Project AITAX13’s Post

Navigating International Tax Planning: Key Insights on U.S. LLCs and S Corps under Portuguese Tax Law 🌍💼 Struggling with how transparent entities like U.S. LLCs and S Corps are treated under Portuguese tax law? Let's break it down. 🔍 **Transparent Entities Basics** These are legal structures that allow income, deductions, and credits to flow through to the owners for tax purposes. The trick? The entity isn't taxed; the owners are. 🇺🇸 **U.S. LLCs in Portugal** U.S. LLCs are treated as transparent entities in Portugal: • Income, deductions, and credits flow through to the members. • Members pay personal income tax on their shares. 🚩 Exceptions: If the LLC has a permanent establishment in Portugal, it could be subject to corporate tax. Also, engaging in trade/business in Portugal means VAT registration may be required. 🇺🇸 **U.S. S Corps in Portugal** Similarly, U.S. S Corps are transparent entities, but with notable differences: • Shareholders are taxed on their income shares. • Permanent establishments in Portugal can attract corporate taxes, even without trade/business activity. 🚩 VAT rules apply if engaged in business within Portugal. 💡 **My Take** During my journey in international taxation, understanding such nuances has made a difference in making strategic decisions for global expansion. Informed decisions are the bedrock of optimizing international tax planning. Curious about how these differences might affect your business strategy? Let’s discuss! #taxplanning #internationaltax #USLLCs #SCorps #PortugueseTaxLaw #offshoreservices #globalbusiness>>>https://lnkd.in/gsUQj4G9

Some people may hate me about this but I will give my opinion anyway. I have often been asked this question: “Do you think Cyprus should increase the corporate tax rate?” Yes, I believe it’s time for Cyprus to consider raising the corporate tax rate to 15%. Here’s why: 1. Aligning with Global Standards: With the OECD's initiative for a global minimum tax rate of 15%, increasing the corporate tax will help Cyprus comply with international efforts to prevent tax base erosion and profit shifting. This move would show that Cyprus is committed to "fair" global tax practices. 2. Reputation Benefits: Raising the tax rate slightly can help enhance Cyprus’s reputation as a legitimate and compliant international business hub, while still remaining competitive in terms of tax attractiveness. This can attract quality investments and boost the island’s credibility. 3. Compliance with EU Regulations: As the European Union continues to push for fair tax competition, increasing the rate would help Cyprus align with EU expectations, reducing the risk of being targeted for low-tax criticisms. 4. Maintaining a Competitive Edge: Even with a rate of 15%, Cyprus will still have one of the lowest corporate tax rates in Europe, making it an attractive destination for businesses seeking a favourable tax environment. Here’s how Cyprus would compare to other EU countries with low corporate tax rates (from lowest to highest): Hungary: 9% Ireland: 12.5% Lithuania: 15% Bulgaria: 15% (recent proposal for increase) Cyprus: 15% (if raised) Poland: 19% Czech Republic: 19% Other Tax Benefits Cyprus Offers: - Expatriate Tax Relief: Expats can benefit from a 50% tax exemption on income over €55,000 for up to 17 years, making Cyprus an attractive location for international professionals. - No Withholding Tax on Dividends: Cyprus offers zero withholding tax on dividends paid to non-residents, which is favourable for shareholders and foreign investors. - Extensive Double Tax Treaty Network: With over 60 double tax treaties in place, Cyprus ensures that businesses can avoid double taxation, making international operations more tax-efficient. - Tax-Free Reorganizations: Companies in Cyprus can benefit from tax-neutral mergers, acquisitions, and reorganizations, allowing for corporate restructuring without immediate tax implications. - Intellectual Property (IP) Regime: The IP Box regime allows companies to enjoy an effective tax rate as low as 2.5% on income derived from qualifying IP assets, making it attractive for tech and innovation-focused businesses. By raising the corporate tax to 15%, Cyprus can benefit from increased tax revenue while maintaining these other attractive tax advantages. This balanced approach can help the country remain a leading choice for businesses and investors while supporting international tax fairness. What are your thoughts on this potential change? Let’s discuss!

