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In a major development for the crypto world, a Delaware bankruptcy court has given the green light for FTX to return more than $14 billion in assets to its creditors.
FTX, the once-popular crypto exchange, filed for bankruptcy in November 2022, estimating it owed around $11.2 billion.
Now, thanks to the approved plan, 98% of creditors will receive 119% of what they’re owed based on the bankruptcy filing date—a surprising and welcome turnaround for those who were left in the lurch.
Key takeaways
FTX has managed to claw back between $14.7 billion and $16.5 billion in assets for distribution, including cash, cryptocurrencies, and other assets (BBC).
What’s remarkable is that this recovered amount is actually higher than the initial estimates of what the company owed, showing just how much work has gone into recovering funds over the last year.
The plan, signed off by Delaware bankruptcy Judge John Dorsey, lays out a clear process to make sure creditors get what they’re entitled to. In the world of bankruptcy, where creditors often only see a fraction of their claims returned, this is a significant win.
The resolution of FTX’s bankruptcy could have a wider impact on the struggling cryptocurrency market.
Over the past year, the industry has faced increasing regulatory pressure and a drop in investor confidence after a string of high-profile collapses.
The fact that FTX’s bankruptcy has been handled efficiently and creditors are getting back more than expected could send a positive signal to the market, possibly restoring some of that lost trust.
According to Bloomberg Law, this payout to creditors could serve as a much-needed boost—or a “fillip”—for the broader crypto industry.
For an industry battered by volatility, the successful resolution of FTX’s claims could encourage other companies facing difficulties to take a proactive approach to bankruptcy and ensure their creditors are prioritised.
While the crypto sector still faces plenty of challenges – from regulatory hurdles to market instability – FTX’s recovery plan offers a roadmap for how strategic planning and transparency can lead to positive outcomes, even in the toughest situations.
Over the next few months, we’ll see how the actual payouts unfold and whether they inspire renewed confidence in the crypto market’s ability to bounce back from financial distress.
If all goes smoothly, this could be a turning point that helps rebuild investor trust and sets the stage for future growth.
If you’re in need of tax advice in the USA, get in touch.
On 3 October 2024, the Irish High Court issued an important judgment concerning the tax residency of a Delaware LLC under the US/Ireland Double Tax Treaty (DTA).
This case involved the ability of three Irish subsidiaries of a Delaware LLC to claim group loss relief under Section 411 of the Taxes Consolidation Act 1997.
The key question was whether the Delaware LLC was considered “liable to tax” and thus “resident” under Article 4 of the US/Ireland DTA, which would enable the subsidiaries to claim group relief.
The High Court’s decision ultimately denied this relief.
The appeal was brought by Susquehanna International Group Ltd and two other companies, which sought to claim group relief by arguing that their parent, a Delaware LLC, was tax resident in the US.
The Irish Revenue disagreed, asserting that the LLC was not a company for group relief purposes and was not tax resident in the US under the DTA.
The crux of the issue was that the LLC was a disregarded entity for US tax purposes, meaning it was not subject to tax at the entity level.
Instead, its members, including several S Corporations and individuals, were taxed on their share of the LLC’s income.
This complex ownership structure raised questions about whether the LLC could be considered a separate taxable entity eligible for group relief.
Initially, the Tax Appeals Commission ruled in favour of the taxpayer, finding that the LLC was a company for the purposes of group relief and that it was resident in the US under the DTA.
The Commissioner took a purposive interpretation of the DTA, arguing that even though the LLC was fiscally transparent, it could still be considered tax resident under Article 4.
This was based on the LLC’s perpetual succession under Delaware law, which made it a body corporate.
The Irish High Court, however, overturned the Tax Appeals Commission’s decision. The Court focused on two key issues:
This ruling underscores the importance of understanding the complexities of entity classification in international tax law.
The Court’s decision hinged on the fiscally transparent nature of the Delaware LLC, which ultimately deprived it of treaty benefits and group relief eligibility.
