David And The No-Tax Goliaths

PUBLICATIONS / Newsletters / 2013 / Newsletter October

David And The No-Tax Goliaths

The UK government is boldly engaged in an epic battle against tax avoiders. And other large evil mythological monsters.
It started when David Cameron publicly declared that companies like Starbucks should: “wake up and smell the coffee” (and a bombardment of other populist rhetoric by him and his Lords of War).
A new day has dawned. And the UK will be rid of tax avoidance quicker than the Falklands were of Tango.
Or perhaps…
The Road To Tax Haven Is Paved With Good Intentions
But dear reader. What are the facts?
There are some very mixed signals coming from Ground Zero, to say the least.
First of all we have the Treasury’s push to make the UK tax regime attractive for investors. Britain’s corporation tax rate is due to fall to 20 per cent by 2015, from 28 per cent in 2010. Several other recently introduced measures will allow businesses to make further savings.
Next to that, the tension is mounting within the European Union about what is referred to as the ‘Patent Box scheme’. This scheme gives corporate tax breaks to companies filing patents in the country. And patent filing has increased as has inward investment. This at the “expense” of the European neighbors, with Germany in particular being “Nicht Amused”.
Last but not least, we have the pin-up-girl-of-anti-tax-avoidance Margaret Hodge. She is the one who bravely stood up in public against big (law abiding) Satanist multinational corporations on behalf of the UK Tax Payers and the subjectively inflated abstraction known as the common good. The fair maiden.
But as it turns out, Lady Hodge’s father Hans Oppenheimer founded Stemcor, a multi billion pound international steel company that is managed by her brother and in which Lady Hodge has a “registrable shareholding”.
Analysis of Stemcor’s latest accounts show that it paid tax of just £163,000 on revenues of more than £2.1bn in 2011 (0,01%) and only 2.7% of the worldwide tax burden was paid at home for this proud “British” company.
Another public relations setback came when a tax expert advising HM Revenue & Customs on its newly enacted general anti-abuse rule was filmed describing ways to keep money “out of the chancellor’s grubby mitts”.
Add to this fact that most well known tax havens are British Overseas Territories and perhaps David Cameron and his pack of barking and foaming tax sniffing hunting dogs should become the new definition of “hypocrite” in the 2013 edition of the prestigious Oxford dictionary.
Your Majesty. What is the verdict?
Now, apparently there are elements in the UK government that do understand that lowering taxes is good for business. When MP’s like Margaret Hodge are gently – but firmly – sailed down the Thames for her tax free retirement on a much needed tropical adventure, “God save the Queen” will one day proudly sound again.
As far as David Cameron is concerned. We have tried to talk some sense into him as far as his populist tax rhetoric is concerned. Unfortunately he did not accept our invitation for a nice cup of Arabian tea and fresh dates. Maybe he is too busy with what Margaret Thatcher would call “spending other people’s money…”
And now for something completely different…

Doing Business In Bulgaria?

Just like the rest of Eastern Europe, Bulgaria (the 14th largest Europe country) has suffered from 45 years of communism.
After adopting its democratic constitution in 1991, it has been a EU member since 2007 and nowadays still keeps attempting to get out of the post Soviet poverty. Despite the communist legacy, it is a country that has a lot to offer to a tax payer who seeks a tax friendly (business) environment.
Sofia, the capital and largest Bulgarian city, offers modern infrastructure and all the comforts of a modern metropolis. The countryside, however, still feels underdeveloped and poor.
But there are advantages to it: labour is very cheap. At EUR 327 per month, the average salary is 2-3 times lower than elsewhere in the EU. Together with low real estate prices and favourable tax regime, Bulgaria surely stands out as a low cost business location.
In 2007, Bulgaria introduced the flat tax of 10%, valid for both corporate and personal income. With this, the country jumped to the top three list of low tax EU members, right next to Cyprus and Ireland.
However, it is still a country with quite some communist legacy. Officially, corruption does not exist in Bulgaria as it is illegal (since 2002) and criminal charges can be pressed against both parties of the corruption process. Especially the young Bulgarian professionals do their best to make Bulgaria ‘clean’.
Unfortunately, the local government is still formed by the former communist bosses who treat themselves as the local tsars and consider themselves the top of the world. Big cities (Sofia, Varna, Plovdiv, Burgas) tend to be the worst. When setting up a business on the ground, you better pick a smaller community where the local authorities are happy you settle there and hopefully create some work opportunities for local population.
Nobody admits they are corrupted but often you are expected to offer small (or big) gifts – like invite the local mayor for a nice holiday in Hawaii – that is still being done in order to get your matters solved quickly.
Historically, the territory of nowadays Bulgaria has been a kettle where several religions and many ethnic groups were boiling. Nowadays over 85% of population are Bulgarians. The second largest ethnical group are Turks and there are hardly any frictions between the two. The relations between Bulgarians and Roma living close to the Romanian border are rather peaceful, too.
For Balkan standards, the criminality is low. The formerly popular carjacking is almost non existing and according to locals, any vehicle can survive on the street overnight.
Poverty shows most when it comes to Bulgarian social system. There are virtually no kindergartens nor homes for elderly citizens. The government stimulates foreign investors by addressing this issue and turning it into a business opportunity.
The legislation still shows some outdated regulations (e.g. labour law) and especially the older generation keeps working according to a socialist work ethos, with its low productivity, extreme hierarchy and low level of loyalty. This has to do with how unreliable the employers in Bulgaria can be.
The employees between 20-45 are definitely better. They are well educated and often consider themselves ‘The Germans of the Balkans’. Example: Lufthansa recently moved their technical HR department to Sofia and hires all graduates from the local Technical College. These young people honour their bosses, cherish their dreams, missions and ambitions and can be very loyal.
Bulgarians themselves say that when hiring an employee, pick a woman: women (over 60% of population in Bulgaria) work harder and are more reliable.
Take this into account as a foreign employer and you will hardly ever experience any bad habits of employees – as long as the paycheck arrives on time.
Real estate in Bulgaria can be extremely cheap. The problem is that it is very difficult to find the owner: there is a tradition of different side letters, semi-formal arrangements with the municipalities etc. Also, Bulgarians fear that the Western investors will try to buy the land under their feet, that is why e.g. foreigners cannot buy the ground under apartment buildings. In Sofia, where the prices are the highest, the current sales price of an apartment is EUR 600-800 per sq/m.
Another interesting Bulgarian feature is banking. When opening a corporate bank account, the local banks still do not need to identify the beneficial owner. They collect data on the ‘company representative’. Bank accounts for offshore companies are not a problem either: as long as certified corporate documents and valid Certificate of Incumbency are presented. No utility bill is needed nor Letter of Reference and all businesses are allowed (without obvious law breakers). Both adult and gaming are also acceptable.
Bulgaria is a country that has a lot to offer. Although it is very different from western Europe, it is a safe and cheap working environment. Besides low tax and low cost labour, there are many more interesting features to consider – think e.g. about the 5 year carry forward loss, anonymous property ownership or maximum 10% tax on your worldwide income.
If you want to know more, please contact us at info@freemontgroup.com.

