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INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS IN ISRAEL – FINANCIAL INSTITUTE Jacques Messeca, Adv, Head of the Tax Department Eversheds Paris LLP Tel Aviv.

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Presentation on theme: "INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS IN ISRAEL – FINANCIAL INSTITUTE Jacques Messeca, Adv, Head of the Tax Department Eversheds Paris LLP Tel Aviv."— Presentation transcript:

1 INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS IN ISRAEL – FINANCIAL INSTITUTE Jacques Messeca, Adv, Head of the Tax Department Eversheds Paris LLP Tel Aviv – January 19, Automatic Exchange of information Pan European Voluntary Disclosure Processes

2 SUMMARY I.General legal background for the automatic exchange of information II.Overview of the US automatic exchange of information: the FATCA Rule III.The voluntary disclosure process in France IV.Comparative overview of the voluntary disclosure processes in Europe: –Italy –Germany –Russia 2

3 I. GENERAL LEGAL BACKGROUND FOR THE AUTOMATIC EXCHANGE OF INFORMATION 3

4 GENERAL LEGAL BACKGROUND FOR THE AUTOMATIC EXCHANGE OF INFORMATION “We are starting a New Era in the International taxation history” - Indonesia PM at the Worldwide Forum on Tax Transparency and Exchange of information (November 2013) Main objectives:  Challenge the international tax fraud  Reduction of the tax havens/use of offshore structures  Globalization of the exchange of information, first on a request basis then on an automatic basis 4

5 The legal framework: 1.The Worldwide Forum on tax transparency and exchange of information 2.The Convention for mutual assistance 3.The EU legislation 4.The increasing development of the bilateral relationships (the OECD standard rule) GENERAL LEGAL BACKGROUND FOR THE AUTOMATIC EXCHANGE OF INFORMATION 5

6 1.The Worldwide Forum on tax transparency and exchange of information (1/2) Set up in 2001 and now covers 121 States and countries Independent from the OECD Objective: Regular review of the national tax rules of the members States to assess their level of compliance vis-à-vis the International standard rules of exchange of information Each country receives a standard classification: Compliant Mainly compliant Partially compliant Non compliant GENERAL LEGAL BACKGROUND FOR THE AUTOMATIC EXCHANGE OF INFORMATION 6

7 1.The Worldwide Forum on tax transparency and exchange of information (2/2) A general three-year process review of each country divided in two phases :  Phase 1: Review of the legislation and regulations for tax transparency and exchange of information in place in the country  Phase 2: Practical valuation: does it work in the country? So far, more than 124 countries tested in Phase 1 and 50 in Phase 2:  18 countries classified as "Compliant" (ex: France)  26 countries classified as "Mostly compliant"  2 countries classified as "Partially Compliant"  4 countries classified as "non compliant" (Cyprus, BVI’s, Luxembourg and Seychelles islands) GENERAL LEGAL BACKGROUND FOR THE AUTOMATIC EXCHANGE OF INFORMATION 7

8 The Worldwide Forum has helped modifying the legislations in the various countries leading to increasing tax transparency and processes of exchanges Development of informal black/grey/white lists of countries within the Worldwide Tax Forum Examples : a)Luxembourg was on the black list in 2009 and then successfully passed the Phase 1 test but failed in Phase 2 b)The French black list on non cooperative countries initially included the Bermuda Islands, the BVI’s and Jersey but Bermuda and Jersey have recently improved their legislation and were withdrawn from the French black list GENERAL LEGAL BACKGROUND FOR THE AUTOMATIC EXCHANGE OF INFORMATION 8

9 2.The Renewal of the Convention for Mutual Assistance (1/3) Initial signature of the Convention in 1988 by the OECD and the European Council Was never used in practice before a new version was enacted in June 2011 The Convention for Mutual Assistance is now global and has been signed by 64 States and especially by countries which were initially quite reluctant with the exchange of information process Ex: * Andorra, Austria, Lichtenstein, Luxembourg, St Marin, Singapore and Switzerland * Israel has signed it in May 2014 This Convention is aimed at becoming the most powerful tool for the various States to challenge the International tax fraud GENERAL LEGAL BACKGROUND FOR THE AUTOMATIC EXCHANGE OF INFORMATION 9

