US-expatriates have to file income tax returns by June 17th. But any US Tax owed to the IRS has to be paid by April 15th. This means that US-expats have to do a tax-calculation by April 15 to make sure that they are not owing any taxes to US tax authorities.
More information will be provided by our co-operation partner Greenback Tax Services.
Presentation at General Meeting of IAPA, May 26, 2012
Republic of Poland is a European country located in the center of the continent and borders with Germany, Czech Republic, Slovakia, Ukraine, Belarus, Lithuania and Russia. Its area exceeds 312 thousand square kilometers where lives over 38 million residents.
The Polish currency is PLN (Polish Zloty). The GDP reached in the year 2011 the level of 14 thousand USD per capita (over 20 thousand USD when the purchase power is considered).
One of the most important facts in the history of the country was adoption of the constitution in 1791. It was the second modern constitution in the world (after United States of America) and the first one in Europe.
The economic situation of Poland is one of the best in Europe. This month German press published comparison of the Polish economy and EU-27 countries. In general Poland has got higher GDP growth since 2004, similar unemployment rate and lower much public debt.
Our company, THOMAS sp. z o.o., operates since 1993, i.e. from the beginning of the free economy in Poland. Recently it is a family company owned and managed by Bożena Wiklińska and Tomasz Wikliński. In our practice we use modern tools helping us act according to the ISO 9001:2008 based quality system we developed. Recently we added to the portfolio of our products BAC (Budget Assistant Concept), a system that helps in budgeting and controlling.
Our company provides wide range of services required by entrepreneurs in every day activity - starting from accounting, through staff and payroll service, finance management that slowly becomes our key product, to tax advisory.
During the last year we had an internal discussion how to select people, how to behave in relation to the clients that have got difficult, not to say illegal proposals. We found out that there is something that makes the company either consistent or inconsistent - its values. In the beginning we referred to our strategy developed a couple of years ago and values we formulated that time. We formulated them, but without any deeper meaning, i.e. what it means in practice. One of the values we defined was professionalism. Now we added sample behaviors that show acting according to this value, for example improving professional skills, finding the best way to help the client reach his strategic goals, communicates with him efficiently.
The same operation we made with the other value that were important for us as the company and our clients, and finally visualized them in graphics with the help of a graphic designer we co-operate with.
The entire task required some time and involvement of all people, but now is a great tools that helps us to hire better people, better assess their skills and attitude and what is the most important - even the most difficult decision we need to make, like staff changes, are much better perceived by other people when referred to the core values of the company.
One of the topics of the Annual General Meeting of the IAPA International Association of Professional Advisers on 25 and 26 May 2011 in London was
Ruling of ECJ on Inheritance Tax
Inheritance and gift tax systems are less harmonised in the EU then other tax laws. This often leads to double taxation in cross-border cases. The EU commission describes in its recommendation of 15 December 2011 various reasons for double taxation scenarios. National tax systems of foreign relief of inheritance taxes have in general limitations. And there is a very limited network of double taxation treaties or no regulations in EU law.
The only protection against double taxation is provided by EU freedom rights of the EU treaty. Prohibited are discriminating measures by EU-member states. Not allowed is also legislation or other legal measures of a member state to restrict EU-freedom rights. There is a wide range of ruling of the European Court of Justice (ECJ) concerning taxation of cross-border transactions but only a limited number of rulings regarding inheritance and gift tax. The ruling of ECJ on inheritance and gift tax is based predominately on the violation of the Freedom to transfer capital. Other freedom rights such as the Right of establishment or Freedom of employees do not play a major role in the court’s ruling.
The ECJ is verifying a violation of EU law always in three steps:
The ECJ considers inheritances, legacies, gifts and foundations always as a capital transfer in this respect. Excluded are only cases where a transaction does not have a cross-border connection. A restriction requires that a non-resident is treated less favourably than a resident in a comparable situation or vice versa, or a citizen of another state is treated less favourably than an own citizen in a comparable situation or vice versa. Important is that the situation is comparable based on objective criteria. But the court ruled that negative tax effects of activities abroad alone do not necessary result in a restriction of freedom rights. Reasons for restricting measures by member states can be the Consistency of tax systems, Measures against tax fraud and tax evasion or the Efficiency of tax collection. In recent rulings the ECJ developed as a new reason the Principle of balanced allocation of power to tax between member states. But the restricting measures must meet certain criteria set by the court. Restricting legal measures by member states often do not meet these criteria.
