08 July 2020 - Events
Senate to act on rules for gifts of artwork
Members of the US Senate Finance Committee are considering loosening the strict rules governing partial gifts of artwork to charities.
Before 2006, when the current law was enacted, donors could keep a work of art in their possession until they died, while pledging a portion to a museum and writing off a percentage of its value for tax purposes each year, as long as they allowed the museum to display the artwork from time to time.
Congress enacted legislation to change the law as part of the Pension Protection Act of 2006 after critics said the old law was being abused. The 2006 law required donors to give up ownership of the artwork within ten years of making a pledge, and capped the value of the work at the time it was pledged, rather than allowing its value to be adjusted for appreciation.
Museum directors say the new law substantially reduced the number of artworks being donated, and lobbied Congress to change the law. Senator Charles Schumer of New York and other lawmakers are now pushing to loosen the restrictions, including extending the period after which the artwork must be relinquished to 20 years.
Tax havens under pressure to reform
A man identified only as Elmar S. admitted in late July to evading 8 million Euros in taxes via two foundations he set up in Liechtenstein, Bloomberg News reported. He was tried in Bochum, Germany, and convicted the same day. The case is part of a huge investigation by the German government of 900-odd suspects alleged to have hidden money in the small principality to evade taxes.
The case has created pressure on Liechtenstein and other so-called tax havens to make their banking systems more transparent. Along with Monaco and Andorra, it is listed by the Organization for Economic Cooperation and Development as an “uncooperative tax haven.”
Until recently Liechtenstein’s Crown Prince Alois has resisted opening up his system – understandably, since its tax-haven status has been good for his economy. But lately the pressure has become intense. Earlier in July Germany signed a tax information exchange agreement with
Jersey, and the large industrialized countries are signing such agreements with other offshore centers.
Germany outlines licensing requirements for family offices
The German Financial Services Supervisory Authority (BaFin) published a circular in June outlining license requirements for family office services. BaFin distinguished between private family offices and what it refers to as external family offices that manage assets for multiple families via a portfolio management contract. The existence of such a contract generally will trigger the licensing requirement.
Changes to UK taxation
As of April 6, sweeping changes to taxation in the UK took effect. Among them:
- Capital Gains tax: Before the April 6 date, variable rates applied for long-term gains. Under the new rules, a flat rate of 18 percent applies to all gains.
- The UK residence test: Under the old rules, days of arrival and departure were unlikely to be counted in the 183 days of presence in any tax year that established a person as a UK resident. Under the new rules, any day of presence in the UK will be counted, with exceptions for transit passengers.
- *The remittance basis: After April 6, an adult must pay a fee of £30,000 annually after seven out of nine years of residence in the UK to qualify for the remittance basis. All remittance basis taxpayers’ income is taxable at 40 percent; gains are taxed at 18 percent. There are no allowances.
- *Distributions from offshore trusts: Distributions of income and capital gain from offshore trusts to non-domiciliaries is now taxable on the remittance basis; formerly they could be made tax free. Highly complex new rules apply.
The changes have brought about some puzzling anomalies in relation to mortgage interest, the abolition of source ceasing, assets purchased out of offshore income and gifts to family members.