While the LLC was structured under US law as a disregarded entity, this classification proved crucial in the Irish Revenue’s denial of relief.
For businesses with similar structures, this judgment highlights the need to carefully examine ownership arrangements and the potential tax implications.
Companies with complex cross-border structures should ensure that their parent entities meet the residency requirements under relevant tax treaties to benefit from relief provisions like group loss relief.
The Irish High Court’s decision serves as a reminder of the challenges posed by hybrid entities in international tax law.
While the Tax Appeals Commission initially supported the taxpayer’s position, the High Court’s strict interpretation of the US/Ireland DTA ultimately led to the denial of group relief.
Businesses should take note of this ruling and review their structures to ensure compliance with tax residency rules.
If you have any queries about this article on Group Loss Relief and Delaware LLCs or tax matters in Ireland, then please get in touch.
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Following the Belgian general elections in May and the formation of new regional governments, significant changes have been introduced regarding registration and inheritance taxes.
These taxes are largely regulated by the individual regions, with new policies aiming to adjust rates and provide relief in certain areas.
Below is a breakdown of the measures introduced by the Walloon and Flemish regions, as well as the current status in Brussels.
On 12 September 2024, the Walloon government presented its planned reforms to registration and inheritance taxes, which will come into effect in 2025 and 2028 respectively.
This shift marks an important step towards a more tax-friendly environment in the Walloon Region, especially for individuals seeking to purchase homes or pass on wealth through inheritance or gifts.
On 30 September 2024, the Flemish government also announced a series of tax changes. Their overarching goal is to implement a proportional and fair tax policy while maintaining fiscal responsibility.
Unlike Wallonia and Flanders, the Brussels Region has yet to announce specific tax reforms, as the formation of a majority coalition is still pending. We expect updates once the new government is fully established, and tax policies for registration and inheritance taxes are likely to follow.
Belgium’s regional governments are taking significant steps to reform registration and inheritance tax policies, particularly in Wallonia and Flanders.
These changes aim to ease the tax burden on homeowners and those passing on wealth through gifts or inheritance.
The upcoming reforms are designed to ensure a more proportional and fair tax environment, especially for smaller estates and first-time buyers.
If you have any queries about this article on New Measures for Registration and Inheritance Taxes, or tax matters in Belgium more generally, then please get in touch.
Alternatively, if you are a tax adviser in Belgium and would be interested in sharing your knowledge and becoming a tax native, then there is more information on membership here.
In Andrew Nunn v HMRC [2024] UKFTT 298 (TC), the First-tier Tribunal (FTT) ruled in favour of the taxpayer.
The case revolved around a property sale agreement between Mr Nunn and a developer, which took place before formal contracts were signed.
This decision could serve as a key reference for taxpayers entering into similar development agreements.
Andrew Nunn purchased a property in Oxfordshire in 1995 for £120,000.
In 2015, he agreed to sell a portion of his garden to a developer, Michael Daly, for £295,000.
The developer planned to build two houses on the land and had already secured planning permission. Although heads of terms were agreed, formal contracts were delayed.
To facilitate construction, Mr Nunn signed a letter in June 2016 that allowed the developer to begin work while the formal contracts were being finalised.
Construction work commenced following this letter, and by September 2016, a formal sale contract was signed.
However, Mr Nunn faced an unexpected challenge when HMRC disallowed his claim for PPR relief, leading to a CGT charge of £72,633.80.
Mr Nunn subsequently appealed to the FTT, arguing that the land had remained part of his **private residence** at the time of disposal, and therefore should be eligible for PPR relief.
The FTT considered several critical issues in the case:
The Tribunal concluded that the relevant date for assessing whether PPR relief applied was 2 June 2016, the date on which Mr Nunn signed the letter permitting the developer to begin construction.
