International Tax Forum

Transfer Pricing impact on domestic market competition

Fernando@konsilia.es (Fernando Del Canto) — Mon, 20 Apr 2009 20:04:30 +0100

The relationship between Gray market goods and transfer pricing regulations is discussed in this most interesting paper from Harvard Business School Working Knowledge, which can be downloaded here

The article, authored by HBS Faculty Romana L. Autrey and Francesco Bova, brings a fresh perspective from the Business Academia, which has been badly missed in the traditional tax analysis of this topic.

For a summary tax discussion on transfer pricing, I refer to our article Transfer Pricing 101.

In the HBS article, the concept of transfer pricing or optimal price is analyzed based on the impact in domestic markets and its consumers. The consequences on internal consumer markets of the tax regulations mandating arm's-length transfer pricing are discussed by Autrey and Bova with great detail.

As per HBS Working Knowledge, the key concepts included in the article are:

A shift to arm's-length transfer pricing erodes domestic consumer surplus by making the gray market less competitive domestically.
In the presence of a gray market, the transfer price that maximizes a multinational's profits may also be the same one that maximizes the social welfare of the domestic economy that houses it.
Arm's-length standard enforcement efforts targeting multinationals that observe little product leakage from foreign markets or that operate in domestic markets that are sufficiently competitive may lead to net welfare gains for the domestic economy.
At the same time, focusing arm's-length standard enforcement efforts on multinationals that work in industries where gray markets provide the only means of domestic competition may make the domestic economy worse off.

For a detailed summary please go to the Harvard Business School Working Knowledge page.

G20 on Tax Havens. From the OECD Site

Fernando@konsilia.es (Fernando Del Canto) — Sun, 05 Apr 2009 13:37:52 +0100

Following the G20 meeting and communique , the OECD Secretariat has provided a detailed report on progress by financial centres around the world towards implementation of an internationally agreed standard on exchange of information for tax purposes. The report available here consists of four parts:

jurisdictions that have substantially implemented the internationally agreed tax standard.
tax havens that have committed to the internationally agreed tax standard but have not yet substantially implemented it.
other financial centres that have committed to the internationally agreed tax standard but have not yet substantially implemented it.
jurisdictions that have not committed to implement the internationally agreed tax standard. Welcoming the outcome of the G20 meeting, OECD Secretary General Angel Gurria said “recent developments reinforce the status of the OECD standard as the international benchmark and represent significant steps towards a level playing field. We now have an ambitious agenda, that the OECD is well placed to deliver on. I am confident that we can turn these new commitments into concrete actions to strengthen the integrity and transparency of the financial system”.

OECD’s Future Challenges:

1. Achieving a rapid and effective implementation of standard: Many of these commitments will require legislative changes and the negotiation of specific bilateral agreements in order to become effective, and the OECD stands ready to assist jurisdictions in their implementation.

2. Speeding up the negotiations of tax information exchange agreements (TIEAs). Small tax havens lack the resources to enter into negotiations with a large number of countries. The OECD’s 2002 Model Agreement on Exchange of Information on Tax Matters sets out an option for multilateral rather than bilateral TIEAs that the OECD intends to explore over the coming weeks. The OECD is also examining how the Nordic experience of multilateral negotiations leading to simultaneous bilateral agreements could be adopted more widely.

3. Extending the scope and role of the OECD’s action: The OECD Global Forum currently encompasses more than 80 jurisdictions and carries out self reviews and peer reviews to assess progress in implementation of the standard.

The time has now come to re-examine the membership, the architecture and the role of the Global Forum in setting standards and evaluating progress. The Global Forum will undertake more robust reviews, to strengthen the implementation of the standard.

Guernsey, Jersey and Isle of Man and OECD Tax Compliance

Fernando@konsilia.es (Fernando Del Canto) — Sun, 29 Mar 2009 11:02:00 +0100

During the last months, and more specifically this month of March, we welcome an unprecedented move toward compliance with OECD guidelines for cooperative territories.

This is particularly true for Guernsey, Jersey and Isle of Man, which by now are positioning themselves high in the list of OECD Tax compliance jurisdictions in Europe - and outside the European Union.

Other tax havens, are part of this move in Europe - outside the EU, such as Liechtenstein, Monaco or Andorra. However, these jurisdictions are still in urgent need to accommodate their internal tax and legal system in a way that can be fully accepted by the international OECD standards.

Please note that I have intentionally excluded Gibraltar. Gibraltar is in Europe and part of European Union, therefore it is "onshore" and in compliance with the EU Tax and Legal system. Please see the Taxprecision.com postings on Gibraltar by clicking here.

