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ROUND TRIPPING

Introduction:

Round Tripping refers to the capital belonging to a country, which leaves the country and is then reinvested into the country in the form of FDI.

This route attracts a lot of incentives, which are:

Firstly, enterprises set up through FDI enjoy

tax benefits,

administrative support,

easier access to financial services.

Secondly, citizens’ from countries with weak property laws prefer to remove profits from their country and invest abroad to enjoy property rights rather than reinvesting their profits.

Thirdly, Round Tripping is often used as an avenue for laundering one’s illegitimate money.

It is due to these reasons that tax havens like Mauritius, the British Virgin Islands, Cayman Islands, Cyprus etc. are used. These places are of immense advantage as money routed through them is exempt from capital gains tax.

Methodology:

Analysis of case studies.

Internet web pages and legal websites.

Legal journals, reports and opinions.

Limitations:

Round Tripping in itself is a very unregulated and ambiguous phenomenon so the literature available is extremely rare and deficient; therefore this report has drawn inferences from the available material to draw out a viable overview of the entire scenario.

Literature Reviewed/ Bibliography:

The Securities and Exchange Board of India Act, 1992

Articles published in The Hindu newspaper

Articles published in The Economic Times newspaper

The Law lexicon

Theoretical Framework:

The tussle between the Reserve Bank of India (RBI) and the Revenue Department

Lately it has been observed that the RBI is leaning towards legitimizing certain types of Round Tripping.

The RBI’s view on the subject is that money reinvested in India through a foreign subsidiary of an Indian company should be considered foreign direct investment and that in many parts of the world such as China these aspects have already been legitimized. It feels that doing so would boost the FDI count of the country and render it a more attractive destination for foreign investment.

However, the Revenue Department looking from a microeconomic point of view feels that round tripping should not be allowed as Indian companies may use it to evade tax by routing their money through the tax havens.

Although in such cases FDI might increase but the country would not benefit in terms of revenue.

The RBI disagreeing with the revenue department’s assessment, cites the Chinese example arguing that where subsidiaries of foreign companies are levied a lower corporate tax, the incidence of round tripping is extremely high i.e. more than 25-30 per cent. However, in India where the corporate tax rates are the same for all companies the incidence of Round Tripping is only 2-3 per cent.

It is pertinent to note that the RBI stand is with regard to legitimizing Round Tripping within the sphere of the International Monetary Fund’s (IMF) definition of FDI only and does not intend to accommodate Round Tripping as a means of escaping tax or laundering ill-legitimate gains. In pursuance of this, recently the RBI has set forth directives with regards to Participatory Notes and tighter Know Your Customer (KYC) norms.

Instances where permission has been refused

1. Bharti Share Transfer case

In 2001, the Government i.e. the FIPB on the advice of the Department of Economic Affairs (DEA) rejected two proposals from the Bharti Group for transferring shares held by UK-based Bharti Global Ltd in favour of Indian Continent Investment Ltd, Mauritius, due to the negative impact of Round Tripping of foreign direct investment (FDI) in the long run, particularly from the taxation angle.

The DEA had itself acted upon the opinion of the Revenue Department and its views on tax implications of the transfer but interestingly the proposal had enjoyed the support of the Department of Telecommunications, which was the administrative authority in the case.

2. Chambal Agritech Plan

The Birla Group’s plan to transfer ownership of Chambal Agritech Ltd (CAL) from India to Singapore was refused permission by the DEA, which categorically stated that in the absence of capital account convertibility for Indian entities, the transfer would amount to Round Tripping.

The Chinese Myth

The China-FDI story has been in the limelight for some time now. The bucketful of billions that the world seems to be pouring down the country definitely makes good copy. No other country attracts as much foreign direct investment (FDI) as China does. Recently approximately USD 60 billion poured in which is about twelve times the amount that has flowed into India. Between the years 1979 (the first year of the China Economic system reform) and 2004, China has absorbed a total of about USD 560 billion in FDI whereas India, the next most popular destination for foreign investment in manufacturing received almost USD 200 billion less in FDI than China.

However, it is important to note that the Chinese FDI statistics are bloated up from Round Tripping whereas India’s figures are understated.

Before delving further we have to comprehend the IMF definition of FDI.

The IMF definition of FDI includes as many as twelve different elements, namely:

equity capital

reinvested earnings of foreign companies

inter-company debt transactions

short-term and long-term loans

financial leasing

trade credits

grants

bonds

non-cash acquisition of equity

investment made by foreign venture capital investors

earnings data of indirectly held FDI enterprises and control premium

non-competition fee

However, with the singular exception of equity capital reported on the basis of issue or transfer of equity/ preference shares to foreign direct investors, India’s current definition of FDI does not include any of the other above elements, whereas the Chinese definition includes them all. In addition to this China also classifies imported equipment as FDI while India captures these as imports in the trade data.

A study undertaken by the International Finance Corporation (FE, 5/6/02) shows that if comparable definitions of FDI are used by India and China, then FDI would constitute around 1.7% of India’s GDP as compared to 2.0% for China.

Besides this China’s FDI numbers include a substantial amount of Round-Tripping where large amounts of Chinese black money is recycled through Hong Kong and sent back to the mainland as FDI. Round-tripping in fact accounts for one-half of China’s FDI inflows, which has practically reduced the reported levels from USD 40 billion to USD 20 billion in the year 2000. In contrast, India’s figures of USD 2-3 billion do not conform to the standards of the IMF (as per the definition mentioned above) because it excludes reinvested earnings, subordinated debt and overseas commercial borrowings which are included in FDI numbers of other countries.

According to the “Round-Tripping” hypothesis, Chinese firms illegally transfer funds to neighbouring countries (like Taipei, Hong Kong and Macau) which in turn gets reinvested in mainland China as FDI.

However, since round-tripping is essentially clandestine, accurate data is practically impossible to obtain but estimates suggest that round-tripped FDI accounts for one-fourth of China’s total FDI count whereas on the hand it is an established fact India is relatively low on Round Tripping as compared to China.

The Mauritius Story

Pursuant to the Double Taxation Avoidance Treaty (DTAT) signed between India and Mauritius in 1983, any capital gain made on the sale of shares of Indian companies by investors resident in Mauritius would be taxed only in Mauritius and not in India. For the first ten years the treaty existed only on paper as FIIs were not allowed to invest in Indian stock markets. However all that changed in 1992 when FIIs were allowed into India and with the passing of the Offshore Business Activities Act, 1992 by Mauritius, foreign companies were allowed to register in the island nation for investing abroad.

There are two aspects which render Mauritius into a tax haven:

Firstly, a body corporate registered under the laws of Mauritius is a resident of Mauritius and thus will be subject to taxation as a resident.

Secondly, the Income Tax Act of Mauritius provides that offshore companies are liable to pay zero percent tax.

Therefore by bringing an offshore company within the definition of “resident”, both the benefits of being an offshore company as well as that of residency allowed under DTAA are bestowed upon it. In effect, the whole exercise of avoidance of double taxation turned out to be avoidance of taxation altogether.

The advantages of registering a company in Mauritius are:

total exemption from capital gains tax,

quick incorporation,

total business secrecy, and

a completely convertible currency.

Therefore the financial entities setting up companies in Mauritius do so without almost any establishment costs.

The economic importance of Mauritius to India can be clearly understood by the Hon’ble Supreme Court’s decision in Union of India v. Azadi Bachao Andolan1, where the entire Mauritius treaty was questioned. The Supreme Court’s decision clearly reflected the underlying policy of the Government to attract FDI into the country at any cost despite the known fact that the treaty is depriving the Indian Exchequer of millions of dollars due to Round Tripping and tax evasion.

The policy in itself has become a catch-22 situation for the Government as any stringent norms with regard to Mauritius might result in future FII investment being targeted away from India and working out for the benefit of South East Asian countries or FIIs looking at alternate options like Cyprus and Singapore to invest into India.

One has to understand that in a growing economy much in need of FDI any scenario decreasing FDI inflow is unfeasible and therefore Round Tripping, a side effect has to be accommodated with.

Recently as of September 15, 2007, Mauritius has started getting tough on Round Tripping. The Financial Services Commission (FSC) of Mauritius, the regulator supervising the non-banking financial services sector & global businesses, has carried out reforms in the Financial Services Act and improved the framework of the tax resident certificate.

In pursuance of this it has been decided that all resident corporations proposing to conduct business outside Mauritius would have to compulsorily apply to the FSC for a global business license. Even though there are no restrictions on any business activity, the FSA now specifically mentions that a license will not be granted, or would be revoked, if found that the activity “is unlawful and causes serious prejudice to the good repute of Mauritius as a financial services centre.”

The salient features of the reforms are:

Global Business Companies (GBC) would now have to compulsorily hold board meetings in Mauritius,

appoint at least two resident directors in Mauritius, (big deterrent as it would now make these directors liable for any unscrupulous activities)

maintain there principal bank accounts in Mauritius, and

carry out their auditing in Mauritius.

All GBCs have to get a certificate from the auditors stating that all requisite conditions have been complied with.

Moreover in the same month it was announced that the DTAA with Mauritius would be brought under the same umbrella as that with Singapore, which contains exclusive clauses to check Round Tripping of Investments.

OCB Investment Ban

In 2003 the RBI imposed a blanket ban on Overseas Corporate Bodies (OCBs) investment in the stock market sector. The move was primarily intended to restrict Round Tripping of money by Indian residents through their NRI counterparts overseas.

Conversely this move also resulted in a substantial amount of genuine FDI being curtailed as the RBI circular in this regard seemed to take away the special status given to genuine NRI businessmen who were looking at doing business in India.

It is to be noted that one of the main avenues for FDI in China is courtesy of Non-Resident Chinese individuals present in regions like Hong Kong, Macau and Taipei.

In contrast, foreign companies can invest in the country even if they have their base in tax havens such as the Cayman Islands. So basically the Automatic route for FDI is open to foreign owned companies whereas there is a blanket prohibition in case of OCBs with NRI ownership.

