GGI INSIDER | No. 83 | May 2016

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© 2016 - GGI Global Alliance

News andInformationfor Membersand Friendsof GGI

Issue No. 83 | May 2016

GGI LatinAmerican &Iberian Regional Conference andGGI EasyMeet

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Contents

EditorialDear GGI Members, Dear Friends,

For the first time, the Latin Ameri-can & Iberian Regional Conference will be held in Europe, concurrently with this year’s EasyMeet. The two events are scheduled to take place in Madrid, Spain, offering a fantastic opportunity for delegates to establish and consoli-date contacts, and learn from each other. Find out what is on the agenda for delegates in Madrid in this edition of INSIDER.

We will also report on past events, such as the European Conference in Warsaw, Poland, and the North Ameri-can Regional Conference in Chicago, Il-linois, USA.

Members build close relationships with each other. These relationships give rise to opportunities, allowing, for example, an employee from the South Africa-based GGI member firm Nolands to travel to London for an ex-change programme with GGI member firm Lawrence Grant – a valuable and impressive experience! Other member firms will also share news of their suc-cesses and recent developments with readers.

Of course, specialist articles written by our members once again feature. Michael Straub (Switzerland) writes about “Client information and data security under Automatic Information Exchange – the Common Reporting Standard, FATCA and the General Data Protection Regulation”, while Vijesh Zinzuwadia informs us from India on the fresh approach and latest devel-opments regarding the “Make in In-dia” initiative. Prof Robert Anthony of France will share with viewers his per-

sonal perspective on a potential Brexit, while a contribution from Kurt C. Wul-fekuhler (USA) entitled “The OECD’s New Transfer Pricing Documentation Guidelines: Master File, Local File, and Country-by-Country Report” is also in-cluded. From Italy, Prof Stefano Lo-conte and Michele Cecchi will report on “Imminent amendments to gift tax and inheritance tax in Italy: an urgent call for estate planning”.

There is also news and specialist articles from the practice groups: An-drew Lacey and Danyal Ibrahim (Aus-tralia) discuss “Changes to Insolvency Laws in Australia”, Huub Kapel (Neth-erlands) shows why we need to pay attention to the theme of Global Mo-bility, and Prof Stefano Loconte and Gabriella Antonaci’s (Italy) article enti-tled “Reverse charge extended to sales of PCs, tablets and game consoles“ makes for fascinating reading. Bern-hard Schwechel (Germany) has writ-ten an article entitled “The new Ger-man Constitutional Court decision on ‘Treaty Override”. Furthermore, Merrill April from the UK will provide a sum-mary of the key points to arise from the WebEx meeting held by the Labour Law group in April – everything related to “Employment law implications of Brit-ain leaving the EU”. Last but not least, Robert S. Jacobson (USA) speaks on the issue of “Saving Estate Taxes with an Irrevocable Life Insurance Trust”.

We wish you an enjoyable read and look forward to seeing you again at fu-ture GGI events.

Your GGI Team

CONTACT | EDITORIAL | CONTENT

GGI Geneva Group International AGSchaffhauserstrasse 5508052 ZurichSwitzerlandT: +41 44 256 18 18E: info@ggi.com W: www.ggi.comW: www.ggiforum.com

The information provided in this INSIDER came from reli-able sources and was prepared from data assumed to be correct; however, prior to making it basis of a decision, it must be double checked. Ratings and assess-ments reflect the personal opinion of the respective author only. We neither accept liability for nor are we able to guarantee the content. This publication is for GGI internal use only and intended solely and exclusively for GGI members.

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GGI INSIDER | No. 83 | May 2016

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Contents➜ 23-26 June 2016 GGI Latin American & Iberian Regional Conference Madrid, Spain➜ 24-26 June 2016 GGI EasyMeet Madrid, Spain➜ 08-10 September 2016 GGI Nordic-Baltic Meeting Oslo, Norway➜ 16-18 September 2016 GGI German Speaking Chapter Strasbourg, France➜ 22-24 September 2016 GGI North American Developing Leaders St Louis, Missouri, USA➜ 22-24 September 2016 GGI North American Best Practices St Louis, Missouri, USA➜ 20 October 2016 GGI Asia-Pacific Regional Conference Bangkok, Thailand➜ 20-23 October 2016 GGI World Conference Bangkok, Thailand➜ 03-05 February 2017 GGI PG Chairpersons Meeting Zurich, Switzerland➜ 11-14 May 2017 GGI European Regional Conference Brussels, Belgium➜ 08-10 September 2017 (TBC) GGI Asia-Pacific Regional Conference Tokyo, Japan➜ 22-25 June 2017 (TBC) GGI Leadership Forum Eisenberg, Austria

Please refer to our website for actualised information and additional events: www.ggi.com, entry “Events”

Diary

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EDITORIAL, CONTACT, DISCLAIMER ................................................................ 02

CONTENTS, DIARY ...............................................................................................03

UPCOMING GGI EVENTS ➜GGI Latin American & Iberian Regional Conference and EasyMeet, Madrid, Spain ..........................................................................04

GGI EVENTS REVIEW ➜GGI European Regional Conference, Warsaw, Poland .................................... 06 ➜GGI North American Regional Conference, Chicago, IL, USA ....................... 09

GGI NEW MEMBER FIRMS ...................................................................................12

GGI INTERNAL NEWS ➜Swapping Nolands for Lawrence Grant .......................................................... 14 ➜Sameer Kamboj wins ”World Motivator of the Year” award ...........................15 ➜GGI Members answer BFIRST’s Call for Help ................................................ 16 ➜Global Attorney Steven Cantor of Cantor & Webb Cited .................................17 ➜KRD named as one of the 2016 Best Places to Work in Illinois .....................18

COMMON INTEREST ➜The age of Automatic Information Exchange: Protection and security of client information data .............................................................. 18 ➜Make in India - A fresh approach: the latest developments ..................... 20 ➜The OECD’s New Transfer Pricing Documentation Guidelines: Master File, Local File, and Country-by-Country Report ..............................22 ➜Imminent amendments to gift tax and inheritance tax in Italy: an urgent call for estate planning ................................................................24 ➜Brexit and its consequences ....................................................................... 26

GGI PRACTICE GROUP PAGES DEBT COLLECTION & RESTRUCTURING ➜Changes to insolvency laws in Australia .................................................... 27 GLOBAL MOBILITY SOLUTIONS ➜Why focus on Global Mobility? ................................................................... 28 INDIRECT TAXES ➜Reverse charge extended to sales of PCs, tablets and game consoles .... 30 ITPG ➜“Treaty Override”: New German Constitutional Court decision ...............31 LABOUR LAW ➜Employment law implications of Britain leaving the EU ............................33 TRUST & ESTATE PLANNING ➜Saving Estate Taxes with an Irrevocable Life Insurance Trust ...................... 34

BOOK REVIEW ........................................................................................................35

FURTHER CONFERENCES / EVENTS .................................................................. 36

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GGI member firm Ficesa Treuhand, S.A.P. will kindly host the first GGI Lat-in American Regional Conference to be held in Europe, concurrently with the GGI EasyMeet. Both events will be held on the same weekend at the InterConti-nental Hotel Madrid. The Latin Ameri-can Regional Conference is designed for GGI members from the region, as well as those interested in doing busi-ness in Latin American countries. All major parts of the conference will be translated from Spanish into English and vice versa.

The EasyMeet programme is rel-evant to the rising leaders within the firm. Juniors and associates who do not usually attend GGI’s internation-al and regional conferences can get together and meet with their peers from all around the world in a fruitful, unique and amiable environment. The EasyMeet begins on 24 June. Please note this will be the only European EasyMeet this year!

The two events will offer some joint sessions, such as meals and sightsee-ing events – a perfect networking op-portunity! This will enable all partici-pants to build connections with their fellow GGI members as well as to learn

and benefit from each other’s experi-ence.

It has been confirmed that Benita Ferrero-Waldner will deliver a keynote speech during the Latin American & Iberian Regional Conference. Ferrero-Waldner is an Austrian diplomat, poli-tician and member of the conservative Austrian People’s Party. She has previ-ously served as the Foreign Minister of Austria, the European Commissioner for External Relations and European Neighbourhood Policy, and as the Eu-ropean Commissioner for Trade and European Neighbourhood Policy.

Inspiring Practice Group meetings and fascinating lectures will mean at-tendees leave well-informed. It is also an opportunity to stay connected with fellow GGI members and exchange ideas, experiences and the latest news and developments from their business

GGI Latin American &Iberian Regional Conference and GGI EasyMeet

UPCOMING GGI EVENTS

Madrid, Spain, 23–26 June 2016

Toledo Benita Ferrero-Waldner

Madrid, Gran Via

GGI INSIDER | No. 83 | May 2016

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with their international colleagues. GGI members should not miss out

on this promising European experi-ence. From sprawling museums to traditional restaurants and bars, won-derful squares and beautiful parks: a single weekend will surely not suffice to see and experience everything this vibrant city has to offer!

For those arriving earlier, on Thursday 23 June a day trip to the World Heritage City of Segovia has been organised. Par-ticipants will find a magical city of warm terracotta and sandstone hues set amid the rolling hills of Castilla, against the backdrop of the Sierra de Guadarrama. Walt Disney is said to have modelled Sleeping Beauty’s castle at Disneyland California on Segovia’s Alcázar.

Accompanying persons can join a day trip to the beautiful World Heritage City of Toledo on Friday 24 June. Located atop a gorge overlooking the Río Tajo, it was known as the “city of three cultures” in the Middle Ages, a place where – leg-end has it – Christian, Muslim and Jew-ish communities peacefully coexisted. Horseshoe-arched mosques, Sephardic synagogues and one of Spain’s finest Gothic cathedrals are all to be found in the city’s dense historical core.

Toledo also has something to offer art lovers, in particular the haunting canvases of El Greco, the influential, ambiguous painter with whom the city has come to be synonymous.

On the Saturday afternoon, regis-tered delegates can join a VIP guided tour of the Royal Palace of Madrid, in-cluding some normally off-limit areas.

Conference delegates can enjoy a tour of Santiago Bernabéu Stadium (the home of Real Madrid) on Satur-day evening, prior to attending dinner at the “Puerta 57” restaurant, which is

located in the Stadium itself. Participants who still have time on

Sunday, can join a trip to the chic Las Rozas Village shopping outlet, which is famous for quality and attention to de-

tail. More than a hundred of fashion retailers have shops there – enjoy special VIP treatment, a personal shopper if required and dis-counts of up to 60%.

GGI members who are yet to register may still do so. Please use the online registration tool at www.ggi.com (Member Login/Events). The detailed pro-gramme for the conference is also available here. We look forward to welcoming many of you to Madrid.Santiago Bernabéu Stadium

The famous ancient aqueduct in Segovia, Castilla y Leon

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Get ready for group work in Madrid

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GGI EVENTS REVIEW

The 2016 GGI European Regional Conference took place in Warsaw, Po-land, between 21 and 24 April, hosted by GGI member firms EFS Group, SMM Legal, and CSWP Audyt Spolka. More than 230 delegates from all over the world participated in the event held at the InterContinental Hotel Warsaw, located in the city centre.

