At the National Financial Directors’ Excellence Awards, Broadcaster Peter Sissons commented: “...with a score of nearly nine-out-of-ten for quality of service, the highest marks ever for an audit firm in ten years.” Francis Clark LLP, National Auditor of the Year – Mid Tier 2011 International Tax Matters For SMEs Stuart Rogers
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International Tax For SMEs September 2011 Abbreviated
These slides were used in a presentation given to attendees at a recent UKTI / Natwest / Francis Clark LLP seminar in Salisbury - How to Open Up New Markets Overseas.
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At the National Financial Directors’ Excellence Awards, Broadcaster Peter Sissons commented:
“...with a score of nearly nine-out-of-ten for quality of service, the highest marks ever for an audit firm in ten years.”
Francis Clark LLP, National Auditor of the Year – Mid Tier 2011
International Tax Matters
For SMEs
Stuart Rogers
#stuartrogerstax
Agenda
• Background & Context
• First Steps Abroad
• International Tax Checklist
• Q&A
Current State of Play
• Global recession – tax revenues down
• G20 April 2009 – increasing focus on tax
• OECD expanding their role
• Proliferation of TIEAs (tax information exchange
agreements)
• Headline tax rates politically sensitive
Net result = tax compliance is becoming tighter
Tighter Compliance – Common Issues
• Stricter application of permanent establishment rules
• Closer monitoring and audit of cross border movement of staff
• Transfer pricing / thin capitalisation continues as an issue
• Share transactions between non residents now being
attacked
Examples
Examples
• Vodafone (UK) purchased shares in Hutchison
Whampoa (a Hong Kong entity) from a third party. HW
held underlying Indian trading assets and so the Indian
tax authorities argued withholding tax was due and have
pursued Vodafone for CGT of £1.6bn (c.US$2.6bn)
• UBS’ ongoing fight with the IRS was a prelude to the
2011 UK – Switzerland withholding tax agreement. The
IRS owed UBS a large tax refund but refused to pay it
unless UBS shared bank account information
Major Legislative Change in UK
UK transfer pricing (2004) Foreign dividends (2009)
Worldwide debt cap (2010) Patent Box (2013)
CFC Reform (2012) R&D (under consultation)
Foreign branch exemption (2012) Non domiciliary taxation (2008 and againunder consultation)
Statutory residence test (under consultation) Accrued interest deductions (2009)
Introduction of SSE (2002)
Reduction in CT rate to 23% Offshore disclosure facility
First Steps Abroad
First Steps Abroad
Are you trading „in‟ or trading „with‟ a
foreign jurisdiction ?
First Steps Abroad
• Payroll obligations
• Permanent establishment
• VAT obligation
• Personal tax residency issues
Payroll Obligations
• Where are the employment duties ?
• Are they temporary or long term ?
• Is there a double tax treaty in place ?
• The sting in the tail – social security rates
Permanent Establishment
• Fixed place of business
• Need not be your own premises
• OECD commentary – 6 months
• Dependent agencies
VAT Obligations
• Place of business establishment
• Distance trading regulations (retail)
• Place of supply principles
• VAT equivalents – sales tax, GST etc
Personal Tax Obligations
• Ceasing to be UK resident ?
• Becoming tax resident abroad ?
• Tax equalisation
• Who is responsible
International Tax Checklist
International Tax Checklist
Permanent Establishments Corporate Tax Residency
Payroll Obligations Withholding Taxes
VAT – place of business Controlled Foreign Companies (CFCs)
Foreign dividends receivable Transfer Pricing
Thin capitalisation Accrued interest deductions
Business Travel Transfer of Assets Abroad
s.13 TCGA Patent Box and R&D
EU law / ECJ cases OECD
Foreign branch exemption Non domicile rules
Statutory residence test Foreign entity classification
Checklist – DTCs
• DTC = double tax convention / treaty
• UK has over 100 DTCs in force
• Some jurisdictions do not enter in to full DTCs
• No DTC = tax issues
Checklist – Withholding Taxes
• Responsibility of the payor
• Often driven by DTC provisions, or EU law
• Reduced rates available
• Creditable against domestic tax liability
Checklist - Residency
Companies are generally tax resident where :
a) They are incorporated
or
b) They are managed
DTT usuallly provides a tiebreaker – jurisdiction
of mgt wins
Checklist – Dividends Received
• 1 July 2009 – foreign dividends received
exempt
• ‘Small’ companies have additional requirement
• Payor’s jurisdiction must be a jurisdiction with
which UK has a full DTC
Checklist - Transfer Pricing
• The act of moving group profits from a high tax
jurisdiction to a low tax jurisdiction using
various mechanisms such as management
charges
• SME exemption – unless counterparty
jurisdiction is one with which the UK does not
have a full DTC
Checklist - Foreign Branch Exemption
• Pressure from banking industry
• SMEs need DTC in overseas jurisdiction
• Anti profit diversion test
• Other wrinkles for SMEs
Checklist - CFCs
• Controlled Foreign Companies regime
• Applies where foreign company controlled by UK companies, and foreign tax is low
• Apportions unremitted profit to UK company
• Changing regime - 2012
Checklist – R&D plus Patent Box
• R&D tax credits changing – current consultation
• Patent Box from 2013 - gradual transition
• 10% tax rate on qualifying profit - formula to
determine qualifying profit
• Future widening of box content?
Checklist – Interest Deductions
• Formerly, accrued interest on loans from non
residents – only deductible when paid
• From 2009 accrued interest is deductible......
• ........as long as counter party jurisdiction has a
full DTC with the UK
Checklist – ToAA and s.13
• ToAA = transfer of assets abroad
• Where assets held offshore if tax planning
motive, HMRC can apportion offshore income
to individual
• S.13 essentially the same but for gains –
however no motive test, treatment is automatic
Checklist – Business Travel
• Stealth workers - Do you know where your staff are and for how long ? PE ?
• Is there a DTC in play ?
• NICs – Form E101 – A1
• Travel & subsistence – all allowable ?
A Complex World
#stuartrogerstax
At the National Financial Directors’ Excellence Awards, Broadcaster Peter Sissons commented:
“...with a score of nearly nine-out-of-ten for quality of service, the highest marks ever for an audit firm in ten years.”
Francis Clark LLP, National Auditor of the Year – Mid Tier 2011
Stuart Rogers
Corporate Tax consultant
A Chartered Tax Adviser and a commerce graduate from The University of Birmingham, Stuart is a tax consultant who specialises in international tax
matters and advising complex corporate entities.
Stuart trained with KPMG in London and Bristol, passing the ATT and CTA examinations and gaining invaluable experience with large foreign owned
subsidiaries and listed businesses. In 2002 he joined a specialist tax firm in Bath as a corporate tax consultant and developed a senior advisory role across
the South of England, latterly based in the firm’s London offices. He was involved in a wide spectrum of work, ranging from advising start ups and niche
businesses, through to leading complex projects for clients such as Mulberry Group Plc and Crabtree & Evelyn Group.
In May 2011 Stuart joined FC as a tax consultant specialising in corporate and international tax matters, based in Salisbury but with a cross-group
brief. He also has experience in complex leasing tax matters, share schemes and employment related securities, due diligence and vendor tax
planning, de-mergers and corporate reconstructions, capital allowances, R&D tax claims, VAT and other general owner managed business issues