Based on many years of international tax practice, I regard Jersey, Guernsey and Isle of Man as the only strong offshore jurisdictions in Europe and outside the EU. These three jurisdictions have developed over many centuries of history a clear autonomous legal and tax system, based on English Law. The three jurisdictions are also accommodating to the new international tax times where international cooperation is paramount.

As reported by the OECD on Friday, " New tax information exchange agreements (TIEAs) signed in recent days by the Isle of Man, Jersey and Guernsey mean that the three jurisdictions now have exchange of information agreements with many of their major economic partners.

During the week the Isle of Man signed an agreement with France, bringing its TIEA tally to 14, of which 12 are with OECD countries; Jersey signed agreements with France and Ireland; and Guernsey signed agreements with France, Germany and Ireland, bringing their tallies to 13 each, including in both cases 11 with OECD countries."

Again, we welcome the move and trust that other countries, including my own, will be following the trend and also modernize their own tax systems to accommodate these cooperative territories.

Isle of Man signs tax information pact with Germany

Fernando@konsilia.es (Fernando Del Canto) — Tue, 03 Mar 2009 21:32:58 +0100

The Isle of Man and Germany announced that they have signed a bilateral agreement for the exchange of information for tax purposes, bringing to 13 the number of such agreements entered into by the Isle of Man.

Jeffrey Owens, Director of OECD’s Centre for Tax Policy and Administration, welcomed the new agreement as a further step in efforts to bring greater transparency and fairness to cross-border financial transactions. “The time has now come ” he noted, “for all jurisdictions that have made commitments to the international standards of transparency and exchange of information to follow the Isle of Man’s lead in implementing them.

” Since the start of 2007, jurisdictions committed to the OECD principles of transparency and exchange of information have signed a total of 36 bilateral information exchange agreements with OECD countries, and the Isle of Man has accounted for 11 of these. “I am particularly pleased with the excellent progress the Isle of Man has made in extending its network of these agreements,” Mr. Owens said.

OECD's work on transparency and information exchange is designed to enable countries to fully and fairly enforce their tax laws in an increasingly borderless world (see progress reports issued in 2000, 2001, 2004 and 2006).

A total of 35 jurisdictions have committed to work with OECD countries under the auspices of the OECD's Global Forum on Taxation to improve transparency and to establish effective information exchange for tax purposes, and many other countries and international organisations have also endorsed these principles. A report issued last September, "Tax Co-operation: Towards a Level Playing Field - 2008 Assessment by the Global Forum on Taxation", describes the progress made over the last year in 83 OECD and non OECD economies in implementing the high standards of transparency and exchange of information for tax purposes.

Transfer Pricing 101

Fernando@konsilia.es (Fernando Del Canto) — Sat, 07 Feb 2009 12:11:32 +0100

A Conference on the new Spanish Transfer Pricing (TP) regulations was held in Sevilla last week by the Law Firm Montero Aramburu and the Transfer Pricing Associates

The conference provided an excellent analysis of the existing Spanish TP regulations from an accounting, tax and legal point of view. It was coordinated by Professor Adolfo Martin, Universidad de Cadiz, one of the foremost European experts in international tax and someone that has inspired my career.

Transfer Pricing has been a fundamental concept in International Tax Planning since I started in the profession many years ago. The first TP guidelines were issued in 1979 by the OECD.

Transfer pricing Rules refers to the recommended pricing tools to determine the prices for services or goods between related companies located in different jurisdictions. Most of the OECD countries have adopted transfer pricing legislation, which makes easier the TP process.

Transfer Pricing rules are based on the arm's length principle. This principle obliges to treat related enterprises within a multinational group by affirming traditional transaction methods as the preferred way of pricing.

The Tax authorities are concerned on how multi-national entities may set transfer prices on cross-border transactions to reduce taxable profits in their jurisdiction. This has led to the rise of transfer pricing regulations and enforcement, making transfer pricing a major tax compliance issue for multi-national companies and has kept tax advisers very busy.

For example, a company located in the US licenses its Intellectual Property to a related company resident in Spain. The Spanish Transfer pricing rules will help the US company to determine the appropriated price to satisfy the Spanish Tax Agency.

How is the right price determined for all goods and services in a given country? It is not an easy process and each country will adopt different approaches, as seen in the variety of OECD countries who have adopted transfer pricing legislation.

To determine the right transfer pricing policy for an international group it is fundamental to do a full analysis from a tax, legal, accounting and financial point of view.

To facilitate this process, some tax authorities offer the possibility to enter into Advance Pricing Agreements (APA).We should cover APAs in a separate article.

One of the main issues we find in practice is that the meaning of the arm's length principle is an undetermined legal concept. The lack of transfer pricing case law is coming in the way to create a safe harbour for companies to operate internationally with confidence.

