2015

Treasury Assistant Secretary for Legislative Affairs Annewall has advised Rep. Ted Lieu, D-Calif., that initiating tax treaty negotiationswith Armenia is not a top priority since no U.S. companies have reported unrelieved double taxation on their investments in Armenia and because it's not Treasury's policy to conclude income tax treaties as a means of promoting commercial relations or enhancing job creation.
For the letter, go here. (TNT subscription required)

Matthew Gilleard introduces this exclusive, comprehensive insight into thework of the OECD in the area of countering tax base erosion and profit shifting (BEPS).within these covers youwill find out about the key messages delivered under each of the OECD's 15 Actions, direct from the individuals responsible for putting each aspect of the project together.
For the ITR article, go here.

Major financial institutions and trade groups, in a series of comments to the Internal Revenue Service, lodged a plea for an industry exception to proposed regulations thatwould impose tax on the outbound transfer of foreign goodwill and going concern value.
For the DTR story, go here. (subscription required)

The Internal Revenue Service's proposed rules on country-by-country reporting contain few surprises, practitioners say, but raise several questionsÔøΩincluding an unexpected one aboutwhether the new requirements should include an exception for national security reasons.


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Many developing countries may implement the recommendations of the BEPS project that are relevant to them. This list of countries and topics seems to bewider than many commentators expected.

The OECD's Task Force on Tax and Development meeting on 2-3 November 2015 allowed a number of countries to specify points of satisfaction or dissatisfactionwith the BEPS recommendations. Therewere further, similar opportunities at recent regional BEPS meetings in various locations. The first plenary session of the Ad Hoc Group on the Multilateral Instrument and the 20th Global Forum on Tax Treaties also showed high levels of participation from developing countries.

For the PwC Tax Policy Bulletin, gohere.

Toddwelty, Mark P. Thomas, Laura L. Gavioli, and Cym H. Lowell discuss the need to improve international tax dispute resolution processes in light of the predicted increase inworldwide tax disputes.
For thewWTD article, go here. (subscription required)

Differences between the effective dates in the proposed country-by-country (CbC) reporting regulations(REG-109822-15) issued by Treasury and the IRS and those in the report on action 13 (transfer pricing documentation) of the OECD's base erosion and profit-shifting program may create timing mismatch problems, according to KPMG's Manal Corwin and Kimberly Tan Majure.

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The IRS should exclude partnerships that have limited opportunities for abuse from rules thatwill crack down on transferring appreciated assets to foreign partners to escape U.S. tax, the New York State Bar Association Tax Section said.

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The New York State Bar Association Tax Section urged the IRS to make it clear that multiple controlled foreign corporations that support a debt obligation of a U.S. personwon't each be stuckwith the entire obligation under tax code Section 956(d).

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The 2013 BEPS Action Plan recognised that "actions to counter BEPS must be complementedwith actions that ensure certainty and predictability for business". Edward Barret and Evelyn Lio track thework of Action 14 of the BEPS Action Plan,which called forwork to improve the effectiveness of the mutual agreement procedure (MAP) and thereby address obstacles that currently prevent countries from solving treaty-related disputes and minimise as much as possible elements of uncertainty related to the interpretation and application of novel rules resulting from the otherwork on BEPS issues.
For the ITR article, go here.

Here's some consolation for Americans concerned about theway the Obama Treasury has been circumventing Congress and the statutory rule-making process to stop U.S. companies from moving overseas. The latest merger news suggests that,while the anti-inversion policy lacks a legal foundation, Treasury Secretary Jack Lew may be too incompetent to implement it anyway.
For thewall Street Journal article, go here.

Congresswill review new Treasury regs on country-by-country reporting in order to prevent the establishment of base erosion and profit-shifting policies that enable foreign governments to misuse information reporting and exploit U.S. companies, Houseways and Means Committee Chair Kevin Brady, R-Texas, said in a December 21 statement.
For the statement, go here.

With tax extenders out of theway,ways and Means Committee Chair Kevin Brady, R-Texas,wants to focus on international tax reform in 2016 and set the stage for a broader tax overhaul after the presidential election.
Brady,who took over as committee chair in early November, told Tax Analysts in two exclusive conversations on December 17 and 18 that he has one-, two-, and four-year plans in mindwhen it comes to overhauling the tax code.
For the TNT story, go here. (subscription required)

The IRS proposed rules requiring large companies to report information including the amount of revenue, profit or loss, capital and accumulated earnings for each country of operation, consistentwith OECD recommendations designed to combat base erosion and profit shifting.
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The Cyprus House of Representatives on December 10, 2015, voted to amend the country's individual and corporate tax framework. The bill addresses:

• neutral tax treatment for foreign currency exchange (forex) differences that do not trade in forex
• compensatory adjustment expense recognition
• employment income exemption (50%) for expatriates earning over €100,000 from five to ten years
• alignmentwith European Directive 2011/96/EU (Parent-Subsidiary Directive).

