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Syllabus for ANTI AVOIDANCE REGIMES

I.          COURSE DESCRIPTION

Non-resident professors Kithsiri De Silva

Traditionally Taught by Kithsri (“Lucky”) DeSilva of the New Zealand Revenue with assistance by other countries Revenue officials.  This course examines the general legal principles, tax regulations, case law, and audit procedures concerning anti tax-avoidance many OECD countries.  Issues concern economic substance; business purpose; economic benefit; abuse of law; assignment of income; thin capitalization; anti-deferral regimes like control foreign company legislation, taxation of passive investment income held in foreign entities, and foreign trust regimes; anti-tax haven regimes; and other anti-avoidance legislation.

Kithsiri Lakshman De Silva

I have been in the field of taxation since 1963 when I joined the Department of Inland Revenue of Sri Lanka. Since then I have worked as a tax expert in Kenya and Botswana and am presently working in the Inland Revenue Department of New Zealand as a corporate investigator. I have worked both for Revenue and the private sector which has given me a better understanding of the view points of both. I have gained practical and theoretical experience in almost all aspects of taxation. My special fields of work have been in Investigation, intelligence and multi national taxation. I have lectured on taxation at the national and international level.

oy Saunders is the founder and chairman of the International Fiscal Services Group of companies which has offices in London, Amsterdam, Madrid, New York, Cyprus, Jersey and Curacao. The Principals of these offices are specialists in international fiscal law who provide Clients and their professional consultants with technical advice on the organisation of their international business arrangements. The IFS Group was formed to offer international tax planning advice coupled with corporate and personal asset management in the major jurisdictions commonly used as business centers.

Roy Saunders qualified as a Chartered Accountant in 1967 and has specialized in international fiscal law since the early seventies. As a Fellow of the Institute of Chartered Accountants in England and Wales, he is an acknowledged authority in the field of international taxation, and has lectured extensively worldwide for various professional bodies including his own Institute, the International Tax Planning Association (ITPA), ESC International Ltd, Economist Conferences and many others. He is on the executive committee of the ITPA and the editorial boards of Tax Planning International, CITE and FDTA.

Roy is known throughout the world for his many books and publications, the foremost being an 800 page loose leaf work entitled ‘International Tax Systems & Planning Techniques’ (Financial Times Law & Tax) which is now into its 34th Release and which analyses the tax systems of more than twenty five countries from the viewpoint of transactions involving residents of other countries. Other publications have included Structuring International Real Estate Transactions (Sweet & Maxwell), Principles of Tax Planning (Tax Management International), Tax Planning for Businesses in Europe (Butterworth) and Intelligence Report: Cyprus International Tax Planning (Financial Times Law & Tax). He is a regular contributor to Tax Planning International, a monthly tax publication of the Bureau of National Affairs in Washington, Practical Tax Planning and Precedents (Financial Times Law & Tax), International Tax Planning (Tolleys) and the articles published in the IFS Tax Digest, IFS News and the IFS Tax Guides all of which can be found on the IFS Website at http://www.interfis.com.

1.       MODULE 1 INTRODUCTION

1.1.    Objectives and the plan of this Course

Tax avoidance is a very nebulous concept. In FCT v Newton (HC), Taylor J expressed the view that:

"it is a condition precedent to the liability of a taxpayer that he shall derive income and it is difficult to understand how, except in a loose sense, a person can be said to avoid liability to tax by putting himself in a position where he will, neither in fact nor in law, derive future income”.

This is the paradox that engages the attention of those that practice tax avoidance and those who try to combat it. Can you actually avoid something that that has already occurred? The answer to it is both yes and no. Yes because if you are quite certain that a liability is inevitably due to arise you can take steps to move out of its path. That would be like getting out of the way of a train bearing down on you. Isn’t that the sensible thing to do? This is called the preventative method. If it has already arisen then it becomes a little more difficult. However the ingenious tax planner has found a way to do that also. And this is called the curative method. You will learn more about all these methods later.

Even as Tax avoidance is difficult to define, the problem of understanding it is compounded by the fact that its interpretation from one tax jurisdiction to another also varies. An example is the way in which that the concept of substance and form is applied in different tax jurisdictions by Courts of Law. There is another dimension that complicates our studies. That is the changes that occur in legislation from time to time reflecting changes in public and judicial tolerance of the many complex tax schemes created by tax practitioners. Tax practitioners need to be aware of the current state of the law not only in the country of residence of the taxpayer, but also of the countries that they may be using to implement their tax plans.

