January 30, 2023

Anti-Abuse Developments: A New Normal in the Netherlands

January 30, 2023/ Ruchelman P.L.L.C.

“Doe normaal” is practical advice in the Netherlands encouraging one to act normal. In the past, that phrase would describe commonly used plans to reduce tax. Today, if the old normal is followed by a multinational group effecting an acquisition, the group could end up facing unintended tax consequences. Legislators and tax authorities are increasingly examining traditionally “normal” acquisition structures and financing arrangements in a quest to combat deemed abusive tax arrangements. Like its fellow E.U. Member States, the Netherlands has shifted its tax policy agenda in recent years in line with international and E.U. initiatives to target perceived abuse. In a similar way, the U.S. has targeted abusive arrangements for several decades via common law doctrines and codified anti-abuse rules, including the economic substance doctrine and conduit financing regulations. Michael Bennett, a U.S. attorney, recounts recent developments in the Netherlands based on a two-year assignment as a U.S. tax adviser in the Amsterdam Office of a major international law firm. He also addresses “economic substance” rules followed for close to a century in the U.S. This is Mr. Bennett’s first article for Insights as an associate of Ruchelman P.L.L.C.

January 30, 2022

Mexico: Recent Developments

January 30, 2022/ Ruchelman P.L.L.C.

The Mexican government adopted its 2022 budget in late October 2021. Several provisions place special emphasis on plugging gaps in tax compliance. More power has been given to the Mexican tax administration when conducting tax examinations. Taxpayers under tax examinations face serious penalties where noncompliance is found to exist, including potential application of the domain extinction law, a forfeiture provision that applies ordinarily in serious criminal investigations. G.A.A.R. has been introduced, tax reporting obligations have been imposed on advisers reflecting policies behind D.A.C.6 in the E.U., and a new regime to disregard foreign entities and arrangements without legal personality have been adopted. Alil Álvarez Alcalá, the founding partner of Álvarez Alcalá, in Mexico City dives into these and other new regimes.

March 15, 2015

India Announces Ambitious Budget for 2015-16

March 15, 2015/ Web Developer

The Indian Finance Minister presented the Budget for 2015-16 and the Finance Bill, 2015 in Parliament on February 28, 2015. The budget statement is indicative that the Indian Government is making a sincere attempt to establish a non-adversarial, stable, certain, and simplified tax regime, conducive to encouraging investment, including foreign investment. Guest contributor Jairaj Purandare of JPM Avisors Pvt Ltd, in Mumbai, India, provides a comprehensive assessment of the provisions, including policy announcements and proposed amendments to the tax law.

October 15, 2014

Action Item 6: Attacking Treaty Shopping

October 15, 2014/ Web Developer

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BACKGROUND

Action Item 6 addresses abuse of treaties, particularly focusing on treaty shopping as one of the most important sources of B.E.P.S. The approach adopted amends the O.E.C.D. Model Convention that borrows from the U.S.'s approach to treaties but expands upon it in a way that can be very helpful to the U.S. and other developed countries if adopted by the C.F.E. next year in their final report. Among other measures, the report recommends inclusion of a Limitation on Benefits (“L.O.B.”) provision and a general anti-avoidance rule called the Principal Purpose Test (“P.P.T.”) to be included in the O.E.C.D. Model Convention. While it is expected the report will be finalized next year, whether countries will adopt the recommendations is the crucial factor that is still unclear.

RECOMMENDATIONS

The key recommendations can be found in Paragraph 14. It contains two basic recommendations:

Countries should agree to include in the tax treaties an express statement of the common intention to eliminate double taxation without creating opportunities for non-taxation or reduced taxation through tax evasion or avoidance through use of treaties.
Countries should demonstrate their commitment to this goal by adopting an L.O.B. provision and a P.P.T. provision in income tax treaties.

The report also notes that special rules may be needed to address application of these rules to collective investment funds (“C.I.F.’s”). The provision should be supplemented by a mechanism that would deal with conduit arrangements not currently dealt with in tax treaties.