You may be aware that on 7th of September BVI has been hit by a severe hurricane called Irma, therefore we would like to inform you about the situation after the hurricane. While core infrastructure work is takingplace on the island, a lot of institutions still do not have internet or telephone lines. They expect to be able to move back to their premises at the end of September. Therefore documents required to be issued in BVI we can order only at the end of September.
On July 14 the Cypriot Parliament adopted long-awaited and long-discussed amendments to the Income Tax Law regarding the tax residency for individuals. The full text of the adopted amendments will be soon published.
As reported, to obtain the status of a tax resident, individuals will need to spend at least 60 days a year in the country, have a residence and work contract, or a position on a company’s board of directors in Cyprus. The company may be controlled by the same individual. At the same time, an important restriction is the requirement not to be a tax resident of any other country in the same time frame, i. e. not to spend 183 days a year or more in any other country in the world.
The Cyprus tax regime without a domicile is one of the most attractive for individuals in the world. The adopted amendments to the Tax Law are designed to attract the interest of the most well-off public from different countries, and is expected to make the citizenship investor program even more popular.
However, investors should keep in mind that neither citizenship nor the tax residency guarantee their exemption from taxation in other countries. Thus, tax obligations remain in place for the US citizens and the Green card holders regardless from their visits to the country. Meanwhile several states in the world practice personal income taxation based of vital or economic interest focus.
13 July 2017, the Tax Court declined to follow Revenue Ruling 91-32 and instead held that a foreign partner’s gain from the redemption of its interest in a partnership did not constitute effectively connected income (ECI) with a US trade or business.
In Grecian Magnesite Mining, Industrial & Shipping Co. v. Commissioner, 149 T.C. No. 3. , GMM was a Greek corporation that owned an interest in Premier Chemicals LLC, a Delaware limited liability company treated as a partnership for US income tax purposes. In 2008, Premier fully redeemed GMM’s interest for $10.6 million by making one payment in July 2008 and another payment in January 2009.
GMM realised a gain of $6.2 million on the redemption, approximately $2.2 million of which was attributable to Premier’s US real estate. Based on the advice of an experienced certified public accountant, GMM did not report any of the gain from the redemption as US taxable income on its 2008 tax return and did not file a 2009 US tax return.
The IRS asserted that GMM had US source gain in both 2008 and 2009 that was effectively connected with a US trade or business. The IRS based its position on Rev. Rul. 91-32, which applies an “aggregate” theory of partnerships to determine that the portion of any gain realised by a foreign partner on a sale of a partnership interest that is attributable to the partnership’s US trade or business assets is taxable as ECI under Code section 864.
The Tax Court disagreed. It initially determined that a redemption of apartnership interest should be treated the same as a sale, and that section 741 of the Code calls for an entity rather than an aggregate approach to sales of partnership interests. The court then applied the general rule that gain on a sale of personal property is sourced based on the residence of the seller under section 865. Because the taxpayer was a foreign corporation and a non-resident of the US, the gain was accordingly foreign source rather than US source income, and hence not ECI.
The court rejected the IRS’s argument that the gain should be US source under section 865 because it was attributable to a US office of the taxpayer. The court held that, even assuming the US office of the LLC was properly treated as a US office of the taxpayer, the gain from the redemption was not attributable to that office because the LLC’s office was not a material factor in the taxpayer’s realisation of income from the redemption transaction and the LLC was not regularly engaged in the business of transacting in its own LLC interests.
26 June 2017, the UK government brought the Scottish Partnerships (Register of People with Significant Control) Regulations 2017 into force, which extend beneficial ownership registration requirements to Scottish limited partnerships (SLPs) and certain Scottish general partnerships in line with other limited partnerships in the UK.
SLPs will need to provide information about the people or legal entities that have significant control within 28 days. If they fail to do so, these partnerships will face daily fines of up to £500. Information provided by SLPs will be available on the Companies House register.
Tax reform drafted by the Ministry of Finance of Latvia will be approved this week to come into force from 2018.
The tax reform will cover both individual and corporate taxpayers in Latvia.
Key changes for legal entities:
- corporate income tax
Where the income is invested in the company’s further development the respective corporate income tax rate will be 0% while the regular corporate income tax rate will increase from 15% to 20%. However, dividends distributed to individuals will be tax-exempt.
- minimum wage
The minimum wage will increase up to EUR 430, the non-taxable minimum wage will increase up to EUR 200, likewise, it is planned to increase the tax deduction for a dependent up to EUR 200.
- social tax
The social tax rate will increase by 1% (0.5% for each of employee and employer) totaling 35.09% where an employer will pay 24.09% and an employee will pay 11%.
- value added tax
The list of sectors with a reverse VAT payment procedure will be expanded. The VAT registration threshold will increase up to EUR 40,000.
Key changes for individuals:
- personal income tax
Personal income tax rates (previously — 23%) will be differentiated depending on income:
- income up to EUR 20,000 will be taxed at 20%;
– income from EUR 20,001 to EUR 55,000 will be taxed at 23%;
– income above EUR 55,000 will be taxed at 31.4%.
The single personal income tax rate of 20% will be applied to capital income, including capital gain. Previously these respective rates were 10% and 15%.
- excise tax
The reform provides for the increase of fuel, cigarette and alcohol excise tax rates. Fuel excise tax rates will be from 7.8% to 24% (depending on fuel type), the alcohol excise tax rates will be from 15% to 24%, and the cigarette excise tax rate will be 5.5%.
Also, the amendments to laws on taxes and duties will require credit institutions to provide to the tax service information about their clients, namely individual taxpayers in Latvia, on an annual basis where debit or credit turnover exceeds EUR 15,000 in the previous year.
The tax service is expected to publish lists of employers where average salary does not exceed the national minimum wage.