International Tax Anti-Avoidance:
International anti-tax anti-avoidance tax avoidance is the focus, the main target of foreign-funded enterprises, foreign-funded enterprises in the prevalence of "long loss does not fall" and "loss of investment in Vietnam Vietnam" phenomenon, so that the focus of the current anti-avoidance measures.
International anti-avoidance measures
First, the natural constraints of international tax avoidance
1. Avoidance of natural migration limit
According to the general principles of public international law, a government should not prohibit its citizens or resident aliens moved to the country. The United Nations in 1966 adopted a resolution on the Covenant on civil and political rights, including freedom of movement, including individuals. Many countries took part in the Covenant. But it was not all signatories within their respective legal systems, mainly for the protection of national security, public order and other needs of the individual freedom of movement restricted. For such as illegal tax evasion, taxes migrants behavior, countries prohibit their departure, however, for there is no illegal tax avoidance intent of settlers, it can not be prevented from leaving the easy way to stop it, but only can take other means to be constrained.
For tax-motivated individuals to international migration, some countries have taken the settlers moved in after the departure of a long period of time, in its home country (nationality) is still liable to tax measures. Such as the United States reserves the right to recourse provisions of taxation. According to the U.S. 'Internal Revenue Code, "if an American in order to avoid U.S. federal income tax as the main purpose of moving him to give up U.S. citizenship, the United States in the 10 years after the person moved to retain the right to tax. All of its U.S. source income to achieve effective linkages with foreign income, at progressive rates of tax; sold in the United States and the sale of the property issued by the U.S. stock or bond returns achieved, is considered U.S. source income. U.S. tax authorities by the people stranded in the United States bank deposits, real estate and other property of the lien, the implementation of effective administration, from its property in the United States to deduct tax liability.
2. Moved to limit false and temporary departure of natural persons
Of tax on natural persons for the purpose of false and temporary migrants leave their country of residence is often not recognized approaches to the use of constraints. For example, the British had a natural emigrated abroad remains an informal three-year residency requirement. The requirement to restrict a natural person resident in the UK to give up, and must provide evidence, for example, sold the house in the UK and abroad to establish a permanent residence, to their departure date, tentatively approved the request. Then stay in foreign countries such as the person at least one complete tax year, if during this time of any visit to the UK total annual number of days of not more than three months, then moved to formally identify it. Otherwise, the status of its residents to give up Britain
Requires the approval of the decision to be extended for three years. In the past three years, will still be taxed as a resident in the UK. Until the expiration of 3 years, and then refer to this period of time to decide what actually happened.
For ways to avoid the use of temporary leave to meet the statutory number of days of tax avoidance schemes, some countries have adopted short-term leave shall not be deducted for the calculation of the response. Some countries have adopted the previous two years the actual number of days spent by a certain percentage to the average, to determine whether a person living in the year the number of days standard.
3. Limit the accumulation of natural persons from the company to use tax havens
Abroad in order to prevent taxpayers with low tax or no tax under the conditions of accumulation of income and property tax, a number of developed countries have some of the anti-avoidance law.
① UK entitlement provisions. UK tax laws, all of the UK offshore "person" from the "entitlement" of the British residents, should be enjoyed in the UK on foreign income tax. "Entitlement" applies to the following conditions: first, whether manifested in the form of income, in fact, dominated by a person proceeds; Second, the income received or accrued, such income individuals who played an increasing The role of contingent assets; third person received or is entitled to receive a variety of income or monetary gain; fourth, personal power through the exercise of one or more of the benefits can be obtained; Fifth, individuals can be in various controlled directly or indirectly from use. This "entitlement" requirement is very broad, making a British resident, in many cases, to tax in another jurisdiction on its own under the income tax, regardless of his income is remitted back to the UK this.
② the use of tax havens on France's anti-avoidance provisions. "The French General Tax Code" provides that a settlement or opened in France (including the only opening in France, not to settle in France) the person for services rendered, and settled in a foreign country or by a person to get opened. One of the following conditions are met, the former should pay taxes in France. First, people get compensation for services rendered, by the French taxpayer, directly or indirectly control; second, to obtain compensation for services rendered can not prove who is mainly engaged in business activities, rather than to provide services; third person to obtain compensation for services rendered, is In the low-tax country or region to settle or opened.
