Monthly Archives: December 2016

Talking Tax – Issue 62

ATO guidance

ATO guidance on foreign resident capital gains withholding tax

The ATO amended its instructions to taxpayers seeking a reduced withholding tax rate on the sale of property on 6 December 2016.

The amended instructions include examples of the supporting information that should be included in an application, which is dependent on the reasons for variation of rate.

Non-portfolio dividend exemption participation test

The ATO has released two draft taxation determinations regarding the application of Subdivision 768-A of the Income Tax Assessment Act 1997 (Cth) (ITAA97) to Australian corporate tax entities which are either a partner of a partnership (TD 2016/D6) or a beneficiary of a trust (TD 2016/D7). The determinations consider the same issue, being whether these partners or beneficiaries can hold a direct control interest within the meaning of section 350 of the ITAA97.

The draft determinations state that partnerships and trusts can be taken to ‘hold’ a direct control interest in a foreign company for the purpose of satisfying the 10% participation test in s 768-15.

Accordingly, depending on their own participation in the partnership or trust, if a partner or beneficiary Australian corporate tax entity receives a distribution from a foreign company, section 768-5 may deem the distribution is non-assessable non-exempt income.

Legislation

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ILN Firm of the Month – Martinez, Algaba, de Haro y Curiel, S.C.

FirmoftheMonth1

December 2016/January 2017

The ILN is proud to announce our latest firm of the month, Martinez, Algaba, de Haro y Curiel, S.C.!
The firm was established in 1969 and has broad experience in civil, commercial and administrative litigation, commercial arbitration, and bankruptcy and restructuring. Specialized publications such as Chambers & Partners, Legal 500, and Who’s Who Legal recognize the firm as a leading firm within said areas of practice. Additionally, the firm provides corporate and banking advisory legal services.
Clients counseled consist of both domestic and foreign entities, many of which are publicly traded and are key players in areas of business and industries as diverse as banking, insurance, investment and pension funds, education, oil and gas, retail, real estate, technology, aeronautics, and telecommunications.
With offices in Mexico City and Monterrey, the firm has nine partners and twenty-five associates with sound academic and professional backgrounds, licensed to practice law all across the country, supported by over sixty people, including paralegals and administrative staff.
Full descriptions of Martinez, Algaba, de Haro y Curiel’s services, expertise, and lawyer profiles are available on their ILN profile.
Olivier Goldstein
Roberto Martínez-Guerrero
Telephone: +52 55 52 58 02 02
Practice Groups: Civil and Mercantile Litigation; Arbitration; Commercial Law; Financial Law; Insolvency and Bankruptcy Law; Administrative Law; Corporate Law; Constitutional Law; Amparo
Laurent Marville
Javier Curiel-Obscura
Telephone: +52 55 52 58 02 02
Practice Groups: Civil, Commercial and Administrative Litigation; Commercial Arbitration; Bankruptcy and Restructuring; Insurance Litigation; Corporate and Banking Law
Pierre-Menno di Girard
Diego Gutiérrez Martínez-Parente
Telephone: +52 (55) 5258 0202
Practice Groups: Civil and Mercantile Litigation; Arbitration; Commercial Law; Financial Law; Insolvency and Bankruptcy Law; Constitutional Law; Amparo
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ILN Announces Release of “Buying & Selling Real Estate: An International Guide”

2016We’re excited to announce today the release of the first edition of our real estate guide, “Buying & Selling Real Estate: An International Guide.” The collaborative electronic guide provides an overview of the legal aspects of buying and selling real estate in eleven jurisdictions internationally. It is designed to serve as a quick and practical reference for those buying or selling real estate in these jurisdictions.

As the facilitator of the guide, I can say that we’re delighted to publish this collaborative work and showcase the strength and depth of the combined expertise of our real estate lawyers. We already have plans to add additional jurisdictions to the publication, which will be regularly revised, to make this a comprehensive and up-to-date source of information. Like our corporate guide on establishing business entities, this is a real labor of love.

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Davis Malm Adds Kimberley C. Maruncic to its Business Law and Litigation Practices

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UK residential property in offshore structures: more surprises from the Government

The Government has confirmed its intention to make UK residential property held indirectly by non-doms through an offshore structure chargeable to UK Inheritance Tax (IHT).  As planned, this will begin on 6 April 2017.

Although the proposal was first announced as far back as July 2015, draft legislation effecting this change was only published on 5 December 2016 – and it contains some surprises.
Main features of the draft legislation

Affected structures clarified

Owners of interests in partnerships and closely held companies whose value is derived, directly or indirectly, from UK residential property, are the key targets. 

A close company broadly means one owned by five or fewer participators (essentially anyone who has an interest in the company, not just shareholders), or owned only by directors, who together control the company.

Debt in the structure

The Government’s 18 August Consultation envisaged that debt funding provided by connected parties would be ignored when valuing an interest for the purposes of these changes.

