently evaluating the impact of the Recent Amendment to the Law.

The old exemption from registration for advisers with fewer than 15 US investors is eliminated as of July 21, 2011 and is replaced by new exemptions that are limited and therefore not terribly useful.

Consequences of this are to file a SEC registration to passport across the US and avoid the tremendous burden to undertake a review of the securities law on a state by state basis.

Advisers’ registration with the SEC implies the filing of Form ADV to disclose detailed information regarding the adviser’s business.

Registered advisers will face many obligations including compliance procedures, code of ethics, conflicts of interest disclosure, compliance officer designation, extensive books and records maintenance requirements…

Registered investment advisers will be required also to report once a year through the filing of Form PF thus providing significant amounts of detail regarding the private funds they advise – compliance date for filing may be as earlier as 12/15/2011.

Although seemingly in contradiction with Dodd Frank, Foreign Account Tax Compliance Act, FATCA is an over-reaching peace of legislation on tax avoidance that will trigger all financial intermediaries to enter agreement with US tax authorities and enforce tax information reporting and withholding for US persons investing via/in non-US entities.

Investments funds and Collective Investment Schemes are in the scope; therefore mutual/hedge/private equity/FoFs/ETF/managed accounts are all concerned by FATCA with some exclusion that would need to be reviewed and monitored on an ongoing base.

Custody, fund administration, private banking and transfer agency functions are all impacted by FATCA and it is therefore paramount to understand the different duties of FATCA and how they will need to be address on the value chain of your organisation.

Braxton has financial regulation expertise in cross-border provision of asset management services and is able to offer help on the consequences of these provisions to non-US investment advisers and all financial intermediaries and fund structures.

Congress on European Tax Law

“BEYOND DISCRIMINATION : THE ROLE OF THE ECJ CASE-LAW IN THE INTERNATIONAL DIVISION OF TAXING POWERS IN DIRECT TAXATION”

We are delighted to welcome our clients to an international tax seminar, in November, addressing opportunities to structure investments from a corporate and family office and family business perspective.

There are ways of cutting costs when investing abroad and direct investment from one country to another does not always achieve optimum savings.

One has to take into account dividends, interest, royalties and capital gains.

One also has to take into account long term objectives.

Is it an objective to accumulate reserves for reinvestment?

This conference looks at the world of cross-border tax issues from a European perspective. It looks at holding company locations. It looks at fiscal traps; it looks at “substance”.

We will be updated on ways of investing into real estate in France.

Investing in BRICS and other emerging economies which constitute the core worldwide economic engine for growth fuelled by demographic megatrends and real consumption is paramount  is into and out of Brazil, Russia, India and China needs to be looked at.

Some tax treaties are better than others. In this context should we be looking at Spain or Madeira for Brazil, Cyprus for Russia, Mauritius for India and Hong Kong for China?

Classical holding companies with tax exemptions are not the only way to make investments. What about the semi regulated funds for sophisticated investors such as the SIF in Luxembourg and the PIF in Malta?

We do hope our clients will find the various sessions interactive and useful and ample time has been set-up for peer discussions and network opportunities.

The following are some abbreviations used commonly in international tax planning:

• AStG Aussensteueurgesetz
• BTW Omzetbelasting (VAT, Netherlands)
• BV besloten vennootschap met beperkte aansprakelijkheid
• BVI British Virgin Islands
• CDT Consolidated Tax Decree (Italy)
• CFC controlled foreign company
• CFO chief financial officer
• CGI . Code Generate des Impots (France)
• CIR Code des Impdts sur les Revenus (Belgium)
• CP cost plus
• CRA Canada Revenue Agency
• CUP comparable uncontrolled price
• EBT employee benefit trust
• ECJ European Court of Justice
• FAPI foreign accrual property income
• FATF Financial Action Task Force
• FAPT foreign asset protection trust
• FIE foreign income exemption
• FOB’ free on board
• FURBS funded unapproved retirement benefit scheme
• GAAP generally accepted accounting Principles
• GAAR general anti-avoidance rules
• GIE groupement d’interet economique
• GST Goods and Services Tax (Australia, Canada)
• HMRC Her Majesty’s Revenue and Customs
• ICTA Income and Corporation Taxes Act 1988 (UK)
• IFS International Fiscal Services
• IR Inland Revenue
• IRC Internal Revenue Code
• IRS Internal Revenue Service (US)
• ITEPA Income Tax (Earnings and Pensions) Act 2003 (UK)
• ITTA Income Tax Assessment Act 1936 (Australia)
• ITTOIA Income Tax (Trading and Other Income) Act 2005 (UK)
• KStR Korperschaftsteuer-Richtlinien
• LLC limited liability company
• LLP limited liability partnership
• LOB limitation on benefits
• LP limited partnership
• MARD Mutual Assistance Recovery Directive (Council Directive 76/308/EEC)
• MEC modified endowment contract
• MLR Money Laundering Regulations 2003 (UK)
• MLRO money laundering reporting officer
• NAFTA North American Free Trade Association
• NCIS National Criminal Intelligence Service
• NIC national insurance contribution
• NV naamloze vennootschap
• OECD Organisation for Economic Co-operation and Development
• OEIC open-ended investment company
• PAYE Pay As You Earn
• PCC protected cell company
• PE permanent establishment
• POCA Proceeds of Crime Act 2002 (UK)
• PPB personal portfolio bond
• PS profit split
• RP resale price
• RST retail sales tax
• SA societe anonyme; South Africa
• SAR suspicious activity report
• SCI societe civile immobiliere
• SDLT stamp duty land tax
• SIPP self-invested pension scheme
• SpA Societa per azioni
• SPV special-purpose vehicle
• STAR Special Trusts (Alternative) Regime (Law of 1997)
• TCGA Taxation of Chargeable Gains Act 1992 (UK)
• TNM transactional net margin
• TVA taxe sur la valeur ajoutee
• UNI undistributed net income
• VAT value added tax
• VISTA Virgin Islands Special Trusts Act (Law of 2003)