A number of activities were sched-uled for the programme as early as Thursday, including a well-attended meeting of the International Taxation Practice Group, a meeting of the GGI Executive Committee, and two sight-seeing tours aimed at allowing partici-pants to explore Warsaw, including the city’s historical and cultural Jewish her-itage. Later in the evening, a welcome dinner was hosted in the hotel.

The programme for Friday began with a welcome speech delivered by Claudio G. Cocca, President and Founder of GGI, and words of welcome from the representatives of the host firms. The session featured interest-

ing contributions by the two keynote speakers, Dr Włodzimierz Cimosze-wicz and Mr Nenad Pacek.

Dr Cimoszewicz discussed the cur-rent situation in Europe, from its be-ginnings with the establishment of the European Community, up until the addition of 10 new states 12 years ago,

8 of which formerly belonged to the Soviet Bloc. This expansion was in-tended to deepen the Community and strengthen the EU’s institutions and common policies. When the financial crisis made its way over the Atlantic and reached Europe in 2008, it re-vealed that numerous countries had implemented reckless financial and economic policies which rendered them more susceptible to its effects. With the exception of Poland, all EU member states sooner or later entered recession, and the European economy entered a period of stagnation. In several eurozone countries, the crisis proved particularly acute and resis-tant to any austerity measures. The social and political consequences of the crisis were significant, especially coming on the back of the failure of the proposed European Constitution, when citizens in France and the Neth-erlands rejected its adoption in 2005. In recent years, due to the situation within member states and events taking place outside the Community,

GGI EuropeanRegional Conference

Warsaw, Poland, 21-24 April 2016

Keynote speach

Audience

GGI INSIDER | No. 83 | May 2016

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optimism and enthusiasm have been turned into instability, self-centred at-titudes coming to the fore and threats of EU withdrawal and even dismissal of some member states.

Dr Cimoszewicz enagaged the audi-ence in discussing key questions, such as the following:

What does the future hold for the European Union?

Do the current climate of pessimism and eurosceptism, lack of involve-ment in joint affairs, lack of agree-ment on common positions and the undermining of the community’s institutions in matters such as Rus-sia’s aggression against Ukraine prove that the Union has lost its mo-mentum?

Does the low economic growth rate in most EU member states reflect prosperity, or excessive limitations on entrepreneurship?

How can the wealthiest group of countries in the world justify a lack of secure employment and dignified

living conditions to the many mil-lions of unemployed people?

Why is it that citizens of Central and Eastern Europe earn several times less than and live in unfa-vourable conditions when com-pared with their Western European counterparts doing exactly the same job?

How does the EU see itself in the fu-ture? What role does it want to play in the world? How does it want to shape its relations with neighbour-ing countries as they face increasing levels of danger?

How should the EU reconcile the ob-vious need to reinforce integration in some areas with a lack of political will, or failure to meet necessary cri-teria, on the part of certain member states?

Should the EU extend its geographi-cal scope or explicitly declare that the process is over?

Finally – where does the EU go from here?

His arguments were interesting and well-developed, and the audience had the opportunity to participate in a fas-cinating Q&A session.

Dr Cimoszewicz has held many po-sitions in government, most notably as Prime Minister of the Republic of Po-land from 1996-1997. More recently, he was an independent senator in the Pol-ish Parliament (2007-2015) and Chair-man of the Senate’s Foreign Affairs Committee.

The second keynote speaker sched-uled for the morning session was Mr Nenad Pacek, who examined the out-look for European economies in a glob-al context, and explained megatrends that have an impact on the European economic outlook. He walked the audi-ence through the prospects of different markets in both western and eastern Europe before moving on to examine business megatrends based on his current advisory work with over 400 multinationals operating in the EMEA region. ...next page

GGI Chairman and Founder Claudio G. Cocca and GGI Global CEO Michael Reiss von Filski with keynote Speakers Dr Włodzimierz Cimoszewicz (photo left) and Nenad Pacek (photo right)

Networking

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GGI EVENTS REVIEW

You can find out more about Mr Pacek’s background in the previous INSIDER issue.

The first part of the Friday session ended with a preview of GGI’s upcom-ing events.

On Friday afternoon, two sets of various practice group meetings took place, during which experts from all over the world shared expertise and their visions while also exploring op-portunities for future joint business projects. After a most interactive day, delegates were invited to dine together at the Endorfina Restaurant, which also featured live music and dancing.

During the Saturday session, dele-gates had a further choice of meetings to attend. Charles S. Baldwin IV & Mark Davidson (USA) led the session “Ad-vising clients regarding United States market entry: an overview of legal, tax and dispute resolution issues”; Oliver Biernat (Germany) discussed “Com-plaint management: How do you tackle unhappy clients?”; Ashish Bairagra (In-dia) delivered a presentation entitled “If not India, where? If not now, when?” and Prof Maciej Mataczyński (Poland) discussed “Recent changes in control of foreign investment in Poland”.

The last workshop scheduled for the morning was the “Understanding GGI” session hosted by Michael Reiss von Fil-ski (Switzerland). This session, which is compulsory for new members and can-didates, provided an interactive over-view offering a better understanding of how GGI operates, including mem-bership criteria, the selection of mem-

bers, conferences, workshops, practice groups, the charter and the workings of GGI’s Head Office, Regional Offices and Executive Committee.

In the afternoon, delegates and their guests could enjoy a sightseeing tour of the Wilanów Palace, the royal sum-mer residence of King Jan III Sobieski,

who famously conquered the Turks at the battle of Vienna in 1683. This won-derful baroque palace is a place of great beauty with its original architecture be-ing the result of the fusion of European art with traditional Polish construction.

The conference ended on a high note with a gala dinner in the Royal Castle, accompanied by a pianist playing Cho-pin. The delegates who attended this black tie event all enjoyed themselves as the conference came to a success-ful end.

The final activity in the programme on Sunday saw many participants take an interesting day trip to the city of Kraków and the Auschwitz concentra-tion camp.

The 2017 GGI European Conference will take place in Brussels, Belgium from 11-14 May. GGI is pleased to in-vite all members to this event, which promises to be yet another rewarding, convivial occasion.

Warsaw dancers Chopin concert

Gala Dinner: Listening to the piano concert

Prof Maciej Mataczyński from host firm SMM Legal

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The 2016 GGI North American Region-al Conference took place at theWit® Ho-tel, Chicago, Illinois, USA, between 12–15 May 2016. Some 130 delegates were in attendance. The conference hosts were GGI member firms Freeborn & Peters LLP, Kutchins, Robbins & Diamond, Ltd and Mowery & Schoenfeld LLC.

For the very first time, the event fea-tured a full day session of the Interna-tional Taxation Practice Group. In the evening, participants met for the wel-come dinner which was followed by cocktails, during which the various new members and candidates who were at-tending the conference were presented.

During the day, a „Taste of Chicago“ tour was organised. Participants were able to enjoy culinary deligths on offer in Downton Chicago.

The Friday morning session was kicked off with some words of welcome, followed by interesting keynote speech-es. Allan Koltin discussed the topic of “How to Facilitate a Partner or Leader-ship Retreat”. Such retreats represent

one of the best forums for discussing or deciding on change. Leaders and part-ners who do not shy away from taking tough decisions and deal with change have a major competitive advantage over other firms in today’s high-per-forming law and accounting firms. Over the past three decades, Mr Koltin has facilitated over 1,000 partner and lead-

ership retreats for law and accounting firms. During a fast-paced and informa-tive session, Mr Koltin discussed strat-egies and techniques to improve the facilitation of firms’ partner and lead-ership retreats. He explored everything from how to prepare for the retreat to sharing facilitation strategies used dur-ing the retreat to increase partner com-munication and involvement. The ses-sion of great interest for all participants as this is a topic which will sooner or later be on the table of all GGI member firms.

The second keynote speaker of the morning session was Jonathan Fitzgarrald, who delivered a speech on cultivating a business development cul-ture within firms and analysing the fun-damental changes in the market for pro-fessional services which have occurred since 2008. The current market supply (of practitioners) outweighs the demand for their services. Therefore, reputation alone can no longer generate enough ...next page

GGI North AmericanRegional Conference

Chicago, IL, USA, 12–15 May 2016

Audience

Presidential Speech: Claudio G. Cocca

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GGI EVENTS REVIEW

business to satisfy a firm’s growth ob-jectives. Mr Fitzgarrald presented a re-al-life case study on how to successfully foster a business development culture within your firm, using GGI member firm Ervin Cohen & Jessup LLP (Beverly Hills, California, USA) as an example. The key aspects of his speech were: to explore ways that talent at all levels of the firm can learn to turn contacts into clients; how to identify and position individual strengths to meet current market demands; best practice for pro-moting collaboration among the firms’ practices; how to leverage a business development coaching programme to retain and recruit talent; and key per-formance indicators for demonstrating results.

The first part of the Friday session ended with the management report for

North America being delivered, and a summary of GGI’s upcoming events.

On Friday afternoon, two rounds of various Practice Group & Special Inter-est Group Meetings took place, during which experts from all over the world shared technical expertise and visions and explored opportunities for future business collaboration. After a highly

interactive day, delegates were invited to dinner at the Columbia Yacht Club, sponsored by the three host firms. Lat-er, there was live music giving everyone a chance to put on their dancing shoes.

On the programme for Saturday Morning were three workshop sessions, offering further meeting opportunities.

The “Millennials in the Workplace” workshop focused on the impact of Mil-lennials (those born between 1982 and 2000) on the workplace. The current workplace can include up to four gen-erations – Silent (born 1925-1945), Baby Boomers (born 1946-1964), Generation X (born 1965-1981) and Millennials, and the interactions between these very dif-ferent generations has a significant im-pact on organisational culture. The goal of this workshop was to explore suc-cessful ways for the various generations to work together in order to bring value to the whole organisation.

The session on “Establishing a Spe-cial Interest Group – Best Practice for Professional Services Organisations” focused on Partner Retirement and Succession Planning, and it involved a group discussion on phased retire-ment of partners, transition of client relationships, and the financial impact of the succession plan. The meeting also focused on the initial preparations for establishing a new Special Interest Group, defining the overall and specif-ic goals and objectives of the Group, electing a Chairman and Deputy Chair-man, and discussing the next steps for the Group.

The “Understanding GGI” session, which is compulsory for new mem-bers and candidates, provided an in-teractive overview offering a better understanding of how GGI operates,

Keynote speakers Allan D. Koltin (left) and Jonathan R. Fitzgarrald

From left to right: GGI Global CEO Michael Reiss von Filski, Keynote speaker Roger Fisk, GGI Founder and Chairman Claudio G. Cocca and GGI Northamerican Region-al CEO Adam Crowson

Allen I. Kutchins from host firm Kutchins, Robbins & Diamond, Ltd

Gladys C. Zolna from host firm Freeborn & Peters LLP

Jeffery L. Mowery from host firm Mowery & Schoenfeld LLC

GGI INSIDER | No. 83 | May 2016

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NetworkingFriday dinner

including membership criteria, the selection of members, conferences, workshops, practice groups, the char-ter and the workings of GGI’s Head Office, Regional Offices and Executive Committee.

The conference session came to a close with a keynote speech by Mr Rog-er Fisk, entitled “21st Century Engage-ment: Data, Social Media and Messag-ing”. Mr Fisk shared his vast expertise on the use of technology and social media during elections as well as his experiences of campaign management. He offered a glimpse behind the scenes and practical insights into the market-ing campaigns of individual firms.

