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French Life Insurance “101” – For U.S. Persons, Run Away

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French Life Insurance “101” – For U.S. Persons, Run Away

An individual takes out life insurance in order to provide for his heirs and to obtain peace of mind. Tax treatment for the individual during life and the heirs is straightforward when everyone resides in one country. But when a life insurance policy is written in France and the insured or the heirs are U.S. citizens or residents, what the policy holder, his estate, or the beneficiaries may encounter is anything but peace of mind. To their chagrin, each may find that he or she is in the crosshairs of contrary laws in two countries resulting in sub-optimal tax results. In their article, Sophie Borenstein, of attorneys Klein Wenner in Paris, Neha Rastogi, and Stanley C. Ruchelman discusses the French and U.S. tax rules applicable to a French life insurance policy. Grown men have cried over less complicated matters.

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Blunders in International Estate Planning

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Blunders in International Estate Planning

Trust & estate lawyers who dabble infrequently in cross border matters, take notice! It is relatively easy to lose your way when advising a non-U.S. person with assets in the U.S. Shortcuts that work when clients and properties are located in the same jurisdiction may lead to horrific problems when clients are domiciled in one jurisdiction and property is located in another. Examples are (A) drafting two wills where each revokes the other, (B) allowing an individual having a foreign domicile to directly own financial assets in the U.S., such as shares of publicly traded stock or mutual funds, can result in unanticipated estate tax and long delays before heirs have access to the assets, (C) not knowing which I.R.S. information reporting forms must be filed when a new client is a recent arrival from abroad can yield significant penalties for the client, (D) allowing a resident, non-citizen individual to return to the home country is an invitation to unnecessary U.S. estate tax if the client retains investment assets and real property in the U.S., and (E) not noticing inconsistencies in residuary clauses in a principal will drafted in the home country and a U.S. property only will drafted in the U.S. begs for a will fight. Diane K. Roskies, a principal in the New York office of the Offit Kurman law firm, and Zachary Weitz, an attorney in the Los Angeles office of the same firm, explain the severe problems that may be encountered, but do so in a light hearted manner.

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Design and Impact of the Colombian “Significant Economic Presence” Regime

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Design and Impact of the Colombian “Significant Economic Presence” Regime

Before and after joining the O.E.C.D. in 2020, Colombia was an enthusiastic adopter of international tax policies promoted by the O.E.C.D.’s B.E.P.S. Project. Two motivations spurred this action. First, the government wished to overcome technical gaps in the domestic legislation of cross-border taxation. Second, the government sought additional revenue from nonresident companies doing business with clients based in Colombia. However, the Significant Economic Presence (“S.E.P.) regime breaks with the tradition of adopting modifications in a way that is consistent with O.E.C.D. policies. Colombia created the S.E.P. regime as a unilateral alternative to the global proposal of Pillar 1, rejecting this proposal based on two strategic considerations. The first was the low probability of global implementation. The second was the expansion of the tax base beyond that provided by Pillar 2. Depending on your viewpoint, the S.E.P. regime contains certain elements that resemble an income tax and other elements that resemble a V.A.T. Eric Thompson, a Partner of attorneys Cañón Thompson in Bogota, takes a deep dive in his article and tells all. He suggests that a tax that was intended to raise revenue from nonresident suppliers may simply result in price increases in Colombia. Who knew that could happen?

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Demystifying Key Complexities of the India Budget 2024-25

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Demystifying Key Complexities of the India Budget 2024-25

The Indian finance minister presented Budget 2024-25 (the “Budget”) earlier this year. During the last financial year, the Indian economy reported growth rate in G.D.P. of 8.2%. Surpassing the United Kingdom, India has sprinted to the position of the fifth largest economy in the world. Budget 2024-25 has been crafted to continue the economic growth of the county. To that end, the budget includes the following provisions regarding direct taxation: (A) Favorable changes in the holding period and tax rates for long-term capital gains, (B) Limitations on the availability to index costs when computing capital gains that in many instances are taxed at lower rates, (C) Parity in rates for residents and nonresidents, (D) Abolition of the Angel Tax, (E) New tax rules for the taxation of a corporate buyback of shares, and (F) The repeal of Equalization Levy 2.0 on e-commerce transactions. Jairaj Purandare, the Founder & Chairman of JMP Advisors Pvt Ltd, Shibani Bakshi, an Associate Director of the firm, and Siddhita Desai, an Associate with the firm, explain the new provisions.

