Int'l Tax News

The Tax Court, granting the Coca-Cola Co. partial summary judgment in a transfer pricing disputewith the IRS, held that the companywas entitled to claim foreign tax credits for taxes paid to Mexico by a Mexican licensee, finding that the taxeswere compulsory levies and creditable under section 901.The IRS made adjustments under section 482 to Coca-Cola's returns for the 2007-2009 tax years. According to the IRS, Coca-Cola's Mexican licensee, a branch of a Coca-Cola subsidiary and member of Coca-Cola's affiliated group, paid royalties to Coca-Cola thatwere not calculated at arm's length. As a result, the IRS determined that the Mexican licensee claimed insufficient deductions for royalties and overpaid taxes to Mexico. The IRS further determined that the overpaymentswere not compulsory andwere not taxes under section 901, making Coca-Cola ineligible to claim foreign tax credits for the overpayments on its federal tax return.

The EU court has rejected the US government's request to join Apple's appeal of Brussels' order that it pay ÔøΩ13 billion in back taxes.

Luxembourg has appealed against an EU decision to make Amazon pay ÔøΩ250m more tax in Europe, making it the latest member state to push back against the Brussels' crackdown on avoidance by big multinational companies.

The anticipated changes to New Zealand's tax regime for cross-border relationships and transactions are fast becoming a reality. All New Zealand businesses that operate overseas, and all business groups based overseas that operate in New Zealand, are likely to be affected in someway by the new rules.It is critical for all businesses operating in New Zealand to consider carefully the potential cumulative effect that the proposed ruleswould have, and to do this as soon as possible given the short lead time.

US value added of US MNCs grew faster than value added in their foreign affiliates over the 2014-2015 and the 2009-2014 periods, reversing the trend for the prior 15 years.

This paper considers the effects of US Tax Reform on Europe,with a focus on Germany, from perspective of tax competition, FDI, and possible responses.

Wall Street is fighting to limit the scope of a provision meant to discourage companies from sending money overseas to avoidtaxes. The Senate's tax bill adds a special tax on overseas bank transactions, including repo and intercompany payments. Foreign banks, too, say thetaxprovisionwill make their U.S. operations more expensive and reduce their ability to lend in the U.S.

An executive order directing federal agencies to eliminate two regulations for every new one they issue could complicate the IRS's task of implementing tax reform legislation, practitioners said.

Donald Trump says U.S. tax cutswill fuel a growth miracle. As the Federal Reserve gave its first formal response to the Republican reforms onwednesday, itwas clear the central bank foresees a far more modest impact.

The Netherlands' dividendwithholding tax is a millstone around the neck of the mostly foreign investorswho prop up the country's major corporations, chief executives from Shell and Unilever have told lawmakers. The corporate executives pointed to the lack of domestic capital as a key reasonwhy the country's 15 percent tax on dividend distributions is a major burden on resident multinational corporations.

The U.K.will reconsider the case for making multinational companies' global tax reports public, a decision thatwould make the country the first to take the step. In its Dec. 14 departmental report for 2018, the U.K.'s tax authoritysaiditwill review international rules for the global tax reports and "consider the case" for making them publicly available.

Israeli finance officials are closely following the progress of the U.S. tax reform bill, as practitionerswarn that the loss of Israel's tax advantage could reduce its attraction for high-tech startups.

The IRS on December 13 announced that France and the United States have signed a joint statement providing for the spontaneous exchange of country-by-country reports for fiscal years beginning in 2016.

A taxbill to counter tax avoidanceby multinational companieswas introduced into New Zealand's Parliament.The government also released its commentary on the bill, prepared by Stuart Nash, New Zealand's Minister of Revenue.

The US Senate voted 51 to 49 to pass an historic tax reform bill on December 2 that is expected to impact Mexico from both a tax and economic perspective.

European Commissioner for Economic and Financial Affairs, Taxation and Customs Pierre Moscovici speaks to International Tax Review about the EU's blacklist of tax havens, the struggle to tackle tax avoidance and how to tax the digital economy.

The French Parliament has passed the 2018 finance bill,which includes a controversial 5 to 10 percent surtax on large corporations thatwas added to cover the financial shortfall createdwhen the Constitutional Council declared France's tax on dividend distributions unconstitutional. The Senate passed the bill by a vote of 128 to 122 on December 12. The National Assembly passed the bill earlier in the day by a vote of 323 to 163,with 32 abstentions.

Republicans struck a deal on a sweeping tax overhaulwednesday, including steep corporate and individual rate cuts, and hope to have legislation on President Donald Trump's desk by nextweek.The agreement includes a 37 percent top tax rate for individuals, Senate Majoritywhip John Cornyn (R-Texas) said, lower than either the House or Senate called for earlier. The corporate tax ratewould be 21 percent, higher than the 20 percent in each chamber's separate legislation, andwould start in 2018 instead of being delayed until 2019 as the Senate proposed.

