LEXUNION Newsletter Nº2 – 2t 2015

We are glad to let you know that the second edition of the Newsletter of our network LEXUNION is now available.

It’s a free quarterly newsletter that deals with legal and tax developments in member countries of the Lexunion network, with the purpose to help french compagnies and persons clients of our network.

It can be downloaded on this link: Newsletter client – Lexunion 2-2015

GERMANY_____________________________________

1.- Amendment to the Franco-German tax treaty relating to taxation of pensions

An amendment to the Franco-German treaty for the avoidance of double-taxation was signed on 31.03.2015. In particular, it con-cerns the taxation of retirement pensions and prescribes, starting from 2016, that all pensions paid out by Pension Insurance will only be taxed in the place of residence of the beneficiary. Thus, a pension paid out by the German pension insurance to a beneficiary residing in France will be taxable only in France. The tax regime for public pensions is thus made to conform with the regime for private retirement pensions (art. 13 al. 8 of the Bilateral Tax Treaty).

This amendment to the treaty must, nevertheless, be ratified by the French and German parliaments before coming into force as planned for 2016.

2.- Simplification of judicial enforcement in a foreign EU member country

The recognition and execution of legal decisions concerning civil or commercial matters in foreign EU member countries were once again simplified considerably on 10.01.2015 with the implementation of the EC Regulation 1215/2012, « Brussels Regulation Ia »), the application of which brings about the following changes:

  • Elimination of the exequatur procedure,
  • Translation of the writ of execution is generally not required,
  • Execution in a foreign EU member country performed on the basis of an certificate of execution drawn up in Germany, and
  • Avenues of redress for the liable party in the case of disturbing public order.

These new rules apply to all European Union Member States and also, indirectly, to Denmark. For more information, please contact the members of the Cabinet LAINÉ & Cie by email: info@avolegal.de

BELGIUM_______________________________________

CAYMAN TAX

More and more Belgian taxpayers place their assets in trusts, foreign foundations and other legal systems where taxation is null or minimal.

However, since the 2014 fiscal year, each taxpayer is required to declare the existence of a legal system (trust, foreign foundation, etc.) for which he is either the founder, or the potential beneficiary in his annual tax return filed by phys

The government has just gone a step further by deciding to tax, in a transparent way, all revenue resulting from these foreign legal systems. This taxation is known as the « Cayman tax » and targets two types of legal systems in particular: those with no legal personality (type 1) and those with legal personality (type 2).

FRANCE________________________________________

The French Council of State recognises the decision made by the CJEU concerning non-residents not being subject to French social security deductions

The last Lexunion Newsletter announced the De Ruyters judgement made by the CJEU relating to subjecting non-residents to French social security deductions and declared that the Council of State should soon approve this decision for domestic law. Since then, this has been made official with the judgement delivered by said jurisdiction on 17 April 2015, upon litigation relating to subjecting a real estate capital gain to French social security deductions (at a rate of 15.5{5a123fd2ff0edecec35de014470138a8d457280103a9b9810af819076914f099}).

The Council of State applied the case made by the CJEU according to which deductions on estate revenue come under the European regulation on social security no.1408/71 and are therefore subject to the « unity » principle of social legislation. Therefore, France cannot subject estate revenue (real estate capital gains and real estate income) of persons who come under the social security regime of another MemberState to social security deductions. However, to this day French law has yet to be adapted to fit with this evolution in legislation, such that during property transfers resulting in taxable real estate capital gains, the social security deductions must still be paid, after which a claim may be filed.

This judgement is in line with a propitious trend for non-residents: for those from Member States with the elimination of the requirement to name an accredited tax representative as calculation and payment guarantor of the real estate capital gain, and for residents of non-Member States with the standardisation of the tax rate for real estate capital gain at 19{5a123fd2ff0edecec35de014470138a8d457280103a9b9810af819076914f099}, now applicable to all non-residents. We can bet that this judgement is not the last in the line of social security deductions for non-residents, as the fate of residents of non-member States who do not benefit from the clauses in the European regulation on social security and who could invoke other grounds to challenge this subjection remains to be determined.

