Brexit and Tax Planning

Tax Attorney Mark Stone spoke at the International Tax Institute luncheon on February 18 discussing the consequences of Brexit for U.S. tax treaties. As the United Kingdom prepares to leave the European Union, questions regarding tax agreements remain. A common issue is that many treaties were drafted based on the assumption that a country would not leave the bloc. One example cited concerns equivalence; 16 U.S. treaties determine equivalent benefits based on EU membership alone and not by the benefits available under a comparable treaty. Leading U.S. tax reporter Lee A. Sheppard summarized the program, including Mr. Stone's remarks, in an article published in Tax Notes International.

"Stone raised a question whether a British investor in a British company could be considered an equivalent beneficiary under the U.K.-U.S. treaty. The EU resident requirement is doubled up in that treaty... For a British investor, the British treaty is not a good enough equivalent treaty! The Treasury technical explanation, which is not binding, states that qualified persons who are U.S. or U.K. residents are equivalent beneficiaries. Stone pointed out that a literal post-Brexit reading of the provision would lead to the opposite conclusion."

READ: Brexit and Tax Planning