The amendments have been published in the Official Gazette on Thursday, December 17, 2015. The alignmentwith European Directive 2011/96/EUwill be effective as ofJanuary 1, 2016; the remaining provisionswill be effective retroactively as of January 1, 2015.

For the PwC Insight, gohere.

We are living in an erawhere 'tax avoidance' is a popular theme amongst voters and, hence, politicians. This is in spite of the fact that tax avoidance is legal – it is tax evasion that is illegal.
For the ITR story, go here.

Matthew Gilleard introduces this exclusive, comprehensive insight into thework of the OECD in the area of countering tax base erosion and profit shifting (BEPS).within these covers youwill find out about the key messages delivered under each of the OECD's 15 Actions, direct from the individuals responsible for putting each aspect of the project together.
For the ITR article, go here.

Kate Ramm explains how the building blocks approachwill lead to effective controlled foreign company rules.
For the ITR story, go here.

by PwC

The Belgian Minister of Finance has shared new insights on how Belgium plans to respond to the OECD/G20 project on Base Erosion and Profit Shifting (BEPS). In a recent policy note, the Minister announced the introduction of Country-by-Country (CbC) reporting legislation, new transfer pricing documentation requirements, increased and more-targeted tax audits, investments in e-auditing and data-mining, and other suggested measures intended to prevent tax abuse and to combat tax fraud.

For the PwC Insight, gohere.

Tim Cook made a compelling case that he is acting in Apple shareholders' interests by keeping billions of dollars in cash overseas, out of the hands of the U.S. tax collectors, industry insiders told CNBC on Monday.
"There's this natural tension,whereas the CEO of a publicly traded company's got a fiduciary responsibility to ensure that revenues and profits are recognized in the most tax-efficientway possible," said Jon Brod, co-founder and president of the encrypted messaging platform Confide.
For the CNBC story, go here.

Tim Cook is making somewaveswith the statement that thosewho complain about Apple avoiding tax are spouting "political crap". Further, that the problem is entirely one that is fixable by Congress any time they decide to put their minds to it. This is of course true: andwhat Congress, alongwith everyone else, should be doing is stopping this pretence of taxing companies and corporates in the first place. For in economic terms it simply is not true that companies pay tax at all. Ever. So, let's drop the pretence and go and get the tax revenueswe need or desire from the only group that ever do pay taxes: people.
For the Forbes article, go here.

The CEO of Apple, theworld's biggest and richest company, says the notion that his company is avoiding taxes on overseas profits is just "political crap" coming from politicianswho refuse to change an antiquated tax code. Charlie Rose conducts awide-ranging interviewwith Tim Cook inwhich the Apple CEO also addresses his company's other hot-button issues including encryption technology and manufacturing products in China.
For the CBS News report, go here.

Corporations have a responsibility to seekways to increase value for their shareholders, including looking at inversion options,which can sometimes be at oddswith the U.S. tax code, a Treasury Department official said.

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After focusing on the issue for years, the Treasury Department and the IRS couldn't craft a foreign goodwill exception thatwould prevent undervaluation in outbound intangible transfers, according to Brenda Zent, special adviser on international taxation for Treasury's Office of International Tax Counsel.
For the TNT story, go here. (subscription required)

Treasury expects to release country-by-country regs for base erosion and profit shifting "any day now," a Treasury official said December 18,while hinting at other active guidance efforts planned for early 2016.
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The IRS Large Business and International Division is stillwaiting for temporary country-by-country (CbC) reporting regulations for 2016 to drop, but it is already thinking about how to handle and exchange the data in CbC reports thanks to its experiencewith the Foreign Account Tax Compliance Act, a top IRS official said.
For the TNT story, go here. (subscription required)

The IRS plans to flesh out both of its controversial anti-inversions notices in one package of regulations, an agency official saidÔøΩawelcome detail on how the Service plans to address the notices in forthcoming guidance.
Implementing both Notice 2014-52 and Notice 2015-79, the packagewill be "well north" of 150 pages, according to Daniel McCall, special counsel to the Associate Chief Counsel (International). "It's a huge project," he said.
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The debate over base erosion and profit shifting has been a dangerous context inwhich to address questions of how income should be sourced, Barbara Angus of EY said during a debate on the merits of source- versus residence-based taxation.
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Victoria Perry, assistant director for tax policy at the International Monetary Fund, said the OECD's project to combat base erosion and profit shifting likelywill have a limited or uncertain effect on the developingworld.

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A proposed regulation from the Treasury Department that eliminates the taxation exception for foreign goodwill in Section 367 arose from frustrations about how to define the term, a Treasury official said.