This proposal has been shelved. 
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Seventh Circuit Holds That Student Athletes Are Not Employees

Berger v. National Collegiate Athletic Association,
No. 14-cv-1710 (7th Cir. Dec. 5, 2016)

Colleges and universities, at least in the jurisdiction of the Seventh Circuit Court of Appeals, surely breathed a collective sigh of relief earlier this month when the Court held that student athletes were not employees under the Fair Labor Standards Act (“FLSA”) and thus were not entitled to minimum wage.

Former student athletes at the University of Pennsylvania sued Penn, the National Collegiate Athletic Association (“NCAA”) and over 120 other colleges and universities that have Division I (the division that covers the largest schools) athletic programs, arguing that student athletes were employees entitled to the minimum wage. Interestingly, the court declined to use any of the multi-factor tests to resolve the issue because those tests would not capture the true nature of the relationship.

Instead, the court relied on the U.S. Department of Labor’s Field Operations Handbook, which indicates that students who participate in extracurricular activities are not employees of the school. In addition, the court took a common sense approach and recognized that college athletes participate in these programs for reasons wholly unrelated to immediate compensation and without any expectation of earning an income. Viewing student athletes as employees also would undermine what the court recognized as a “revered tradition of amateurism in college sports.”

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Change: What’s Holding Us Back?

Speedometer with needle racing through the words Revolution, Change, Shake it Up, Status Quo and Stagnation

“Change or die.”

How many times have you heard that over the last eight years?

A friend of mine in the legal industry pointed that out to me yesterday, along with commenting that it always sounds so dire. And it does sound dire.

But after the statistics that we covered in last week’s post (1/3 of clients are openly dissatisfied with their outside counsel, chief legal officers rank firms at a 3 on a 1 to 10 scale for commitment to change, and clients are moving their legal work to other firms or to nonfirm vendors), it would seem that we should be properly incentivized to speed up the pace of change. From the Peer Monitor/Georgetown 2016 Report on the State of the Legal Market, which cautioned BigLaw against a “Kodak moment”

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Supreme Court Reverses Apple v. Samsung Design Patent Damages Award

Smartphone on leather backgroundOn December 6, the Supreme Court reversed Apple’s $399 million patent infringement verdict against Samsung.  The decision – the first from the Supreme Court to interpret design patent damages since 1886 – arguably raises more questions than it answers.

In a series of widely-publicized cases around the globe, Apple and Samsung have been battling over the alleged infringement of smartphone designs since 2011.  Through multiple trials and appeals, Apple eventually obtained a $399 million verdict for Samsung’s infringement of three Apple design patents covering various aspects of the iPhone, including the front screen and ‘rounded corners.’

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Steps any organisation can take to protect themselves this silly season

Every year the festive season brings a spike in claims against employers and employees, with claims around health and safety, bullying, sexual harassment, inappropriate behaviour and more.

How can employers minimise their risks and avoid the festive season becoming the silly season?

Most claims arise from work social functions, including Christmas parties, and often have far-reaching consequences. Claims often take many months to resolve, with a great deal of stress experienced from all sides. People might lose their jobs, and employers may take a significant financial or reputational hit.

First step – policies

Proper policies on work-related social activities are most critical and must be in place. Policies are most effective when using examples of inappropriate behaviour.

Policies need to be known and understood throughout the organisation; there’s no point in having them at the bottom of a drawer somewhere.  Workplace behaviour training in conjunction with the policies is an important step to take and can be conducted in person or online, via intranet, webinars and so on.

Good policies will include clear complaint handling procedures. Experience shows that when staff know how to make a complaint they are more likely to make it earlier, resulting in swift action, rather than letting the issue fester and become worse.

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New Queensland workers’ legislation voids contractual clauses

It is a serious matter to interfere with the rights of parties to agree between themselves, to whatever contractual terms they chose. Recent amendments to the Queensland workers’ compensation legislation1 have effected a significant change to the way businesses are allowed to contract with each other and allocate risk for injury to workers. The amendments render void and unenforceable, certain contractual clauses where an employer, effectively indemnifies another entity against contribution claims the employer might otherwise have had for damages for injury to a worker. It is doubtful the full ramifications of this proposal have been adequately considered.

The utility of the reform is questionable and has the potential to cause great uncertainty and dispute. Parties who think they have agreed on certain carefully crafted or well understood terms may find the validity of those terms stripped or challenged. Insurance arrangements placed on the basis of agreed risk allocations may prove inadequate or erroneous, causing overlap or gaps in cover, increased premiums and increased litigation. Is this aspect of the reform necessary, economically sound and wise?

The relevant amendments to the legislation stem from the recent judgment in Byrne v People Resourcing (Qld) Pty Ltd & Anor2. Byrne confirmed a long line of court authority that if WorkCover is liable directly to the claimant in negligence or contract, then it must pick up and indemnify all related liabilities of the employer. Therefore contractual variations of the employer’s negligence liability that alter contribution apportionments between defendants will still be indemnified by WorkCover.

Understandably WorkCover Queensland took issue with insuring this additional contractual liability. Its premiums are not based on a careful review of all contractual risk allocation arrangements and it is effectively funding its insured’s contractual concessions out of its own coffers.

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