Tag Archive for 'tax'

Celebrity royalties flow into Dutch tax shelters – International Herald Tribune

Celebrity royalties flow into Dutch tax shelters – International Herald Tribune

It has become painfully clear that when even renowned humanitarians, like Bono of U2, are movings their assets to overseas tax shelters that we have basically create a system of taxation that is fundamentally unfair, because it is a system which no one complies with voluntarily, instead it is a system in which the majority find it to costly to avoid. We comply because it is too expense of the majority of people to pursue other options, like the ones in the article below. Maybe income tax isn’t such a good idea, after all, wealth redistribution has failed, because certain individuals with the highest tax burden find it cheaper to hire lawyers and consultants to avoid their tax liability than to pay it, which means the less well off are force to carry the load. Maybe this is the reason income tax wasn’t in the constitution originally.

Other Dutch shelters that Promogroup has arranged for the three have already paid off handsomely: over the past 20 years, according to Dutch documents, the musicians have paid just $7.2 million in taxes on earnings of $450 million that they have channeled through Amsterdam — a tax rate of about 1.5 percent, compared with the British rate of 40 percent.

The Rolling Stones are not the only celebrities sheltering income in the Netherlands. The rock powerhouse U2 has transferred lucrative assets to Amsterdam, as have other pop singers and well-known athletes, all of whom have used or continue to take advantage of the Netherlands’ tax shelters, according to a Dutch tax lawyer who requested anonymity because of client confidentiality agreements.
Entertainment companies and others that benefit handsomely from Dutch shelters include EMI, the record label, and CKX, the entertainment company that owns stakes in “American Idol,” the Elvis Presley estate and the soccer pin- up idol David Beckham.
When it comes to attracting celebrity wealth seeking shelter from taxes, the Cayman Islands and other classic Caribbean tax havens are receding in favor, according to tax experts here and overseas. While old-school, offshore tax havens — the warm ones with tropical fish, off-the-shelf holding companies with post-office-box addresses and scant regulation or transparency — still attract money, they are largely patronized, tax lawyers and entertainment bankers say, by hedge funds and private equity firms looking to protect lush trading profits from taxes.
But for earnings derived from intellectual property like royalties, the Netherlands has become a tax shelter of choice. With celebrities lending their names and images to clothing lines, licensing their hit songs to corporate sponsors, seeking roles in Hollywood and engaging in other ventures that generate significant taxable income, the Dutch system, which does not tax royalties, offers a nifty shelter.
The Dutch shelter is simple: royalties that flow into or out of a Dutch holding company are exempt from taxes. Although the nominal corporate tax rate in the Netherlands is around 30 percent, analysts say domestic tax shelters bring that rate down substantially.
“For 90 percent of the people who do this, the motivation for using these structures is tax minimization, or avoidance,” said Ton Smit, a tax lawyer at Tax Consultants International in Rotterdam, a firm that caters to celebrities, athletes and multinational corporations seeking to minimize their taxes.

NY Mortgage Recording Tax and “related” parties

    Recently, a relative asked me about a tax that went into effect last year and I had never heard of; it’s called the a Recording Tax, and applies to certain types of mortgages presented for recording to the county clerk. If you what to look it up it’s in the NY code, Title 11, Chapter 26, Administrative Code, Tax Law § 253. What caused me concern is that a practitioner may be somewhat overwhelmed by the list of mortgages which this is applicable to that they may never reach the information contain in the following subsection. I am refering to NY Tax Law § 253a (this citation, should bring up the correct statute in Westlaw).
    I believe that part of the motivation for the creation of this tax is the taxation of transaction which are engineered to avoid paying income taxes by parties engaging in various forms of self-dealing. Traditionally, the money which came from a loan that was secured by a mortgage, or security interest on the real property, was not considered income as to the recipient of the loan because the recipient also incurred an equal and opposite obligation to repay the loan. google cloud . The most pertinent information for determining which mortgages are subject to this tax is subsection 2 of 253a, which states:

"2. (a) For the purpose of determining whether a mortgage is subject to the tax authorized to be imposed by paragraph (B) or (C) of subdivision one of this section ……. , where such mortgages form part of the same or related transactions and have the same or related mortgagors. …… For purposes of this subdivision, there shall be a presumption that all mortgages offered for recording within a period of twelve consecutive months having the same or related mortgagors are part of a related transaction, and such presumption may be rebutted only with clear and convincing evidence to the contrary. The commissioner of taxation and finance may require such affidavits and forms, and may prescribe such rules and regulations, as he determines to be necessary to enforce the provisions of this subdivision. "

The statute then goes on to specify in §253a(2)(b), what the term "related" means:

"(b) The term "related", when used in this subdivision with reference to mortgagors, shall include, but shall not be limited to, the following relationships:

(i) members of a family, including spouses, ancestors, lineal descendants, and brothers and sisters (whether by the whole or half blood);

(ii) a shareholder and a corporation more than fifty percent of the value of the outstanding stock of which is owned or controlled directly or indirectly by such shareholder;

(iii) a partner and a partnership more than fifty percent of the capital or profits interest in which is owned or controlled directly or indirectly by such partner;

(iv) a beneficiary and a trust more than fifty percent of the beneficial interest in which is owned or controlled directly or indirectly by such beneficiary;

(v) two or more corporations, partnerships, associations, or trusts, or any combination thereof, which are owned or controlled, either directly or indirectly, by the same person, corporation or other entity, or interests; and

(vi) a grantor of a trust and such trust."

The list of relationships, noted above, are ones in which self- dealing can occur. This observation is what lead me to believe that the policy which motivated it’s creation was not so much revenue generating as the purposeful closing of a perceived income tax loop hole.
    Though, I have yet to familiarize myself with the reset of the statute, practicing lawyers should note that the above section can be used, potentially, to save their clients in the taxes they will incur. Afterall, why look for an exemption to the statute, if the statute is inapplicable to your clients particular situation. So make a note, if the parties to a mortgage are not related, then this may apply to you. NY Tax Law § 253a(2)(a), even specifies that a presumption of "relatedness" may be rebutted by affidavit.