Int'l Tax News

The Organization for Economic Cooperation and Developmentwill scrutinize part of the new U.S. tax law, specifically the FDII provisions, in the fall to see if it violates international standards, a U.S. Treasury official said. The U.S.will defend the law, Doug Poms, international tax counsel at the U.S. Treasury Department, said May 11.

A proposed tax on financial transactions in 10 European Union countries could generate about 19.6 billion euros ($23.5 billion) of annual revenue, though Brexit could make collection more difficult, according to a new estimate.

The European Union's tightened company ownership transparency rules crossed the final legislative threshold May 14when EU member states backed the measures. Therules, among theworld's toughest, are meant to expose shell companies used for tax evasion and money laundering.

An expansion of a Brazilian tax incentive program for information technology and communications firms has passed its first congressional hurdle. Under the government's program, companies are exempted from paying Brazil's PIS and Cofins social contribution taxes and excise taxes on their investments in research, development, and innovation. To qualify, companies must demonstrate they are investing at least 5 percent of their gross revenues in these areas.

Practitioners are eagerly awaiting guidance from Treasury specifying how new international tax provisionswill apply in the context of consolidated groups, but some provisions are piquing more interest than others.

Two critical chapters of the OECD's transfer pricing guidelines are ripe for revision, an OECD official said. The OECD announced May 9 it is considering starting two new projects to revise the guidance in Chapter IV of the guidelines on administrative approaches to resolving transfer pricing disputes, and Chapter VII on pricing intra-group services.

Tax guidance from the Australian tax office could trigger a structural review of foreign parent companies' Australia-based subsidiaries, if these had been consolidated for tax purposes. In May 9 draft guidance, the Australian Tax Office set out details of the circumstances underwhich a foreign entityÔøΩwhich has joined a consolidated groupÔøΩwon't have its tax costs reset.

The European Union moved closer to agreement on provisions for a new destination-based VAT system after a contentious element of the planwas dropped. EU presidency holder Bulgaria dropped the controversial "certified taxable person" provision from the four pending "quick fix" provisions proposed in October 2017, according to a confidential EU document seen by Bloomberg Tax. The provisionwould allow qualified companies to continue using the current value-added tax scheme that relies on reverse charging for cross-border sales.

Four industriesÔøΩtechnology, pharmaceutical, manufacturing, and banking and financial servicesÔøΩare among those that could lose foreign credits and other tax benefits under a new tax on income from intangible assets, like patents and trademarks, and other kinds of assets overseas.

States normally excuse corporate income taxes on foreign income. Mechanically, these exclusions usually involve a special state-level dividends received deduction for foreign dividends and deemed dividends. So states that startwith federal taxable incomewill first include GILTI in the state tax base, then apply their DRD for foreign dividends to GILTI. State DRDs generally do apply to federal deemed dividends. But a state DRD may not cover 100 percent of the dividend; often there is a sliding scale based on proportionate ownership.

Digital-economy companies affected by international tax reform are not limited to thewell-known GAFA (Google, Amazon, Facebook, Apple) tech giants. Video game companies share many characteristicswith GAFA companies andwill be similarly affected by tax reform.

Taxpayers that reverse their established transfer pricing positions inways that favorably affect their liability under the Tax Cuts and Jobs Act's base erosion and antiabuse taxwill likely face heightened IRS suspicion.

In this article, the authors explain the Chinese government's unexpected decision to centralize China's tax administration and merge the central and provincial tax authorities into a single body by the end of this year.

The OECD has invited public comments on revisions to its transfer pricing guidelines regarding special considerations for intragroup services and administrative approaches to preventing and resolving transfer pricing disputes; submissions are due June 20.

The Tax Cuts and Jobs Actwon't meaningfully reduce base erosion or profit shifting, but it does encourage the offshoring of economic activity and real assets, according to some experts.

In this article, the authors discuss the new global intangible low-taxed income provisions of the Tax Cuts and Jobs Act and reassess the double Irish structure andwhether it continues to deliver tax savings.

Sub-Saharan African countries could increase tax revenue by an average of 5 percent of gross domestic product -- much more thanwhat they receive in international aid -- if they reform their tax policies, the International Monetary Fund said.