③ U.S. personal holding company income balance unallocated impose punitive taxes. Personal holding company tax year is defined as any time after six months, more than 50 percent of its stock value, directly or indirectly, for five or fewer persons (including non-Americans) have, negative income in the adjustment of its income to achieve a certain percentage of the company. Of this company, in addition to the normal corporate tax collection, and then its distribution should be allocated without the "accumulated surplus" cf the highest personal income tax rate for a punitive tax. This personal holding company tax for individuals of the three major tax avoidance methods. First, in order to avoid corporate income tax rate than personal income tax that part of the difference between the high burden, they formed a company to invest in securities held by the individual, the individual's interest and dividend income into the company's taxable income, which can lower the corporate tax rate tax. Second, individual labor income, transferred to a company. Such as a person formed a company, to become the company's employees. Come forward by the company signed a contract with the service needs of parties and individuals are only responsible for providing services, while service revenues received by the company, the company is less than the salary paid to the personal service income earned by this method, an individual can successfully these earnings to the company to lower the corporate tax rate by the tax. Third, the use of company business activities deduction benefits. Such as their personal yacht, racing or holiday villas and other property, together with its investment be transferred to the company, the costs associated with personal property, such as the property maintenance fees, net of non-deductible expenses into sex operating expenses to offset against business income, and access to pay less income tax benefits.
Second, the legal constraints of international tax avoidance
1. Emigration restrictions
UK tax laws, the Ministry of Finance has not been allowed in the case of British companies can not migrate to tax havens and transfer part of its business, or create a tax haven subsidiary. Violators will be severely punished, including the parties two years in prison, three times the total tax liability of a fine.
2. Restrict the transfer of business and assets
UK tax law, in addition to the direct binding legal migration, but also provides residents will trade or business transferred to non-residents, residents of non-resident parent to allow sale of subsidiary shares or bonds and the sale of subsidiaries and other acts, it must first approval of the Ministry of Finance, they will be punished.
3. Limit the use of company formation, reorganization, merger or liquidation of tax avoidance
In France, when the restructuring of the foreign companies involved in the French company was merged or its assets to pay for the French company the shares of foreign companies, should be applied to the combined series of tax provisions, and subject to the French Ministry of Finance for approval. Current taxable profits the merged company still bear the tax liability, before the merger also allowed to write off the losses. However, the transfer of assets must remain in French territory, and must be included in the branches of foreign companies in France's balance sheet.
4. Limited form of management changes
United States provides for its own branch in the form of doing business abroad in the early stages of the loss, allowing the company's earnings from the U.S. to be deducted; but if the foreign branch profits and the change of a subsidiary, American companies still need to be ordered to return before the deduction amount to prevent the adoption of the reform operation, and from the loss of deductions and deferred tax benefit of both.
In order to prevent the change of shareholder loans, to increase the interest expense deduction, reduced tax burden, a number of countries in the tax law clearly provides debt and equity ratio shall not exceed 3:1 or 5:1, etc., than the ratio of debt interest payments are not deductible.
5. Tax collection and tax administration of justice in the use of "substance over form" principle
"Substance over form" refers to the legal form of legal recognition but essentially acts contrary to legislative intent and arrangements. The principle used in the handling of tax avoidance, which means for those who meet legal requirements, but not sufficient reason for companies and business transactions will be recognized. Name of a company in the form of transactions, according to the facts may be identified as individuals. Tax authorities have found fraud avoidance transaction, the contract or transaction will be declared invalid.
Third, the constraints on the abuse of tax treaties
National measures to limit abuse of tax treaties, generally there are several methods.
1. Control method
Control a low tax system with those countries or easy to set up the company's conduit tax haven countries (such as Liechtenstein, Monaco, Panama, etc.) have entered into tax treaties, tax treaties, because the abuse is often created in such countries by means of conduit companies to achieve.
2. Exclusion
The other Contracting State to be subject to lower tax resident companies (such as holding company), excluded from the scope to enjoy the preferential treatment agreement.
3. Perspective
Will enjoy preferential tax treaty eligibility limited to its country of residence, but to see through the legal entity's country of residence of its shareholders. It does not take into account the name of the beneficiary shareholders, but consider that the final person's country of residence to receive dividends.
