Int'l Tax News

Vietnam's Decree 91 on VAT and corporate income tax (CIT) came into effect on October 15 2014. It includes provisions on deductible expenses, tax incentives for manufacturers and high-technology firms, a reduction in the paperwork required for tax filing and in the corporate tax rate for agricultural businesses,which are all applicable for the 2014 reporting year.

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The European Commission announced its directive proposal for a common consolidated corporate tax base (CCCTB) more than three and a half years ago, on March 16 2011. Andreas Eggert discusses how the proposal has developed since then.

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The European Court of Justice should abandon the terms established by the landmark 2005 Marks & Spencer judgment allowing for cross-border corporate group tax relief, the European Union's top legal adviser said in an opinion.
If the EU high court adheres to the Oct. 23 opinion (C-172/13) by ECJ Advocate General Juliane Kokott,which happens in 80 percent of all cases, itwould dismiss a European Commission legal challenge brought against the United Kingdom in an effort to force it to properly apply the Marks & Spencer judgment.
The surprise legal opinion could restrict the fundamental freedom of establishment for companies that is one of the pillars of the EU single market, according tax experts.
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A new study concluding that European Union member states lost more than $200 billion in value-added tax revenue in 2012 underlines the need for changes to the patchwork VAT system, according to the European Commission.
Based on the commission-sponsored study, the difference betweenwhat should have been collected by EU member states andwhatwas actually collectedÔøΩthe "VAT gap"ÔøΩwas $224 billion.
In addition towidely different approaches taken by EU member stateswhen it comes to rates on certain products, the commission said the report, issued Oct. 22, proves EU member states' continued rejection of proposals for more harmonization has significant fiscal costs.
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The Organization for Economic Cooperation and Development's proposed country-by-country reporting template, master file and local file portend a doubling of the transfer pricing compliance burden of multinational companiesworldwide, a London practitioner said.
Patrick Trapp of EY LLP said the Sept. 16 draft guidance under Action 13 of the international plan to combat base erosion and profit shifting constitutes a significant change in transfer pricing documentationÔøΩ"both in focus and in detail, and for most parts of theworld."
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Ireland's finance chief defended his country's tax policies that have encouraged numerous American companies to route profits through his country, but said he alsowelcomes recent U.S. efforts to stifle awave of corporate inversion deals.
Finance Minister Michael Noonan, speaking at the second Finance Tax Policy Conference in Dublin, said the 12.5 percent corporate tax rate set in Ireland's recently announced budget provides investorswith certainty as many countries are changing their policies as part of global tax changes spearheaded by the Organization for Economic Cooperation and Development, under the direction of the Group of 20.
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Countries thatwork together like Ireland and the US "need to be cognisant" of the impact their tax policies have on each other, new US Ambassador to Ireland Kevin O'Malley said in a speech yesterday.


He said cross-border mergers can make the Irish and American economies stronger, but that "these transactions should be driven by genuine business strategies and economic efficiencies, not a desire to shift the tax residence of the parent entities simply to avoid taxes".
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Pascal Saint-Amans, the director of the Centre for Tax Policy and Administration at the Paris-based Organisation for Economic Cooperation and Development (OECD), told the Irish Independent itwas "common sense" for the Government towait for the conclusion of an examination of patent box schemes elsewhere by Europe before moving.
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European Union tax regulators suffered a setback as an aide to the bloc's top court sidedwith the U.K. in a clash over the nation's corporate tax system.

Rules that EU authorities criticized for making it almost "impossible" for companies to claim tax relief on non-resident subsidiaries are justified, an adviser to the EU Court of Justice said today.

