INTERNATIONAL TAX POLICY OF KAZAKHSTAN

The purpose of this article was to study the international aspects of taxation in Kazakhstan. What is relevant for Kazakhstan is that the country implements international standards in its national legislation, for example, the BEPS plan, information exchange, etc. In addition to the implementation of the 15 Actions of the BEPS plan, the country implements some special anti-avoidance rules (SAAR), for example, the transfer pricing rule, the thin capitalization rule, beneficial ownership concept, etc. In order to improve the international tax policy of Kazakhstan, the country needs to continue to implement all the Actions of the BEPS plan, conclude tax treaties, introduce general (GAAR) and targeted anti-avoidance rules (TAAR) into its legislation.

Effectiveness of the Beneficial Ownership Test in Conduit Company Cases

<p>Countries enter into double tax agreements with the economic objective of preventing double taxation of cross-border transactions. To achieve this objective, the contracting states agree reciprocally to restrict their substantive tax law. That is, a major policy of double tax agreements is to reduce double taxation of residents of states that are parties to the agreement. Residents of third states sometimes contrive to obtain treaty benefits typically by interposing a person or a conduit entity in one of the contracting states. In order to ensure that a resident of a contracting state who claims treaty benefits is entitled to them in substance, double tax agreements should be interpreted according to their substantive economic effect. Generally, double tax agreements follow the pattern of the OECD Model Tax Convention. The OECD Model Convention addresses the double taxation of dividends, interest and royalties, commonly collectively known as "passive income", in Articles 10, 11 and 12 respectively. These provisions usually operate by reducing withholding tax imposed by a source state on passive income that flows from the source state to a resident state. In order to prevent a resident of a third state from obtaining a source state withholding tax reduction by interposing a person or a conduit entity in the resident state, the OECD Model Convention requires the immediate recipient of passive income to be the "beneficial owner" of that income. That is, the OECD Model Convention requires the immediate recipient to be an owner in a substantive economic sense. Courts and commentators have difficulty in interpreting and applying the concept of beneficial ownership to conduit entities that are corporations, commonly referred to as "conduit companies". They have attributed the cause of the difficulty to the absence of a definition of the term "beneficial owner" in the OECD Model Convention. This thesis argues that the difficulty in applying the beneficial ownership concept to conduit companies has arisen not because of the absence of the meaning of the concept, but because logically and from an economic perspective the concept cannot be applied to companies in general, not to conduit companies in particular. The beneficial ownership test was meant to be a test of economic substance. From an economic perspective, the benefit or the burden of a contract entered by a company is economically enjoyed or borne by its shareholders. That is, in substance a company cannot be considered as owning income beneficially. From this consideration, it follows that conduit companies can never be considered entitled to treaty benefits. Nevertheless, the OECD Model Convention applies the beneficial ownership test to conduit companies pursuant to an assumption that at least in some cases conduit companies can be the beneficial owners of passive income. The Model Convention's assumption is based on the legal perspective that courts conventionally adopt. According to this legal perspective, companies hold income beneficially because they exist as separate legal entities from their shareholders. Courts find themselves battling these opposing perspectives when applying the beneficial ownership test to conduit companies. In order to make income tax law work efficiently, courts that are obliged to determine whether to honour claims to treaty benefits made by conduit companies have preferred to employ the legal perspective. Courts have justified this approach by adopting surrogate tests for the actual beneficial ownership test. Most of the surrogate tests do not relate to the concept of ownership at all. This thesis categorises the surrogate tests as "substantive business activity" and "dominion". By analysing reported cases, the thesis identifies deficiencies in these tests. One of the proposed outcomes of the thesis is to suggest an alternative approach for deciding conduit company cases. The thesis suggests that courts should consider an arrangement as a whole and investigate reasons for the existence of an immediate recipient of passive income in the specific corporate structure. The thesis also recommends amendments in the official commentary on Articles 10, 11 and 12 of the OECD Model convention in order to address the conceptual shortcomings inherent in those Articles.</p>