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Earning My Credits: Life At Ruchelman P.L.L.C.

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Earning My Credits: Life At Ruchelman P.L.L.C.

Ruchelman P.L.L.C. actively participates in the extern program for students in the LLM Program at New York Law School. We provide real life professional experience to the extern and the extern receives two credits towards the award of a degree. Our younger lawyers benefit by providing hands-on supervision of the extern, a needed step in professional development. Recently, we expanded our extern program to include J.D. students at New York Law School who have taken enough tax courses to demonstrate a desire to pursue a tax focus in the practice of law. This spring, our extern was Vanessa Lebbos, now a law school graduate. In her article, Vanessa explains her journey in law school, her interest in taking tax courses, and her experience at our firm. Mentoring an extern can be its own reward. That certainly was our experience with Vanessa. 

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Netherlands: New Legislation to Combat Hybrid Mismatches

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Netherlands: New Legislation to Combat Hybrid Mismatches

Late in 2023, the Netherlands parliament adopted a legislative proposal intended to significantly reduce the use of hybrid mismatch arrangements by companies operating internationally. While the legislative proposal reflects the policy of A.T.A.D. 2. – combatting hybrid mismatches – it does so through the adoption of a system to achieve uniform classification of entities on a cross border basis. Gerard van der Linden, a partner of Van Olde Tax Lawyers in Amsterdam, and Thijs Poelert, an associate at Van Olde Tax Lawyers in Amsterdam, explain the fixed method and the symmetric method for classifying foreign entities that are at the core of the law. Classification rules for certain domestic and foreign entities have been modified significantly. C.V.’s, L.P.’s, and L.L.C.’s will be treated as fiscally transparent. The new law is scheduled to take effect on January 1, 2025.

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French Reporting Obligations for Foreign Financial Trusts

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French Reporting Obligations for Foreign Financial Trusts

In general, French information reporting obligations regarding foreign financial trusts are broad, the scope of reporting persons and transactions are broader, and the risk of penalties is severe. By definition, foreign financial trusts are formed under foreign law, have only non-French individuals as settlors and beneficiaries, and in France own only financial investment assets. French reporting obligations can be a burden for the trustees of these trusts and foreign trustees often are not aware of the full scope of the French rules. Even when the rules are known by the trustee, they are ambiguous and imprecise, leading to legal uncertainty. The problem often affects U.S. individuals who invest in French financial assets through trusts upon the recommendation of U.S. asset managers or private bankers. Programs to issue U.S. Dollar Denominated Medium-Term Notes (“U.S.D.M.T.N.’s”) represent a major source of U.S. Dollar liquidity for French banks. In their article, Benoit Bailly, a partner in the Paris office of CMS Francis Lefebvre, and Carl Meak, an associate in the Paris office of CMS Francis Lefebvre, address the labyrinth of reporting obligations that exist in the guidelines issued by French tax authorities. They point out that several rulings of the the Service de la sécurité juridique et du contrôle fiscal appear to be helpful. Nonetheless, more work is left to be done.

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U.S. Citizens Owning Swiss Real Estate – Cross Border Estate Planning is a Necessity

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U.S. Citizens Owning Swiss Real Estate – Cross Border Estate Planning is a Necessity

More and more Americans are living and working in Switzerland. Today, it is common for American citizens to own assets in Switzerland, especially real estate. While impediments to acquire Swiss real estate are easily overcome, the ability to transfer real estate at death in a way that meets the expectations of the American owner requires careful planning in advance. Differences in the inheritance and tax laws of the two countries make estate planning in U.S.-Swiss inheritance cases particularly complex. The problem is exacerbated by differences in conflict-of-law laws. Daniel Gabrieli, a partner in the Private Clients practice group of attorneys Wenger Plattner in Zurich, and Nils Kern, an associate in the Private Clients practice group of attorneys Wenger Plattner in Zurich, explain the issues that are faced under Swiss law, provide a typical fact pattern that may create problems at death, and suggest steps that can be taken during life to avoid the issue altogether.

