The government is proposing an ambitious tax amnesty law which would allow taxpayers to disclose undeclared assets and extinguish any tax obligation relating to such assets by paying a penalty. The government proposal gives taxpayers the option to use the disclosed assets to subscribe to a three-year zero coupon bond and a seven-year 1% per year coupon bond.
The BVI tax information exchange system is largely modelled on international principles developed by the Organisation for Economic Cooperation and Development and is split into two types of regime. The 'automatic' exchange of information regime requires financial institutions to exchange formulistic data about the accounts of foreign taxpayers, while the 'on request' regime deals with specific and potentially in-depth investigations into the affairs of named taxpayers with offshore or international holdings.
Quebec recently announced that it intends to expand its requirements for non-resident vendors to collect and remit Quebec sales tax on sales to Quebec consumers, effective as early as January 1 2019. It will be interesting to see whether the Quebec government has the authority to impose requirements on non-resident businesses that do not carry on business in the province. Another issue will be whether an assessment for failure to collect the tax can be enforced against a non-Quebec seller.
The 2018 federal budget signifies another chapter in the Department of Finance's saga to overhaul the taxation of private corporations and their shareholders. Budget 2018 sets out two changes to the taxation of private corporations: a reduction of the small business deduction based on the amount of passive investment income earned at a corporate level and a restriction on obtaining refunds of corporate tax on dividends paid from income taxed at the reduced small business rate.
The British Columbia Property Transfer Tax Act applies only to registered transfers of real property. However, significant real property-related tax changes are rumoured to be proposed in the upcoming provincial budget. Any amendment to the act that would tax transfers of beneficial ownership should not be made haphazardly. Such an amendment must be joined by, among other things, a mechanism to relieve the tax where the beneficial ownership is transferred to an affiliate.
At a basic level, cryptocurrencies constitute property under the Income Tax Act. As such, dispositions of cryptocurrencies ordinarily lead to income tax consequences. Although cryptocurrencies are an exciting development, along with the rewards come a variety of risks, not least of which is tax. Failure to comply with all applicable tax obligations can result in severe penalties and hefty arrears interest.
The latest chapter in the story of the 'half-loaf' plan was recently penned by the Federal Court of Appeal. The case concerned a plan by which the taxpayer intended to split the capital gains on a share sale to an arm's-length purchaser between him and his wife and thus benefit from both of their lifetime capital gains exemptions. On appeal, the taxpayer argued that none of the conditions of the general anti-avoidance rule had been met; however, the Federal Court of Appeal disagreed.
As Cayman Islands entities are not directly subject to the so-called 'automatic exchange of information' agreements, the government has introduced legislation to implement these under the Tax Information Authority Law. Guidance notes have also been issued, providing details of the notification, reporting and ongoing obligations that apply, as well as a useful reminder of the differences between the Foreign Account Tax Compliance Act and the Common Reporting Standard.
A taxpayer recently requested a ruling from the Tax Department on the treatment of gains from cryptocurrency transactions for income and value added tax purposes, as cryptocurrencies are not specifically regulated in Chile or recognised as legal tender or foreign currency. The department's analysis reflected the broad definition of 'income' in the Income Tax Act and the fact that there is no specific exemption or favourable treatment given to these specific gains.
A business group recently requested an advance ruling from the Internal Revenue Service regarding the merger of a Chilean subsidiary with a company resident in a low-tax jurisdiction. The service stated that pursuant to Article 64 of the Tax Code, it will not exercise its assessment authority where it has been effectively proven that the legal effects of a merger in another country will be carried out in accordance with Chilean legislation and that the operation will be carried out under the terms of tax neutrality.
The Tax Department recently issued Circular 57, which provides a definition of a 'permanent establishment' for domestic law purposes and underlines that such fixed places of business require a tax registration number. Although the circular has been issued with a limited scope, it may have additional benefits, including identifying whether a foreign entity or individual has a permanent establishment operating in Chile.
The Supreme Court recently revoked two appeal court decisions in which the underlying issue was the Tax Department's authority to deny taxpayers the ability to issue invoices in certain circumstances. It is unclear whether the Tax Department will review its criteria in this regard, as court decisions in Chile affect only the parties in the specific case.
A taxpayer resident in Chile with a portfolio investment in the United States recently requested a ruling on whether he was entitled to a refund of certain withholding taxes paid by the portfolio because it included bonds issued in Chile. The taxpayer argued that withholding tax should be refunded to the beneficiary of the interest if the beneficiary is a Chilean resident. However, the Tax Department took a different view.