In recent years there were a few cases on inheritance a gift tax
The court case Block seems curious. The court ruled that the Freedom to transfer capital is not restricted. But obviously the German regulation is meant to restrict a free capital transfer abroad. It seems that this ruling was a political decision. And one can understand the court’s problem. Which member state is breeching EU freedom rights: Germany or Spain or both?
There is no clear outline in the EU which member state has to avoid or minimise double taxation burdens. But the consequence is that one member state alone is not allowed to breech EU law. But two or more member states together can do it without any negative consequences.
Now the problem of double taxation in inheritance and gift tax law has been addressed by the EU commission in its recommendation dated 15 December 2011. The commission states very clearly that double taxation concerning inheritance or gift tax is not supporting the smooth functioning of the internal market. Revenues from inheritance and gift tax especially from trans-border transactions represent a relatively small share of overall tax revenue of member states while double taxation have a major impact in individuals affected. The commission recommends an EU-system which allows avoiding double taxation scenarios. Whether this recommendation has an impact on the ruling of the ECJ remains to been seen.
Another uncertainty is whether cases with connection to non-member states will be protected by EU law. This is due to the fact that the Freedom to transfer capital is not restricted to the EU. In theory also citizens or residents of non-member states are protected by Article 63 EU treaty. And also property outside of the EU might be protected. The ECJ will be able to clarify whether the Freedom to transfer capital will also be applicable in cases with connection to non-member states. The Bundesfinanzof (highest German fiscal court / BFH 15/12/2010, II R 63/09) asked the ECJ whether business property situated in Canada can be valued for inheritance tax reasons at a higher level than property situated in Germany.
Unclear is also whether Swiss citizens can claim the same rights as EU citizens based on the non-discrimination clause of the Agreement of free movement and settlement between Switzerland and the EU.
Author: Peter Scheller Hamburg www.somannscheller.de
This presentation was given by Tom Kean, BKRM Ireland at the conference of IAPA International Association of Professional Advisers on 26 April 2012 in The Hilton Metropolitan Hotel, London.
Tax advantages of setting up business in Ireland
Corporation Tax Rate
Stamp Duty
Research & Development (R&D) Incentives
Intellectual Property (IP) Tax Regime
Attractive to Holding Companies
Special Assignment Relief Programme (SARP)
Other advantages of setting up in Ireland
The Start-up Entrepreneur Programme
Immigrant investor programme
Authors: Tom Keane and Deidre Byrne; BKRM Ireland (www.bkrm.ie)
European Commission - Further Developments regarding the One Stop Shop aimed for 2015
On 13 January 2012 the Commission accepted a proposal regarding the broadening of the one stop shop for non-established taxable persons (both EU and non-EU) supplying telecommunication, broadcasting and electronic services to non-taxable customers.
As previously reported, from 2015, all telecommunications, broadcasting and electronic services are to be taxed in the Member State in which the non-taxable customer is established, or has his permanent address, or usual residence, regardless of where the supplier of the services is established.
However, as is currently the case for non-EU suppliers providing electronically supplied services to non-business customers in the EU, taxable suppliers would have the option to make use of a special scheme, i.e. the One Stop Shop. This would allow the taxable suppliers to only account for the VAT in the EU Member State in which they are established, without having to register for VAT in various other EU countries where their customers are located.
Austria - Limitation to the application of the reverse charge mechanism for non-established suppliers organizing fairs, exhibitions, conferences or congresses
With effect from 1 January 2012, non-established suppliers that organize a fair, exhibition, conference or congress in Austria and charge attendance fees will no longer be able to avail of the extended domestic reverse charge mechanism in Austria with respect to the event registration / attendance / entry fees.
Events with only selected attendees (events not open to the public) are not affected and therefore, the extended domestic reverse charge mechanism continues to apply on such event registration / attendance / entry fees.
Cyprus - Increase standard VAT rate by 2% from 1 March 2012
The standard VAT rate of Cyprus will increase to 17%, from 15%, and will come into force from 1 March 2012. There will be no change to the reduced VAT rates of 5% and 8%.
France - President Nicolas Sarkozy is to raise the VAT rate to 21.2%
The French President has announced an increase in the standard VAT rate from 19.6% to 21.2%, which will be due to come into force in October 2012, It has been approved by Parliament on 29 February 2012 and now still needs to be validated by the Constitutional Council.