10 2.The Renewal of the Convention for Mutual Assistance (2/3) Very broad scope:  Covers all types of taxes (including social contributions)  Covers both the upon request exchange of information or the automatic exchange of information process  Provides for the possibility to run cross border and simultaneous tax audits by two States  Assistance for tax collection between States  Practical processes, list of information and delays are covered in the Mutual Convention  May also cover anti-corruption and money laundering processes GENERAL LEGAL BACKGROUND FOR THE AUTOMATIC EXCHANGE OF INFORMATION 10

11 2.The Renewal of the Convention for Mutual Assistance (3/3) It is anticipated that such convention may become even more used between the States in the future as it offers a pre-established and comprehensive framework to facilitate the future bilateral or multilateral exchange of information processes GENERAL LEGAL BACKGROUND FOR THE AUTOMATIC EXCHANGE OF INFORMATION 11

12 3.The Develoment of the exchange of information tools within the European Union (EU) (1/3) A.Legal framework: Directive 77/799/CEE dated December 19, 1977 and, Directive 2011/16/EU dated February 15, 2011 Implemented as from January 1st, 2015 for the automatic exchange of information Broad scope:  Applies to any type of taxes except VAT, customs and excise duties  Forbids any EU Member State to refuse not to transfer any tax data for domestic tax policy reasons or for bank secrecy  Fix processes and rules between EU Member States to cooperate for the extensive exchange of information GENERAL LEGAL BACKGROUND FOR THE AUTOMATIC EXCHANGE OF INFORMATION 12

13 3.The Develoment of the exchange of information tools within the European Union (UE) (2/3) Broad scope:  Automatic exchange of information as from January 1st, 2015 for certain types of income and capital:  Professional income  Directory fees  Certain life insurance products  Pensions  Real estate ownership and related income GENERAL LEGAL BACKGROUND FOR THE AUTOMATIC EXCHANGE OF INFORMATION 13

14 3.The Develoment of the exchange of information tools within the European Union (UE) (3/3) To be extended in the near future to other types of income such as dividends, capital gains, other financial income and bank accounts balance Clear objective of the EU to get a powerful tool of exchange of information comparable to the US FATCA scheme B.Directive 2003/48/CE dated June 23, 2013 on the savings income related to the interest payment made between EU Member States: Automatic exchange of information between EU Member States on interest payments derived from savings schemes Objective to check and control that the savings income are correctly declared and taxed in the residence country of the beneficiary of the Interest payment (Interest income are exempt from any withholding tax in the EU source country) GENERAL LEGAL BACKGROUND FOR THE AUTOMATIC EXCHANGE OF INFORMATION 14

15 4.The increasing development of the bilateral relationships (1/5) Old times: Only bilateral relationships formalized through bilateral tax treaties signed between two States Now:  The Article 26 of the OECD Standard Rule (last updated in 2010) on the exchange of information is now included in most bilateral tax treaties: “1. The competent authorities of the Contracting States shall exchange such information as is foreseeably relevant for carrying out the provisions of this Convention or to the administration or enforcement of the domestic laws concerning taxes of every kind and description imposed on behalf of the Contracting States, or of their political subdivisions or local authorities, insofar as the taxation thereunder is not contrary to the Convention. The exchange of information is not restricted by Articles 1 and 2. GENERAL LEGAL BACKGROUND FOR THE AUTOMATIC EXCHANGE OF INFORMATION 15

16 2. Any information received under paragraph 1 by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, the enforcement or prosecution in respect of, the determination of appeals in relation to the taxes referred to in paragraph 1, or the oversight of the above. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions. Notwithstanding the foregoing, information received by a Contracting State may be used for other purposes when such information may be used for such other purposes under the laws of both States and the competent authority of the supplying State authorises such use. 3. In no case shall the provisions of paragraphs 1 and 2 be construed so as to impose on a Contracting State the obligation: a.to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State; b.to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State; c.to supply information which would disclose any trade, business, industrial, commercial or professional secret or trade process, or information the disclosure of which would be contrary to public policy (ordre public). GENERAL LEGAL BACKGROUND FOR THE AUTOMATIC EXCHANGE OF INFORMATION 16

17 4. If information is requested by a Contracting State in accordance with this Article, the other Contracting State shall use its information gathering measures to obtain the requested information, even though that other State may not need such information for its own tax purposes. The obligation contained in the preceding sentence is subject to the limitations of paragraph 3 but in no case shall such limitations be construed to permit a Contracting State to decline to supply information solely because it has no domestic interest in such information. 5. In no case shall the provisions of paragraph 3 be construed to permit a Contracting State to decline to supply information solely because the information is held by a bank, other financial institution, nominee or person acting in an agency or a fiduciary capacity or because it relates to ownership interests in a person.” GENERAL LEGAL BACKGROUND FOR THE AUTOMATIC EXCHANGE OF INFORMATION 17

