Getting One´s Wires Crossed
22.11.2011Company: Amcham
The exchange of tax information is still in its infancy.
We have a long way to go regarding tax information exchange. Nevertheless, the situation in well-established centres of capitalism is also a bit complicated from time to time.
Recently we have come across a Czech (corporate) tax payer who made quite a big receivable disappear from his assets. He achieved this by conducting a number of relatively minor transactions involving his accounts abroad, the parent company in Luxembourg and setting-off receivables. The Czech Tax Administrator did not like being stripped of the profit and so it decided to perform a tax audit. The relevant contracts were found together with the documents regarding the payments, agreements and decisions. The persons involved described the events along with the rest of the evidence. In addition, the Czech Financial Authority asked for further information via the tax information exchange. The Authority submitted an application explaining the whole matter and asked the Luxembourg Tax Administrator for information about the money transfer, legal titles related to the transfer and how it influenced the tax base of the relevant tax payers.
A few months later, the Luxembourg Administrator replied: “Dear Madams and Sirs, we declare that the aforementioned taxpayer is a tax resident of the Grand Duchy of Luxembourg and is subject to the local income tax.”
This is what we call a “laconic reply” in our business.
Daniel Kovačovič, Tax Consultant
Mobil: +420 739 182 283
E-mail: daniel.kovacovic@rsm-tacoma.cz
