Taxation Of Trusts Research Articles

Developments in Germany concerning the Taxation of Trusts

Abstract Based on recent court decisions and rulings from the German revenue services, the article highlights the current developments in Germany regarding trusts. The number of court cases and revenue rulings dealing with trusts has substantially increased in the last two years. Nevertheless, they show that using trusts for wealth planning raises complicated and complex tax questions for German-based beneficiaries.

Blockchain-Based Trust Mechanism for IoT-Based Smart Manufacturing System

Integrated and collaborative manufacturing system develops as massive data are obtained by the Internet of Things (IoT) technology. However, the “trust tax” imposed on manufacturers during their countless collaborations with customers, suppliers, distributors, governments, service providers, and other manufacturers is very high. Blockchain is an emerging technology that can lead to more transparent, secure, and efficient transactions. It represents a new paradigm, as well as new thinking, of how data can be securely stored, integrated, and communicated among different stakeholders, organizations, and systems that unnecessarily trust each other. Blockchain is greatly useful for reducing the “trust tax,” especially beneficial for the small- and medium-sized enterprises that must tolerate much heavier trust tax than the established manufacturers. This paper investigates the blockchain-based security and trust mechanism and elaborates a particular application of blockchain for quality assurance, which is one of the strategic priorities of smart manufacturing. Data generated in a smart manufacturing process can be leveraged to retrieve material provenance, facilitate equipment management, increase transaction efficiency, and create a flexible pricing mechanism. The dairy industry is used to instantiate the value propositions of blockchain for quality assurance.

Recent Developments in Federal Income Taxation: The Year 2018

This article summarizes and provides context to understand the most important developments in federal income taxation for the year 2018. 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 Treasury. The article focuses primarily 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.

Brief of Constitutional Law Scholars in North Carolina v. Kaestner

Nominally, this case is about whether North Carolina may tax a trust’s undistributed net income because the trust’s beneficiary resided in North Carolina during the relevant tax years. But the broader problem is that many states seek to tax trust income based on the local residence of various persons or assets connected to the trust. The existence of multiple triggers for taxation raises a problem of overlapping jurisdiction that the Due Process Clause is ill-suited to address. For example, if a settlor in State W designates a trustee in state X, who holds assets in an account in state Y, for a beneficiary in State Z, four different states might seek to tax the trust’s income and might not provide offsetting credits. The Due Process Clause, as opposed to the Dormant Commerce Clause, is a poor fit for sorting out this regulatory overlap for at least three reasons. First, the Court’s due process jurisprudence is designed to identify when a given state may act in isolation, rather than when the overlapping authority of multiple states creates a risk of cumulative burdens. Second, current Dormant Commerce Clause jurisprudence provides robust tools for addressing the problem of cumulative burdens. Third, relying on the Dormant Commerce Clause rather than the Due Process Clause would preserve flexibility for Congress to provide comprehensive solutions if it identifies a problem arising from multistate taxation of trust income. In contrast, a ruling on Due Process grounds that North Carolina may not impose the tax at issue here, or that other states may not tax trusts in other circumstances, would tie Congress’s hands in the face of tax avoidance schemes that may undermine reasonable state interests.

IRC Section 678 and the Beneficiary Deemed Owner Trust (BDOT)

This article explores Section 678 of the Internal Revenue Code and how and when a beneficiary is deemed to be the owner of a trust for income tax purposes (called a beneficiary deemed owner trust, or BDOT). More specifically, the article explores when and how this may be done without granting a withdrawal power over the entire principal of the trust, but only over its taxable income. Income tax benefits of such trusts include simpler tax reporting, exploiting lower tax brackets of beneficiaries, using capital gains tax exclusions for sales of residences, obtaining much more favorable Section 179 expense deductions, engaging in disregarded transactions, better exploitation of GST exemption and many more benefits often overlooked. The recent passage of the SECURE Act gives much greater impetus to use BDOT designs as a solution to the new 10-year rule applicable now to most trusts receiving taxable retirement benefits, which can otherwise be disastrous when combined with the highly compressed trust tax brackets. Asset protection for such trusts, while seemingly substandard, is hardly a disaster. Any ill effects of a withdrawal power can not only be counteracted but even turned into an advantage over other trust designs. A comprehensive 50-state comparison chart at the end summarizes the various state asset protection statutes and law around powers of withdrawal and lapses.

The Taxation of Trusts and Foundations in Greece

This article discusses the taxation of trusts and foundations in Greece, which has been clarified following the issuance of the long-awaited Circular POL. 1114/2017. Trusts and foundations are concepts unknown under Greek private law; therefore, their tax treatment is of particular interest from a comparative perspective. Although the new Circular provides a much better understanding of how these vehicles are taxed, some issues remain unresolved.

