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Prenuptial Agreements in the Context of an International Couple – Views from France and Spain

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Prenuptial Agreements in the Context of an International Couple – Views from France and Spain

Choosing a life partner is a complex decision. It becomes even more complex if the parties are not of the same nationality or if one of the parties moves to another country in order to avoid a two-city lifestyle. Many couples in France and Spain are unaware that, in the absence of a duly executed prenuptial agreement, the rules that determine how property will be distributed if the marriage is dissolved due to divorce or death will be the rules of the first country of residence after their marriage becomes official. Conversely, other couples believe that they are protected by the provisions of a prenuptial agreement signed in France or in Spain that generally provides for separation of property. However, the contract may not be followed in common law countries such as England and United States, meaning that each spouse is entitled to one-half of the marital assets. All this and more are explained in the article authored by Delphine Eskenazi, a Partner of Libra Avocats, Paris, and Maria Valentin, of Counsel to Libra Avocats, Paris. The takeaway is that life can be about more than tax planning.

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New Belgian Federal Government Announces Significant New Tax Measures

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New Belgian Federal Government Announces Significant New Tax Measures

The most recent general election in Belgium took place in June, but a new government was not sworn in until February, when the five-member coalition government agreed to a federal government agreement, a document of 200 pages in a single language containing many significant tax measures. Tax items addressed include, inter alia, (i) the replacement of a dividends received deduction by a simple exclusion, (ii) the modernization of the group contribution regime, the Belgian equivalent of group relief, making it more flexible and simpler to coordinate, (iii) the simplification of the investment deduction rules, the Belgian equivalent of investment credits in the U.S., (iv) the adoption of accelerated depreciation rules for CAPEX investments, (v) the adoption of a “solidarity contribution,” a 10% capital gains tax on financial assets held by individuals, allowing a basis step-up to current value as of the effective date of the tax, (vi) simplification of disallowed expense rules, and (vii) the adoption of carried interest rules for managers of investment funds. Werner Heyvaert, a senior international tax lawyer based in Brussels and a partner at AKD Benelux Law Firm explains these and other tax provisions. The takeaway is that Belgium is modernizing its tax rules.

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French Budget 2025 – Significant Provisions Affecting Individuals

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French Budget 2025 – Significant Provisions Affecting Individuals

The French Budget for 2025 reflects significant political instability reflecting two factors. The first is the fragmentation of the French Parliament after elections last summer. The second is a significant budgetary deficit. It was adopted with limited debate on February 14, 2025, after an earlier Finance Bill was rejected in December 2024, resulting in a change of government. Key measures to note include, inter alia, (i) Introduction of enhanced social contribution on high incomes, with an instalment that was due in December 2025, (ii) reform of the tax and social security treatment of management packages, including those already in existence, (iii) an overhaul of the tax framework for the B.S.P.C.E., one of the main employee shareholding tools, (iv) tax incentives for gifts received to acquire a new primary residence or to finance energy-efficient renovations, (v) Introduction of a special reassessment period in cases of misreported tax residence, (vi) clarification on the supremacy of treaty law in determining tax residency, (vii) additional social contributions for companies with revenues over a €1 billion, and (vii) a tax on capital reductions linked to share buybacks by companies with revenues exceeding a €1 billion. Philippe Stebler, the founder of Stebler Avocats, Paris, explains these and other provisions. The takeaway is that, if you thought French taxes in 2024 could not get any higher, you were mistaken.

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N.H.R. 2.0 in Portugal – a Better Regime for Skilled Workers and Their Employers

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N.H.R. 2.0 in Portugal – a Better Regime for Skilled Workers and Their Employers

Following the unexpected termination of the N.H.R. regime to newly arrived residents as of December 31, 2023, a new regime was offered, known as N.H.R. 2.0. The new regime attracts working individuals, investors and international groups planning on setting up Portuguese subsidiaries. N.H.R. 2.0 is now fully operational for those within scope of eligible activities, which is very wide. João Luís Araújo, a Partner in the Porto Office of Telles, and Sara Brito Cardoso, an Associate in the Porto Office of Telles, explain why N.H.R. 2.0 provides a better result for newly arrived skilled personnel and their employers. The takeaway is that Portugal is very much open for business and keen to attract talent, companies, and investment.