Two sightseeing tours were sched-uled for the second half of the day. First, something quintessential Chi-cago: a visit to ball game to watch the city’s beloved Chicago Cubs play the Pirates at the historic Wrigley Field. Second, a Chicago Architecture River Cruise, where expert guides shared an insider’s glimpse into the buildings,

architecture and engineering that gave Chicago its reputation as the birthplace of the skyscraper and home of modern American architecture.

The conference ended on a high note with dinner at the Signature Room, on the 95th floor of the John Hancock Cen-ter. Delegates arrived just in time to en-joy the sunset from one of the highest points of view of the city, followed by dinner and an open bar. Networking

Workshop audience

Questions from the audience

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Contents

NEW MEMBER FIRMS

WE WISH TO EXTEND A VERY WARM WELCOME TO OUR NEW DISTINGUISHED MEMBERS.

SwitzerlandBelgiumAustralia

PaulBolland

Prof Dr PatrickDe Wolf

GaryWilliams

Westleton Drake LtdWaldmannstrasse 6 8001 ZurichSwitzerland

T: +41 43 333 0013 F: +41 43 333 0014E: paul.bolland @westletondrake.chW: www.westletondrake.com

Further Offices: Geneva (Switzer-land), London (United Kingdom)Company languages: English, French, German Contact person: Paul BollandServices: Tax, Advisory

DALDEWOLFAvenue Louise 81 Louizalaan1050 BrusselsBelgium

T: +32 2 627 10 10F: +32 2 627 10 50E: pdw@daldewolf.comW: www.daldewolf.com/en

Company languages: French, Dutch, English, Slovakian, Ger-man, Italian, Czech and Hungar-ian, Spanish, Mandarin Chinese, Lingala and SwahiliContact person: Prof Dr Patrick De WolfServices: Law Firm

Rosenfeld Kant & CoLevel 24, Tower 2,101 Grafton Street,2022 Bondi Junction (Sydney)Australia

T: +61 2 9375 1200E: gary@roskant.com.auW: www.rosenfeldkant.com.au

Company languages: English, Spanish, Italian, Greek, Mandarin, SerbianContact person: Gary WilliamsServices: Auditing & Accounting, Tax

GGI INSIDER | No. 83 | May 2016

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WE WISH TO EXTEND A VERY WARM WELCOME TO OUR NEW DISTINGUISHED MEMBERS.

United StatesUnited States

PaulSkeith

HarveySorensen

Richards Rodriguez & Skeith LLP816 Congress, Suite 120078701 Austin, TXUnited States

T: +1 512 476 0005F: +1 512 476 1513E: pskeith@rrsfirm.comW: www.rrsfirm.com

Further Offices: Round Rock, San Marcos (Texas)Company languages: English, SpanishContact person: Paul SkeithServices: Law Firm

Foulston Siefkin LLP1551 N Waterfront Pkwy #100KS 67206 Wichita, KSUnited States

T: +1 316 267 6371F: +1 316 267 6345E: hsorensen@foulston.comW: www.foulston.com

Further Offices: Overland Park, To-peka (Kansas)Company languages: English, Jap-anese, Russian, SpanishContact person: Harvey SorensenServices: Law Firm

RichardMander

Mander Duffill Ltd65 St Mary StreetChippenhamSN15 3JF WiltshireUnited Kingdom

T: +44 1249 650441F: +44 1249 443171E: rmander@manderduffill.comW: www.manderduffill.com

Company language: EnglishContact person: Richard ManderServices: Advisory, Auditing & Ac-counting, Tax

United Kingdom

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GGI INTERNAL NEWS

Swapping Nolandsfor Lawrence Grant

By Anthony Hobson

On 30 November 2015, I prepared myself for an experience of a life time. This sheltered, conservative South Af-rican was about to take on London and all that it had to offer.

This journey started back in March of 2015 where I approached Graeme Saggers, director of Nolands, regard-ing the opportunities available for a trainee to go on secondment. It all started out as a mere dream and the thought of ‘What If’. After looking at the numerous GGI member firms around the world, I had come up with a short list, with Lawrence Grant top-ping it.

With the close relationships be-tween Nolands and Lawrence Grant it was not long before my dream started to become a real possibility. With the help of Graeme Saggers, Alan Mundell and Clive Noland from Nolands and Prodipta Patel, Alan Rajah and Gra-ham Busch from the offices of Law-rence Grant, things moved forward quickly.

Before I knew it, I was rushing to organise a Visa, accommodation and flights. Next thing I was waiting in De-

partures at Cape Town International in preparation for my UK adventure.

I soon realised what it was like to live in the fast lane in London. Arriving early in the morning on 1 December, I

had to rush to catch the tube and then get ready for my first day of work at Lawrence Grant in London.

Being South African and always wanting to start up a conversation, I soon realised this wasn’t the way of life on the tubes and trains. This was until I got to the Lawrence Grant of-fices. Everyone was very welcoming and it felt like I was back at Nolands with both firms being medium in size. I quickly settled into this family-like environment where everyone is willing to help each other in order to reach a common goal.

I was thrust into the deep end in that I chose to go to Lawrence Grant during their busiest time of the year… Tax Season. This, however, was a won-derful experience. It was great learn-ing how different tax systems operate

From left to right: Bradley Busch, Graham Busch, Anthony Hobson, Paul Levy and Alan Rajah.

Sending firmGGI member firmNolands SAAuditing & Accounting, Advisory, Tax, Corporate Finance, Fiduciary & Estate Planning Bloemfontein, Cape Town, Durban, Harare, Johannesburg, Ladysmith, Port Elizabeth, Pretoria, Tygerberg, South AfricaAnthony HobsonE: anthonyh@nolandscpt.co.zaW: www.nolands.co.za

Receiving firmGGI member firmLawrence GrantAuditing & Accounting, Tax,Advisory, Fiduciary & EstatePlanningLondon, UKGraham BuschE: graham@lawrencegrant.co.ukW: www.lawrencegrant.co.uk

GGI INSIDER | No. 83 | May 2016

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whilst finding similarities between the South African and UK systems.

Coming from an audit background, it was an interesting experience to see the other side of business. Accounting services gives you the ‘bottom up’ per-spective, as opposed the ‘top down’ approach of audit.

Apart from all the new friends I made in office, there were many fun memories created outside of the of-fice. None more so than being afforded the opportunity to watch a live Premier League game. Being an avid Arsenal supporter made for some good banter with the partners of Lawrence Grant since they are all Spurs supporters. I

was lucky enough to have seen a live game (even though it would not have been my first choice of ground, White Hart Lane). I had to bite my tongue in the dying moments of the game and the following morning, after witness-ing the high flying Leicester City grab a late winner at The Lane, to my delight of course.

The whole secondment experience is something I will keep with me for the rest of my life. I was so fortunate to have learnt so many things that I would not have been exposed to in South Africa. The experience broad-ened my view and understanding of business in general and I also got to

know about how people lead their lives in the UK, being a daily part of it my-self for two months.

I can definitely say that I learnt a lot about myself and a lot about different cultures of business during my trip.

I am so grateful to have been afford-ed this opportunity by both Nolands and Lawrence Grant. I don’t think this would have been possible if it weren’t for the GGI group. I think this is a won-derful platform, not only for business, but for like-minded individuals to share thoughts and ideas and broaden their horizons. Thank you so much to everyone involved – for giving me the opportunity of a lifetime.

Sameer Kamboj wins “World Motivator of the Year” award

At the recent Leadership Manage-ment International Inc. (LMI) World Convention held at The Westin, Kuala Lumpur, Malaysia on 22nd April 2016, Mr Sameer Kamboj, Co-Founder of GGI member firm SKC Consulting Pvt. Ltd. was bestowed with the “World Motivator of the Year” award. SKC bagged a total of five awards at the event – a clean sweep in most of the categories they were nominated in.

SKC is partnered with USA-based LMI, the world’s oldest and largest professional development organisa-tion. LMI programmes are delivered in 23 different languages across 72 countries.

They have worked with more than 150,000 companies including most Fortune 500 organisations and thou-sands of SMEs. In addition, more than 2.5 million people have benefited from their programmes, which enhance their personal lives while adding im-mensely to their organisation’s pro-ductivity and efficiency. LMI has more

than 2,700 coaches, mentors, think-ers and consultants as licensees in 72 countries. LMI has been conducting

its business continually for the past 50 years since it was founded in 1966. ...next page

Award ceremony for Sameer Kamboj (3rd from the rigtht)

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GGI INTERNAL NEWS

GGI Members Answer BFIRST’S Call for Help

By Alan Rajah

BFIRST, which stands for the Brit-ish Foundation of International Recon-structive Surgery and Training, is the official charity sibling of BAPRAS, the National Plastic Surgery Association.

Established in 2013 by Barbara Jem-ec (Consultant Plastic Surgeon at the Royal Free Hospital), the organisation focuses on training local surgeons in some of the poorest countries in the world, so that they can in turn train others to a level that is sustainable.

BFIRST runs on a volunteer basis, with UK consultants providing the training and a committee that consists of indi-viduals with various expertise.

Alan Rajah (Chairman of GGI’s Busi-ness Development & Marketing Prac-tice Group) has agreed to be BFIRST’s Treasurer for 2016-2018.

Wee Lam, Chairman of BFIRST com-ments: “We have been overwhelmed by the support we have received from GGI members from all over the world who have given their time so generously to assist us in locating referees. The sup-port in researching the doctors who were then able to apply for the unique BFIRST-fellowships has been more than we could ever have expected. This generosity has opened the door to in-valuable 6-week training opportunities in the UK.

On behalf of BFIRST I say Thank You to, most notably, Peter Käeser, R A Jay-aweera, Nil Saru and Bimpe Balogun for the assistance and kindness they have shown.”

BFIRST provides annual fellowship training in the UK and would welcome applications from doctors and consul-tants who are based in 3rd world coun-tries.

Other GGI members are welcome to continue the great work in aid of our very worthwhile charity.

GGI member firm Lawrence GrantAuditing & Accounting, Tax,Advisory, Fiduciary & EstatePlanningLondon, UKAlan RajahE: alan@lawrencegrant.co.ukW: www.lawrencegrant.co.uk

Alan Rajah

Receiving awards from such an or-ganisation is considered one of the highest possible honours. Criteria for these awards include original think-ing, walking the walk and talking the talk, excellent client feedback and tes-timonials, a review of the competitive field and the business created for the individual and his clients.

In deciding the winner of the pres-tigious “World Motivator of the Year” award, all of the above criteria were taken into consideration. Mr Kam-boj and Team SKC take great pride in practising what they preach in their personal lives. The “World Motivator” commendation was preceded by the “Asia Pacific Motivator of the Year”

award which includes the Australasia region, the Silver Medal achieved in the Sales Olympics, the Bronze Medal for Team Sales as a Country, and the Gold Medal within India in terms of sales, resales and referrals.

Through their unrelenting efforts over 19 years, Mr Sameer Kamboj and SKC have made a difference to many lives. Average year-on-year growth for their clients is in excess of 40%, indi-cating how robust these change and transformation strategies are.

