Friday, February 8, 2019
Andrés Báez Moreno (Universidad Carlos III, Madrid, Spain) presents Indirect Transfers of Resident Companies: The Problems of Taxing Who Is Not Here on Something That Is (Not) Here at Florida today as part of its Tax Colloquium Series:
A significant amount of recent scholarly work has considered the appropriateness from a policy perspective of taxing capital gains realized by non-resident on alienation of domestic sources and, in this context, almost by implication also the opportunity of taxing ITRC [indirect transfers of resident companies]. However, this article will consider taxation of capital gains realized by non-residents and ITRC as a given fact; there are two reasons for this: 1) Despite good policy reasons for a different approach –as regards particularly assets different from real property — the truth is that a significant amount of (developing) countries do tax these gains; 2) The review of the existing work on ITRC demonstrates a significant attention on policy issues frequently at the expense of legal and technical matters.
With the goal of offering pros and cons of different technical alternatives to jurisdictions which are looking into taxing ITRC or facilitating interpretative solutions to those countries which already tax them, the article analyses the two main legal devices used so far by jurisdictions seeking to tax ITRC and compares pros and cons of these devices as regards their conditions of application and their legal consequences; and examines the compatibility of these domestic legal devices with Double Taxation Conventions with a special emphasis on bilateral treaties signed by jurisdictions which already tax ITRC.