Int'l Tax News

In the October Budget, the Minister for Finance announced the intention to change the Irish tax residency rules. These changeswill apply to Irish incorporated companies resident in non-treaty jurisdictions, butwith a generous six-year grandfathering provision for existing investors.

As originally drafted, the 'grandfathering provisions'would have beenwidely available to all companieswhichwere incorporated in Ireland before January 1, 2015, regardless of ownership or activity. Amendments to this draft legislation have now been proposed in order to limit the ability to access these grandfathering provisions.

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OECD countries collectively raise the most revenue from consumption taxes and social insurance taxes, and the United States relies the most on individual income taxes, the Tax Foundation said in a November 12 release.

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The leaders of the Group of 20 major economieswill consider the next steps for their financial regulation agenda andwillwork to close loopholes in the international tax system as a part of a multi-year Base Erosion and Profit Shifting (BEPS) programwhen they meet Nov. 15-16 in Brisbane, Australia.
G-20 leaderswill continue to advance their two-yearwork program to update international tax rules for the 21st century by closing loopholes in the international tax systems and strengthening public finances through its two-year BEPSwork plan.
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Starbucks Corp. may have unfairly lowered its tax bills by routing profits through Dutch subsidiaries, European Union regulators said as they continued to investigate sweetheart fiscal deals between multinational companies and national governments.

"The Dutch authorities confer an advantage" on Starbucks Manufacturing EMEA BV through tax agreements that may have constituted illegal state aid, according to a European Commission letter outlining its case to Dutch officials posted on the EUwebsite today.

The Dutch authorities allowed Starbucks Manufacturing to transfer profits through royalty payments to a unit outside the country that "could be overestimated," the EU said in the letter dated June 11. The regulator's findings are preliminary.

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An EU probe into sweetheart tax deals is confronting the Netherlands by alleging it artificially lowered Starbucks' tax bill through approving a complex, irrational and inappropriate corporate structure.

In a 40-page letter outlining its preliminary conclusions from its probe, the European Commission alleges the US coffee chain paid less tax than it should have done under Dutch law, and that this is a form of favourable treatment that amounts to an illicit state subsidy.

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In 2015, the Australian government is releasing awhite paper on tax policy reform,which analysts expectwill include suggestions to increase the goods and services tax (GST) rate and expand its base.

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A new study analysing the effects of different levels of ICT-related taxes and tariffs around theworld has been published by the Information Technology & Information Foundation,with recent changes affecting India noted.
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The long-awaited goods and services tax (GST) is very likely to be discussed in the Indian Parliament'swinter session, and the tax could be introduced in April 2016.
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The European Commission plans to propose a new version of the Common Consolidated Corporate Tax Base legislation that likelywill exclude the current option provision to the plan and may also include harmonized corporate tax rates.
In a move designed to head off the controversy over revelations stemming from Luxembourg "sweetheart" tax agreements signedwith multinational companies by European Commission President Jean-Claude Junckerwhen hewas prime minister and finance minister of Luxembourg, the European Commission also said the new proposalwill take into account the Organization for Economic Cooperation and Development guidelines on base erosion and profit shifting.
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The OECD has unveiled a plan to bring more developing countries into the discussions on base erosion and profit shifting. But tax justice campaigners have given it only a guardedwelcome.

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In this article, the authors argue that although some U.S. international income tax reforms, such as limitations on earnings stripping, can be handled by targeted legislative action, broad reform of the U.S. international income tax system should take place only as part of a general revision of the U.S. corporate income tax.
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The European Commission has released a preliminary view that an advance agreement struck between Starbucks and the Dutch government constitutes state aid.
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The UK and German governments on November 11, 2014, announced a proposal that they co-developed to advance negotiations on new rules for preferential intellectual property regimeswithin the G20/OECD base erosion and profit shifting (BEPS) project. If agreed, this is a key development for the UK patent box. Germany had led opposition to patent box regimes,while the UKwas in the minority in opposing the nexus approach as set out in the September OECD BEPS paper on Harmful Tax Practices.