Mr Sameer Kamboj: “I am glad that our efforts were recognised and that the world today took notice of the transformation that our strategies and methods bring. We have set ourselves

a mission to touch a million lives, to help people develop an amazing abil-ity for achieving economical, physical, emotional and spiritual well-being. It is only in this way that a person devel-ops in a holistic way.”

GGI member firm SKC Consulting Pvt. Ltd.Auditing & Accounting, Tax, AdvisoryNew Delhi, IndiaSameer KambojE: sameer.kamboj@skca.inW: www.skca.in

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Global Attorney Steven Cantor of Cantor & Webb Cited

Three accomplished individuals and four prominent organizations accepted Gold Medal honors highlighting their outstanding contributions to Greater Miami at Miami Today’s Gold Medal Awards Dinner on Thursday, 14 April 2016 at the JW Marriott Marquis.

Steven L. Cantor, Managing Partner of the law firm Cantor & Webb, was named by Latinvex one of Latin Ameri-ca’s Top 100 Lawyers in 2015. The list-ing was based on Mr Cantor’s tax-plan-ning work with Latin Americans, the prominence of Latin Americans within his practice and rankings by third par-ties such as the UK-based Chambers & Partners, Legal 500 and Thomson Re-uters.

For this recognition, Miami Today’s Gold Medal panel gave Mr Cantor the 2016 Bronze Award for an Individual.

Cantor & Webb is well-known within the international legal and financial world for its exclusive focus on the rep-resentation of ultra-high net worth pri-vate clients in the areas of cross-border tax and estate planning, US tax com-pliance services, family office advisory services and cross-border real property transactions.

“My Latin American clients,” Mr Cantor says, “come from the Rio Grande all the way to Tierra del Fuego and everywhere in between. Typically there’s some connection with the US. Maybe the first generation lives in the

home country while the second or third generation live part-time or full-time here – or maybe someone is looking to marry someone in the US. We see all kinds of different circumstances that have tax implications for families as a whole.”

Mr Cantor, who grew up on Miami Beach, studied international tax law at New York University in the early 1970s. His timing was good.

“The Miami I came back to,” he says, “was vastly different from the Miami I left behind. It was already becoming the de facto capital of Latin America, and my knowledge of tax laws made me valuable to the international com-munity.

“I first worked in a larger law firm environment, but when the Foreign In-vestment in Real Property Tax Act was enacted in 1980 I went on my own. At first, it was just me and an IBM Selec-tric typerwriter.”

Still not fluent in Spanish, Mr Can-tor says, he began flying to Central America – and then South America – every four to six weeks to meet with high net worth clients with US con-nections, and to establish relations with Latin American law firms. He holds a broker’s license, and used his real estate relationships to expand his international reach. A member of the US chapter of FIABCI, the Inter-national Real Estate Foundation, he was invited in 1994 to join the newly formed London-based Society of Trust & Estate Practitioners, and founded a branch of that organization in Miami Beach.

These connections, he says, “gave our firm a very high profile in the off-shore community. Today we have about 30 people in the firm, and our client base is very diverse. We have clients throughout the Caribbean, Canada, the

UK, South Africa, and the Middle East. We also have a tax preparation affiliate, CW Tax Services.

“Our practice is defined more by the type of client than by geography. We concentrate on wealthy individuals or families, and we have always been fo-cused on quality over quantity at every level.”

Eight judges selected the Gold Med-al Awards winners from among victors in local and national competitions held last year – only top-level recipients were eligible for consideration for the Gold Medals. Judges based selections on:

The importance of achievements for which nominees had received awards in the past year and the stature of the recognizing organiza-tions; and

The long-term impact of the honor-ees’ achievements on this commu-nity.Past Gold Medal Award winners, the

judges and leaders in business and ed-ucation, as well as an international del-egation of consuls general, attended to salute the honorees.

GGI member firm Cantor & Webb P.A.Fiduciary & Estate Planning, Law Firm Services, TaxMiami, FL, USASteven L. CantorE: steve@cantorwebb.comW: www.cantorwebb.com

Steven L. Cantor

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KRD named as one of the 2016 Best Places to Work in Illinois

GGI member firm Kutchins, Robbins & Diamond, Ltd. (KRD) was recently named as one of the 2016 Best Places to Work in Illinois. This is the fifth year for KRD to be recognized.

This statewide survey and awards program was designed to identify, rec-ognize and honor the best places of employment in Illinois, benefiting the state’s economy, workforce and busi-

nesses. The 2016 Best Places to Work in Illinois list is made up of 30 com-panies in the small employer category (15-99 US employees), 26 companies in the medium category (100-499 US em-ployees), and 18 companies in the large category (500 or more US employees). KRD has been named one of the Best Places to Work in Illinois small category.

Companies from across the state entered the two-part process to deter-mine the Best Places to Work in Illi-nois. The first part consisted of eval-uating each nominated company’s workplace policies, practices, and de-mographics (25% of total score). The second part consisted of an employee survey to measure the employee ex-perience (75% of total score). The combined scores determined the top companies and the final ranking. Best Companies Group managed the over-all registration and survey process in

Illinois and also analyzed the data and used their expertise to determine the fi-nal rankings.

GGI member firm Kutchins, Robbins& Diamond, Ltd.Auditing & Accounting, Advisory, Corporate Finance, Fiduciary & Estate Planning, TaxChicago, IL, USAAllen KutchinsE: akutchins@krdcpas.comW: www.krdcpas.com

Allen Kutchins

Protection and securityof client information data

By Martin Straub

Automatic Information Exchange (AIA) of client financial data under the US Foreign Account Tax Compliance Act (FATCA) and the OECD’s Common Reporting Standard (CRS) is now real-ity. Information is flowing under FATCA and information will start to flow under

CRS in September 2017. These unprec-edented invasions of personal privacy have now removed any remaining illu-sion of client privacy or confidentiality.

Requirement four of the CRS to “Protect confidentiality and safeguard data” is the OECD’s realisation that hacking, leaks, loss or sale of confi-dential, private, often sensitive data

can potentially be extremely harmful to people and their families. On roughly the same timeline therefore as imple-mentation of the CRS, the EU is intro-ducing the General Data Protection Regulation (GDPR) and the Network & Information Security Directive (NIS). With these, Brussels wants to show it is serious about protecting peoples’

The age of Automatic Information Exchange:

GGI INSIDER | No. 83 | May 2016

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data, and not just taking government nosiness to unprecedented levels. The GDPR will unify data protection through-tout the EU with a single law. Being a regulation, not a directive, GDPR affects all EU member states after the two year transition period. It does NOT require any enabling legislations to be passed by any member state.

As more and more personal data is collected and used, policymakers want to make at least a show of pro-tection. This is putting cybersecurity increasingly on the agenda for com-pliance and management. The US’ SEC has understood and recognised the seriousness of the issues. In a recent communique, SEC Chair Mary Jo White said that “Cyber security is the biggest risk facing the financial system” in one of the frankest assess-ments yet of the threat to financial in-stitutions from digital attacks.

Within the EU, the GDPR extends data protection law to all companies processing the data of EU residents, including non-EU countries. Security breaches carry severe penalties un-der the GDPR of 2-5% of global rev-enue for the offending company. Yes, you read this right. For large multina-tional companies, banks or insurance firms, this could easily become pain-ful. For Google, Amazon or UBS, the numbers involved have the potential to make this cartoonish. With around 640 million records breached in the EU during the period 2005–2014 the

potential is huge; a new, lucrative, “sure fire” source of revenue. Even bet-ter, easily marketable under the banner of “protecting EU citizens”. However, there appear to be no penalties or con-sequences for government agencies when they lose your client data. No-where. In the CRS, there also appears to be no penalties for a “competent au-thority” or any other agency for losing client data, be it leaked, hacked, stolen or just misplaced.

With good reason. Governments’ record on security is rotten. One large OECD tax authority lost over 600,000 tax records to hackers in 2013. In a very well-known hack, the US Office of Personnel Management (OPM) lost over 21 million records to hackers in 2014. In the stolen data were 5.6 mil-lion sets of fingerprints, including CIA, FBI and secret service agents’ prints. These were two cases that could not be hushed up. The UK government is relatively open, admitting to around 20 serious security breaches between 2008 and 2013 with several million re-cords hacked, stolen, lost or sold. EU governments own up only to 55 serious cases of data breach between 2005 and 2015, involving the breach of around 55 Million records. There is no doubt that this is only a small fraction of the true number. Unknown is what govern-ments are not owning up to and, of course, what they don’t detect. It took OPM a year to even realise its security

had been comprimised. The realisation hit when the information turned up for sale.

Why does this matter so much? Breaches lead to fraud, identity theft, financial damage, increased kidnap-ping and extortion risk. Plus, in many countries, political pressure, blackmail and trumped up criminal charges. Firms will need to get much more se-rious about safeguarding data. Most of these leaks would most likely have been prevented had the data been se-curely encrypted on devices and serv-ers. Additionally, who accesses which data, when, should be logged with user patterns modeled, thus alerting firms to suspicious or unauthorised activity. Firms must work with specialist data security partners to put systems, pro-cesses and procedures in place to keep data secure. Server and device encryp-tion erects hard barriers. User logging and behavioural modeling enables firms to identify persons internally who may have leaked or sold data. In light of the penalties in the GDPR, you do not want your company to be the one to lose data.

Governments will continue to lose data in increasing quantities as AIA moves forward. You need to have asset protection strategies and structures in place for your clients for when this happens. Because damages will result, for the “unprotected” or “naked”, it’s ...next pageMartin Straub

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COMMON INTEREST

Make in India – A fresh approach: thelatest developments

By Vijesh Zinzuwadia

About Make in IndiaMake in India is an initiative

launched by the Government of India

to encourage multinational, as well as national companies to manufac-ture their products in India. It was launched by Prime Minister Narendra Modi on 25 September 2014. The idea is for India to emerge, after initiation of the programme in 2016, as the top global destination for foreign direct investment, surpassing the USA and China. India received USD 63 billion in FDI in 2015.

If your clients are interested in ex-panding their business into India, this might represent a very attractive op-tion for them.

“Make in India”campaign objective

The campaign’s ultimate objective is to make India a renowned manufac-turing hub for key sectors. Companies across the globe would be invited to in-vest, set up factories and expand their

facilities in India and use India’s highly talented and skilled workforce to create world-class zero-defect products. The ultimate mission is to manufacture in India and sell the products worldwide.

Key steps to making “Make in India”successful

Doing business in India just got easier – new de-licensing and de-regulation measures are reducing complexity and significantly in-creasing speed and transparency.

Process of applying for Industrial License & Industrial Entrepreneur Memorandum available online via eBiz portal on 24/7 basis.

Validity of Industrial License ex-tended to three years.

States asked to introduce self-certi-fication and third party certification

a certainty. For the “prepared”, you can mitigate the effect. When damage re-sults, work with specialist legal teams to demand accountability and obtain compensation and reparation. Do not hesitate to take legal action to hold government agencies accountable. Class action suits for losing confiden-tial data are already underway in the US. With AIA we are entering a period where we begin to find out what gov-ernments can be held accountable for and what compensation and damages

may be claimable. Compliance officers and manag-

ers need to talk to IT staff about the data security both “at-rest” on servers and “in-motion” during transmission. Partnerships with specialist providers need to be established to implement solutions, process and procedural, to address this latest challenge in an ever changing, increasingly complex world.

