Withholding Tax Research Articles

Italian Tax Regime Applicable to Interest on Loans Granted by Non-Italian Resident Banks to Italian Residents – Certain Considerations in Light of the Recent Positions of the Italian Tax Authorities

The Italian tax authorities together with the Italian tax police are sending tax questionnaires to non-Italian financial institutions and banks aimed at assessing whether the mentioned non-Italian entities have realized Italian-source income (including, inter alia, interest on loans granted to Italian individuals not acting as withholding tax agents) which has not been reported and taxed in Italy. Such tax questionnaires follow the release of Ruling 41/2018, whereby the same tax authorities stated that interest on loans, granted by a Swiss bank without an Italian permanent establishment to Italian residents, qualifies as Italian-source income to be taxed in Italy at the rate provided by the applicable tax treaty even when the borrower does not qualify as Italian withholding tax agent. This article intends to provide a preliminary description of the Italian tax rules applicable to interest on loans granted to Italian residents by non-Italian resident banks also in light of the recent changes in laws and recent guidelines issued by the Italian tax authorities.

Tax Avoidance — Methodology for Quantification and the Case of the Netherlands

The goal of this paper is to define and quantitatively measure tax avoidance. So far any rigorous assessment of financial flows related to tax avoidance that entails paying (almost) no taxes, is lacking. This prevents a proper assessment of the necessity for further regulation to fight such undesirable tax avoidance. Quantifying tax avoidance provides a sound starting point for assessing the severity of regulation – matching the expected benefits with costs – and sheds further light on the possible design of effective regulation. The paper defines tax avoidance as the legal use of tax constructions aimed at paying (almost) no taxes in the entire international financial chain. Our paper shows that in order to prevent international tax systems from being used for such double non-taxation, governments could introduce a withholding tax on outgoing interest and royalty flows to low tax jurisdictions (tax havens). If the low tax threshold is set at 15% or 10% respectively, then depending on the choice for one of the two provided definitions of ‘low tax jurisdiction’, we find that the combined outgoing royalty and interest flow related to tax avoidance via Dutch conduit companies was on average 9.7 or 11.9 billion euro per year in the period 2009-2013.

원천징수와 소득처분에 관한 새로운 이해

원천징수와 소득처분에 관한 새로운 이해

Non-Residents and Capital Gains Tax in Australia

The evolution of capital gains taxation in Australia parallels that in Canada in many respects. Federal income taxes were adopted in both countries during the First World War, and in both jurisdictions the courts interpreted the term "income," the subject of taxation, using United Kingdom judicial concepts that excluded capital gains from the tax base. In the last quarter of the 20th century, both countries amended their income tax laws to capture capital gains, and in both countries concessional rates apply. Initially, the Australian capital gains tax regime had rules that paralleled those in Canada in respect of the application of capital gains tax measures to non-residents, and the list of assets that might generate a capital gains tax liability for non-residents was similar in both countries. Australia changed course just over a decade ago with a decision to limit the income tax liability of non-residents in respect of capital gains to gains on land and land-rich companies alone, albeit with an extended definition of land to capture directly related interests such as exploration and mining rights. Consequently, until this decade, reform of Australia's regime imposing capital gains tax on non-residents focused on the concept of source as a primary driver, with the categories of taxable assets being gradually reduced. However, after more than a decade of unprecedented increases in housing prices in Australia, reform has moved away from addressing source to integrity matters. In Australia, as in Canada, there has been considerable investment in property, particularly residential property, by non-residents in recent years, and the government has sought ways to enhance the enforcement and integrity of the capital gains tax rules applying to non-residents disposing of Australian real property. Since 2013, Australia has proposed three separate measures to ensure integrity within this regime: removal of a concessional rate, introduction of a withholding tax, and removal of the principal residence exemption for non-residents. This article considers the history and development of Australia's capital gains tax regime as it applies to non-residents and examines the recent shift in focus from what is captured in the capital gains source rules to integrity provisions adopted to achieve both compliance and geopolitical objectives.

