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More Permanent Establishments: The Dwindling Preparatory and Auxiliary Activities Exception

More Permanent Establishments: The Dwindling Preparatory and Auxiliary Activities Exception

Nothing is certain in this world, except death and taxes – and even taxes are subject to change.  The ever-expanding definition of a permanent establishment (“P.E.”) and ever diminishing exceptions to a P.E. under the O.E.C.D.’s B.E.P.S. Project has made one thing clear – the restrictions local jurisdictions put on activities by foreign taxpayers to trigger taxation are tightening.  The dwindling preparatory and auxiliary activities exception is a prime example.  Neha Rastogi and Beate Erwin explain.

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The I.R.S. Approach to the Dependent Agent Concept

The I.R.S. Approach to the Dependent Agent Concept

When foreign corporations have certain limited activities in the U.S., a question that arises is whether a taxable presence exists in the U.S. for Federal income tax purposes.  A foreign corporate taxpayer with direct activities or operations in the U.S. is subject to U.S. corporate income tax and branch profits tax if it conducts a U.S. trade or business generating effectively connected income. Recently, the I.R.S. Large Business and International division published an international practice unit (“I.P.U.”) addressing the creation of a P.E. through the activities of a “dependent agent.” Fanny Karaman and Beate Erwin lead the reader through the I.P.U. and explain the four-step process that is used by the I.R.S. to evaluate whether a permanent establishment exists.

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Strategies for Foreign Investment in Indian Start-Ups

Strategies for Foreign Investment in Indian Start-Ups

Foreign investment in Indian high-tech start-ups can yield significant profit opportunities for savvy investors.  During 2018, over 1,000 deals were struck, reflecting $38.3 billion in new investments.  If these investments turn out to be profitable, the tax exposure for the investor will vary with the form of the investment.  Choices of investment vehicles include (i) L.L.P.’s, (ii) Category I, Subcategory I alternative investment funds (“A.I.F.’s”) registered with the Securities Exchange Board, (iii) Category III A.I.F.’s, and (iv) trusts.  Each has unique tax consequences for investors receiving dividends and realizing gains.  Raghu Marwah and Anjali Kukreja of R.N. Marwah & Co L.L.P., New Delhi, explain the entities choices and the resulting tax costs.

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Trust Regulations and Payment Services: Dutch Law in 2019

Trust Regulations and Payment Services: Dutch Law in 2019

The Dutch government has taken steps in recent months to enhance regulatory oversight.  The new Act on the Supervision of Trust Offices 2018 adopts serious best practices for trust companies designed to prevent Dutch entanglement in the next set of Panama Papers.  KYC due diligence must be real.  At the same time, the Second Payment Services Directive (“P.S.D. II”) was transposed into Dutch law.  With customer permission, companies involved in payment service businesses will have greater access to information on spending habits of customers.  This generates a win-win scenario – a miracle for companies engaged in marketing activities and insights for consumers into their spending patterns, enabling them to make better financial decisions.  Lous Vervuurt of Buren N.V., the Hague, explains how the new rules work, including new standards of account security.  

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F.B.A.R.’s — What You Need to Know

F.B.A.R.’s — What You Need to Know

April 15 is almost here, and while most people know this date as the filing deadline for individual tax returns, it is important to another filing requirement: the Report of Foreign Bank and Financial Accounts (“F.B.A.R.”).  Although the form has been around since the 1970’s, many people continue to profess ignorance of  its existence.  Others are simply confused about the requirements.  A recent Federal case illustrates the perils of failing to file a required F.B.A.R.  Rusudan Shervashidze and Nina Krauthamer explain that penalties are high, and courts are skeptical about claims of ignorance of the law, especially when taxpayers have accumulated several million dollars placed in an offshore account.

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