EU proposes to remove Barbados and others from tax haven blacklist
BRUSSELS (Reuters) – European Union officials have proposed removing eight jurisdictions from the blacklist of tax havens the bloc adopted in December, in what critics may see as a blow to its campaign against tax avoidance. EU states decided last month to draw up the list in a bid to discourage the most aggressive tax dodging practices. But eight of the 17 jurisdictions currently listed are set to be quickly removed from the list after they offered to change their tax rules, according to EU documents seen by Reuters. Panama, South Korea, the United Arab Emirates, Barbados, Grenada, Macao, Mongolia and Tunisia are the jurisdictions that EU officials have recommended be delisted. The removal of Bahrain was also initially considered, but its delisting was eventually not recommended, the documents show. The proposal will be discussed at a meeting of EU ambassadors on Wednesday and is expected to be adopted by EU finance ministers when they meet next week in Brussels for monthly talks. Jurisdictions set to remain on the blacklist are American Samoa, Bahrain, Guam, the Marshall Islands, Namibia, Palau, Saint Lucia, Samoa, and Trinidad and Tobago. The proposal for the delisting was made by the so-called Code of Conduct Group, which gathers tax experts from the 28 EU member states. It monitors countries’ commitments to abide by EU standards on tax matters. If the recommendation were confirmed by EU ministers, the eight jurisdictions will be moved to a so-called gray list which includes those who have committed to change their rules on tax transparency and cooperation. The gray list currently includes 47 jurisdictions. The shrinking of the blacklist is likely to be criticized by tax transparency groups. In December some activists denounced the listing process as a whitewash and had called for the inclusion in the blacklist of some EU countries accused of facilitating tax avoidance, like Luxembourg, Malta, Ireland and the Netherlands. The recommended removal of Panama may cause particular outcry, as it has been at the center of one of the largest disclosures of offshore schemes, the so-called Panama Papers. EU officials have said the purpose of the blacklist is to convince jurisdictions to become more transparent. Having fewer on the list means more countries have committed to changes, they say. Article compliments Reuters
Demand for a second passport to Caribbean countries soars in the UAE
The Dubai-based Citizenship Invest, a market leader specialized in the fastest citizenship programs to legally obtain a second passport, has said that high net worth families and residents in the United Arab Emirates (UAE) contributed to over 70 percent increase in demand for second European and Caribbean nationality in the fourth quarter of 2017, according to reports here. The top three nationalities that contributed to this spike in demand are Yemenis with 31 percent, followed by Syrians by 15 percent, and Lebanese by 8 percent, according to Arab News, the Middle East’s leading English Language daily. It said on Monday that the increase in demand is also attributed to the latest amendments in the citizenship legislation of countries like St. Kitts and Nevis, Dominica, and Antigua and Barbuda. “The amendments decreased the application costs by 50 percent, which have made it a much more accessible process,” Arab News said. “Obtaining a European or a Caribbean passport has become a crucial requirement for high net worth individuals. “These passports provide people in the region with a sense of comparatively more security for their families and businesses, as well as freedom of movement,” it added. Veronica Cotdemiey, chief executive officer of Citizenship Invest, said: “We have been seeing a great increase in the number of families applying over single applicants. The main reason is that countries like St. Kitts and Nevis, and Antigua and Barbuda are accepting a family of four members for around SR500,000 (US$133,400) when only two months ago the same would have cost over SR1 million.” All the countries that have a fast-track citizenship by investment program offer a passport that allows a visa-free entry into 146 countries, Arab News said. It said these countries include nations under the Schengen zone as well as the UK, China, Singapore and Russia. “Caribbean countries also have strong ties with the Gulf Cooperation Council (GCC) countries, which makes their passports very popular among Middle Eastern investors,” Arab News said. Citizenship Invest claims that it is one of the “oldest most reputable companies within the Citizenship by Investment industry and holds the strongest credentials.” During its journey, Citizenship Invest said it has successfully processed a second nationality and passports for thousands of clients from over 45 countries across the Middle East, Europe and Asia. “Through our strong track record with the Governments and historical experience, we ensure the highest success rates for our clients,” it said in a statement. Source: Caribbean Life News
‘Taxpayer Friendly’ IRS Guidance Could Ease Offshore Worries
Barely a week after President Trump signed the Tax Cuts and Jobs Act into law, the U.S. Treasury Department and the Internal Revenue Service issued a guidance that could ease the confusion CFOs might have had about how corporations should calculate the act’s “transition tax” on offshore earnings. In amending section 965 of the Internal Revenue Code, the new law slaps the transition tax on the previously untaxed earnings of foreign subsidiaries of U.S. companies by deeming those earnings to be “repatriated,” or subject to U.S. corporate income tax. Under the act, which became law on December 22, 2017, companies will now be taxed on foreign earnings held as cash and cash equivalents at a 15.5% rate and on the remaining non-cash earnings at an 8% rate. In contrast, companies will see their maximum tax rates on domestic income slashed from a previous maximum of 35% to a flat 21% rate. Companies can string out the transition tax payments in instalments over an eight-year period, according to the act. Prior to the December 29 guidance from Treasury and the IRS, however, it wasn’t clear how companies should calculate the one-time transition tax. (After paying the tax, U.S. companies will no longer be able to defer payment of U.S. tax on foreign earnings. Instead, they will have to decide whether earnings are truly onshore or offshore in the current year, and then be taxed just on the onshore earnings.) The guidance should largely ease CFOs’ worries about complying with the part of the new tax law that concerns offshore earnings, according to Pat Jackman, a principal in the international tax group of KPMG’s Washington national tax practice. Concluding that the guidance is, on balance, “taxpayer friendly,” Jackman points to a provision in the act that had company executives concerned that the new law would require companies to “double count” earnings on transactions made by their subsidiaries — and therefore pay a higher transition tax on them. “There was lots of uncertainty in terms of how certain calculations [would be] done, and, in some cases, there was a concern that the amount of cash would be overstated in the way that the statute was drafted,” Jackman says. “This notice clarifies that the procedure that taxpayers are allowed to employ will avoid overstating the amount of cash.” In terms of double counting (or double non-counting, for that matter), the tax years of two foreign subsidiaries of the same U.S. parent company may end on different dates. Such a situation could result in the parent company having to treat a transaction between the two subsidiaries two times, thereby overstating or understating its taxable income when it repatriates. The guidance provides an example in which USP, a calendar-year taxpayer, wholly owns CFC1, which has a December 31, 2017, year-end, and CFC2, which has a November 30, 2018, year-end. Further, USP’s share of the cash position of each of CFC1 and CFC2 is $100 for each of their taxable years, with the result that USP’s aggregate foreign cash position would be overstated at $200. Under the example, CFC1 might make a payment in, say, interest or royalties, to CFC2. Before the guidance, the parent company might have been expected to pay a 15.5% transition tax on that whole $200. The new guidance provides the IRS with the authority to clarify the situation in favour of the parent company that would halve the taxable cash-based income in the example. The revenue service could now adjust the company’s earnings “to ensure that a single item of a specified foreign corporation is taken into account only once,” according to the guidance. Article compliments IFC Review.