It would be futile to attempt to cover in depth all the anti avoidance provisions enacted by legislatures of all countries in the brief period of 14 weeks. What this course does provide is a broad overview of the provisions found in many OECD countries and a few other selected countries.

The objective of this course is to give the students an understanding of the fundamental principles that underlie anti avoidance provisions and to acquaint you with the current of state of the law in selected countries.

The course will cover the following areas of study:

There will be 10 assignments to be completed during the semester and these  will contribute to your final grades.

Recognizing the fact that most of you are not full time students and are constrained by the time you could devote per week to your studies the weekly study guides will be limited to approximately 25 to 35 pages. However you are expected to read the selected tax cases each week.

The final grades will be assigned as follows:

Collection assistance

Globalization of the economy not only makes it harder for tax authorities to determine the correct tax liabilities of their taxpayers, it also makes the collection of tax more difficult. Taxpayers may have assets throughout the world but tax authorities generally cannot go beyond their domestic borders to take action to collect taxes. For this reason, the Working Party is developing an article on collection assistance for inclusion in the OECD Model Tax Convention.

Combating corruption: The tax dimension

The first milestone in the OECD effort against international bribery was the 1994 Recommendation for countries to take effective measures to deter, prevent and combat the bribery of foreign public officials in connection with international business transactions. In 1996, at the suggestion of the Committee on Fiscal Affairs, the Council recommended that Member countries that allow the tax deductibility of bribes to foreign public officials re-examine this treatment with a view to denying the tax deductibility of such bribes. The Working Party on tax evasion is monitoring the implementation of the 1996 Recommendation.

In May 1997, Ministers endorsed the Revised Recommendation on Combating Bribery in International Business Transactions. In particular, they reaffirmed their commitment to criminalize bribery of foreign public officials in an effective and coordinated manner. They noted that an international Convention in conformity with the common elements agreed to by Member countries is an appropriate instrument to attain such criminalisation rapidly. They recommended that Member countries should submit criminalisation proposals to their legislative bodies by 1 April 1998 and seek their enactment by the end of 1998. Ministers promptly commenced the negotiation of a convention with a view to its entry into force in 1998 and urged the prompt implementation of the 1996 Recommendation on the tax deductibility of bribes. The Convention on Combating Bribery of Foreign Public Officials in International Business Transactions entered into force on 15 February 1999 after having been signed by 34 countries and ratified by 11.

As a result of these developments, all OECD Member countries concerned have now taken action to prohibit the deductibility of bribes to foreign public officials (the update on country practices may be found on http://www.oecd.org/daf/nocorruption/index.htm).

The Working Party on tax evasion is now working on a manual to implement legislation denying the deductibility of bribes. It is also providing input from a tax perspective, to the Working Group on Bribery which is discussing ways to respond to the decision of the OECD Council to examine, on a priority basis, the issues of bribery acts in relation to foreign political parties, advantages promised or given to any person becoming a foreign public official, as well as the role of foreign subsidiaries and offshore centers in bribery transactions.”

During the week beginning 9^th February you will be informed of the topic(s) that you would have to write your dissertation on and the format in which it should be presented. It is important that you agree your topic with the professors as early as possible to allow you enough time to conduct your research. You will be able to seek the assistance of the professors to identify reading material for your dissertation.

1.2.    This module consists of the following topics:

·         What is tax avoidance?

·         Public and judicial opinion that affects its definition

·         What makes tax avoidance possible

·         Main concepts

·         Definitions of tax avoidance

·         The main areas of tax avoidance

·         Descriptions of tax avoidance by the Courts

·         OECD summary of tax avoidance and its effects

·         Appendix 1 Glossary of commonly used words and phrases

·         Assignment 1

2.       What is tax avoidance?

2.1.   Finance literature may offer some guidance to what is meant by tax avoidance in its definition of arbitrage’. Arbitrage is a means of profiting from a mismatch in prices. An example is finding and  exploiting price differences between countries in shares in the same listed company. Tax arbitrage is a form of tax planning. It is an activity directed towards the reduction of tax by exploiting such differences between the incidence of tax on the same transaction within the country or between two or more countries.

2.2.   It is this concept of tax arbitrage that may constitute a generally accepted notion of what is tax avoidance. Activities such as giving money to charity or investing in tax-preferred sectors, could fall into this definition of tax arbitrage, and thus would be acceptable tax avoidance in a wider sense even if the action were motivated by tax considerations.