The European Union has issued a code of conduct onwithholding tax to provide member stateswith guidance on reducing costs and simplifying procedures for cross-border investors.

The OECD has opened a consultation on mandatory disclosure rules intended to target promoters and service providers involved in the design, marketing, or implementation of common reporting standard avoidance arrangements or offshore structures; interested parties should submit comments by January 15, 2018.

The OECD has issued a public discussion draft on possible approaches to address arrangements designed to circumvent the common reporting standard and the use of offshore structures to conceal actual beneficial ownership.

One major feature of the tax bills moving through Congress at the end of 2017, aswell as the proposals of all major Republican presidential candidates in recent years, is a provision thatwould create a territorial tax system for the United States. Both territorial andworldwide systems for taxing income of multinational companies are difficult to implement because the concepts of income source and corporate residence onwhich the systems are based have become less economically meaningful.

Aparna Mathur and Cody Kallen of the American Enterprise Institute analyzewhat effect the proposed business tax legislation may have on investment, gross domestic product, andwages. The authors conclude that their model predicts modest but non-negligible growth impacts from the business tax reform.

Some investors are betting governments around theworldwill find away to start taxing meat production as they aim to improve public health and hit emissions targets set in the Paris Climate Agreement.

As House and Senate Lawmakers continue hashing out differences between their tax overhaul bills, the prospect lingers that they could push the new corporate tax rate to 22%. Even though both chambers passed bills thatwould have cut the rate to 20%, pressure is growing to find money for a variety of interests.

Facebook has become one of the first large technology companies to shake up its tax structure and book less of its revenue in Ireland, as multinationals come under pressure to pay tax in the countrieswhere they operate. Next year, advertisements soldwill be booked as revenue in the 25 countries across theworld rather than at its international headquarters in Ireland.

France's tax authority published a note aimed at easing "transitional" compliance problems for French subsidiaries of multinationals from countries that have lagged France in adopting international guidelines on country-by-country reporting of corporate tax data.

Guidance for U.S. multinational companies required to bring back overseas cash "is probably at the top of our list" if a current version of the tax reform legislation moving through Congress becomes law, an IRS official said.

As the U.S. prepares to take China to task over trade imbalances, economic mandarins in Beijing are focusing on a potentially more immediate threat fromwashingtonÔøΩDonald Trump's tax overhaul. Chinese officials are putting in place a contingency plan to combat consequences for China of U.S.taxchanges aswell as expected interest-rate increases by the Federal Reserve.

The finance ministers from Europe's five largest economies havewarned the Trump administration that Republican tax cut planswould flout international agreements and undermine trade, threatening to turn awashington policy battle into a transatlantic row.

The close-to-disclose cycle for most publicly traded corporations is a matter ofweeks. CFO magazine reports that the median time is 15 days (Mary Driscoll, "Metric of the Month: Close-to-Disclose Cycle Time," CFO, Aug. 10, 2015). Problemswith accounting for taxes have been among the most frequent reasons for restatements ("Restatements and Materialweakness ÔøΩ Income Tax Matters Are Under the Spotlight," Andersen Tax, May 2012). That phenomenon is likely to increase ÔøΩ perhaps by leaps and bounds ÔøΩ after the probable passage of the Tax Cuts and Jobs Act that now needs only a House-Senate compromise to become law.

Because the corporate AMT rate of 20 percent is identical to the new regular corporate tax rate, the unintended effect is to eliminate the benefit of any new deduction or credit in the tax reform legislation. This effect occurs because under section 55(b)(2), the tax base for corporate AMT purposes is generally determined by increasing the tax base by 75 percent of any deductions that do not reduce earnings and profits except for a list of deductions enumerated in section 56(g)(4)(C), and none of the deductions introduced by the tax reform legislation are enumerated. A similar effect occurs for credits under section 38(c),which limits business credits by reference to the taxpayer's AMT liability.

Tax advisersworldwide are scrambling to understand the effect that recently proposed changes to U.S. tax rules could have on their clients and companies. But of at least equal importance to many tax professionals is the impact the legislation might have on their own careers. Many have spent years studying the complex U.S. tax rules and how to apply them to maximize their clients' tax benefits. Congress's proposed dramatic rewrite of the rules raises the questionwhether tax professionals stand towin or lose from the changes, andwhich specialty areaswill benefit or suffer the most.

The United States needs to prepare for immediate challenges from thewTO member states and its tax treaty partners if it adopts the international provisions in either the House or Senate version of the Republican tax reform plan, a tax law professor told Tax Analysts. The inbound regimes outlined in both bills presentwTO problems, said Rebecca Kysar, a law professor at the Brooklyn Law School and a visiting professor at the Fordham University School of Law. The United States' trading partnerswill likely characterize the anti-base erosion measures in the bills as forbidden charges on importation or discriminatory international taxes, she said.