So keep reading the Newsletter regularly! For any additional information, especially on complaints pursuant to social security deductions your client has paid, please contact the following people by phone (at 00.33 1 44 01 25 25) or by e-mail:
Pascale SANSEAU: pascale.sanseau.75237@paris.notaires.fr),
Bertrand SAVOURE: bertrand.savoure@paris.notaires.fr),
Pascal JULIEN SAINT-AMAND: pjsa@paris.notaires.fr).

ITALY__________________________________________

“LIFETIME MORTGAGE LOAN” AMENDMENTS.

On May 6, 2015 the Law of April 2, 2015, n. 44 came into force, thereby amending the rules for “Lifetime mortgage loans” as was first introduced by the Decree-Law of September 30, 2005, n. 203 (so-called « reverse loan”), with the purpose of allowing the owner of a real estate property to take out a loan from a bank by mortgaging one (and not more than one) property in his possession.

In the case where the owner has not refunded the loan before his death, at the moment of the borrower’s death the heirs may pay off the debt to the bank and free up the property, sell the mortgaged property on their own or let the bank sell the property to refund its own credit. The sale will be carried out according to the market value of the property as determined by an independent expert appointed by the bank, and the amount of debt owed to the bank can never exceedthe sale value of the property, net of expenses included.

This type of financing is very popular on the UK market, but in Italy has always struggled to become widely implimented, partly because of the lack of clear legislation that the new law 44/2015 seeks to introduce.

The new law lowers the age requirement of the previous standard from 65 to 60 years, clarifies tax issues and places more confidence in the banks concerning credit mechanisms and guarantees the protection of the loan.The new rules identify other events, in addition to death, that would result in the full repayment of the debt, such as transfer or the owner setting up a minor iura in re or rights of guarantee. Another new development that is clearly formulated is the application of the tax relief provided for credit operations in the mid or long term: this specifically entails the exemption from stamp duty, registration, mortgage and cadastral tax on government concessions, due to the payment of a substitute tax (0.25{5a123fd2ff0edecec35de014470138a8d457280103a9b9810af819076914f099} of the total amount of subsidized loans granted; 2{5a123fd2ff0edecec35de014470138a8d457280103a9b9810af819076914f099} if related to the first house and its outbuildings).

For example: A 70-year-old owner taking out a loan of €50K, equal to 20{5a123fd2ff0edecec35de014470138a8d457280103a9b9810af819076914f099} of the value of his home (first home), appraised at €250K This loan does not foresee any repayment by installment; principal and interest are capitalized until the end of the contract.

If the owner dies ten years after the signing of the contract, in the case of a fixed rate of 5.7{5a123fd2ff0edecec35de014470138a8d457280103a9b9810af819076914f099}, the sum to be repaid would be €86,876. If instead he had opted – as the new law allows – for the annual payment of interest only, amounting to €2,840 per year, the only capital to be returned at the moment of his death would be the principal (€50K).

THE NETHERLANDS______________________________

HEMA is one of the largest department stores in the Netherlands. Other than the 500 stores in the Netherlands, HEMA also has stores in Belgium, France, Germany and the United Kingdom. One of the trademarks of HEMA is the quality of the goods combined with reasonable prices, and since 2014 HEMA has offered notarial services in the Netherlands in collaboration with 30 affiliated civil-law notaries (amongst them are many NICO-notaries). The service provides the opportunity to compose last will and testaments and cohabitation contracts for the most common situations. Noteworthy as well is the fact that the documents are written in a far more understandable register than the usual notarial deeds, and the costs are low (only €125,00 per deed).

The HEMA services are completely digital, and if it is necessary for the service, people are asked to deliver all the required information. The deed will then be automatically drafted and as soon as the client agrees to its content, he can make a payment on the website and choose one of the affiliated civil-law notaries according to their preference or one in their neighbourhood. The notary will contact the client to verify the information provided and will inform him extensively about the legal consequences of the deed (“Belehrung”) that will be executed in the presence of the civil-law notary.