2.3.  Tax arbitrage can have a useful economic function. If differences in taxation are deliberate government policy furthering economic efficiency, it is possible that tax arbitrage directs resources into activities with low tax rates, as intended by government policy. It is also likely to ensure that investors in tax-preferred areas are those who can benefit most from the tax concessions, namely, those facing the highest marginal tax rates. If government policy objectives are better achieved, tax arbitrage is in accordance with the government’s policy intent. Unacceptable tax avoidance, then, can be viewed as a form of tax arbitrage that is contrary to legislative or policy intent.

2.       Public and judicial opinion

Tax being as old as civilization and human nature being what it is, we could safely assume that the practice of tax avoidance is not a modern phenomenon. It is human nature that tax avoidance stems from and an early example in recorded history is that of Mesopotamians who 6000 years ago attempted to swim across the rivers in order to avoid paying a toll levied by the King for the use of his ferry. The unfortunates who were caught were fined. This obviously indicates that the imposition of penalties was also an ancient art.

Another example is that of the 17^th Century city dwellers in England who boarded up their windows to avoid paying a tax on windows.

The attitude to tax avoidance and evasion has depended to a large extent on the prevalent political ideology and the socio-economic environment of each country. The role of the Government as perceived by the people and their attitude towards their obligations to the State influences the way that they look at persons who attempt to avoid tax.  The attitude to tax avoidance in the UK, for example, has changed dramatically over the last century, to the point where the Chancellor of the Exchequer, Gordon Brown in his first Budget speech in 1997 announced that the Government is

“committed to the proper funding of public services” and “will not tolerate the avoidance of taxation and will be relentless in its war against tax avoidance.  I have...instructed the Revenue to carry out a wide-ranging review of areas of tax avoidance, with a view to further legislation in future Finance Bills. I have specifically asked them to consider a general anti-avoidance rule.”

Indeed, this stance against tax avoidance schemes in general can be seen in numerous countries around the world and is not unique to the UK.

Public opinion ultimately influences judicial opinion. If the majority of persons in a country are engaged in a form of tax avoidance, such practice may soon be considered the norm and be treated as acceptable. Looking across the spectrum of judicial opinion expressed over time, it can be noted that opinion has varied from those judges who thought that the practice of tax avoidance was “not a virtue” (Lord Denning) to those that thought that it disclosed “an ingenious use” of the legislation (Barwick CJ in FCT v Westraders Pty Ltd).  Lord Templeman in IRC v. ex parte Matrix Systems Limited [1994] STI 249 went as far as saying:

“every tax avoidance scheme involves a trick and a pretence. It is the task of the Revenue to unravel the trick and the duty of the court to ignore the pretence.”

Both the Legislature and the judiciary have shown concern over the effect of Tax avoidance on society. Woodhouse J in Elmiger v CIR (1966) NZLR expressed the following view:

“There has been a growing awareness by the legislative and the courts alike that ingenious legal devices contrived to enable individual taxpayers to minimize or avoid their tax liabilities are often not merely sterile or unproductive in themselves…but that they have social consequences which are contrary to the general public interest”.

On 31 March 1998 the Chartered Institute of Taxation in the UK issued a Press Release on the “Tax Avoidance Debate”.  Of particular interest is the following extract:

“If a GAAR is to be introduced to give the tax authorities powers to ensure the law is interpreted as intended, its operation must extend to giving taxpayers the ability to claim reliefs or exemptions which were intended but which seem to be denied by the words of statute.

In any debate on this area, people need to be reminded that tax avoidance is legal; also that none of us condones tax evasion. Tax avoidance is probably impossible to define. Avoidance is something that changes with years and trends. It is also the case that one man's tax planning is another man's tax avoidance. After all, is investing in a PEP or participating in a PRP scheme tax avoidance?

It has to be said that the term "tax avoidance" is becoming an emotive one. Because of the emotion that is aroused, balanced debate may be lost. It is perhaps arguable that the debate should focus on "tax planning" - or that, as we propose below, that any GAAR must be balanced by a statement that tax planning is acceptable.”

The question of GAARs (General anti avoidance rules) will be covered later.

From the all the above extracts it is clear that tax avoidance is not universally defined or accepted. For the advisor this is problematic since the advisor will be at pains to ensure his client receives the best possible advice without contradicting any domestic or international law.  If his profession is therefore stigmatised is this fair?  Is public perception of tax avoidance the correct one and what influences this perception?