Martin Straub, martin.straub@ envisage.ch, is a Swiss based expert for Wealth Management.

Martin Straub’s articlehas been published on behalfof GGI member firm Westleton DrakeAdvisory, TaxZurich, Geneva SwitzerlandLondon, UKPaul BollandE: paul.bolland @westletondrake.chW: www.westletondrake.com

Vijesh Zinzuwadia

GGI INSIDER | No. 83 | May 2016

21

under Boilers Act. Major components of defence

products list excluded from in-dustrial licensing.

Deregulation of dual-use items with military/civilian applica-tions.

Services of all central govern-ment departments & minis-tries will be integrated within eBiz – a single-window IT plat-form for services.

Process of obtaining environ-mental clearances to be carried out online.

Following advisories sent to all departments/state govern-ments to simplify and ration-alise the regulatory environ-ment:– All returns should be filed online

through a unified form.– A checklist of required compli-

ances should be placed on the web portal of the relevant minis-try or department.

– All registers required to be main-tained by the business should be replaced with a single electronic register.

– No inspection should be under-taken without the approval of the Department Head.

– For all no-risk, non-hazardous businesses, a system of self-cer-tification to be introduced.

The government received INR 1.20 lakh crore (USD 18 billion) worth of proposals from companies inter-ested in manufacturing electronics in India.

The Spice Group said it would start a mobile phone manufacturing unit with an investment of INR 5 billion (USD 74 million).

10 “MSME-Samsung Technical Schools” will be established in In-dia.

H u a w e i opened a new research and development (R&D) campus and in-vested USD 170 million.

France-based LH Aviation signed an MoU (Memorandum of Understanding) with OIS Advanced Technol-ogies to set up a drone manufacturing plant.

Foxconn an-nounced that it would invest USD 5 billion over the course of five years to set up R&D and hi-tech semicon-ductor manufacturing facilities.

Boeing could assemble fighter planes and either the Apache or Chinook defence helicopters in In-dia. Manufacture of the F/A-18 Su-per Hornet will be in India if the Indian Air Force (IAF) were to pur-chase it.

Alstom and GE Transport will invest INR 400 billion (USD 5.9 billion) to set up locomotive manufacturing factories.

Japan will set up a USD 12 billion fund for Make in India-related proj-ects called the “Japan-India Make in India Special Finance Facility”.

Kamov Ka-226 multi-purpose heli-copter is to be built in India.

Lockheed Martin stated that it was “ready to manufacture” F-16 air-craft in India.

Favourable segments/industries

Automotive, automobile compo-nents, aviation, biotechnology, chemi-cals, construction, defence manufac-turing, electrical machinery, electronic systems, food processing, IT and BPM, leather, media and entertainment, mining, oil and gas, pharmaceuti-cals, ports and shipping, railways, re-newable energy, roads and highways, ...next page

Industrial responseto “Make in India”

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COMMON INTEREST

Master File, Local File, and Country-by-Country Report

The OECD’s New Transfer Pricing Documentation Guidelines:

space, textiles and garments, thermal power, tourism and hospitality, well-ness.

About Startup IndiaStartup India is a flagship initiative

of the Government of India, intended to build a strong ecosystem for nurtur-ing innovation and startups in the coun-try that will drive sustainable economic growth and generate large scale employ-ment opportunities. Through this initia-tive, the Government aims to empower startups to grow through innovation and design. In order to meet the objectives of the initiative, the government is an-nouncing this Action Plan that address-es all aspects of the startup ecosystem, simplification and handholding.

Definition: Startup means an entity, incorporated or registered in India for no longer than five years, with annual turnover not exceeding INR 25 crore (approximately USD 3.6 million) in

any preceding financial year, working towards innovation, development, de-ployment or commercialisation of new products, processes or services driven by technology or intellectual property.

Benefits of “Startup India”

Compliance regime based on self-certification.

Create a single point of contact for the entire startup ecosystem and enable knowledge exchange and ac-cess to funding.

Mobile App and Portal. Legal support and fast-tracking of

patent examination at lower costs. Relaxed norms for public procure-

ment for startups. Faster exit for startups. Funding support through a “fund of

funds” with a corpus of INR 10,000 crore (approx. USD 1,470.58 mil-

lion). Credit guarantee fund for startups. Tax exemption on capital gains. Tax exemption for startups for a pe-

riod of three years. Tax exemption on investments

above fair market value. Startup festivals in order to show-

case innovation and providing a platform for collaboration.

For any inquires related to above please contact us.

GGI member firm Zinzuwadia & Co. CAAuditing & Accounting, Corporate Finance, Advisory, TaxAhmedabad, Kalol, Rajkot,Vadodara, IndiaVijesh ZinzuwadiaE: vijesh@zinzuwadiaco.comW: www.zinzuwadiaco.com

By Kurt C. Wulfekuhler

Globalization has produced tremen-dous gains for the world’s economies through increased trade and foreign direct investment leading to greater employment and innovation. Multina-tional enterprises (“MNEs”) have also become more integrated and global-ization has helped them reduce their tax burdens by shifting profits to low-tax jurisdictions through transactions with related parties. Concerned that this so-called base erosion and prof-it shifting (“BEPS”) poses a serious

risk to tax revenues, tax sovereignty, and tax fairness, the Group of Twen-ty (“G20”) and the Organisation for Economic Co-operation and Develop-ment (“OECD”) developed an Action Plan on Base Erosion and Profit Shift-ing (“Action Plan”).

Central to the Action Plan is align-ing transfer pricing outcomes with value creation. That is, transactions between members of a multinational group should result in an allocation of profit that is aligned with the eco-nomic activity that produced the profit. To evaluate whether taxpayers’ trans-

fer pricing outcomes are aligned with value creation, the OECD developed a three-tiered approach to transfer pric-ing documentation, consisting of:

1. Master file;2. Local file; and a3. Country-by-Country (“CbC”) Report.

Because the CbC Report has gar-nered the greatest attention and be-cause it should help direct the rest of an MNE’s transfer pricing documenta-tion, we begin our discussion there.

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Country-by-Country Report

The CbC Report will contain impor-tant group information not generally available in the past to all tax admin-istrations where the MNE operates. it is required for enterprises with con-solidated global revenues equal to or exceeding EUR 750 million. The CbC Report requirement will be effective for fiscal years beginning on or after Janu-ary 1, 2016. It is to be filed with the tax administration for the group’s parent company. It comprises two tables: (1) an overview of the allocation of revenue, income, taxes, and other financial mea-sures by tax jurisdiction; and (2) a list of all the constituent entities of the MNE group and their main business activi-ties.

Master FileThe master file provides a high-level

overview of the group. It includes infor-mation on the MNE’s legal-entity orga-nizational structure, business, intangi-bles, intragroup financing, and financial and tax positions including tax rulings.

The master file is also the taxpayer’s

opportunity to explain the results of the CbC Report. It can describe how the al-location of income is aligned with how the business operates globally, how transfer prices are set, and how intan-gibles are developed, owned, and ex-ploited. It is imperative to get this part of the documentation right so that the taxpayer can support the resulting allo-cation of income within the group.

Local FileThe local file contains specific infor-

mation for a particular country. It in-

cludes a description of the local entity, its business and business strategy, any business restructurings or transfers of intangibles, and key competitors. It also includes descriptions of the mate-rial controlled transactions, intercom-pany agreements, all of the economic analysis supporting the arm’s-length nature of the controlled transactions, and copies of any advance pricing agreements or other tax rulings relating to those transactions to which the local tax jurisdiction is not a party.

Conclusion andRecommendations

The new OECD documentation guidelines mark a new chapter in trans-fer pricing disclosure and transparency. Tax administrations will now have ac-cess to financial and other information on entities outside of their jurisdiction. And the amount of information required in the transfer pricing master file and lo-cal files has generally been expanded.

Transparency, however, is likely here to stay so it is important for MNEs to adapt to the new regime. There are even some benefits for taxpayers from the new guidelines. For one, they help stan-dardize local transfer pricing documen-

Kurt C. Wulfekuhler

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COMMON INTEREST

tation. Understanding different local requirements has been a considerable challenge has resulted in a compliance burden through the need to engage dif-ferent service providers in each jurisdic-tion. For sure, local jurisdictions will still have their own idiosyncrasies but completing a master file and local file will go far to meet local requirements.

A useful strategy for addressing the new transfer pricing documentation guidelines could include the following steps:

1. Prepare a CbC Report. Even if the group’s sales do not meet the thresh-old for requiring the CbC Report, it is an important exercise for developing the master file.

2. Evaluate risks. From the CbC Report identify any areas that are not consis-tent with the group’s transfer pricing

policies and/or substance and modi-fy accordingly.

3. Develop the master file. Make sure the master file agrees with other pub-lic information about the group’s business and profit drivers (for ex-ample, Form 10-K business descrip-tion). Be sure that the narrative in the master file supports the informa-tion in the CbC Report.

4. Prepare the local files. Develop a lo-cal file for each relevant jurisdiction based on the material controlled transactions within the group.

5. Translate as needed. Prepare the master file and local files in the global language of the group. That way, all documentation can be reviewed, un-derstood, and confirmed by the tax function within the head office. The documentation can be translated (for example, by a translation agency)

where it needs to be presented in the local language.

Following these steps will help pro-duce transfer pricing documentation that is consistent globally and presents the MNE’s transfer pricing in the best possible light.

GGI member firm Economics Partners, LLCCorporate FinanceBala Cynwyd (PA), Denver (CO), Mendham (NJ), Washington DC, USAKurt C. WulfekühlerE: kurt.wulfekuhler @econpartners.com W: www.econpartners.com

Italy: An urgent callfor estate planning

By Prof Stefano Loconteand Michele Cecchi

A draft bill has been recently intro-duced to the Italian Parliament which aims to amend the currently levied gift tax and inheritance tax. Although the hearings on the proposed bill have not started yet, it is true that there has been a lot of talk regarding this issue lately, and it is highly foreseeable that in the very near future, a radical change will be applied to the legislation to such an ex-tent that will be considerably detrimen-tal to taxpayers (possibly by means of a sudden intervention by the Government instead of a long discussed reform by Parliament).

After being reintroduced in the Italian

legal system in 2006, gift tax applied to gifts made during a donor’s life and on transfers upon death is (presently) con-siderably lower than in most countries.

As far as inter vivos gifts are con-cerned, if the donor and/or the recipi-ent are Italian residents at the time of the gift, the gift tax is always levied, re-gardless of whether assets or rights are located abroad, and whether the gift is performed by way of a deed executed abroad.

In relation to transfers on death, in-heritance tax is levied on any transferred asset or right, whether or not the trans-ferred assets and rights are located in It-aly or abroad, if the deceased is resident in Italy at the time of his / her death.

The tax base of both of the levies is

constituted by the value of the trans-ferred assets or rights. The tax rate cur-rently applicable to transfers both inter vivos and on death varies in relation to the kinship between the donor and the donee or between the deceased and the heir or legatee:i. transfers to the spouse or lineal rela-

tives are taxed at 4%; ii. transfers to relatives in collateral line

up to the fourth degree, to lineal rela-tives in law up to the fourth degree and to relatives in law in collateral line up to the third degree are taxed at 6%;

iii. transfers to other unrelated subjects are taxed at 8%.