International tax changes in the Tax Cuts and Jobs Act could be phased in to allow corporations time to adjust to the new law, Houseways and Means Committee Chair Kevin Brady, R-Texas, told reporters December 7. Brady said lawmakers on the tax reform bill's conference committee,which hewill chair,willwork to address the complex international tax provisions in the tax bill, noting that some industries have asked for a transition period to provide more certainty. "Most of the requests have been very fair," Brady added, but declined to be more specific, saying only that he planned to meetwith Senate lawmakers to compare notes.

This article analyzes the U.S. Tax Court's judgment in Topsnik v. Commissioner and the U.S. Federal Court of Claims' judgment in McManus v. United States, focusing on the definition of theword "resident" under the Germany-U.S. and Ireland-U.S. income tax treaties.

By: Reuven Avi-Yonah

The Tax Cut and Jobs Act (TRA17) as passed by the House on November 16 and by the Senate on December 2, 2017, contains multiple provisions that incorporate the principles of the OECD/G20 Base Erosion and Profit Shifting (BEPS) into domestic US tax law. Togetherwith the changes in the 2016 model US tax treaty, these provisions mean that the US is following the EU and China in implementing BEPS and in particular its underlying principle, the single tax principle.

This report describes various tax games, roadblocks and glitches in the tax legislation currently before Congress. This report highlights particular areas of concern that have been identified by a number of leading tax academics, practitioners, and analysts, including unanticipated costs, potential legal roadblocks, and glitches that may improperly and haphazardly penalize or benefit individual and corporate taxpayers.

First, the combination of corporate tax cuts and the inducements to repatriate funds parked inoffshore subsidiarieswill increase businesses' purchasing power, and some of that money could find itsway into M&A.

Republicans have renewed a fraught debate over the scale of planned corporate tax cuts as a series of eleventh-hour obstacles forces them to reconsider the generosity of giveaways to business. Lawmakers seeking new sources of revenue as they try to merge two separate tax bills are reluctantly discussingwhether to lower the corporate tax rate to 22 percent rather than the 20 percent they had promised, said aides.

The European Commission is examiningwhether a proposed 20 percent excise tax in the U.S. tax reform bill is discriminatory and therefore a violation ofworld Trade Organization rules. The excise tax, contained in a bill the House passed last month (H.R. 1),would apply to certain payments, including royalties, made to foreign units, butwouldn't apply to payments between two domestic affiliates.

Republican lawmakers have told multinational companies they are prepared to resolve their concerns about international tax issues as the party races to finalize the most sweeping package of reforms in 30 years. Company lobbyists said business concerns centered on the proposed treatment of cross-border payments related to debt, intellectual property and goods and materials,which add up to billions of dollars for multinationals.

The U.K. government has 14 large businesses in its highest risk category for suspected tax avoidance, indicating that multinational companies are still engaging in abusive tax planning.

South Korean lawmakers voted to raise corporate taxes for very large companies and private income taxes for top earners late Dec. 5, ending a drawn-out battle over the Moon Jae-in administration's budget bill.

EU finance ministers have blacklisted 17 countries for refusing to co-operatewith its crackdown on tax havens but havewelcomed reform promises from 47 other nations.

U.S. companies, and some households, look likely be celebrating lowertaxesnext year. In China, President Donald Trump's first big legislative accomplishment is likely to prompt less good cheer. The immediate danger--a giant sucking sound as U.S. businesses take advantage of a lower rate to repatriate profits earned in China--is likely manageable. Moreworrying is the proposedtaxoverhaul's impact on U.S. inflation and interest rates,which could complicate China's own monetary policy, and on foreign investment in China,which is already near its lowest level since the financial crisis.

Comments are presented by:AneriDani&Associates, BIAC, BEPSMonitoringGroup, CBI, ChinaStateAdministrationofTaxation, Deloitte, InternationalChamberofCommerce(ICC), GovernmentofIndia InternationalTaxandInvestmentCenter(ITIC), JubileeUSANetwork, KPMG, PwC, Repsol, SergioGuida, SiliconValleyTaxDirectorsGroup(SVTDG), TaxExecutivesInstitute(TEI), TransferPricingEconomistsforDevelopment(TPED), UnitedStatesCouncilforInternationalBusiness(USCIB)

The EU Council has listed 17 jurisdictions as non-cooperative for tax purposes in its latest blacklist, and also released a grey list of 47 countries, but, it has played it safe by excluding known tax havens.

The U.S. Senate votedwednesday to start formal tax-bill negotiationswith the House of Representatives as lawmakers began grapplingwith the delicate balance they must strike to advance final legislation through both chambers and to the president by Christmas.

It is a feature of most countries' tax systems that non-residents are taxable on certain types of income that arise in that country. Royalties are typically one such type of income and, to enforce their taxing right, countrieswill generally require the payer of the royalty towithhold tax from the payment and account for it to the tax authorities. The UK is no exception to this approach,which is subject to international agreements, such as Double Taxation Agreements (DTAs), that allocate taxing rights over such payments.