The PN predicament

Lately Participatory Notes (PNs) have come under the scanner for their alleged role in Round Tripping. The RBI as well as SEBI has shown their concern about the inflow of money coming into the country through PNs.

PNs are instruments issued by registered FII brokerages in India to foreign funds or investors who are not registered with SEBI, but are interested in trading in Indian securities. FII brokers buy and sell securities on behalf of their clients on their proprietary account and issue such notes in favour of such foreign investors. PNs are mostly used by entities that are not welcome by SEBI as well as by non-resident Indians who do not want to directly invest in Indian securities. SEBI’s worry is that the ultimate owner or beneficiary of PNs is not known as these PNs are transferable. On a similar track, RBI feels that the non-transparent nature of these instruments make them ideal money-laundering vehicles. The unstated fear of the regulators is that money belonging to Indian residents is being “round-tripped” through the PN route.

However as of 2007, SEBI has banned PNs in the off-shore Derivative Segment (to be applicable within a period of 18 months). It has cited the reason as a security measure and as a means of curtailing Round Tripping.

Conclusion/ Recommendations:

The laws present today dealing with Round Tripping are adequate, however the emphasis has to be on enforcing them rather than curtailing the route itself. The trick lies in essentially enforcing laws that are there to prevent round-tripping and encouraging foreign money including NRI and OCB money. Merely because a company is owned by an NRI, one should not discriminate against it investing and the solution lies in either abolishing what remains of capital gains tax, or in taxing foreigners’ profits made in Indian markets. Both would inevitably reduce instances of Round Tripping by rendering it less viable.

1 (2004) 10 SCC 1 : (2003)132 TAXMAN 373

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Tax avoidance

Tax avoidance is the legal utilization of the tax regime to one’s own advantage, to reduce the amount of tax that is payable by means that are within the law. The United States Supreme Court has stated that “The legal right of an individual to decrease the amount of what would otherwise be his taxes or altogether avoid them, by means which the law permits, cannot be doubted.” See Gregory v. Helvering. Examples of tax avoidance include:

Country of residence

One way a person or company may lower taxes is by changing one’s tax residence to a tax haven, such as Monaco, or by becoming a perpetual traveler. Some countries, such as the U.S. and the Philippines[citation needed], tax their citizens, permanent residents, and companies on all their worldwide income. In these cases, taxation cannot be avoided by simply transferring assets or moving abroad.

The United States is unlike many other countries in that its citizens and permanent residents are subject to U.S. federal income tax on their worldwide income even if they reside temporarily or permanently outside the United States. U.S. citizens therefore cannot avoid U.S. taxes simply by emigrating. According to Forbes magazine some nationals choose to give up their United States citizenship rather than be subject to the U.S. tax system; however, U.S. citizens who reside (or spend long periods of time) outside the U.S. may be able to exclude some salaried income earned overseas (but not other types of income unless specified in a bilateral tax treaty) from income in computing the U.S. federal income tax. The 2008 limit on the amount that can be excluded was US,000.

Double taxation

Most countries impose taxes on income earned or gains realized within that country regardless of the country of residence of the person or firm. Most countries have entered into bilateral double taxation treaties with many other countries to avoid taxing nonresidents twice — once where the income is earned and again in the country of residence (and perhaps, for US citizens, taxed yet again in the country of citizenship) — however, there are relatively few double-taxation treaties with countries regarded as tax havens. To avoid tax, it is usually not enough to simply move one’s assets to a tax haven. One must also personally move to a tax haven (and, for U.S. nationals, renounce one’s citizenship) to avoid tax.

Legal entities

Without changing country of residence (or, if a U.S. citizen, giving up one’s citizenship), personal taxation may be legally avoided by creation of a separate legal entity to which one’s property is donated. The separate legal entity is often a company, trust, or foundation. Assets are transferred to the new company or trust so that gains may be realized, or income earned, within this legal entity rather than earned by the original owner. Usually one is only personally taxed on property and earnings that one actually owns; thus, by donating assets to a separate legal entity, personal taxation can be avoided, although corporate taxes may still be applicable. If the legal entity is ever liquidated and the assets transferred back to an individual, then capital gains taxes would apply on all profits.

The company/trust/foundation may also be able to avoid corporate taxation if incorporated in an offshore jurisdiction (see offshore company, offshore trust or private foundation). Although income tax would still be due on any salary or dividend drawn from the legal entity. For a settlor (creator of a trust) to avoid tax there may be restrictions on the type, purpose and beneficiaries of the trust. For example, the settlor of the trust may not be allowed to be a trustee or even a beneficiary and may thus lose control of the assets transferred and/or may be unable to benefit from them.

Tax evasion

A “Lion’s Mouth” postbox for anonymous denunciations at the Doge’s Palace in Venice, Italy. Text translation: “Secret denunciations against anyone who will conceal favors and services or will collude to hide the true revenue from them.”

By contrast tax evasion is the general term for efforts by individuals, firms, trusts and other entities to evade taxes by illegal means. Tax evasion usually entails taxpayers deliberately misrepresenting or concealing the true state of their affairs to the tax authorities to reduce their tax liability, and includes, in particular, dishonest tax reporting (such as declaring less income, profits or gains than actually earned; or overstating deductions).

Statistics

The difference between the amount of tax legally owed and the amount actually collected by a government is sometimes called the tax gap.

In the United States, the IRS estimated in 2007 that Americans owed 5 billion more than they paid, or about 14% of federal revenues for the fiscal year of 2007.

This section requires expansion.

Illegal income and tax evasion

Main article: Taxation of illegal income in the United States

In the United States, persons subject to the Internal Revenue Code who earn income by illegal means (gambling, theft, drug trafficking etc.) are required to report unlawful gains as income when filing annual tax returns (see e.g., James v. United States), but they often do not do so. Suspected lawbreakers, most famously Al Capone, have therefore been successfully prosecuted for tax evasion when there was insufficient evidence to try them for their non-tax related crimes. The United States Supreme Court has ruled that this does not violate an individual’s right to remain silent, and so tax evasion remains a popular method for catching criminals.[citation needed] Other times tax evasion can be used as a “one more nail in the coffin” by prosecutors by stating that if a person earns illegal income, s/he may also be guilty of tax evasion. Those who attempt to report illegal income as coming from a legitimate source could be charged with money laundering. By contrast: In the UK law enforcement agencies do not generally have access to tax returns and so illegal earnings can supposedly be safely declared[citation needed] but in practice those carrying on criminal activities generally prefer not to do so, and so can sometimes be prosecuted for tax evasion rather than for other crimes[citation needed]. Soviet spy Aldrich Ames, who had earned more than million cash for his espionage, was also charged with tax evasion as none of the Soviet money was reported on his tax returns. Ames attempted to have the tax evasion charge dismissed on the grounds his espionage profits were illegal, but the charges stood.

Economics of tax evasion

In 1968, Nobel laureate economist Gary Becker first[citation needed] theorized the economics of crime, on the basis of which Allingham and Sandmo produced in 1972 an economic model of tax evasion. It deals with the evasion of income tax, the main source of tax revenue in the developed countries. According to them, the level of evasion of income tax depends on the level of punishment provided by law.

This section requires expansion.

Evasion of customs duty

Customs duties are an important source of revenue in the developing countries. The importers purport to evade customs duty by (a) under-invoicing and (b) misdeclaration of quantity and product-description. When there is ad valorem import duty, the tax base is reduced through underinvoicing. Misdeclaration of quantity is more relevant for products with specific duty. Production description is changed match an H. S. Code commensurate with a lower rate of duty.

This section requires expansion.

Smuggling

Smuggling is importation or exportation of foreign products through unauthorized route. Smuggling is resorted to for total evasion of leviable customs duties as well as for importation of contraband items. A smuggler does not have to pay any customs duty since the products are not routed through an authorized or notified Customs port and therefore, not subjected to declaration and payment of duties and taxes.

Evasion of value added tax (VAT) and sales taxes

During the latter half of the twentieth century, value added tax (VAT) has emerged as a modern form of consumption tax through the world, with the notable exception of the United States. Producers who collect VAT from the consumers may evade tax by under-reporting the amount of sales. The US has no broad-based consumption tax at the federal level, and no state currently collects VAT; the overwhelming majority of states instead collect sales taxes. Canada uses both a VAT at the federal level (the Goods and Services Tax) and sales taxes at the provincial level; some provinces have a single tax combining both forms.

In addition, most jurisdictions which levy a VAT or sales tax also legally require their residents to report and pay the tax on items purchased in another jurisdiction. This means that those consumers who purchase something in a lower-taxed or untaxed jurisdiction with the intention of avoiding VAT or sales tax in their home jurisdiction are in fact breaking the law in most cases. Such evasion is especially prevalent in federal states like the US and Canada where sub-national jurisdictions have the constitutional power to charge varying rates of VAT or sales tax. Intranational borders in such countries usually lack customs offices or similar facilities that could effectively control the movement of any goods carried in private vehicles from one jurisdiction to another and most of the respective state and provincial governments simply lack the manpower and resources to pursue and prosecute every case of state/provincial sales tax evasion arising from purchases which do not cross state or provincial borders other than for major purchases such as cars.

Control of evasion

Level of evasion depends on a number of factors one of them being fiscal equation. People’s tendency to evade income tax declines when the return for due payment of taxes is not obvious. Evasion also depends on the efficiency of the tax administration. Corruption by the tax officials often render control of evasion difficult. Tax administrations resort to various means for plugging in scope of evasion and increasing the level of enforcement. These include, among others, privatization of tax enforcement, tax farming, and institution of Pre-Shipment Inspection (PSI) agencies.