We should try to cover more aspects of this topic in subsequent articles and welcome any comments.

Australia and Isle of Man Tax agreement signed

Fernando@konsilia.es (Fernando Del Canto) — Sun, 01 Feb 2009 19:24:22 +0100

The OECD announces that on 29/01/09 Australia and the Isle of Man have signed a Tax Information Exchange Agreement (TIEA).

Australia and IoM will continue to examine what further measures could be adopted to enhance their economic and trading relationship, and ways in which bilateral cooperation can be made as effective as possible. It is great to see the list of TIEAs growing.

The agreement can be downloaded here

Of particular interest to our readers is to see Spain moving slowly into negotiating TIEAs according to the OECD list, where they refer to a new treaty signed in June 08 between Spain and Netherlands Antilles. (Disclaimer: I have not been able to find that agreement signed with Spain. The last one according to my records was signed in 2005 with The Netherlands . Any help to find this TIEA will be greatly appreciated)

The model agreement was developed by the OECD Global Forum Working Group on Effective Exchange of Information (“the Working Group”). The Working Group consisted of representatives from OECD Member countries as well as delegates from Aruba, Bermuda, Bahrain, Cayman Islands, Cyprus, Isle of Man, Malta, Mauritius, the Netherlands Antilles, the Seychelles and San Marino.

Recent bilateral agreements (by date of signature)

Australia - Isle of Man (29 January 2009)
The United Kingdom - Guernsey (20 January 2009)
The United States - Liechtenstein (8 December 2008)
The United Kingdom - British Virgin Islands (29 October 2008)
Denmark - Guernsey (28 October 2008)
Denmark - Jersey (28 October 2008)
Faroes - Guernsey (28 October 2008)
Faroes - Jersey (28 October 2008)
Finland - Guernsey (28 October 2008)
Finland - Jersey (28 October 2008)
Greenland - Guernsey (28 October 2008)
Greenland - Jersey (28 October 2008)
Iceland - Guernsey (28 October 2008)
Iceland - Jersey (28 October 2008)
Norway - Guernsey (28 October 2008)
Norway - Jersey (28 October 2008)
Sweden - Guernsey (28 October 2008)
Sweden - Jersey (28 October 2008)
Australia - British Virgin Islands (27 October 2008)
Isle of Man - United Kindom (29 September 2008)
Jersey - Germany (4 July 2008)
Netherlands Antilles - Spain (10 June 2008) [A copy of the agreement will be provided in due course]
Guernsey - Netherlands (25 April 2008)
Isle of Man - Ireland (24 April 2008)
Bermuda - United Kingdom (4 December 2007)
Denmark - Isle of Man (30 October 2007)
Faroes - Isle of Man (30 October 2007)
Finland - Isle of Man (30 October 2007)
Greenland - Isle of Man (30 October 2007)
Iceland - Isle of Man (30 October 2007)
Isle of Man - Norway (30 October 2007)
Isle of Man - Sweden (30 October 2007)
Jersey - Netherlands (20 June 2007)
Netherlands Antilles - New Zealand (01 March 2007)
Australia - Netherlands Antilles (01 March 2007)
Antigua & Barbuda - Australia (30 January 2007)
Australia - Bermuda (15 November 2005)
Isle of Man - Kingdom of The Netherlands (12 October 2005)
Aruba - United States (21 November 2003)
Jersey - United States (04 November 2002)
Isle of Man - United States (02 October 2002)
Guernsey - United States (19 September 2002)
Netherlands Antilles - United States (17 April 2002)
British Virgin Islands - United States (03 April 2002)
Bahamas - United States (25 January 2002)
Cayman Islands - United States (27 November 2001)
Antigua And Barbuda - United States (06 December 2000)

Tax Investigation Priorities.- Spain 2009

Fernando@konsilia.es (Fernando Del Canto) — Fri, 30 Jan 2009 11:57:33 +0100

The Spanish Tax Office, AEAT, has published last week the 2009 Tax Investigation Priorities.

The plan can be downloaded here, and these are some of the main areas of focus for international investors:

Corporation Tax review.- A special emphasis is going to be placed on companies with high turnover and low profits, where taxable profit may have been reduced artificially.

International holding companies.- To review existing international corporate structures holding Spanish assets with a deemed "artificial arrangement"

Transfer Pricing.- To enforce new transfer pricing rules and statutory provisions with special focus on invoices from Spain to countries with a lower taxation system.

Property Holding companies (Sociedades Patrimoniales).- To review Companies that have benefited from the former special regimen for Sociedades Patrimoniales where capital gains were taxed at 15%.

