Asia Tax Forum May 9-10, 2012 – Raffles, Singapore How Officials Can Establish Better Trust With...

Asia Tax ForumMay 9-10, 2012 – Raffles, SingaporeMay 9-10, 2012 – Raffles, Singapore

How Officials Can Establish Better Trust With Taxpayers

Ask the Authorities

www.taxand.com


Speakers

Dr Veerinderjeet Singh – Chairman, Taxand Malaysia

Chinchie Killfoil – 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 Corporations Corporate Tax Division, IRAS

Miss Yong Sing Yuan – Senior Tax Specialist, Tax Policy & International Tax Division, IRAS

Arthit Satthavorasit – Bureau of Legal Affairs,

Thailand Revenue Department


Agenda1. Main Tax Developments / Issues Globally

2. New Legislation / Proposals & Interpretation

3. Tax Audit Scrutiny – New Focus / Developments

4. Anti-Avoidance Initiatives

5. Learning from Other Tax Agencies / information Sharing / Cooperation

6. Competent Authority – Effectiveness

7. Tax Treaty Policy – Changes?

8. US issues for MNCs in Asia – FACTA

9. Conclusion

10. Q & A


Dr. Veerinderjeet SinghTaxand Malaysia

Main Tax Developments / Issues Globally

www.taxand.com


Main Tax Developments / Issues GloballyEconomic 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


New Legislation / Proposals & Interpretation

www.taxand.com


Tax Audit Scrutiny – New Focus / Developments

www.taxand.com


Anti-Avoidance Initiatives

www.taxand.com


Learning from Other Tax Agencies/Information Sharing/Cooperation

www.taxand.com


Competent Authority – Effectiveness

www.taxand.com


Chinchie KillfoilTax Attaché, IRS, US Embassy Beijing

Competent Authority – IRS Update

www.taxand.com


ContentsFrom 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


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

13


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.

14


15

Director, Competent Authority & InternationalCoordination (CA&IC)

Director, International Business Compliance

(IBC)

CommissionerLarge Business &

International

Director, International Individual Compliance

(IIC)

Deputy Commissioner (International)

IRS Commissioner

IRS Deputy Commissioner for

Services & Enforcement

lllllllll

Asia Tax ForumMay 9-10, 2012 – Raffles, SingaporeMay 9-10, 2012 – Raffles, Singapore 1

6

4

Direct, International Business Compliance

(Kathy Robbins)

Director, Transfer Pricing Operations

(Sam Maruca)

CommissionerLarge Business &

International

Director, International Individual Compliance

(Rosemary Sereti)

Deputy Commissioner International

(Michael Danilack)

Assistant Deputy Comm’r Int’l

(Doug O’Donnell)

IRS Commissioner

Treaty UnitIRS Deputy

Commissioner for Services & Enforcement

Foreign Posts

Service-wide Strategy

JITSIC

EOI Program


7

17

Director, Transfer Pricing Operations

(Sam Maruca)

Deputy Commissioner (International)

Assistant Deputy Comm’r (Int’l)

Treaty Unit

Foreign Posts

Service-wide Strategy

JITSIC

EOI Program

Director, APMA(Richard McAlonan)

Deputy Directors

Combined MAP/APA team

Field-focused team


8

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


So what is our strategy?

19


International strategy ties into LB&I’s areas of core emphasis

20

• Identify the highest compliance risks among our taxpayer base

• Work cases effectively and efficiently

• Find appropriate ways to resolve cases as soon as possible


1

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


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

22


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)

23


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 – Hareesh Dhawale, Bill Morgan

Transfer Pricing Practice – APMA

Transfer pricing practice - APMA 24


Tax Treaty Policy—Changes?

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US Issues for MNCs in Asia – FATCA

www.taxand.com


Chinchie KillfoilTax Attaché, IRS, US Embassy Beijing

FATCA

www.taxand.com


IRS International OperationsU.S. Embassy Beijing Chinchie Killfoil, Tax Attaché


Contents

Recent Developments - FATCA

FATCA

Transitional Rules

Due Diligence

Deemed Compliant

FATCA—Moving Forward

FATCA—Making Use of the Information



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



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



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)


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


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.


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


Due Diligence

Review and identify “U.S. Indicia”1. U.S. Passport or other U.S. ID

2. U.S. Place of Birth

3. U.S. Address

4. U.S. Phone Number

5. Standing instruction to transfer funds to an account maintained in the U.S.

6. POA or signatory authority granted to a person with U.S. Address

7. An U.S. c/o address that is the sole address used by the account holder


Deemed Compliant

Registered Deemed Compliant FFI

1. Local FFI

2. Non-reporting Member of PFFI

3. Qualified Investment Vehicle

4. Restricted Funds (sale to U.S. persons is prohibited)

5. 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.


Deemed Compliant

Certified Deem Compliant FFI:

1. Non registering local banks (very small local banks with only local clients)

2. Retirement Plans3. Non-Profit Organizations4. Certain Owner documented FFI (reporting already

done thru withholding agent)5. FFI with only low value accounts

These FFI do not register but self-certify with IRS via W-8 every 3 years.


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


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


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!


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!


Conclusion– Taxand’s TakeMNCs –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”


Thank you


Presenter Profiles

Ask the Authorities Panel

www.taxand.com


E.T.

[email protected] +603 (2032) 2799

Dr. Veerinderjeet Singh is a member of the Taxand Board which comprises nine Taxand country leaders from around the world. Veerinderjeet is the Chairman 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 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. He is a member of the Commission on Taxation of the International Chamber of Commerce which is based in Paris. He has also published widely in various local and international publications and is a frequent speaker at various tax conferences.

Dr. Veerinderjeet Singh

Chairman

Taxand Malaysia

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.

Chinchie Killfoil

Tax Attaché

IRSUS Embassy Beijing

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)

Presenter Profile


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.

Mrs Lim-Leow Lay Hwa

Tax Director-MediumCorporations

Corporate Tax Division IRAS

Presenter Profile


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.

Miss Yong Sing Yuan

Senior Tax Specialist

Tax Policy & International Tax

Division

IRAS

Presenter Profile


Arthit joined the Revenue Department in 1994. He has experiences in the all aspects of Thai Revenue law. His work involves proposing a legislative change to implement the government policies and giving advice to the government on tax related matters.

Before joining the Department, he obtained a law degree from Thammasat University and subsequently studied for a Master of Laws degree at UCL in the UK under the Thai government scholarship. After joining the Department, he was awarded a British Chevening Scholarship to study for his MSc in Fiscal Studies from the University of Bath, and a Thai government scholarship to complete his Ph.D. in law from Cardiff University respectively.

Arthit is a visiting lecturer at Thammasat University and Mahidol International College, Mahidol University in Bangkok.

Arthit Satthavorasit

Senior Legal Officer

Bureau of Legal Affairs

Revenue Department

Ministry of Finance,

Thailand

Presenter Profile

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