Int'l Tax News

Forecasts of foreign-based multinationals, including some that inverted in recent years, suggest that their tax rates may not be helped, and are sometimes hurt, under U.S. tax reform. Their U.S. counterparts are reporting better results.

The European Parliament has endorsed plans for a harmonized corporate tax regime that includes a digital presence standard for determining if a company is taxable in a member state.

The number of advance pricing agreements EU governments have entered intowith multinational companies increased 57 percent during 2016,with recent EU statistics showing Belgium more than doubling its APAs during that time.

The U.K. and the European Union have struck an agreement over a 21-month transition period forwhen the country leaves the bloc, taking pressure off the British government on its cross-border tax system.

Foreign corporationswill likelywait to determine how political and tax developments in the U.K., the U.S. and Europe influence the domestic tax landscape before following the example of Unilever and relocating to the Netherlands.

Claims by European governments that large digital companies such as Google, Amazon, and Uber don't pay their fair share of taxes are false, a European think tank said. At the same time, leading tax academics havewarned that European Union plans for a 3 percent turnover tax on themwould be a "populist, flawed" measure that risks exacerbating transatlantic trade tensions.

Governments may need to increase property and consumption taxes if theywant to maintain current spending amid falling revenue, the OECDwarned. Nations are struggling to generate revenue as individuals are continuing to turn to the gig economy, a labor market that pays far less in employment taxes.

Multinational companies may face less confusion now that the Chinese tax authority has integrated its national and local tax offices. The shift, taking place below the provincial level, is meant to make the system more efficient. Itwill allow taxpayers toworkwith one tax bureau, instead of dealingwith offices at both local and state levels.

The reduction of corporate taxation from 29 percent to 20 percent in two years and the implementation of an aggressive reform agendawill be priorities for Kyriakos Mitsotakis, leader of Greece's main opposition party, if he comes into power.

A transatlantic rift over tax and tradewidened on Friday afterwashington opposed the EU's plans for a levy on digital revenues and Brussels set out its retaliatory measures over the US's steel and aluminium tariffs.

Criticswarn the sheer volume of such agreements hampers the Commission's ability to identify theworst tax-avoidance cases.

Final U.S. anti-inversion regulations thatwould follow up on temporary and proposed regs are forthcoming, butwhat this means for a prominent case currently on appeal is uncertain. The news came to light in a request from the government in its March 9 motion for a stay of briefing in its appeal to the Fifth Circuit in the closelywatched case, Chamber of Commerce v. IRS, No. 17-51063. The opening brief is due March 16, but the government is requesting a stay until the regs are published.

EU-based online merchants insist an upcoming European Commission digital tax proposal targeting online platforms such as Amazon and Airbnbwill drive sales out of Europe to non EU-based companies, especially those in China.

Multinational companies shifted profits through Ireland – an accounting technique designed to avoid corporation tax - equivalent to almost a quarter of the country's GDP between 2010 and 2015.

The U.S. Chamber of Commerce has identified many issues arising under the Tax Cuts and Jobs Act (P.L. 115-97) that require regulatory guidance or clarification, suggesting some solutions and urging Treasury and the IRS towork closelywith the business community as it implements the recent tax law changes.

In this article, the authors discuss Japanese 2017 tax reforms thatwill become effective in April, aswell as proposed 2018 reforms.

The launch of a joint tax risk assessment pilot has been successful, and lessons from the programwill eventually be sharedwith the inclusive framework on base erosion and profit shifting, an IRS official said.

While developing countries have cited sovereignty as a reason against adopting mandatory binding arbitration in the past, many are now taking await-and-see approach instead, according to the OECD's deputy tax chief.

This article contains Chapter 1 of a book that explores a topic that has been highly controversial in recent years: the use by multinational companies of "base erosion and profit shifting" tax planning structures to reduce their tax liabilities in countrieswhere they conduct business, including theworld's lower-income developing countries. In this installment, the author provides an introduction to BEPS and an overview of the book.

The Australian government has amended its proposed hybrid mismatch legislation to address branch mismatch arrangements and introduce a targeted integrity rule to neutralize the effects of arrangements intended to circumvent the proposed rules.

Multinational group financial data support the view that some EU countries ÔøΩ especially Ireland, Luxembourg, and the Netherlands ÔøΩ have increased their own tax bases at the expense of others, according to a European Commission report.

The IRS has provided answers to questions regarding return filing and payment obligations arising under the new section 965 transition tax, noting that the provision may give rise to a 2017 tax liability for a calendar year U.S. shareholder holding an interest in a calendar year specified foreign corporation.

In its updated paper on taxing digital companies, HM Treasury has tentatively recommended allowing countries to tax social media and search engine providers on a share of residual profit determined by a user-based allocation factor.

Brussels is preparing to hit tech giants such as Google, Facebook, Applewith a "digital tax" on EU turnover thatwill raise around ÔøΩ5bn a year, according to draft proposals seen by the Financial Times. The European Commissionwill unveil a three-pronged digital tax nextweek that targets revenues rather than profits, heeding calls in France, Germany and Britain for a tougher approach to tax avoidance by tech companies.

Vietnam quietly secured a pair of concessions in a new Pacific Rim trade deal, giving it greater leeway to regulate and tax digital commerce.

The European Parliament overwhelmingly approved terms for tax alignment between the EU and the U.K. once it leaves the bloc. Members of parliament have previously said the alignment is needed to prevent the U.K. from adopting corporate tax levels far below those in the EU, as many are expecting.

The European Commission has released the final report of its study of aggressive tax planning (ATP)which has as its aim to provide economic evidence of the relevance of ATP structures for all EU Member States. It says that a solid understanding of the extent and channels of ATP is fundamental to draw policy conclusion and recommendations for the fight against unfair tax practices. Among other conclusions, it finds consistently higher profitability in MNE groups if they are located in a relative low tax country.