Non Residents.- Special focus on non residents owning property in Spain and transfers of said properties, including working with regional tax offices regarding Wealth Tax up to 31/12/08.

Tax Identification Numbers.- There is going to be an increased activity in line with statutory obligations for international companies to be identified with a Spanish tax identification number

VAT and Indirect Taxes.- Continues been a classic and renovated focus is going this year where the new regimen of monthly VAT refund has been established.

Please find below an extract in Spanish of the main statutory provisions.

Control del sector inmobiliario. Durante el año 2009 aprovechando las novedades tecnológicas desarrolladas por la Dirección General del Catastro que permiten la determinación más exacta de los precios de mercado de los inmuebles objeto de transmisión, se desarrollarán programas de control de las transmisiones patrimoniales de inmuebles, especialmente de viviendas, al objeto de verificar que se adaptan al concepto de precio de mercado que se fija en el Impuesto sobre la Renta de las Personas Físicas y en el Impuesto sobre Sociedades. Se proseguirá con el control de las sociedades que, dedicándose a la actividad de promoción inmobiliaria, han declarado improcedentemente como sociedades patrimoniales al objeto de aprovechar la menor tributación de las plusvalías de estas entidades, no reuniendo los requisitos para ello, así como se realizarán actuaciones especiales de control en materia de subcontratación y operaciones inmobiliarias de adquisición, tenencia y transmisión de inmuebles por no residentes. Como novedad, se realizarán actuaciones de control sobre promotores y constructores a los que se les han efectuado imputaciones por declarantes del IRPF en concepto de pagos para adquisición de vivienda de nueva construcción que no se corresponde con los importes declarados en el Impuesto sobre Sociedades o en el Impuesto sobre el Valor Añadido, actuaciones que se completarán con el control de posibles declarantes indebidos de estas cantidades en el IRPF. También, en materia de control del sector inmobiliario, se mantendrá la práctica de importantes actuaciones de captación de información masiva y normalizada cuyo uso pueda resultar relevante a los efectos de detección de posibles bolsas de fraude tributario, especialmente en lo que se refiere a los desarrollos urbanísticos.

Investigación de operaciones de ingeniería fiscal y de interposición de sociedades sin nivel relevante de actividad económica. Las actuaciones se dirigirán a la detección de formas de fraude basadas en la utilización de figuras negociales anómalas o en el uso improcedente de determinados beneficios fiscales que suponen el desarrollo de estructuras de planificación tributaria abusivas. Entre las distintas operaciones de fraude complejo y que una vez identificadas serán objeto de comprobación, figuran las siguientes: disolución de sociedades transparentes y, en su caso, de sociedades patrimoniales, operaciones de fusión, escisión, aportaciones y canje de activos acogidas al régimen especial del Capítulo VIII del Texto Refundido de la Ley del Impuesto sobre Sociedades, aprobado por Real Decreto Legislativo 4/2004 , de 5 de marzo, o reducciones de capital con adquisición previa de acciones. Igualmente, se realizarán actuaciones de control sobre la deducibilidad de gastos financieros, provisiones de cartera y deducciones fiscales que pongan de manifiesto un vaciamiento de los resultados contables o bases imponibles de los obligados tributarios.

Se pondrá un especial acento en el control de aquellos sujetos que habiendo declarado un resultado contable relevante, mediante la realización de ajustes al resultado contable o a la base imponible o deducciones en la cuota del tributo, hayan procedido a presentar autoliquidaciones en el Impuesto sobre Sociedades con resultado muy reducido. Se potenciará el control de la procedencia de los beneficios fiscales aplicados por los contribuyentes, especialmente en lo referente a la deducción por reinversión de beneficios extraordinarios, además de los supuestos señalados en la letra e) anterior.

Se van a potenciar las actuaciones de control en materia de Fiscalidad Internacional. Especialmente relevante será el control de las operaciones en las que han existido precios de transferencia que en ocasiones suponen simplemente transferencias de rentas que debían tributar en territorio español hacia otros territorios de menor tributación mediante la mera realización de operaciones entre sociedades de un mismo grupo empresarial o vinculadas. Igualmente resultará relevante en este ámbito el control de las transacciones con paraísos fiscales, manteniéndose los controles en materia de fiscalidad inmobiliaria de no residentes en línea con lo establecido en el apartado d) anterior, el control de operaciones con contribuyentes deslocalizados y la aplicación de las normas anti-abuso de la legislación española. Finalmente, en desarrollo de las previsiones de actualización del Plan de Prevención del Fraude, se fomentará la participación de los órganos de inspección de la Agencia Tributaria en la realización de controles multilaterales junto con los órganos de inspección de otros países de la Unión Europea, realizando de esta forma actuaciones de comprobación coordinadas entre todos ellos para lograr una mayor eficacia en la lucha contra el fraude que se aprovecha de la existencia de jurisdicciones fiscales distintas, especialmente en materia de fraude en el IVA y en operaciones vinculadas.

