2015

Taxpayers seeking simultaneous appeals of a tax treaty issuewith the IRS should be aware that the ultimate decision-making authority lies notwith the Office of Appeals butwith the Office of Competent Authority, an agency official said.

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In news analysis, Lee A. Sheppard looks at recently released proposed and temporary regulations that dealwith the use of partnerships to avoid subpart F income.
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Taxpayers could have a tough time under new proposed rules intended to make it harder for controlled foreign corporations to use loans to foreign partnerships as away to avoid income inclusions under Section 956, practitioners said.

Issued Sept. 1 alongwith temporary rules to shut down specific transactions, the proposed rules are "overbroad," Matthew Chen, a practitioner in the International Tax Services Team at PricewaterhouseCoopers LLP, said Sept. 9 (170 DTR G-5, 9/2/15).

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Mindy Herzfeld examines the advantages and disadvantages of using a patent box to spur investment in technology and explainswhy U.S. politicians may support a patent box, despite its complexity and economic inefficiency.
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In economic analysis, Martin A. Sullivan looks at a recent study on the use of formulary apportionment as a replacement for the arm's-length method for transfer pricing.
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Temporary and final regulations (T.D. 9738) released by the IRS and Treasury September 14 clarify the application of the arm's-length standard and the best method rule under section 482with other tax code provisions.
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The European Union's antitrust chief plans to handle its probes into countries' tax arrangementswith international companies on a case-by-case basis and not decide on them as a package.

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The IRS released a package of regulations aimed at attacking "aggressive" tax positions on outbound transfers of intangibles under tax code Section 367.
In final and temporary regulations (T.D. 9738, RIN 1545-BM72) effective Sept. 14, the IRS is clarifying the coordination of transfer pricing ruleswith other sections of the code and regulations, to provide that under the "best method rule," the reliability of a measure "depends on the economics of the controlled transactions, not their formal character."
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The European banking and financial service industry stepped up its criticism of a financial transactions tax on the heels of a meeting atwhich 11 European Union member states insisted they have narrowed differences on the base for the levy they plan to launch in 2017.

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An international business group and one of the Big Four accounting firms told the Treasury Department they have serious concerns about proposed changes to the U.S. model tax treaty.
Both the United States Council for International Business and PricewaterhouseCoopers LLP said in separate letters released Sept. 14 that the changesÔøΩin part intended to prevent double non-taxation of income between treaty partnersÔøΩaren't the rightway to address government concerns and might make treaties tougher to negotiate.
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Kimberly Blanchard ofweil, Gotshal & Mangeswrites that the OECD's draft report on controlled foreign corporation rules for the Base Erosion and Profit Shifting project fails to address issues presented by the use of CFCs. The author says the draft fails to acknowledge the very different role CFC rules play in territorial versusworldwide tax systems and is inconsistent on the extent towhich CFC rules should be designed to discourage foreign-to-foreign profit shifting.
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Since the development of the IRS transfer pricing practice (TPP),whichwas designed to integrate transfer pricing enforcement, practitioners have noted an increase inwhat they see as aggressive and inconsistent administrative tactics by the IRS, often aimed at further developing the IRS's case rather than resolving the issues.
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Finance ministers from 11 European Union countries hope to break a four-year deadlock on a financial transactions tax proposal through an agreement on the scope of a levy theywant to start phasing in at the end of 2016.
Convening in Luxembourg ahead of a Sept. 12 informal European Union Council of Economic and Finance Ministers meeting, EU diplomats expressed optimism that a deal on the tax base can be reached, provided Spain and Belgium lift their opposition.
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The Internal Revenue Service issued training materials to its examiners on how to determine the arm's-length price of intangibles assets and services associatedwith the sale of tangible property, in an International Practice Unit.
The unitÔøΩISO/9411.02_04(2014)ÔøΩ outlines several issues for examiners to consider before determiningwhether the transfer of the service or intangible can be included in a sale of tangible property, or must be given a separate priceÔøΩincluding the terms and conditions of its use;whether the transfer pricing study adequately explains its price; andwhether appropriate comparable services or intangibles have been used.
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The IRS gave its examiners instructions on auditing inbound liquidations in a new international practice unit.
The unitÔøΩISO/9411.08_02(2014)ÔøΩspecifically addresses liquidations of controlled foreign corporations into a U.S. corporate shareholder. Itwas made public Sept. 10 by the Internal Revenue Service's Large Business & International Division.
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Congressmen Charles Boustany (R–LA) and Richard Neal (D–MA), Members of the Houseways and Means Committee, recently proposed legislation thatwould create an innovation box.In addition to being unsound policy, innovation boxes, in general, are notoriously difficult to implement because of the host of questions the law must answer to prevent abuse and to insure that the box conveys the benefits its authors intend.
For the Heritage report, go here.