Some features of Estonia's corporate tax system might be used by multinational companies for aggressive tax planning, says a new report by the European Commission.

The European Union has been pushing the OECD to develop solutions for taxing the digital economy ÔøΩ andwith the lack of clear direction, it's decided to take matters into its own hands. The European Commission's official report on a proposed EU approach to taxing tech companies is expected this month (although Politico leaked a draft outline in late February). The EU proposals are intended not just to direct members on how to tax digital profits, but also to shape the OECD's path; the organization's interim report on taxing the digital economy is due to the G-20 in April, and a final report is expected in 2020.

The action 2 report from the OECD's base erosion and profit-shifting project may be instructive for taxpayers attempting to interpret the phrase "other tax benefit" under the hybrid dividend rules in IRC section 245A. Speaking March 9 on a panel on international tax developments at the Tax Law Conference of the Federal Bar Association Section on Taxation inwashington, Douglas Poms, Treasury international tax counsel, said taxpayers evaluatingwhether a payment from a controlled foreign corporation to a U.S.-based C corporation is a hybrid dividend under section 245A(e) because of the CFC's receipt of a deduction or other tax benefit for the dividend in a foreign jurisdiction may find it helpful to review the BEPS action 2 report on hybrid mismatches.

Praising the OECD's base erosion and profit-shifting project overall, an official from Singapore's Inland Revenue Authority (IRA) has revealed reasons for the country's hesitation about some provisions of the multilateral agreement.

The BEA survey of global operations of U.S. multinationalswere relatively unchanged in the most recent in 2015 according to preliminary results from the 2015 Annual Survey of U.S. Direct Investment Abroad, although noteworthy differences in activity can be seenwhen these measures are viewed by geography and by industry.

Theworld Investment Report 2017 makes an argument for a comprehensive investment policy framework for the digital economy, attempting to demonstrate how aligning investment policieswith digital development strategieswill play a role in the gainful integration of developing countries into the global economy.

The United Nations Conference on Trade and Development has released a special edition of its Investment Trends Monitor on the implications of U.S. tax reform of international investment, saying that the U.S. reform includes changes to the corporate tax regime that are likely to have significant implications for global Foreign Direct Investment. The report says that the stimulus to investment in the U.S. provided by a lower tax rate and full investment expensing could lead to higher inward investment, and possibly to further re-shoring of manufacturing activity.

The OECD's Framework Programme for Research and Innovation has released a review of national R&D incentives and estimates of R&D tax subsidy rates for 2016. The report provides an overview of the main design features of R&D tax incentives in OECD, EU and other major economies based on data collected through the 2016 OECD-NESTI R&D tax incentive survey.

The European Commission has published its full redacted opinion of its decision that Luxembourg granted illegal state aid to Amazon of around ÔøΩ250 million, and that Luxembourg must now recover the illegal aid.

SpeakerPaul Ryan(R-Wis.) is fighting an uphill battle to keep the focus on the GOP's tax cuts and the economy in the face of a news cycle dominated byPresident Trump'swhite House.

Ryan has aggressively talked up the benefitsof the tax cuts, promoting the law lastweek in a conference callwith a group backed by GOP donors Charles and David Koch and in a visit to Home Depot's Store Support Center in Atlanta.

Big multinationals are paying significantly lower tax rates than before the 2008 financial crisis, according to Financial Times analysis showing that a decade of government efforts to cut deficits and reform taxes has left the corporateworld largely unscathed. Companies' effective tax rates ÔøΩ the proportion of profits that they expect to pay, as stated in their accounts ÔøΩ have fallen 9 per cent (two percentage points) since the financial crisis. This is in spite of a concerted political push to tackle aggressive avoidance.

A greater emphasis on mandatory binding arbitration under tax treaties is satisfying corporate taxpayersÔøΩwho see the move as increasing tax certaintyÔøΩbut leaving developing countries concerned, a UN official said.

Ohio-based auto parts supplier Dana Inc. plans to relocate its corporate address to the U.K. for tax purposes if a takeover bid announced Friday is successful, a move that comes justweeks after passage of U.S. tax legislation designed to discourage American companies from doing just that.

The EU is investigatingwhether Britain has failed to respect single market laws by not imposing enough tax on commodity derivatives trades, according to the UK Treasury.

The Internal Revenue Service is closely examining how companieswith complex structures can calculate a deduction for intangible income derived from serving foreign markets, an agency official said.

A pending legal dispute between a U.K.-based online auction company and the country's tax authorities illustrates the challenge of applying value-added tax in a burgeoning digital economy.

Sweeping cuts included in China's tax reform plan, totaling $126 billion,will be a major boon for multinational companies.

The U.K. government has cleared theway for the European Union to blacklist the Bahamas as a tax haven after British officials dropped their opposition to the move.

The European Commission has named and shamed seven of its own member statesÔøΩBelgium, Cyprus, Ireland, Hungary, Luxembourg, the Netherlands and MaltaÔøΩfor engaging in "aggressive tax planning."

The European Union has tasked the OECD's forum on harmful tax practiceswith reviewing U.S. tax reform, the latest step in the bloc's scrutiny of the new law. The EUwants the OECD to conduct a "fast-track" review of the U.S. tax changes, following February discussions among EU finance ministers on how to react to the law, andwhether to mount retaliatory measures in theworld Trade Organization, an EU diplomat told Bloomberg Tax.

Tax practitioners predict that Australia's proposed changes to hybrid mismatch arrangementsÔøΩwhich exploit tax deduction differences between different jurisdictionsÔøΩwill have far-reaching implications for loan structures from low-tax jurisdictions.