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If the United States can't take on comprehensive tax reform, it should at least come upwith legislation to directly address inversions and earnings stripping, a top Treasury official said.
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Multinationals and the government are much morewilling to go to court to resolve transfer pricing disputes than they used to be, an IRS official said.
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There is a misconception that U.S. companies are the only participants in global tax avoidance strategies because they are the most recognized names in the news, said Thomas Neubig, deputy head of the Tax Policy and Statistics Division at the OECD's Centre for Tax Policy and Administration.
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On 16 December 2015, Japan's coalition leading parties released the 2016 Tax Reform Outline (Outline). The Outline includes both favorable proposals, such as a further corporate tax rate reduction and unfavorable proposals, such as further limitation of an annual net operating loss (NOL) deduction. A new transfer pricing documentation rulewill be introduced,which is in linewith the Organisation for Economic Co-operation and Development's (OECD) on Transfer Pricing (TP) Documentation and Country-by-Country Reporting (CbCR) as a part of the Base Erosion and Profit Shifting (BEPS) project.
For the EY report, go here.

Quarterly capitalists should gird themselves for disappointment.with post-tax earnings running around 10 percent of national income, according to the Bureau of Economic Analysis, U.S. companies are close to the peak of profitability not seen since at least the late 1960s. High levels of corporate profit are a global phenomenon, too. Competition, disruption and tax policy – not to mentionweaker growth – are set to change all that.
For the Reuters article, go here.

Australiantaxauthorities on Thursday published the records of hundreds of companies, includingGoogleand Apple,which show that they paid little or notaxon their earnings in the country.
Of more than 1,500 largely foreign-owned companies that reported total earnings over 100 million Australian dollars ($72.11 million) in the 2014 financial year, more than one-third paid notax, theAustralian Taxation Officedata showed.
For the Reuters story, go here.

The clarification of some aspects of the 2014 inversion notice (Notice 2014-52, 2014-42 IRB 712) in Notice 2015-79, 2015-49 IRB 775, should not be taken as a sign that there isn't more to come, cautioned Brenda Zent, special adviser, Treasury Office of International Tax Counsel.
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The Treasury Department hopes to release a finished copy of the U.S. model treaty in early 2016, an official said.
Quyen Huynh, associate international tax counsel for Treasury, said Dec. 17 that the U.S. hopes a completed version of the modelwill be a factor in the discussions over the limitation-on-benefits provisions in the Organization for Economic Cooperation and Development Model Tax Convention in February, but that the two documents aren't expected to be identical.
For the DTR story, go here. (subscription required)

The government continues towork on more guidance to address abusive inversions, and earnings stripping is still part of that process, a Treasury Department official said.

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While the European Commission's state aid cases are still ongoing and the U.S. government has not yet analyzedwhether any recovered state aid is eligible for its foreign tax credit, the commission's actions raise questionswhether the EU can handle political pressure on tax avoidancewhile still maintaining a fair system, a Treasury official said December 17.
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Pfizer's $160 billion acquisition of Allergan shows that highly-mobile American companies are still looking to "self-help" action such as inversion as the US tax code fails them on competitiveness.
For the ITR article, go here.

The transactional profit split method may be applied under the OECD's transfer pricing guidelines only if it is the most appropriate transfer pricing method, the head of the organization's transfer pricing unit said.

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Samuel C. Thompson Jr. argues that moving to a territorial systemwould create a stealth tax cut for U.S. corporations and likelyworsen the problem of base erosion and profit shifting.
For the Tax Notes article, go here. (subscription required)

PwC has submitted comment letters on the IRS's proposed regulations under Section 367 and temporary regulations under Section 482. Both comment letterswere submitted to the IRS and Treasury on December 15, 2015.
For the comment letters, gohere.

Proposed regulations aimed at attacking "aggressive" tax positions on the outbound transfers of intangibles is unsound, two Big 4 accounting firms said, urging Treasury towithdraw the guidance or amend it significantly.
Deloitte Tax LLPandPricewaterhouseCoopers LLPsubmitted Dec. 15 comment letters on Internal Revenue Service proposed regulations (REG-139483-13) that eliminate the foreign goodwill and going concern exceptions under Treasury Regulations Section 1.367(d)-1T.
For the DTR story, go here. (subscription required)

With the final deadlines for the OECD's BEPS Project falling at the end of this year, 2016was always going to be a year dominated by questions about implementation.while BEPS-related activity is not the only issue on the horizon, that alonewill ensure multinationals are kept busy over the next 12 months. Joe Stanley-Smith and Matthew Gilleard look through the peephole to analyse taxpayer hopes, fears and expectations for the year ahead.
For the ITR article, go here.