Measures To Counter Cross Boarder Tax Evasion

Question 1

Outline the EUSTD

Answer 1

European Union Savings Tax Directive

applies to EU residents with overseas investments

Aim
-savings income in form of interest made in one EU member state to beneficial owner resident elsewhere / subject to effective taxation in country of residence

Question 2

Outline the EUSTD offshore

Answer 2

Non EU have choice how to implement EUSTD / some SP pay interest savings income on EU residents will ask clients to choose;

• retention tax option - SP retain tax at predetermined rate & pay country authorise without disclosing details about whom related
• voluntary exchange info - SP won’t retain tax from savings @ provide authorities with info clients interest relates / requires consent from individuals
• exemption - SP not required to apply either if client presents cert drawn by authority of EU member state of residence
• Directive used instead of withholding taxes / not part of EU
• some SP offer certain options only
• offshore move towards automatic exchange & transparency & commitment to support global standards

Question 3

FACTA s

Answer 3

US foreign account tax compliance act

Designed to limit evasion of us taxpayers holding offshore accounts by placing reporting requirements on financial institutions / even if taxpayers hold substantial interest in entity

FFI report to US IRS / intergovernmental agreements allow entities to report directory to national tax authorities

FFI - bankers, insurance co, trust services business

Participating FFI - entities can avoid withholding tax

Question 4

Outline offshore centres use of FACTA

Answer 4

SP invest resources to improve standards & general admin to comply with requirements

Provide info: name, address, tax is number for us taxpayers

US Indicia - entities with US connections

Person US citizen if;

• us address
• us DOB
• us telephone number
• standing instructions to transfer to us account

Offshore centres privacy legislation won’t protect against FACTA / close account if refuse to waive rights

Question 5

What are intergovernmental agreements

Answer 5

Aim to improve international tax compliance by establishing frameworks for exchange of info between FFI & tax authorities

Based on domestic reporting & automatic exchange of info

UK report to HMRC

Agreements closely followed by FACTA negotiated to ensure slight differences offshore :

• address type of business undertaken
• facilitate reporting of financial info held in jurisdiction

Some jurisdictions have negotiated a disclosure facility which allows investors with assets to come forward / regularise past affairs