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A tax overhaul proposal from Rep. Dave Camp (R-Mich.), chairman of the Houseways and Means Committee, doesn't create a new definition of intangible assets due to "universal" fears among taxpayers that doing sowould create confusion and uncertainty, a committee staffer said.
Sean Hailey, an adviser for the majority onways and Means, said fear of uncertaintywas behind Camp's decision to use a percentage-based formula to identify the intangible-related returns thatwould be taxed under a new provision of Subpart F in the proposal rather than using a definition based on "facts and circumstances."
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Alvin C.warren reviews the basic analytics of deferral and exemption systems for taxing the income of foreign corporate subsidiaries, highlighting some relationships that are not always appreciated in policy discussions.
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Tax savings are not the main driving factorwhen multinational companies outsource their routine functions; rather, those decisions are driven mainly by the desire to reduce costs and standardize, according to a Dell Inc. tax official.
"You do notwant thewhole outsourcing strategy to hinge on the tax savings," said Lionel Nobre, Dell's director of Latin America tax, at the International Fiscal Association conference in Mumbai.
Speaking on a panel devoted to cross-border outsourcing issues, Nobre pointed out that tax incentives and exemptions are affected by changes in the law and in the business aswell as economic changes.
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Three bills introduced in the New Jersey Legislature target domestic corporations that become foreign-incorporated corporations, subsidiaries of a foreign corporation, or shift operations offshore. Precluding inverted companies from obtaining government contracts and state incentives could be a significant cost that companies shouldweigh in their decision to 'invert.'
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In a joint letter to Heads of State and Government of the European Union ahead of thisweek's European Council meeting, European Commission President Barroso and European Council President Van Rompuy inform about the key issues coming up for discussion at the G20 summit in Brisbane (Australia) on 15-16 November 2014.
For the release, go here.

This publication considers action 13 of the OECD's BEPS Action Plan, aimed at re-examining transfer pricing documentation requirements ÔøΩ and in particular providing for more information from taxpayers. Such informationwill offer useful indicators for risk assessment and allow tax administrations to better focus their limited resources.
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Six years after the onset of the economic crisis, French growth remainsweak. France faces great challenges as it seeks to boost its competitiveness and its medium-term growth potential and to transform its economic and social structures so as to preserve all that it has achieved in a context of heavy pressure on the public finances. The reforms that it undertakes todaywill determine its productivity tomorrow and its place in theworld economy.
Studies consistently show that, in order to improve business competitiveness, France should give priority to reforms in four areas.
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Ireland adopts first mover advantage including commitment to a best-in-class knowledge development box – a clear roadmap for the future.

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On the first floor of a rust-colored building near the main railway station, Marius Kohl spent years engineering this country's most valuable export: tax relief.
As head of a federal agency called Societes 6, Mr. Kohl approved thousands of tax arrangements for multinational corporations, sometimes helping them save billions.
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Modifications to subpart F rules included in the comprehensive tax reform draftreleased February 26 by Houseways and Means Committee Chair Dave Camp, R-Mich., could be changed and "fleshed out" in the future, Ray Beeman, former tax counsel and special adviser for tax reformwith the committee, said October 21.
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Italy's Ministry of Economic Development and the Italian Treasury announced a plan to change the calculation method of the value of trademarks, patents and some types of intellectual property, in order to lower the tax bill on those assets.
The plan is in response to the relocation of headquarters outside Italy by several large Italian companies,which left at least in part to save on their tax bills.
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The European Commission has referred Belgium to the Court of Justice for imposing a higher tax rate on foreign collective investment undertakings (CIUs) from other European Union member states than on those established domestically.
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A number of American corporations are making news, and not in a goodway.
They have announced mergerswith foreign companies so they can avoid paying U.S. taxes. They are seekingwhat is called a "tax inversion" and it allows an American corporation to mergewith a foreign corporation, move their headquarters overseas, andwith some accounting manipulations avoid paying most of their U S taxes.
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Irish officials are examining the feasibility of a 6.25 per cent rate on a new corporate tax scheme as the Government moves to shore up inward investment after its decision to scrap the controversial "Double Irish" mechanism.
While this is one of several options under discussion, such a ratewould apply to a new "knowledge box" scheme inwhich a preferential ratewould be levied on assets such as patentswhich are managed from Ireland and located here.
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Amendments to the Australian thin capitalization rules have been granted Royal Assent. The amendments are part of the Tax and Superannuation Laws Amendment (2014 Measures No. 4) Act 2014 (the act),which makes numerous changes first announced in the Australian Federal Budget released on May 14, 2013.

The thin capitalization measures apply to tax years commencing on or after July 1, 2014. This defers application of the rules for companieswith a calendar year-end for Australian tax purposes to tax years commencing January 1, 2015.

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The Irish government decided lastweek to get rid of a tax loophole that has helped big multinational companies like Apple and Google avoid paying billions in taxes to any government at all. But hold the champagne: Ireland couldwell replace one problematic tax policywith another, leaving aggressive tax avoidance pretty much intact.
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Senate Finance Committee Chairman Ronwyden (D-Ore.) said hewill keep pushing legislation to curb corporate inversions, even as the Treasury Department's administrative moves may be quelling the tide.
In a statement Oct. 17,wyden said hewould continue discussions about inversion-related measures andwelcomed news that directors of AbbVie Inc. had abandoned a proposal to buy Dublin-based drugmaker Shire.

