Over the course of the last few years, interest in the field of international taxation has grown steadily. The topic has found its way into the heart of public debate where it is often subjected to oversimplification and political spin. Objective technical and legal analysis is rarely considered worthy to explain, too complex, too complicated for the layman to grasp (or maybe too dry), and so the topic is filtered through concepts of fairness and morality in order to give it mass appeal. Seemingly in response to society’s increased appetite for “tax justice”, the EU Commission has amplified its activity, publically denouncing a number of tax practices it perceived as illegal State Aid and quickly introducing sweeping legislative actions aimed at tacking this perceived abuse. EU Member States have just as swiftly adopted these new provisions and directives in an effort to address the issue.
What do a bank and a duty free shopping group have in common? Answer: they both invested abroad. In itself, hardly noteworthy, but in this case, these 2 Spanish companies benefitted from a specific Spanish tax provision allowing the tax write off of goodwill on acquisitions of foreign subsidiaries. The EU Commission challenged this on the basis that it constituted illegal State Aid and litigation ensued. The procedure started in October 2007 and has been running ever since. A General Court (“GC”, the lower European court) decision in November 2014 that was taxpayer and Member State-friendly was overturned today by the European Court of Justice (ECJ, the supreme European court).
On 7 December 2016, the European Network on Debt and Development (Eurodad) released a report entitled “Survival of the Richest: Europe’s role in supporting an unjust global tax system 2016” which was produced by NGOs in countries across Europe. At the core of the report is the accusation that the number of Advance Pricing Agreements (APAs), referred to as secret “sweetheart deals” in the report, significantly increased over the last years. The key messages of the report have been much-cited in newspapers in Luxembourg and across the globe. Unfortunately, the journalists covering the topic merely relied on the information provided in the executive summary of the report without conducting a critical review of its content. Otherwise, the misrepresentations in the report would have been detected and pointed out.
The Apple case has shot EU state aid rules into the headlines. It finishes the metamorphosis of State Aid from what was seen as a somewhat dull back-room legal field into a high-visibility front-line political topic. The case was announced in a high drama televised press conference which made headlines all around the world. The Apple case was high profile because of the company concerned, the financial impact on budgets on both sides of the Atlantic and also because it brought simmering political unease with the subject of State Aid in tax matters to a head. In this blog we will seek to frame some of the political questions in a more objective legal manner in order to bring structure to the political debates raging around the subject. We will look in particular at the Apple and McDonalds cases but similar considerations apply to others.
Earlier this month, Boeing, the American aerospace giant, won a 17 billion dollar contract with Iran. This contact comes after an even more impressive 25 billion dollar deal with Airbus six months ago. Subject to US government approval, these contracts represent over 200 new planes that will replace the rundown national Iranian fleet. Dangerous and dilapidated, the outdated aircraft operated by Iran Air such as the Airbus 300 serves as a reminder of how long economic sanctions have been in place. These sanctions have prevented the country from updating important infrastructure, such as the transportation system.
The popular website Airbnb gives travelers to Paris the possibility to stay a few nights in 40,000 different homes and apartments without a single Haussmanian building or bourgeois townhouse in the French capital entered on its balance sheet. Valued at over 25.5 billion dollars, some investors question how this brick and mortar-less company can reach valuation levels only previously reserved for hotel industry elites like the Hilton and Marriott groups. More head scratching occurred when Microsoft recently acquired LinkedIn for about the same amount, 26 billion, after the social network announced disappointing losses at the beginning of the year.
Shockwaves from this morning’s announcement are still rippling through the media, the markets and foreign and UK government. The “leave” scenario that many business owners and public figures dismissed at first as fantasy has now been voted by a majority of the British public. As the dust settles, the impact of Brexit will become clearer, but for the moment we can begin to piece through what this decision may mean for business in Luxembourg and abroad. We’d like to offer some of our initial thoughts and suggestions, as tax advisers with strong knowledge of both markets and just how intertwined they have become.
As the OECD pushes for more transparency across borders, the Common Reporting Standard, or CRS, with its automatic exchange of information will soon become the norm for many countries around the world. We’ve put together this infographic to bring you quickly up to speed with what you should know about CRS.
Conventional wisdom warns us against putting all our eggs in one basket: portfolios must be diversified, risk spread as thin as possible… However, in our line of work, putting all your eggs in one basket has proven advantages whether it be when structuring investment funds, large group of companies, or dealing with complex transactions. Over the years, we have built an integrated approach of tax advice and corporate implementation services that is designed to bring value in many different ways, where and when it counts most to you.
Transfer pricing has become the hot topic in Luxembourg taxation over the last few years in an environment that relies increasingly less on tax rulings. In the past, businesses viewed tax rulings as a way to provide certainty and avoid risks when structuring investments or intra-group transactions. However, for a number of reasons this is no longer the case. This means that multinationals and international investors need to develop a solid strategy for transfer pricing and related documentation. In this blog, I would like to suggest some best practice recommendations which should help businesses define a reasonable approach towards transfer pricing.