4. Under tax law
The law should be given preferential agreement obtained from a country's income, at least in another country must bear the tax burden based. Its purpose is to avoid the same amount of income, not taxable in both Contracting States.
5. Channel method
The law limits a company a certain percentage of gross income shall not be used to pay for not living in either Contracting State the person or company charged. Otherwise, the company paying the dividends, interest, royalties do not give preferential agreements. This is a stepping stone conduit for the company's response.
6. True method
The terms of the license law, to ensure that real transactions not excluded from the tax treaty benefits in addition. These provisions include: the establishment of the company's motives, in their country of residence of the business transactions, corporate tax in the amount of their country of residence and so on. Unless a company has sufficient motivation for commercial reasons, a large number of state-owned companies in the residential business, the company in the country of residence to pay the tax deduction exceeds the requirements, otherwise, do not give the company preferential agreement.
The basis of international anti-avoidance legislation
(A) national tax sovereignty
Sovereignty of national sovereignty in tax revenue in the field of expression. State to exercise the right to tax is based on national sovereignty, but, once the country through the signing of bilateral or multilateral international treaties in international tax coordination and cooperation, after the conclusion of the treaty meant to be bound by the treaty, the exercise of sovereignty must be tax based on international law. In coordination within the country's tax policy is no longer only by their government management and development, and coordination of the organization must comply with the relevant agreements, international treaties and other international law constraints.
(B) International Tax Agreements
International tax agreements concluded between sovereign states in international agreements on tax issues, generally refers to on income (and property) to avoid double taxation agreements. It is an effective international anti-avoidance to establish the basic principles, essential procedures and feasible measures, in the current lack of a unified field of international tax multilateral tax treaty case, the coordination of international tax agreements prevent cross-national conflicts of jurisdiction and the taxpayer to evade tax The most important legal basis. Among them, the anti-avoidance provisions and tax information exchange is the main embodiment.
1, anti-tax avoidance.
Countries on anti-avoidance is the main thrust of the Agreement signed one, specifically as follows: First, the true identity of the residents is to prevent "abuse Agreement" premise. Resident status should be recognized the importance of preventing cross-border tax evasion "firewall." New OECD Model has been stressed many true "resident" status of the concept. If necessary, the tax authorities with the cooperation agreement country, residents identified the suspect's true identity. The second is "permanent establishment" principle is the basis for determining tax liability of foreign companies. "Permanent establishment" activities in general and complex, and involve cross-border tax services, OECD regularly reviewed the terms of the model agreement and continue to make changes and add notes, tax administration guidelines were reasonable definition of "permanent establishment", the correct implementation of the Agreement . The third is "affiliated companies" profit control transfer pricing adjustment is an important measure. The face of multinational companies around the world, "Associated Enterprises" network and trading activities, OECD in 1995 to form a "multi-national corporations and the tax authority transfer pricing guidelines" for the national anti-avoidance measures provide important information and guidelines. However, the guidelines are not legally binding, but to "encourage" countries to their domestic practice is consistent with the guidelines.
2, the tax information exchange.
This is a tax treaty country as an international obligation undertaken by States parties, but also the country's tax authorities in other countries between the administration and control of international cooperation to prevent tax avoidance in important ways. The terms involving the exchange of information important international tax treaty with OECD international tax treaty, the United Nations International Tax Treaty and the United States international tax treaty. Since 2000, OECD international tax agreements for continuous concentration of the amendments and additions, to adapt to the changing international tax information exchange on request, to strengthen anti-avoidance efforts, the model has become the most important and basic template. The main content: the gradual elimination of technical barriers to information exchange, to promote the global exchange of tax information more widely and more effective manner; the exchange of intelligence exceptions, limit the use of clearly defined the extent and scope, to prevent the abuse of these exceptions ; automatic information exchange initiative and the gradual increase; more and more emphasis on the protection of the rights of taxpayers.
It is worth mentioning is that tax havens by the OECD countries and a global forum against harmful tax competition "issued by the tax information exchange agreement template" for the object, including part of the 11 OECD member countries and the world's major tax havens. As an international public goods, other countries can also apply. In fact, to encourage more countries to apply the mind is one of the template agreement. It is the face of multinational companies worldwide tax avoidance activities. Through the efforts of relevant countries to reach a multilateral framework.