Paul Krugman, a Nobel on Spanish Economy

Fernando@konsilia.es (Fernando Del Canto) — Sat, 24 Jan 2009 12:25:21 +0100

Dr Paul Krugman, Nobel Prize for Economics 2008, published The Pain in Spain in The New York Times.

The article, in his regular column The Conscience of a Liberal, is dated Monday January 19th 2009, one day before President Barack Hussein Obama took his Oath of Office.

What did inspire Dr Krugman to write about Spanish pains in a NY paper on such relevant day for America?

Let me say upfront that I admire Dr Krugman's economic theory and his ability to communicate in plain English with a broader audience.

Having said that, I would have appreciated that before making an economic analysis on a complex situation like the EU monetary policy and Spain, and before having entered into an international comparative analysis with the US Federal system and Florida; Dr Krugman had selected better the forum, the length and the timing needed to give an accurate picture to US readers.

In order to elucidate properly the issue of Spain's current economy, Dr Krugman may have needed several pages, and not just a short column in The NY Times.

For me the question is, what does make someone of Dr Krugman's intellectual caliber to sacrifice academic precision for the sake of mass communications? A sign of our times?

In his defense, I must say that at least Dr Paul Krugman took the time to spice his article by comparing Florida to Spain and the US Federal system to the EU, making a more interesting reading for a broader audience.

I leave our readers to assess the comparison and the arguments used and would appreciate any comments on this topic.

IP Escrow and International Tax Planning

Fernando@konsilia.es (Fernando Del Canto) — Sat, 24 Jan 2009 11:38:52 +0100

Branded By Blog posted Software Database and Website escrow- do businesses really need it?.

In the article, UK solicitor Izaz Ali outlines the importance of using escrow as a protection for electronic IP as well as a sound business development tool.

Izaz mentioned in his article that ¨Escrow comes in to play when two parties hand over something valuable (money, contracts, software etc) to a trusted third party (who acts as the agent) to release the valuable item when certain conditions are met¨

From an international tax perspective, placing IP on escrow under certain circumstances, and in an appropriated jurisdiction may provide an advantageous tax planning tool for transactions involving software or electronic IP.

Using escrow for tax planning purposes involves careful tax planning and legal drafting of the arrangements between the parties and the escrow agent.

Any tax strategy must consider tax residence issues for the parties, escrow jurisdiction, contractual drafting and the appropriate timing for execution and completion.

Guernsey and the United Kingdom- Double Tax Treaty signed

Fernando@konsilia.es (Fernando Del Canto) — Thu, 22 Jan 2009 11:20:28 +0100

As reported by the OECD the Bailiwick of Guernsey and the United Kingdom have today signed a bilateral agreement for exchange of information for tax purposes bringing to 10 the number of such agreements entered into by Guernsey, including:

This particular agreement is especially significant given the close economic and political relations between Guernsey and the United Kingdom.

Jeffrey Owens, Director of the OECD’s Centre for Tax Policy and Administration welcomed the new agreement as an important development. Given the current financial crisis, he noted, “it is now more important than ever that countries implement international standards of transparency and exchange of information.”

“Guernsey has signed nine tax information agreements with other countries within the past year, making its commitment to international standards in these areas clear and strengthening its reputation as a legitimate financial centre,” Mr. Owens said. “Guernsey has shown that the standards can be implemented quickly where there is a real willingness to do so.”

A bit of history to understand the relationship between Guernsey and the United Kingdom.

The Bailiwick of Guernsey is a British crown dependency off the coast of France. As well as the island of Guernsey itself, it also includes Alderney, Sark, Herm, Jethou, Brecqhou, Burhou and other islets. There are 10 Parishes in Guernsey. Together with the Bailiwick of Jersey, it is included in the collective grouping known as the Channel Islands. It is known in French as Guernesey.

According to the official States of Guernsey webpage, everything began in 933 AD when the Channel Islands became part of the Norman Realm. In 1066, the Duke of Normandy landed his army in Sussex and became William I of England. The Channel Islands, however, remained part of the Duchy of Normandy and continued to be governed as such.

When Continental Normandy was lost in 1204 the Channel Islands remained loyal to the King of England as the King promised to rule the islands as though he was the Duke of Normandy (i.e. observing the Duchy’s laws, customs and liberties). The special tax exemption regime in respect of the Kingdom of England was maintained since those times.