France – Clarification on the application of the new reduced rate of 7%
The new reduced rate of 7% will apply to all goods and services that were previously subject to the 5.5% VAT rate, with the exception of foodstuff, gas and electricity, energy supply networks, and goods and services for disabled persons that will remain at the 5.5% VAT rate.
The increase in the reduced VAT rate is effective from 1 January 2012, except in relation to paper books which has been delayed to 1 April 2012.
The French Government have also clarified that prepared food ready for consumption (sandwiches, pizza) will be subject to the new 7% VAT rate.
Norway - VAT Updates
A significant change has been introduced in Norway in respect to VAT refunds through the refund scheme available to businesses involved in international transport services. Pursuant to a statement issued by the Ministry of Finance, companies without an establishment in Norway that carry out cross- border transport services are liable to register for VAT in Norway, subject to the standard registration thresholds.
In light of the above businesses will no longer be entitled to recover input VAT incurred in Norway via the refund scheme. Instead, Norwegian VAT incurred will only be deductible via local VAT returns by businesses who successfully register for Norwegian VAT purposes.
Despite this statement being announced by the Ministry of Finance only recently, the changes apply retrospectively with effect from 1 January 2010.
With effect from 1 January 2012 the online submission of VAT returns has become mandatory in Norway. The Norwegian VAT authorities will no longer issue paper based VAT returns but in special cases taxable persons may be allowed to continue submitting paper returns if they can convince the tax authority that they cannot make electronic filings due to practical considerations.
The VAT rate on nutrients/foodstuffs has been increased from 14% to 15% with effect from 1 January 2012.
UK - Registration threshold to become NIL
Effective from 1 December 2012, non-established businesses will be required to register immediately if they make taxable supplies in the UK as the UK VAT registration threshold, currently £73,000, will no longer apply to non-established businesses.
Author: Tamás Bajor, Vienna Consult Kft., www.viennaconsult.hu
Czech Republic - Proposal to bring single 19% VAT rate from 2012 defeated
Proposal from Czech Finance Minister, Miroslav Kalousek, to bring in a single 19% higher VAT rate from start 2012 has been defeated. The proposal to rush in a higher rate of VAT than under a previously agreed timetable was challenged by junior member of the coalition. Under the existing timetable, two rates of higher VAT at 20 percent and 14 would be introduced next year with a single 17.5 percent rate coming in 2013. Kalousek had been proposing a single 19% higher rate to come in from start of 2012.
France - New 2011 taxation rules for conference and event organisers in France
On the 28 March 2011 the French Tax Authorities published an official guideline on the new VAT place of supply rules for event related services
This guideline is clarifying the impact of the VAT changes that were introduced by the Directive 2008/8/EC dated 12 February 2008 and came into force on the 1st January 2011, and deals in particular with services supplied in connection with conferences, congresses, trade fairs, etc. The information in this administrative guidance can be very useful for taxable persons who are either attending, or organising events in France. It brings some level of response to the uncertainty created by the new EU VAT taxation rules in this area, and also sheds some light on the implementation of those rules in France by featuring specific examples and solutions for various situations.
The information in this guideline is focusing the following items:
However this guideline is also dealing with other questions such as VAT taxation rules for services rendered by Professional Congress Organisers (”PCO”) or the VAT place of supply rules for training services.
Greece - VAT rate on food and drinks supplied for immediate consumption to increase from 1 September 2011
The VAT rate applicable to non-alcoholic beverages and to the supply of food for immediate consumption in restaurants, as well as on some connected services is to increase from 13% to 23% (16% in the Agean Islands) from the 1st of September 2011.
This change will not affect food and beverages supplied in canteens used by medical, educational or social welfare organisations. Also, this change will not affect food intended for mass consumption that are ready to eat and are sold in packages in the restaurant/take-away.
Hungary - Hungary’s VAT regulatory practices not compliant with EU VAT Directive
The European Court of Justice found that Hungary’s practices are incompatible with EU law and need to be modified. The current situation allows taxable persons to deduct the input VAT of their acquisitions from the amount of VAT payable. If the amount that is deductible is greater than the VAT payable the excess can then be reclaimed, except where the taxpayer has not paid the consideration.
This means that for certain taxpayers the opportunity to reclaim VAT is postponed for several tax periods, this was considered by the ECJ in its decision on 28th July 2011 to be contrary to the EU VAT Directive.