18 4.The increasing development of the bilateral relationships (2/5)  The scope of the current request of information between States is based on the data and information which are likely to support or assess a tax fraud The request for exchange of information between States should be as precise as possible  "data fishing" is still prohibited.  More than 900 bilateral exchanges of information agreements have been concluded between 2009 and 2013 by referring to the Standard Article 26 of the OECD Tax Treaty Standard Model GENERAL LEGAL BACKGROUND FOR THE AUTOMATIC EXCHANGE OF INFORMATION 18

19 4.The increasing development of the bilateral relationships (3/5)  The new bilateral relationships resulting from the US/FATCA regulations: The implementation of the US FATCA rule has generated the obligation for the US to sign numerous agreements with the other States ("Intergovernmental agreements“ or IGA’s) as the US laws would simply not be enforceable outside of the US 54 final FATCA agreements have already been signed in December 2014 by the US with the other countries / 58 other countries have reached an agreement in substance but not final yet Similar intergovernmental types of agreements may be implemented within the EU in the near future: France, Germany, Spain, Italy and the UK have requested from the European Commission the implementation within the EU of a process similar to the FATCA GENERAL LEGAL BACKGROUND FOR THE AUTOMATIC EXCHANGE OF INFORMATION 19

20 4.The increasing development of the bilateral relationships (4/5)  The future trend: G20 (September 2013):  Automatic exchange of banking information by the end of 2015 = new future standard for the international and multilateral tax cooperation Scope:  Interest payment  Dividends  Outstanding amounts of bank accounts  Insurance products  Capital gains generated by financial products  Bank accounts owned by individuals or through Trust or Foundations GENERAL LEGAL BACKGROUND FOR THE AUTOMATIC EXCHANGE OF INFORMATION 20

21 4.The increasing development of the bilateral relationships (5/5) Such automatic exchange of banking information will require to implement a common platform and process The legal instrument to be used will very likely be a derivative from the existing multilateral convention for mutual assistance The Worldwide Tax Forum will likely be in charge of the implementation of this new platform on a worldwide basis GENERAL LEGAL BACKGROUND FOR THE AUTOMATIC EXCHANGE OF INFORMATION 21

22 II. THE US FATCA SCHEME 22

23 What is FATCA? The “Foreign Account Tax Compliance Act” (FATCA) is a US law enacted in 2010 and designed to prevent tax evasion by US citizens using offshore banking facilities The FATCA rules went into effect on July 1 st, 2014 FATCA creates a new tax information and reporting and withholding regime, designed to gain information about US persons rather than to raise revenue FATCA is a controversial piece of legislation because it is wide- ranging and applies to non-US financial institutions and to non US tax residents THE US FATCA SCHEME 23

24 What is FATCA? FATCA also imposes a 30% withholding tax on payments of US source income made to non-US financial institutions/taxpayers and provides for an effective ban from the US market unless such financial Institutions enter into an agreement with the US Internal Revenue Service (IRS) and disclose information about their US citizens account holders FATCA also requires certain US taxpayers holding foreign financial assets with an aggregate value of USD 50,000 to report certain information on a specific US form (Form 8938) Failure to file the specific form will result in a USD 10,000 fine (increased to USD 50,000 for continued failure after IRS notification) THE US FATCA SCHEME 24

25 FATCA requires information to be provided in respect of certain accounts in existence on or after 30 June 2014 FATCA compliance presents a number of problems for foreign financial institutions because the information disclosure requirements under FATCA are not necessarily permitted under data protection rules The burden of each foreign financial institution entering into an agreement with the IRS about its compliance with FATCA is significant Most governments in the world (France, Italy, Germany, UK, China, …) have entered into bilateral arrangements with the US to allow FATCA compliance to take place at national level Eg: - FATCA US-France on November 14, FATCA US-Israel on June 30, 2014 THE US FATCA SCHEME 25