Last Friday we wrapped with success the International Bar Association New Era of Taxation Conference https://lnkd.in/dCHBax-f We had more technical discussion panels followed by the always insightful roundtables. Here are my off-the-cuff takes at the end of each great panel: (i) International tax controversy in the new era - Navigating international tax disputes these days is like wandering through a maze with a GPS that only speaks “legalese” and comes with a 500-page manual. We all agree to be lost together. (ii) Source taxation in a digitised world - Finding the source in digitalisation is like trying to find Wi-Fi in a remote cabin. You’re pretty sure it’s somewhere, but the closer you think you get, the worse the connection. Be sure that once you connect there will be digital tax, withholding tax, VAT, PE (hopefully not all at the same time)! (iii) VAT aspects of M&A real estate transaction - VAT in real estate M&A is the only place where “being tax exempt” sounds less like a perk and more like a problem. (iv) Winds of change in international tax systems - The world of international tax, it’s starting to look like Star (ups Tax) Wars: The panel seems not to agree who is the Jedi and who is the Darth Vader (OECD or UN). What we know is that Businesses are left trying to navigate these intergalactic battles. Good news is we asked Elon Musk to train the new international tax lawyers in Mars! Thank you again to all our participants and specially to our sponsors Aurifer Middle East Tax; Abreu Advogados, D.C.Christopoulos Law Firm, VdA Vieira de Almeida, Morais Leitão,TMF Group, Greenberg Traurig, LLP, RFF Lawyers and Weil, Gotshal & Manges LLP. It was a very successful conference in Lisbon, and we passed on the torch to Milan (Italy) for September 2025. Good luck to our friends Antonietta Alfano and Andrea Gallizioli. Thank you again to my co-chair Serena Cabrita Neto for the wonderful farewell at her office.

As the year draws to a close, we are pleased to announce the successful conclusion of our final event, a webinar titled 𝗜𝗺𝗽𝗮𝗰𝘁 𝗼𝗳 𝗖𝗥𝗘𝗔𝗧𝗘 𝗠𝗢𝗥𝗘 𝗼𝗻 𝗘𝘂𝗿𝗼𝗽𝗲𝗮𝗻 𝗕𝘂𝘀𝗶𝗻𝗲𝘀𝘀 𝗶𝗻 𝘁𝗵𝗲 𝗣𝗵𝗶𝗹𝗶𝗽𝗽𝗶𝗻𝗲𝘀! This session was organized in collaboration with Du-Baladad and Associates. During the virtual forum, BDB Law Senior Partner Atty. Irwin Nidea Jr. and Partner Atty. Mabel Buted provided insights into value-added tax (VAT) and other indirect tax incentives introduced under the CREATE MORE initiative. Atty. Nidea highlighted incentives in the Philippines and the evolution of tax policies such as the TRAIN, CREATE, and CREATE More laws. CREATE MORE, which took effect on November 28, 2024, introduces significant changes to VAT incentives, emphasizing a shift from the "direct and exclusive use" principle to a more flexible "directly attributable" principle. This allows more goods and services, including administrative expenses like legal or janitorial services, to qualify for VAT zero-rating if they are directly attributable to the registered activity of an export enterprise. In her presentation, Atty. Mabel Buted provided a detailed analysis of CREATE MORE's income tax-based incentives, highlighting three key types—Income Tax Holiday (ITH), Special Corporate Income Tax (SCIT), and Enhanced Deductions Regime (EDR). A significant structural change under CREATE MORE is the enhanced authority of IPAs, which can now independently grant incentives for investments up to PHP 15 billion, while larger investments remain under the Fiscal Incentives Review Board (FIRB). Moderating the session and offering his insights on how these incentives aim to attract investments, support economic recovery, and promote industry competitiveness was Atty. Fulvio Dawilan, Managing Partner at BDB Law. We extend our sincerest gratitude to BDB Law for their partnership in co-hosting this virtual session, and to our online attendees for their engagement and participation in the discussion! We look forward to hosting even more insightful events in the coming year! #ChamberOfChoice #BrighterPossibilities

