Int'l Tax News

After months of negotiations, on October 10, 2017, a new business-minded Dutch government announced its political plans for the upcoming four years. These plans include various corporate tax proposals.

The relevant items for multinational enterprises (MNEs) doing business in the Netherlands are the reduction of the general Dutch corporate income tax (CIT) rate to 21% and elimination of the dividendwithholding tax. The government also is planning to introduce various measures to further counter international tax avoidance that alignwith EU and OECD BEPS recommendations.

Ireland's Department of Finance on October 19 published the Finance Bill 2017,whichwould implement changes announced by Finance Minister Paschal Donohoe in his budget speech aswell as additional antiavoidance measures. The finance bill also includes amendments to begin the process of implementing the OECD's Multilateral Instrument (MLI). The text of the finance billwas released alongwith an explanatory memorandum. A release by the Department of Finance also includes a list of Finance Bill 2017 provisions.

The Estonian presidency of the EU Council said it sees three short-term alternatives to an equalization tax on digital companies' turnover: amending member states' bilateral tax treaties, amending the anti-tax-avoidance directive (ATAD), or adjusting the European Commission's common consolidated corporate tax base (CCCTB) proposal.

The OECDwill likely have the five ratifications required for its multilateral instrument (MLI) to enter into force by early 2018, an OECD official said.Speaking during the OECD's seventh installment of the Tax Talkswebcast series on October 17, Sophie Chatel,whowas appointed the new head of tax treaty unit at the Centre for Tax Policy and Administration (CTPA) in July, said the OECD had received the first MLI ratification from Austria.

Tax measures announced by the new Dutch governmentwill benefit retail and manufacturing companies,while high-tech and leveraged companieswill bear the brunt of the compensatory measures, practitioners say. Although the surprise reduction of the headline rate and the abolition of the 15 percent dividendwithholding tax announced October 10thwere quick to draw praise from business lobbies and companies, practitioners are nowwarning that the government also plans to implement several measures thatwill cost companies money.

Washington is softening its position on European plans to impose taxes on US tech giants such as Apple and Google, officials said thisweek

The evolving attitude in recent dayswould mark a stark shift from American officials' frustration at previous efforts by European authorities to collect taxes from Silicon Valley firms.

Important progress is being made toward the elimination of harmful tax practices pursuant to the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project. The OECD/G20 BEPS Project delivers solutions for governments to close the gaps in existing international rules that allow corporate profits to "disappear" or be artificially shifted to low or no tax environments,where companies have little or no economic activity. Revenue losses from BEPS are conservatively estimated at USD 100-240 billion annually, or the equivalent of 4-10% of global corporate income tax revenues.

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Debates overwhether the right to tax residual profits of multinationals belongs to source or residence countries have traditionally pitted developing countriesagainst developed countries. Developing countries have been arguing for greater source-based taxation for years. Developed countries, meanwhile, have generally resisted big changes to the international tax system, holding firm to historical principles that give residence countries strong claims of tax, including the existing transfer pricing system.

In late 2015 the OECD and G-20 released their final base erosion and profit-shifting proposalswith 15 actions to provide governmentswith tools to combat BEPS. The actions include new or more stringent international standards and are meant to improve the coherence of international tax rules, reinforce focus on economic substance, and increase tax transparency.The German legislature has reactedwith the Anti-BEPS Implementation Actwhich focuses on aligning German transfer pricing documentation legislationwith OECD requirements, and includes a number of other measures.

The Irish government invites businesses and practitioners to provide feedback on its plans to update its international tax strategy, including how Ireland should incorporate the OECD's transfer pricing guidelines into national law and implement the EU's anti-tax avoidance rules. The government announced immediate changes in the budget, including a new limit to the amount of income againstwhich capital allowances for intangible assets businesses can deduct in a tax year, aswell as an increase on stamp duty on commercial transactions. The deadline for comment is the end of January, 2018.

Houseways and Means Committee Republicans agree that a foreign minimum tax on overseas corporate earningswill likely be a necessary part of moving to a territorial tax system. The Tax Reform Framework proposes taxing U.S. multinational companies at a reduced rate and taxing their foreign profits "on a global basis."white House and congressional leaders have been hesitant to call the provision a foreign minimum tax, an idea that many multinational corporations have opposed in previous tax reform bills.