3.       What makes tax avoidance possible?

Three conditions need to be present for tax avoidance to take place.

3.1. A difference in the effective marginal tax rates on economic income is required. For arbitrage to exist, there must be a price differential and, in tax arbitrage, this is a tax differential. Such tax differences can arise because of a variable rate structure, such as a progressive rate scale, or rate differences applying to different taxpayers, such as tax-exempt bodies or tax loss companies. Alternatively it can arise because the tax base is less than comprehensive, for example, because not all economic income is subject to income tax.

3.2.  An ability to exploit the difference in tax by converting high-tax activity into low-tax activity is required. If there are differences in tax rates, but no ability to move from high to low-tax, no arbitrage is possible.

3.3.    Even if these two conditions are met, this does not make tax arbitrage and avoidance possible. The tax system may mix high and low-rate taxpayers. The high-rate taxpayer may be able to divert income to a low-rate taxpayer or convert highly-taxed income into a lowly-taxed form. But this is pointless unless the high-rate taxpayer can be recompensed in a lowly-taxed form for diverting or converting his or her income into a low-tax category. The income must come back in a low-tax form. The benefit must also exceed the transaction costs. This is the third necessary condition for tax arbitrage.

Since all tax systems have bases that are less than comprehensive because of the impossibility of defining and measuring all economic income, tax arbitrage and avoidance is inherent in tax systems.

4.       Main concepts

4.1.    Definitions of Tax Avoidance

When dealing with tax avoidance on an international scale it is difficult to define it in one simple statement. Each country’s definition would depend on the rationale on which its legislation has been enacted. There is another difficulty. Two words that are commonly found in tax avoidance legislation and thus in tax literature are “avoid” and “evade”. In common usage they are often interchangeable. But, in the tax context they have very different meanings. This has made some writers to comment that the legal definition of tax avoidance has become a term of art.

The IBFD International Tax Glossary defines avoidance as being:

“the reduction of tax liability by legal means.  It often has pejorative overtones, where for example it is used to describe avoidance achieved by artificial arrangements of personal or business affairs to take advantage of loopholes, anomalies or other deficiencies of tax law.  Rules introduced into the law to prevent or circumvent certain types of avoidance which are disapproved of by the legislature may be described as “anti-avoidance provisions” or “provisions against legal avoidance”.  In contrast with avoidance, tax evasion is the reduction of tax by illegal means”

4.2.    The Main Areas of tax Avoidance

In this Study Guide tax avoidance as a concept will be taken to encompasses all activities by which persons attempt to reduce the amount of tax that would otherwise be payable. Another way would be to say that it incorporates all behavior that is tax induced. Because conceptions of tax avoidance vary significantly, the wide view of the concept can be considered to encompass all forms of conduct or activity that either attempt and/or result in the reduction or elimination of tax otherwise payable. This view focuses upon the activity and/or result rather than the acceptability or otherwise of such activity or result. In this respect tax avoidance is treated as a generic term and tax evasion and other forms of tax induced behavior treated as species of it. Having said this we will soon find that this definition may be too simplistic and too general. But for the moment it will suffice.

To understand the international dimensions of tax avoidance it is important to start at the general meaning of it as it applies to domestic tax legislation. The popularity of international tax avoidance schemes may be of recent origin but they are based on the same principles that have driven domestic tax avoidance for years. The range of activities covered by the term spreads from the perfectly legal and acceptable forms to the highly suspect and dangerous forms of criminal behavior. The main broad areas of tax avoidance can be classified as follows:

·         Tax planning

·         Tax mitigation

·         Acceptable tax avoidance

·         Unacceptable tax avoidance

·         Tax avoision

·         Tax evasion

These areas are not distinct and separate from each other. In fact they are sometimes synonymous and often overlap.  It is impossible to express a precise test as to whether taxpayers have avoided, evaded or merely mitigated their tax obligations.  As we go along we will study specific examples that will illustrate this point.

