June 1, 2010
UHY International Tax Practitioners Unite in Split
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On May 20-22, UHY held its Europe/Middle East/Africa Regional meeting hosted by UHY HB Ekonom (Split) and UHY Rudan (Zagreb) at a conference center near Split, Croatia. The meeting was the opportunity for close to 60% of the member firms in UHY's network of 76 countries to convene and share ideas, including tax planning opportunities.
As Chair of the Tax Special Interest Group for UHY International, your correspondent Meril Markley had the honor of leading the Tax Session and updating tax practitioners on efforts to strengthen UHY's tax consulting capabilities across the region and in conjunction with the two other regions – the Americas and Asia.
Johannes Bitzer from the Munich office made a presentation on European Union (EU) provisions governing the cross-border accounting for value added tax (VAT) with respect to services. He described the complex new rules that went into effect January 1, 2010 and ways in which UHY offices across the Union can cooperate in advising clients on complying with these new rules. Examples included: situations where materials are supplied in the destination country but involving services performed by a person from another EU country; the transportation of goods by a company from one EU country between points in another EU country, between points outside the EU, and between points only one of which is in the EU. In an effort to spur compliance and collection, additional forms will now be required to show whether the supply of a service is subject to VAT in an EU country and if so, how it will be collected and accounted for.
Clive Gawthorpe from the Manchester office presented a case study involving an investor with dual UK/Swiss residency considering various locations within the EU to place a company to exploit intellectual property and earn royalties and other fees from numerous countries. Clive's presentation included a table comparing the offerings in three countries – Belgium, Ireland and the Netherlands – as the "finalists" after also considering Luxembourg, Malta, and the U.K. Criteria included the tax system, exemptions and incentives, whether research and development must be undertaken in the country, whether marketing intangibles would qualify, ease of access for purposes of flying in to hold board meetings and to perform management tasks, as well as tax consequences on exiting the investment.
Pierre Galea-Musu from UHY's member firm in Malta gave an update on Malta's legislation to encourage companies to locate their financial centers there as well as the advantages of using Malta as a location for an international holding company. In light of the U.S. treaty with Malta awaiting ratification in the U.S. Senate, Malta may quickly move to the top of the list of EU countries, such as Cyprus, whose holding company regimes are attractive to U.S. middle market companies because they do not require as much in the way of infrastructure and employees as the more traditional destinations such as the Netherlands and Luxembourg.
Finally, Andreja Sekusak from the Zagreb office gave an overview of transfer pricing rules as they operate in Croatia, including an update on adoption of OECD Guidelines and the requirements for taxpayers to document the arm's length nature of cross border transactions with related parties in other countries.
The undercurrent throughout the meeting was one of concern about the strength of national economies and the likelihood that some countries would be instituting new taxes, raising existing taxes (especially VAT) and eliminating tax incentive programs while others would be slashing corporate income taxes – both in a bid to increase revenues on the heels of the recession.