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The United States is not serious about taxing U.S. multinationals on their foreign income and does not need the revenue.
This fundamental understanding is amply demonstrated by the U.S. attitude toward the base erosion and profit-shifting project,which is a polite pretense of participationwith quiet undermining. European efforts to change laws to extract tax from U.S. multinationals are metwith U.S. proposals to enact a minimum tax thatwould still have the effect of encouraging foreign investment.
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Antonioweiss, the Lazard Ltd. executive chosen to be a top lieutenant to Treasury Secretary Jacob J. Lew,will endorse efforts to curb corporate inversions,white House counselor John Podesta said.
That may ease tension overweiss's role as an adviser in several high-profile inversions. Sen. Elizabethwarren (D-Mass.), a populist foe ofwall Street, opposes the nomination because ofweiss's involvement in those inversions, a person familiarwith her position said.
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The furor over the release of more than 300 tax rulings prepared by PricewaterhouseCoopers LLP for submission to Luxembourgwill likely lead to more negative portrayals of cross-border tax planning and structuring. The public debate may result in changes to tax laws and additional investigations by prosecutors and lawmakers. At the same time, the outcry raises questions about the extent towhich shifts in public acceptance of some types of corporate behavior may result in changes to professional practice.
Changes to corporate tax practice caused by informal pressure and social regulation are not easily reconciledwith accounting rules for how andwhen to recognize and measure tax positions.
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The OECD said on Friday the plans of G20 nations to boost theworld economy could beat their target of adding 2 percentage points to global growth by 2018, though geopolitical risks such as Ukraine and Ebolawere mounting.
Angel Gurria, the secretary-general of the Paris-based Organisation for Economic Co-operation and Development, said that the more than 1,000 measures proposed since Februarywould exceed the target, over the next five years, if implemented.
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The G20 started in 1999 as a somewhat technical grouping of finance ministers and central bankers. That all changedwith the Global Financial Crisiswhich turned it into a virtual 'global government' comprising a regionally balanced choice of theworld's largest economies, represented at the leadership level.
The personal presence of national leaders at the annual G20 Summit from then on has insured its intensely political nature. The crises in the Middle East, Ukraine and the triangle between China, Japan and the USÔøΩ not to mention the newly announced US-China climate deal ÔøΩ are thus likely to dominate thisweekend's summit in Brisbane, threatening to push financial and fiscal tasks to the background.
Enter 'Luxleaks', the unearthing by the International Consortium of Investigative Journalistsof an important number of confidential 'tax rulings' by the Luxembourg Government ensuring favourable corporate tax rates for a number of globally active companies including some of the largest and best-known names in international business.
Just in time to grab the headlines back for a core G20 issue: tax.
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On both sides of the aisle and and at both ends of Pennsylvania Avenue, almost everyone inwashington says it is time for comprehensive tax reform.
Stakeholders from nearly every industry have skin in the gamewhen it comes to tax reform. Closing so-called loopholes that provide incentives to one industry or anotherwill instigate knock-down-drag-out political fights.
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The scope of the UK Patent Box regime is to be restricted after Germany and the UK reached agreement to reduce the competitive advantages it provides. The restrictions are likely to be extended to other European intellectual property (IP) tax regimes.
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Following the major corporate income tax (CIT) reform that entered into force on January 1, 2014, Portugal has become more stable. The 2015 State Budget proposes minor changes to this CIT regime. Notably, the Budget includes a reduction of the standard applicable CIT rate from 23% to 21%.

Moreover, in order to increase competitiveness, the Portuguese government has approved the new Investment Tax Code. The Codewill reinforce the existing investment tax benefits and adapt them to the new European Union State aid framework.

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The European Commission (EC) has published its opening decision in the formal investigation into transfer pricing agreements between Starbucks and the Dutch tax authorities. The Commission had already communicated this investigation through a press release issued on June 11, 2014. The current decision, issued November 14, 2014, explains the reason for this investigation, and specifies the additional informationwhich the EC has requested from the Netherlands.
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The OECD's base erosion and profit shifting initiative is facing a significant issue in how it addresses controlled foreign corporations because European case law currently restricts the scope of EU members establishing CFC regimes, Stephen E. Shay of Harvard Law School said November 14.
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The transfer pricing arrangements Starbucks Corp. used to pass profits through its European subsidiary based in the NetherlandsÔøΩa deal approved by the Dutch governmentÔøΩconstitutes illegal state aid, the European Commission ruled.
In the latest challenge of "sweetheart" tax rulings EU member states have granted multinational companies to attract foreign direct investment, the commission Nov. 14 said the Dutch government allowed Starbucks to exclude the cost of coffee beanswhen it declared a taxable profit equal to a percentage of its costs.
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American companies have plowed more money into the Netherlands than any other country in theworld -- for five years running.
This does not reflect a new fascinationwith pot or pancakes. It is about the taxes, or lack of them.
The laws in Netherlands shield a variety of profits from taxation, making it attractive for big multinational companies like Starbucks, Google and IBM to set up offices. Even rock stars like the Rolling Stones and U2 have taken advantage of Dutch tax shelters.
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European Union authorities have accused the Netherlands of making a special dealwith Starbucks that helped the company lower its taxes, creating unfair advantages over other countries in the bloc.
The report by the bloc's competition authority, made public on Friday, is a preliminary finding in a review of Starbucks' arrangementswith the Netherlands. It is the latest sign of mounting concern, and indignation, over the scale of tax breaks for multinational companies in a period ofweak growth and high unemployment in many parts of Europe.
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Luxembourg's governmentwas taken by "complete surprise" by the amount of files revealed lastweek in a report detailing hundreds of secret corporate deals that allegedly helped multinationals dodge taxes during Jean-Claude Juncker's tenure as the nation's prime minister.

