Presentation Transcript

1. Ask the Authorities How Officials Can Establish Better Trust With Taxpayers www.taxand.com
2. Speakers Dr Veerinderjeet Singh – Chairman, Taxand Malaysia ChinchieKillfoil– Tax Attaché, IRS, US Embassy Beijing Rabi Narayan Dash – Former Director General of International Taxation for India Mrs Lim-Leow Lay Hwa– Tax Director-Medium CorporationsCorporate Tax Division, IRAS Miss Yong Sing Yuan– Senior Tax Specialist, Tax Policy & International Tax Division, IRAS
3. Agenda Main Tax Developments / Issues Globally New Legislation / Proposals & Interpretation Tax Audit Scrutiny – New Focus / Developments Anti-Avoidance Initiatives Learning from Other Tax Agencies / information Sharing / Cooperation Competent Authority – Effectiveness Tax Treaty Policy – Changes? US issues for MNCs in Asia – FACTA Conclusion Q & A
4. Main Tax Developments / Issues Globally Dr. Veerinderjeet SinghTaxand Malaysia www.taxand.com
5. Main Tax Developments / Issues Globally Economic outlook/recession/deficit budgets Pressure to increase tax revenue Enhanced tax audit scrutiny/TP audits/ Challenging tax avoidance schemes Penalties being increased, deductions being curtailed, plugging ‘loopholes’, retrospective law changes… Greater cooperation e.g. Forum on Tax Administration, JITSIC, SGATAR…..joint tax audits Disclosure of uncertain tax positions/attack on offshore tax abuse Scope of taxes being expanded Growing compliance & regulatory burden
6. New Legislation / Proposals & Interpretation www.taxand.com
7. Tax Audit Scrutiny – New Focus / Developments www.taxand.com
8. Anti-Avoidance Initiatives www.taxand.com
9. Learning from Other Tax Agencies/Information Sharing/Cooperation www.taxand.com
10. Competent Authority – Effectiveness www.taxand.com
11. Competent Authority – IRS Update ChinchieKillfoilTax Attaché, IRS, US Embassy Beijing www.taxand.com
12. Contents From our Competent Authority Latest Developments Large Business & International (LB&I)-- International Function What did the realignment accomplish? So what is our strategy? International strategy ties into LB&I’s areas of core emphasis Maximizing compliance impact Our outbound strategy must track how U.S.- based MNEs plan So why is ETR planning important to an outbound strategy? Transfer pricing practice--APMA
13. From Our Competent Authority LB&I is in a “knowledge business” − International tax is a vast specialty tax area − International specialists must have a solid understanding of “the big picture” of international tax − To succeed as a knowledge-based organization, we must develop, nurture, and leverage our collective expertise
14. Latest Developments Realignment of LB&I transfer pricing operations − To increase efficiency & Effectiveness − Reduce lapse time for APA/MAP cases − Recruit talents from outside IRS − Number of case closed dropped for 2011 but improved results expected for 2012 and beyond.
15. lllllllll IRS Commissioner Commissioner Large Business & International IRS Deputy Commissioner for Services & Enforcement Deputy Commissioner (International) Director, Competent Authority & International Coordination (CA&IC) Director, International Business Compliance (IBC) Director, International Individual Compliance (IIC)
16. 4 IRS Commissioner Commissioner Large Business & International EOI Program IRS Deputy Commissioner for Services & Enforcement Treaty Unit Deputy Commissioner International (Michael Danilack) Assistant Deputy Comm’r Int’l (Doug O’Donnell) JITSIC Foreign Posts Service-wide Strategy Direct, International Business Compliance (Kathy Robbins) Director, Transfer Pricing Operations (Sam Maruca) Director, International Individual Compliance (Rosemary Sereti)
17. EOI Program Treaty Unit JITSIC Deputy Commissioner (International) Assistant Deputy Comm’r (Int’l) Foreign Posts Service-wide Strategy Director, Transfer Pricing Operations (Sam Maruca) Director, APMA (Richard McAlonan) Deputy Directors Field-focused team Combined MAP/APA team 17
18. What did the realignment accomplish? The realignment positioned LB&I’s international specialists to operate as a single program Integrated all international functions and operations to the fullest extent possible Now function as a cohesive practice Now operate off a strategic platform Now working as a team
