Taxation Of Trusts Research Articles

Comparative analysis of trust taxation: a deep dive into Australian and Canadian regimes

Abstract This article examines trust taxation in Australia and Canada, focusing on the Australian Income Tax Assessment Act 1936's Section 97(1) and the Canadian Income Tax Act’s Section 94.1. It explores the Australian Carter and the Canadian Fundy Settlement cases, highlighting their implications for tax avoidance strategies. The article employs a comparative methodology to provide insights into the policy and legislative nuances shaping trust distribution taxation in these jurisdictions. The goal is to bridge traditional legal frameworks with modern fiscal challenges and inform future reforms in common-law countries.

Determinants of Taxpayer Compliance in MSMEs registered at KPP Pratama Karawang Utara

The study aims to evaluate and test the impact of tax understanding, mental accounting and the level of trust tax confidence on compliance with MSMEs tax obligations registered in the KPP Pratama Karawang Utara. This research uses quantitative methods using primary data. The population in this study is the entire MSMEs tax liability registered in KPP Pratama Karawang Utara. Sample on this research as many as 100 MSMEs tax obligations registered in KPP Pratama Karawang Utara. The sampling technique uses purposive sampling with criteria based on gender, age, having a NPWP, type of business, length of business and turnover. This research model uses PLS. The findings of this study show that tax understanding has a positive influence on MSMEs tax compliance. Calculation of tax liability MSMEs tax likewise with a level of trust that influences on compliance with MSMEs tax obligations with a significant value of 0.05. The results of the research show that the rate of tax payments will be imposed on the cars with the turnover criteria ranging between 250-50 million, 100-300 million and above 300 million.

Trusts taxation in Italy: the current state of art

Abstract Although a legal instrument typical of common law Countries, over the years, the trust has become better known in Italy, also due to the ratification of the Hague Convention in 1989. This has led to the introduction in the Italian legislation of a specific discipline regulating the taxation of trusts, together with the issue of numerous guidelines provided by the Italian Tax Authorities, which this in depth article tries to address in detail, even focusing on the more troublesome aspects, especially for income tax purposes.

Taxation of the Hungarian asset management foundation, trust and hybrid trust

Abstract How should new legal forms—trusts, asset management foundations and hybrid trusts—be treated and their taxation implemented into an existing tax regime? Is tax exemption the best way forward or should the new legal forms be included in the tax regime that applies to taxable entities? Who should be taxed and when? The legal instrument itself, the trustee or the beneficiary? Should a look-through approach be applied to provide for tax-neutral treatment of the new vehicles? In this article, the author explains the key issues and significant benefits of the taxation of trusts, AMFs and hybrid trusts, providing answers to these questions.

Italian Revenue Agency Provides New Guidance on the Taxation of Trusts

In this article, the author examines Circular Letter No. 34/E of 20 October 2022 on certain aspects of the taxation of trusts, which provides guidance on two specific issues, i.e. the tax treatment of “attributions” in favour of subjects resident in Italy from trusts established in “privileged taxation jurisdictions” and the form of application of the inheritance and gift tax in respect of assets transferred to a trust fund.

Navigating the complexities of section 100A: a look at the future of trust taxation in Australia

Abstract Section 100A of the Income Tax Assessment Act of 1936 is a provision designed to prevent arrangements in which a distribution is made to a beneficiary with a low tax rate, yet, the economic benefit is conveyed or paid to a second beneficiary with a higher tax rate. The Australian Taxation Office provided its final guidance on this provision very recently. This article provides an overview of the guidance, analyses cases regarding the application of Section 100A, and assesses the guidance’s potential future implications on trust taxation in Australia.

