Int'l Tax News

The New Zealand Government passed awide-ranging taxation Bill on February 24 2016,which includes measures that clarify GST and R&D tax rules for companies.

For the ITR story, go here.

Congress can take steps now to stop corporate inversionswhile itworks on a more permanent solution, Council of Economic Advisers Chair Jason Furman told Joint Economic Committee members March 2.
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One of the most beneficial stepswe can take to grow our economy is to reform our broken, outdated tax code.
International tax reform is an important part of this overhaul to make the United States a more competitive place to invest and create jobs.
For the York News-Times op-ed, go here.

The Group of 20 finance ministers has endorsed the OECD's new framework thatwould allow all interested countries and jurisdictions to join in implementing the final recommendations of its BEPS project.
For the DTR story, go here. (subscription required.)

Ken Brewer exploreswhether an anti-inversion measure recently announced by Treasury and the IRS could be invalidated under the non-delegation doctrine or the presumption against extraterritorial effect.
For the Tax Notes article, go here. (subscription required)

The IRS has issued Rev. Rul. 2016-8, 2016-11 IRB 1, removing the previously applicable restrictions under sections 901(j) and 952(a)(5) that denied a foreign tax credit for income taxes paid to Cuba and disallowed deferral on income earned in Cuba through a controlled foreign corporation.

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The U.S. may opt out of new standards for permanent establishment from the OECD regardless of how this year's debate on applying the new standards plays out, a U.S. official said.
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The European Union's competition chief sought to dispel "misunderstandings" and rebut U.S. claims that her clampdown on preferential tax deals unfairly targets American companies as regulators prepare to rule on Apple Inc.'s fiscal pactwith Ireland.
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Requiring member states to recover unlawful aid given to multinational enterprises in the form of favorable transfer pricing treatment is intended to remove economic distortion rather than to penalize the affected companies, EU Competition Commissioner Margrethe Vestager argued in a February 29 letter to Treasury Secretary Jacob Lew.
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G-20 finance ministers on February 27 endorsed the OECD's proposal for an inclusive framework for all other countries and jurisdictions towork on base erosion and profit-shifting project implementation on an equal footingwith OECD and G-20 countries.
For thewWTD story, go here. (subscription required)

States considering tax haven legislation to address the taxation of foreign-source income are headed in awrong -- and possibly unconstitutional -- direction, according to a March 1 report from the research foundation of the Council On State Taxation.
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Ajay Gupta examines the allegations of political motivation against the European Commission's state aid investigations into the transfer pricing agreements reached by U.S. multinational enterpriseswith tax authorities in several member states.
For the TNI News Analysis, go here. (subscription required)

The Netherlands,which holds the rotating European Union presidency, insisted itwill push to get an agreement by the end of June on the recently proposed Anti-Tax Avoidance Directive (ATAD), but in order to do so itwon't oppose splitting the legislation in two.

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Lowell D. Yoder of McDermottwill & Emery examines revised temporary regulations (T.D. 9733) that expand the tax code Section 956 indirect investment rule. The revised rules "require taxpayers to evaluatewhether any transfer of funds made by a CFC to a related foreign corporation that holds an investment in U.S. property might be subject to the indirect investment rule," hewrites.

For the BNA Insight, go here. (subscription required)

The Brookings Institute has a briefing paper out on the financial transactions tax ideas floating around. And sadly,while much of the paper is entirely reasonable, they manage to miss the most important point about an FTT.which is thatwhilewewill all be able to see the revenues that come from the taxwewon't be able to see the fall in revenues that come from our having a smaller economy as a result of the tax.
For the Forbes article, go here.

Margrethe Vestager, the EU's powerful competition chief, has rebuffed claims fromwashington that a series of tax probes she has launched into multinationals such as Apple and McDonald's amount to unfair discrimination against US companies.

Ms Vestager haswritten to Jack Lew, the US Treasury secretary, saying the probes "aim at a proper, non-discriminative, application of tax laws in Europe" and are "based on firm legal ground".
For the Financial Times story, go here.

Some multinational companies operating in Belgium are considering shifting part of their business out of the country after the European Union declared a government tax discount illegal and is requiring the companies to pay back hundreds of millions of euros in unpaid taxes.

