Transcript Tax Planning 2008 Riga, March 12, 2008, 8th annual seminar

Tuesday, 21 July 2015
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1
Expatriate Tax Planning 2009
Dovilė Preikšaitė
Lawyer
Tuesday, 21 July 2015
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Europe sails into tax storm
 Investigators used ‘yacht spotter’
sites on the internet to find out where
vessels were located
 Tax authorities and customs services
from 11 EU member states coperated in random checks on 322
owners, which led to inquiries into
225 transactions with a joint value of
more than EUR 1bn.
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Dutch ruling means windfall for
EU tax-exempt investors
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Dividends in LT
 Increase from 15 to 20%;
 Residents- individuals shall pay 26% total tax
on dividends;
 Non-residents will not be taxed 6%: 20% total
tax on dividends will be applied if the international
agreement will not set differently
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Tax free dividends in LT
Dividends paid by a Lithuanian entity to a
foreign entity will not be taxed if:
• Foreign entity controls for 12 months more than 10% of
voting shares in LT entity;
• Is not registered or organized in target territories
(Ecuador);
• All the income taxed at the rate of 20% (no tax
exemption like 0 %)
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Tax free dividends
15% corporate
tax (LV)
Tax free
1. Latvian residents-individuals
2. EU/EEA
Non EU-residents -individuals taxable at 10% rate
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Divideds in EE
Dividends are taxed upon their distribution;
No withholding tax upon distribution to Latvian residents;
Estonian resident receiving dividends from non-resident pays 21%
personal income tax;
If 1000 EUR is paid as dividends by EST company 26,58%
corporate income tax (265,80 EUR) is paid in Estonia. Person
receives EUR 734,20.
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 Designers failed to declare money they earned while
working in Italy
The Wall Street Journal
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Lithuanian Residency
•
•
•
•
Residence/Domicile in LT;
Social and Economic interest is in LT;
183 or more days in LT during taxable period;
During the 2 years stays more than 280 days in
LT
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Lithuanian Residency
Individual will not be considered as resident of LT
even if he stays in LT for 183 days during the calendar
year and during the 2 year period stays in LT more than
280 days in the following cases:
•
•
•
If he is only engaged in individual activity through his permanent
establishment in LT;
If he works in LT, but receives his salary from foreign states budget;
If he works for foreign states diplomatic, consular or international
organizations agency in LT.
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Lithuanian Residency
Non-Lithuanian resident in Lithuania pays
income tax from the following income:
• Through his permanent establishment in Lithuania received
income from individual activity (Tax rate – 15% +social security
tax 9% if it is not paid in other state);
• Not through permanent establishment received income if the
source of this income is in LT. (Tax rate 15%, dividends – 20%).
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Residency
Becoming Latvian resident
 183 days in any 12 month period
 Day count
 Residence/domicile in Latvia
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Estonian Residency
• 183 days in any 12 month period;
• Residence/Domicile in EE;
• Day count.
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Swedish resident
 Stay more than 6 months over 2 years
 Temporary interruption does not count in as spent
outside Sweden
 5.5 months in Sweden
 3.5 months away – included or not in stay?
 6 months agreement
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Dual residency
Lithuanian & Swedish
tax resident
Worldwide income
Worldwide income
Taxed in Lithuania
Taxed in Sweden
Double taxation !!!