A three-day VAT conference attended by business representatives, industry bodies and all 28 EU member states' tax authorities concluded onwednesday 9 September. The discussions have laid the groundwork for future legislative proposals.
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The European Court of Justice (ECJ) has ruled in favour of multinational IT company Steria in its disputewith France. It could lead to major changes regarding fiscal integration and refunds for some companies.
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In comments that may assuage practitioner fears about a potentially broader move away from the issuance of private letter rulings related to the treatment of transfers of stock to foreign corporations generally, an official indicated September 9 that the IRSwill still consider issuing such rulings upon taxpayer request.
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In comments that may assuage practitioner fears about a potentially broader move away from the issuance of private letter rulings related to the treatment of transfers of stock to foreign corporations generally, an official indicated September 9 that the IRSwill still consider issuing such rulings upon taxpayer request.
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Japanese Prime Minister Shinzo Abe pledged to follow throughwith a corporate tax cut, a day after government data underscored businesses' reluctance to ramp up domestic investment.
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The ambiguitywithin Treasury's recent guidance on the transfer of property to partnershipswith related foreign partners is a necessary consequence of moving quickly to address a situation the government views as abusive, a recently departed Treasury official said September 9.
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European Commission President Jean-Claude Juncker called for greater fairness in tax policy through increased transparency, aswell as equity for citizens and companies, during his state of the EU address September 9 in Strasbourg, France.
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In news analysis, Amanda Athanasiou examines cross-border moves to enhance tax savings among multinationals in the European Union,where freedom of establishment is strictly enforced and views on changes in tax domicile are very different from those in the United States -- at least for the time being.
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Theworld's advanced economieswant to create a "global forum" aimed at ensuring that outcomes from the international plan to fight base erosion and profit shifting are implemented by awide range of countries, not justwealthy and emerging economies, the OECD's tax chief, Pascal Saint-Amans, told Bloomberg BNA.

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The Court of Justice of the European Union (CJEU) has ruled that the French tax consolidation regime is not compatiblewith the EU freedom of establishment because it excludes cross-border dividends from the full exemption granted to French intra-group dividends (CJEU, 2 September 2015, case C-386/14, Groupe Steria SCA).

For the PwC Insight, go here.

At the B20 Conference in Ankara (Turkey) on 3-5 September, BIAC Secretar -General Bernhardwelschke and Chair of the BIAC Taxation and Fiscal Policy Committeewill Morriswelcomed the B20 recommendation
on taxation and BEPS,which emphasizes the need to encourage trade and investment flows especially in relation to infrastructure and cross-border Foreign Direct Investment (FDI).
For the BIAC release, go here.

Lucas de Lima Carvalho explores the benefits of mutual cooperation between Latin American countries in the regional mergers and acquisitions market in the aftermath of the OECD's base erosion and profit-shifting project.
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Most members of the European Parliament's Special Committee on Tax Rulings and Other Measures Similar in Nature or Effect,which met September 7, believe the committee's July 20 draft report doesn't go far enough in prescribing specific transparency measures to counteract aggressive tax planning and avoidance by multinational enterprises.
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For years, Hungarian tax policy has focused on trying to develop Hungary into an attractive location for foreign investors.while there are many incentives for new investments in the country, the tax regime also provides for favourable regimes for holding shares or intellectual property (IP).
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Financial sector backlash against UK tax changes continues to grow as revenue figures become clearer.
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The Treasury Department has pushed American-based corporations to lobby against a tax provision prized by their foreign counterparts, according to peoplewho have heard the pitch.

