Int'l Tax News

Packaged and sold as part of a larger effort to combat inversions, Treasury's new proposed regulations under section 385 show just how far the agency iswilling to go to rethink how to combat earnings stripping through interest deductions -- and that it's not about to have limitations dictated to it by section 7874 and inverters.
For the TNT story, go here. (subscription required)

U.S. companies may rethink their plans to re-domicile after Treasury issued temporary regs on April 4 that contain several new rules not previewed by the prior anti-inversion notices aswell as changes to the rules in the notices.
For the TNT story, go here. (subscription required)

While all but five EU member states make use of tax rulings,with some issuing a few a year and others issuing thousands, "the good news is most of the rulings are not about aggressive tax planning," EU Competition Commissioner Margrethe Vestager said.
For thewWTD story, go here. (subscription required)

Taxlawyers at the Treasury Department have grappled in recent yearswith the many corporations findingways to mergewith overseas ''inversion'' partners and, as a result of the merger or acquisition, move their legal residence offshore to reducetaxpayments.
TheTreasury's new administrative guidance thatwas releasedon Mondaytackles awide range oftaxissues related to inversions, including new approaches to multistep acquisitions and earnings-stripping. The new guidance also revises and completes rules the Treasury had previously proposed in 2014 and 2015.
For the New York Times article, go here.

You can tell it's an election year, because the Obama Administration is moving again to blame U.S. companies for trying to remain competitive despite the developedworld'sworst corporatetaxburden. No less than President Obama himself appeared in thewhite House press roomTuesdayto praise newTreasuryrules, issued the day before, that sandbagPfizer Inc. and other companies using foreign takeovers to reduce theirtaxburden.
For thewall Street Journal article, go here.

When Iwrote in my most recent column that I hoped the Treasurywould swing for the fences to try to limit corporate inversions, it never occurred to me that itwould issue rules remotely as tough as the ones it unveiledon Monday.
For that matter, I had no idea that the ruleswould be issued just three days after my columnwent online and the day after it ran in theSundaypaper. But as they say, timing is everything.
For thewashington Post story, go here.

The U.S. Treasury department's announcement on Monday of new rules to discourage U.S. companies from resorting to "inversion deals" to relocate to lower-tax countries has shaken the corporateworld by its unprecedented force and reach.
For the Knowledge@Wharton release, go here.

The pastweek has arguably been one of the most significant in burnishing President Obama's legacy in the businessworld.
The administration took its toughest actions yet against tax deals known as "corporate inversions," and finally pushed through strict new rules on retirement investment.
For The Hill story, go here.

Pfizer Inc. and Allergan Plc have terminated their $160 billion merger in an abrupt end to the largest-ever health-care deal after the U.S. government cracked down on corporate tax inversions.
The Treasury Department's proposed new rules to deter companies from using acquisitions to shift their tax addresses overseas drove the decision, the companies said April 6 in a statement.
For the DTR story, go here. (subscription required)

The Treasury Department's tough new guidance to curb inversions and earnings strippingwon't stop some kinds of deals, practitioners and academics said.

For the DTR story, go here. (subscription required)

Thewhite House traded dueling accusations of unpatriotic behaviorwith the chief executive officer of a major drugmaker after unexpectedly tough new rules from the Treasury Department on corporate inversions derailed a $160 billion merger between Pfizer Inc. and Allergan Plc.
The timing and severity of the new rules, issued April 4, took both companies and even many members of Congress by surprise.
For the DTR story, go here. (subscription required)

Senate Finance Committee Chair Orrin G. Hatch, R-Utah,welcomed the news that Pfizer Inc.was terminating its inversion dealwith Allergan PLC, but the taxwriter maintained that lowering corporate rates is the key to discouraging U.S. companies from moving abroad.
For the TNT story, go here. (subscription required)

A review of Airbnb's overseas regulatory filings shows it has a far more extensiveweb of subsidiaries than it has publicly acknowledgedÔøΩmore than 40 in allÔøΩmeaning it pays little tax in the U.S. and countries such as Australia.
Every time Ian Haines rents out his spare room in the Australian port city of Albany, Airbnb Inc. takes a 13 percent cut. Haines,who is semi-retired, uses the extra money to supplement his income running a local farmers market. He says he is careful to pay taxes on the Airbnb money, because the San Francisco company may report the transactions to the Australian government.
For the DTR story, go here. (subscription required)