19. So what is our strategy?
20. International strategy ties into LB&I’s areas of core emphasis Identify the highest compliance risks among our taxpayer base Work cases effectively and efficiently Find appropriate ways to resolve cases as soon as possible
21. Maximizing Compliance Impact Focus on cases/issues where taxpayers engage in aggressive planning Invest in high profile cases Focus on cases/issues where the planning can be replicated Move into high-risk areas not receiving sufficient attention Pursue strategy with discipline; be willing to let go of less important issues/cases
22. Our Outbound Strategy Must Track How US-Based MNEs Plan Agents must have a basic understanding of U.S. GAAP accounting for income taxes Agents must understand that a lower tax expense results in higher earnings per share (EPS) and higher shareholder value Agents must understand the concept of “permanent reinvestment” (suspension of residual US tax on PRI) So low ETR is not per se “wrong” − Companies try to manage costs efficiently (including taxes) to produce shareholder value − Taxpayers may manage tax expense through legitimate planning
23. So Why is ETR Planning Important to an Outbound Strategy? If an MNE will derive benefits from achieving certain results, it will likely be aggressive in striving for those results Agents must understand a taxpayer’s motivations to understand why they adopt structures and undertake transactions Agents must be able to look at international transactions in context and evaluate technical issues with not only absolute understanding (what and how) but also relational understanding (why and when)
24. Transfer Pricing Practice – APMA Transfer pricing practice - APMA Transfer Pricing Practice- APMA Added approximately 30 new staff and 5 new managers New branch in San Francisco Added additional economists to the team Key hires: − Managers – Patricia Fouts, John Hughes, Fred Johnson, Ken Wood − Economists – HareeshDhawale, Bill Morgan
25. Tax Treaty Policy—Changes? www.taxand.com
26. US Issues for MNCs in Asia – FACTA www.taxand.com
27. FATCA ChinchieKillfoilTax Attaché, IRS, US Embassy Beijing www.taxand.com
28. IRS International OperationsU.S. Embassy BeijingChinchieKillfoil, Tax Attaché
29. Contents Recent Developments - FATCA FATCA Transitional Rules Due Diligence Deemed Compliant FATCA—Moving Forward FATCA—Making Use of the Information
30. Recent Developments - FATCA Why FATCA? Information reporting is the bedrock of voluntary compliance Most “audits” are done by computer information matching Offshore information reporting is needed in addition to U.S. information reporting FATCA will improve tax compliance globally
31. Recent Developments - FATCA Two components Foreign Financial Institutions (FFI) Identify United States Accounts and report directly to the IRS on Form 1099-FFI U.S. taxpayers report foreign financial asset holdings on Form 8938 starting with 2011 tax return if certain thresholds are met
32. Recent Developments - FATCA Foreign Financial Institutions (FFI) Identify United States Accounts and report directly to the IRS on Form 1099-FFI FFI to register on-line starting 1-1-2013 and become PFFI; registration ends 6-30-2013; PFFI to report Name, Address, TIN & Account Balance (reporting starts in 2014 with respect to 2013) Income Amount (reporting starts in 2016) Gross Proceeds (reporting starts in 2017)
33. FATCA Compliance & Enforcement Proposed Regulations Issued 2-8-2012 Large volume of comments regarding due diligence obligations Proposed Regulations took into consideration input and reduced burden Additional comments and public hearing 30% W/H on Gross U.S. Source Income to FFI failing to comply
34. Transitional Rules FFI in jurisdiction with legal prohibition on compliance has until 1-1-2016 These FFI must agree to perform due diligence to ID accounts and maintain records. Only FFI in “restricted” jurisdiction get additional time. The rest of affiliated group must comply and become PFFI.
35. Due Diligence Electronic Search conducted on pre-existing accounts: Over $50,000 USD Cash value of insurance or annuity contracts over $250,000 USD Accounts under $50,000 are exempt Cash value of insurance or annuity contracts under $250,000 USD are exempt. Accounts with balance over $1 million USD requires additional due diligence - in additional to electronic review, there must be a manual review of non-electronic files maintained, including inquiry made to the relationship manager or account manager for the account
36. Due Diligence Review and identify “U.S. Indicia” U.S. Passport or other U.S. ID U.S. Place of Birth U.S. Address U.S. Phone Number Standing instruction to transfer funds to an account maintained in the U.S. POA or signatory authority granted to a person with U.S. Address An U.S. c/o address that is the sole address used by the account holder
37. Deemed Compliant Registered Deemed Compliant FFI Local FFI Non-reporting Member of PFFI Qualified Investment Vehicle Restricted Funds (sale to U.S. persons is prohibited) FFI under Gov-to-Gov agreements These FFI will register and receive a FFI EIN and be recognized as “deemed compliant” if they meet the requirements set out in the regulations.
38. Deemed Compliant Certified Deem Compliant FFI: Non registering local banks (very small local banks with only local clients) Retirement Plans Non-Profit Organizations Certain Owner documented FFI (reporting already done thru withholding agent) FFI with only low value accounts These FFI do not register but self-certify with IRS via W-8 every 3 years.
39. FATCA February 8 Joint Statement Treasury Department recognized legal barrier with respect to requiring banks to report to the IRS Significant challenges, i.e., Data Privacy laws Alternative Approach – United States, France, Germany, Italy, Spain & UK to develop alternative arrangements
40. FATCA February 8 Joint Statement - Impact Automatic Sharing - Gov to Gov Reciprocal information sharing Transparent Approach – Reporting of Accounts reduces evasion opportunities in both countries
41. FATCA – Moving Forward Significant movement in collaboration and transparency FATCA Alternative Approach (Reciprocity) has global impact Impact upon United States citizens and residents is substantial Implementation of FATCA will be resource intensive!