Corruption by tax officials

Corrupt tax officials cooperate with the tax payers who intend to evade taxes. When they detect an instance of evasion, they refrain from reporting in return for illegal gratification or bribe. Corruption by tax officials is a serious problem for the tax administration in a huge number of underdeveloped countries.[citation needed]

Role of middleman

It is often alleged that tax lawyers and chartered accountants help taxpayers including firms and companies in evading taxes. In the same vein, the Clearing and Forwarding agents help in evasion of Customs duties. It has been suggested that removal of human interface is a reliable solution to this problem.[citation needed]

Level of evasion and punishment

This section contains weasel words, vague phrasing that often accompanies biased or unverifiable information. Such statements should be clarified or removed. (October 2009)

Tax evasion is a crime in almost all developed countries and subjects the guilty party to fines and/or imprisonment – in China the punishment can be as severe as the death penalty. In Switzerland, many acts that would amount to criminal tax evasion in other countries are treated as civil matters. Even dishonestly misreporting income in a tax return is not necessarily considered a crime. Such matters are dealt with in the Swiss tax courts, not the criminal courts. However, even in Switzerland, some fraudulent tax conduct is criminal, for example, deliberate falsification of records. Moreover, civil tax transgressions may give rise to penalties. So the difference between Switzerland and other countries, while significant, is limited. It is often considered that extent of evasion depends on the severity of punishment for evasion. Normally, the higher the evaded amount, the higher the degree of punishment.

Privatization of tax enforcement

Professor Christopher Hood first[citation needed] suggested privatization of tax enforcement for overcoming limitations of government tax administration in controlling tax evasion. Some governments have resorted to privatization of tax enforcement to enhance efficiency of the tax system. The assumption is that leakage of revenue will lower under a privatized regime. In Bangladesh, part of Customs administration was privatized in as early as 1991.

Tax farming

Tax farming is an old means of collection of revenue when it is difficult to determine the leviable amount taxes with certainty. Government leases out the collection system to a private entity for a fixed amount who then collects the revenue and shoulders the risk of attempts at evasion by the tax-payers. It has been suggested that tax farming may be a solution to the problem of tax evasion seen in developing countries.

This section requires expansion.

PSI Agencies

Pre-shipment Agencies like SGS, Cotecna etc. are employed to prevent evasion of customs duty through under-invoicing and misdeclaration. However, in the recent times, allegations have been lodged that PSI agencies have actively cooperated with the importers in evading customs duties. Authority in Bangladesh has found Cotecna, a PSI agency of Swiss origin, guilty of complicity with the importers for evasion of customs duties on a huge scale. The same company Cotecna was implicated for bribing Pakistan’s prime minister Benazir Bhutto for securing contract for importation by Pakistani importers. She and her husband were sentenced both in Pakistan and Switzerland.

This section requires expansion.

The distinction in various jurisdictions

The use of the terms tax avoidance and tax evasion can vary depending on the jurisdiction. In general, the term “evasion” applies to illegal actions and “avoidance” to actions within the law. The term “mitigation” is also used in some jurisdictions to further distinguish actions within the original purpose of the relevant provision from those actions that are within the letter of the law, but do not achieve its purpose.

The examples and perspective in this section deal primarily with Anglo-American law and do not represent a worldwide view of the subject. Please improve this article and discuss the issue on the talk page.

The distinction in the United States

In the United States “tax evasion” is evading the assessment or payment of a tax that is already legally owed at the time of the criminal conduct. Tax evasion is criminal, and has no effect on the amount of tax actually owed, although it may give rise to substantial monetary penalties.

By contrast, the term “tax avoidance” describes lawful conduct, the purpose of which is to avoid the creation of a tax liability in the first place. Whereas an evaded tax remains a tax legally owed, an avoided tax is a tax liability that has never existed.

For example, consider two businesses, each of which have a particular asset (in this case, a piece of real estate) that is worth far more than its purchase price.

Business One sells the property and underreports its gain. In this instance, tax is legally due. Business One has engaged in tax evasion, which is criminal.

Business Two consults with a tax advisor and discovers that it can structure the sale as a “like kind exchange” (formally known as a 1031 exchange, named after the Code section) for other real estate that it can use. In this instance, no tax is due because (legally, under Section 1031) no sale took place. Business Two has engaged in tax avoidance (or tax mitigation), which is completely within the law.

In the above example, tax may eventually be due when the second property is sold. Whether and how much tax will be due will depend on circumstances and the state of the law at the time. This is true of many tax avoidance strategies.

The distinction in the United Kingdom

The United Kingdom and jurisdictions following the UK approach (such as New Zealand) have recently adopted the evasion/avoidance terminology as used in the United States: evasion is a criminal attempt to avoid paying tax owed while avoidance is an attempt to use the law to reduce taxes owed. There is, however, a further distinction drawn between tax avoidance and tax mitigation. Tax avoidance is a course of action designed to conflict with or defeat the evident intention of Parliament: IRC v Willoughby. Tax mitigation is conduct which reduces tax liabilities without ax avoidance (not contrary to the intention of Parliament), for instance, by gifts to charity or investments in certain assets which qualify for tax relief. This is important for tax provisions which apply in cases of voidance: they are held not to apply in cases of mitigation.

The clear articulation of the concept of an avoidance/mitigation distinction goes back only to the 1970s. The concept originated from economists, not lawyers. The use of the terminology avoidance/mitigation to express this distinction was an innovation in 1986: IRC v Challenge.

In practice the distinction is sometimes clear, but often difficult to draw. Relevant factors to decide whether conduct is avoidance or mitigation include: whether there is a specific tax regime applicable; whether transactions have economic consequences; confidentiality; tax linked fees. Important indicia are familiarity and use. Once a tax avoidance arrangement becomes common, it is almost always stopped by legislation within a few years. If something commonly done is contrary to the intention of Parliament, it is only to be expected that Parliament will stop it. So that which is commonly done and not stopped is not likely to be contrary to the intention of Parliament. It follows that tax reduction arrangements which have been carried on for a long time are unlikely to constitute tax avoidance. Judges have a strong intuitive sense that that which everyone does, and has long done, should not be stigmatised with the pejorative term of voidance. Thus UK courts refused to regard sales and repurchases (known as bed-and-breakfast transactions) or back-to-back loans as tax avoidance.

Other approaches in distinguishing tax avoidance and tax mitigation are to seek to identify he spirit of the statute or isusing a provision. But this is the same as the vident intention of Parliament properly understood. Another approach is to seek to identify rtificial transactions. However, a transaction is not well described as rtificial if it has valid legal consequences, unless some standard can be set up to establish what is atural for the same purpose. Such standards are not readily discernible. The same objection applies to the term evice.

It may be that a concept of ax avoidance based on what is contrary to he intention of Parliament is not coherent. The object of construction of any statute is expressed as finding he intention of Parliament. In any successful tax avoidance scheme a Court must have concluded that the intention of Parliament was not to impose a tax charge in the circumstances which the tax avoiders had placed themselves. The answer is that the expression ntention of Parliament is being used in two senses. It is perfectly consistent to say that a tax avoidance scheme escapes tax (there being no provision to impose a tax charge) and yet constitutes the avoidance of tax. One is seeking the intention of Parliament at a higher, more generalised level. A statute may fail to impose a tax charge, leaving a gap that a court cannot fill even by purposive construction, but nevertheless one can conclude that there would have been a tax charge had the point been considered. An example is the notorious UK case Ayrshire Employers Mutual Insurance Association v IRC, where the House of Lords held that Parliament had issed fire.

History of the distinction

An avoidance/evasion distinction along the lines of the present distinction has long been recognised but at first there was no terminology to express it. In 1860 Turner LJ suggested evasion/contravention (where evasion stood for the lawful side of the divide): Fisher v Brierly. In 1900 the distinction was noted as two meanings of the word vade: Bullivant v AG. The technical use of the words avoidance/evasion in the modern sense originated in the USA where it was well established by the 1920s. It can be traced to Oliver Wendell Holmes in Bullen v Wisconsin. It was slow to be accepted in the United Kingdom. By the 1950s, knowledgeable and careful writers in the UK had come to distinguish the term ax evasion from voidance. However in the UK at least, vasion was regularly used (by modern standards, misused) in the sense of avoidance, in law reports and elsewhere, at least up to the 1970s. Now that the terminology has received official approval in the UK (Craven v White) this usage should be regarded as erroneous. But even now it is often helpful to use the expressions egal avoidance and llegal evasion, to make the meaning clearer.

Public opinion on tax avoidance

Tax avoidance may be considered to be the dodging of one’s duties to society, or alternatively the right of every citizen to structure one’s affairs in a manner allowed by law, to pay no more tax than what is required. Attitudes vary from approval through neutrality to outright hostility. Attitudes may vary depending on the steps taken in the avoidance scheme, or the perceived unfairness of the tax being avoided.

In the judiciary, different judges have taken different attitudes. As a generalization, for example, judges in the United Kingdom before the 1970s regarded tax avoidance with neutrality; but nowadays they regard it with increasing hostility. See the quotes below for examples.

Responses to tax avoidance

Avoidance also reduces government revenue and brings the tax system into disrepute, so governments need to prevent tax avoidance or keep it within limits. The obvious way to do this is to frame tax rules so that there is no scope for avoidance. In practice this has not proved achievable and has led to an ongoing battle between governments amending legislation and tax advisors’ finding new scope for tax avoidance in the amended rules.

To allow prompter response to tax avoidance schemes, the US Tax Disclosure Regulations (2003) require prompter and fuller disclosure than previously required, a tactic which was applied in the UK in 2004.

Some countries such as Canada, Australia and New Zealand have introduced a statutory General Anti-Avoidance Rule (GAAR). Canada also uses Foreign Accrual Property Income rules to obviate certain types of tax avoidance. In the United Kingdom, there is no GAAR, but many provisions of the tax legislation (known as “anti-avoidance” provisions) apply to prevent tax avoidance where the main object (or purpose), or one of the main objects (or purposes), of a transaction is to enable tax advantages to be obtained.

In the United States, the Internal Revenue Service distinguishes some schemes as “abusive” and therefore illegal.