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Italy Introduces a Penalty Protection Regime for Hybrid Mismatches: Trick Or Treat?

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Italy Introduces a Penalty Protection Regime for Hybrid Mismatches: Trick Or Treat?

Anti-hybrid legislation consistent with A.T.A.D. 2 has been in effect in Italy for fiscal years beginning on or after January 1, 2020. But towards the close of last year, legislation was enacted under which penalty relief is available as of the 2023. The key to obtaining relief is the “hybrid dossier,” which is submitted to the tax authorities and provides full disclosure of the hybrid transactions, the relevant laws in Italy and the other country, and the reasoning why the anti-hybrid penalties are inapplicable. While the new rules clearly apply beginning with the 2023 fiscal year, retroactive relief back to the 2020 fiscal year is allowed, provided one hurdle is overcome. Retroactive relief is available if, and only if, Italian tax authorities “have not started a tax audit, investigation activities, or other similar actions for those fiscal years.” It is understood that Italian tax authorities have already begun to notify targeted taxpayers with questionnaires. In their article, Federico Di Cesare, a Partner of Macchi di Cellere Gangemi in Rome and Milan, and Dimitra Michalopoulos, an Associate in the tax practice of Macchi di Cellere Gangemi in Rome, explain the legislation, address the content of the hybrid dossier, and address the most important issue for many taxpayers: have Italian tax authorities taken action similar to a tax audit by the circulation of the questionnaire?

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Adventures In Transfer Pricing – Practical Experience In Germany

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Adventures In Transfer Pricing – Practical Experience In Germany

 For many years, German tax authorities suspected that M.N.C.’s transfer pricing policies were not in line with the arm’s length principle. Consequently, it comes as no surprise that Germany spearheaded international regulatory developments related to the arm’s length standard. International M.N.C.’s face ever increasing tax controversies in matters related to transfer pricing. In some cases, T.N.M.M. benchmarking is challenged under the view that a German sales entity makes intangible-related D.E.M.P.E. contributions in the field of marketing. In other cases ,C.U.T. benchmarking for intercompany license fees is challenged on grounds that the intangible property licensed to a German affiliate is unique by definition, thereby leading to a profit split. Restructures are attacked using inflated values for routine activities that remain in Germany. However, all is not bleak. In three case studies, Dr. Yves Herve, a Senior Managing Director in the Frankfurt Office of NERA and Philip de Homont, MSc, a Managing Director in the Frankfurt Office of NERA, illustrate in “plain language” the ways by which in-depth economic analysis has been used to overcome aggressive assertions by tax examiners.

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Israel Proposes Modifications to Tax Reporting Obligations for Olim

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Israel Proposes Modifications to Tax Reporting Obligations for Olim

Acting in response to recommendations by the O.E.C.D. Global Forum on Transparency and Exchange of Information for Tax Purposes, legislation has been proposed in Israel to adopt new reporting obligations for Israeli entities, certain trusts, and individuals known as “Residents for the First Time” and “Senior Returning Residents.”  The proposed amendment does not alter tax liabilities in Israel or eliminate preferred tax treatment of Olim. Rather, it revises certain reporting obligations in order to increase transparency. As of April 1, 2024, adoption is imminent. Boaz Feinberg, a partner of Arnon, Tadmor-Levy Law Firm, Tel Aviv, explains all. 

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The Most Important 15 Questions to Ask About the Forfait in Switzerland

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The Most Important 15 Questions to Ask About the Forfait in Switzerland

As one door closes for non-doms in the U.K., a tried and true door may open in Switzerland, in the form of a negotiated annual tax amount. For many decades, several cantons in Switzerland have adopted a special taxation regime known as the forfait. It allows foreign nationals relocating to the respective canton to pay tax based on worldwide living costs. Although the forfait regime was abolished in a number of cantons, a national vote was held in 2014 turning down a proposal calling for its elimination. In his article, Michael Fischer, the founding partner of Fischer Ramp Buchmann AG, Zürich, asks – and answers – questions about the most important elements to be considered when considering Switzerland as a new place of residence.