The Dutch Royal Notarial Association objected to the HEMA notarial service through the notarial disciplinary Court citing the lack of control granted to the civil-law notary in the process, the failure to uphold its duty of care and its obligation to maintain confidentiality. Many Dutch notaries also objected to the simple language used in the deeds: not legal Dutch, but in comprehensible layman’s Dutch (on so-called B1-level).

The court of appeal ultimately reached a judgement in this case and ruled that the affiliated civil-law notaries and the deeds in and of themselves do not technically, juridically or substantively contradict with the applicable legislation and regulations for civil-law notaries. As a result, in the most common situations consumers have the possibility of making final will and testaments and cohabitation contracts. Some of the members of the Dutch alliance called “NICO notaries”, as a member of LEXUNION, were involved in the drafting of the documents and are now affiliated civil-law notaries for the HEMA notarial service.

SPAIN_________________________________________

AUTOMATIC TAX INFORMATION EXCHANGE AT EU LEVEL

According to the Council Directive 2011/16 / EU of 15th February, on administrative cooperation in the field of taxation and repealing Directive 77/799/EEC, each competent national authority must send to the competent authority of any other EU country, by automatic exchange, available information concerning taxable periods as from 1st January 2014 relating to residents in the other EU country on the following incomes and capitals: income from employment; director’s fees; life insurance products not covered by other EU legal instruments on the exchange of information and other such measures; pensions; ownership of and income from immovable property.

Council Directive 2014/48/EU was published and came into force on March 24th, 2014 amending Directive 2003/48/EC on the taxation of savings income in the form of interest payments and should be adopted and published by each Member State before 01.01.2016. Nevertheless, since not all EU countries implement the automatic exchange of information (Austria and Luxembourg), they were granted by a transition period establishing a withholding tax in order to guarantee a minimum level of effective taxation. It came into force in Spain on 01.01.2015, and financial institutions and payers of income from capital resources have already submitted information to the Spanish Tax Agency statements. In the case of interest payments to non-residents, but who are residents in another Member State of the EU, the Spanish Tax Agency, in turn, will communicate this information automatically within six months to the competent authorities of the state residence of each beneficiary. At the same time, and in the same terms, all countries in the EU will send information to the Spanish Tax Agency about all citizens living in Spain who are beneficiaries of interest payments in any EU country.

The minimum information that must be reported by the paying agent to the competent authority of its Member State of establishment will be: (a) the name and address of the paying agent, (b) the identity and residence of the beneficial owner and (c) his account number or, if none exists, the identification of the debt claim, life insurance contract, security, share, etc. giving rise to that payment. Concerning interest payments, the information shall include at a minimum:

  1. Yields on government securities and income from bonds or debentures, including bonus attached to them;
  2. Interest accrued or capitalized at the time of the assignment, refund or redemption of the debt claims referred to in subparagraph a);
  3. Income from interest payments on undertakings for collective investment.
  4. Income resulting from the sale, refund or redemption of shares in: (i) Investment funds or schemes, if they invest at least 15{5a123fd2ff0edecec35de014470138a8d457280103a9b9810af819076914f099} in income products covered by the directive; (ii) Capital gains on shares of capitalization and investment funds which invest at least 40{5a123fd2ff0edecec35de014470138a8d457280103a9b9810af819076914f099} in income products.

SWITZERLAND__________________________________

SWISS TAXES ON INHERITANCE: THE STATUS QUO

When called to make a decision on June14th 2015 concerning the citizens’ initiative made by the political left, Swiss voters refused the introduction of a federal tax on inheritance by a wide margin. This tax would have been designed to replace the current taxation systems, at the canton level.

In layman’s terms, this means that nothing has changed:

  • The surviving spouse (or partner) remains exempt from donation and inheritance taxes in all cantons,
  • Neither are the heirs required to pay donation and inheritance taxes in nearly all the cantons, except the cantons of Neuchâtel, Vaud and Appenzell (AI).
  • The value in this decision is that it definitively lifts the incertitude that had prevailed on this subject for several years now.