수익자부존재신탁에 관한 과세문제

In general, there are grantor, trustee, and beneficiaries in a trust. And the grantor transfer grantor’s property to the trustee to grant profits to the beneficiary. However, trust can be established in accordance with a ‘contract between the grantor and the trustee’. So, the existence of a beneficiary is not essential in the establishment of the trust.
 In terms of the tax law, if there is a beneficiary fixed by the grantor when establishing the trust, the beneficiary will be deemed to have received profits from the grantor and bear the tax obligation. However, if there is no beneficiary, only grantor and trustee exist as trust parties. At this time, the grantor transferred and disposed of own property to the trustee, so grantor will no longer have a tax obligation with respect to the property.
 From the trustee’s point of view, the trust property is in trustee’s name, but trustee will argue that paying the beneficiary the profits generated through the management and operation of the trust property is the main task and only receiving remuneration. In other words, the trustee will argue that the trust property is formally in trustee name, but the trustee is not a real owner who can use, profit, or dispose of the trust property like own property, so there is no tax obligation.
 This paper review trust without beneficiary in Inheritance Tax and Gift Tax Act. First, it will review the problems of the current regulations related to the judgment of the taxpayer. And this paper presents its own views through comparative legal review with foreign legal systems.
 First, in consideration of the relationship between the Trust Act and the Tax Act, it is necessary to prepare provisions on the duration of a trust without beneficiary to prevent unnecessary tax delays and difficulties in evaluating trust property.
 Second, in the trust without beneficiaries under Article 33 (2) of the current Inheritance Tax and Gift Tax Act, taxation on grantor did not reflect the Substance over form. In addition, since double taxation problems may arise in this regard, it is not logically reasonable for the grantor to give to the grantor, which should be solved by income tax. In addition, taxation based on Substance over form taxation should be promoted by referring to foreign concepts such as trust taxation in the United States.
 Third, if a beneficiary occurs after the trustee’s heir pays the tax, it is necessary to more clearly define. In this case, it is considered logically to give gifts from the grantor’s heir to a new beneficiary, not the grantor, and it is necessary to refer to Japanese legislation.
 Fourth, there is a need for taxation on trustees in a trust withot beneficiary. In terms of grantor taxation, it can also be seen in foreign legislation that grantor taxation can be recognized even if the grantor does not enjoy economic benefits. It is necessary to discuss trustee taxation in trust for the existence of beneficiaries by more actively referring to these thinking methods or criteria.
 It is expected that the above discussions will contribute to discussions on the literary interpretation and taxation method of the provisions on taxation in the trust without beneficiaries under the Inheritance Tax and Gift Tax Act in the future.

Federal Taxation: Comprehensive Topics

Federal Taxation: Comprehensive Topics

Draft Circular Sheds Light on Tax Ramifications of Italian Taxation of Trusts

This note examines the tax treatment of trusts in Italy in light of a draft Circular of the Italian tax authorities, published in August 2021, on Italian tax provisions related to trusts.

공익신탁 과세제도의 개선방안 연구

The Public Trust Act (“PTA”) was enacted in 2014 and came into effect in 2015. According to the PTA, a public trust is a trust under the Trust Act which mainly engages in public services and has been approved by the Minister of Justice. The Minister of Justice discloses the status of approved public trusts pursuant to the PTA, and as of May 2022, a total of 33 public trusts have been identified. The total entrusted amount in Korea’s trust business has increased rapidly, reaching KRW 1,166.7 trillion as of December 2021. On the other hand, the growth of public trusts has not reached that level. One of the reasons to account for the unpopularity of public trusts is that, while many studies have been accumulated on trusts in general, successfully resolving uncertainty in terms of tax practice, research on the taxation system of public trusts has not been active. Therefore, defining the taxation system for public trusts, to spot potential issues and present possible solutions, will aid in promoting the use of public trusts and developing the relevant taxation system. This study focuses on the concept of public trust and how the current taxation system of public trusts are operated, to spot potential issues with reference to case studies of other countries and finally recommending solutions to improve the public trusts taxation system. In order to find specific problems and suggest solutions, this study organized the issues that may come up at establishment stage of a public trust. In addition, this study conducted an analysis according to the subject of public trusts, such as grantor, trustee, recipient (the word ‘recipient’ is used instead of a ‘beneficiary’, because public trusts are a type of a purpose trust without a beneficiary), and trust property. During this process, systematic errors and problems appearing in each respective subject were discovered, and directions for improvement were found. In this process, several problems were discovered and improvement mea- sures were suggested. First, the possibility of conflicts between the provisions of the Corporate Tax Act was discovered and suggestions for improvement were suggested. Second, a plan was proposed to organize and simplify the complex public trust taxation system. Third, since it was confirmed that the income tax taxation regulations for public trusts were insufficient, we proposed an amendment to the regulations. Fourth, it pointed out that public trust trusts are not included in “public interest corporations, etc.” under the Corporate Tax Act, and suggested improvement measures. Fifth, it pointed out that public trusts are being discriminated against compared to public interest corporations in non-inclusion of deductible expenses for projects for specific purposes, and suggested improvement measures. Finally, argued for the resolution of the discrepancy between PTA and relevant taxation system.

Probability and the Factors That Affect the Loss of Tax Disputes in the Indonesian Tax Court