For the sake of clarity, Italian law de-

Imminent amendments to gift tax and inheritance tax

GGI INSIDER | No. 83 | May 2016

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fines “lineal relatives” as individuals who descend from one another (e.g. father-son), while “relatives in collat-eral line” share one ancestor (e.g. the father or the grandfather) but do not descend one from the other (e.g. sib-lings or cousins).

n order to calculate the degree of “lineal relation” you have to count each individual up to the common ancestor (albeit without counting the common ancestor).

In order to calculate the degree of “relation in collateral line” you have to count each generation upwards to the common ancestor (albeit once again without counting the common ancestor) and then descending from him/her.

“Relation in law” refers to the legal relationships between a spouse and the other spouse’s relatives.

The degree of “relation in law” is the same degree of “relation” which links one of the spouses (e.g. father-in-law and son-in-law are first degree relatives-in-law because the spouse is a first degree relative of her father). Furthermore, relatives-in-law can be lineal or collateral: the former if the relatives of the spouse are linear rela-tives, the latter if the relatives of the spouse are collateral relatives.

Specific thresholds are then provided for transfers benefiting certain classes of individuals:

i. the spouse or lineal relatives of the transferor are taxed on the net value

exceeding EUR 1 mil-lion for each trans-feree;

ii. siblings of the transferor are taxed on the net value exceeding EUR 100,000 for each transferee;

iii. t r a n s f e r e e s with serious disabili-ties are taxed on the net value exceeding EUR 1.5 million for each transferee, re-gardless their ties with the transferor .

Transfers inter vivos and on death which are in favour of the State and oth-er local authorities, public bodies, polit-ical parties, foundations, legally recog-nized associations and other non-profit entities whose purpose are exclusively of public interest, are exempt from the above.

The proposed reform will likely in-crease the tax rate to 7% for the spouse or lineal relatives of the transferor, to 8% for siblings, to 10% for relatives in collateral line up to the fourth degree, for lineal relatives in law up to the fourth degree and for relatives in law in collat-eral line up to the third degree, to 15% for other unrelated subjects. It is worth underlining that each of these percent-ages would then be tripled for transfers over EUR 5 million.

Furthermore, the threshold for the spouse or lineal relatives of the trans-feror will be reduced to EUR 500,000.

As if all the above were not enough, the tax burden is set to increase even more in the foreseeable future where real estate is transferred: in such cases, the tax base of gift tax and inheritance tax is the cadastral revenue multiplied by the relevant coefficients; concurrent-ly with the reform of gift tax and inheri-tance tax, the Italian Legislator is also performing a comprehensive review of the Land Registry, which will in turn lead to an overall increase in cadastral rev-enues. The latter reform will therefore also have a very direct and negative im-pact on the gift tax and inheritance tax burden.

In light of such concerning develop-ments, you can see why practitioners with Italian resident clients and/or those with interest in Italian assets are best advised to suggest taking urgent, even immediate, action to mitigate (fu-ture) liabilities by freezing the current lower taxation levels immediately. It’s now or never!

Prof Stefano Loconte Michele Cecchi

GGI member firm Loconte & PartnersAuditing & Accounting, Advisory, Corporate Finance, Fiduciary & Estate Planning, Law FirmServices, TaxBari, ItalyProf Stefano LoconteE: stefano.loconte @studioloconte.itMichele CecchiE: Michele.cecchi @studioloconte.it W: www.loconteandpartners.it

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COMMON INTEREST

Brexit and its consequencesProf Robert Anthony’s

point of view

On 22 April, during U.S. President Barack Obama’s visit to London, he in-vited the British to reconsider their po-sition on a possible Brexit and to vote to stay in the European Union. His argu-ment was supported by the conclusions of HM Treasury which recently drafted a 200-page report on the disastrous con-sequences Brexit would have, with GDP falling by 6% by 2030. The Chancellor of the Exchequer, George Osborne, goes even further, stating that leaving the EU “would be the most extraordinary self-inflicted wound”.

As Principal Partner of a Multi Family Office (MFO), many people are asking me what my views on a Brexit are. It is clear that after long-standing EU mem-bership, the UK is deeply integrated into the Union. Their domestic legislation is influenced and has been amended in several areas to respect European law. These include employment law, tax and VAT law and a wealth of other legisla-tion. Whilst there are treaties between European countries, European law over-rules domestic law and illegal clauses in these treaties. What could happen in the future is that the UK would no longer need to respect European legislation. This would create a massive handicap for the public, as they would no longer have an arbitrator to protect them from overzealous politicians and bureau-crats. Private and public-sector invest-ment abroad would be prejudiced.

The currency, despite not being the euro, would come under pressure from speculation and concerns as to a par-tial potential collapse of, or exodus from, the city. It has been estimated that sterling will depreciate by around 20% although I personally believe it would be more in the region of 30%. The City of London and Greater London as a whole are at serious risk. One-fifth of London’s population is foreign and there are several hundreds of thou-

sands of French nationals living in the city. Yet some luxury properties are al-ready struggling to find buyers. This will affect the availability of manual labour, often immigrants. Some of the middle classes will be relocated leaving a vacu-um thereby reducing general demand of goods and services. Restaurants which have thrived over the years will be short of clients and face financial difficulties if an exodus occurs. Foreign nationals have already had their non-domicile status undermined by tax legislation. The effect of yet another change could take years to recover from. London would stagnate as a result of companies and people leaving the city to relocate abroad. Manufacturing would falter due to a slowdown in demand and the UK risks stagnating or even dipping into recession. The idea that a weaker ster-ling would boost exports is somewhat outdated. Do not forget that raw mate-rials are often imported as part of the manufacturing process. Many imports would come from a European country at a higher cost! It is also important to not overlook the significance of imports from China, as well as the rest of Asia!

Imported goods would cost more. North Sea oil is not a source of revenue forever, and this revenue is not what it once was. Even with increased oil prices

this will not help with imports of other commodities or types of fuel. Increas-ing unemployment could lead to more physical violence in the streets, thereby encouraging emigration to calmer plac-es and thus accelerating the internal problems.

Finally the French and British armies cooperate closely. What happens to do-mestic security? What happens to bor-der controls and free circulation within the EU? What happens to employment rights? People may migrate to/from the UK because of their employment status as well as uncertainty for their future. How do governments envisage dealing with this?

In the circumstances, this is not the best time to be selling French property. Prices have been depressed and sterling has been strong. However, for French people repatriating to France, property prices are likely to strengthen and rise in view of the current trends. If sterling loses value, British people will obtain more for their property. It could be ar-gued that the best option is to sell up and repatriate the funds in the UK out of GBP. You could even argue that now is the best time to buy French property. Whilst it is clear that the French prop-erty market is recovering, the rest really depends on the UK referendum. I do not have a crystal ball and would not wish to take the responsibility for any decisions made. However, I would rec-ommend seeking independent advice, being careful of any currency risk expo-sures and buying options to hedge any volatility and exposure.

Prof Robert Anthony

GGI member firm Anthony & Cie (MFO)Fiduciary & Estate Planning, TaxSophia Antipolis, FranceProf. Robert AnthonyE: robert@antco.comW: www.antco.com

GGI INSIDER | No. 83 | May 2016

27GGI PRACTICE GROUP PAGES

By Andrew Laceyand Danyal Ibrahim

W The Australian Government re-cently introduced the Insolvency Law Reform Bill 2015 into Parliament.

The reforms are part of a wider gov-ernment initiative, labelled the ‘Na-tional Innovation and Science Agenda’, which are designed to boost innova-tion and entrepreneurship amongst Australians. While the initiative is still in its embryonic stage, it will undoubt-edly result in some deregulation in or-der to tear down some barriers to entry in the market. By way of example, the Australian Government has already an-nounced new tax incentives for small businesses seeking to “innovate”, while also announcing new funding and promising to make it easier for small businesses to win government contracts.

Amongst the more critical of the proposed reforms are specific protec-tions to individuals aimed at encourag-ing entrepreneurs and businesses to take greater risks, for instance:1. Reducing the standard bankruptcy

period for individuals from 3 years down to 1 year; and

2. Shielding directors from personal li-

ability for insolvent trading if they ap-point a professional restructuring ad-viser to develop a plan to turnaround a company in financial difficulty.A further important change is the

prohibition on certain types of ‘ipso facto’ clauses, an expression used for terms in a contract which permit one party to terminate the contract upon an insolvency event relating to the other. Such terms are common place in com-mercial contracts in Australia and the proposed reform would prohibit the inclusion of an agreement to be termi-nated solely due to an insolvency event but only if a company is going through a restructure.

It is intended that such a reform would assist companies in working

through financial problems by giving administrators, by way of example, a greater opportunity to keep a company trading while the future of a company is being assessed and determined by creditors.

The bill will reduce the costs asso-ciated with administering companies in distress and gives greater investi-gative powers to the two corporate and insolvency regulators in Australia – the Australian Securities and Invest-ments Commission (‘ASIC’) and the Australian Financial Security Authority (‘AFSA’). There are also calls to align the procedural rules for governing personal (bankruptcy) and corporate (liquidation) insolvency, including the handling of funds, record keeping and audit requirements.

While the Government initiative will not take effect until at least early 2017, it is clear that the Australian Govern-ment is less concerned with protecting creditors and more concerned about ...next page

Changes to insolvencylaws in Australia

DEBT COLLECTION, RESTRUCTURING & INSOLVENCY (DCRI)

Andrew Lacey Danyal Ibrahim

GGI member firm McCabesLaw FirmSydney, AustraliaAndrew LaceyE: a.lacey@mccabes.com.au Danyal IbrahimE: d.ibramhim@mccabes.com.auW: www.mccabes.com.au

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wider policy objectives such as stimu-lating economic growth. For lawyers, accountants and business advisors, the challenge will be to ensure that their clients remain protected when engaging in business going forward, including protection against the risk that the other party to a transaction will become insolvent. Reducing the consequences of insolvency, which is

essentially what the reforms seek to achieve, is likely to be met with caution by investors.

This move is, however, consistent with other recent attempts to make Australia more competitive on an in-ternational scale, such as the free trade agreements now in place with China, Japan and South Korea.

While it is too early to predict the

precise form that the legislation will take, the Government’s commitment to spend $1.1 billion on the project will almost certainly provide a much need-ed boost in innovation and economic growth for Australia in the coming years.

McCabes was awarded the GGI XLNC award for 2014 as Member Firm of the Year.

GGI PRACTICE GROUP PAGES

By Huub Kapel

The answer is simple. In order to retain business from existing local cli-ents and to attract new business from foreign clients, an understanding of the tax, social security, accounting and legal issues associated with the assignment of the (first) employee is key. Should the (first) assignment be successful, more business is likely to follow. In a market that is ruled by the Big 4, the multi-disciplinary character

of GGI provides unique business op-portunities.

In today’s world, organisations are exploring international business op-portunities more than ever before. They may be searching for new dis-tribution markets, or reducing opera-tional expenses or production costs. Nowadays, global mobility is seen as a critical means of deploying and devel-oping talent that increasingly pursues international career opportunities, and will therefore become more integrated

into strategic re-cruitment and talent mobility processes.