Pfizer Inc. announced April 6 that it has backed away from its $160 billion inversion dealwith Irish-based Allergan PLC in thewake of Treasury's new anti-inversion guidance.
For the TNT story, go here. (subscription required)

In news analysis, Mindy Herzfeld says it'swrong to label the proposed section 385 regulations as anti-inversion earnings-stripping rules, as they radically alter the landscape of corporate tax planning for multinationals -- both U.S. and foreign -- and effectively overturn decades of guidance applying corporate tax rules to cross-border planning.
For the TNT article, go here. (subscription required)

The OECD plans to advise the G-20 finance ministers at their upcoming meeting to stay the course on internationally agreed tax standards, including that on automatic information exchange, in the aftermath of the Panama Papers investigation.
For thewWTD story, go here. (subscription required)

Pfizernever tried to hide the fact that its proposed $152 billion mergerwithAllergan, based in Ireland,would cut itstaxbill in the United States. But even as it rushed to complete the biggesttax-avoidance deal in the history of corporate America, it continued to promote the strategic and economic benefits of the merger.
Any pretense to a motivation other than dodging taxes has now beenwiped away.Onwednesday, just two days after the Obama administration introduced new rules to narrow the loopholes that the drug companieswere exploiting,Pfizer announced that the dealwithAllerganwas off.
For the New York Times article, go here.

The drug giantPfizerwanted to cut its taxes through a $152 billion takeover of the Dublin-based maker of Botox. AndHalliburtonsought to buy a major rival in the business of selling equipment to oil drillers for nearly $35 billion.
But thisweek, the Obama administration took on both deals -- and it has claimed at least one trophy so far.
For the New York Times story, go here.

A day after the Obama administration limited the ability of U.S. companies to do international deals to lighten theirtaxburdens,Pfizer Inc. andAllergan PLCterminated their planned $150 billion merger and other companies around the globe raced to assess the impact of the new rules.
The new Treasury Department rules drew swift condemnation from Allergan Chief Executive Brent Saunders,who criticized them as "un-American" and "capricious."
For thewall Street Journal story, go here.

President Obama's push to stop American companies from heading overseas to avoid U.S. taxes scored its biggestwin yetWednesdaywhen pharmaceutical giantPfizercalled off a $160 billion mergerwith Dublin-basedAllergan.
The sudden collapse of the deal comes just days after the Treasury Department made a rule change that appeared to be aimed specifically at the transaction, stripping it of many of its benefits.
For thewashington Post story, go here.

Anti-inversion regulations released by the Treasury Departmentwill help "level the playing field for domestic companies competingwith multinationals," but the new regulations may not go far enough to stop "serial inverters," Frank Clemente of Americans for Tax Fairness said in an April 6 statement.
For the statement, go here.

The evolution of international taxation, driven by the OECD's BEPS Actions, is eliciting newways of thinking about the effective management of an internal tax function.
For the ITR article, go here.

I'm glad to see that the Pfizer-Allergan deal has apparently fallen apart. It probablywasn't a great deal from a business standpoint, especially for the Pfizer shareholderswho may have been over-paying. (Pfizer stock apparently rosewhen the deal collapsed - Allergan stock first fell a lot, then rebounded a little.)

Whatwere the tax advantages that Pfizer hoped to garner from the deal? Robertwillens suggests that enhancement of Pfizer's ability to access some $140 billion in foreign earnings, tax-free, for loans among its affiliated companieswas "100 percent the reason behind this deal."
For the blog post, go here.

President Barack Obama scored a victory thisweekwhen Pfizer scrapped a $160 billion overseas deal thatwould have kept a chunk of the drugmaker's profits beyond the U.S. tax man's reach.
But recent, aggressive federal actions that discouraged Pfizer Inc.'s combinationwith another drugmaker, Allergan PLC,won't stop all so-called inversions, or deals that endwith a company relocating to another country ÔøΩ at least on paper ÔøΩ and trimming its U.S. tax bill in the process.
Tax and legal experts say these deals,which have come under growing criticism from politicians,will remain attractive to some companies until the U.S. pursues a massive tax law overhaul.
For the ABC News story, go here.