This arrangement has been confirmed in charters of successive sovereigns that have secured for the islands their own judiciaries and freedom from the process of the English Courts. Indeed the Islands are independent in all matters with the exception of international representation and defence for which the United Kingdom is responsible.

My experience of the States of Guernsey fiduciary and Trust system as well as the financial and business environment in general has been very positive. I also recommend Guernsey as a fabulous place to visit.

How Many Beans Make Five? Determining the Advisory Capacity

Fernando@konsilia.es (Fernando Del Canto) — Mon, 12 Jan 2009 20:51:15 +0100

How to select these days a savvy business proposition?

When asked about it, Tony, a successful English investor told me "you must know how many beans make five".

The old British expression "he knows how many beans make five" indicates a clever fellow, or someone who is able to resolve problems with common sense - also referred to as the less common of the senses.

The expression may date back to the abacus, an accounting tool with wooden beads (beans) used for computations.

Back to the question, the importance of knowing how many beans make five can not be underestimated in today's world.

Despite the many solutions offered by GBEC.- "Googling", "Blogging" "Emailing" or "Chatting", our common sense and human brains are still essential. This is particularly true in the 21st Century Accounting, Tax and Legal advisory world.

Thinking about this, I came up with a 5 letters acronym - LADOO - which also resembles the name of a nice Indian sweet. This may well act as a representation of the 5 beans to be counted by the modern tax adviser.

Listening to what the client really wants.- Tax planning propositions must not tax clients' life.
Analyzing all the facts.- Consider all past, present and future projections
Determining all applicable Legislation.- Refer to Civil & Commercial / Domestic & International
Optimizing the economy of the options.- Balancing results vs costs
Organizing a clear proposal.- Including SMART actions in Plain English

Therefore, in the course of your practice, if a client asks you how many beans make five, please come up with something better than just responding: One, One and a half, Half and Two.

Thank You Tony!

Bank of England 1.5% interest rate- lowest in 315 years history

Fernando@konsilia.es (Fernando Del Canto) — Fri, 09 Jan 2009 22:26:59 +0100

The Bank of England cut interest by 0.5 percent, reducing Base Rate to 1.50 percent – the lowest in its 315 year history, reports HSBC

In its statement, the BoE expressed concern over the increasing pace of contraction in activity and the sharp drop in output. “The availability of credit to both households and businesses has tightened further, pointing to the need for further measures to increase the flow of lending …,” they said – suggesting that the Bank may have to use alternative tools to fight the lending drought. We expect further cuts in the months to come.

The statement also highlighted sterling’s depreciation and pointed out that recent falls in the pound may help exporters to limit the impact of the global slowdown. Indeed sterling has fallen dramatically, losing 24% of its value in the last 12 months. After the announcement the pound rallied touching a high of $1.5372 and closing above $1.5100 versus the dollar.

German industrial orders for November dropped by 6 percent m-o-m, while the expected decline was just 1.1 percent. The y-o-y rate (minus 24 percent) registers a new record low the second time in a row.

Today’s data kicks off with the UK Industrial Production (Nov) and PPI (Dec) at 9.30 GMT. Eurozone numbers for retail sales will be out at 10.00, followed by German industrial production at 11.00GMT. However, most focus today will be on US non-farm payrolls at 13.30 GMT, where many are expecting a downside surprise, despite yesterday’s lower than expected jobless claims for the week ending 3 January (falling to 467k while the consensus was 545k).

Tax Payers and Baby Boom

Fernando@konsilia.es (Fernando Del Canto) — Fri, 09 Jan 2009 18:58:12 +0100

The Economist reports this week on Quebec's efforts to improve its demographic prospects and how taxpayers contributed to it.

The cradle's costly revenge explains how the use of cash incentives for new births coupled with some generous parental leave policies increased 8% the birth rate in 2006.

Baby boom is a big word, according to Céline Le Bourdais, a demographer at Montreal’s McGill University, and it may be more appropriate to speak of a little baby bump as the policies had very little effect after 2006.

These news will add to the debate of tax policies used as a tool to influence the Economy and many other areas of our lives !!!

Strategies for a SMART 2009

Fernando@konsilia.es (Fernando Del Canto) — Tue, 06 Jan 2009 11:30:55 +0100

Happy New Year 2009 and May this year be a SMART year.

In Taxprecision.com we look forward to continue our learning and be able to contribute to greater clarity in these interesting times.

How the World and the Economy will evolve in 2009 is difficult to assess even for the best Economists.

In The New York Times online edition an interesting article reads It's called the Economist not the Futurist. In this article Stephanie Clifford says “...About 2008: sorry,” reads a note from the issue’s editor, Daniel Franklin, in the prediction edition for 2009. Who would have seen the financial crisis coming, Mr. Franklin asked? “Not us. The World in 2008 failed to predict any of this,” he said.