The European Commission, the bloc's antitrustwatchdog, in January ordered Belgium to recoup about 700 million euros ($765 million) from some 35 companies after concluding that a Belgian tax-discount plan for multinationalswas distorting competitionwithin the EU's single market.

Butwith the program overturned, some companies are consideringwhether to transfer part of their operations out of Belgium.
For thewall Street Journal story, go here.

Despite the U.S. failure to serve as a model for taxation of multinationals in recent years, it is providing a model for taxation of financial transactions.
For the Tax Notes article, go here. (subscription required)

Action 7of the OECD's base erosion and profit-shifting project has broadened the rules for defining a permanent establishment to make it easier for countries to determinewhether a PE exists, according to Robert Stack, Treasury deputy assistant secretary (international tax affairs).
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The recently updated U.S. model income tax conventionwas drafted to conform more closely to the OECD model treaty but does not introduce any type of primary purpose test, according to Treasury International Tax Counsel Danielle Rolfes.

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The U.S.would halt the exchange of country-by-country information to a jurisdiction that makes the reports public, a top Treasury official said.
"There is no circumstance inwhich the U.S. CBC information that's given by the IRS can be made public as a general matter, or as a matter of compliancewith some other legislative rule," said Robert Stack, deputy assistant secretary for international tax affairs at Treasury. "If they take IRS information and make it public,wewill stop sending it, because it violates our treaties."
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In discussions about changing the U.S. tax system, one topic almost always arises: the possibility of adopting a value-added tax.
After all, most of the industrializedworld uses a VATÔøΩwhich is not to say they all like it.
For thewall Street Journal article, go here.

Multinational companies that don't provide adequate information to subsidiaries for mandatory country-by-country tax and profit reporting to tax authoritieswould face subsequent transfer pricing probes, under a proposal to be considered by EU finance ministerswhen they meet March 8.

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U.S. corporations doing business overseaswere able to take a big chunk out of their income taxes in 2011ÔøΩmore than 41 percentÔøΩby claiming the foreign tax credit, the IRS said.
The data comes at a timewhen controversy continues to percolate on Capitol Hill surrounding tax breaks for U.S. multinationals.
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In Finland, any new interpretations of the OECD transfer pricing guidance issued under the organization's project to combat tax base erosion and profit shiftingwill need to adhere to existing law, the country's tax administration said.

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The Treasury Department should rework its anti-inversion rules to require a foreign acquirer to conduct substantial business activities in the countrywhere it is a tax resident, rather thanwhere it is organized, the New York State Bar Association Tax Section said.

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The U.S. business community has lost the global public relations battle on international tax planningÔøΩand should considerwhether a proposed global minimum taxwould be better for their interests than continuingwith the status quo, a top Treasury Department official said.

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The OECD is actively looking at three provisions in the newly released U.S. model treatyÔøΩincluding those on special tax regimes, limitations on benefits, and an anti-abuse provision involving permanent establishmentÔøΩas talks go forward on its own model treaty and a multilateral instrument, a top official told Bloomberg BNA.
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The Treasury Department doesn't plan to renegotiate tax treaties currently before the Senate even though it recently published a new model treaty, a top official said.
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U.S. multinationals are losing the public debate on international tax reform by continuing to play games and shift income between low-tax jurisdictions, according to Robert Stack, Treasury deputy assistant secretary (international tax affairs).
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A senior Treasury official on February 25 remained noncommittal regarding a recently published proposal inTax Notescalling on Treasury to expand the anti-hopscotch rule enunciated in 2014's anti-inversion guidance beyond the inversion context.
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Amid questions aboutwhy the IRSwaited nearly two decades to release guidance under section 721(c) on cross-border partnership transfers, an IRS official on February 25 cited an unlikely source as providing the necessary "momentum" to issue the new notice announcing the coming regs: 2014's anti-inversion notice.
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As other countries gear up to protect their tax bases, U.S. taxpayerswith foreign income need to seriously considerwhat may happen to their foreign tax credits, according to Bretwells, a professor in international tax at the University of Houston Law Center.
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The Senate's top Democratic taxwriter on February 25 announced that he isworking on an international tax reform package, offering it in explicit contrast to Republican visions of reform for attendees of an Urban-Brookings Tax Policy Center conference inwashington.
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We don't often agreewith President Obama's chief economist, Jason Furman, but he got it exactly rightwhen he noted earlier this month that the U.S. treatment of international business income is a "stupid territorialtaxsystem."
His point is simple. On paper, the U.S. has aworld-widetaxsystem that imposes two layers oftaxon overseas business income -- an initial foreigntaxwhen the money is earned and a second U.S.taxwhen the money is repatriated. In practice, however, companies actively avoid the U.S.taxby various means, including inversions (moving their headquarters abroad by mergingwith foreign corporations), shifting profits to foreign subsidiaries, and hoarding the cash overseas. The result is, in effect, a territorial system, but one that produces less revenue for theU.S. Treasuryand less growth for the U.S. economy.
For thewall Street Journal article, go here.