Israel to apply 15% minimum corporate tax from 2026 https://ift.tt/KCtUPOj The Israeli Ministry of Finance announced that it will implement a qualified domestic minimum tax (QDMTT) starting in 2026, as part of the OECD’s Pillar II international tax reform. This is a plan to change the current corporate tax system, allowing countries to collect more taxes from international companies that sell products or services to their citizens. The program aims to update tax laws and allow them to deal with the digital economy and with companies that report their profits in countries that collect less tax than them, regardless of the countries where their profits are generated. The change will affect multinational technology companies, including Facebook, Apple, Amazon and Google. Israeli Finance Minister Bezalel Smotrich said: “Israel’s joining the international standard that was formulated regarding the taxation of multinational corporations will help maintain the attractiveness of the Israeli tax system in the new global tax reality, and will ensure that taxes on domestic activity are prevented from leaking from Israel. Compliance with advanced international standards is a necessary condition for creating a free and global market economy that leads to growth and improves our quality of life. I am grateful to the officials of the Ministry of Finance and the Tax Authority, who worked in cooperation with industry, investors and other interested parties. As I have done since the beginning as Minister of Finance, I will continue to work to strengthen and improve the attractiveness of the State of Israel for investment in the field of innovation and high technology.” Over the past decade, the OECD has been promoting the Base Erosion and Profit Shifting (BEPS) project to prevent base erosion and profit shifting by multinational corporations between countries, among other things by shifting activity to countries where the effective corporate tax rate is low. 140 countries participate in the project, including the State of Israel. The OECD plan for taxing the digital economy is based on two levels: the first level (pillar 1) deals with the taxation of profits of international giants by countries to whose residents they provide services or products, when, according to the emerging scheme, it is possible to tax part of the profits of these giants in the countries where they operate, even if they do not have a physical presence in the country. The second tier (Pillar 2) seeks to prevent tax schemes that aim to erode the tax base or shift profits to tax havens for multinational companies, and to put an end to the “race to the bottom” in setting tax rates. According to the preliminary plan, a minimum tax rate will be set for members of these companies. Pillar 2 will apply to multinational companies with an annual turnover of 750 million euros. Under Pillar 2, participating countries are required to apply an effective corporate t...

🌐GLOBAL TAX COOPERATION Tax havens have long posed challenges for governments, providing safe havens for wealth and enabling individuals to avoid their fair share of taxes. However, a global increase in the Automatic Exchange of Information (AEOI) has significantly enhanced tax transparency. A 2024 EU Tax Observatory working paper titled “Taxing Capital in a Globalized World: The Effects of Automatic Information Exchange” highlights the significant impact of AEOI, particularly through the Common Reporting Standard (CRS) in Denmark. The findings are striking, revealing a 70% reduction in the offshore tax gap implying a substantial amount of previously hidden wealth is now compliant or identifiable to tax authorities. How did AEOI achieve this⁉ The paper identifies 3 main factors: 👉Asset repatriation whereby the implementation of AEOI deterred individuals from hiding wealth offshore, prompting a considerable repatriation of assets back to Denmark. 👉Increased self-reporting whereby taxpayers were more likely to accurately report their foreign income knowing that authorities had access to their offshore accounts’ information. 👉 Enhanced detection whereby tax authorities were able to identify and address underreporting more effectively by comparing CRS data with self-reported income. The paper also mentions key challenges i.e., Discrepancies between reported income and CRS data often stem from bank errors or misclassifications on tax returns. However, audits have shown that actual underreporting was about half of the initial estimates, underscoring the critical role of audits in uncovering and correcting these issues. Notably, underreported income tends to be more concentrated among wealthier individuals, with the top 1% accounting for roughly 30%. 🏰 SWITZERLAND Complementing the 2024 report, a Enea Baselgia's 2023 paper titled “The Compliance Effects of the Automatic Exchange of Information: Evidence from the Swiss Tax Amnesty” provides a real-world case study on AEOI’s impact in Switzerland. Following AEOI's implementation, there was a marked increase in tax compliance, with many taxpayers participating in a 2023 tax amnesty program to disclose hidden assets. This showed that AEOI significantly heightens the detection tax evasion. Similar to Denmark, tax evasion appeared more prevalent among wealthier individuals, highlighting a need for continued research. 🌍UGANDA The fight against tax havens is not limited to developed nations. Uganda’s recent enactment of the Convention on Mutual Administrative Assistance in Tax Matters (Implementation) Act, 2023, exemplifies its commitment to international tax transparency. This Act aligns Uganda with the global trend towards AEOI, facilitating the automatic exchange of financial information and bolstering international cooperation in combating tax havens. AEOI's rise and global cooperation are crippling tax havens. Hiding wealth is getting harder, paving the way for a fairer tax landscape.