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Tiebreaker test
Lithuania
 Home
Sweden
 Home
 Vital connection
 Vital connection
 Habitual dwelling
 Habitual dwelling
 Passport
 Passport
Lithuanian resident
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Swedish resident
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Withholding Taxes
Dividends %
Interest %
Royalties %
Armenia
Czech Republic
Poland
Ukraine
Canada
Kazakhstan
Slovenia
5/15
5/15
5/15
5/15
10
10
10
10
10
10
10
10
Azerbaijan
Belgium
Denmark
Israel
Sweden
The Netherlands
USA
Estonia
Finland
Iceland
Norway
Switzerland
UK
Italy
5/15
5/15
5/15
5/15
5/15
5/15
5/15
10
10
10
10
10
10
10
5/10
5/10
5/10
5/10
5/10
5/10
5/10
China
Croatia
Georgia
Malta
5/10
5/10
10
10
10
10
Belarus
Moldova
Slovakia
Portugal
Rumania
Uzbekistan
10
10
10
10
10
10
10
10
10
5/10
5/15
0/15
10
5/10
5/10
5/10
10
5/10
5
5/10
0
10
10
10
5
0/5/10
5/10
5/7
5
0
5/10
7.5
5/10
10/5
5/15
5
Bulgaria
Ireland
Lithuania
Turkey
Singapore
Austria
Macedonia
Non-treaty country
Kirgiztan
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Obama’s team
 As result paid USD 140.000 in back taxes and
interest
The Wall Street Journal
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Obama’s team (cont.)
Mr. Geithner was considered
self-employed and was required
to pay Social Security and Medical taxes for
himself as both employer and an employee
 It was common mistake for employees at international
organizations in Washington
The Wall Street Journal
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Capital Loss – Non EU
Securities
 Loss carry forward for sale of securities
(5 years)
 One sale per year
 Holding more than 12 months in LV; in LT2 years and more than 25% of shares.
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Trust funds and bank accounts
Citizens suspected of
dodging taxes by
opening undisclosed
trust funds in
Liechtenstein
The Wall Street Journal
Tuesday, 21 July 2015
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Trust funds and bank accounts
bank was
indicated in helping
hide about USD 20
billion in assets
belongings to about
17,000 American
clients from the IRS
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List of Low Tax Countries
Antilles
Andorra
Anguilla
Antigua & Barbuda
Aruba
Bahamas
Bahrain
Barbados
Belize
Bermuda
British Virgin Islands
Brunei Darussalam
Cayman Islands
Cook Islands
Costa Rica
Dominican Republic
Ecuador
Gibraltar
Grenada
Guam
Guatemala
Guernsey
Tuesday, 21 July 2015
Hong Kong (Sjangana)
Isle of Man
Jamaica
Jersey
Jordan
Jisbuty
Kampione
Kenya
Kuwait
Labuana (Malaysia)
Lebanon
Liechtenstein
Liberia
Maldives
Macao
Madeira (Portugal)
Mauritius
Marshall Islands
Monaco
Montserrat
Nauru
New Caledonia
Vilnius
Niue (New Zealand)
Olderne
Panama
Qatar
San Marino
Seychelles
St. Helens
St. Kitts and Nevis
St. Maria Island (Portugal)
St. Pierre and Michel (France)
Samoa
Santome and Prinsipi
St. Lucia
St. Vincent and Grenada
Tahiti (French Polynesia)
Tonga
Turks and Caicos Islands
United Arab Emirates
Uruguay East Republic
Vanuatu
Venezuela
Virgin Islands (USA)
Zanzibar Islands (Tanzania)
26
President Obama is a long-standing
campaigner against tax havens
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Foreign Bank customers who store untaxed assets
in Switzerland must expect their accounts to be
revealed
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TAX HAVENS
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TAX HAVENS
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Businessman spent
heavily on lobbying;
trips for politicians
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Sale of real property in LV
Until 12.06.2007
From 12.06.2007 –
until 01.01.2009
Income tax exempt if Income was tax
property owned more exempt if property
than 12 month is sold was owned more
than 60 month and
for more than 12
month this property
has been persons
residence place
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From 01.01.2009
Income tax exempt if
property owned more
than 12 month is sold
32
Sale of Real Property
Payer
LV property
2% PIT as withholding from the whole
payment if the person does not submit
personal income tax return.
Non-resident
23% PIT from the difference between
sale price and acquisition costs if the
person submits personal income tax
return.
Taxable income
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Sale of immovable property in LT
Tax exempt if:
• Ownership for more than 3 years;
• If a person has lived in that property for more than 2
years;
• Lived less than 2 years if uses the profit from sale for
acquisition of new property for living (acquisition has
to be made within 1 year).