The Tribunal determined that this agreement altered Mr Nunn’s relationship with the land, which was no longer held for his own occupation.
The FTT held that on 2 June 2016, the land still formed part of Mr Nunn’s garden, as it had not yet been physically separated or developed.
The letter allowing construction did not immediately sever the land from his residence, and thus it still qualified for PPR relief.
The Tribunal ruled that for CGT purposes, the land was deemed disposed of on 2 June 2016, when the letter agreement was signed.
This was important as it meant the land was still considered part of Mr Nunn’s private residence on that date.
Since the FTT ruled in favour of Mr Nunn’s claim for PPR relief, the penalty of £20,155.87 imposed by HMRC was set aside.
The case hinged on the interpretation of Section 222 of the Taxation of Chargeable Gains Act 1992 (TCGA), which provides relief from CGT for gains on the disposal of a private residence and its associated grounds.
The Tribunal also referred to Section 28A of the Taxes Management Act 1970 (TMA) in relation to the enquiry and closure notice issued by HMRC.
This ruling is a welcome development for taxpayers who may find themselves in similar circumstances.
The case highlights the importance of the timing of key events, such as when development agreements are made and when works begin on the land.
Importantly, the Tribunal’s decision confirms that land may still qualify for PPR relief even if an agreement is in place for its future sale, as long as it remains part of the taxpayer’s garden at the time of disposal.
The FTT’s decision in favour of Andrew Nunn provides clarity on the application of PPR relief in cases involving property development agreements.
The case illustrates how the status of land at the time of disposal plays a crucial role in determining whether relief is available, and offers valuable guidance for taxpayers entering into similar agreements with developers.
If you have any queries about this article on Main Residence Relief or general tax matters in the UK, then please get in touch.
Alternatively, if you are a tax adviser in the UK and would be interested in sharing your knowledge and becoming a tax native, then there is more information on membership here.
In a recent case, Denmark issued a ruling on the concept of Permanent Establishment (PE), which has important implications for businesses that operate across borders.
This ruling followed a case involving a Swedish company’s CEO working part-time in Denmark, raising questions about when a business is deemed to have a PE in a foreign country.
The ruling highlights the importance of understanding the concept of PE, as it can determine whether a company is liable to pay tax in a particular country.
Permanent Establishment refers to the situation where a business has a sufficient physical presence in a foreign country, making it liable to pay tax on its profits in that country.
PE can take many forms, such as having an office, factory, or even just a representative working in a foreign country.
The exact definition of PE can vary from one country to another, but the principle is the same: if a business is operating in a country for a certain period of time, it may be required to pay taxes there.
In this particular case, the CEO of a Swedish company was working part-time in Denmark, raising questions about whether the company had established a PE in Denmark.
The Danish tax authorities argued that the company had a PE in Denmark because the CEO was regularly conducting business activities in the country.
The company, however, claimed that the CEO’s presence in Denmark was not enough to constitute a PE.
The Danish court ultimately ruled that the company did have a PE in Denmark, as the CEO’s work in the country went beyond a mere temporary presence.
This ruling has important implications for businesses with employees who work remotely or travel frequently between countries.
The Danish ruling on Permanent Establishment serves as an important reminder for businesses operating internationally.
Companies need to carefully assess their operations in foreign countries to determine whether they have a PE and may be required to pay tax there.
The rise of remote work and cross-border business activities has made this issue more relevant than ever.
If you have any queries about this article on Denmark Permanent Establishment Rules, or tax matters in Denmark, then please get in touch.
Alternatively, if you are a tax adviser in Denmark and would be interested in sharing your knowledge and becoming a tax native, then there is more information on membership here.
Brazil is known for having one of the most complex tax systems in the world, which often poses challenges for businesses trying to operate efficiently.
The country’s VAT system, or Value Added Tax, has been a significant area of concern due to its multilayered structure.
Recognising this, the Brazilian government has introduced new reforms aimed at simplifying VAT compliance and making it easier for businesses to navigate the tax system.