Which are the more important international tax conventios?

Some of them are the following Conventions:

• Hague Convention on the Law Applicable to Trusts and on their Recognition 1985
• Income and Capital Gains Tax Convention (Canada and UK) 1978
• Income and Capital Gains Tax Convention (France and UK) 2004
• Mutual Administrative Assistance in Tax Matters (Denmark, Finland, Iceland, Norway and Sweden) (BKI No. 42, 30 April 1992)
• Mutual Administrative Assistance in Tax Matters {OECD/Council of Europe) (1995) (European Treaty Series No.127)
• OECD Model Convention with respect to Taxes on Income and on Capital (OECD Model Treaty) 1977
• OECD Model Convention with respect to Taxes on Income and on Capital (OECD Model Treaty) 2003
• United Nations Model Double Taxation Convention between Developed and Developing Countries 2001 and Commentary
• United States Model Income Tax Convention 1996 and Technical Explanation

]]> http://www.tax-international.com/international-conventions/feed/ 0 http://www.tax-international.com/double-tax-treaties/ http://www.tax-international.com/double-tax-treaties/#comments Thu, 26 Aug 2010 16:48:30 +0000 Braxton7 http://www.tax-international.com/?p=356 Which are important double tax treaties for international tax planning?

Some of the most important double tax treaties for international tax planning purposes are:

• Australia/Netherlands 1976
• Belgium/Netherlands 2001
• Canada/France 1975
• France/Canada 1975
• France/United Kingdom 2004
• Italy/United Kingdom 1988
• Mauritius/United Kingdom 1981
• Netherlands/Australia 1976
• Netherlands/Belgium 2001
• Netherlands/Switzerland 1977
• Netherlands/United Kingdom 1980
• Netherlands/United States 1992 with Protocol 2004
• New Zealand/United Kingdom 1983
• Switzerland/Netherlands 1977
• United Kingdom/France 2004
• United Kingdom/Italy 1988
• United Kingdom/Mauritius 1981 with Protocol 2003
• United Kingdom/Netherlands 1980
• United Kingdom/New Zealand 1983
• United Kingdom/United States 2003
• United States/Netherlands 1992 with Protocol 2004
• United States/United Kingdom 2003

]]> http://www.tax-international.com/double-tax-treaties/feed/ 0 http://www.tax-international.com/permanent-establishment-for-vat/ http://www.tax-international.com/permanent-establishment-for-vat/#comments Mon, 26 Jul 2010 23:27:48 +0000 Braxton7 http://www.tax-international.com/?p=450 Permanent establishment for VAT in the Netherlands

What is a permanent establishment for VAT purposes?

A permanent establishment is a business premises in the Netherlands that is equipped with sufficient facilities to operate as an independent business. The business premises are used for supplying goods or services to third parties. Examples of a permanent establishment are:

• a shop or another fixed retail outlet
• a workshop or a production plant with an adjoining office

Storage space, a goods depot or an establishment that is used only for supporting activities (such as performing research, advertising or distributing information) is not regarded as constituting a permanent establishment. A rented holiday home is not considered to be a permanent establishment either.

For example, a French department store sells goods from a shop in the Netherlands. This shop is a permanent establishment because it operates as an independent business. The permanent establishment is a domestic company.

Another example. A UK manufacturer has a warehouse for raw materials in the Netherlands. This warehouse is not a permanent establishment because it does not operate as an independent business. The manufacturer is deemed to be a non-resident entrepreneur for the turnover tax.

Permanent establishments are not the same for VAT purposes than for corporate tax purposes.

You can learn more about permanent establishments for VAT purposes in International VAT