THE PROTOTYPE OF FINANCIAL SYSTEM ON LOCAL TAX PAYERS AND TAX OFFICERS

This study aims to determine the problems that occur in the practice of parking tax withholding and create a system in the form of SOP to reduce the number of local tax payers and tax officers that commit tax evasion in Malang, Indonesia. The object of this research is taxpayers in Malang. This study used qualitative descriptive method with data collection technique by interview, observation, and documentation.The results of this study indicate that the practice of parking tax withholding is still not in accordance with the SOP and tax regulations in Malang, Indonesia. Parking Tax Withholding in Malang, Indonesia also has problems causing leakage and loss of potential in Parking Tax such as lack of awareness of Parking Tax Payers, Self Assessment System implementation, unperforated ticket, lack of field supervision and free parking policy. This study also proposed improvements to SOP. SOP improvement proposal is expected to reduce taxpayers to commit tax evasion in Malang Town.

Taxing the Digital Economy Post BEPS ... Seriously

For years the advent of the digital economy has left countries stumped in their attempt to tax income earned by foreign firms without physical presence within their jurisdiction. International organizations and their member countries have failed in their attempts to tweak the rules of the international tax regime and address these challenges presented by the digital economy. This article argues that such conservative approach could not work, and fundamental reform is inevitable. The article proposes a withholding tax solution, explaining its merits and demonstrating its superiority over alternative reforms proposed to date.

The Swiss Tax Case on Short Sales cum Dividend

This article discusses the recent Swiss court case on cum-ex short sales and the tax treatment of secondary withholding tax payments.

Estimating the revenue costs of tax treaties in developing countries

Abstract(12764) Petr Janský Marek Šedivý Tax treaties between countries influence how much tax revenues governments receive from multinational enterprises. These treaties often reduce the withholding tax rates on outgoing dividend and interest payments. We provide illustrative estimates of costs for these two taxes for 14 developing countries in sub‐Saharan Africa and Asia in a first multi‐country comparison of this kind. These might be overestimates because we assume that foreign direct investments are not influenced by the tax treaties. We estimate that the highest potential tax revenue losses are within hundreds of millionsUS$and around 0.1% ofGDP, with Philippines incurring the highest losses both inUS$and relative toGDP. We also find that around 95% of the losses is due to dividends and that only four investor countries—Japan, Netherlands, Switzerland and Singapore—are together responsible for more than half of the losses. We discuss the limitations of these estimates and how future research could improve their quality as well as coverage.

Country note: Implementation of Current Withholding Tax in France: The French Exception is Gone!

Almost every developed country has put in place a system of current year withholding. What better way to ensure that taxes will be paid than to require the employer to withhold current year taxes from current year wages! Yet France has been virtually the last country to change from its current system where payment is made the year after income is earned and the employer is completely eliminated from the tax process. Each time moving from the old system to the standard current year withholding system has been discussed, resistance to change has prevailed. This time, after some last minute prevarication, President Macron will be leading the country forward with the reform starting 1 January 2019. It is important to understand what changes are in store, what happens during the 2018 transition tax year, and some unintended consequences on US taxpayers residing in France. We will first review how the new French withholding tax applies to salaries. We will then examine the transition measures that have been put in place to avoid tax abuse and yet avoid double taxation. Finally, we will look at an exceptional issue that the transition creates for US taxpayers residing in France for whom immediate action may be necessary.

Migrants with Retirement Plans: The Challenge of Harmonizing Tax Rules

Many countries seek to encourage retirement savings for their residents by offering tax preferences for privately-operated “qualified retirement plans.” These tax preferences generally take the form of delaying taxation of contributions made to the plan and of the earnings thereon until funds are withdrawn by the participant during retirement. In a few cases, countries instead tax contributions immediately but forgo further tax. Because these rules encompass the tax treatment to be accorded throughout an individual’s lifetime, the individual is able to plan for retirement with some assurance of the eventual tax consequences. However, in recent years, it has become increasingly likely that an individual who has accumulated qualified retirement savings in one country will later migrate and retire in another country and, as a result, face unexpected tax consequences.This Article examines (1) the tax rules commonly applied by the country of emigration in order to maintain its ability to tax a departing participant in a qualified plan, and (2) the tax rules commonly applied by the country of immigration when its new resident has accumulated savings in another country’s qualified plan. The Article then analyzes how the interaction of the two countries’ rules may lead to inappropriate tax consequences and administrative burdens. In addition, it considers the various ways that bilateral treaties and model tax treaties seek to ameliorate these concerns.The Article concludes that the provisions regarding pensions in the U.S. Model Treaty achieve a reasonable degree of coordination of the two countries’ tax rules, but also could be improved in a variety of ways. The Article also explores further coordination methods in light of the improbability that bilateral treaties with the improved rules will become universal. The Article recommends adoption of a multilateral agreement for information-sharing and for taxation of qualified retirement plans and the establishment of an International Retirement Plan (“IRP”) to facilitate the operation of the multilateral agreement. The IRP would have the limited administrative role of accepting deposits from qualified individual retirement accounts established in participating countries; collecting withholding tax pursuant to the tax rules (including treaties) of the participating countries; and promoting the flow of information between the participating countries.