These reforms are intended to enhance Brazil’s competitiveness in the global market by reducing the administrative burden on companies.
VAT is a tax on the value added to goods and services at each stage of the production and distribution process.
In Brazil, VAT is administered at multiple levels—federal, state, and municipal—each imposing different taxes.
This makes compliance difficult and costly for businesses, as they need to keep track of various tax rates, deadlines, and regulations depending on the jurisdiction they operate in.
Brazil’s VAT system includes a combination of taxes, such as:
The multiple layers of taxation often lead to confusion, especially for companies that operate across state lines or provide services in different municipalities.
The complexity also results in frequent disputes between businesses and tax authorities, which can delay business operations and increase costs.
The existing VAT system has long been criticised for being overly complicated and inefficient.
The reform aims to simplify the process by reducing the number of taxes and consolidating the different tax rates into a more uniform structure.
This will not only reduce the administrative burden on businesses but also encourage compliance and reduce the likelihood of tax disputes.
The VAT reform is also seen as crucial to improving Brazil’s standing in the global business community.
As Brazil looks to attract more foreign investment, simplifying the tax system is an important step in making the country more appealing to multinational corporations.
Brazil’s VAT reforms are a welcome development for businesses operating in the country.
By simplifying the tax system, the government hopes to reduce the administrative burden on companies and encourage greater compliance.
These changes are expected to improve Brazil’s competitiveness in the global market, attracting more foreign investment and helping local businesses grow.
If you have any queries about this article on Brazil’s VAT reforms, or tax matters in Brazil, then please get in touch.
Alternatively, if you are a tax adviser in Brazil and would be interested in sharing your knowledge and becoming a tax native, then there is more information on membership here.
India is making substantial changes to its transfer pricing rules, with the aim of making its tax system more competitive and easier to navigate for multinational corporations.
These reforms are expected to simplify compliance and attract more foreign investment.
Transfer pricing refers to the rules governing how related companies price goods, services, or intellectual property transferred across borders.
Transfer pricing is the method by which goods, services, or intellectual property are priced when they are transferred between different entities within the same multinational group.
These prices can significantly affect the tax liabilities of companies in different jurisdictions, as shifting profits between countries with different tax rates can lower a company’s overall tax burden.
India has traditionally had a complex and burdensome transfer pricing system, which has led to a high volume of tax disputes between multinational companies and the Indian tax authorities.
The new reforms aim to simplify the system, reducing the risk of disputes and encouraging foreign businesses to invest in India.
The reforms also bring India closer in line with the OECD’s guidelines on transfer pricing, which are used by many countries around the world.
One of the most significant changes is the introduction of bilateral APAs.
This allows companies to agree on transfer pricing rules with the Indian tax authorities in advance, providing more certainty and reducing the likelihood of future disputes.
The reforms also streamline the documentation requirements for businesses, making it easier for them to comply with the rules and avoid penalties.
Clearly, by implementing these changes, India hopes to make the country more attractive for foreign investment.
If you have any queries about this article on transfer pricing, or tax matters in India, then please get in touch.
Alternatively, if you are a tax adviser in India and would be interested in sharing your knowledge and becoming a tax native, then there is more information on membership here.
Amazon’s tax practices in the UK have been under the spotlight for many years, with criticism frequently aimed at the tech giant for its minimal corporation tax payments.
In recent years, Amazon paid very little in taxes due to the utilisation of a government tax break, which has now expired.
This development has led to Amazon paying corporation tax for the first time since 2020, marking a significant shift in both the company’s approach to tax and the broader UK tax policy landscape.
Amazon operates globally, with the UK being one of its key markets.
Historically, like many multinational companies, Amazon has faced criticism for taking advantage of legal tax avoidance strategies.
These strategies often involved reporting profits in low-tax jurisdictions such as Luxembourg, while paying relatively little tax in high-tax markets like the UK.
