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The Doom of Offshore Tax Planning?
Moderators Diego Salto Peter
Utterström Panel Michael Burns, Thijs Clement,
Stephan Neidhardt, Michael Silva
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AGENDA

• 1. Introduction - Diego Salto/Peter Utterström
• 2. Model use historically - the practioners
  view! Thijs Clement
• 3. The Obama Tax Bill and transparency - Michael
  A. Silva
• The OECD/G20 view on transparency - Stephan
  Neidhardt
• The Offshore Perspective - Michael Burns
• 6. Future outlook restrictions, tools etc.
• 7. Discussion

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Some statistics

• In 1996 money laundering was estimated to be
  between USD 590Bn to 1,5 Trillion
• World Bank estimates the value of criminal
  activities, corruption and tax evasion to be
  between 1 trillion and 1.6 trillion per year
• OECD estimates that 50 of all cross border
  trade is made via tax havens
• In 2004 US MNEs paid 2,3 in tax (16 bn on 700
  bn of foreign active earnings)
• In 2006 UK established that 3,5 of tax payers
  provide information re offshore accounts.

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Some statistics (cont.)

• BVI has 19,000 inhabitants but 830 000 companies
  registered
• One address alone in the Cayman Islands serves as
  the registered office for gt 18 000 companies
• Assets equal 1,3 times GDP in Norwegian banks,
  2,5 times GDP for the Euro zone. In Cayman
  Islands the assets total gt 700 times the GDP

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Convenient knowledge CFC Controlled Foreign
Corporation DTT Double Tax Treaty FBAR
Foreign Bank Account Report (US) LOB Limitation
of Benefits QI Qualified Intermediary Tax
Haven - ? TIEA Tax Information Exchange
Agreements White, Grey, Black List CFC-related
lists
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Tax Havens - The top five secrecy jurisdictions

• Delaware, US The world's top secrecy
  jurisdiction. Register a company here and no one
  will ever know. If you have overseas income, it
  will be tax exempt.
• Luxembourg Europe's most powerful investment
  management centre. It does require company
  accounts to be publicly available. But in
  virtually every other category secrecy rules.
• Switzerland The traditional home of the opaque
  bank. For years, it resisted international
  requests for tax information exchange.
• Cayman Islands The Caribbean island has a
  serious budget crisis. Its leaders take a dim
  view of having the "good name" of the most
  powerful hedge fund centre tarnished by
  accusations.
• City of London, UK The International Narcotics
  Control Strategy Report said last year "Illicit
  cash is consolidated in the UK and then moved
  overseas where it can readily enter the
  legitimate financial system." It adds "Drug
  traffickers and other criminals are able to
  launder substantial amounts of money in the UK
  despite improved anti-money laundering measures.
• guardian.co.uk 

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With this will tax havens have a future?
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Having said all this ---

• . The historical model transaction and its use -
  the practioners view!
• Thijs Clement, Van Doorne

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Example 1

• Use of (high tax) jurisdictions to establish
  conduit entities

Loan
Loan
NL
INVESTORS
ITALY
Interest
Interest
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Discussion

• Transfer pricing
• Treaty application
• Limitation on Benefits ?
• Concept of Beneficial Ownership

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Example 2

• Use of Hybrid corporate structures to optimise
  taxation of interest

Equity
Loan
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Discussion

• Qualification legal entities in multiple
  jurisdictions

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Example 3

• Use of Special Tax regimes

TOP CO
OP CO
FIN CO
OP CO
Loan
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Discussion

• Jurisdiction of establishment of FinCo
• Tax Haven/Non Tax Haven

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What Threats do U.S. and OECD Reforms Pose to
Global Foreign Direct Investments?
Michael A. SilvaInternational Tax Partner
Hunton Williams LLP
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U.S. Proposals

• Stop Tax Haven Abuse Act
• IRS attempts to improve withholding
• Override Check the Box Rules
• Expansion of U.S. Treat and TIEA Network
• Foreign Account Tax Compliance Act of 2009

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Stop Tax Haven Abuse Act

• Domesticate foreign companies if managed and
  controlled from the U.S.
• Obama Speech Ireland, Bermuda and Netherlands
  identified as corporate tax havens
• Cayman Island IBCs featured in tax deferral
  debate
• QI issues for offshore banks

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Should U.S. Adopt a Managed and Controlled Test
for Offshore Corporations?

• Section 103 of Stop Tax Haven Abuse Act
• . . . Substantially all of the executive
  officers and senior management of the corporation
  who exercise day-to-day responsibility for making
  decisions involving strategic, financial and
  operational policies of the corporation are
  located primarily within the United States.