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U.K. Budget Proclaims Death Knell For Remittance Basis Taxation

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U.K. Budget Proclaims Death Knell For Remittance Basis Taxation

As was widely anticipated, the Chancellor of the U.K. used his budget speech on March 6 to announce the termination of the non-domicile regime and remittance basis of taxation effective April 12, 2025. In its place, a new foreign income and gains (“F.I.G.”) regime will be available for individuals who become U.K. tax resident after a period of 10 tax years of nonresident status.  Individuals who qualify for the new regime will be able to bring F.I.G. to the U.K. free from any U.K. tax for up to four years. Current non-doms who cannot qualify for the F.I.G. regime can benefit from a 50% deduction on remittances through April 5, 2026. Kevin Offer, C.A., a partner of Hardwick and Morris L.L.P., London, explains these and other provisions that will apply as the U.K. enters a brave new world.

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Mauritius – Gateway To Africa

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Mauritius – Gateway To Africa

Rightly called “the Pearl of the Indian Ocean,” Mauritius is much more than a popular tourist destination. Recent World Bank statistics identify Mauritius as the country with the second highest per capita G.D.P. in Africa. Mauritius maintains relationships with key African and international bodies, such as the Southern African Development Community (“S.A.D.C.”), the Common Market for Eastern and Southern Africa (“C.O.M.E.S.A.”), the World Trade Organization, and the Commonwealth of Nations. It has a low income tax rate and offers a range of incentives to boost its competitiveness. Sattar Abdoula, the C.E.O. of Grant Thornton Mauritius, and Mariam Rajabally, a partner in the international financial services and tax at Grant Thornton Mauritius, take a deep dive into the tax, financial, and commercial benefits that are available in Mauritius, and why it remains an important gateway into Africa.

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Square Pegs in Round Holes – You Like "To-May-To" and I Like "To-Mah-To"

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Square Pegs in Round Holes – You Like "To-May-To" and I Like "To-Mah-To"

In a post-COVID-19 world, anecdotal evidence suggests that individuals and families are relocating to new jurisdictions of residence. Equally, individuals have evidenced renewed vigor in acquiring and structuring assets across a range of jurisdictions. When the individual is a U.S. citizen and the place to relocate or acquire assets is the U.K., care must be taken to avoid common – and not so common – traps and pitfalls regarding taxation. In their article, Ed Powles, a Partner of Maurice Turnor Gardner, London and Emma-Jane Weider, the Managing Partner of Maurice Turnor Gardner, London, identify areas for which tax planning is crucially important prior to a move. Included are (i) tax residence and domicile rules for individuals, (ii) residence tests for trusts, companies, and charities, (iii) identifying areas for which income tax treaties do not necessarily provide relief against double taxation, and (iv) ways in which gift and estate planning, dissolution of marriages, forced heirship, and structures to own personal use residential real property are affected by the move.

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Andorra: A Comprehensive Tax And Legal Analysis

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Andorra: A Comprehensive Tax And Legal Analysis

Andorra is a tiny landlocked principality nestled in the Pyrenees mountains between France and Spain. While it offers many quality-of-life benefits, the country’s biggest attraction has been its favorable taxation system. In recent years, Andorra has worked diligently to enhance transparency and to promote international cooperation in an attempt to rid itself of a tax haven reputation. Today, Andorra is widely considered to have a modern tax system, making it an approved jurisdiction by the E.U. It is a party to 10 double tax agreements, participates in C.R.S., is not on the O.E.C.D. list of noncooperative tax jurisdictions, and has ongoing discussions of association with the E.U. All the while, Andorra maintains attractive tax rates for individuals and corporations. Albert Folguera Ventura, C.E.O., Partner, and Head of Tax at Addwill Partners, Barcelona, explains the ins-and-outs of the Andorran tax system applicable to corporations and individuals resident in the country.