Fiscal legitimacy of environmental taxation: challenges for green growth policy

In Indonesia the fiscal legitimacy of environmental taxation has not received serious attention from tax experts. This is proved by the limited number of studies investigating it. There are at least three interesting perspectives. First, the Indonesian perspective as a country, this research is very necessary and the results are awaited in order to get answers to the failure of Indonesia in application of environmental taxes. Second, policy maker perspective, the result of this research is needed to build policy based on evidence and Third, scientific perspective to introduce contemporary tax paradigm that should be well understood by government and society. It is in this context that the tax essence adequately can be well known in the structure, the posture of state levies and its impact on the productivity and competitiveness of society. This research aims to explain the implications if the government implements new environmental taxes (e.g. environmental taxes) and challenges of fiscal legitimacy from environmental taxes within the framework of green growth policy. By using constructivism paradigm, this research is done through documentation and literature study, and technical data analysis in the form of meta-analysis. The research results show that there are some pseudo environmental taxes and charges applied in Indonesia. That is, if the government impose a new tax type, then the government will add compliance costs and distort entrepreneur cash flow. However, if the government can manage revenue from environmental taxes and charges through good spending quality, it will create tax justification that will rise the tax trust. Therefore, spending quality should be done transparently, accountably and consistently, to ensure that environmental taxes that do not cause high economic costs, do not reduce competitiveness, and ensure the stability of state revenues. Thus, the restructuring, convergence and harmonization of environmental taxes and charges must be conducted in order to achieve a connection between tax payments and inclusive and sustainable economic growth can be created.

The Taxation of Trusts in Portugal

The author provides a historical overview of the recognition of trusts in Portugal, focusing on international private law and civil rules, the tax landscape surrounding a foreign trust, the recent tax treatment of trusts in Portugal and the challenges that lie ahead.

Financing Health Care in Ghana: Are Ghanaians Willing to Pay Higher Taxes for Better Health Care? Findings from Afrobarometer

Considering the recent struggle in the Ghanaian health sector, Ghanaian policy makers and donor agencies are confronted with rethinking how the health sector can be funded and sustained. In Ghana, where budgetary decisions are heavily contested and politically expensive, one option available to the government may be to raise taxes or user fees to allow for increased spending on public health care. Using Afrobarometer 2014/2015 round six survey data, this study examined whether Ghanaians would support or oppose paying higher taxes or user fees in order to increase government spending on public health care. In this study, Cross tabulation, correlation, and multiple linear regression analysis were performed to examine whether Ghanaians willingness to pay or not to pay higher tax is correlated with demographic factors, access to health services, perceptions of health care, government performance, and perceived official corruption. Findings from this study indicate that only (35%) of respondents support the payment of higher taxes or user fees even though many Ghanaians have difficulties in accessing better health and medical care. More importantly, findings from the correlation and a multiple linear regression analysis indicate that, Ghanaians support for or opposition to higher taxes/fees are powerfully influenced by perceptions of government’s performance and trustworthiness (President’s performance = 0.136**; MP performance = 0.130**; leaders serving their own interest = 0.085**; trust President = 0.147**; trust Parliament = 0.121**; trust tax department = 0.136**) rather than sociodemographic factors or difficulties in obtaining health care as well as going without medical care. Also, corruption in the Office of the President and among tax officials showed negative association with paying of higher taxes (corruption at the tax department, −0.021; p-value = 0.003 and corruption at the Office of the President, −0.005; p-value = 0.001). Therefore, improving popular access to information about taxes people owe and public spending, while reducing corruption and misuse of public monies, will help encourage voluntary compliance and enhance the government’s revenue generation in Ghana.

The Common Law and Taxation of Trusts in Australia in the Twenty-First Century

This paper proposes that the concept of the ‘trust’ held for over a thousand years under the British legal system is drawing to a close. Education and Legislation is heralding the demise of that ancient and noble institution in the Australian context. The Paper puts forward various alternatives and solutions to the identified problems.The term ‘trust’ by definition expresses honour, reliance, justice and friendship. It implies an honourable relationship under which the property of one, the beneficiary, is placed in the control of another, the trustee. The Knights and Barons of Medieval England did not trust their descendants to manage their titles in a favourable fashion but suspected they would slowly but surely allow the decay of property that the barons had fought long and hard to establish. Various types of trust have come to be recognised in modern law.In modern times the focus of trusts has shifted somewhat from the preservation of property to the alienation of income and hence taxation. Australian taxation law has continued to attempt to tax the income and property of these trusts with varying degrees of success. Series of Australian Governments have enacted and proposed legislation to pierce the trust structure and tax the income in the hands of the beneficiaries. Where the beneficiaries cannot be taxed the trustee is responsible for the tax.For trading purposes trusts are no longer the optimum business structure. The previous taxation benefits of income splitting (and thereby reducing individual taxation burdens) are coming to an end. Trust income arising from personal exertion, whereby income earned by an individual is attempted to be transposed into earnings of a trust, has been vigorously attacked in recent years. The problem is that it is difficult to distinguish between a ‘genuine purpose’ and a ‘tax avoidance one’.As beneficiaries are becoming more legally aware they realise the property of their parents has been transferred to them. Parents are being faced with either having to relinquish ownership and control of ‘their’ property or admit that the structure is simply a means of avoiding tax.