In the UK, judicial doctrines to prevent tax avoidance began in IRC v Ramsay (1981) followed by Furniss v. Dawson (1984). This approach has been rejected in most commonwealth jurisdictions even in those where UK cases are generally regarded as persuasive. After two decades, there have been numerous decisions, with inconsistent approaches, and both the Revenue authorities and professional advisors remain quite unable to predict outcomes. For this reason this approach can be seen as a failure or at best only partly successful.

In the UK in 2004, the Labour government announced that it would use retrospective legislation to counteract some tax avoidance schemes, and it has subsequently done so on a few occasions. Initiatives announced in 2010 suggest an increasing willingness on the part of HMRC to use retrospective action to counter avoidance schemes, even when no warning has been given.

Tax protesters and tax resistance

Main articles: Tax protester, Tax protester arguments, and Tax resistance

Some tax evaders believe that they have uncovered new interpretations of the law that show that they are not subject to being taxed (not liable): these individuals and groups are sometimes called tax protesters. Many protesters continue posing the same arguments that the Federal courts have rejected time and time again, ruling the arguments to be legally frivolous.

Tax resistance is the refusal to pay a tax for conscientious reasons (because the resister does not want to support the government or some of its activities). They typically do not take the position that the tax laws are themselves illegal or do not apply to them (as tax protesters do) and they are more concerned with not paying for what they oppose than they are motivated by the desire to keep more of their money (as tax evaders typically are).

In the UK case of Cheney v. Conn, an individual objected to paying tax that, in part, would be used to procure nuclear arms in unlawful contravention, he contended, of the Geneva Convention. His claim was dismissed, the judge ruling that “What the [taxation] statute itself enacts cannot be unlawful, because what the statute says and provides is itself the law, and the highest form of law that is known to this country.”

Definition of tax evasion in the United States

The application of the U.S. tax evasion statute may be illustrated in brief as follows, as applied to tax protesters. The statute is Internal Revenue Code section 7201:

Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall, in addition to other penalties provided by law, be guilty of a felony and, upon conviction thereof, shall be fined not more than 0,000 (0,000 in the case of a corporation), or imprisoned not more than 5 years, or both, together with the costs of prosecution.

Under this statute and related case law, the prosecution must prove, beyond a reasonable doubt, each of the following three elements:

the “attendant circumstance” of the existence of a tax deficiency an unpaid tax liability; and

the “actus reus” (i.e., guilty conduct) an affirmative act (and not merely an omission or failure to act) in any manner constituting evasion or an attempt to evade either:

the assessment of a tax, or

the payment of a tax.

the “mens rea” or “mental” element of willfulness the specific intent to violate an actually known legal duty;

An affirmative act “in any manner” is sufficient to satisfy the third element of the offense. That is, an act which would otherwise be perfectly legal (such as moving funds from one bank account to another) could be grounds for a tax evasion conviction (possibly an attempt to evade “payment”), provided the other two elements are also met. Intentionally filing a false tax return (a separate crime in itself) could constitute an attempt to evade the “assessment” of the tax, as the Internal Revenue Service bases initial assessments (i.e., the formal recordation of the tax on the books of the U.S. Treasury) on the tax amount shown on the return.

Application to tax protesters

This statute is an example of an exception to the general rule under U.S. law that “ignorance of the law or a mistake of law is no defense to criminal prosecution.” Under the Cheek Doctrine (Cheek v. United States), the United States Supreme Court ruled that a genuine, good faith belief that one is not violating the Federal tax law (such as a mistake based on a misunderstanding caused by the complexity of the tax law itself) would be a valid defense to a charge of “willfulness” (“willfulness” in this case being knowledge or awareness that one is violating the tax law itself), even though that belief is irrational or unreasonable. On the surface, this rule might appear to be of some comfort to tax protesters who assert, for example, that “wages are not income.” However, merely asserting that one has such a good faith belief is not determinative in court; under the American legal system the trier of fact (the jury, or the trial judge in a non-jury trial) decides whether the defendant really has the good faith belief he or she claims. With respect to willfulness, the placing of the burden of proof on the prosecution is of limited utility to a defendant that the jury simply does not believe.

A further stumbling block for tax protesters is found in the Cheek Doctrine with respect to arguments about “constitutionality.” Under the Doctrine, the belief that the Sixteenth Amendment was not properly ratified and the belief that the Federal income tax is otherwise unconstitutional are not treated as beliefs that one is not violating the “tax law” i.e., these errors are not treated as being caused by the “complexity of the tax law.”

In the Cheek case the Court stated:

Claims that some of the provisions of the tax code are unconstitutional are submissions of a different order. They do not arise from innocent mistakes caused by the complexity of the Internal Revenue Code. Rather, they reveal full knowledge of the provisions at issue and a studied conclusion, however wrong, that those provisions are invalid and unenforceable. Thus, in this case, Cheek paid his taxes for years, but after attending various seminars and based on his own study, he concluded that the income tax laws could not constitutionally require him to pay a tax.

The Court continued:

We do not believe that Congress contemplated that such a taxpayer, without risking criminal prosecution, could ignore the duties imposed upon him by the Internal Revenue Code and refuse to utilize the mechanisms provided by Congress to present his claims of invalidity to the courts and to abide by their decisions. There is no doubt that Cheek, from year to year, was free to pay the tax that the law purported to require, file for a refund and, if denied, present his claims of invalidity, constitutional or otherwise, to the courts. See 26 U.S.C. 7422. Also, without paying the tax, he could have challenged claims of tax deficiencies in the Tax Court, 6213, with the right to appeal to a higher court if unsuccessful. 7482(a)(1). Cheek took neither course in some years, and, when he did, was unwilling to accept the outcome. As we see it, he is in no position to claim that his good-faith belief about the validity of the Internal Revenue Code negates willfulness or provides a defense to criminal prosecution under 7201 and 7203. Of course, Cheek was free in this very case to present his claims of invalidity and have them adjudicated, but, like defendants in criminal cases in other contexts who “willfully” refuse to comply with the duties placed upon them by the law, he must take the risk of being wrong.

The Court ruled that such beliefs even if held in good faith are not a defense to a charge of willfulness. By pointing out that arguments about constitutionality of Federal income tax laws “reveal full knowledge of the provisions at issue and a studied conclusion, however wrong, that those provisions are invalid and unenforceable,” the Supreme Court may have been impliedly warning that asserting such “constitutional” arguments (in open court or otherwise) might actually help the prosecutor prove willfulness. Daniel B. Evans, a tax lawyer who has written about tax protester arguments, has stated that:

[ . . . ] if you plan ahead to use it [the Cheek defense], then it is almost certain to fail, because your efforts to establish your ood faith belief are going to be used by the government as evidence that you knew that what you were doing was wrong when you did it, which is why you worked to set up a defense in advance. Planning not to file tax returns and avoid prosecution using a ood faith belief is kind of like planning to kill someone using a claim of elf-defense. If youe planned in advance, then it shouldn work.

Failing to file returns in the United States

According to some estimates, about three percent of taxpayers do not file tax returns at all.[citation needed] In the case of U.S. Federal income taxes, civil penalties for willful failure to timely file returns and willful failure to timely pay taxes are based on the amount of tax due; thus, if no tax is owed, no penalties are due. The civil penalty for willful failure to timely file a return is generally equal to 5.0% of the amount of tax “required to be shown on the return per month, up to a maximum of 25%. By contrast, the civil penalty for willful failure to timely pay the tax actually “shown on the return” is generally equal to 0.5% of such tax due per month, up to a maximum of 25%. The two penalties are computed together in a relatively complex algorithm, and computing the actual penalties due is somewhat challenging.

In cases where a taxpayer does not have enough money to pay the entire tax bill, the IRS can work out a payment plan with taxpayers.

For years for which no return has been filed, there is no statute of limitations on civil actions — that is, on how long the IRS can seek taxpayers and demand payment of taxes owed.

For each year a taxpayer willfully fails to timely file an income tax return, the taxpayer can be sentenced to one year in prison. In general, there is a six-year statute of limitations on Federal tax crimes.

Tax shelters

See also: Tax shelter and Tax haven

Tax shelters are investments that allow, and purport to allow, a reduction in one’s income tax liability. Although things such as home ownership, pension plans, and Individual Retirement Accounts (IRAs) can be broadly considered “tax shelters”, insofar as funds in them are not taxed, provided that they are held within the IRA for the required amount of time, the term “tax shelter” was originally used to describe primarily certain investments made in the form of limited partnerships, some of which were deemed by the U.S. Internal Revenue Service to be abusive.

The Internal Revenue Service and the United States Department of Justice have recently teamed up to crack down on abusive tax shelters. In 2003 the Senate’s Permanent Subcommittee on Investigations held hearings about tax shelters which are entitled U.S. TAX SHELTER INDUSTRY: THE ROLE OF ACCOUNTANTS, LAWYERS, AND FINANCIAL PROFESSIONALS. Many of these tax shelters were designed and provided by accountants at the large American accounting firms.

Examples of U.S. tax shelters include: Foreign Leveraged Investment Program (FLIP) and Offshore Portfolio Investment Strategy (OPIS). Both were devised by partners at the accounting firm, KPMG. These tax shelters were also known as “basis shifts” or “defective redemptions.”

Prior to 1987, passive investors in certain limited partnerships (such as oil exploration or real estate investment ventures) were allowed to use the passive losses (if any) of the partnership (i.e., losses generated by partnership operations in which the investor took no material active part) to offset the investors’ income, lowering the amount of income tax that otherwise would be owed by the investor. These partnerships could be structured so that an investor in a high tax bracket could obtain a net economic benefit from partnership-generated passive losses.

In the Tax Reform Act of 1986 the U.S. Congress introduced the limitation (under 26 U.S.C.  469) on the deduction of passive losses and the use of passive activity tax credits. The 1986 Act also changed the “at risk” loss rules of 26 U.S.C.  465. Coupled with the hobby loss rules (26 U.S.C.  183), the changes greatly reduced tax avoidance by taxpayers engaged in activities only to generate deductible losses.