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News From Italy – Recent Updates to Inbound Workers Regime and Register of Beneficial Owners

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News From Italy – Recent Updates to Inbound Workers Regime and Register of Beneficial Owners

This month, the good news regarding special tax regimes in Italy relates to the flat tax. No changes are expected to the regime as Italy finishes its legislative session. The €100,000 flat tax remains intact. Good news also exists for the lesser known Pensioners Regime that imposes a 7% substitute tax on all pension payments paid on non-Italian source pension income if certain conditions are met. However, cutbacks in benefits and more stringent standards for qualification have been announced regarding the Inbound Workers Regime. In addition, the Register of Beneficial Owners of enterprises with legal personality, private legal entities, trusts, and similar legal arrangements has become operational at local Italian Chamber of Commerce offices. Andrea Tavecchio, the Founder and Senior Partner of Tavecchio & Associati, Tax Advisers, Milan, and Alessandro Carovigno, a chartered accountant at Tavecchio & Associati, Tax Advisers, Milan, explain the revisions to the Inbound Workers Regime and the information that must be filed with the Beneficial Owner Register. They also address the persons obligated to file with the Register and the persons who have access to the information filed with the Register.

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Invoking M.F.N. Clause Under Indian Tax Treaties Requires Notification

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Invoking M.F.N. Clause Under Indian Tax Treaties Requires Notification

India’s tax treaties with various countries mitigate double taxation and reduce the scope of taxable income or provide lower rates of withholding tax in certain cases. Some agreements include a most favoured nation (“M.F.N.”) clause. The clause allows the treaty partner country to import benefits from a subsequently signed Indian income tax treaty when certain conditions are met, most notably that the treaty partner country in the treaty subsequently signed is a member of the O.E.C.D. Opinions differed as to whether the M.F.N. clause is self-executing when a treaty partner country was not a member of the O.E.C.D. at the time its treaty with India is negotiated but subsequently becomes a member. Does the M.F.N. clause apply automatically or are there procedures to follow? Recently, the Supreme Court of India upheld the position of Indian tax authorities that an M.F.N. clause is not self-executing and that an M.F.N. clause properly looks only to the list of O.E.C.D. member states at the time the earlier treaty was signed. Sakate Khaitan, the Senior Partner of Khaitan Legal Associates, Mumbai, Abbas Jaorawala, a Senior Director and Head-Direct Tax of Khaitan Legal Associates, Mumbai, and Weindrila Sen, an associate of Khaitan Legal Associates, Mumbai explain all. Indian subsidiaries now face the risk of taxation, interest, and penalties for the past 10 years.

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Changes Announced to Dutch Entity Classification Rules and Tax Regimes for Funds

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Changes Announced to Dutch Entity Classification Rules and Tax Regimes for Funds

 In the Netherlands, the third Tuesday in September, known as Princes’ Day, marks the opening of the new parliamentary year. The budget for the coming year is announced, including an accompanying Tax Plan. The 2024 Tax Plan was presented by the sitting Dutch government, which is merely a caretaker until a new coalition is formed in November. This year, the Tax Plan contains provisions that will have a significant impact on businesses and financial institutions, particularly in relation to Dutch investment institutions. One major goal is to simplify the tax characterization of various entities to eliminate the opportunity of planning through hybrid entities. The distinction between open and closed C.V.’s is eliminated. The possibility of planning for an F.G.R. to be opaque or transparent is mostly eliminated, but for those F.G.R.’s that adopt the redemption method as the exclusive means of disinvesting in a fund. Where transparent, an F.G.R. will not be eligible to benefit from the V.B.I. regime for collective investment vehicles and its 0% rate of tax. Paul Kraan, a tax partner at Van Campen Liem in Amsterdam, explains all, and advises that the general consensus in the Netherlands is that the legislative process should continue, having been subject to public consultation previously.

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Regulating the Issuance of A.P.A.’s in Greece

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Regulating the Issuance of A.P.A.’s in Greece

Advance Pricing Agreements (“A.P.A.’s”) regarding intercompany transactions have been issued in Greece for several years. In late July, the Independent Authority for Public Revenue introduced new procedural and timeline-related modifications, aligning the A.P.A. procedure in Greece with global standards. In her article, Natalia Skoulidou, a partner of the Iason Skouzos Law Firm, Athens, addresses new rules for (i) pre-submission consultations, (ii) procedures to be followed when applying for an A.P.A., (iii) the content of the information that must be submitted, (iv) the taxpayer’s A.P.A. history in other countries, (iv) the disclosure of key assumptions on which the proposed pricing method is based, (v) the ability to roll back the methodology to open years, and (vi) revisions, revocation, or cancellation of the A.P.A. 

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