Learning from previous years the best thing we can do is to continue our focus on the opportunities ahead.

By wishing you a SMART 2009, I would like to bring your attention to SMART, a good criteria to enhance our Projects for this year.

The word SMART is applied to a person having or showing a quick-witted intelligence. Another meaning we all learn in our Project Management 101 is the criteria to set clear goals. As defined by Projectsmart "...The acronym SMART has a number of slightly different variations, which can be used to provide a more comprehensive definition for goal setting:

S - specific, significant, stretching

M - measurable, meaningful, motivational

A - agreed upon, attainable, achievable, acceptable, action-oriented

R - realistic, relevant, reasonable, rewarding, results-oriented

T - time-based, timely, tangible, trackable

With this in mind, may this year 2009 be a year of SMART Projects!!!

Today is the Three Kings festivity in Spain , a day for gifts and good wishes and I want to bring to your attention a couple of interesting articles for both investors and entrepreneurs to act upon:

The Harvard Business Review brings us the article Marketing your way through a recession, which gives some tips to ensure a successful 2009.

The Economist Ready for a Rally? bring some good perspectives for equity investors.

For all of us let's have a great year and remember the importance of the SImple Bare Necessities

The 'Official' Wealth Tax abolition. Ley 4/2008 de 23 de Diciembre

Fernando@konsilia.es (Fernando Del Canto) — Sat, 27 Dec 2008 22:41:44 +0100

The Spanish Parliament has now passed "officially" the legislation abolishing the Ley 19/1991 de 6 de Junio del Impuesto sobre el Patrimonio (Wealth Tax Act) .

The Wealth Tax Act itself was not abolished as it is part of the more complex Spanish sistema de financiación de las Comunidades Autónomas (regional finance system), which requires a much larger - and politically charged - discussion with the Gobiernos Autonomicos.

The Ley 4/2008 de 23 de diciembre, por la que se suprime el gravamen del Impuesto sobre el Patrimonio(...), was published on the Spanish Government Official Gazette (BOE) in Christmas Day. The legislation was passed by the Spanish Parliament the 23rd December 2008 and will apply to tax years starting 1st January 2008 onwards.

The Wealth Tax abolition is instrumentalised by terminating the obligation to submit a wealth tax return and by applying a 100% deduction to the taxable base. This deduction is referred to in the Third article of the Ley 4/2008.

The deduction is applied to all taxpayers, both Spanish residents (Obligacion personal) and non residents (Obligacion real) regarding Wealth Tax (Impuesto de Patrimonio).

The following Articles of the Wealth Tax Act have been repelled by this new Ley 4/2008.

Article 6 and Disposicion Transitoria regarding the obligation for non residents to appoint a Tax Representative in Spain

Article 36, 37 and 38 regarding the obligation to submit a return and payment of the tax

After a year where we have got to know each other around the Wealth Tax abolition, we are very happy to end the year with this, our last 2008 posting, wishing you all a Happy 2009!!!!!

Gibraltar Tax Regimen.- New Favourable EC Court Rule

Fernando@konsilia.es (Fernando Del Canto) — Fri, 19 Dec 2008 06:40:23 +0100

We welcome the EC Court of Justice ruling against the European Commission argumenting that Gibraltar's corporate tax reform constitutes illegal state aid.

The Judgement from the Eight Chamber of the Court of First Instance says: "It follows from all of the foregoing that the Commission has not established the existence of selective advantages stemming from the three aspects of the tax reform that are at issue. Therefore, by classifying those aspects as State aid, the Commission made an error of law in the application of Article 87(1) EC."

As reported by Down Jones Deutschland, " Gibraltar's tax regime must be considered as Gibraltar's only and not as a part of the UK.'s, the Court of First Instance said. The court ruling means Gibraltar won't have to match UK. tax rates and it won't lose the fiscal independence that is key to its ability to attract businesses seeking favorable tax treatment within a sovereign British territory.

The commission investigated the Gibraltar tax reforms after the UK notified it in 2002 of Gibraltar's plans. Gibraltar is seen as part of the UK for the purposes of EU membership.

The reform aimed to abolish the 35% corporate tax rate and replace it with payroll tax and a business property occupation tax - both capped at 15% of profit. This, the commission said in a 2004 statement, meant "offshore companies with no physical presence in Gibraltar won't incur any tax liability at all."

The commission found the tax reform violated EU state aid rules as it resulted in a lower corporate tax rate (15%) for Gibraltar companies than for UK. companies and favored certain sectors over others."

Liechtenstein and US tax cooperation. Is Spain following the OECD trend?