EUR 39 million Tax Bill – Can Maradona Avoid Tackles From The Tax Man?

The case of Lionel Messi [Lionel Messi Tax Troubles] has only just been settled when another Argentinean soccer star gets into trouble.
Between the years 1984-1991 Diego Armando Maradona played in Italy, mostly for Napoli. He contributed to the club’s double victory in the national competition and UEFA cup.
And according to the authorities, he has not always paid his taxes.
Driven by the lack of funds collected from tax payers, the Italian tax authorities started taking steps towards freezing Maradona’s Italian assets in order to collect on his presumably massive tax debts. And since we are in Italy, the drama is ever present:
Already in 2006 an Italian court order justified the police confiscating Maradona’s two golden Rolex watches worth EUR 25,000 when the former soccer God traveled to Italy for a benefit match. Then in 2009, while sweating at a weight loss clinic in Merano, the police again grabbed his jewels – this time three diamond earrings worth EUR 5,000.
This all is happening with the consent of the court that rules that the tax authorities are free to grab anything they see within Maradona’s assets that might be worth something.
Now this month, Maradona came to Italy to promote a new release of the DVD series about his life and career. After a day spent at Gazzetta dello Sport in Rome, he was returning to his hotel for a quiet evening with a dinner at a local restaurant. At 20.30 the two Equitalia (Italian tax collection agency) officials knocked at his hotel room door. But he did not feel like having other company than his partner.
The two tax men however waited till next morning and knocked at the door again. This time he opened the door – And the box of tax-Pandora of the Italian authorities who now have 180 days to confiscate whichever assets they can get their hands on up to the presumed tax debt value of EUR 39 million.
Needless to say that according to Maradona the debt is not just. Earlier this week, while traveling to Dubai, the 53 year old former enfant terrible of the world soccer said to media that he would love to meet Sophia Loren and discuss with her how she managed to shake off the taxman. Back in the seventies, the now 79 years old legendary Italian actress was accused of tax evasion and even spent 2 weeks in jail back in 1982 only to win her case against the tax man and clean up her name several days ago!
But a lesson is learned here. You can be one of the world’s best soccer player of all time, but when you stick your hand of god in the cookie jar of the tax man … you are tackled. You end up face down on the pitch and pull grass out of your ears for the coming six days…

Legal framework for protection of IP in the UAE

UAE legislation enables the protection of copyright, trade marks, patents and designs.
Inventions can be protected in the form of a single patent across the Gulf Cooperation Council (GCC states are: Bahrain, Oman, Qatar, Kuwait, Saudi Arabia, and the UAE). Patents are granted for a period of 10 years.
There is no unified register for the GCC to register copyright and trademarks; each country has its own national register.
In the UAE, as elsewhere, copyright is automatically vested in the author upon creation of the work. So therefore it is not necessary to register a copyright in order to enforce it. However registration of a copyright in artistic, dramatic, literary works as well as in sound and film recordings at the UAE’s Copyright Office is possible (regardless of where the work was created).
The advantage of registration is that it is a quick way to prove ownership and to facilitate speedy enforcement against infringers. Copyright is protected for duration of the author’s life plus 25 years. In the case on companies: 50 years from the date of publication.
The UAE is not part of the Nice Agreement which governs the international classification of goods and services. This means that for a trademark to be protected in the UAE it needs to be registered with the UAE’s Trade Mark Office.
Multi-class registrations are not possible so an application needs to be filed separately for each class of goods or services in which protection is sought. Registration of trade marks in the UAE is essential since the UAE does not recognize prior user rights, as is for instance the case in countries with a legal system based on common law.
A trademark registration needs to be renewed every 10 years but can be renewed indefinitely. However if a trade mark has not been used for 5 years it may be cancelled by applying to the court.
Assignments and licenses of a trademark may also be registered at the Trade Mark Office, but it is not required. If you are trading in the UAE or even if your goods are passing through the UAE local trademark protection is important.
Please contact us if you need assistance with registering your patent, copyright or trademark in the UAE.

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