Tax disputes are disputes that arise due to differences in understanding of the rights and obligations in implementing tax laws and regulations between Taxpayers and Tax administration (DGT) which can be resolved in the appeal process at the Tax Court. According to Aritonang (2020), the legal remedy for filing an appeal against a tax dispute is a further substantive examination of the Tax Assessment Letter issued during the tax audit, and the Objection Decision Letter which is determined in the objection process at the DGT. The practice of tax disputes must be able to describe how the government, in carrying out its duties, upholds the principle of justice to create tax trust in the wider community.Nevertheless, in reality, there are not a few objection decisions that cannot be defended in the Tax Court which results in the defeat of the DGT or the victory for the Taxpayers. From 2011-to 2018, almost every year the percentage of DGT losing is higher than the DGT winning percentage. The highest percentage of DGT's wins occurred in 2017 which was 40 percent, while 2018 was the year where DGT's wins reached the lowest point of 28 percent. The average decision of the Tax Court appeals that won the DGT from 2011-to 2018 was 34 percent. When compared to other countries, the DGT's winning rate over tax disputes is indeed quite low. Indonesia occupies the 32nd position or the 4th lowest position compared to other countries. Both the logit model and the linear probability model (LPM) are used to estimate the data in this study where the dependent variable is a binary variable consisting of 0 and 1 (0 if the decision does not win DGT and 1 if the decision wins DGT). Keywords: Appeal Decision, Influencing Factors, Tax Administration loss

An Overview Concerning Certain Recent Changes for Foreign Compensatory Trusts: 402(b) Trusts, Grantor Trusts and "Rabbi" Trusts

Foreign companies and their U.S. subsidiaries employing U.S. persons have devised a wide range of executive and other deferred compensatory arrangements in order to be an incentive to their workforce. Because of matters relating to administrative ease, or in some cases, certain foreign legal or accounting issues, these incentive awards are often contributed to trusts by foreign employers or foreign parents of U.S. employers, and most notablyforeign trusts described in section 7701 (a)(3 1).Under the Code, special rules govern the U.S. federal income taxation of trusts. In particular, under sections 671 through 679, a grantor of a trust who retains certain powers over or interest in the trusts is treated as the "owner" of the trust, with the result that all of the trust's income is taxable to the owner. Certain special vehicles, so-called "rabbi trusts," whose assets are subject to the claims of creditors of the employer, are also subject to these rules. Additionally, under section 402(b), certain compensatory trust arrangements result in a separate level of tax on the trust entity, along with the additional result that participants are often taxed on their vested interest in the trust.In 1996, the Small Business Job Protection Act amended portions of sections 672 and 679, among others, and in September of 1996, and again in June of 1997, the Internal Revenue Service (the Service) issued proposed regulations which dramatically affect the foreign trust deferred and incentive compensatory world. In February 1999, and again in August 1999, the Service issued certain final regulations affecting foreign trusts. The cumulative effects of the statutory and regulatory changes are broad, involving changes in the treatment of both "inbound" and "outbound" compensatory trust arrangements.

Taxation of trusts in Italy: new developments

Abstract In August 2021, the Italian Tax Authorities published a discussion Draft Circular Newsletter on the Taxation of Trusts in Italy: New Developments, to practitioners and institutions. A complete change of interpretation seems to happen about indirect taxation of trusts, following constant Court Decisions in the last couple of years. Further clarification came with regard to direct taxation with particular attention paid to the effect on Italian tax resident beneficiaries.

Rethinking the Indirect Taxation of Trust in the Reform of the Italian Tax System

Abstract In Italy, among the priorities of the National Recovery and Resilience Plan (PNRR), a strategic position is taken by the tax reform, which is part of the actions to remedy the structural weaknesses of the country’s system and to stimulate economic recovery aft er the Covid-19 crisis. In this context, in order to design a new tax structure, in terms of economic growth and competitiveness, a legislative rethink of indirect taxation of trusts and other destination constraints is desirable. In fact, the current tax rules of these negotiation models, in addition to giving rise to numerous disputes, oft en discourage their use in regulating new interests and needs.

A Study on Establishment of Value Added Tax Management Model for Real Estate Trust Companies - Focusing on VAT on urban maintenance projects-

초기 도시정비법은 조합만을 시행 주체로 하였으나, 조합임원의 전문성 부족 및 각종 비리 등으로 인해 사업은 장기화되었다. 정부는 이러한 문제점을 해소하기 위해 2016년 개정된 도시 및 주거환경정비법 및 2018년 제정된 빈집 및 소규모주택 정비에 관한 특별법의 제정하였으며, 부동산개발에 전문지식을 갖춘 신탁사의 도시정비사업 참여를 가능하게 하였다. 이러한 시장의 요구와 수익원천의 다변화를 필요로 하는 신탁사는 도시정비사업을 블루오션으로 인식하여 공격적인 영업활동을 전개하고 있다. 신탁세제의 선진화 방안으로 개정된 부가가치세법은 신탁사가 지정 개발자(시행자) 방식으로 도시정비사업에 참여할 경우, 신탁사를 납세의무자로 하였다. 이러한 신탁사의 도시정비시장은 확대되는 반면, 부가가치세법에 개정에 따른 조세 관리를 위한 신탁사의 준비는 상당히 미흡한 실정이다. 이러한 점을 고려하여 부동산 신탁 구조의 정비사업과 관련 개정 부가가치세법을 분석하고 도시정비에 참여하는 신탁사의 부가가치세 관리 모델을 구축함으로써 도시정비사업을 투명하게 관리하고, 업무에 대한 효율성을 증대시키고자 하였다.In the early days, the Urban Maintenance Act was implemented only by the urban development corporations, but the project was prolonged due to the lack of professionalism and various irregularities of urban development corporations executives. In order to solve these problems, the government enacted the Urban and Residential Environment Improvement Act 2016 and the Special Act on the Improvement of Empty and Small-Sized Houses in 2018, enabling real estate trust company with expertise in real estate development to participate in urban improvement projects. Trust company that require diversification of market demands and revenue sources are actively engaged in business activities by recognizing urban maintenance projects as blue ocean. The Value-added Tax Act, which was revised to advance the trust tax system, made the trust company a tax obligation when the trust company participates in urban maintenance projects through designated developers (executors). While these trusts urban refurbishment markets are expanding, the trusts preparations for tax management under the revised VAT Act are quite inadequate. In consideration of this, it was intended to transparently manage urban maintenance projects and increase efficiency of work by analyzing the real estate trust structure and the revised VAT Act and establishing a VAT management model for trusts participating in urban maintenance.