The Obama administration's crackdown on corporate inversions has highlighted a fact both parties find disturbing: Companies benefit by having their tax addresses outside the U.S.
Lawmakers on both sides agree the U.S. corporate tax code is broken and in desperate need of an overhaul. Neither side expects change any time soon.
For the Nasdaq story, go here.

The fix to the problem of inversions is not more legislation fine-tuned to specific inversion deals. It is much needed corporate tax reform.
For the Forbes article, go here.

Former Treasury Secretary Hank Paulson told CNBC on Friday he's "troubled and disappointed" by the Obama administration's stopgap answer to trying to prevent corporate inversion deals.

For the CNBC story, go here.

The U.S. Treasury Department issued another volley in their ongoing effort to stop corporate tax inversions thisweek. Large corporations are not happy, but that's only part of the story. The Treasury's re-engineering of the law may have inadvertently created some major obstacles for the broader economy.

For the Forbes article, go here.

A day after the Obama administration limited the ability of U.S. companies to do international deals to lighten their tax burdens,Pfizer and Allergan terminated their planned $150 billion merger and other companies around the globe raced to assess the impact of the new rules.

The new Treasury Department rules drew swift condemnation from Allergan Chief Executive Brent Saunders,who criticized them as "un-American" and "capricious."

For the Fox Business story, go here.

On Monday April 4, Treasury announced our third action to address the problem of corporate inversions. Since that time, the issue has been the subject of extensive media attention and commentary. This is an important issue, and one that Treasury has been intently focused on for several years.

Some recent commentary has inaccurately portrayed Treasury'swork and has failed to recognize Treasury's long record on this issue. Here are the facts:

For the blog post, go here.

The European Commission today [April 7] presented an action planwhich establishesways to improve and modernise the EU VAT system.

For the ITR story, go here.

Corporations pay less in taxes now than they did in 1945, and efforts by lobbyists and lawmakers to lower the U.S. corporate income tax rate ignore "critical facts such as the many large tax breaks, loopholes and other corporate tax exceptions" in the tax code, Citizens for Tax Justice said in an April 7 analysis.

For the CTJ analysis, go here.

The IRS is telling its agents to take a broad viewwhen determiningwhether taxpayers are clearly reflecting income from related-party transactions or are trying to evade taxes under tax code Section 482.
That code section allows the Internal Revenue Service to allocate income if a taxpayer's actions don't pass muster.

For the DTR story, go here. (subscription required)

For months, a bipartisan group of Senate Finance Committee members have complained that the European Union's state-aid investigations could unfairly force some U.S. companies to pay taxes retroactively.
On April 7, they metwith Margrethe Vestager, the European commissioner for competition, to air their grievances and tell her that U.S. companies "were being disproportionately treated" as the EU investigates tax deals between large corporations and member countries.

For the DTR story, go here. (subscription required)

Jacob J. Lew did something that has been a rarity in his three-plus years as Treasury secretary: surprise people.
Just 37 hours after Lew announced unexpectedly tough guidelines aimed at deterring corporate inversionsÔøΩdeals inwhich U.S.-based companies use an overseas acquisition to relocate their tax addresses to cut their billsÔøΩPfizer Inc. and Allergan Plc said theywould end their $160 billion merger, terminating the largest-ever pharmaceuticals transaction.

For the DTR story, go here. (subscription required)

On April 4, 2016, the IRS and Treasury issued proposed Section 385 regulations that addresswhether an interest in a related corporation is treated as stock or indebtedness, or as in part stock and in part indebtedness.
The Proposed Regulations appear to be intended to limit the effectiveness of certain types of tax planning by characterizing related party financings as equity, even if they are in form straight debt instruments. The types of transactions targeted appear to include debt through note distributions in the inbound and outbound context, and debt repatriation in the outbound context.

It is critical to note, however, that the application of these Proposed Regulations isnotlimited to these types of transactions.

For the PwC Insight, gohere.

The candidates for the Republican presidential nomination may be calling each other "losers" and "lightweights" and "robots" and "cheaters," but there is at least one issue aroundwhich they share common ground ÔøΩcorporate tax reform. Though there are minor differences in specifics there is major agreement that many of the corporate tax rules and laws that date back to the 1960s need to be rewritten.
For the CFO.com story, go here.