Effectiveness of the Beneficial Ownership Test in Conduit Company Cases

<p>Countries enter into double tax agreements with the economic objective of preventing double taxation of cross-border transactions. To achieve this objective, the contracting states agree reciprocally to restrict their substantive tax law. That is, a major policy of double tax agreements is to reduce double taxation of residents of states that are parties to the agreement. Residents of third states sometimes contrive to obtain treaty benefits typically by interposing a person or a conduit entity in one of the contracting states. In order to ensure that a resident of a contracting state who claims treaty benefits is entitled to them in substance, double tax agreements should be interpreted according to their substantive economic effect. Generally, double tax agreements follow the pattern of the OECD Model Tax Convention. The OECD Model Convention addresses the double taxation of dividends, interest and royalties, commonly collectively known as "passive income", in Articles 10, 11 and 12 respectively. These provisions usually operate by reducing withholding tax imposed by a source state on passive income that flows from the source state to a resident state. In order to prevent a resident of a third state from obtaining a source state withholding tax reduction by interposing a person or a conduit entity in the resident state, the OECD Model Convention requires the immediate recipient of passive income to be the "beneficial owner" of that income. That is, the OECD Model Convention requires the immediate recipient to be an owner in a substantive economic sense. Courts and commentators have difficulty in interpreting and applying the concept of beneficial ownership to conduit entities that are corporations, commonly referred to as "conduit companies". They have attributed the cause of the difficulty to the absence of a definition of the term "beneficial owner" in the OECD Model Convention. This thesis argues that the difficulty in applying the beneficial ownership concept to conduit companies has arisen not because of the absence of the meaning of the concept, but because logically and from an economic perspective the concept cannot be applied to companies in general, not to conduit companies in particular. The beneficial ownership test was meant to be a test of economic substance. From an economic perspective, the benefit or the burden of a contract entered by a company is economically enjoyed or borne by its shareholders. That is, in substance a company cannot be considered as owning income beneficially. From this consideration, it follows that conduit companies can never be considered entitled to treaty benefits. Nevertheless, the OECD Model Convention applies the beneficial ownership test to conduit companies pursuant to an assumption that at least in some cases conduit companies can be the beneficial owners of passive income. The Model Convention's assumption is based on the legal perspective that courts conventionally adopt. According to this legal perspective, companies hold income beneficially because they exist as separate legal entities from their shareholders. Courts find themselves battling these opposing perspectives when applying the beneficial ownership test to conduit companies. In order to make income tax law work efficiently, courts that are obliged to determine whether to honour claims to treaty benefits made by conduit companies have preferred to employ the legal perspective. Courts have justified this approach by adopting surrogate tests for the actual beneficial ownership test. Most of the surrogate tests do not relate to the concept of ownership at all. This thesis categorises the surrogate tests as "substantive business activity" and "dominion". By analysing reported cases, the thesis identifies deficiencies in these tests. One of the proposed outcomes of the thesis is to suggest an alternative approach for deciding conduit company cases. The thesis suggests that courts should consider an arrangement as a whole and investigate reasons for the existence of an immediate recipient of passive income in the specific corporate structure. The thesis also recommends amendments in the official commentary on Articles 10, 11 and 12 of the OECD Model convention in order to address the conceptual shortcomings inherent in those Articles.</p>

12. Interests in the Home: The Acquisition Question

All books in this flagship series contain carefully selected substantial extracts from key cases, legislation, and academic debate, providing able students with a stand-alone resource. This chapter explores the acquisition question in relation to the family home through an analysis of the doctrines of resulting and constructive trusts. The chapter explains the different initial presumptions drawn in cases of joint and sole legal ownership and the particular approach that has been adopted in the case of a home purchased ‘in joint names for joint occupation by a married or unmarried couple, where both are responsible for any mortgage’. The chapter considers how the ‘common intention’ of parties in relation to the common intention constructive trust is determined differently in relation to the primary acquisition question (in cases of sole legal ownership) and the secondary question of the quantification of beneficial shares (applicable in cases of joint and sole beneficial ownership). The chapter addresses the contentious issue of the extent to which the courts’ broader approach to common intention in relation to quantification may be carried over to the primary acquisition question. The chapter considers statutory rights to occupy and current Law Commission proposals for reform.

11. Trusts

All books in this flagship series contain carefully selected substantial extracts from key cases, legislation, and academic debate, providing able students with a stand-alone resource. This chapter describes how trusts may arise in relation to land, providing an overview of key situations in which a party may acquire an equitable interests under a trust of land. It considers express, resulting, and constructive trusts of land. A resulting trust can arise in favour of A, where A purchases or contributes to the purchase of land held by B, or in some cases where A transfers land to B without receiving anything in return. Constructive trusts arise in a number of diverse circumstances in which it can be said that it would be unconscionable for the legal owner to assert his or her own beneficial ownership and to deny the beneficial interest of another. They may arise, for example, under the doctrine in Rochefoucauld v Boustead and the Pallant v Morgan equity. The doctrine in Rochefoucauld v Boustead imposes a constructive trust to prevent a transferee of land from fraudulently relying on the absence of compliance with formalities to deny a trust pursuant to which the land was transferred. The Pallant v Morgan constructive trust can arise where one party acquires land pursuant to an informal commercial joint venture and reneges on an agreement that another party will have an interest in the land. The trust has been categorized as a form of ‘common intention constructive trust’ but this categorization is contentious.