It is claimed that one of the main tools Amazon and other companies had been using in recent years to reduce their UK tax burden had been Rishi Sunak’s much vaunted “Super Deduction”.
The relief allowed for 130% corporation deduction for qualifying expenditure on qualifying plant and machinery in a two year period beginning in April 2021.
This change in Amazon’s tax payments also aligns with a global push for fairer taxation of multinational companies.
The OECD’s Pillar Two reforms, which aim to introduce a global minimum tax rate of 15%, have garnered widespread support.
These reforms are designed to stop companies from shifting profits to low-tax jurisdictions, ensuring that all multinationals, including tech giants like Amazon, contribute a fair share to the countries in which they generate significant revenue.
Amazon’s recent corporation tax payment in the UK is a reflection of both changes in UK tax policy and global efforts to reform corporate taxation.
With governments across the world, including the UK, pushing for greater tax transparency and compliance from large multinationals, we may see further shifts in how companies like Amazon structure their global tax strategies.
If you have any queries about this article on Amazon UK’s corporation tax, or tax matters in the UK, then please get in touch.
Alternatively, if you are a tax adviser in the UK and would be interested in sharing your knowledge and becoming a tax native, there is more information on membership here.
Transfer pricing has always been a complex area for multinational companies, as it involves setting the prices for transactions between related entities in different countries.
The UK tax authority, HMRC, has recently issued new guidelines on transfer pricing risks, which have been hailed as a “game changer” by tax experts.
These guidelines aim to provide clearer guidance to businesses, helping them manage the risks associated with transfer pricing and avoid costly disputes.
Transfer pricing refers to the pricing of goods, services, and intellectual property that are traded between companies under common ownership.
For example, a UK-based subsidiary of a multinational company might buy raw materials from a related company in another country.
The price at which these goods are traded—known as the transfer price—needs to be set at an “arm’s length” rate, meaning it should be the same as if the transaction were between unrelated parties.
In practice, transfer pricing has been a contentious issue for tax authorities, as companies can manipulate these prices to shift profits to low-tax jurisdictions, thereby reducing their overall tax liability.
HMRC’s latest guidelines focus on identifying and addressing key transfer pricing risks.
These include areas such as the valuation of intangibles (e.g., patents and trademarks), the provision of management services, and the pricing of goods and services traded between related entities.
One of the main changes in these guidelines is HMRC’s focus on risk-based assessments.
This means that HMRC will be targeting businesses that they perceive to be high-risk, particularly those with complex supply chains or significant intangible assets.
By providing clearer guidance on what constitutes high-risk behaviour, HMRC hopes to encourage businesses to take a more proactive approach to transfer pricing compliance.
For multinational companies operating in the UK, these new guidelines represent both a challenge and an opportunity.
On the one hand, the guidelines place a greater burden on companies to ensure that their transfer pricing arrangements are compliant with UK tax law.
On the other hand, by providing clearer guidance, HMRC is helping companies to better understand the risks and avoid costly disputes.
For companies that have traditionally relied on aggressive transfer pricing strategies to minimise their tax bills, these guidelines could force a rethink.
HMRC’s emphasis on transparency and risk-based assessments means that companies will need to ensure that their transfer pricing policies are well-documented and justifiable.
HMRC’s new guidelines on transfer pricing risks are a significant development for multinational companies operating in the UK.
By providing clearer guidance on high-risk areas, HMRC is helping businesses to manage their transfer pricing risks and avoid disputes.
At the same time, these guidelines are likely to result in greater scrutiny of companies’ transfer pricing arrangements, particularly those with complex supply chains and intangible assets.
If you have any queries about this article on HMRC’s transfer pricing guidelines, or tax matters in the UK in general, then please get in touch.
Alternatively, if you are a tax adviser in the UK and would be interested in sharing your knowledge and becoming a tax native, there is more information on membership here.