Ireland - Introduction of a new reduced VAT rate of 9%
The Minister for Finance has announced that a second reduced VAT rate of 9% will be introduced in respect of certain goods and services (mainly related to tourism) for the period 1 July 2011 to 31 December 2013 under the “Jobs Initiative 2011”. The new VAT rate is effective from the 1st of July 2011.
Ireland - Update on the deduction rules for Car related expenses
The information used to prepare this update is contained in the VAT Leaflets published on the Irish Revenue website: http://www.revenue.ie/en/tax/vat/index.html
1. Purchase of cars
The purchase of a car in Ireland is subject to Irish VAT. VAT incurred on this purchase is usually not deductible. However, a VAT registered trader may deduct VAT if the car is used 100 % for business and if it belongs to category B or C, i.e. commercial vehicles.
There is an exception to this rule, Motor dealers and driving schools may recover VAT incurred on the purchase of a wider range of vehicles.
From the first January 2009 a trader can also recover some of the VAT incurred in relation to the purchase of category A vehicles, i.e. saloons, estates, hatchbacks, convertibles, etc. However there are conditions;
Where those conditions are fulfilled it is possible to recover up to 20% of the VAT paid.
2. Hire and leasing of cars
VAT is recoverable on the hire and leasing of cars under the same conditions than above, i.e. full deduction of VAT may be possible if the car is category B or C and 100% used for business purposes and up to 20% deduction is possible for cars belonging to category A where the conditions described above are fulfilled.
3. Repairs and servicing of cars
VAT is recoverable on repair and servicing of cars under the same conditions than above, i.e. full deduction of VAT may be possible if the car is category B or C and 100% used for business purposes and up to 20% deduction is possible for cars belonging to category A where the conditions described above are fulfilled.
4. Petrol and diesel
VAT registered traders are not entitled to recover VAT incurred on the purchase of petrol.
VAT is fully recoverable on diesel by VAT registered traders if the vehicle is used 100% for business.
5. Toll bridges and car parking
VAT registered traders are entitled to deduct VAT incurred on toll bridges and “off-street” car parking. VAT should be fully recoverable by VAT registered traders if the vehicle is used 100% for business. VAT on “on-street” car parking is exempt.
The Irish revenue has created categories of vehicles ; A, B, C, D, M, M1, M2 etc. only commercial vehicles in categories B and C open right to VAT deduction, Category A is for vehicles such as estates, saloons, convertibles, etc., that are not designed as commercial vehicles.
United Kingdom - HMRC will target businesses who have not registered to pay VAT
HMRC has launched a campaign to target businesses that are trading above the VAT registration threshold (73,000 GBP) but are not registered for VAT.
Under the terms of the VAT Initiative, those who have not registered to pay VAT can come forward any time up to 30 September to tell HMRC that they want to take part. If they make a full disclosure, most face a low penalty rate of 10 per cent on VAT that has been paid late. After 30 September, using information pulled together from different sources, HMRC will investigate those who have failed to come forward. Substantial penalties or even criminal prosecution could follow. HMRC uses new technology and legislation to gather and analyse data, from internal and external sources, to identify people who should come forward.
United Kingdom - Businesses call for VAT cut
Fears that the UK economy has flatlined in the nine months since October have led to the Federation of Small Businesses (FSB) to call for yet another VAT rate change urging the government to drop VAT to 5% in certain sectors. While this approach has been adopted in other jurisdictions such as France, Germany and most recently Ireland there is little evidence of a positive impact and in some cases questions over whether these reductions were being passed on to end consumers at all.
United Kingdom - HMRC continue to move VAT on-line - Consultation Document Released
HMRC has just released a consultation document covering the changes to the operation of VAT and moving of more transactions on-line. HMRC proposes that from 1st of April 2012, for businesses with a turnover below £100,000, it will be compulsory to file VAT returns on-line and make electronic payment of any VAT due. On-line filing is currently optional for these smaller businesses, however, all new businesses that registered for VAT since 1 April 2010 and larger businesses, with a turnover of £100,000 or more are obliged to file and make VAT payments on-line.
Author: Tamás Bajor, Vienna Consult Kft., www.viennaconsult.hu
Foreigners often have a misconception of their tax situation if moving to Germany and working there.