Netherlands Budget Plan 2019: International Tax Update – December 2018

The last quarter of 2018 has seen tremendous developments in Dutch international tax rules, including a (withdrawn) proposal to abolish the dividend withholding tax, further relaxations, the announced introduction of a new withholding tax on interest and royalties and new policies and procedures in the Dutch tax ruling practice. This article focuses on the recent changes in the Dutch withholding tax rules and tax ruling policy and procedures.

An Action Research Methodology into the Interpretation on Withholding Tax: In the Case of the Inland Revenue Board of Malaysia

This paper describes the research work undertaken by the authors in applying action research methodology to identify the interpretation spectrum of the withholding tax provision in respect of section 4A of the Income Tax Act 1967 and the related public ruling. There has been no similar study published on using action research to improve the clarity of withholding tax provision. This study discusses the interpretation spectrum of section 4A of the Act on withholding tax. It is essential to focus on tax clarity as tax uncertainty affect both taxpayers and tax administration. The research had adopted action research method and utilised qualitative method of data gathering by way of focus group and semi-structured interviews and concludes that section 4A need improvements and policymakers should focus their attention on enacting clear law so that taxpayers understand and comply with the law.

The Design of a Web-Based Program for Reporting Incomes Tax Article 21 for Civil Servants

This research aimed to created a model program of tax retun (SPT) of income tax article 21 especially for civil servants. The method of data collection used in this researchr are field research through the face-to-face interview and observation in district TBS, Inspectorate of Bandar Lampung and Politeknik Negeri Lampung. The result from this research is the formation of modelling of program SPT income tax article 21 special for civil servants which withholding tax slip both final and non final can be printed online. This program is made to resolved the problem especially for civil servants who only received the withholding tax slip from their regular income. A withholding tax slip that can be printed later is a form 1721 A2 (non final) which is obtained once a year, while a form 1721-VII (final) will be obtained whenever employee received their income.

Tax Challenges Arising from Digitalization

In this article, the author argues that, since economic activity is no longer preconditioned on physical presence, the existing international tax rules are insufficient. Using evidence of base erosion and profit shifting by digitalized businesses, the article discusses the adequacy and utility of alternative measures for taxing profits arising from digitalized operations – including withholding tax, an equalization levy and the test for significant economic presence – and the consequences for source countries. The author finds that the test for significant economic presence may be a useful measure; however, its wider acceptance hinges on international consensus.

Identification of conduit jurisdictions and community structures in the withholding tax network

Due to economic globalization, international tax avoidance has emerged as a well-known global issue. To contribute to providing the solution of international tax avoidance, we tried to investigate which part of the network is vulnerable. Specifically, focusing on treaty shopping, which is one of the international tax avoidance schemes, we attempt to find which jurisdictions are likely to be used for treaty shopping from the viewpoint of tax rates and reveal the relationships between jurisdictions used for treaty shopping and the others. For that purpose, based on withholding tax rates imposed on dividends, interest, and royalties, we produced the withholding tax network expressed as weighted graphs, computed the centralities and detected the communities. As a result, we identified the jurisdictions used for treaty shopping and pointed out that there are community structures. The results of our study suggested that fewer jurisdictions need to introduce more regulations for the prevention of treaty shopping worldwide.