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French Tax Investigations Target H.N.W. Individuals

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French Tax Investigations Target H.N.W. Individuals

Tax evasion and avoidance have been significant concerns for governments worldwide, and France is no exception. In recent years, the French government has ramped up efforts to investigate high net worth individuals (“H.N.W.I.’s”) suspected of tax evasion, particularly as global scrutiny increases over the wealthy’s financial practices. France, with its robust tax system and a tradition of enforcing tax compliance, utilizes a range of investigative techniques to target H.N.W.I.’s. The article delves into how French tax investigations are carried out, focusing on methods, legal framework, and high-profile cases involving the wealthy. Sophie Borenstein, a partner of attorneys Klein Wenner, Paris, explains all. The takeaway is that the footprint of an H.N.W.I. is large and is being looked at in detail by the tax authorities.

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When Baskets Go Beyond Weaving – Understanding Foreign Tax Credit Baskets Under the Look-Through Rules

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When Baskets Go Beyond Weaving – Understanding Foreign Tax Credit Baskets Under the Look-Through Rules

While the word “basket” may trigger a mental image of a bicycle with a daisy basket that is a gift in early childhood, the term has a totally different connotation in the tax world. It denotes “foreign tax credit baskets” to an international tax geek in the U.S. The foreign tax credit provisions are among the most complicated areas of U.S. and become further complicated when a “U.S. Shareholder” of a Controlled Foreign Corporation includes income in one year but receives distributions in another. In their article, Neha Rastogi and Stanley C. Ruchelman explore the labyrinth of the foreign tax credit provisions that are designed to ensure that (i) income and (ii) related foreign taxes are reported in the same foreign tax credit basket. The takeaway is that, if the exercise is not computed properly, double taxation of income is sure to arise.

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Another Taxpayer Allowed Treaty-Based Foreign Tax Credit Against N.I.I.T.

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Another Taxpayer Allowed Treaty-Based Foreign Tax Credit Against N.I.I.T.

The application of the foreign tax credit to the net investment income tax (“N.I.I.T.”) has been a recurring battle in courtrooms in recent years. In the most recent installment, the taxpayer in Bruyea v. U.S. prevailed in claiming a foreign tax credit under the Canada-U.S. income tax treaty. The N.I.I.T. is a 3.8% tax on certain items of passive income that is levied on U.S. individuals whose gross income is above certain thresholds. The position of the I.R.S. is that the foreign tax credit cannot be claimed to reduce the amount of N.I.I.T. that is due. In the facts of the case, the Canada-U.S. Income Tax Treaty clearly provided that the foreign tax credit applies to all U.S. taxes based on income whether in existence at the time the treaty came into force and effect or afterwards. Wooyoung Lee explains all.

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Insights Volume 12 Number 1: Updates & Other Tidbits

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Insights Volume 12 Number 1: Updates & Other Tidbits

This month, Tidbits returns to Insights. One tidbit addresses the on-again / off-again status of the Corporate Transparency Act. A second tidbit addresses a rare win for an individual who challenged taxation at the state level.

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Reading Tea Leaves – What May Be In Store For Tax Legislation

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Reading Tea Leaves – What May Be In Store For Tax Legislation

President Trump made several tax proposals in the course of his winning campaign for the White House. In her article, Nina Krauthamer lists proposals made by the President and the likely responses of Democrats in Congress followed by a general analysis of various positions. What becomes clear is that when political parties are in power, proposals to spend money are plentiful. Yet, when they are voted out of office, the same parties object to every tax cut as ultimately being profligate. 

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Hooray for New Math: Is It Really a Simplified Transfer Pricing Approach for 2025?

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Hooray for New Math: Is It Really a Simplified Transfer Pricing Approach for 2025?

As promised before the end of 2024, the I.R.S. has outlined its approach to the codification of Amount B, a component of the O.E.C.D. Pillar One approach to controlled distribution transactions of tangible property. Notice 2025-04 allows taxpayers to elect to use the streamlined, simplified approach (“S.S.A.”) for corporate tax years beginning on or after January 1, 2025.  If a valid election is made, the I.R.S. will consider the S.S.A. to be the best method under the Treas. Reg. §1.482-1(c). While touted as a method that brings simplicity to transfer pricing, in practice simplicity is achieved at the price of certain important concepts fundamental to the arm’s length standard codified in tax law. Michael Peggs does yeoman’s work in taking the reader through the steps to be followed, the conditions to be applied, and the variable values that pop out of the S.S.A. machine. To readers who have given transfer pricing advice over the years, Amount B may seems to be based on concepts of the command economy of bygone days rather than market transactions.