When he signed sweeping U.S. tax changes into law six months ago, President Trump probably didn't expect to bolster U.K. companies' takeover transactions. That, however, is exactlywhat happened. The 2017 U.S. tax act has become a factor in the U.K.'s largest hostile takeover for a decade.

The U.K. government's tax investigations of the intra-group transactions of local multinational companies has fallen 31 percent, signaling a growing focus on more complex cases.

An Indian high court has opened the door for Vodafone to dispute a $1.8 billion tax bill before an international tribunalÔøΩa move thatwill test India's domestic tax laws against bilateral investment treaties.

Controlled foreign company rules and restrictions on tax exemptions top the list of sanctions the European Union should impose on black-listed tax havens, according to confidential documents seen by Bloomberg Tax. Drawn up by EU presidency holder Bulgaria, the new sanctions proposal is an effort to bridge divisions among EU member nations on how strict the "defensive measures" imposed on the tax havens should be.

Australian Federal Treasurer Scott Morrison announced May 8 a sweeping reform of the research and development tax incentive, part of a push to spur large companies to invest in R&D.

Leaders of Israel's tech industry said there could be "disastrous consequences" if Israel maintains its tax policy toward stock-based compensation granted to employees of high-tech multinational companies.

A new U.S. tax provision likely violatesworld Trade Organization rules and redesigning it to complywould achieve different ends than the law seems to be aiming for, tax professionals said. European Union finance ministers have said the foreign-derived intangible income provision of the 2017 tax law could "face challenges" as an illegal export subsidy underwTO rules.

Austria's implementation of the EU's most recent anti-money laundering directive includes loopholes that let firms circumvent new transparency mechanisms, analysts say. Still, it provides a more comprehensive approach than neighboring Germany's for reporting a firm's true beneficial owner. In fact, this difference in implementation between member nations means changes under the EU's pending directivewill likely have little effect in curtailing manipulative business practices.

Bermuda-based insurers and reinsurers are making moves to hold their own after the U.S. effectively smacked down a big tax advantage they used to have. The 2017 tax act subjects companieswith such arrangements to the new base erosion and anti-abuse tax (BEAT), removing the economic incentive for using the reinsurance agreements and significantly reducing a long-standing tax advantage Bermuda companies have had over their U.S. competitors.

An order from Taiwan's Finance Ministry to ease the tax burden of foreign companieswith fixed operationswill help promote the island as a trans-shipment hub in global trade, tax practitioners say. Theorderclarifies tax for foreign companieswith activities that include importation, manufacturing, storage, and sale of goods. It's also part of Taiwan's effort to compete for the business of foreign investors engaged in logistics operationswith China, Korea, and Hong Kong.

Ideas for a minimum tax on foreign income and repeal of deferralwere discussed in these pages,where all important tax ideas are discussed. And yes, many of the commentatorswere from the other party. Former Clinton and Obama administration officialswent at each other over the merits of repeal of deferral versus introduction of a minimum tax on foreign income. In the end, the Tax Cuts and Jobs Act (P.L. 115-97) adopted both. GILTI is both the effective repeal of deferral and a minimum tax.

If businesses are generally pleasedwith changes enacted by the Tax Cuts and Jobs Act, they have proven themselves bold in hurling criticism at the mechanics behind two of the law's most notable international reforms. Both the global intangible low-taxed income provision and the base erosion and antiabuse tax provision suffer from shortcomings in their implementation, according to former and current executives of large multinational companies. Andwhile Treasury and the IRS may be free to solve some of the issues through regulatory interpretation, others may be fixed only through legislation, they said.

Karen G. Sowell of the New York State Bar Association Tax Section has submitted comments regarding significant issues it has identified regarding the global intangible low-taxed income provisions of the Internal Revenue Code added by the Tax Cuts and Jobs Act (P.L. 115-97), aswell as detailed analysis and discussion of its recommendations for addressing those concerns.

Australian businesses need a lower corporate tax rate to help them competewith global rivals and to encourage investment, Treasurer Scott Morrison said ahead of Tuesday's national budget.

Republicans sold the 2017 tax law as "rocket fuel" for American investment and growth, saying that corporations ÔøΩ flushwith cash from lower tax rates ÔøΩwould channel money back into the economy by building factories and offices and investing in equipment,whichwould help companies grow and providewinnings forworkers.