26 What does FATCA do? FATCA requires all Foreign Financial Institutions (FFIs) to provide information about their US customers to the IRS in accordance with the terms of an agreement (FFI Agreement) entered into between the FFI and the IRS If it does enter into an FFI Agreement, the FFI is known as a “participating FFI” and if does not, it will be deemed to be a “non-participating FFI” and an automatic 30% withholding tax charge will be applied in the US to certain payments made to it The definition of FFI includes not only banks, insurance companies and broker-dealers but extends to clearing organizations, trust companies, hedge funds, private equity funds and pension funds. It will also include securitisation vehicles and other investment vehicles THE US FATCA SCHEME 26

27 The information that must be provided by the FFI’s to the IRS includes: the name, address and, US taxpayer identification number of each Specified US Person that is an account holder, the year end account balance or value, the total gross amount of interest credited to the account and, the total gross amount paid or credited to the account holder in the case of any other account. THE US FATCA SCHEME 27

28 Two ways for the FFI’s to report the eligible information depending upon the type of IGA’s being signed by their countries with the US:  Model 1: The national FFI’s will report the information to their respective domestic tax authorities followed by a government to government transfer of information  Model 2: FFI’s would report directly to the US IRS If a FFI does not comply with the disclosure obligations imposed by FATCA, a 30% withholding tax is applied to payments, such as interest and dividends, made to the FFI by US-based entities and also to payments made to it from other FFIs that are FATCA compliant It also includes gross proceeds of sale from assets that produce US source dividends and interest, for example, interest earned on a US Treasury bond THE US FATCA SCHEME 28

29 There is an exemption from the withholding tax for payments made in the ordinary course of business for non-financial services, including payments for wages, lease payments, licence payments, etc. THE US FATCA SCHEME 29

30 III. VOLUNTARY DISCLOSURE PROCEDURE IN FRANCE 30

31 France has implemented over 2013 a new voluntary disclosure process So far, about 35,000 taxpayers entered into the voluntary disclosure process 7,000 files are now in a complete and final status 2,000 files have been closed through a formal and official settlement signed between the taxpayer and the French tax authorities It is expected to collect between 1.5 and 2 billions € of taxes and penalties through the voluntary disclosure procedure in France VOLUNTARY DISCLOSURE IN FRANCE 31

32 Based on the official reports, the average global rate for the regularisation amounts to 27% of the funds held in a non declared foreign account The recent reinforcement of the investigation and penal powers of the French Tax Authorities as well as the increasing development of a Double Tax Treaty network in France in matters of exchange of tax information have led any French taxpayers owning undeclared funds abroad to seriously consider the opportunity to engage in a tax regularisation procedure with the French authorities VOLUNTARY DISCLOSURE IN FRANCE 32

33 France has put in place a special regularisation unit (STDR) within the French tax authorities that allows taxpayers to reveal their foreign funds to the French Tax Authorities and benefit from a secured set of rules Specific regularisation conditions for French taxpayers owning undeclared funds abroad have been set up VOLUNTARY DISCLOSURE IN FRANCE 33

34 The regularisation unit allows French taxpayers wishing to reveal their undeclared foreign funds to :  pay the related taxes according to a specific statute of limitation period,  avoid criminal offense prosecution, and  reduce the amount of penalties which would otherwise be imposed under standard rules up to 40% (bad faith) or 80% (tax fraud) The regularisation procedure allows for the unrestricted use of initially undeclared funds after payment of the taxes being due and reduced penalties and fines The regularisation procedure is not allowed in case the French Tax Authorities have formally started a tax audit procedure against a French taxpayer VOLUNTARY DISCLOSURE IN FRANCE 34

35 At that stage, no deadline has been published which may close the window for the regularisation process in France Specific delays however apply to file the voluntary disclosure package with the French tax authorities:  As from December 10, 2014: 6 months to complete the regularisation package with the French Tax Authorities after the initial documents have been filed  Before March 31, 2015 or May 30, 2015 if the initial documents have been filed before December 10, 2014 VOLUNTARY DISCLOSURE IN FRANCE 35

36 Content of the “regularisation package” to be filed by the taxpayers:  Filing of amended tax returns for each non statute barred tax year for individual income tax and French wealth tax, if applicable  Data justifying: The income to be reported each year (bank accounts balance, reporting document issued by the foreign banks, …) The origin of the undeclared funds held abroad (inheritance, own account, …) VOLUNTARY DISCLOSURE IN FRANCE 36