Taxation of trusts in Singapore

Abstract Trusts are commonly used in the design of wealth planning structures in Asia. It is generally necessary for a trustee to consider the Singapore taxation of a trust if it is administered in Singapore, or otherwise has a nexus due to the functions performed by other parties. Few specific legislative provisions apply and the administrative practise of the Inland Revenue Authority of Singapore is concisely stated. This gives rise to a number of potentially complex issues which should be considered by trustees. These issues are ripe for future administrative or judicial clarification.

Israel: foreign trusts, trustee confidentiality and dispute resolution

Abstract Trusts/foundations are a relatively new estate planning tool in Israel. As such, the Trust Law, passed in 1979, is basic legislation governing the principles of trust law. Together with the Tax Ordinance governing the taxation of trusts and court precedents, Israel trust practice is formed. Although, compared to extensive practices in other jurisdictions such as the UK or the USA, the trust practice in Israel is in its initial stages with much room to grow and expand. The factual basis and the necessity for establishing trusts lie in HNW families, social changes in the nuclear family and the need to care for the elderly and disabled. In addition, there is a growing practice of holding real estate via trust structures which remains to be resolved from a tax perspective as such structures are taxed under the Taxation of Real Property Law and not under the Tax Ordinance. This article will focus on several important legal issues involved in drafting and administering Israeli trusts/foundations; recognition of foreign trusts/foundations in Israel, the trustee's confidentiality obligation, and dispute resolution options for trusts.

Automating the Search and Discovery of Manufacturing Service Providers to Enable a Digital Supply Chain Network

Abstract Uncertainty in manufacturing networks has created barriers to closing the gap between design enterprises and the American industrial base. Uncertainty arises from the lack of transparent access to manufacturer capabilities, the inability to auto-discover service providers who are best capable for a given job request, and the dependence on human word-of-mouth trust network relationships that exist in the manufacturing supply chain. This uncertainty slows down the pace of product development lifecycles from a viewpoint of inefficient forms of supplier assessment, vetting, selection, and compliance, leading to a trust tax tacked onto the final price of products. In times of global crisis such as the coronavirus disease pandemic, this uncertainty also leads to inefficient forms of gathering information on manufacturing capability, available capacity, and registered licenses and assessing compliance. This technical note outlines solution pathways that can help ease the search and discovery process of connecting clients and manufacturing service providers through digitally enabled technologies.

Recent Developments in Federal Income Taxation: The Year 2019

This article summarizes and provides context to understand the most important developments in federal income taxation for the year 2019. The items discussed primarily consist of the following: (i) significant amendments to the Internal Revenue Code; (ii) important judicial decisions; and (iii) noteworthy administrative rulings and regulations promulgated by the Service and the Treasury Department. This article primarily focuses on subjects of broad general interest – tax accounting rules, determination of gross income, allowable deductions, treatment of capital gains and losses, corporate and partnership taxation, exempt organizations, and procedure and penalties. This article generally does not address items relating to federal estate and gift taxation, income taxation of trusts and estates, qualified pension and profit-sharing plans, international taxation, or specialized industries such as banking, insurance, and financial services.

Japan taxation of trusts

Abstract Although trusts are not widely used for estate planning purposes in Japan, the taxation of trusts is becoming an important issue as the scope of Japan’s gift and inheritance taxes have expanded to include settlors or beneficiaries residing in Japan, and Japanese and non-Japanese national settlors or beneficiaries residing abroad. Despite the 2007 revision of the Japan trust and trust taxation rules, the taxation of foreign trusts is often unclear, in part because of the differences in Japan and foreign trust structures. This article is designed to provide a general overview of the Japan taxation of trusts.