See also

Wikiquote has a collection of quotations related to: Tax avoidance and tax evasion

Bottom of the harbour tax avoidance (Australia)

Civil disobedience

David Wynn Miller

Gary Becker

Loophole

Tax patent

Stop Tax Haven Abuse Act

Tax exile

Tax farming

Tax haven

Corporate inversion

Tax incidence

Tax protester

Tax resistance

Taxation as slavery

Underground economy (also known as the black market)

References

^ “The new refugees. (Americans who give up citizenship to save on taxes)”. Forbes. 1994-11-21. http://web.archive.org/web/20060227051231/http://www.frissell.com/taxpat/FORBES1.HTM. Retrieved 2006-12-23. 

^ There are certain well-known exceptions to this: Cyprus has a heavily exploited double taxation relief treaty with Russia; another frequently used treaty is the double taxation relief treaty between Mauritius and India. There are also a number of other less well known and less frequently utilized treaties, such as the one between the British Virgin Islands and Switzerland.

^ 5B tax gap: Random Tax Audits Return to the IRS, 9 Oct 2007, Morning Edition.

^ 366 U.S. 213 (1961), overruling Commissioner v. Wilcox, 327 U.S. 404 (1946).

^ Allingham, M. G. and A. Sandmo ncome Tax evasion: A Theoretical Analysis, Journal of Public Economics, Vol.1, 1972, p.323-38.

^ Chowdhury, F. L. Evasion of Customs Duty in Bangladesh, 2006: Desh Prokashon Dhaka.

^ Chowdhury, F. L. Evasion of Customs Duty in Bangladesh, 2006: Desh Prokashon Dhaka.

^ Spiro, Peter S. (2005), “Tax Policy and the Underground Economy,” in Christopher Bajada and Friedrich Schneider, eds., Size, Causes and Consequences of the Underground Economy (Ashgate Publishing).

^ Tomkov, Eva (2008): “Tax Evasion in the Czech Republic” In: A Brief Introduction to Czech Law. Rincon: The American Institute for Central European Legal Studies (AICELS), 2008. p. 111 – 121, ISBN 978-0-692-00045-8

^ Chowdhury, F. L. (1992) Evasion of Customs Duty in Bangladesh, unpublished MBA dissertation, Graduate School of Management, Monash University, Australia.

^ Stella, P. Tax Farming – A radical Solution for Developing Country Tax Problem, IMF Working Paper No. 92/70

^ Alam. D (1999) Introduction of PSI system in Bangladesh: Facts and Documents, Desh Prokashon, Dhaka.

^ Hood, C. (1986) Privatizing UK tax Law Enforcement?, Public Administration, Vol. 64, Autumn, 1986, p. 319-33.

^ Chowdhury, F. L. Evasion of Customs Duty in Bangladesh, unpublished MBA dissertation, Graduate School of Management, Monash University, Australia.

^ Stella, P. (1992) Tax Farming – A radical Solution for Developing Country Tax Problem, IMF Working Paper No. 92/70.

^ “NBR showcauses Cotecna on car import scam”, New Age

^ New York Times, 06 August 2003

^ The term “assessment” is here used in the technical sense of a statutory assessment: the formal administrative act of a duly appointed employee of the Internal Revenue Service who records the tax on the books of the United States Treasury after certain administrative prerequisites have been met. The term “assessment” has a separate, non-statutory meaning in the United States, viz. the act of the taxpayer computing the amount of the tax when preparing and filing a Federal income tax return.

^ 70 TC 57.

^ See for instance CT Sandford, Hidden Costs of Taxation, IFS, 1973.

^ (1986) STC 548.

^ 27 TC 331.

^ (1860) 1 de G F&J 643 (England).

^ (1901) AC 196 (England).

^ Minimising Taxes, Sears, 1922, Vernon Law Book Co.

^ 240 U.S. 625, 630 (1916).

^ (1988) 62 TC 1 at 197.

^ HMRC goes on 1bn retro warpath, Accountancy Age, 18 Feb 2010

^ (1968) All ER 779.

^ 26 U.S.C.  7201.

^ 26 U.S.C.  7206.

^ Ignorantia legis neminem excusat, or “ignorance of law excuses no one.” Black’s Law Dictionary, p. 673 (5th ed. 1979).

^ 498 U.S. 192 (1991).

^ The U.S. courts have consistently rejected arguments that “wages” or “labor” are not taxable as income under the Internal Revenue Code. For example, see United States v. Connor, 898 F.2d 942, 90-1 U.S. Tax Cas. (CCH) paragr. 50,166 (3d Cir. 1990) (tax evasion conviction under 26 U.S.C.  7201 affirmed by the United States Court of Appeals for the Third Circuit; taxpayer argument that because of the Sixteenth Amendment, wages were not taxable was rejected by the Court; taxpayer argument that an income tax on wages is required to be apportioned by population also rejected); Perkins v. Commissioner, 746 F.2d 1187, 84-2 U.S. Tax Cas. (CCH) paragr. 9898 (6th Cir. 1984) (26 U.S.C.  61 ruled by the United States Court of Appeals for the Sixth Circuit to be n full accordance with Congressional authority under the Sixteenth Amendment to the Constitution to impose taxes on income without apportionment among the states; taxpayer argument that wages paid for labor are non-taxable was rejected by the Court, and ruled frivolous); White v. United States, 2005-1 U.S. Tax Cas. (CCH) paragr. 50,289 (6th Cir. 2004), cert. denied, ____ U.S. ____ (2005) (taxpayer argument that wages are not taxable was ruled frivolous by the United States Court of Appeals for the Sixth Circuit; penalty imposed under 26 U.S.C.  6702 for filing tax return with frivolous position was therefore proper); Granzow v. Commissioner, 739 F.2d 265, 84-2 U.S. Tax Cas. (CCH) paragr. 9660 (7th Cir. 1984) (taxpayer argument that wages are not taxable was rejected by the United States Court of Appeals for the Seventh Circuit, and ruled frivolous); Waters v. Commissioner, 764 F.2d 1389, 85-2 U.S. Tax Cas. (CCH) paragr. 9512 (11th Cir. 1985) (taxpayer argument that income taxation of wages is unconstitutional was rejected by the United States Court of Appeals for the Eleventh Circuit; taxpayer required to pay damages for filing frivolous suit).

^ Cheek, 498 U.S. at 205-206 (footnote omitted; emphasis added).

^ See also Spies v. United States, 317 U.S. 492 (1943); Sansone v. United States, 380 U.S. 343 (1965); Cheek v. United States, 498 U.S. 192 (1991).

^ Daniel B. Evans, The Tax Protester FAQ; downloaded 24 April 2007.

^ See 26 U.S.C.  6651.

^ See 26 U.S.C.  6651(a)(1).

^ See 26 U.S.C.  6651(a)(2).

^ See 26 U.S.C.  6501.

^ See 26 U.S.C.  7203.

^ See 26 U.S.C.  6531.

Further reading

Taxation of Foreign Domiciliaries (James Kessler QC, 5th edition, 2005, Key Haven Publications) chapter 16 discusses tax avoidance in context of UK anti-avoidance provisions.

External links

Look up Tax avoidance or Tax evasion in Wiktionary, the free dictionary.

Tax Justice Network – research into “the negative impacts of tax avoidance, tax competition and tax havens”

Law Enforcement

Online security Scams Information from ATO

The Tax Gap Special report from The Guardian about tax avoidance by big business

US Justice Dept Press Release on Jeffrey Chernick, UBS tax evader

US Justice Dept Press Release on Robert Moran and Steven Michael Rubenstein, two UBS tax evaders

US States Atty for Central Dist of California Press Release on John McCarthy of Malibu, Calif, UBS tax evader

Tax Me if You Can – PBS Frontline documentary into tax avoidance

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More Cyprus Property For Sale Articles

Co-authored by Jordan L. Eftekari, Esq.

(1)     Introduction

On November 2, 2007, the Wall Street Journal published an article: “Got 0,000?  The U.S. Awaits (Government’s EB-5 Program Offers Foreign Investors Green Cards for Job Creation)”.

A Federal program known as EB-5 (Immigrant-Investor Visa), administered by the U.S. Citizenship & Immigration Services (“USCIS”), encourages foreign investors to invest their way to living in the U.S.A.

Morrie Berez, chief of the EB-5 program at USCIS, stated: “The opportunity is truly beautiful to individuals who want to live and contribute their energy in the United States, and it creates economic growth and especially jobs for Americans.”

There are 10,000 EB-5 Visas available every year, and only 867 issued in 2007.  Based on the favorable currency arbitrage (Euro/Dollar, UK Pound/Dollar) the EB-5 Visa is a cost-effective, time-efficient way to immigrate to the U.S.

An investor (and immediate family) can now obtain green cards (Permanent US Residency) with an EB-5 Visa by investing 0,000 into a Government approved Regional Center (currently, over 30 Regional Centers).  Investors receive the security of permanent US residence without repeated visa applications. Citizenship may be obtained after five years.

The investment may be made in one of three forms with the EB-5 Visa:

Invest ,000,000 into a business and hire ten employees anywhere in the USA, or Invest 0,000 and hire ten employees in an area where the unemployment rate exceeds the national average by 150% or the rural population is less than 20,000, or Invest 0,000 into a Government designated Regional Center and avoid direct employment.

The 0,000 investment is the least expensive way to satisfy the visa requirements in order to receive the permanent green card after the two-year period.  Although the first two types of investment lead to permanent green card status, they require an additional showing that at the end of the two year period, ten qualified individuals have maintained jobs in the targeted employment area.

The minimum period of the investment is approximately three years.  Once an investor emigrates they may apply to have ‘conditions’ removed after 1 year and 9 months in the USA.  Processing takes up to six months. ‘Conditions removal’ means that the investment is no longer tied to the EB5, and the investor is then free to sell the investment.

The EB-5 Visa investment may be a passive investment, requiring no active business management.  With a green card via an EB-5 investment visa investors have the flexibility to take any job, run any business, retire and live anywhere in the USA, with the benefits enjoyed by U.S. citizens including property ownership or education.