4.3.     Descriptions of Tax Avoidance By the Courts

The description is ultimately a matter of judgment for the courts. As Baragwanath J said in Miller v CIR; McDougall v CIR:

"What is legitimate ‘mitigation’ and what is illegitimate ‘avoidance’ is in the end to be decided by the Commissioner, the Taxation Review Authority and ultimately the courts, as a matter of judgment"

In IRC v. Challenge Corporation Ltd [1987] 2 WLR 24 Lord Templeman similarly attempted to distinguish tax avoidance from tax mitigation:

"Income tax is mitigated by the taxpayer who reduces his income or incurs expenditure in circumstances which reduce his assessable income . . . Income tax is avoided and a tax advantage is derived from an arrangement when the taxpayer reduces his liability to tax without involving him in a loss or expenditure which entitles him to that reduction . . . In an arrangement of tax avoidance the financial position of the taxpayer is unaffected (save for the costs of devising and implementing the arrangement) and by the arrangement the taxpayer seeks to obtain a tax advantage without suffering that reduction in income, loss or expenditure which other taxpayers suffer and which Parliament intended to be suffered by any taxpayer qualifying for a reduction in his liability to tax.”

In Ayrshire Pullman Motor Services & Ritchie v. CIR CS 1929, 14 TC 754 Lord Clyde said:

“no man in this country is under the smallest obligation, moral or other, so as to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest possible shovel in his stores…And the taxpayer is…entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Revenue.”

Lord Greene MR commented in Lord Howard de Walden v. CIR [1942] 1 All ER 287 that :

“for years a battle of maneuver has been waged between the Legislature and those who are minded to throw the burden of taxation off their own shoulders on to those of their fellow subjects.  In that battle the Legislature has often been worsted by the skill, determination and resourcefulness of its opponents…it would not shock us in the least to find that the Legislature has determined to put an end to the struggle by imposing the severest of penalties.  It scarcely lies in the mouth of the taxpayer who plays with fire to complain of burnt fingers.” 

4.4.     OECD Summary of Tax Avoidance and its Effects

The OECD summaries the effects of tax avoidance and evasion as follows:

“Globalisation and the removal of exchange controls and other barriers to the free movement of capital have promoted economic development. But they have also increased the scope for tax avoidance and evasion, and the loss of tax revenues can be significant.

Tax avoidance and evasion cause many problems. Governments lose revenues and so taxes on those who do not escape the tax net must rise to plug the gap. Countries where tax compliance is highest lose out, as trade flows are diverted elsewhere. The Committee on Fiscal Affairs has taken a number of steps to combat international tax avoidance and evasion. The main focus of this work is on improving the means for co-operation between governments.

International co-operation

Tax authorities have responded to concerns about avoidance and evasion by taking on new powers to collect information from taxpayers. Delegates to the Working Party on tax avoidance and evasion systematically inform other countries about the means at their disposal for countering avoidance, covering legislation, court decisions and audit techniques. It is through this exchange of experiences that the Committee is able to develop and promote the adoption of practices that should enable tax authorities to administer their tax laws in an effective and equitable manner. An example of the results of such discussions is the OECD recommendation on the use and disclosure of Tax Identification Numbers (TINs) to increase compliance on cross-border income flows.

Ways of increasing compliance in cross-border financial transactions and on access to bank information for tax purposes are the focus of current work. Additional work will also be carried out to identify and address other barriers to the identification of beneficial ownership and exchange of such information.

The Committee has promoted the exchange of information between tax authorities as the best way of fighting non-compliance in transactions across borders. For this reason, the OECD Model Convention contains an article on exchange of information. Current work to improve exchange of information includes looking not only at barriers to effective exchange of information but also at how better use of the latest information technology can help. OECD countries have adopted a standard magnetic format for exchange of information. The Working Party is also considering how technology can be used to improve and expedite procedures for the certification of residence for purposes of granting treaty benefits. A pilot study on the exchange of TINs is being conducted.

The Committee is also exploring the relationship between money laundering and tax-related crimes. In particular, it is examining how tax authorities can obtain access to information gathered by anti-money laundering authorities both to pursue tax offenses as well as to exchange that information with foreign tax authorities.

Tax inspectors meetings

With identities concealed, real cases are examined in regular meetings of tax inspectors. The aim is to share practical experience and information among people working in the fields of tax auditing and detection of fraud. Past meetings have looked at the detection of evasion and avoidance schemes in financial transactions, the use of tax-minimizing vehicles in tax havens, tax-motivated cross-border transactions and attributing profits in global trading concerns.

New international legal instruments

Backing up increased co-operation, new legal instruments have been developed. In 1995, the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, established in co-operation with the Council of Europe, came into force.