The publication of a "tsunami" of more than 500 so-called tax rulings executed by the government between 2002 and 2010 "totally astonished" Luxembourg Finance Minister Pierre Gramegna, he told journalists at a briefing yesterday in Luxembourg.

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A Dutch unit of Starbucks Corp. paid millions of euros to a U.K.-based arm of the company that isn't taxed in Britain in exchange for a technique to roast coffee beans.

Exaggerated tax-deductible royalty payments for this technique may have allowed Starbucks to unfairly lower its Dutch taxes, the European Union said as it continues to probe sweetheart fiscal deals for multinationals. The EU findings are preliminary.

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World leaders have backed a transparency drive against the use of anonymous shell companies and trusts, giving new political momentum to longstanding promises to tackle the secrecy behind corruption, tax evasion and money laundering.

Following talks on Sunday, the Group of 20 leading nations published a set of principles for governments that aims to make it easier to find outwho is the beneficial owner of shell companies. Experts say these entities facilitate hundreds of billions of dollars in illicit financial flows.

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Move over, Ireland.

Companies from Microsoft Corp. to China's Huawei Technologies Co. scouring Europe for fiscally attractive shores are turning to an unlikely country: France.

As a base for research and development teams, that is.

Tax breaks for R&D, 5.6 billion euros ($7 billion) this year alone, combinedwithworld-class scientists are making France a honey pot for technology companies. As the French parliament debates how to shrink the country's budget deficit this month some lawmakers are demanding reining in the R&D credits, saying some companies are abusing them. President Francois Hollande has pledged it's a budget line hewon't touch.

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Treasury has sent the OECD an alternative method of addressing the cash box problem that does not focus on rewriting transfer pricing rules, Robert Stack, Treasury deputy assistant secretary (international tax affairs), said November 10.
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Unlike the media or government,when U.S. companies consider Ireland, their attention is drawn elsewhere. Certainly tax rates matter, but they are far from thewhole story.
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Jean-Claude Juncker, the new president of the European Commission,was always a bad choice for the job, foisted on the bloc's 28 national governments by a European Parliament eager to expand its powers. It's becoming clear now just how poor a decision that appointmentwas.