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With some companies reconsideringwhether to pursue inversions following Treasury's notice about forthcoming guidance to address the issue, Senate Finance Committee Chair Ronwyden, D-Ore., is monitoring the pace of inversion transactions to determinewhether stopgap legislation is still needed orwhether it canwait for comprehensive tax reform.

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The OECD is trying to determine the appropriate return for intangible assets in various action items of its base erosion and profit-shifting project.
Action item 8 on intangibles has proved so controversial that the OECD has had to postpone part of the project until later this year. In the report on harmful tax practices, the OECD has determined that a preferential intellectual property regime should not be considered harmful if its tax benefit depends on the performance of substantial activities in the relevant jurisdiction. However, the OECD members have not been able to agree onwhat substantial activities means.
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PayPal's announced spinoff from parent company eBay could open the door to one or both resulting entities moving offshorewith foreign merger partners. Each of these expatriations, however,would encounter statutory and regulatory hurdles -- including those presaged in Notice 2014-52, 2014-42 IRB 1.

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The much-awaited ruling of the Bombay High Court (HC) in the context of thewrit Petition filed by Vodafone India Services Private Limited (VISPL or the taxpayer) has been released.
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The "anti-dilution" provisions under tax code Section 7701(l) in the government's notice to put the brakes on inversions are intended to stop companies from "hemorrhaging" earnings and profits before the deals, a senior IRS official said.
The governmentwants to "ringfence" the E&P, Internal Revenue Service Associate Chief Counsel (International) Steven Musher said at a corporate tax conference sponsored by the Practising Law Institute Oct. 16.
Under Section 7701(l), transactionswould be recast to ensure a company's earnings and profits are appropriately taxed, Musher said.
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Breaking his silence on the anti-inversion notice issued September 22, Steven Musher, IRS associate chief counsel (international), on October 16 answered numerous practitioner questions on how to interpret the notice and, in particular, on the mechanics of the so-called 36-month rule in the excess distribution test.
Notice 2014-52, 2014-42 IRB 712, directs taxpayers to disregard some distributions for purposes of applying the 80 percent and 60 percent ownership fraction tests. The 36-month rule provides that non-ordinary course distributions made by the inverting company during the 36 months preceding the acquisition date are disregarded.
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Despite Treasury guidance intended to slow inversions, the guidance only addresses some reasonswhy corporations invert,which iswhy Congress should take legislative action to more fully address inversion incentives and avoid litigation that could challenge Treasury actions, Citizens for Tax Justice said in an October 16 release.

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The Obama Administration keepswonderingwhy businesses don't invest more andwhy it gets no credit forwhat it claims is itswonderful economic recovery. Look no further than its new and increasingly successful campaign to prevent money that corporations earn overseas from returning to the United States. That's the practical economic impact as so-called corporate-inversion deals die in thewake of Treasury's September tax raid on cross-border mergers.
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In a decision that could give relief to more than 20 other pending cases, the Bombay High Court has ruled in favour of Vodafone that in the absence of income, a share issue transaction cannot be subjected to transfer pricing.
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Apple, Amazon and Starbucks are now on high alert: Europe, unlike more plodding U.S. tax authorities, is swiftly moving to blast heavyweight corporations for playing shell games to skirt taxes on billions in profits.

In the past severalweeks alone, the European Commission accused Apple of manipulating the company's tax rate, and it called out Amazon for using royalty payments to avoid taxation in Luxembourg. The crackdown is putting pressure on low-tax European countries like Ireland ÔøΩwhich has attracted big name companieswith tax benefits ÔøΩ to tighten the rules.

"The EU has sort of justwoken up to the fact thatwithin its midst are a bunch of countrieswhose existences depends on luring" companies away from each otherwith sweet tax deals, said David Rosenbloom, director of the international tax program at New York University.

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The Irish government announced yesterday that itwas moving to close the infamous "Double Irish" tax loophole. The tax arrangement,which has sparked endless controversy for multinational corporations, involves royalty payments for intellectual propertywhich can be transferred from one Irish-registered subsidiary to anotherwith no corporate income taxes.