(2)     History EB-5 Program

The EB-5 Visa program was started in 1991. In 1991, the Investor for an EB-5 Visa was required to make an investment of a minimum:

,000,000 0,000 (in a targeted unemployment area)

The investment required the creation of 10 jobs.

          For the first two years the program was only set up for those who were willing to invest and create their own business that would produce at least ten jobs. However, in 1993, the government began to designate certain businesses as regional centers. Original businesses that existed in an area where the unemployment rate exceeds the national average by 150% or the rural population is less than 20,000 fit within the regional center designation and were then eligible to be duly approved by the CIS (formerly the INS).

          Between 1993 and 1998 several companies were designated as regional centers. These companies all competed for foreign capital from the foreign investors involved in the EB-5 Visa program. The competition that existed for the foreign capital and the newness of the EB-5 Visa program led to abuses of the system. Most of the companies didn’t offer sound investments and were really in business to collect fees rather than to fund an ongoing business. Many investment opportunities didn’t raise the full 0,000 investment capital or hire the required number of employees.

          CIS rightly wanted to stop these abuses of the program. In 1998, CIS wrongly applied their revised rules retroactively to people who already had approved petitions. CIS attempted to revoke these visa petitions. This started the litigation. The litigation that ensued put the program on hold from 1999-2002.

          In 2002, Congress passed a new law to protect the pre-1998 investors. Also, in 2002, in a case commonly known as “Chang” the 9th Circuit Court of Appeals ruled that CIS may not apply their new rules retroactively. In August of 2003, CIS began approving regional center and EB-5 Visa petitions for the first time since 1998.

The EB-5 Visa Program was amended in 2002 by the following statute (Pl 107-273 Sec. 11037 – 2002): 

          “A regional center shall have jurisdiction over a limited geographic area, which shall be described in the proposal and consistent with the purpose of concentrating pooled investment in defined economic zones.  The establishment of a regional center may be based on general predictions, contained in the proposal, concerning the kinds of commercial enterprises that will receive capital from aliens, the jobs that will be created directly or indirectly as a result of such capital investments, and the other positive economic effects such capital investments will have.”

As of 2002, Investors may invest 0,000 in a regional center (in a targeted unemployment area) without the necessity of creating 10 jobs.  For the 0,000 investment, an investor receives a “conditional green card.”

          In January 2005, to improve and expedite EB-5 regional center related applications USCIS established an Investor and Regional Center Unit, (“IRCU”). The unit is the sole adjudicative jurisdiction for Regional Center applications pursuant to the Immigrant Investor Pilot Program for purposes of approval, denial and Requests for Evidence (RFE’s). The unit also monitors and follows up on the actions of approved Regional Centers to ensure compliance with the terms, scope, and conditions of their approval/designation relative to their approved business plans and indirect job creation methodologies. Finally, the unit develops and proposes EB-5 program, policy, and regulation changes or improvements to USCIS management.

The CIS is constantly continuing their efforts to expedite and organize the EB-5 program. Up until January 2009, there were three different filing locations for visa and/or regional center petitions. Currently the CIS has established a unit at the California Service Center and utilizes it as the sole location to file for the EB-5 program. This center is comprised of specially-trained adjudicators dedicated to EB-5 adjudications.  By consolidating adjudications at the center, USCIS believes that it will be able to reduce overall processing times and better monitor EB-5 related adjudications.

(3)     U.S. Tax Issues – Non-Resident Aliens

U.S. Estate Tax (Non-Resident Aliens)

A non-resident alien is subject to U.S. estate tax on their taxable estate assets situated in the U.S. (IRC §2101(a), 2106(a)).

For U.S. estate tax, both stock of a U.S. corporation (IRC §2104) and U.S. real estate (Treas Reg §20.2104-1(a)91)) are “situated” in the U.S.

Non-resident aliens are entitled to:

Unlimited deduction for transfers to U.S. citizen spouses (IRC §2106(a)(3)). A “,000 unified credit”, which permits a non-resident alien to transfer only ,000 worth of property free of estate tax. Deduct a portion of expenses, indebtedness, taxes and losses from their gross estates (IRC §2106(a)(1)), deduct certain charitable contributions from their gross estates (IRC §2106(a)(2)(A)), but only if they disclose their world-wide estate in their estate tax return (IRC §2106(b)).

A person who acquires property from a non-resident alien decedent will receive a “stepped-up” basis in the property (i.e., a basis equal to the fair market value of the property at the date of the decedent’s death) regardless of whether the property was includible in the non-resident alien’s gross estate for estate tax purposes (IRC §1014(b)).

Generation Skipping Tax

Non-resident aliens are subject to the generation skipping tax but only on gifts subject to gift or estate tax (e.g., no gift tax on lifetime “skips” of intangible property).

U.S. Gift Tax (Non-Resident Aliens)

A non-resident alien is subject to gift tax when he makes a gift of real or tangible personal property situated in the U.S. (IRC §2501(a)(1), §2511(a); Treas Reg §25.2511-1(b)).

A gift of U.S. real estate is subject to gift tax (Treas Reg §25.2511-3(b)(1)).

A gift of U.S. intangible personal property is not subject to gift tax (IRC §2501(a)(2)).

Non-resident aliens are not entitled to the unified credit (M in gifts exempt from tax).

Non-resident aliens are entitled to:

,000 annual exclusion for gifts to any person. Unlimited exclusion for gifts to defray educational or medical expenses. The unlimited exclusion for gifts to citizen spouses. The 3,000 (2009) annual exclusion for gifts to non-citizen spouses (see: Rev Proc 2008-66, IRC §2503(b); 2503 (e), Treas Reg §25.2523(i)-(1)(a), (c)(2)). Unlimited amount of property to U.S. charity free of gift tax (IRC §2522(b)). Unlimited amount of property to a trust, or foundation, only if the gift is to be used within the U.S. Basis of property, acquired by gift from a non-resident alien is determined in the same manner as property basis acquired by gift from a resident alien (IRC §1015, 1015(d)).

U.S. Income Tax (Non-Resident Aliens)

Non-resident aliens are subject to U.S. Income Tax on U.S. source: (1) FDAP Income, (2) Effectively Connected Income.

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(1) “FDAP” Income

 U.S. Source “FDAP Income” i.e., Fixed or Determinable Annual or Periodical Income (e.g., salaries, wages, interest, rents, dividends and royalties).

A non-resident alien is subject to U.S. federal income tax on FDAP income at a flat 30% tax rate (without the benefit of any related deductions) IRC §871(a), 873(a).  The flat 30% income tax is withheld at the income source (IRC §1441).

“FDAP Income” includes:

Gains from sale of intangible property (i.e., patents, copyrights or other intangibles) (IRC §871(a)(1)(D)).

“FDAP Income” does not include:

Gain from the sale of stock of a domestic corporation (Treas Reg §1.871-7(a)(1)). Interest on bank deposits and “portfolio interest” (IRC §871(h) and (i).

Income tax treaties may reduce or eliminate the 30% flat tax on the FDAP Income.

(2) Effectively Connected Income

Income that is “effectively connected” to a U.S. trade or business.

A non-resident alien, who is engaged in a U.S. trade or business, is subject to U.S. federal income tax on his “effectively connected income”, at same tax rates as U.S. citizens and resident aliens (IRC §871(b)).

For a non-resident alien, engaging in a U.S. trade or business is not the basis for U.S. income tax.  U.S. income tax is imposed if a non-resident alien owns a business through a permanent establishment in the U.S., i.e., a fixed place of business, (e.g., place of management, a branch, an office, a factory).

If the non-resident alien is a resident of a country with which the U.S. has an income tax treaty, the treaty may reduce or eliminate U.S. federal income tax on effectively connected income.

A non-resident alien must file IRS Form 8833 to disclose reliance on a U.S. tax treaty for an exemption from U.S. tax on “effectively connected income.”

(4)     U.S. Tax Treaties

          Introduction

          In the 21st Century, world globalization has produced the following results:

Instantaneous global communications Multi-national investors (with transnational families) International mobility of people on a previously unimagined scale

International investors in the U.S. face immigration issues (i.e., legal presence) and Income, Estate & Gift Tax issues, potential “double taxation” (in the U.S. and their country of citizenship), potential “triple taxation” (if they have a third country of residence).

The U.S. currently has 61 Income Tax and 18 Estate & Gift Tax Treaties (see, below).  A Tax Treaty is a bi-lateral agreement, between two (2) countries, in which country modifies their tax laws for reciprocal benefits.

Tax Treaties have three (3) objectives:

Prevent double taxation Prevent discriminatory tax treatment of a resident of a treaty-country Permit reciprocal tax administration to prevent tax avoidance and evasion (see: Rev. Rul. 91-23, §2.01, 1991-1 C.B. 534)

U.S. Estate & Gift Tax Treaties

Under U.S. Federal Estate & Gift Tax Laws, an alien is taxed as a U.S. Estate & Gift Tax Resident once he establishes a U.S. domicile.  An alien acquires a U.S. domicile by living in the U.S. (for even a brief period of time) with the requisite intention to indefinitely remain (Treas Reg §20.0 – 1 (b)(1) Treas Reg §25.2501 – 1(b))

An alien, who establishes a U.S. domicile, is subject to:

A U.S. Gift tax on the donor’s act of making the gift (transfer of asset) (IRC §2501(a)) A U.S. Estate tax on the transfer of their taxable estate (worldwide assets) (IRC §2001(a))

Since 1976, a unified tax rate is applied to assets transferred for both estate and gift tax (tax free gifts up to M, tax free estate up to .5M (2009), which includes gifts).

Top Tax Rate (2009): 45%

The United States has 18 estate & gift tax treaties (see below).  To qualify for the treaty tax benefits, an alien must be domiciled in either the U.S. or a U.S. Treaty Country i.e., country of origin (or choice), at the time of his death or at the time of the gift.

The treaties contain special tax rules which may reduce the alien’s U.S. Federal estate and gift tax liability.  The treaties are designed to prevent double taxation on the transfer of the same asset (which is the subject of the estate or gift tax).