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A senior aide defended European Commission President Jean-Claude Juncker on Monday against charges of having provided a haven for corporate tax avoidance in Luxembourg, saying the entire new EU executivewas committed to stamping out tax evasion.
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Although the OECD is moving quickly in developing guidance as part of its base erosion and profit-shifting project, taxpayers are likely to face varied levels of implementation of its recommendations by countries desperate to raise revenue, practitioners said at a tax conference in Philadelphia.
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Attacking the "cash box" problem of stacks of cash sitting in low-tax jurisdictions to evade home country taxes is part of the fast-moving Organization for Economic Cooperation and Development's action plan on base erosion and profit shifting, a Treasury Department official said.
Treasury is trying "to be as transparent in our thinking as possible as the process is moving on," Robert Stack, deputy assistant secretary for international tax affairs for Treasury, told a Silicon Valley audience Nov. 10 at the High Technology Tax Institute sponsored by San Jose State University and the Tax Executives Institute.
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Dutch tax rules for multinational enterprises (MNEs) are comparablewith rules in other European countries, the Netherlands Court of Audit said in a tax evasion report released Nov. 6, adding that Dutch tax rules aren't exceptional, but still favorable for MNEs.
The Court of Auditwas commissioned by the House of Representatives, the lower house of parliament, to examine tax avoidance in relation to the tax rules. The courtwas taskedwith completing an in-depth audit of tax evasion practices in relation to the tax treaty network, aswell as determining how MNEs allocate their assets and liabilities.
Overall, the court concluded that Dutch law is favorable to MNEs because of rules in place to prevent double taxation, and that the rules aren't significantly different from those of neighboring countries.
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A United Nations tax committee has deleted language from the commentary to the UN Model Tax Convention that gives primacy to the Organization for Economic Cooperation and Development's transfer pricing guidelines.
Michael Lennard, chief of the UN's international tax cooperation unit, told Bloomberg BNA Nov. 10 that the Committee of Experts on International Cooperation in Tax Matters deleted paragraph 3 of the Article 9 commentary,which recommended that countries follow the OECD's transfer pricing guidelines in applying the arm's-length principle.
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A Melbourne attorney said implementing the Organization for Economic Cooperation and Development's plan to combat base erosion and profit shifting may cause uncertainty for companies in the short term.
Niv Tadmore of the law firm Clayton Utz,who also is a member of the Australian Treasury's BEPS tax advisory group, told Bloomberg BNA Nov. 10 that the BEPS plan's impact on Australia "was a key issue" discussed at a recentworkshopwhere business representatives and Australian Treasury officials met.
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The Treasury Department and Internal Revenue Service have officially listed corporate anti-inversion guidance among the administration's regulatory priorities that deserve additional resources.
The first bit of anti-inversion guidance, Notice 2014-52,was issued Sept. 22 and Treasury officials in recent days have said additional noticesÔøΩincluding one that could address earnings strippingÔøΩare being considered.
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Michael J. Graetz and Alvin C.warren Jr. suggest that corporate shareholder integration offers a straightforward approach that could help resolve many of the most difficult issues and provide a key to unlocking business tax reform.
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Stuartweichsel of Farrell Fritz PC looks at precisely how Notice 2014-52 limits "hopscotch transactions" that avoid U.S. tax on foreign earnings, and points out the range of transactions thatwon't be affected under its terms. "The hopscotch loophole isn't used only by U.S. corporations that engage in corporate inversions as defined by tax code Section 7874," although those transactions are the ones targeted by the notice,weichselwrites. However, he says, the IRS has authority to issue regulationswith a broader reach.
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As the governmentworks to develop regulations under section 367(d) to target transactions intended to repatriate earnings from foreign corporations, practitioners at a conference November 7 drew attention towhat they consider to be the government's use of the statute in away thatwas never intended.
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Eleven euro zone countries moved closer to agreeing on a financial transactions taxÔøΩa form of the long-debated "Tobin tax"ÔøΩby lowering the proposed tax rate, hoping for an agreement in December.
The countries have disagreed throughout the 22-month negotiations, mostly aboutwhether a greater or smaller number of financial products should be taxed. France has supported a more limited scope,with only stocks and some credit default swaps,while Germany has preferred to include almost all derivatives.
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The recent Luxembourg tax scandal is a clear sign theworld's biggest economies need to combine their politicalwill to force rule changes to combat base erosion and profit shifting (BEPS) by multinational companies and tax evasion by individuals, the head of the Organization for Economic Cooperation and Development said.
But to get little countries like Luxembourg to "play ball by the rules," big countries like the U.S. and the U.K.will also have to end practices that contribute to tax avoidance, said OECD Secretary-General Angel Gurria.
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South Koreawill introduce a streamlined version of its existing advance pricing agreement program beginning January 2015 for companieswith annual sales of 50 billionwon ($45.9 million) or less, the National Tax Service said.
The streamlined programwill help more companies, representing 7,023 (76 percent) of 9,212 foreign companies currently doing business in South Korea, get transfer pricingwaivers, the agency said Nov. 6.
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Irish Finance Minister Michael Noonan said the European Union may have to abandon a state aid investigation into the nation's tax arrangements for Apple Inc.
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In a sprawling conference center on the outskirts of the Irish capital, more than 20,000 people from the global tech industry gathered lastweek to sign deals and swap contacts.
Despite the throngs of start-ups, American heavy hitters like Peter Thiel and executives from Facebook and Twitter, talk often centered on taxes -- specifically Ireland's controversial rules that have allowed some of theworld's largest tech companies to sidestep paying billions of dollars.
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Luxembourg,with just half a million people, is the second-richest country in theworld. Its position at the heart of the EU is essential to this prosperity, enabling it to trade and exportwith the large advanced economies around it. Butwhat really underpins its economy is finance,with banking assets 20 times the size of its GDP. So much money floods across its borders that Luxembourg stands tenth in rankings of global investment.

It is becoming clearer that much of this money flow is motivated by considerations of tax.

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Banco Santander SA's court victory in a case over Spanish tax breaks may hamper the European Union's probes into unfair fiscal deals for multinational firms, lawyers said.
The Nov. 7 ruling at the EU General Court, on special treatment for companies that take a stake in overseas firms, follows the revelation of hundreds of fiscal dealswith companies in Luxembourg,which sparked calls for tougher EU action to combat corporate tax dodging.
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