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2009 Tax Treaty Network Expansion

• France-U.S. Protocol
• New Zealand U.S. Income Tax Treaty
• Malta-U.S. Income Tax Treaty

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The OECD / G20 view Stephan Neidhardt Walder
Wyss Partners Ltd. Zurich
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History

• 2000 OECD identified a large number of Tax
  Havens
• October 2008 UN Committee of Experts on
  International Tax Matters ? Model Tax Convention
  on Internationally agreed standards for exchange
  of information and transparency in tax matters
• November 2008 G20 Meeting
• April 2, 2009 OECD Progress Report on the
  implementation of these standards for 84
  jurisdictions
• October 6, 2009 OECD Issues Background
  Information Brief

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The OECD Standards of Transparany and Exchange of
Information

• By OECD and non-OECD countries working together
  in the OECD Global Forum on Transparency and
  Exchange of Information coming out of
• G20 Ministers of Finance Berlin 2004 Meeting
• Xinghe (China) 2005
• UN Committee of Experts on International
  Cooperation in Tax Matters October 2008
• Standards Require
• Exchange of information on request where it is
  foreseeably relevant to the administration and
  enforcement of the domestic laws of the treaty
  partner.
• No restrictions on exchange caused by bank
  secrecy or domestic tax interest requirements.
• Availability of reliable information and powers
  to obtain it.
• Respect for taxpayers rights.
• Strict confidentiality of information exchanged.

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III. The List
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How to get on the White List?

• Countries have to sign 12 agreements on exchange
  of information that meet the OECD standards
• Jurisdictions with which the agreements have been
  signed (tax havens do not count)
• The willingness to continue to sign agreements
• The effectiveness of implementation

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What is a Tax Haven?

• Criteria
• No or nominal tax on the relevant income
• Lack of effective exchange of information
• Lack of transparency
• No substantial activities
• Numbers
• 2000 Over 40
• 2002 Andorra Monaco Lichtenstein
• 2009 none

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Reservations to Art 26 of the OECD Model Treaty
(until recently)

• Austria
• Belgium
• Luxembourg
• Switzerland
• Now none

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Proposed Measures against non complying countries

• Increased disclosure requirements on the part of
  taxpayers and financial institutions to report
  transactions involving non-cooperative
  jurisdictions
• Withholding taxes in respect of a wide variety of
  payments
• Denying deductions in respect of expense payments
  to payees resident in a non-cooperative
  jurisdiction
• Reviewing tax treaty policy
• Asking international institutions and regional
  development banks to review their investment
  policies and
• Giving extra weight to the principals of tax
  transparency and information exchange when
  designing bilateral aid programs

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Summary

• OECD was very successful in the last nine years.
• Most success just recently, when Art. 26 of the
  OECD Model Treaty was accepted by all countries,
  but now the implementation of the standards has
  to be supervised by the OECD.

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The Offshore Perspective
Michael BurnsAppelby
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Introduction

• The Offshore Perspective
• Separating spin from reality
• All is not lost
• Opportunity not threat
• Helps make the world go around
• An unstoppable force

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Fact Tax neutrality, not tax evasion or avoidance

• Investors and their advisors choose offshore
  financial centres (OFCs) for tax neutrality,
  not tax evasion or avoidance
• OFC entities provide a tax-neutral platform so
  that investors from several jurisdictions are not
  subject to additional layers of foreign taxation
  to those imposed by their home country.
• Investors remain subject to tax in accordance
  with the codes of their own jurisdictions

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Fact OFC entities required for international
business

• Global financial system needs legal entities to
  be formed in a stable jurisdiction on a
  tax-neutral basis
• Multinational companies, investment banks and
  fund managers are often required to accommodate
  investors from all over the world

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Fact OFCs to play key role in global economic
recovery

• Investment funds allow international
  institutional investors to invest in government
  and sovereign debt
• Provide microfinance loan facilities to small
  businesses in developing countries often with the
  help of institutions like the World Bank or other
  national development aid organizations and
  agencies

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Fact OFCs to play key role in global economic
recovery

• Enable syndicates of international banks to make
  secured loans to finance power and other
  infrastructure projects in developing countries
• Take part in the U.S. government's TARP and
  related schemes designed to encourage private
  investors to buy "toxic assets" from banks to
  help free up their balance sheets to allow them
  to recommence lending

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Summary

• OFCs will continue to survive and will continue
  to serve the purpose of promoting the efficient
  deployment of international capital
• Continuing future for OFCs, as long as they
  comply with internationally accepted standards of
  transparency
• Applebys jurisdictions are all on the White list
  
• Choice of jurisdiction largely dependent on the
  nature of the business to be transacted

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With all this

• what is really the future for tax havens?
• The toolbox availabke
• Accepted use of tax havens
• Future outlook
• DISCUSSION!!
• Or?

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