U.S. Estate Tax Treaties are either non-comprehensive (Estate Tax only) or comprehensive (Estate & Gift Tax).Non-Comprehensive Treaties

          Non-comprehensive treaties deal exclusively with Estate Taxes, providing “situs rules” for specific assets and determining which country has jurisdiction to impose tax on the assets.  Estate tax deductions (and specific exemptions) are allowed under the law of the country imposing the tax.

          Estate Tax Treaties provide tax credits to eliminate double taxation.  Each country allows a credit against its Estate Tax, in accordance with a formula specified in the treaty, with respect to property situated in either country or both countries.

Comprehensive Treaties

          Comprehensive Treaties address both Estate & Gift Taxes, determine primary taxing jurisdiction and Decedent’s residence (based on domicile).  Location determines primary taxing jurisdiction for real estate, business assets of a permanent establishment, and a fixed base for the performance of personal services.

          These treaties provide for “competent authority” resolution for tax disputes (and information exchange), address double taxation by tax credits, and may provide a U.S. Estate Tax deduction for property passing to a Surviving Spouse.

          If a treaty contains a savings clause, the U.S. may tax a Decedent’s Estate, or donor’s gift, as though the treaty was not in effect.

Estate & Gift Tax Treaties (18)

Australia Estate Tax Treaty Australia Gift Tax Treaty Austria Estate and Gift Tax Treaty Canada Estate Tax Treaty Denmark Estate and Gift Tax Treaty Finland Estate Tax Treaty France Estate and Gift Tax Treaty Germany Estate and Gift Tax Treaty Greece Estate Tax Treaty Ireland Estate Tax Treaty Italy Estate Tax Treaty Japan Estate and Gift Tax Treaty Netherlands Estate Tax Treaty Norway Estate and Inheritance Tax Treaty South Africa Estate Tax Treaty Sweden Estate, Inheritance and Gift Tax Treaty Switzerland Estate and Inheritance Tax Treaty United Kingdom Estate and Gift Tax Treaty

U.S. Income Tax Treaties

Under U.S. Federal Income Tax Laws, an alien is either taxed as a resident alien (subject to U.S. Income Tax on world-wide income) or a non-resident alien (subject to U.S. Income Tax on U.S. source income).

 Non-Resident Alien: U.S. Tax Resident

 An alien is classified as a resident alien (U.S. tax resident) if:

He is a U.S. lawful permanent resident at any time during the calendar year (i.e., has a “green card”). He meets the “substantial presence test” (present in the U.S. for 122 days per year over a 3 year period).

 Substantial Presence Test

An alien satisfies the “substantial presence test” for any calendar year (the “current year”) if:

He is in the U.S. for at least 31 days during the current year. The sum of the number of days in the U.S. in the current year and two preceding calendar years equals or exceeds 183 days (“183 day test”). For the “183 day test”, each day in the U.S. in the current year is counted as a full day.  Each day in the U.S. in the first preceding calendar year is counted as 1/3 of a day, each day of presence in the second preceding calendar year is counted as 1/6 of a day (IRC §7701(b)(3)(A)(ii)).

 “Substantial Presence Test”: Closer Connection Exception

          An alien who meets the substantial presence test may avoid being classified as a U.S. tax resident if:

He is present in the U.S. for fewer than 183 days during the calendar year. He maintains a tax home in a foreign country during the entire current year. He has a closer connection to the foreign country (i.e., his tax home) during the current tax year. He timely files IRS form 8840, and has not applied for a “green card” (IRC §7701(b)(3)(B) and (C)).

The United States has 61 income tax treaties (see below).  To be eligible for the benefits of an income tax treaty, an individual must qualify as a resident of either the U.S. or the other country that is a party to the treaty (“the contracting state”).

The U.S. Model Income Tax Treaty (Art 4(1)) defines “resident of a contracting state” as “any person who, under the laws of that state is liable for tax in the state, by reason of his domicile, residence, citizenship, place of management, place of incorporation”.

If an alien is classified as both a U.S. tax resident and a resident of its treaty partner (“dual resident”), the tax treaties contain “tie-breaker” provisions which determine the dual resident’s tax residence status as follows:

Tax resident in country with permanent home. If permanent home in both countries, tax resident in country with “center of vital interests” (personal and economic interests). If the center of vital interests cannot be determined, tax resident in country in which he has a habitual abode. If the habitual abode is in both (or neither) countries, he is a tax resident of the country in which he is a national).

An alien who claims the benefit of a treaty, to be classified as a non-resident, will still be subject to U.S. federal income tax as a non-resident alien.

A non-resident alien who relies on a U.S. tax treaty for an exemption from U.S. tax that is effectively connected with a U.S. trade or business is required to file IRS Form 8833 to disclose the tax exemption reliance (IRC §6114; Treas Reg 301.6114-1).

Income Tax treaty benefits are available only to a “resident” of a country and special rules may apply to determine residency of trusts, estates, flow-through and hybrid entities.  Relief from double taxation is afforded a treaty resident by specific provisions allocating taxing jurisdiction over items of income between the two countries that are parties to a treaty, and by a “treaty” tax credit provision.  Administration provisions, providing for mutual agreement procedure and for exchange of information and assistance in collection are intended to prevent tax avoidance and evasion.

Special treaty residency issues are presented by U.S. citizens and aliens admitted for permanent residence in the United States (i.e., “green card holders”).  The United States taxes its citizens and residents on their world-wide income, wherever they reside.  Such individuals may be U.S. Income Tax residents (for tax treaty purposes) even when physically residing outside the U.S.).

Under a treaty’s savings clause, the United States reserves the right to tax its citizens and residents (as determined under a treaty) as if the treaty had not entered into force.  As a result, U.S. citizens and residents may not use a U.S. Income Tax Treaty to reduce U.S. Income Tax.

Income earned through a fiscally transparent entity (i.e., partnership, limited liability company, grantor trust) will be considered to be derived by a treaty resident if the residency country considers that person as deriving the item of income.

In the case of non-grantor trusts and estates, treaty “residency” (i.e., the liability for income tax) is determined by the domicile, residence, place of management of the estate or trust.  The trust or estate is liable for tax in the treaty per the country (not whether income is liable to tax in the “hands” of the trust/estate or its beneficiaries).

A non-resident partner of a U.S. partnership (trade or business in the U.S.) is taxable by the U.S. in the partner’s share of partnership income (under the branch profits article of a U.S. income tax treaty).  Any gains from the sale of such a partnership interest will be taxable by the U.S. to the extent the gains are attributable to business assets of the partnership (Donroy v. U.S. 301 F.2d 200 (9th Cir 1962), Unger v. Commr 936 F.2d 316 (D.C. Cir. 1991), aff’g T.C. Memo 1991-15; Rev. Rul. 91-32 1991-1 C.B. 107).

Non-resident shareholders of U.S. corporations are subject to a 30% statutory withholding tax on U.S. source dividends that are not “effectively connected” business income and paid to a non-resident (IRC §871(a), 881(a), 1441(a)).  The withholding rate may be reduced by treaty.

Income tax treaties seek to prevent double taxation by:

Assigning primary taxing jurisdiction over a resident to one treaty partner. Limiting source country taxation of income. Providing a foreign tax credit by the resident country for items of income taxed by both the source and residence countries.

Under U.S. Income Tax treaties, interest, royalties (intellectual property: copyrights, patents, trademarks) is taxable by the owner’s country of residence (i.e., the source country attributes the income to owner’s country of residence).

Under U.S. Income Tax treaties, source country taxation is preserved for real estate income (i.e., the source country has the primary taxing right).  The source country does not have the exclusive taxing right; avoidance of double taxation depends upon the residence country granting a tax credit for source country tax.

Capital Gains

Under U.S. domestic tax rules, the U.S. retains the right to tax gains realized by a non-resident from the sale of U.S. real property holding companies (IRC §897).  Gains realized by a non-resident from the sale of personal property are “foreign source” and not taxable by the U.S. (IRC §865).

Under U.S. tax treaties, gains from the sale of real property are taxable by the country in which the real property is located.  The source country has the primary taxing right which is not an exclusive right.  Avoidance of double taxation will depend upon whether the resident country grants a credit for source country taxes.

Personal Services

          Income from employment may be taxed in the country of residence.  Income from furnishing personal services (i.e., not employee services) is taxed by the source country as “business profits” derived from furnishing personal services.  Income that may be taxed as business profits includes all income from the performance of the personal services carried on by the partnership and any income from ancillary activities to the performance of these services.

          For employees, compensation for personal services (i.e., dependent personal services) may be taxed by the employee’s residence country and by the source country, to the extent the services are performed in the source country (see U.S. Model Income Tax Treaty Art. 14(1)).

          The source country retains the right to tax all compensation from dependent personal services.  If three (3) conditions are satisfied, dependent personal services income is exempt from source country taxation:

The employee is in the source country for less than 183 days during the calendar year in which services are performed. The compensation is paid by an Employer who is not a resident of the source country. The compensation is not a deductible expense by a permanent establishment that the employer has in the source country (U.S. Model Income Tax Treaty Art. 14(2)).

Athletes & Entertainers

Under the U.S. Model Income Tax Treaty Art 16(1), performance income of an athlete or entertainer may be taxed by the source country if gross receipts paid by the entertainer or athlete exceed ,000 for the taxable year.  If gross receipts exceed ,000, the full amount paid the athlete or entertainer may be taxed (not just the excess over ,000).  Tax may be imposed under Article 16 even if the performer would have been exempt from tax under Article 17 (Business Profits) or Article 14 (Income from Employment) of the U.S. Model Income Tax Treaty.

If an “employer” corporation provides the entertainer/athlete’s services, the income may be taxed in the country in which the activities are exercised unless the contract pursuant to which the personal services are performed allows the Employer Corporation to designate the individual who is to perform the personal activities (U.S. Model Tax Treaty 16(2)).