INTRODUCTION TO TAX AVOIDANCE AND TAX EVASION

Lesson 1

Introduction to Anti-Avoidance Legislation in International Fiscal law

2.1.    Public and judicial opinion

2.2.    What is tax avoidance?

2.3.    What makes tax avoidance possible

2.4.    Main concepts

2.4.1. A UK Perspective

2.4.2. Definitions of Tax Avoidance

2.4.3. The Main Areas of Tax Avoidance

2.4.4. Descriptions of Tax Avoidance by the Courts

2.4.5. OECD Summary of Tax Avoidance and its Effects

1.5    Glossary/lexicon of commonly used words

1.6   Tax planning

1.6.1          What is tax Planning?

1.6.2          The Methods used to Plan Taxes

1.6.2.1                Reducing Assessable Income

1.6.2.2                Derive capital, not income

1.6.2.3                Avoid Deriving Assessable Amounts

1.6.2.4                Maximising the Cost Base of an Asset

1.6.2.5                Income Exemptions

1.7   Increasing Deductions

1.7.1          Deductions for Businesses

1.8   Reducing Rate and Deferring Payment of Tax

1.8.1          introduction

1.8.2          tax offsets and other benefits

1.8.3          withholding tax: interest, dividends and royalties

1.9   Methods of Diverting Income

1.9.1          introduction

1.9.2          transfer of income-producing assets

1.9.3          problems arising from the transfer of assets

1.9.4          contracting with associated taxpayers

1.9.5          discretionary distributions

1.9.5.1                partnerships and trusts

1.9.5.2                Dividends and Dividend Streaming

1.9.5.2.1           Dividend stripping

1.9.6          commercial considerations

1.9.7          Conduits

1.9.8          requirements of other statutes

1.10                        Recipients of Diverted Income

1.10.1      choice of recipients

1.10.2      family members

1.10.3      family partnerships

1.10.4      family companies

1.10.5      family trusts

1.10.6      Family trusts or family companies?

1.10.7      Loss companies

1.10.8      Unit Trusts

1.10.9      Tax Havens

1.11                        Avoiding Unforeseen Tax Problems

1.11.1      Partnership Restructuring

1.11.2      Business Sales

1.11.3      Capital Gains Tax Issues

1.11.4      Anticipating Tax Changes

Lesson 2

Definitions of Tax Avoidance and Evasion

2.1   Tax avoidance and tax evasion

2.2   Potential overlap between avoidance and evasion

2.3   Characteristics of evasion and avoidance

2.4   The characteristics of evasion

2.5   The characteristics of avoidance

2.6   Constituent elements of avoidance and evasion

2.6.1          Tax minimisation or elimination should have resulted

2.6.2          Lawfulness or legality of the transaction

2.6.3          Relevance of the purpose or motive of the taxpayer

2.6.4          Artificiality criterion

2.6.5          Exploiting loopholes

2.6.6          Economic reality test

2.7   Legislative intent or purpose

2.8   Acceptable tax avoidance

2.9   unacceptable tax avoidance

2.10                        Innocent and Fraudulent Evasion

2.11                        Penalty Tax and Offences

2.12                        Imposition of penalties

2.13                        increase or decrease of penalty tax

2.14                        tax avoision

2.14.1      Wine box inquiry (NZ)

2.14.2      Magnum transaction

2.15                        Categories of tax avoidance schemes

2.16                        Preventative

2.17                        Curative

Lesson 3

Shams, Substance over Form and Legislatures Response to Avoidance

3.1   Sham - meaning of the term

3.2   Essential features of a sham

3.3   Application

3.4   Effect of a sham

3.5   Cases involving sham transactions

3.6   Example

3.7   Summary

3.8   Substance over form - Legal provisions

3.9   Fraus legis, abus de droits

3.10                        General anti avoidance rules (GAAR)

3.10.1      Country Analysis

3.11                        Does  GAAR apply?

3.11.1      Is there a scheme?

3.11.2      Was a tax benefit obtained?

3.11.3      What was the purpose of the scheme?

3.11.3.1             Business Purpose test and Commerciality of Transactions

3.12                        Cancellation of tax benefits

3.12.1      Advanced Rulings/clearance certificates

Lesson 4

Domestic tax residence of foreign entities under Management and Control concept

4.1 Court cases and legislation on Corporate residence

-          (ITSAPT + Nick’s article)

-          (Philip Baker’s book on Double Tax Treaties)