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Personal Income Tax in LT
• PIT has been reduced by 3 percentage points to 21%
(this rate includes 6 % health insurance tax);
• From 1st January 2009 most personal income tax
exemptions have been cancelled;
• Calculation of non-taxable income amount has been
changed:
For persons with income not exceeding 800 LTL (232
EUR) per month non-taxable amount shall be 470 LTL
(136 EUR). If income exceeds 800 LTL (232 EUR), nontaxable amount shall be decreased by 20 LTL (6 EUR)
for every 100LTL (29 EUR) above the 800 LTL (232
EUR), meaning that for persons earning more than 3150
LTL (913 EUR) per month, non-taxable amount shall not
be applied
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Personal Income Tax in LV
• From 2008 for individuals engaged in a business
activity and for independent service providers
PIT– 15%
• Possibility to choose fixed income tax which
depends from the amount of income gained by
individuals engaged in a business activity:
* 9500,01–10 000,00 LVL = 500 LVL
*10 000,01 = 500 LVL plus 7% from the income
of business activity which exceeds 10 000 LVL
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Independent Service Providers
Independent activity:
 consultants
 architects
 composers
 actors
 engineers
 Register as self employed
 Tax certificate
 Documents to keep 5 years in LV, 10 years in LT.
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Self employed (assets) in LV




20% depreciation only (half of 40%)
Car depreciation – not more than 70%
Car maintenance – 50% - 70% of costs
Premises for personal use and business – 70%
of costs
 Representative costs – 60%.
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Real Property Tax in LT
• Tax rate varies on municipality from 0,3% in
Rokiškis to 1% in Joniškis;
• Tax rate in Vilnius is 0,8 % if in bad condition –
1%;
• Possibility to promote the municipality by paying
0,9%.
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Real Property Tax in LV
• From 1st January 2008 is 1%
• A restriction:
if there are no changes in the usage of such property
the amount of the real property tax in 2009, and 2010
must not exceed not more than 25% prior tax
• As of 1st January 2011 the real property tax rate will
be 0,4% from the property’s appraised value
• Municipalities will have the rights to increase the tax
rate up to 1%
• The previously mentioned restriction will not apply
anymore
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Capital gain for shares
Payer
Offshore/ onshore
LV or foreign movable property, sale of
shares, except, the sale of shares of the
company
which assets more than 50 % in the year
of sale or in the previous year consist or
were consisting from the immovable
property situated in Latvia.
Latvian resident/EEA or EU
qualifying non-resident
Tax free income
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Cross-border Group Relief in LV
LV parent
Transfer of losses
UK subsidiary
LV subsidiary
• Subsidiary has exhausted the possibilities available in its state of
residence of having those losses taken into account for the
accounting period concerned and for previous accounting periods
• There is no possibility for those losses to be taken into account in
the subsidiary's state of residence for future periods
• Foreign company is a resident in state with which Latvia has a
double tax treaty, or EEA
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Swedish 6 month rule
• Rule
- Swedish maximum marginal tax rate
(above 495000 crowns)
- Latvian flat tax rate
- Potential savings
57%
23%
34%
• Work in one or more countries
• In Sweden less than 36 days
- no tax in Sweden
• Income is taxed in Latvia
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Swedish 12 month rule
 Work in one country
 In Sweden less than 72 days
 Even if no tax according to Latvian law
 Social fee in Sweden:

- intention to stay for less 12 month – 31,42%
and 7%

- intention to stay for more than 12 month – no
social fee
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Detection of offshore accounts
Offshore
company
Banks obligation to disclose
• taxpayers does not file declarations
Latvian
credit card
1 use in
Sweden
Tuesday, 21 July 2015
Inquiry to
Latvia from
Sweden
Vilnius
Loan
agreement
justification
45
Suspect transactions







Cash declaration from July 1, 2006 exceeding EUR 10000
Cash LVL 40000 (except salary, pension and social fee)
Cash LVL 1000 change of small nominal
Cash LVL 10000 traveler checks purchases
EUR 15000 suspect transactions
Currency exchange more than LVL 5000 in cash
Transfers for LVL 40000 without opening account or taking
from account
 Penalty 5% on cash transactions exceeding LVL 3000
 More than LVL10000, except bank account payments,
prohibited, penalty 15%
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Credits
Tax paid in
Sweden
Tax payable
in Latvia
100
300
- 100
Credit applicable
Document from
Swedish tax
authorities on:
Payable 200
but not more
than 23%
*taxable income
*tax paid
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Consulting fees
Salary paid
from Swedish
company
Withholding tax
Expatriate
VAT
Consulting fee
Swedish company
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Latvian company
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Withholding tax in LT
As of 1st January 2009 the withholding tax rate
increased from 10% to 20% rate:
• As an example to such payments: income from the
sale, or lease of immovable property located in
Lithuania, dividends and other income from
distributed profits, income from artistic or sports
activities performed in Lithuania and annual
bonuses paid to the members of supervisory board.