ECJ Referral on whether Withholding Tax Burden on Foreign Pension Funds Receiving Dividends from Domestic Corporations Infringes the Freedom of Movement of Capital

In this article, the author discusses the pending ECJ decision in the case of College Pension Plan of British Columbia (C-641/17), which addresses the potential unequal treatment of German versus foreign pension funds with regard to withholding tax on dividends.

Shell’s Unification in 2005 and the Dutch Dividend Withholding Tax

Shell’s Unification in 2005 and the Dutch Dividend Withholding Tax

The Unrecognized Relationship Between Tax Law and Public Assistance

Lawmakers enact tax laws to raise revenue, redistribute resources, and change behavior. The ability of a tax law to serve its goals depends on how individuals respond to the tax law, and how individuals respond to the tax law can depend on how it interacts with other laws. This article unearths unrecognized connections between the operations of tax law on the one hand and the voluntary nature of public assistance programs on the other. Because households’ decisions to enroll in public assistance programs depend on their disposable income, and higher taxes decrease disposable income, higher taxes render the benefits of public assistance more appealing to households. Low-income households not enrolled in public assistance programs can respond to an increase in taxes by taking up those programs. This article shows the importance of considering the interactions between tax law and public assistance, both by demonstrating the pitfalls that result if the interactions are not considered and by presenting several opportunities to increase take-up of public assistance if the interactions are exploited. In terms of pitfalls, this article shows that the interactions between tax law and public assistance programs can limit the ability of a tax law to raise revenue, redistribute resources from the rich to the poor, and change individuals’ behavior. In doing so, it uncovers novel legal questions that arise from these complex interactions between tax law and public assistance, including some related to tax earmarking, fiscal federalism, and income tax withholding. In terms of opportunities, this article outlines policy proposals that take advantage of the interactions between tax law and public assistance programs identified in the paper. For example, to encourage take-up of public assistance, governments could earmark the revenue from taxes paid in part by low-income households for the funding of voluntary public assistance programs, publicize how public assistance is funded, and publicize that tax laws are set with the expectation that eligible households take up public assistance. Some eligible households that would otherwise not enroll in public assistance programs would enroll because they would feel as if they earned the benefits, and other households would enroll because they would feel that they would be paying more than their fair share in taxes if they do not enroll.

ANALISIS PENERAPAN WITHHOLDING TAX SYSTEM PRESPEKTIF MUTATIS MUTANDIS PADA LEMBAGA KEUANGAN SYARIAH (Studi Kasus pada BMT Al-Hijrah KAN Jabung)

The research objective is to know the tax cut by sharia financial institution by referring to the Tax Legislation on Income Tax (PPh) that is generally applicable, as well as the procedures of tax cuts using the means of Withholding Tax System and the basic of tax imposition on revenue sharing in sharia financial institution.The data analyzing method used by the researcher is qualitative data analysis with Case Study formulate theory, looking at theory as well as cases as the induction process from the observation toward facts (gathering information). Based on the data analysis and interview result done in this research, the finding suggests that BMT Al Hijrah KAN Jabung have implemented tax system in accordance with the generally applicable tax provision as well as withholding tax system in BMT Al Hijrah KAN Jabung which is implemented in deposit revenue sharing and time mudharabah (deposito).

Billions of Interest-Free Loans to the IRS through Filing Incorrectly on Form W-4

<p><em>Form W-4 was created by the IRS to provide tax withholding guidelines to employers. The form informs employers of employees’ filing status and the number of allowances each is eligible to claim. However, because of various factors, taxpayers unintentionally create interest-free loans to the IRS. Some of these factors include intentional and unintentional incorrect completion of Form W-4. Lack of education, knowledge, as well as fear of noncompliance have been contributing factors to this growing trend. </em></p><p><em>These interest-free loans create a one-sided benefit annually for the IRS, thus depriving taxpayers of the alternative use of such funds. CPAs and other tax preparers need to play a more proactive role in educating and assisting their clients in combating these interest-free loans to the IRS. Education is the most valuable tool to break the uneven cycle created by this behavior. True, some may continue to fund the coffers of the IRS from an inability to change, but through education, many others may change the way they manage their tax withholdings.</em></p><p><em>The subject of non-interest-bearing loans to the IRS is not heavily publicized nor discussed outside the financial arena. How does one engage average taxpayers in this discussion? Educating the public is key.</em></p>