A robustworkforce and ample investment are the main ingredients of a growing economy. But the alchemy that produces truly booming economies often lies in technological breakthroughs. To foster these leaps in innovation, nations (the United States included) provide funding for basic research patent protections and tax incentives. Innovation or patent "boxes" are a growing feature of many nations' research support policies that attract research-intensive investment. Patent boxes offer preferential tax treatment of income derived from intellectual property, often patent-related income.
For the American Action Forum story, go here.

Developing countrieswill be invited by G20 governments to join talks aimed at stopping multinationals dodge taxes in a bid to defuse tensions over their limited role in global tax reform.

Finance ministers meeting in Shanghai later thisweek are expected to endorse proposals to open up talks on stopping "base erosion and profit shifting" (BEPS) to all countrieswilling to implement them.

For the Financial Times story, go here.

Separate but parallel plans to establish a more territorial tax system for U.S. companies' overseas profits and end double taxes on corporations are advancing, according to their chief champions in Congress.
Both plans should lessen pressures pushing businesses to relocate abroad for tax purposes, Houseways and Means Committee Chairman Kevin Brady (R-Texas) and Senate Finance Committee Chairman Orrin G. Hatch (R-Utah) said.
For the DTR story, go here. (subscription required)

Philip Morrison of McDermottwill & Emerywrites that the European Commission's state aid cases against U.S. multinational enterprises have potential implications for some of the standard structures used by U.S. MNEs in Europe. He says the Commission's rulings are as much a political attack as a legal one.
For the BNA Insight, go here. (subscription required)

Proposals to cut taxes on intellectual property could cost as much as $236 billion or as little as $5 billion over a decade, according to an analysis from the American Action Forum.
The range reflects differences inwhat may be considered intellectual property for the purposes of the lower tax rate, aswell aswhether the changewould happen as part of a broad reshaping of the U.S. tax code.
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Astudy by advocacy groupsTransnational Institute and Global Justice Now says a free trade deal proposed between the European Union and U.S.would hamper efforts to fight tax evasion by making it easier for corporations to challenge tax rulings before investor-state dispute settlement (ISDS) tribunals.
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An international tax reform draft from a Houseways and Means subcommittee should be ready by the end of March, the subcommittee's chair said February 24.
"For international,we are hoping to get something done this first quarter,"ways and Means Tax Policy Subcommittee Chair Charlesw. Boustany Jr., R-La., told reporters after a full committee hearing on international tax reform. "Iwant to have a bill; that'swhat the chairmanwants me to do."
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Senate Finance Committee Chair Orrin G. Hatch, R-Utah, said February 24 that his corporate integration plan and the Houseways and Means Committee's efforts on international tax reform could complement each other.
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In this article, Brewer and Antoon discuss recently proposed regulations under section 367 thatwould dramatically change the treatment of goodwill and going concern value transferred by a U.S. person to a foreign corporation.
For the Tax Notes article, go here. (subscription required)

Taxpayers, tax advisers and politicos alike are eagerly awaiting India's 2016 Budget,whichwill be released on Monday [February 29].will BEPS be covered, andwhich Action Pointswill feature?will there be an update on GST?what other indirect tax changes might there be?
For the ITR story, go here.