F u r t h e r m o r e , global mobility poli-cies are normally reviewed every two years to ensure they are up to date with market prices, competitive in their industry and pro-viding sufficient support to meet employee and their families’ needs. Software tools and data analytics are used to help mobil-ity programs run smoother, more

cost-effectively and provide better ser-vice but also just to know who is where in case of evacuation. In short, global mobility is on the rise.

Whatever the case may be, organ-isations are aware of the increasingly costly, complex and time-consuming nature of the various legal, tax, social security and legal compliance require-ments of a global mobile workforce. Even the OECD action plan on Base Erosion and Profit Shifting (BEPS) ad-dresses the permanent establishment risks associated with globally mobile employees.

Why focus on Global Mobility?GLOBAL MOBILITY SOLUTIONS

Huub Kapel

GGI INSIDER | No. 83 | May 2016

29

Whether it relates to long-term as-signments, short-term assignments, “Local Plus” packages, permanent re-locations, frequent business travellers or stealth commuters, employers and employees will have to deal with the is-sues involved.

Organisations that find new oppor-tunities in other countries lack both in-frastructure and talent on the ground. Many of the initial skills needed there-fore come from international assign-ments or transfers. In spite of this, organisations also expect the (first) as-signee to hit the ground running and start adding value immediately and make the international adventure a success as from the start.

This is, however, easier said than done in an expatriate environment. Em-ployees who leave their country to work abroad say goodbye to not only their home, but also family, friends, culture and core values they have grown up in. During the first months abroad, many day-to-day routines appear to be cum-

bersome. Whether it relates to traffic regulations, local bank jargon, utility issues, health care or local shopping, the new environment can be stress-ful for the expatriate and their family. It does not take long for an expatriate to realise that the assignment is not an extended holiday.

Organisations are aware of these stress factors and the risks associated with expat assignment. Troubles ad-justing can cause issues for individu-als, families and companies alike. The burden may lead to poorer work perfor-mance, or compel some to leave their positions altogether: neither situation is beneficial to the organisation.

However, by carefully planning and monitoring the process of the (first) assignment, both employer and em-ployee can grow and develop together leading to a successful international expansion of the business.

Planning and monitoring may in-clude:

global mobility management design/implementation of global

mobility policies international tax planning application for special expat tax re-

gimes international social security planning set-up and implementation of (shad-

ow) payroll preparation of income tax returns mandatory (tax) registration application for work and residence permits

preparation of employment con-tracts/assignment letters

preparation of intercompany docu-ments

This is the recipe for a happy and profitable business environment, which GGI members around the world can provide and from which GGI mem-bers around the world can benefit.

For more information please con-tact Huub Kapel, Global Chairperson of the PG Global Mobility Solutions at huub@limes-int.com

GGI member firm Limes International Advisory, Fiduciary & EstatePlanning, TaxValkenburg, The NetherlandsHuub KapelE: huub@limes-int.comW: www.limes-int.com

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GGI PRACTICE GROUP PAGES

By Prof Stefano Loconteand Gabriella Antonaci

Italian Legislative Decree No. 24 of 11 February 2016 (hereinafter the “De-cree”) entered into force on May 2nd 2016 and brought about a particularly rapid proceeding to allow EU States to apply the reverse charge method when tax inspections reveal the occurrence of sudden and massive fraud in rela-tion to specific business transactions.

In particular, the Decree amended the heading of Art. 17 of Presidential Decree (DPR) No. 663/1972 from “tax-able person” to “tax payer” in order to identify more precisely the person who has to pay the tax due.

In accepting EU Directive No. 2013/43/UE, the Decree also amends the list of operations to which Member States may apply the reverse charge method for the payment of VAT, on a pilot basis until 31 December 2018. The reverse charge has been extended to the sales of game consoles, PCs, tab-lets and laptops (lett. c), as well as to integrated circuit devices such as mi-croprocessors and central processing units, transferred prior to their installa-tion in products for the end user.

Instead the sales of (i) mobile phone components and accessories (lett. b); (ii) personal computers and their com-ponents and accessories (lett. c); (iii) stone materials and products directly derived from quarries and mines (lett. d); (iv) goods made to hypermarkets, supermarket and food discounts (lett. d - quinquies) were deleted from Art.

17, Paragraph 4 of Presidential Decree (DPR) No. 633/1972. These provisions had been erased because they were not authorised by the EU.

The Decree confirmed the power of the Ministry of Economics and Finance to identify further operations subject to reverse charge by other Decrees. In this regard, it was explained that they should be included among those listed in articles 199 and 199-bis of EU Direc-tive No. 2006/112.

In order to apply the reverse charge method to further operations other than those set out under articles 199, 199 bis and ter of EU Directive No. 2006/112, it was also explained that the release of a special measure of ex-ception by EU bodies was necessary.

In compliance with the EU Directive, the Decree provides that the reverse charge is applied on a temporary ba-

sis until 31 December 2018 to: (i) sales of mobile phones, (ii) sales of game consoles, PCs, tablets and laptops and integrated circuit devices (such as mi-croprocessors and central processing units transferred prior their installa-tion) for the end user, (iii) transfers of greenhouse gas emission allowances, (iv) transfer of other units and certifi-cates for gas and electricity, (v) trans-fer of gas and electricity to a “taxable dealer” (soggetto passive rivenditore under Italian law)”.

Moreover, Italian Law No. 208 of 28 December 2015, (the so-called Ital-ian Stability Law 2016) added letter a-quater to Art. 17 of Presidential Decree (DPR) No. 633/1972 provided that the reverse charge is also applied to the provisions of services by the members of consortia to consortia that, as sup-pliers of the Public Administration, ap-

Reverse chargeextended to sales of PCs,tablets and game consoles

INDIRECT TAXES PRACTICE GROUP

Prof Stefano Loconte Gabriella Antonaci

GGI INSIDER | No. 83 | May 2016

31

ply VAT in a split payment regime. This provision aims to reduce the

negative financial effects for Public Ad-ministration suppliers which, following the entry into force of split payment, have found themselves in a constant creditor position against tax authori-ties.

The new reverse charge only applies to consortia of cooperatives of produc-tion and work, those of artisans, the consortium companies, and ordinary consortia of competitors. The rule does not apply to temporary groups of companies and organisations par-ticipating in a network agreement (the Italian (“contratto di rete”).

This new type of reverse charge will be applicable when the EU Council re-leases a special authorisation.

Furthermore, Legislative Decree No. 158 of 24 September 2015 has mitigated the penalty regime previously in force regarding the violations of reverse charge, with reference to the sanction notice that has not become definitive in the meantime, as at the date of entry into force of this law (1 January 2017, whereas the 2016 Italian Stability Law was established one year earlier with an effective date as of 1 January 2016).

In particular, the Decree has com-pletely rewritten Art. 6, Paragraph bis

of Legislative Decree No. 471/1997, also introducing new paragraphs 9 bis 1, 9-bis 2 and 9-bis 3.

Under this new sanctioning system, if VAT has mistakenly been paid where the requirements for the application of the reverse charge apply (under Art. 6, Paragraph 9 bis 1 of Legislative Decree No. 471/1997) a sanction amounting to between EUR 250 and EUR 10,000 is levied. The assignee/buyer and the assignor/lender are both liable for pay-ment. The assignee or buyer may de-duct VAT if it has been mistakenly paid. Previously, the sanction was equal to 3% of the tax with a minimum amount of EUR 258.00. If the error is due to tax avoidance or tax fraud, a sanction of between 90% and 180% of the tax applies. In this regard, the burden of proof is on the tax authority.

Conversely, if the reverse charge method has been mistakenly applied where it does not apply, a sanction of between EUR 250 and EUR 10,000 is applied (under Art. 6 Paragraph 9 bis 2 of Legislative Decree No. 471/1997). The assignor/lender and the assignee/buyer are both liable for payment. The assignee or buyer may deduct VAT mis-takenly applied through the reverse charge method, but if the mistake is due to evasion or tax fraud by the as-

signor/lender, a sanction of between 90% and 180% of the tax applies. Pre-viously the sanction was equal to 3% of the tax with a minimum amount of EUR 258.00.

Finally, if the buyer does not apply the reverse charge, a sanction of be-tween EUR 500.00 and EUR 20,000.00 is applied. Even if the transaction does not result from accounting, a sanc-tion of between 5% and 10% of tax-able income is raised, with a minimum amount of EUR 1,000.00. Previously, the sanction was between 100% and 200% of taxable income, with a mini-mum of EUR 258.

GGI member firm Loconte & PartnersAuditing & Accounting, Advisory, Corporate Finance, Fiduciary & Estate Planning, Law FirmServices, TaxBari, ItalyProf Stefano LoconteE: stefano.loconte @studioloconte.itGabriella AntonaciE: gabriella.antonaci @studioloconte.it W: www.loconteandpartners.it

By Bernhard Schwechel

In a decision in December 2015, the German Federal Constitutional Court confirmed the practice of treaty override

in tax law. “Treaty override” described the procedure whereby the German legislator adopts a law which violates a prior international treaty (often a treaty on double taxation). The German Fed-

eral Fiscal Court (Bundesfinanzhof) had doubts about the constitutionality of this practice. It was convinced that a recent amendment to the Income ...next page

New German Constitutional Court decision

INTERNATIONAL TAXATION PRACTICE GROUP (ITPG)

“Treaty Override”

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Tax Act, which is incompatible with a German-Turkish dual taxation treaty of 1985, is unconstitutional for this very reason.

If in a pending judicial proceeding, a German court is convinced that a le-gal provision, which it needs to apply to resolve the case under scrutiny, is unconstitutional, that court must stay the proceeding and pose a “reference question” on the law’s constitutional-ity to the Federal Constitutional Court. This ensures that the Constitutional Court remains the only body with the right to declare a law unconstitutional. The court thus retains its status as a hallmark of the concentrated system of constitutional control in Germany.

This judicial proceeding is available only for questions of constitutionality, not for questions of compatibility with international law. This worked, because the courts involved in fact “translated” the question of the relationship be-tween international law and domestic law into a constitutional law question of the separation of power and of con-stitutional principles: rule of law versus democracy.

The German Federal Fiscal Court deemed treaty override unconstitution-al, saying that it is a violation of the rule of law and of the German constitutional declaration on the primacy of interna-tional law.

The Constitutional Court did not share this view. It opined that the constitutional principle of democracy (which includes the principle of dis-continuity of parliament following elec-tions) demands that the German Par-

liament is free to change its mind and to make or amend a law even if this violates an international treaty which had been ratified by a previous Parlia-ment. Also, the constitutional declara-tion on the primacy of international law does not have the legal effect to render statutes which violate international law at the same time (and for that reason) unconstitutional. Put differently, this commitment does not create a consti-tutional obligation to comply with in-ternational treaties “unconditionally”, since the constitution does not pro-hibit Germany as a state from violating international law. The Basic Law “does not renounce the sovereignty which lies in the last say of the German constitu-tion” (note that the Court, as set out in the Görgülü Decision of 2004, ascribes “sovereignty” to the constitution, not to the state).

The constitutional requirement to interpret statutes in conformity with international law does not require a “schematic parallelism of the internal legal order with international law”, but also a “maximal adoption of substan-tive value judgments” – and only “to the extent that this is compatible […] with the precepts of the Basic Law”.