4.2   General legislation against the use of tax haven entities

4.3   Determination of residence under double tax treaties

-          (Model OECD Commentary on Effective Management)

Lesson 5

Trading within a territory without tax registration 

5.1   Concept of trading within and trading with

-          (ITSAPT + Nick’s article)

5.2   Limited activities without taxation permitted under double tax treaties

5.2.1          Model OECD Commentary on Permanent Establishments

5.3   Jeopardy assessments and withholding tax mechanisms for transfers abroad

5.4   Clearance under advance tax rulings

Lesson 6

Specific Anti Avoidance Rules – Controlled Foreign Companies

6.1   Introduction

6.2   Controlled foreign companies regime

6.2.1          Exemptions in various countries for eg active income

6.2.2          Conflict with double tax treaties

6.2.3          Upstream loan provisions

-          (ITSAPT sections for various countries + RS articles (Website)

-          (Any IFA Cahiers on this topic?)

6.3   Foreign investment fund regime

6.4   Foreign tax credits

6.5   Income of non residents

Lesson 7

Specific Anti Avoidance Rules Attribution of Foreign Income to Individuals

7.1 Income earned by foreign entities

7.2                           Capital gains of foreign entities

7.3              Capital retained by offshore trusts and other entities

-          (B1.10.1 et seq for UK, Art 209B France, SubPart F US etc)

-          (Any IFA Cahiers on this topic?)

Lesson 8

Specific Anti Avoidance Rules – Transfer pricing

8.1   General overview of transfer pricing

8.2   Migration of trade

8.3   Adjustment of sale prices on transfers of assets abroad

8.4   Transfer pricing re products and other expenses

-          (See US Transfer Pricing file in Training/Lessons)

-          (OECD Papers on Transfer Pricing)

-          (IFA Cahiers on Transfer Pricing)

8.5   General disallowance of expenses paid to tax haven entities

-          (Excerpts from ITSAPT under sub-section 9 of various chapters)

8.6   Advance pricing agreements

- See IFA Cahiers 1999 Eilat Conference

Lesson 9

Specific Anti Avoidance Rules Thin Capitalisation

9.1   Thin capitalisation

9.1.1          (Basil Newton has written 50 pages on thin capitalisation)

                                    (Any IFA Cahiers on this topic?)

9.2   Arm’s length concept in financing arrangements

9.3   Constructive dividend concept

                        -           (Add Swiss/German subsections to Newton’s notes)

                        -           (Any IFA Cahiers on this topic?)

Lesson 10

Double tax treaty shopping and anti-avoidance measures

10.1   Use of conduit companies

10.2   Treaty shopping and abuse of treaties

-          (RS lecture notes)

10.3   Local rules eg Swiss Federal decree

10.4   Treaty anti-avoidance provisions and limitation of benefits

-          (ITSAPT for LOBs + Scala/Osho files for Swiss/Dutch/US reviews)

-          (Philip Baker’s book on Double Tax Treaties)

Lesson 11

Extension of tax residence following emigration

11.1   Departure taxes for individuals

11.2   Continued domestic taxation on capital gains of certain assets

                        - (ITSAPT sections on Canada, Australia, US (partial))

11.3   Double tax treaty provisions permitting continued taxation

11.4   Crystallisation of tax liabilities on transfer of corporate residence

Lesson 12

Reporting requirements and Penalties imposed on non-payment of taxes

12.1                        Incorporation of subsidiaries by parent corporations

12.2                        Establishment of non-resident companies by individuals

12.3                        Establishment of offshore trusts

12.4                        Reporting transactions between domestic and foreign entities

12.5                        Ordinary penalties and interest on overdue payments

12.6                        Equitable adjustments of profits between countries

Criminal liability for tax evasion

12.7                        Criminal penalties imposed for assistance in tax evasion by professionals

                                    - (Miles articles on NCIS reporting requirements)

LLM Online Course Requirements for AAFM Financial Board Certification:

• CWM Chartered Wealth Manager - Take LLM 131, and LLM200
• CTEP Chartered Trust & Estate Planner - Take: LLM111 and LLM 131
• CPM Chartered Portfolio Manager - Take LLM 222
• CRA Chartered Risk Manager - Take LLM106 and 110
• CAM - Chartered Asset Manager - Take LLM 104 and LLM 105
• CMA - Chartered Market Analyst - Take LLM 333 (Must of Masters Degree, JD or CPA)
• RFS - Registered Financial Specialist - LLM 101 and LLM 102