Australia and New Zealand - mutual recognition of securities offerings
On 13 June 2008, the New Zealand Commerce Minister and the Australian Minister for Superannuation and Corporate Law jointly announced the signing of an agreement designed to smooth the way for businesses to raise capital, and for the public to invest with greater ease in both countries.
The Agreement on the Mutual Recognition of Securities Offerings, launched on 13 June 2008 by both Ministers at a signing ceremony at the New Zealand (NZ) Parliament, allows for the same securities offerings document to be issued in both countries.
Under the regime, Australian issuers can extend an offer that is being made in Australia to New Zealand investors without being required to comply with most of the substantive requirements of New Zealand’s capital raising laws.
The Ministers each described the regime as a major achievement under the Memorandum of Understanding on Business Law Coordination between NZ and Australia and noted that the regime is widely supported by businesses in both countries. Legislation and regulations were recently introduced in each country to bring this regime into effect.
United States - scope of advanced pricing agreements expanded
The United States (US) Inland Revenue Service has announced that it is expanding the scope of Revenue Procedure 2006-09, detailing the procedures for requesting an ‘advance pricing agreement’ (APA). The modification is effective from 9 June 2008.
The revisions to the APA Revenue Procedure provide that the program will now be available as an avenue to resolve issues arising under certain income tax treaties, and US law and regulations, for which transfer pricing principles may be relevant. Expressly included within the expanded scope are:
- attribution of profits to a permanent establishment under an income tax treaty
- determination of the amount of income effectively connected with the conduct by the taxpayer of a trade or business within the United States, and
- determination of the amount of income derived from sources partly within and partly without the United States, as well as related subsidiary issues.
United States - exit tax legislation
The Heroes Earnings Assistance and Relief Tax Act of 2008 was signed by the President into law on 17 June 2008. Intended to provide tax relief to certain military personnel, the legislation also imposes a so-called ‘exit tax’ on certain US citizens and long-term permanent residents who terminate citizenship or long-term permanent residence status. An individual is a long-term resident if he/she was a lawful permanent resident in at least eight out of the fifteen taxable years ending with the year in which the residency termination occurs.
Under the provisions certain expatriating individuals are subject to tax on the net unrealized gain on their world wide property as if such property were sold for fair market value on the day before the expatriation date. The deemed sale rule generally applies to all property interests held by the individual on the date of expatriation. Special rules apply in the case of certain deferred compensation items, specified tax deferred accounts, and interests in non-grantor trusts.
The provisions specify rules for establishing the date of expatriation. In the most common cases, this will be the date the individual swears or affirms their oath of renunciation in front of a consular officer and witnesses or files Form I-407 terminating permanent residence status. Long-term residents would also be treated as expatriating when utilizing residency ‘tie-breaker’ provisions of income tax treaties to be treated as US non-resident aliens despite their permanent residency status.
Expatriates to whom these provisions apply are permitted to make an irrevocable election to defer payment of the mark-to-market tax on a property-by-property basis, which includes an interest charge during the deferral period. Tax may be deferred only until the due date for the return of the taxable year in which the property is disposed of. The individual would generally be required to provide a bond in order to make this election, and is required to waive any treaty rights that would preclude the assessment or collection of the tax.
Luxembourg to abolish capital duty
On 22 May 2008, the Luxembourg Prime Minister proposed to the Luxembourg Parliament the complete abolition of capital duty as from January 2009. The current rate of capital duty payable in Luxembourg is 0.5 percent on capital contributions and this will continue until 31 December 2008. This represents one of the final moves in a process, begun in 2007, to abolish capital duty in Luxembourg in response to a European Union Council Directive in late 2006 which proposed the abolition of capital duty in all European Union member states which continued to impose the tax.
The Luxembourg Prime Minister also announced a concurrent reduction in the Luxembourg corporate income tax rate. The current rate of 29.63 percent is proposed to be reduced progressively to 25.5 percent, however no schedule in relation to this proposal has as yet been provided.