Welcome stranger: a global perspective on the taxation of trusts—Canadian income taxation of trusts and beneficiaries

Welcome stranger: a global perspective on the taxation of trusts—Canadian income taxation of trusts and beneficiaries

Taxation of trusts for income tax purposes in Italy

Taxation of trusts for income tax purposes in Italy

Democracy and Trusts

Spendthrift trusts which shield assets from creditors have been an ongoing problem for the law since their advent in the nineteenth century. Other, very recent, forms of trust are an even bigger problem: they take the notion of asset protection much farther, allowing settlors to protect not only the beneficiary’s assets, but their own, from creditors; these are called “self-settled asset protection trusts. Moreover, more and more states allow so-called “dynasty trusts” which allow settlors and beneficiaries to maintain assets in trust tax free for generations, overturning long-settled principles of the common law such as the Rule Against Perpetuities. All of these trusts represent bad public policy: they disrupt contracts by allowing debtors to avoid their debts, they disrupt the tort system by denying victims compensation and removing deterrents to high risk behavior, and they withhold vast tax revenues from the public fisc. Most efforts to reform trust law to alleviate the problems of these trusts have been statutory - and unsuccessful, for reasons I explain below. No one has looked to principles in the law itself for a brake on their proliferation. This is a serious oversight because property law itself does offer a solution in the obsure but important doctrine of numerus clausus. Students in common law juridictions do not study this doctrine, and few academics pay attention to it, but it is nonetheless a foundational principle of the law and one which unequivocally bars the types of trusts discussed above.

New Regime for Managed Investment Trusts

Taxation of trusts in Australia has been tangled for a very long time in a web of English law concepts of equity and later statutory intervention. The author discusses amendments to income tax law that are basically focussed on adopting an income attribution method for determining the tax liability of trust beneficiaries.

The Taxation of Trusts, Trustees, Protectors and Underlying Companies Under Swiss Law

This article by Jacob C. Jorgensen examines under which circumstances the trust assets and/or the income that flows from such assets are exposed to taxation under Swiss law.

The Taxation of Trusts in Hong Kong

The question of to what extent, if at all, trusts are taxable in Hong Kong is regularly raised and debated in both academic and professional circles. In light of the increasing interest in Hong Kong as a jurisdiction in which to establish trusts and develop wealth and estate planning solutions, there is a greater need than ever for certainty on how exactly a trust is taxed in Hong Kong and its domestic and international implications both for trustees and beneficiaries. This article aims to provide an overview of the law in Hong Kong and evaluate different analytical approaches to the question, before proposing a clear, elegant solution consistent with the statutory schema of the Inland Revenue Ordinance and common law decided authorities.

A Study on Introduction Plan of Trustee Taxation for Korea Trust Taxation

A Study on Introduction Plan of Trustee Taxation for Korea Trust Taxation

An investigation into the future of discretionary trusts in South Africa – An income tax perspective

Trusts have long been associated with elaborate tax avoidance schemes, primarily as a result of their flow-through nature. In the National Budget the Minister of Finance indicated that the government was proposing several legislative measures during 2013/2014 regarding trusts to control abuse. At this stage the proposals are vague and confusing, but it is intimated that the conduit pipe principle may be under review as the proposals state that trusts should no longer act as a flow-through vehicle, meaning that the amounts distributed to the beneficiaries will no longer retain their original identity. The main objective of the research was to clarify the proposed changes to the taxation of trusts, to investigate the potential impact(s) of these proposals (albeit unclear and consequently based on certain assumptions), and to assess whether discretionary trusts still have a future in South Africa given these proposals. In order to meet this objective, a qualitative approach based on a literature study of pure theoretical aspects was used. It was found that should the proposals become law the beneficiaries will be worse off.

Israel: dramatic changes to the taxation of trusts

Israel: dramatic changes to the taxation of trusts

Japanese Taxation of Trusts

In this article, the author discusses some aspects of Japanese gift tax law with regard to foreign trusts, focusing on a recent Japanese court case. The article also investigates how to interpret and apply Japanese tax legislation in connection with cross-border matters.