37 The regularisation procedure is not anonymous The regularisation process covers:  The individual income tax (assessed on the income – interest, dividends, capital gains – generated by the foreign bank account over the non statute barred period) up to the 45% marginal tax rate  Specific social contributions (up to 15.5%)  The French wealth tax  If applicable, the inheritance taxes Payment dates:  Immediate payment upon filing of the regularisation package for the French wealth tax (Principal) and inheritance taxes (Principal)  Differed payment for additional individual income tax, social contributions and specific fines, penalties and interest for late payment at the time of the signature of the official settlement with the French Tax Authorities VOLUNTARY DISCLOSURE IN FRANCE 37

38 A distinction is made between:  “passive taxpayers”: these are frauds that concern mainly taxpayers having inherited foreign funds who are subject to reduced penalties, fines and,  “active taxpayers”: subject to more onerous regularisation terms VOLUNTARY DISCLOSURE IN FRANCE 38

39 Examples : Taxpayers owning undeclared family funds abroad that they received by right of succession or financial assets earned by the taxpayer when he was not a French tax resident qualify as “passive frauds” and therefore benefit from a more favorable treatment French taxpayers having personally opened their foreign bank account and transferred regular amounts to it qualify as “active fraud”. Active taxpayers also cover taxpayers owning undeclared funds through trusts or foundations Hidden activities do NOT qualify for the regularisation process and are excluded from the voluntary disclosure regime Hidden or illegal activities which do NOT benefit from the voluntary disclosure program are subject to fines and penalties according to standard rules. Hidden activities cover limited cases ie. professional activities not registered with the French official bodies and illegal activities VOLUNTARY DISCLOSURE IN FRANCE 39

40 VOLUNTARY DISCLOSURE IN FRANCE 40 Specific set of rules for the application of the penalties as follows: Origin of the Financial Assets Payment of taxes due Level of penalties Bad Faith Penalty (assessed on the annual additional taxes due) Specific Fines (assessed on the balance of the foreign bank account) Interest for late payment PASSIVE FRAUD: Inheritance or donation Financial assets earned/generated by the taxpayer when not French tax resident Individual Income tax French Wealth tax Social contributions Inheritance taxes 15% Rate: 1.5% (3.75% in case of Trust or Foundation) Basis: Balance of the foreign bank account at December 31 of any given year 4.8% per year 30% Rate: 3% (7.5% in case of Trust or Foundation) Basis: Balance of the foreign bank account at December 31 of any given year 4.8% per year ACTIVE FRAUD: Any other origin

41 VOLUNTARY DISCLOSURE IN FRANCE 41 STATUTE OF LIMITATION A.Individual income tax and specific social contributions Income earned since 2009 in case of tax assistance clause in the bilateral tax treaty signed with France (eg: France-Israel) Income earned since 2006 in the absence of any tax assistance clause in the bilateral tax treaty signed with France (eg: Switzerland / Luxembourg) B.French wealth tax: 2007 (in principle 10 years) C.Inheritance taxes: 2007

42 VOLUNTARY DISCLOSURE IN FRANCE 42 STATUTE OF LIMITATION D.Practical examples For a bank account held in Switzerland: Individual Income Tax: 2006  2014 French Wealth Tax: 2007  2014 Inheritance Tax: 2007  2014 For a bank account held in Israel: Individual Income Tax: 2009  2014 French Wealth Tax: 2007  2014 Inheritance Tax: 2007  2014

43 VOLUNTARY DISCLOSURE IN FRANCE 43 FRENCH INDIVIDUAL INCOME TAX RATES Tax Rates in 2015 Net incomeRates Until 9,690 €0% From 9,691 € to 26,764 €14% From 26,764 € to 71,754 €30% From 71,754 € to 151,956 €41% Above 151,956 €45%

44 VOLUNTARY DISCLOSURE IN FRANCE 44 SPECIFIC TAX ON HIGH INCOME (CEHR) Taxable income Applicable Tax Rate Single people Married people Below 250,000 € 0% Between 250,001 € and 500,000 € 3% Between 500,001 € and 1,000,000 € 4% 3% Above 1,000,001 €4%

45 VOLUNTARY DISCLOSURE IN FRANCE 45 FRENCH WEALTH TAX RATES Portion of the net taxable value of assetsApplicable rate Not exceeding 800 K€ 0% Higher than 800 K€ but lower than, or equal to, 1.3 M€0.5 % Higher than 1.3 M€ but lower than, or equal to, 2.57 M€0.70 % Higher than 2.57 M€ but lower than, or equal to, 5 M€1 % Higher than 5 M€ but lower than, or equal to, 10 M€1.25 % Higher than 10 M€1.5 %