One senior Treasury official in particular, Danielle Rolfes, urged domestic companies to more aggressively target an incentive for interest expensing during a March tax conference in Florida, in a statement that one person in the room saidwas "almost unprecedented."
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The G-20 finance ministers and central bank governors called on the OECD to create a framework for the implementation of the OECD and G-20's base erosion and profit-shifting project outcomes by 2016,with input from non-G-20 jurisdictions, particularly developing countries.
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SMEs are important for their contribution to employment, innovation, economic growth and diversity. This report examines the tax treatment of SMEs, the case for SME preferences, and the use of tax preferences and simplification measures for SMEs in thirty-nine OECD and G20 countries.
For the OECD report, go here.

James P. Fuller comments on U.S. tax developmentswith international implications, focusing specifically this month on new competent authority and advance pricing procedures, transfers of property to partnerships, the Altera case, base erosion and profit shifting, and IRS international practice units.
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Mindy Herzfeld previews the final deliverables the OECD is expected to release October 5 under its base erosion and profit-shifting action plan and explainswhy the United States is unlikely to take any significant action on them.
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With the expiration of the highway bill at the end of October and pressure to move a tax extenders bill by year-end, congressional taxwriterswill be coming up on a series of deadlineswhen they get back towork after the August recess.
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In news analysis, Marie Sapirie discusses how renewed interest in spinoff transactions could lead to new guidance that answers some older questions.
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The European Union plans to standardize some national tax and insolvency laws as part of its overhaul of the bloc's capital markets.
The European Commission, the EU's executive arm, identified divergent tax laws in the bloc's 28 countries as one of the obstacles to a capital markets union and cross-border investment, according to a preliminary commission paper. The Brussels-based commission may propose a "simplified and unified template" for the recovery ofwithholding tax, among other steps.
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The IRS is asking for public comment on a tax form used to report information about transactions between U.S. corporations that are 25 percent foreign owned, or foreign corporations engaged in U.S. trade or business, and related foreign parties.
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In economic analysis, Martin A. Sullivan looks at how a U.S. patent box might be as complicated to administer as the deduction for manufacturing under section 199.
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The IRS on August 12 issued final guidance significantly revising prior procedures for obtaining assistance under US tax treaties from the US competent authority,which operates through the Advance Pricing and Mutual Agreement Program (APMA) and the Treaty Assistance and Interpretation Team (TAIT).
For the PwC Insight, go here.

A U.K. tax official, defending the U.K.'s recently enacted diverted profits tax, said the controversial tax is consistentwith the international project to combat base erosion and profit shifting.
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European Union member states are struggling to reach consensus on the mission of the Code of Conduct Group for Business Taxation.
Countries are split onwhether the group should examine foreign countries' corporate taxation schemes orwhether it should be taskedwith establishing an "effective level of minimum taxation" for companies in various sectors, including intellectual property rights.
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Alan Lederman of Gunster, Yoakley & Stewartwrites that the IRS's ruling in PLR 201515006, like PLR 201322009 before it, suggests that the Servicewill insist certain non-tax-avoidance indicia exist as a condition for favorably ruling that a foreign corporation seeking to avoid passive foreign investment company classification can utilize tax code Section 1298(b)(7) to treat, as a non-passive asset, the stock of a second-tier U.S. subsidiarywith significant passive income and assets.
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Varying degrees of lingering disenchantmentwith the OECD's base erosion and profit-shifting projectwere apparent during a September 2 International Fiscal Association panel discussion, as representatives of the United States and the business community expressed concerns about uneven implementation and uncertain outcomes.
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Practitioners discussing the effects of the forthcoming October guidance from the OECD's project to combat base erosion and profit shifting said multinational companies are likely to move their cash box structures from zero-tax jurisdictions such as Bermuda to low-tax jurisdictions such as Ireland and Singapore.

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A U.S. Treasury official said some officials and practitioners in the international tax community have misunderstood the U.S. decision not to participateÔøΩat this timeÔøΩin the negotiation of a multinational tax treaty under Action 15 of the project to combat base erosion and profit shifting.

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Draft Canadian legislation to deny deductions for inter-corporate dividends on shares involving synthetic equity arrangements pose a significant risk to the ability of Canadian public companies to offer employees incentive-based compensation, the Tax Executives Institutes Inc.warned.

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Ajay Guptawonderswhether the European Commission maywield its power to conduct state aid reviews as a backup in the event that the OECD's base erosion and profit-shifting project turns out to be a damp squib
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