42. FATCA – Making use of the Information Much Work to be Done in - International Individual Compliance (Resident Income Reporting) International Business Compliance (W/H Agent Compliance) Improving automatic exchange Substantial Collaboration with foreign countries!
43. Conclusion– Taxand’s Take MNCs –take initiative to plan for change Need to be more agile and flexible in structuring There must be real substance- be ready to invest time and effort to defend your tax plan Utilise compliance assistance programmes—enhanced relationship, etc Ensure that internal tax processes and controls are robust “It is not the strongest of the species who survives nor the most intelligent but the one most responsive to change”
44. Thank you
45. Ask the Authorities Panel Presenter Profiles www.taxand.com
46. Presenter Profile E. T. vs@taxand.com.my +603 (2032) 2799 Dr. Veerinderjeet Singh is a member of the Taxand Board which comprises nine Taxand country Managing Partners from around the world. Veerinderjeet is the Managing Director of Taxand Malaysia.  Veerinderjeet has extensive experience in tax matters. He has served with the Malaysian Inland Revenue Department, been a Tax Partner in international accounting firms and has held the position of Associate Professor in Taxation at the University of Malaya. He was a visiting Associate Professor at the University of Newcastle in Australia, and a Visiting Scholar at the International Tax Program, at Harvard University, USA. He is a Council Member of the Malaysian Institute of Certified Public Accountants, the Immediate Past President of the Chartered Tax Institute of Malaysia and a member of various local and international organisations. He is also the Chairman of the IFA – Malaysia Branch and a member of the Board of Trustees of the IBFD in the Netherlands. Dr. Veerinderjeet Singh Taxand Malaysia
47. Presenter Profile Chinchie is the first IRS Tax Attaché assigned to the U.S. Embassy in Beijing, China. She interfaces with foreign taxing authorities and manages an active Exchange of Information program as the representative of the U.S. Competent Authority. She has regional responsibility covering China, Japan, Korea, India, and a dozen other Asian countries. Before coming to China, she served as a Tax Treaty Manager in Washington DC, responsible for resolving tax treaty related disputes with European countries. Prior to her assignment to the area of international tax, Chinchie served as the Director of Tax Policy and Procedure for Collection Programs in the Office of Chief Appeals in Washington D.C.In this position, Chinchie and her team was responsible for providing written guidance to Appeals Settlement Officers on policy and procedural matters. During her 20 plus year career with IRS, Chinchie has held a wide range of technical and management positions. Chinchie started her IRS career as a revenue officer in Texas. She grew up in Taiwan and is fluent in Mandarin Chinese. She is a Certified Public Accountant and has a Masters degree in Counseling from University of Southern California. Before IRS, Chinchie worked for DOD for 3 years as a Guidance Counselor in Brussels, Belgium. She is proficient in French. ChinchieKillfoil Tax Attaché IRS US Embassy Beijing
48. Presenter Profile Mr. Rabi Narayan Dash is currently working as an Advocate and Independent Tax Advisor in India after serving 36 years in the Indian Revenue Service. He was formerly the Director General of International Taxation for India (2010-2012) where he was head of the tax administration for International Tax and Transfer Pricing. He has worked with organizations ranging from the African Development Bank, the European Union (EU), the Ministry of Civil Aviation and the Indian Tax Department & Department of Revenue. Rabi Dash has a Ph.D in Business Management (Corporate Governance), a Law Degree and Dual Masters. Rabi Dash has expertise in corporate taxation involving large corporations in Mumbai and Delhi, with extensive knowledge of national and international tax law, corporate law, and compliance issues. He is known for his work on Transfer Pricing and is credited with spearheading the preparatory work for India's first Advance Pricing Agreement program. Rabi Narayan Dash Advocate & Independent Tax Advisor in India Former Indian Revenue Service & Director General of International Taxation for India (2010-2012)
49. Presenter Profile Mrs Lim-Leow Lay Hwa Tax Director-MediumCorporations Corporate Tax Division IRAS Mrs Lim is the Tax Director of the Medium Corporations Branch in the Corporate Tax Division in IRAS. She is responsible for planning and implementing strategies to manage the compliance risks of medium-sized corporations in Singapore. Prior to this, she was the Tax Director of Small Corporations Branch where the emphasis is on education and providing excellent service to encourage voluntary compliance. She has also spent almost 14 years in the banking and financial industry in Large Corporations Branch.
50. Presenter Profile Miss Yong Sing Yuan Senior Tax Specialist Tax Policy & International Tax Division IRAS  Sing Yuan is currently a Senior Tax Specialist in the Inland Revenue Authority of Singapore, where she handles a spectrum of international tax work ranging from tax treaty negotiations to transfer pricing issues. Sing Yuan holds a Bachelor of Accountancy with Honours from the Nanyang Technological University and a Master of Advanced Studies in International Tax Law with Honours from Leiden University. She is also an Accredited Tax Advisor with the Singapore Institute of Accredited Tax Practitioners. Sing Yuan lectures for some courses conducted by the Tax Academy.