Income is deemed to accrue to the Employer Corporation if it controls or has the right to receive gross income in connection with the performer’s services (Article 16).

Foreign Tax Credits

          Under the Model Treaty, the U.S. as the country of residence provides its citizens and residents with a credit for income taxes imposed by a treaty partner to release double taxation.  The creditable taxes are listed in the treaty (Art 23(1)).  The U.S. statutory foreign tax credit rules determine the amount of the tax credit (U.S. Model Treaty Article 23).  The U.S. will allow a foreign tax credit pursuant to the treaty credit article, even if a credit would not otherwise be available under the U.S. statutory foreign tax credit rules.

Administrative Provisions

U.S. Income Tax Treaties grant permission to authorities of each country to deal directly with each other to resolve taxation disputes, to exchange information and assist each other in tax collection (Model Treaty Art. 25: Mutual Agreement Procedures, Art 26: Exchange of Information).

Income Tax Treaties (61)

Australia Income Tax Treaty Austria Income Tax Treaty Bangladesh Income Tax Treaty Barbados Income Tax Treaty Belgium Income Tax Treaty Bermuda Income Tax Treaty Bulgaria Income Tax Treaty Canada Income Tax Treaty China Income Tax Treaty Cyprus Income Tax Treaty Czech Republic Income Tax Treaty Denmark Income Tax Treaty Egypt Income Tax Treaty Estonia Income Tax Treaty Finland Income Tax Treaty France Income Tax Treaty Germany Income Tax Treaty Ghana Income Tax Treaty (Ships and Aircraft) Greece Income Tax Treaty Hungary Income Tax Treaty Iceland Income Tax Treaty India Income Tax Treaty Indonesia Income Tax Treaty Ireland Income Tax Treaty Israel Income Tax Treaty Italy Income Tax Treaty Jamaica Income Tax Treaty Japan Income Tax Treaty Jordan Income Tax Treaty (Shipping and Aircraft) Kazakhstan Income Tax Treaty Korea Income Tax Treaty Latvia Income Tax Treaty Lithuania Income Tax Treaty Luxembourg Income Tax Treaty Malta Income Tax Treaty Mexico Income Tax Treaty Morocco Income Tax Treaty Netherlands Income Tax Treaty New Zealand Income Tax Treaty Norway Income and Property Tax Treaty Pakistan Income Tax Treaty Philippines Income Tax Treaty Poland Income Tax Treaty Portugal Income Tax Treaty Romania Income Tax Treaty Russia Income Tax Treaty Slovak Republic Income Tax Treaty Slovenia Income Tax Treaty South Africa Income Tax Treaty Spain Income Tax Treaty Sri Lanka Income Tax Treaty Sweden Income Tax Treaty Switzerland Income Tax Treaty Thailand Income Tax Treaty Trinidad and Tobago Income Tax Treaty Tunisia Income Tax Treaty Turkey Income Tax Treaty Ukraine Income Tax Treaty United Kingdom Income Tax Treaty USSR Income Tax Treaty Venezuela Income Tax Treaty

Whatever you’re looking for from your villa holiday, be it nightlife, a family escape, skiing or theme parks. In this article we explore some of the best worldwide destinations to satisfy all types of holiday makers.

When you start thinking about your villa holiday the type of holiday you want to have and activities you’re interested in will have a large bearing on your destination choice. Being in the right location is the best way to ensure you have plenty to do outside the villa and you, or your family won’t get bored during your holiday.

San Antonio, Ibiza is Great for Nightlife and Group Holidays

Ibiza is known as the party capital of Europe owing to it’s large number of nightclubs and bars and San Antonio is the clubbing centre with superclubs Es Paradis and Eden based there as well as Ibiza Rocks, Bar M and popular dance bar Plastik all within close proximity of one another in San Antonio.

Basing your villa holiday in San Antonio or just outside in the surrounding villages will put you right at the heart of the Ibiza clubbing scene and make for the ultimate group party holiday. San Antonio is also an increasingly popular destination for stag and hen weekends (batchelor parties).

Orlando, Florida – the Ultimate Family Villa holiday Destination

Kids will love the theme parks in Orlando including disneyworld, blizzard beach, sea world and universal studios and you’ll love the great choice and relatively competitive pricing of villas available for rent in and around Orlando Florida. Many within a short drive of Disney.

Because of the sheer size of Florida, car hire is usually recommended for villa holidays in this area to help get you around to parks and further afield to nearby beaches. Public transport is available in Orlando but it’s not an ideal way to get around and requires more forward planning, which you don’t want on your holidays!

Portugal for European Sunshine Holidays and Golf Holidays

The Algarve in Portugal has a number of big attractions as a villa holiday destination but the 2 most prominent are the great beaches and world class golf courses.

Portugal has the perfect summer climate, hot days and cooler evenings compared to Spain or other hot destinations. The sophisticated Portugese resorts on the algarve have amazing restaurants, trendy bars and most places are kid friendly. If you’re looking for nightlife Albuferia is one of the liveliest resorts in Europe and a favorite for group holidays.

Northern Cyprus for Year Round Sunshine

With an increased number of direct flights from uk airports and it’s hot, dry year round climate, Turkish owned northern Cyprus is increasingly competing with the more popular holiday resorts of the more established, Greek controlled southern Cyprus. The holiday villa rental market is also booming in northern Cyprus with a large number of expats buying up property there a few years back and now renting it out to holiday makers who can often snap up an off season bargain with a weekly villa rental starting from as little as 150 for a 4 person villa during the quieter months of November- March.

Why not get away from those cold winter months at home with a cheap flight and bargain holiday villa in northern Cyprus, all for less than a long weekend break in the UK.

Cheap Holiday Villas in the Costa del Sol, Spain

If you’re looking for a bargain summer villa holiday the Costa Del Sol area of Spain, famous as a British package holiday hang out, has you covered with a huge range of holiday villas and holiday home rentals, many starting from just 100 per person even going into the summer season (may- June, based on 4+ sharing and not including flights). In the peak school summer holiday months expect to pay a little more for flights and your accommodation and expect the resort to be at it’s busiest.

With plentiful cheap flights to Spain from airports across the UK from low cost operators like ryanair, easyjet and flybe you should be able to get to the costa del sol even on a shoestring budget providing you book your flights early and look out for the regular flight sales offered out of season by the low cost flight operators.

We hope you enjoy your villa holiday wherever you decide to go. If you enjoyed this article you may also be interested in reading: top destinations for villa holidays, villa holidays for all the family and making the most of family villa holidays.

Find More Cyprus Property For Sale Articles

So, in this article Lee Byers will look at where you can retire abroad if you want favourable tax treatment, because if you’re taxed less on your pension income it will go far further and thus afford you a better quality of life!

A new league table compiled by KPMG looks at which nations in the world offer the most favourable tax treatment to expatriates, and according to the results, Cyprus, which is already a popular choice with retirees, has the most favourable tax regime in the whole of Europe!

The KPMG league table was compiled by surveying over 400 accountants, tax advisers and taxation professionals who work in multinational companies across Europe, and everything from the level of tax charged to the consistency in interpreting taxation owed were praised when it came to a discussion of Cyprus.  Cyprus came out ahead of even Ireland and Switzerland, and this just cements the nation in the number one spot for thousands of would-be British retirees.

With the tax box ticked – note, expat retirees pay a maximum of 5% on their pension income in Cyprus – it’s time to look at what else the island nation has to offer retirees: -

• Cyprus has over 300 days of sunshine every year

• The island is in the European Union, thus benefitting from the stability that membership offers a country, however it is still setting its own taxation levels, making it more competitive

• The standard of living in Cyprus is first world and Western – major European supermarkets and department stores make the transition from living in the UK to retiring in Cyprus even easier!

• The pace of life is slower in Cyprus and there is more emphasis on enjoying life, spending time with family and friends and appreciating the environment than there is in the UK

• Despite the strong euro effect at the moment, pensioners generally find that the cost of living in Cyprus is attractive with local produce being sold cheaply at markets for example, and eating out costing a fraction of what it does in the UK

• The properties available for sale are generally well built and attractive

• Cyprus is a Mediterranean island – therefore you benefit from the beautiful scenery associated with the Med region, the fabulous climate, the excellent cuisine and stunning beaches

• Cyprus is already a popular choice with retirees, therefore a newly arrived retired person will quickly meet up with like minded people, find activities to interest them and generally settle in to their new, low tax lifestyle!

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Manufactured homes for sale can be described as factory-made homes. They are built on an assembly line and shipped as one complete structure to the owner’s land. They are usually smaller than regular homes but they can be custom-built. It is perfect for individuals who need to move into a new home in the quickest time possible. There are some points to ponder however, if you do plan to invest in a manufactured homes California.

Points to Ponder

Inspection is a vital step when buying manufactured homes for sale. As in other products that have gone through an assembly line you need to carefully check the parts of the home for defects or fixtures that may need repairs or even a replacement. The thing about en masse manufacturing is though there are standard quality controls to ensure uniformity, there always are some units that get built with defects that are only uncovered after close scrutiny.

Conduct a full inspection but focus on the small parts like door knobs, cabinets, frames and sidings. Make sure your seller will be willing to repair or replace these defective parts. A huge thing to consider is the foundation, make sure you are aware of how your home was anchored to the lot, it should be strong enough to brave the elements.

You should also make sure that you are asking the correct questions about the home you wish to buy. Learn and understand how the home was set up. Know the process used to construct your home this is how you will have a better idea of how secure the structure is. Ask for the blue prints used to build you home, this way you will know if the seller of the manufactured homes for sale has followed building codes by the book. Inquire about the details of the house in terms of the payment you will make. What is covered, does the package include a pest control certification or a title insurance. Check out the sewer and electric lines and all the other needed installations.

If you are really serious in purchasing the right Manufactured Home in California for an unbelivable Price, you should consider calling The Mobile Home Factory in Northridge Ca , they will save tons of money 1-866-662-4516 to see their floorplans: You must click on Manufactured Homes California Above.