The anti-money laundering act of 2020

Purpose The purpose of this article is to inform stakeholders about the Anti-Money Laundering Act of 2020 (AMLA), explain its impact on the U.S. anti-money laundering (AML) regime, and highlight critical updates for financial institutions. Design/methodology/approach The article provides an overview of the AMLA, and specifically addresses three key components: (1) the development of uniform beneficial ownership requirements and the creation of a beneficial ownership registry at the Financial Crimes Enforcement Network (FinCEN); (2) the expansion of FinCEN’s powers and the Bank Secrecy Act/AML program requirements; and (3) new subpoena powers with potential extraterritorial effect granted to the U.S. Secretary of the Treasury and the U.S. Attorney General for documents located at foreign banks that have a correspondent banking account in the U.S. The article also notes the purpose and goals of the AMLA. Findings The AMLA is the first major overhaul of the U.S. AML regime since the 2001 USA PATRIOT Act, and is designed to strengthen national security, protect the financial system, and simplify compliance obligations. The beneficial ownership reporting requirements represent an effort to combat illicit financial activity conducted by shell companies formed and registered in the U.S. Originality/value The article provides financial institutions with a brief overview of a lengthy new law that will impact their AML compliance obligations. Financial institutions should be on alert for forthcoming regulations.

National risk assessment – the Croatian features

Purpose The purpose of this paper is to present the risk of the non-financial sector in Croatia concerning the threats of money laundering through the prism of national and supranational risk assessment. In addition to a brief overview of the financial sector, the specifics of the non-financial sector have been highlighted. This paper aims to emphasize the peculiarities of the non-financial sector, focusing on the consequences of arbitrary application on the right to professional secrecy and independence. Design/methodology/approach Specifics of the national risk assessment in Croatia have been analyzed using deductive and inductive methods. To provide an overview of the non-financial sector, the risk assessment at the supranational level has been discussed and compared with the national one. Particular attention has been paid to the areas of increased risk. Findings The effectiveness of risk assessment depends on several factors such as the characteristic of the sector being observed, the specifics of each profession or business, changes at the level of awareness-raising and efficient and coherent supervision. Most deficiencies were observed in the area of beneficial ownership identification, conducting due diligence, awareness of the risk exposure and permanent education. Originality/value By recognizing the risk profile faced by the non-financial sector, this paper seeks to point out their role as “Gatekeepers” that is far from being negligible. By analyzing the risk of money laundering in Croatia, the tendencies of harmonization with international standards are pointed out along with the occurrences indicated by the practice.

Law of Trust and the Beneficial Interest in Matrimonial Property

Beneficial interest at home is a very fundamental element of a marriage institution. When a couple ties the knot, wanting to spend the rest of their lives together, such relationship will give rise to many implications, be it legal or social. Such legal implications will continue throughout their lives not only as husband and wife, but will also become more apparent if the union between these two is broken. Hence, issues relating to distribution of property, especially matrimonial property, need to be handled as subtle as possible, alongside other ancillary claims such as maintenance and custody. The existence of both legal and beneficial interests in a property has enabled the court to resolve claims relating to ownership by looking at the existence of common intention to share beneficial ownership. Thus, this article examines the ways on how the court has utilized the concept of trust in dealing with disputed issues on matrimonial property. The study adopted a qualitative methodology where data were collected through library research. It analysed statutes, books, journals, reports, conference proceedings and other periodicals. The study concludes that the use of law of trust in the distribution of matrimonial property has become obvious since trust will be the best option to be used in resolving matters relating to any disputed property.

Freeports: Innovative trading hubs or centres for money laundering and tax evasion?

Purpose This study aims to provide a critical overview of freeports’ trading operations and consider to what extent they may present a money-laundering and tax-evasion risk. Design/methodology/approach This study reviews the literature surrounding freeports and offers an up-to-date narrative of their potential money-laundering and tax-evasion activities. The paper relies on secondary data from published sources referencing peer-reviewed papers and “grey-literature” material relating to freeports, offshore finance and anti-money laundering control. Findings This study demonstrates the attractive trading advantages offered by freeports to enable enterprise and innovation. However, the study reveals that the secretive offshore space in which freeports operate also helps to obscure beneficial ownership and illicit trade-based practices that frustrate authorities’ efforts to trace laundered monies and recover government taxes. Despite freeports’ trade offerings, stronger regulation is needed to prevent them from being abused for money-laundering and tax-evasion purposes. Originality/value This study provides an important insight into the money-laundering and tax-evasion risks presented by freeports and, in doing so, advances the contemporary debate on illicit activities occurring through offshore jurisdictions.

Comparing family property disputes in English and Singapore law: ‘context is everything’

This paper examines why Singapore law has not followed English law in the area of beneficial ownership of family property. It points out that the landmark cases in the two jurisdictions are underpinned by different family paradigms.The English landmark cases are based on the unmarried cohabitants paradigm and the legal rules that have emerged from these cases are aimed at, whether successfully or not, ensuring a fair division of the family home upon the breakdown of these relationships. In contrast, the Singapore seminal judgments are underlaid by contests between children over their parents’ property which raised questions as to the parties’ true intentions and the legal techniques to determine that. In the main, this paper argues that the legal rules that emerge in a society are shaped by the conditions of that society: these rules are purpose-built to resolve the specific types of disputes that come through the judicial system, which are in turn moulded by the distinctive conditions of that society. The discussion also shows that whilst the courts in the two jurisdictions differ in the legal techniques which they apply to determine these disputes, they do not appear to differ greatly in their understanding of human interactions and complex family relationships.