Fernando@konsilia.es (Fernando Del Canto) — Sat, 13 Dec 2008 17:16:10 +0100

The US and Liechtenstein signed an agreement for the exchange of information on tax matters.

According the International Tax Review "The US government is leading the way on expanding information exchange," said Jesse Eggert, attorney adviser at the US Department of Treasury. "This is a comprehensive information exchange which pierces bank secrecy."

This is another encouraging step toward a more transparent economy. The move is particularly welcomed as Liechtenstein is not included in the list of OECD cooperative jurisdictions .

We look forward to see the Spanish government moving in this direction instead of pursuing an inquisitional approach to offshore jurisdictions, as reflected by the infamous RD 1080/1991, a 17th years old Statute, still in force, criminalizing MOST offshore jurisdiction. It is very unfortunate that the Spanish government is neglecting to consider the OECD position, by accepting that 35 Jurisdictions are complying or planning to comply with the international rules for information exchange. We would like to see a change of approach.

Meanwhile, from Tax Precision we continue advocating for all the OECD countries to increase the network of bilateral tax agreements and information exchange protocols with cooperative offshore jurisdictions, and beyond. We believe this is a much efficient and effective approach to fight tax evasion.

First Electronic Apostille (E-Apostille) in Europe

Fernando@konsilia.es (Fernando Del Canto) — Sat, 13 Dec 2008 12:47:13 +0100

The web page of The Hague Conference on Private International Law reports the very good news.- the issuing of the first Electronic Apostille in Europe!.

For those of us working with international documentation and deeds, this comes as a breeze of fresh air, which we look forward to further development.

The Hague Conference web page reports:

"The Superior Court of Murcia (Spain) recently issued the first electronic Apostille (e-Apostille) in Europe.

This Apostille, issued within the framework of an international adoption procedure, is perfectly consistent with the model proposed under the e-APP. Please click here to read the press release from the Superior Court of Murcia."

Spanish Wealth Tax Update

Fernando@konsilia.es (Fernando Del Canto) — Thu, 04 Dec 2008 12:54:39 +0100

Today the Spanish Parliament Diary (BOCG) has published the Proyecto de Ley, to amend the Wealth Tax Legislation by "abolishing" in practice the Wealth Tax charge for residents and non residents.

The legislation has been approved by the Parliamentary Commission appointed for drafting this Act. The Proyecto de Ley must still be approved by the Spanish Parliament. The Legislative reference is 121/000008 published today, 4th December 2008, in the Boletin Oficial de las Cortes Generales.

The Wealth Tax is amended by abolishing the tax rate. Is this technically a formal abolition of the Tax? The answer is No. T he only certain thing is that no wealth tax will be chargeable for residents (obligacion personal) and non residents alike (obligacion real).

The abolition of the tax charge leaves the Tax without its primary purpose, the collection of taxes from the taxpayer.

Why is not the legislator abolishing the Tax itself? I do not really know.

Is the Spanish Government interested in keeping the door open for the future? it may be the case.

Is the tax office interested in keeping the formal obligation to submit a NIL tax return to keep controlling the value of the assets for Inheritance or Income Tax purposes? This will be seen when final legislation is enhanced.

What is likely to be the time frame for final approval? The Parliament has got technically until the end of the tax year to do so, and they will utilize every available second.

Over the last decades the Spanish Parliament has adopted the bad habit to publish tax legislative amendments with the annual budget -which happens to be the last week of the Tax Year. We can expect a similar pattern for the final passing of this legislation.

Therefore, you will be able to find the final approval by checking www.taxprecision.com from Trafalgar Square or Puerta del Sol the 31st December 2008. By the way, Feliz Año Nuevo!!!

The approved Proyecto de Ley includes some context for the Wealth Tax amendment in Section IV, which mentions the anachronism of this tax as well as the legislative technique to effect the amendment.

The amendment is mentioned in article third of this Proyecto de Ley titled Amendment to the Ley 19/1991, of sixth of June, regulating the Wealth Tax. This is a short article modifying article 33 of the existing Law by applying a 100% allowance to the taxpayers, both residents and non residents. The article repeals articles 6, 36, 37,38 and the transitional clause.

There are many questions to be asked, which are not and will not be included in the final approval of this Proyecto de Ley. Therefore, for those of you who has been asking, is this really approved? the answer is keep watching this space.

A Stitch in Time, Financial wisdom from around the world.

Fernando@konsilia.es (Fernando Del Canto) — Mon, 01 Dec 2008 21:47:21 +0100

A Stitch in Time

A compendium of proverbs from around the world for these trying financial times.,

By Ben Schott, New York Times, December 1, 2008.