46 VOLUNTARY DISCLOSURE IN FRANCE 46 FRENCH INHERITANCE TAX RATES Deduction of € per parent and per child Net Asset ValueRates Below8,072 €5 % Range8,072 € and 12,109 €10 % 12,109 € and 15,932 €15 % 15,932 € and 552,324 €20 % 552,324 € and 902,838 €30 % 902,838 € and 1,805,677 €40 % Above1,805,677 €45 %

47 VOLUNTARY DISCLOSURE IN FRANCE 47 PRACTICAL EXAMPLES 1.Mr. A owns an undeclared account in Switzerland up to 4.6M€. He has himself opened the account and made regular deposits on it and created a trust to run the account  Mr. A qualifies as an “active taxpayer” The taxes + fines amount to 1.5M€ as follows:  Individual income tax + social contributions + penalties and interest for late payment : 1M€  French wealth tax + penalties and interest for late payment: 0.2M€  Specific fines: 0.3 M€ resulting in a 33.33% global regularisation rate. The remaining net in pocket is about 3M€.

48 VOLUNTARY DISCLOSURE IN FRANCE 48 PRACTICAL EXAMPLES 2.Mr. and Mrs. B have inherited in 1995 of an undeclared bank account opened in a Swiss bank for a global amount of 1.3M€. They qualify as “passive taxpayers”. The global regularisation cost amounts to 125K€ and is divided as follows:  Individual income tax + social contributions + penalties and interest for late payment: 64K€  French wealth tax + penalties and interest for late payment: 22K€  Specific fines: 39K€  Inheritance taxes: statute barred resulting in a 10% global regularisation cost and a remaining net in pocket of 1.2M€

49 IV. VOLUNTARY DISCLOSURE PROCEDURE IN ITALY 49

50 50 The Italian voluntary disclosure program is available for taxes on financial and non-financial assets (real estate, life insurance policy, …) held in Italy or abroad It applies to violation committed through 30 September 2014 and includes all the tax periods for which the statutes of limitation have yet to expire For assets of up to 2M€, it is possible to apply a flat tax rate of 27% on a taxable income calculated as 5% of the value of the financial assets For assets of more than 2M€, the taxes to be paid depend on the type of transaction performed, revenues obtained, etc. VOLUNTARY DISCLOSURE IN ITALY

51 51 The administrative penalties are reduced and may vary and depend on both on the violations disclosed as well as the countries where the income was generated or invested The program grants immunity for certain tax crime, such as incorrect returns, fraudulent return including non-payment of withholding tax, non-payment of VAT, etc. The minimum threshold for a disclosure is 15K€ The program is limited until 30 September 2015 VOLUNTARY DISCLOSURE IN ITALY

52 52 There is no anonymity The program is not allowed in case the tax authorities have formally started a tax audit procedure against a taxpayer A new crime of “self-laundering” is introduced in criminal law system, but a specific immunity is granted for those who follow the voluntary disclosure program VOLUNTARY DISCLOSURE IN ITALY

53 V. VOLUNTARY DISCLOSURE PROCEDURE IN GERMANY 53

54 54 Objectives The objective of the German voluntary disclosure of tax evasion is to encourage the return to tax compliance and honesty in tax matters The disclosure programme has become more restrictive in recent years The legal consequence of a successful and accepted voluntary disclosure of tax evasion is impunity VOLUNTARY DISCLOSURE IN GERMANY

55 55 The impunity extends only to the person who makes the voluntary disclosure The voluntary disclosure itself can be made by the taxpayer himself or by a representative with a specific power of attorney The taxpayer or any other person who makes the voluntary disclosure has therefore to disclose his full identity The disclosure programme applies to all undeclared taxable items of the same kind of tax, e.g. income tax, VAT, inheritance and gift tax VOLUNTARY DISCLOSURE IN GERMANY

56 56 It does not comprise impunity from all criminal prosecution, especially administrative offences and criminal acts committed in the course of tax evasion, e.g. forgery of documents, abuse of trust, money laundering etc. If the voluntary disclosure is not validly performed the tax authorities and criminal prosecution are entitled to and will prosecute the tax crime or tax offence taking into account any information voluntarily disclosed One practical example is the case of the former president of FC Bayern Munich, Mr. Uli Hoeness, who has been convicted for tax evasion in March 2014 after an unsufficient voluntary disclosure of tax evasion (the verdict was 3 ½ years imprisonment) VOLUNTARY DISCLOSURE IN GERMANY