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Dynasty in the Details – U.S. Estate Planning Considerations for Global Families

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Dynasty in the Details – U.S. Estate Planning Considerations for Global Families

In the United States, creating “dynasty trusts” has become common planning tool for many estate planners. A dynasty trust is a trust that may continue for generations. If done well, it provides a myriad of benefits for strategic income, estate and gift tax planning, creditor protection and ensuring family inheritance. Nonetheless, life choices have a way of interfering with preset plans. A beneficiary moves to a different country. A trustee who is a U.S. resident, but not a citizen decides to move home. A foreign parent of a U.S. spouse wishes to make a gift to the next generation of beneficiaries. These seemingly trivial details could unintentionally cause severe tax and other planning consequences in the U.S. and abroad. Based on her experience, Allison Dolzani leads the reader through a cycle of cross border issues that must be addressed as life progresses.

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B.V.I.: Beneficial Ownership Reporting and Consultation on Access to Beneficial Ownership Information

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B.V.I.: Beneficial Ownership Reporting and Consultation on Access to Beneficial Ownership Information

As of January 2, 2025, a new beneficial ownership reporting regime has come into effect. This regime replaces the previous beneficial ownership reporting framework. New entities must identify and file adequate, accurate, and up-to-date beneficial ownership reports within 30 days of registration Existing Entities have until Julyl 2, 2025, to comply. On January 17, 2025, the B.V.I. Government launched a consultation on a draft policy regarding rights of access to the Register. In line with its commitments, access to information will be granted to persons demonstrating “legitimate interest” to information. The period for responses to the Consultation closes on February 28, 2025. Joshua Mangeot, a partner in the B.V.I. office of Harneys, explains how the new system addresses major issues, including the definition of a “legitimate interest” and circumstances in which disclosure will be viewed as posing a disproportionate serious risk for affected U.B.O.’s.

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The B.V.I., Cayman Islands, and Bermuda – Current Practice, Enforcement, and Emerging Trends

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The B.V.I., Cayman Islands, and Bermuda – Current Practice, Enforcement, and Emerging Trends

These three leading Caribbean international financial centers are members of the Caribbean Financial Action Task Force and have consistently implemented O.E.C.D. initiatives and E.U. requirements. They pride themselves in following international best practices. None of the regimes discussed below is a taxing regime. Consequently, their compliance focus is on information exchange, increased transparency and economic substance. Joshua Mangeot, a partner of the B.V.I. office of Harneys Celeste Aubee, an associate in the B.V.I. office of Harneys, explain the hurdles that have been overcome to remain in good standing with Europe and the U.S.

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Recent Developments to Combat Tax Avoidance in Germany

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Recent Developments to Combat Tax Avoidance in Germany

“Paper is patient.” This is a common German saying, typically used to highlight the sluggishness of processes and plans of all kinds. However, paper can also catch up with you or even take you by surprise in a way that may be embarrassing or worse when your name pops up in leaked information relating to offshore accounts. Jurisdictions with preferential tax regimes are under the scrutiny of tax and investigative authorities in Germany. This affects multinational corporations, family offices, entrepreneurial families, and wealthy private individuals who invest their assets internationally in a diversified and international manner. Dr. Marco Ottenwälder, a partner in the Frankfurt Office of Andersen Tax, and his colleague, Andreas Gesel, a senior associate of the firm, explain recent measures taken in Germany to combat tax avoidance and follow up with recent practical experience. The tax authorities are aggressive, exit tax has a wider scope than might be commonly expected, and unhappy events occur for individuals and associated companies stemming from arrival in Germany and also departure. Not a pretty sight.

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Focus on H.N.W.I.’S and Offshore Structures – an Indian Perspective

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Focus on H.N.W.I.’S and Offshore Structures – an Indian Perspective

The topic of offshore assets held by H.N.W.I.’s based in India is a topic of substantial interest for various governmental authorities in India. It is not just the Indian Tax Authority that is interested in offshore accounts. Substantial exchange control regulations are in place in India and other regulatory authorities keep a close track of the offshore interests of Indian residents. Over the years, Indian names appeared in data leaks of offshore structures and bank accounts, triggering significant administrative focus and amendments to the law. In 2015, the Black Money Act was introduced in India, with the stated intent of enacting provisions to deal with the problem of undisclosed foreign income and assets and to impose tax on undisclosed foreign income and assets. Ashish Mehta, a partner in the Direct Tax Practice in the Mumbai office of Khaitan & Co., and his colleague, Ujjval Gangwal, a principal associate of the firm, explain in infinite detail the risks that apply to residents hiding funds abroad, the aggressive steps taken by Indian tax authorities in seeking information, the traps for returning Indian nationals stemming from the ownership foreign assets, and the steps to ensure compliance.

