2010 OECD Model Tax Convention, Transfer Pricing and updated PE definition

From the OECD site 22 July 2010 — The OECD Council today approved the 2010 versions of the OECD’s Model Tax Convention, the 1995 Transfer Pricing Guidelines and the 2008 Report on the Attribution of Profits to Permanent Establishments. The updates are the result of several years of work to improve these core OECD instruments in the area of international taxation.

Continue Reading

Spanish Economy, heading in the right direction according to IMF report

On July 30, 2010, the Executive Board of the International Monetary Fund (IMF)  issued its report on Spain.1 and welcomes the Government initiatives on Financial Institutions, deficit reduction and employment market reforms. Yes, Spain is going in the right direction, and this not just about Football!

The main challenge for the Spanish economy is not its financial stability, which is now clear after last weeks market reaction to the EU Banking stress tests, in which the Spanish Financial sector came as one of the strongest in the EU.

Ending the year 2010 with a public deficit of 9.3% is out of questions. The issue that the government must tackle is the paradigm shift from an economy relying on the construction industry toward improving innovation and the internationalization of the Spanish corporations, which is being primarily lead by the private sector as demonstrated by Banco Santander, BBVA, Abengoa, Telefonica and many other not so well known companies.

Summarizing, the IMF report restates the situation as perceived by most analysts and acknowledge the many challenges and the solutions. The IMF Board welcomes the government initiatives and suggests other necessary reforms. Overall, it seems from the report, what the Market has already understood, the Spanish Economy is heading in the right direction.

Continue Reading

Burdensome and costly tax requirements

The American Institute of Certified Public Accountants told members of Congress recently they should repeal the section of the new health care law that requires businesses to report to the Internal Revenue Service any purchase from a vendor of goods or services worth $600 or more during the calendar year.

During the last few years we have watched the Tax Offices worldwide  ‘delegating’ their collector and investigation powers to Professionals and clients, which in some cases may benefit all parties.

The trend however is in crescendo at a time where most governments worldwide are looking at reducing their administration costs. The Tax Officials, in producing draft legislation, should be mindful in their collection zeal and try to balance collection vs. taxpayer’s rights.  A right balanced approach helps the economy, by helping the clients of the tax office to succeed in their businesses.

It is encouraging to see the American Institute of Certified Public Accountants in the US confronting a legislative initiative to protect taxpayer rights. Well done!

Continue Reading

The Pound vs Euro for the Spanish British Expats

There is a big debate in the British expat community in Spain about the pros and cons of having the investments in Euros versus British Pounds. As Tax Counsel I am not qualified to respond to those queries and asked Sara Perez-Frutos, the CEO of Dracon Partners in Madrid, to let me have her thoughts.

Dracon Partners EAFI is one of the less than 30 regulated Independent Financial Advisers in Spain (CNMV)

Sara and Eunjoo, a financial analyst, drafted an article for us on this topic. Please click here to download The Euro and the British Pound,  good food for thought!

OECD: Average tax burden on workers’ earnings was reduced in 2009

As reported in the OECD page, average tax and social security burdens on employment incomes fell slightly in 24 out of 30 OECD countries last year as governments struggled to shore up faltering economies amid the worst recession in decades. But whether this trend will continue this year is uncertain given the widespread pressures on public budgets.
Continue Reading

Gibraltar & Spain, what’s going on?

We are surprised, happily surprised, to see Spain signing another TIEA. This one with Bahamas signed on March 11, 2010, follows the Netherlands Antilles, Aruba, Trinidad y Tobago agreements. Please see our Taxprecision post for more information.

When coming to Gibraltar, the question brings some political issues to the table which must be put aside as a matter of urgency.

The Spanish Tax legislation clearly discriminate Gibraltar by discouraging the furtherance of trade, commerce and business with this territory of the UK and part of the EU.

There are powerful economic reasons to end this situation. Gibraltar accounts for 3% of the exports in Andalucia, compared with a 4% with Morocco, or another 4% with Mexico or US. Gibraltar is, therefore, a strategic partner of Andalucia.

I can understand that a generation of Spaniards may still have some issues coming to terms with reality. I would like to invite my fellow Spaniards to rethink their position by reviewing our 2008 posting to get to know Gibraltar and more about its OECD compliance.

There are compelling reasons for the Spanish government to speed up the signature of this TIEA and remove Gibraltar from the list of Tax Havens as per Spanish RD1080/91.

Continue Reading

Gibraltar update on Tax Information Exchange Agreements TIEAs

The list below contains the Tax Information Exchange Agreements (TIEAs) signed by Gibraltar.

Revised OECD-Council of Europe treaty to increase multilateral cooperation

The OECD and the Council of Europe have agreed on an update to an international treaty that aims to help governments enforce their tax laws, as part of the worldwide drive to combat cross-border tax evasion.
The update takes the form of a protocol amending the Convention on Mutual Administrative Assistance in Tax Matters for which the two multilateral organisations are the custodians. Its effect is to align the convention to the international standard on information exchange for tax purposes by allowing for the exchange of bank information.
The Protocol will be opened for signature on the occasion of the OECD’s annual Ministerial Meeting in Paris on 27-28 May. This initiative responds to a call by G20 leaders at their April 2009 summit for proposals as to ways to help developing countries secure the benefits of the new cooperative tax environment. U.K. Prime Minister Gordon Brown, as chair of the G20, indicated that “it would be helpful, in this regard, if an effective multilateral mechanism could be developed”.
The original convention entered into force in 1995. It currently groups 14 countries — Azerbaijan, Belgium, Denmark, Finland, France, Iceland, Italy, Netherlands, Norway, Poland, Sweden, United Kingdom, United States, and Ukraine – with Canada, Germany and Spain having signed it but not yet ratified it. Other OECD and Council of Europe members, including some that are G20 countries, are looking at becoming parties to the convention, and it is now being opened up to other countries that are not members of either the OECD or the Council of Europe members .

This will enable developing countries to become parties to the amended convention and benefit from the new, more transparent tax-cooperation environment. The protocol provides,  among other things, for exchange of information, multilateral simultaneous tax examinations, service of documents and cross-border assistance in tax collection, while respecting national sovereignty and the rights of taxpayers and  ensuring extensive safeguards to protect the confidentiality of the information exchanged.
OECD Secretary-General Angel Gurría and Council of Europe Secretary-General Thorbjørn Jagland welcomed the finalisation of the protocol by both organizations, noting that as more countries join, the benefits of the convention grow.
“Given its multilateral nature, the Convention is a unique instrument to counteract international tax avoidance and evasion,”  Angel Gurría commented. “The OECD and the Council of Europe have agreed to improve international cooperation to combat tax evasion and the standards set by the convention are being updated to reflect this new consensus.”
“New provisions aim to remove obstacles to effective co-operation and exchange of information, especially those related to bank secrecy legislations,” said Thorbjørn Jagland.  “The amending protocol also provides for the opening of the convention to countries that are not members of the Council of Europe or the OECD, thereby transforming it into an instrument to fight tax evasion worldwide.”