#NewResidents Regime and Corporate #TaxResidence Shifting   A particularly interesting case is that relating to the ownership of shares in foreign companies by an individual who benefits from the regime for new residents pursuant to art. 24-bis of the TUIR, The new residents regime favors the individual's tax position by offering a flat tax of €200,000 on income generated abroad. However, at the corporate level, it’s essential to verify whether the role of the new resident in the foreign companies could bring these companies under Italian taxation, particularly due to the requirement regarding the place of effective management (Article 73, paragraph 3 of the TUIR, as well as the so-called POEM under DTAs).   Let's consider the case of a company incorporated abroad, owned and managed solely by the new domiciled person, which receives periodic dividends from it. By itself, the dividend paid by the foreign company would qualify as foreign-source income, falling under the flat tax.   The question arises as to what would happen if the company's Italian tax residence were challenged because its sole director is based in Italy. For the new resident, the dividend would lose its foreign-source nature, as it would be paid by a company tax resident in Italy, and thus would be subject to ordinary taxation.   In circular no. 17 of 23 May 2017, the Italian Revenue Agency ruled that foreign companies that are not merely intermediaries, as operating companies carrying out an effective business activity abroad, substantial owners of the income resulting therefrom, can also meet the requirements to be considered residents in Italy.   According to the Revenue Agency, however, it’s necessary to take into account the particular status recognized to new residents in relation to income produced abroad, even in the case of natural persons who, acting as the center of imputation of the management choices of foreign entities, transfer their residence to Italy. In such cases, the presumption of the company’s tax residence, based on the place of effective management, would be inoperative if related solely to the relocation of the new resident director to Italy.   The Revenue Agency reaches a different conclusion if the foreign entities are managed not only by the new resident but also by other individuals residing in Italy who do not fall under the new residents tax regime. In such a case, the income of these foreign companies may be subject to taxation in Italy under Article 73 of the TUIR.   To mitigate any risks related to this situation, the same circular suggests a solution: it’s permitted for taxpayers benefiting from the regime to inform the tax authorities of the foreign entities they intend to manage directly from Italy and request an opinion on the (continuing) foreign nature of the income earned by these entities and attributable to them. This opinion may be requested when entering the regime or during a subsequent tax period.

⚠️ Understanding the Fine Line Between Tax Optimization and Tax Evasion Offshore solutions offer exceptional advantages for businesses looking to reduce their financial burdens. However, understanding the difference between tax optimization and tax evasion is crucial for leveraging these benefits in a lawful and ethical manner. Tax Optimization: Maximize Your Advantages Legally Tax optimization involves legally reducing tax liabilities through strategic planning and compliance with international regulations. Key aspects of tax optimization include: 🌐 Compliance with Laws: Utilizing tax-friendly regulations and international treaties to your benefit, all while maintaining transparency. 📜 Alignment with OECD Guidelines: Operations are aligned with BEPS (Base Erosion and Profit Shifting) standards to ensure full compliance with global tax frameworks. ✅ Ethical and Reliable Practices: Businesses gain tax advantages in a transparent way, building credibility and trust on the global stage. 🚨 Tax Evasion: Legal Violations and Consequences Tax evasion refers to the illegal practice of avoiding tax obligations through fraudulent or deceptive means. This approach carries significant risks and severe repercussions: ❌ Concealment of Income: Failure to report or intentionally hiding income is a clear violation of tax laws. ⚠️ Misrepresentation of Information: Providing false or misleading data to tax authorities puts your business at risk of audits and penalties. 💼 Heavy Fines and Reputational Damage: Tax evasion not only results in substantial financial penalties but also harms the credibility and long-term reputation of the business. 🌍 Offshorix Approach: Trust, Transparency, and Compliance At Offshorix, our mission is to help businesses achieve their financial goals while staying fully compliant with global and local tax regulations. Our expertise ensures you can focus on growth without worrying about legal risks. 📌 Comprehensive Offshore Solutions: From offshore company formation to international banking and tax optimization strategies, we guide you every step of the way. 📑 Full Regulatory Compliance: All processes are meticulously aligned with legal requirements, ensuring your operations remain transparent and compliant. 🌐 Global Reach with Local Expertise: With a deep understanding of international frameworks, we deliver tailor-made solutions that prioritize ethical and lawful practices. 💼 Offshorix: Your Trusted Partner in Tax Optimization Ready to reduce costs and expand globally? Our offshore solutions are designed to help you unlock tax advantages while maintaining full legal compliance. 📩 Got Questions? Contact us to learn how Offshorix can transform your business with strategic tax optimization. "Grow your business ethically and legally—because the right strategy always wins." #Offshorix #TaxOptimization #EthicalFinance #ComplianceMatters #TaxAdvantages #GlobalBusiness #OffshoreStrategies #InternationalFinance #OECDGuidelines