57 57 The full disclosure of all undeclared items has to comprise all not time-barred tax crimes and tax offences, but with legal effect since January 1 st, 2015 at least the tax crimes and tax offences within the last ten calendar years Before 2015, a voluntary disclosure had to be made for the last ten calendar years only in particularly serious cases subject to a limitation period of ten years In addition to the full disclosure, the evaded taxes and interests at the rate of 6 % per annum have to be repaid within a reasonable period of time set by the tax authorities There is no threshold below which the taxpayer is authorized not to enter into the voluntary disclosure programme VOLUNTARY DISCLOSURE IN GERMANY

58 58 If the evaded taxes exceed the amount of EUR per tax crime since 2015 (before: EUR per tax crime) or in particularly serious cases, e.g. if the taxpayer abuses his authority or position as a public official, solicits the assistance of a public official who abuses his authority or position or repeatedly understates taxes or derives unwarranted tax advantages by using falsified or forged documents, an extra fine under the disclosure programme has to be paid to obtain impunity The extra fines have been increased with legal effect since January 1 st, 2015 and amount to:  10 % of the evaded tax if the amount of evaded tax does not exceed EUR ;  15 % of the evaded tax if the amount of evaded tax does exceed EUR but not EUR ;  20 % of the evaded tax if the amount of evaded tax does exceed EUR VOLUNTARY DISCLOSURE IN GERMANY

59 59 Example: If taxes of EUR are evaded the taxpayer has to fully disclose all undeclared taxable items, repay the taxes and interests at a rate of 6 % plus the extra fee at a rate of 20 % on the evaded taxes of EUR to obtain impunity Impunity will not be granted if any condition for exclusion exists. These conditions for exclusion are especially:  if the tax crime or the tax offence has already fully or partially been detected by the tax authorities and the taxpayer was aware of this or should have expected this upon due consideration of the facts of the case, VOLUNTARY DISCLOSURE IN GERMANY

60 60  If the taxpayer or his representative has been notified of the initiation of criminal proceedings or proceedings for the imposition of administrative fines resulting from the act, or  If a public official at the revenue authority has already appeared for the purpose of carrying out a tax audit or of investigating a tax crime or a tax offence VOLUNTARY DISCLOSURE IN GERMANY

61 VI. VOLUNTARY DISCLOSURE PROCEDURE IN RUSSIA 61

62 62 On December 4, 2015 President of Russia Mr. Vladimir Putin announced that there should a full amnesty for offshore capital and assets The Russian Prime Minister Mr. Dmitry Medvedev made several comments on the proposed amnesty, ie. the goal of the amnesty is collection of taxes rather than return of the capital to Russia Sources of capital amnestied shall not be requested by the State authorities. Individuals and business transferring offshore capital to Russia shall be exempt from criminal proceeding or from the requests of State authorities related to offshore capital At this moment, several draft laws regarding amnesty of offshore capitals are proposed for consideration of the State Duma of the Russian Federation (the Russian law-making body) VOLUNTARY DISCLOSURE IN RUSSIA

63 63 The State Duma is currently considering Draft Law No “On procedures of the return of assets to the Russian Federation”. Pursuant to the draft law, the Russian citizens and companies may legalize their foreign assets within the period from January 1, 2015 to August 31, 2015 under the following conditions: 1.Exemption from taxes, penalties and fines in respect of the returning assets; 2.No administrative and /or criminal liability for the violation of the Russian tax and currency legislation; 3.Submission of documents concerning the source of the assets is not required. VOLUNTARY DISCLOSURE IN RUSSIA

64 64 For the purposes of the tax amnesty, Russian citizens and companies should take the following steps: i.file the application for the assets’ return with the tax authority till August 31, 2015; ii.pay the declarative payment in the amount of 2,5% of the returning assets till August 31, Provisions of law after its consideration by the State Duma may however be substantively amended VOLUNTARY DISCLOSURE IN RUSSIA

65 Any questions?

66 Contact: Jacques Messeca Eversheds Paris LLP 8, Place d’Iéna Paris / France Tel: +33 (0) Mail:

67 © EVERSHEDS LLP Eversheds LLP is a limited liability partnership. 67


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