President Obama made a forceful caseTuesdayfor stopping corporations from moving their headquarters overseas to avoid U.S. taxes, saying they are taking advantage of the American economic system and saddling the middle classwith the bill.
These companies "effectively renounce their citizenship," Obama said at awhite House news briefing. "They declare that they're based somewhere else, thereby getting all the rewards of being an American companywithout fulfilling the responsibilities to pay their taxes theway everyone else is supposed to pay them."
For thewashington Post story, go here.

The Treasury Department on Monday took aim at U.S. companies moving their headquarters overseas to lower their tax bills, issuing aggressive newrules intended to make such moves less profitable and throwing a potentialwrench into Pfizer's recent $160 billion proposed deal to combinewith Allergen and become an Irish company.
For thewashington Post story, go here.

The Treasury Department's crackdown on tax inversions reverberated through the political and corporateworlds on Tuesday.

Both Democraticwhite House hopefuls endorsed the effort from President Obama's administration.

For The Hill story, go here.

Kerwin Chung, Shiraj Keshvani, and Eddie Morris explain how BEPS guidancewill impact APA programmes globally.

For the ITR story, go here.

New Treasury regulations are a positive step toward ending corporate tax avoidance, but Treasury should take further regulatory action to prevent hopscotch loans and Congress "should stop coddling corporate deserters and enact anti-inversion reforms," Robert S. McIntyre of Citizens for Tax Justice said in an April 5 statement.
For the statement, go here.

Since October 2015, authorities have been reacting to the outcome of the BEPS Project. The implementation of new legislation and adaption of existing regulations to match the new OECD guidelines has already begun to impact multinationalsworldwide. The undeniable headline change has been a broad move to implement country-by-country reporting (CbCR); however the other policy that stands out from the crowd is in the area of patent boxes, as Joelle Jefferis explains.
For the ITR story, go here.

For the past couple of years, President Barack Obama has been accused of failing to prevent US companies from abandoning their home base in search of lower tax rates.
Critics dismissed his administration's early efforts to deter such controversial inversion deals,which companies use to shift their addresses abroad for tax purposes, as timid and ineffectual.
Not any more.
For the Financial Times story, go here.

In keepingwith the reputation that "The United States can always be relied upon to do the right thing ÔøΩ having first exhausted all possible alternatives,"the Obama Treasury has announced its third set of rules aimed at preventing U.S. companies from mergingwith foreign companies based in low-tax countries such as Ireland. These transactions are known as inversions.
Of course, since the 35% U.S. corporate tax rate is the highest among all industrialized nations, the right thing to do is to cut our tax rate to a competitive level, not build a higherwall to prevent companies from leaving.
For the Forbes article, go here.

International Tax News is designed to help multinational organisations keep upwith the constant flow of international tax developmentsworldwide. Among the topics featured in this month's edition are:
Romania's new tax code
Treaty benefit implications of the final US Model Income Tax Treaty
Luxembourg's 2017 tax changes
The OECD framework for broader participation in BEPS stage two
For the latest edition, gohere.

As the U.S. took tougher steps Monday to limit the tax-cutting power of corporate inversions, analysts said the new rules may put a planned $160 billion merger between Pfizer Inc. and Allergan Plc in jeopardy.

The Treasury Department said Monday the ruleswould limit companies' ability to participate in inversion transactions if they've already done themwithin the past 36 months. Allergan has been involved in several mergers in that time frame. In a corporate inversion, a U.S. company mergeswith a smaller foreign firm and then transfers the new company's tax address offshore.

For the Bloomberg story, go here.

The European Commission is scrutinizing more than 100 advance transfer pricing tax rulings that multinational companies have signedwith European Union member states over concerns the terms give an incomplete picture of the group's profits and could result in new illegal state aid decisions.
For the DTR story, go here. (subscription required)

The U.S. government is taking more steps to clamp down on companies that try to reduce their tax bills by mergingwith foreign firms.
On Monday, the Treasury announced new regulations intended to further discourage so-called inversions,which have been on the rise in recent years.
For the CNN story, go here.

The top Republican taxwriters in the House and Senate are unhappywith the Treasury Department's latest actions aimed at deterring companies from moving their legal residences overseas to lower their taxes.
For The Hill story, go here.