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On October 14, 2014 the Minister for Finance announced the Irish Budget 2015. As part of this process he also published a policy statement entitled 'A Road Map for Ireland's Tax Competitiveness,'which provides some overall international tax strategy context for the Budget announcements. The package of tax measures including 'grandfathering' of existing arrangements and a new intangible property (IP) regime should provide certainty on the Irish tax regime for both existing and new investors.
These announcements should enable Ireland to remain competitive and attractive as a location inwhich to align IP, profits, and substance.
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This article considers the IRS's continued efforts in litigation under reg. section 1.482-7A(g)(2), despite the Tax Court's rejection of the IRS's position in Veritas. The article asserts that the IRS's approach is flawed, that Veritaswas correctly decided, and that the IRS should consider refocusing its efforts.

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A subcommittee of the United Nations Committee of Experts on International Cooperation in Tax Matterswill recommend that the committee, at its annual meeting Oct. 27 in Geneva, delete a controversial paragraph from the Article 9 Commentary of the U.N. Model Tax Convention, according to a subcommittee member.
The paragraph recommends that countries follow the principles set out in the Organization for Economic Cooperation and Development transfer pricing guidelines in applying the arm's-length principle to determine the correct prices for the transfer pricing of goods, technology, trademarks and services between associated enterprises and the methods that may be applied.
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The OECD's recent transfer pricing guidance on intangibles, issued as part of the base erosion and profit-shifting project's deliverables,with large portions unfinalized, is unlikely to be finalized anytime soon. Thatwas the takeaway from a seminar, titled "Tax Issues Relating to Intangibles," held October 15 at the 68th annual Congress of the International Fiscal Association in Mumbai.

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Europe's top antitrust official criticizedwhat he called the "defensive" and "irrational" response by European politicians to his investigation of Google Inc., and said separately that his department may launch more probes into alleged sweetheart tax deals for multinational companies.
Spanish-born Joaquin Almunia --who is preparing to step down as the European Union's competition commissioner in a fewweeks -- said the political pressure that preceded his decision to reopen the four-year-old Google case for a fourth timewas unprecedented. The commission has rejected three settlement offers by the U.S.-based Internet giant.
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A simple tweak to the "Double Irish" tax structure might be enough to prolong its lifespan, advisers said as they pondered new strategies to replace the high-profile tax planning scheme axed by Ireland's government on Tuesday.

Dublin's decision to bow to international pressure by phasing out the Double Irishwas hailed as awatershed in the international crackdown on corporate tax avoidance. The structure has allowed companies such as Microsoft, Google and Abbott to route profits to tax havens such as Bermuda by exploiting different definitions of corporate residency in Ireland and the US.

But the promise to axe the "Double Irish" by 2020was greeted calmly bywall Street,where analysts noted itwould be phased out over six years and forecast itwould have, at most, a modest impact on earnings.

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The Irish government is to scrap the so-called double-Irish structure and introduce an income-based system for the taxation of intellectual property,which it is calling a knowledge development box.
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On August 6 the Korean Ministry of Finance announced initial plans to tax corporations on excess cash reserves. The government hopes the extra tax revenuewill stimulate growth but there is a risk the move could cause Korean firms to move excess reserves offshore.
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Taxpayers got some mixed news from this year's Malaysia budget, the last before goods and services tax (GST) comes into effect next April.

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According to the European Commission - the executive body of the European Union - perceived 'aggressive tax planning' is contrary to the principles of the EU's internal market. Fair competition is one of these principles. EU Member States cannot grant 'aid' - e.g. subsidies or tax reliefs - to certain companies on the internal marketwithout prior authorisation by the European Commission. If such aid is grantedwithout authorisation, the aid is unlawful. Unlawful aid has to be repaid by the companies concerned. Recently, the European Commission has made a link between State aid and BEPS. Following are answers to key questions on State aid.
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Bono may front theworld's most popular rock band, but the U2 singer did not earn many new fanswhen he recently defended Ireland's controversial tax policies,which arewidely seen as helping multinationals to avoid paying their fair share. Norwas his support for this low-tax regime enough to save the "Double Irish", the biggest of the loopholes,which Ireland's government outlined plans to close on October 14th.

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Ireland adopts first mover advantage including commitment to a best-in-class knowledge development box – a clear roadmap for the future.

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In a special report, Mike Goral and Tatyana Lirtsman complete their two-part series on state tax issues facing foreign corporationswith an examination of sourcing of income to the taxing state and how income should be apportioned.

For the report, go here.