In this article, the author proposes a new tax mechanism ÔøΩ a commercial approach involving both an annual asset tax and a sales taxwith a unique valuation component ÔøΩ designed to target a range of tax avoidance schemes including the use of complex corporate structures to avoid taxation.

Revenue from pending EU corporate tax reforms should be used to help finance the bloc's budget, alongwith a new levy on non-recycled plastic and revised value-added tax contributions, the European Commission said.

Finance ministers from 10 European Union countrieswill try again this month to reach an agreement on a financial transactions tax, a levy that has stymied negotiators for several years.

Multinationalswith Israeli subsidiaries face a sharp increase in tax liabilities after a court ruled that equity compensation schemes must be included in intra-group pricing calculations using a method that measures comparable but uncontrolled manufacturing costs.

Draft guidance issued May 2 by Australia's tax office could mean that aggressive tax schemes that try to limit a company's taxable presencewill be subject to a low-threshold "connection" test between the company and its supply of a product or service.

Canada is considering targeting online sellers like Netflix Inc., Alphabet Inc.'s Google, and Facebook Inc.with sales and income taxes that could raise C$2.6 billion ($2 billion) a year in revenue. Taxing online sales of tangible and intangible products follows international efforts to address profit shifting, but the proposal could stall given the reluctance of Canadian political leaders to tackle online taxation issues, tax lawyers told Bloomberg Tax.

Thewhite Housewillwait until after midterm elections in November before pushing forwardwith its plans to make last year's tax cuts permanent, according to Steven Mnuchin, Treasury secretary.

A small group of technology and energy companies is driving a rebound in capital expenditure in the US, bucking expectations that boardswould distribute most of thewindfalls from recent tax legislation to shareholders.

British overseas territories, including the Cayman Islands and Bermuda,will be forced to lift the veil of secrecy over the ownership of companies based there after the UK approved radical new measures to tackle money-laundering and corruption. Globalwitness, a campaign group, said the UK measurewas "a hugewin in the fight against corruption, tax dodging and money laundering".

Standard & Poor's 500 banking industry first quarter earnings results concluded yesterday. All 18 banks in the industry group reported higher earnings compared to same quarter last year, in part due to the benefits from the tax plan implemented at the end of 2017. The aggregated effective tax rate of all 18 bankswas reduced by 7 percentage points to an average of 19 percent compared to an average of 26 percent a year earlier.

Indiawill continue to take its own steps to tax the digital economy, building on its equalization levy on digital advertising, unless international consensus is reached, an Indian tax officialwarned.

A sudden drop in the stock of U.S. Treasury debt held in Ireland has fueled speculation that U.S. multinationals may be shifting some of their gigantic cash piles back to the United States in response to changes in how foreign earnings are taxed.

The EU debate over the European Commission's controversial interim digital services tax proposal continues to intensify,with some countries, including Sweden, opposing the idea, but the proposal's champions remain optimistic.

The OECD may accelerate itswork on taxing the digital economy and produce a blueprint in 2019 instead of 2020, the organization's chief said, as debates on the EU's proposed tax on digital services continue.

The U.S. tax law passed in December aimed to remove the features of the old tax system that gave American companies a strong incentive to put their profits, factories and headquarters overseas.

In this article, the authors discuss the first outcomes of the peer review process following implementation of the OECD's action 14 minimum standard on making dispute resolution mechanisms more effective, aswell as the reporting of MAP statistics under the new framework.

On March 8, President Trump imposed a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports. Customs and Border Protection began collecting the tariffs on March 23. Import tariffs on solar panels took effect in early February. Trump may propose increasing tariffs on more select imports from some countries to improve the competitiveness of products made in the United States. If import duties increase, U.S. importers that purchase goods from offshore related parties have an incentive to reduce their customs values.would decreasing customs values require a decrease in transfer prices? Put anotherway, are U.S. intercompany transfer prices and customs values bound together?

An increasing number of global companies plan to sell assets in the next two years as away to narrow strategic focus and funnel funds to stronger areas of the business. Corporate decision makers point to shifts in global tax policy and industry trends, particularly those tied to new technologies, as amplifying the need to sell noncore units and reroute capital to other business areas.