handbook-tb

Taxation of non-residents’ capital gainsfew owners, the complexity may be manageable. And the exclusionof shares of publicly listed entities from a tax on indirect transfers isindependently justifiable, as they are unlikely to be used mainly for taxavoidance purposes.One final issue that deserves mention is that the policy of taxingindirect transfers, when implemented by a number of source countries,increases the likelihood that a single share transfer may be taxable inmultiple source countries, for example, because subsidiaries in differentcountries are indirectly transferred when a holding company issold. The tax authorities in the different source countries may havedifferent assessments of the amount of gain attributable to their country,which may lead to taxation of the same gain by multiple sourcecountries. 95 Notably, there is currently no international arrangementfor source countries to coordinate their taxes in such situations. 966.3 Issuance of new shares and corporate reorganizationsSometimes, taxpayers may try to avoid a tax on the sale of shares(whether direct or indirect) by having the target company issue newshares to new investors. This may or may not be accompanied by adistribution of the proceeds from the new share issuance to existingshareholders. When it is, there is a barely disguised share sale. Buteven when it is not, there can be an effective transfer of the value ofthe company from existing to new shareholders. 97 Such tax planningtactics may be used within purely domestic contexts as well, and theyneed to be dealt with whether used domestically or in cross-bordertransactions.Many developed countries adopt tax-deferral regimes for corporatereorganizations, and businesses are accustomed to using such95This problem is worsened if, as is likely under traditional practicein taxing indirect transfers, the source country taxes the entire gain in thetransfer even if only a portion of the gain is attributable to it.96The author is grateful to Mr. Peter Barnes for providing this information.97This issue is highlighted in Lee Burns, Honoré Le Leuch and Emil Sunley,“Transfer of an interest in a mining or petroleum right,” in Philip Daniel,Michael Keen, Artur Swistak and Victor Thuronyi, eds., Resources withoutBorders, supra note 37.151