• However the withholding tax at 10% rate will be
applied as previously on compensations for violation
of copyright or related rights, royalties and interest
payments.
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Residence Certificates
 Certificates valid for 5 years
 Date and number of contract
 Confirmation from Latvia tax authorities required (30
days answer); no confirmation from LT tax
authorities;
 WTH paid by payer
if exemption is not obtained
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E 101 certificate
 Sent for 12 month – pay in home country
 Pay where work, regardless where is
residence
 Work in 2 states – pay where is residence
 No residence in working states – where
company’s legal address
 Several employers – where is residence
country
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Tuesday, 21 July 2015
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Social fee in LT
• As from 2009 the list of income sources taxed by social
insurance tax has been extended to royalties and
remuneration of sportsmen and artists.
• the rates for these persons will increase gradually – they
will pay reduced rates in 2009 and 2010. In 2009, in
respect of royalties the employer will have to pay
additional 7% to state insurance budget but the
employee 1%. In 2010 - employer will have to pay
additional 14% but the employee 2%. While full rates –
for employers 28% but for employees 3%- shall apply
only in 2011.
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Social fee in LV
 Self - employed – LVL 658,37 (rate 30,48%
from LVL 2160)
 Non – resident employed by non – resident –
31,13%
 Residents employed by resident or non
resident – 33,09% (rate 9%+24.09%)
No maximum taxable amount from 01.01.2009
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Salary taxation in Baltics
Latvia (lats)
Lithuania (litas)
Estonia (kronor)
rate
rate
rate
amount
amount
amount
Bruto salary
10000
10000
10000
Non taxable income
90
0
2250
Income tax
23%
2072,30
15%
1500
21%
1627,50
Obligatory healthcare
-
-
6%
600
-
-
Social security
9%
900
3%
300
-
-
Unemployment fee
-
-
-
-
0,6%
60
Net salary
7027,70
7600
8312,50
Employers
unemployment fee
-
-
-
-
0,3%
30
Social security
24,09%
2409
30,98%
3098
33%
3300
Guarantee fund
payment
-
-
0,1%
10
-
-
Risk duty
0,25
-
-
-
-
Total company
Tuesday, 21 July 2015
expenses
12409,25
Vilnius
13108
13330
56
LITHUANIA
Stock Options
•
•
Stock Options are not separately regulated;
Derivative financial instrument taxed at 20%
rate:
“shall mean a financial instrument (futures
contract, forward contract, etc.) the value
or price whereof is linked to the value or
price of the goods on which the instrument
is based as well as a financial instrument
(futures contract, forward contract, etc.) the
value or price whereof is linked to the price
of securities, exchange rate, interest rate,
stock exchange index, determination of
creditworthiness or any other variable.”
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LITHUANIA
Sale of Shares
The income from the increased property is not taxed
if certain conditions are met:
• If it is established in European Economic zone
• Holds at least 25% of shares for at least 2 years.
If these conditions are met and we buy share for
1LTL, sell for 4 LTL, so 3 LTL is not taxed income
In all other cases – 20% of corporate income tax
shall be applied
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