Here are typical issues often misunderstood:
We have developed a checklist “Foreign citizens working in Germany – Required documents and information” to file a German income tax return. The checklist can be ordered free of charge at our German office (www.iapa-online.com/hamburg-germany).
On January 1, 2009 Germany introduced the possibility for German tax payers to install electronic bookkeeping outside of Germany. This enables German companies and subsidiaries of foreign entities to outsource IT infrastructure and accounting and payroll processes to other countries. The limitation to EU/EEA-countries has been abolished by the end of 2010.
Note: This regime only applies to electronic books and records. Paper documents such as annual financial accounts, opening balance sheets but also in- and outgoing invoices have to be kept in Germany. This restricts the possibilities to transfer the entire bookkeeping abroad.
The following requirements apply:
German tax authorities may grant permission to transfer electronic bookkeeping abroad. The application has to be made in writing. The following information is required:
Foreign Service provider who is conducting the bookkeeping for a German company has to follow German accounting standards. Provisions of German commercial and tax law have to be considered. And he has to follow the special regulations of the Principles of proper IT-based Accountancy Systems (Grundsätze ordnungsmäßiger DV-gestützter Buchführungssysteme).
German tax authorities have the right to audit data produced by means of data processing systems (EDP systems). There are three forms of data access:
In practice only access form Z 3 is used by tax inspectors when auditing smaller companies. The special rules of the Principles of Data Access and Auditability of Digital Records (GDPdU) have to be followed by the foreign service provider.
If the company and/or its service provider is not complying with the requirements under this regime fines in a range between € 2,500 and € 250,000 may be imposed. And the tax authorities have the right assessing taxes based on estimates.
As a US citizen or green card holder you are required by the US government to continue to file a US tax return, even if you are living, working and paying taxes abroad. This has been the law since about 1914, but it is only in the past few years that the IRS has started cracking down on Americans living abroad who have not been filing their tax returns.
The US government thinks that there is about $ 700 billion dollars of tax revenue that it is missing out on due to individuals and businesses failing to properly report their US taxes and hiding money in foreign bank accounts. The IRS is actively looking for individuals with over $ 50,000 held outside the US and is finding and prosecuting these individuals. In an effort to encourage US citizens living abroad to “catch up” on their taxes and to properly report their foreign bank accounts the IRS recently announced its Second Voluntary Disclosure Initiative. This is good news for anyone who has not been filing their taxes, reporting their bank accounts or both.
The first Voluntary Disclosure Program ended in 2009 and since then people who did not disclose their overseas bank accounts and other liquid assets were in a state of limbo as there was no official policy for how they would be dealt with (i.e. fines, criminal prosecution or both). The new initiative clearly defines the penalties and the requirements for properly disclosing your foreign accounts and catching up on your tax filings. The 2011 Offshore Voluntary Disclosure Initiative is the best opportunity since 2009 for people to catch up on their taxes and once again become compliant with the IRS. The penalties are higher than in 2009, but the IRS policy is not to reward people for not reporting and the IRS has stated that penalties will only increase in the future. This means that now is the time to catch up on your US taxes and report all of your foreign bank accounts.
In order to take advantage of the Voluntary Disclosure Initiative you will need to completely catch up by August 31st 2011 so you should contact your tax advisor immediately to get started. The terms will require you to file for up to 8 years and to disclose your foreign bank, brokerage and savings accounts and the balances for up to 8 years. You will also need to pay any late taxes, penalties and fines by August 31st 2011.
Finally, some key dates you should be aware of:
Whether you have been filing your taxes each year or iyou have recently moved abroad, you should be aware of the important tax dates for 2011 (the 2010 US tax year). They are:
The US tax code can be very confusing and is quite complex so we strongly recommend speaking to a US expat tax expert before getting started. This will greatly improve your chances of avoiding double taxation and getting hit with a large US tax bill.
All information was correct at the time this article was written (February 2011).
Author: David McKeegan, Director and Founder of Greenback Expat Tax Services, a US Income Tax provider that specializes in tax preparation for Americans who live abroad
Tax law is a field of scientific research. And there are co-operations of universities from different countries. On 4 March 2011 the second Joint Seminar of the following universities will take place in Hamburg :
The seminar will cover the following topics:
Co-ordinators are the professors Gerrit Frotscher and Pietro Selicato.
Speakers from the IAPA are involved and will cover the following topic:
Domestic Measures against the improper use of tax havens