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Trusts In Italy: The View of Italian Tax Authorities & Recent Developments

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Trusts In Italy: The View of Italian Tax Authorities & Recent Developments

The legal construct of a trust is a common law arrangement having features that make it suitable for a wide range of uses. Italy lacks a specific legal framework for trusts, which limits its use in a purely Italian set of circumstances. Nevertheless, Italy ratified the Hague Convention on the Law Applicable to Trusts and on their Recognition (1985) and in so doing, introduced a degree of recognition of trusts governed by foreign law. The absence of a specific civil law framework for trusts, combined with Italy’s fragmented and evolving tax law regarding the treatment of trust structures has led to significant interpretative uncertainty both as to income tax matters for the settlor and the beneficiaries and inheritance and estate tax matters. Fabio Chiarenza, a partner in the Rome office of Gianni & Origoni, Francesca Staffieri, also a partner of Gianni & Origoni, and Alessandro Minniti, a managing associate of that firm explain all, including opaque trusts, transparent trusts, timing of the imposition of inheritance and gift tax, and the concept of fictitious interposition of trust as applied by the Italian tax authorities. Good read.

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The Evolution of Tax Enforcement in Switzerland

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The Evolution of Tax Enforcement in Switzerland

As in the rest of Europe, Swiss tax authorities have ramped up examinations of cross border transactions of Swiss residents and cooperation with tax authorities in other countries. Examinations of Swiss residents focus on the abuse of offshore structures and increases in the number of tax examinations and aggressiveness of tax authorities. Regarding Swiss holding companies owned by nonresidents, Switzerland now has an active exchange of information program that provides administrative assistance within the framework of the more than 100 double tax treaties. Thierry Boitelle, the Founding Member of Boitelle Tax Sàrl, in Geneva, and his colleagues Sarah Meriguet and Marine Antunes, Senior Associates at the firm, explain all.

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International Tax Investigations in the U.K.

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International Tax Investigations in the U.K.

It is no secret that the U.K. government is anxious to raise revenue as the public sector debt is estimated to be equivalent to 98.5% of G.D.P. (approximately £2.7665 trillion). The Labour government is dead set on raising income. Non-dom taxation is gone, tax rates are on the rise, and what was capital gains for certain carried interests is ordinary income. Part of the labor program is an attack on tax evasion and avoidance. There are plans for the Labour government to invest £855m over five years in resources for H.M.R.C. to raise £2.7 billion per annum from this investment. In those circumstances, it is not unexpected that assertions of tax fraud and evasion will be raised against those caught up by the compliance initiative. Gary Ashford, a partner of Harbottle & Lewis in London, explains H.M.R.C.’s definition of tax fraud and goes on to discuss the steps that are available for those wishing to make a voluntary disclosure. It is not a pretty picture, especially for those having used offshore vehicles.

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Examining High Net Worth Taxpayers in the U.S.

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Examining High Net Worth Taxpayers in the U.S.

Beginning in 2023, I.R.S. D.O.J. took up the call with programs of enhanced (i) I.R.S. examinations of high-net-worth individuals, large partnerships, and large corporations and (ii) D.O.J. prosecutions of persons accused of criminal tax offenses. The first initiative focused on taxpayers with income of more than $1 million and tax debt in excess of $250,000. The second initiative expanded the focus to large partnerships, which traditionally have more than $10 million in assets. Included were hedge funds, real estate investment partnerships, publicly traded partnerships, and large law firms. At the same time, D.O.J. began prosecuting a slew of recalcitrant taxpayers with significant means, whose tax schemes resulted in millions of dollars in lost tax revenue. Philip Colasanto, a senior associate in the New York Office of Withers Bergman L.L.P. (WithersWorldwide) takes a deep dive into the initiatives and the prosecutions. He goes on to explain various ways that are available to taxpayers wishing to come into compliance regarding past reporting failures.

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Developments In Cross-Border Tax Investigations Target High Net Worth Individuals

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Developments In Cross-Border Tax Investigations Target High Net Worth Individuals

Tax collection and tax policy remain high priorities for the F.A.T.F. and the O.E.C.D. These organizations are responsible for developing and monitoring implementation of standards aimed at enhancing transparency, combatting financial crime, and ensuring effective regulation. The past decade saw adoption of accelerated reforms and ambitious deadlines. Differences between implementation and interpretation of international standards and unilateral or bilateral initiatives increase complexity and uncertainty for H.N.W.I.’s. In an introductory chapter to this edition of Insights, Joshua Mangeot, a partner of the B.V.I. office of Harneys, sets the table for the articles that follow.

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