Ultimately treaty override is lawful and constitutional, independently of the option of denouncing the treaty first. Withdrawal can only be brought about by the executive branch, and Par-liament cannot compel the government to do so. Also, from the perspective of

the affected tax payer, denunciation of the double taxation treaty is not neces-sarily the better option.

In another case on 11 December 2013, the German Federal Fiscal Court submitted a question to the Federal Constitutional Court as to whether the treaty override provision (article 50d (10) of the Income Tax Act) is uncon-stitutional. This issue is relevant for many inbound German investments as foreign investors often organise their German investments in the legal form of a German commercial partnership.

Germany’s national tax law requali-fies interest income paid by a German commercial partnership to its domes-tic or foreign partner as commercial income. The same requalification is applied for the purpose of interpret-ing and applying a tax treaty between Germany and the partner’s country of residence. The German tax authorities feel permitted to levy income tax on this interest income based on article 7 of the OECD Model Tax Treaty. Without this requalification set out in German national tax law, interest income would be subject to tax in the partner’s coun-try of residence instead of in Germany.

The aforementioned German requal-ification of interest income to com-mercial income formally began as the German tax authorities’ interpretation of the tax treaties. It has, however, be-come a treaty override issue, because in earlier cases the German Federal Fiscal Court decided that the interpretation used to requalify interest income was unacceptable. The introduced provi-sion shall be applicable with retroactive effect to all open cases. The interpreta-tion of the German tax authorities and the new provision will lead to double taxation, since in the majority of cases, the partner’s country of residence will also see legal grounds on which to tax the interest income as defined under Article 11 of the OECD Model Tax Trea-ty. The allocation of taxation rights does not just affect interest, but also any kind of remuneration that a partner receives from its partnership (e.g. royalty fees).

In the opinion of the Federal Fis-cal Court, overriding bilateral treaty provisions that have been negotiated

GGI PRACTICE GROUP PAGES

GGI member firm FACT GmbH - Steuerberatungsgesellschaft, Wirtschaftsprüfungsgesellschaft Auditing & Accounting, Advisory, Corporate Finance, Fiduciary & Estate Planning, Law FirmServices, TaxKassel, GermanyBernhard SchwechelE: b.schwechel@fact-ks.deW: www.fact-ks.de

Bernhard Schwechel

GGI INSIDER | No. 83 | May 2016

33

between two contracting states in order to reallocate taxation rights is an un-constitutional breach of international law. For this reason, the German Fed-eral Constitutional Court was asked to decide on this issue. It is the first time the Federal Constitutional Court has been involved in issues relating to treaty override. Therefore, at this time, it is unclear how it will decide. Affected

taxpayers should monitor future devel-opments closely and cases should be kept open with the German tax authori-ties with reference to the case pending before the Federal Constitutional Court.

This case is still pending but in light of the aforementioned decision we ex-pect that the Federal Constitutional Court will decide in the same direction: that article 50d of the German Income

Tax Act is in accordance with the Ger-man constitution.

Therefore, the fundamental decision of the Federal Constitutional Court is likely to open the door for further addi-tional tax provisions introduced by the German Bundestag, however with a fo-cus on increasing the German Ministry of Finance’s budget without affecting tax treaties.

By Merrill April

With the EU Referendum just a few weeks away, a YouGov survey has claimed that the British public are split down the middle – 40% of voters were planning on voting to leave, and 42% to remain a part of the EU.

With the prospect of ‘Brexit’ still sig-nificant at this stage, Memery Crystal’s head of employment Merrill April held a webinar for GGI’s labour law practice group on the employment law implica-tions of Britain leaving the EU, both for the United Kingdom and for the rest of Europe. Below, we outline some of the main points from the discussion:

Currently, UK employment law is a combination of domestic legisla-tion pre-dating membership in the

EU, and European law enforced and upheld by the British courts. Judg-ments from the ECJ influence the interpretation of EU-derived UK law and have strongly influenced the di-rection of UK law as a result.

Should the UK vote to leave the EU, this would serve as a 2-year notice of our exit. This is intended to create a smooth transition.

An independent UK would still re-quire some form of trade agreement

with the EU – this could take several forms, such as remaining a mem-ber of the EEA or EFTA, or using the WTO relationship as a basis for trade. In each case, there would be legal constraints put on the UK for its membership.

Some of the significant regulations that could be affected include:– Transfer of Undertakings (Protec-

tion of Employment) Regulations 1981 (“TUPE”)

– Discrimination Legislation– Working Time Regulations– Collective Consultation Rules– Agency Workers– Aspects of Health and Safety Law

Given that the UK has adopted and integrated the majority of EU em-ployment law into its own domes-tic law, it is unlikely that there will be significant changes if the Leave campaign is successful.

However, if the UK does become independent, there is no guarantee it will continue to match EU regula-tions, so if the government assumed a deregulatory agenda this could have significant impact on social employment rights.

Employment law implications of Britain leaving the EU

LABOUR LAW

Merrill April

GGI member firm Memery Crystal Law FirmLondon, UKMerrill April E: mapril@memerycrystal.com W: www.memerycrystal.com

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GGI PRACTICE GROUP PAGES

By Robert S. Jacobson

Few people realize that, even though they may have a modest estate, their families may owe hundreds of thou-sands of dollars in estate taxes be-cause they own a life insurance policy with a death benefit that could exceed the current estate tax exemption of 5.43 million dollars. This is because life in-surance proceeds, while not subject to federal income tax, are considered part of your taxable estate and are subject to federal estate tax.

The solution to this possible estate tax problem is to create an irrevocable life insurance trust that will own the life insurance policy and receive the policy proceeds on your death. A properly drafted life insurance trust keeps the insurance proceeds from being taxed in your estate as well as in the estate of your surviving spouse. It also protects the trust beneficiaries from any poten-tial future creditors since the assets are held in trust.

Here are the mechanics of the life in-

surance trust. You create an irrevocable life insurance trust to be the owner and beneficiary of one or more life insur-ance policies on your life. You contrib-ute cash to the trust to be used by the trustee to make premium payments on the life insurance policies. If the trust is properly drafted, the contributions you make to the trust for premium pay-ments will qualify for the annual gift tax exclusion, so you won’t have to pay gift tax on the contributions.

The life insurance trust typically pro-vides that during your lifetime both principal and income, at the trustee’s discretion, may be paid to your spouse and descendants. This allows indirect access to the cash surrender value of the life insurance policies owned by the trust, and permits the trust to be terminated if desired despite its be-ing irrevocable. Upon your death, the trust continues for the benefit of your spouse during his or her lifetime.

Your spouse is given certain benefi-cial interests in the trust, such as the right to income and eligibility to receive principal. On the death of your spouse, the trust assets are paid outright to, or held in further trust for the benefit of, your descendants, tax free.

If you own a life insurance policy with a significant death benefit, an ir-revocable life insurance trust may be of substantial benefit to you.

Saving Estate Taxes with anIrrevocable Life Insurance Trust

TRUST & ESTATE PLANNING (TEP)

Robert S. Jacobson

GGI member firm Kutchins, Robbins& Diamond, Ltd. (KRD)Auditing & Accounting Tax, Advisory, Corporate Finance, Fiduciary & Estate PlanningChicago, IL, USARobert S. JacobsonE: rjacobson@krdcpas.comW: www.krdcpas.com

GGI INSIDER | No. 83 | May 2016

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Turning Uncertainty into Breakthrough Opportunities

The forces driving today’s world of structural change create sharp bends in the road that can lead to major explo-sions in your existing market space. But exponential change also offers exponen-tial opportunities. How do you leverage change to go on the offense? The Attack-er’s Advantage is the game plan for win-ning in an era of ambiguity, volatility, and complexity, when every leader and every business is being challenged in new and unexpected ways. Ram Charan, harness-ing an unequalled depth and breadth of experience working with leaders and companies around the globe, provides tested, practical tools to help you:

Build the perceptual acuity to see around corners and detect, ahead of others, those forces – especially peo-ple, who are the catalysts of change – that could radically reshape a com-pany or industry

Have the mindset to see opportunity in uncertainty

Commit to a new path forward despite the unknowns, positioning your busi-ness to make the next move ahead of competitors

Break the blockages that can hold your

company back Know when to acceler-

ate and when to shift the short-term and long-term balance

Make your organiza-tion agile and steerable by aligning people, pri-orities, decision-mak-ing power, budgeting and capital allocation, and key performance indicators to the new realities of the market-place

The Attacker’s Advan-tage provides a stark and simple challenge: stay in a legacy world of incremen-tal gains or defensiveness, or be an attacker by creat-ing a new world, scaling it up quickly, ahead of the traditional players.

The Attacker’s Advantage –Turning Uncertainty into Breakthrough OpportunitiesAuthor: Ram Charan

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The Attacker’s Advantage

GGI Latin-American & Iberian Regional Conference | Madrid, Spain | 23-26 June 2016

GGI EasyMeet | Madrid, Spain | 24-26 June 2016

GGI Nordic-Baltic Meeting | Oslo, Norway | 08-10 September 2016

GGI German Speaking Chapter | Strasbourg, France | 16-18 September 2016

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Hardcover: 240 pages Publisher: PublicAffairs,February 24, 2015Language: English

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Further Conferences & Events

What: Organisational & Cyber Resilience for Board Members & ExecutivesWhere: London, UKWhen: 1-5 August 2016

Brief Description: The course is designed to furnish participants with a concrete agenda that will minimise your organisa-

tions exposure to risk and make it cyber-resilient. Cyber threats are explored in a business context, how the threat evolves and how organizations are being target-ed. Delegates will build an understand-ing of governance and regulatory expec-tations and how to demonstrate maturity of cyber risk management. The course also discusses the essential capabilities

an organisation should demonstrate from a leadership perspective. Finally we demonstrate how to lead a learning organization that manages cyber risk at pace and at scale using a cyber-threat in-telligence led approach.

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What: Mergers & Acquisitions Where: Dubai, United Arab EmiratesWhen: 24-27 July 2016

Brief Description: The course covers all the main areas of M&A practice:

Valuation (including the modelling) Synergies Due diligence Legal structure Financing with debt and/or equity Financial versus strategic acquisitions

M&A modelling Post merger integration Arb trading

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What: Corporate Compliance and Ethics Institute 2016Where: New York, NY, USAWhen: 1-2 June 2016

Brief Description: TCompliance and ethics programs are critically impor-tant to the success and growth of any organization. Such programs allow organizations to identify and mitigate legal risks before they become serious problems. The effective compliance and ethics program also allows an organization, of any size, to establish itself as doing business with integrity,

which will not only avoid legal prob-lems, but enable it to command the re-spect of employees, customers, suppli-ers, and government enforcers. With an increasingly tough enforcement en-vironment, and greater demands for transparency and accountability from a variety of stakeholders, an effective compliance program is no longer just “nice-to-have.” It’s essential. A distin-guished faculty, drawn from major cor-porations, academia, law firms and the government will provide you with the tools you need to create or enhance a program that works to increase em-

ployee awareness and mitigate legal risk. The program is highly interactive and includes case studies, practical tools and real-time benchmarking with peers. Whether you are constructing a new program or refining an existing one, our panels of experts will help en-sure that your company’s program sat-isfies government standards and best practices expectations.

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FURTHER CONFERENCES

GGI INSIDER | No. 83 | May 2016

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Contents

FURTHER CONFERENCES & EVENTS

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