2015

In long-awaited proposed guidance, the IRS and Treasury propose adopting an aggregate approach to controlled foreign corporation loans to foreign partnershipswith U.S. partners under section 956.
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The chairman of an OECD focus group taskedwith overseeing the negotiation of a multilateral tax treatyÔøΩunder an international project to combat base erosion and profit shiftingÔøΩhas identified the four action items the treatywill cover.

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European Union member stateswill challenge the European Parliament over amendments thatwould require listed EU companies to report revenue earned and taxes paid on a country-by-country basis, according to confidential documents obtained by Bloomberg BNA.

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International tax practitioners returning to their desks after the August lull face a rapidly evolving regulatory landscape as countries rush to rewrite their international tax rules in response to the OECD's two-year project to combat base erosion, now entering its final stage.

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The Internal Revenue Service issued long-awaited proposed and temporary rules to make it harder for controlled foreign corporations to use loans to partnerships to avoid income inclusions under tax code Section 956.

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A tax policy advocacy group called for online retailer Etsy Inc. to be stripped of a certification awarded to companies that adhere to strict standards for transparency and social accountability unless it dismantles its offshore tax-cutting structure.
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The key issue for multinational pharmaceutical companies decidingwhere to locate a new research facility iswhether the jurisdiction has a research and development credit that is available for contract aswell as proprietary research, a Novartis AG official said.

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Early October guidance under Action 5 of the international project to combat base erosion and profit shiftingwill adopt a "nexus approach," requiring intellectual property regimes to only grant preferential tax benefits in proportion to the taxpayer's research and development expenditures, an OECD official said.

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Action 13 of the OECD's Action Plan on Base Erosion and Profit Shifting (BEPS) strives to enhance transparency for tax administrations by providing themwith adequate information to conduct transfer pricing risk assessments and examinations through increased transfer pricing documentation requirements, specifically including a new country-by-country report (CbC report) and a master file.

The OECD has recommended that the first CbC reports be required to be filed for multinational enterprises' (MNEs) fiscal years beginning on or after January 1, 2016. The OECD also recommends that MNEs be allowed one year from the close of the fiscal year towhich the CbC report relates to prepare and file it, meaning that the first reportswould be filed by December 31, 2017, for companieswith fiscal years starting January 1, 2016.

Even if the United States does not implement CbC reporting, or delays implementation for one year, US-parented MNE groupswill be required to file reports by the end of 2017 if the group includes entitieswith operations in a foreign country inwhich CbC reporting requirements have been implemented.
For the PwC Insight, go here.

China and Taiwan have agreed a double tax treaty after talks between the Taipei-based Straits Exchange Foundation (SEF) and Beijing-headquartered Association for Relations Across the Taiwan Straits (ARATS).
For the ITR story, go here.

As governments around theworld assess the bestway to attract – and tax – R&D and
intellectual property investment, Giulia Cipollini and Bianca Macrina ofWithers inMilan look
at the incentives taxpayers can avail in Italy, tracking the nuances of the Italian Patent Box
regime from introduction to operation.
For the ITR article, go here.

Consultationwith an economist can help an examiner determinewhether a taxpayer is using the best transfer pricing method andwhether the price meets the arm's-length standard, according to examiner training materials released by the Internal Revenue Service.
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Brazilian government officials confirmed their intention to restore a controversial tax on financial transactions, provoking angry reactions from business leaders and economists.
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When a transaction occurs that moves property from a controlled foreign corporation to a foreign corporation, IRS agentswill be looking first atwhether the controlled foreign corporation ceased to exist after the dealwas done.
In training materials provided to its examiners and released publicly Aug. 28, the Internal Revenue Service's Large and Mid-Size Business Division looks at the potential tax effects of certain foreign-to-foreign transactions on U.S. corporate shareholderswho are making an exchange in the deal.
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Though details on a plan to lower tax rates on income from intellectual property emergedweeks ago, a fair bit of silence has followed.
Mum has been theword for manywould-be advocates and opponents alike.
They seem to be holding back in anticipation of other proposals to change taxes on international profits in concertwith the reduced rate for intellectual property, some observers said. Those added details are still to come, according to Houseways and Means Committee members and their staffers.
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nternational Tax News is designed to help multinational organisations keep upwith the constant flow of international tax developmentsworldwide.
For this month's issue, go here.

The twotop Republican taxwriters in Congress arewarning the Treasury Department not to get ahead of Congress as it negotiatesnewinternational tax rules, questioningwhether the administration is seeking towield power it does not have.
For thewashington Post story, go here.

The latest in a series of tax measures enacted by Brazil's government that reinstate socialwelfare tax contributions on financial income for about 80,000 large companies took effect and already has provoked legal challenges.

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Sen. Orrin G. Hatch (R-Utah) and Rep. Paul D. Ryan (R-Wis.) sent another letter to the Department of Treasury questioning its authority to implement the Organization for Economic Cooperation and Development's country-by-country reporting standardsÔøΩand demanding that the department respond by Aug. 31.

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India's Department of Revenue is close to resolving tax disputeswith almost 120 U.S. companies inwhat analysts hope is an indication of the authorities' positive intentions and shift toward a more cooperative approach.
Revenue Secretary Shaktikanta Das told a conference in New Delhi on Aug. 21 that the government isworking to settle tax-related disputeswith the U.S.-based companies, aswell as those from Japan and elsewhere. Das stressed that the government doesn't intend to double-tax foreign entities in India.
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GOP presidential front-runner Donald Trump said hewould favor repatriating trillions of dollars of corporate profits at a lower tax rate in order to create U.S. jobs and stem the tide of corporate inversions.
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In a letter today, Senate Finance Committee Chairman Orrin Hatch (R-UT) and Houseways and Means Committee Chairman Paul Ryan (R-WI) outlined concerns regarding the country-by-country (CbC) reporting requirements that are being considered by the Treasury Department and called on Secretary Jack Lew to respond to their earlier request for information on the Base Erosion and Profit Shifting (BEPS) project that is being developed by the Organization for Economic Cooperation and Development (OECD).
For the letter, go here.

The turbulent times in global stock markets are giving rise a controversial idea: Tax the traders. Proponents sayslapping a tiny tax on financial transactionswould discourage the sudden sell-offs and volatiletrading that are causing the Dow Jones Industrial Average'swild swingsthisweek.
For the International Business Times story, go here.

Foreign businesses rendering services in South Africa should consider the aggregated time ofworkers in calculatingwhether they have a permanent establishment now that the tax court in Johannesburg has rendered one of the first decisions on the tax treaty concept of a PE, practitioners tell Bloomberg BNA. The tax court finds the taxpayer's presence in South Africa constituted a PE under the country's double tax agreementwith the U.S.when the overall time spent by its employees in South Africawas factored in aggregate, rather than on an individual basis.
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Law of Ukraine No. 609-VIII (the Law) dated July 15, 2015, introducing changes to Ukraine's Tax Code regarding transfer pricingwas officially published on August 10, 2015, and came into force from August 11, 2015.

The introduced amendments are aimed at bringing the Ukrainian transfer pricing regulations in linewith international practice and the OECD guidelines.
For the PwC Insight, go here.

The Canada Revenue Agency (CRA) recently released its 2015 annual report on the Canadian Mutual Agreement Procedure (MAP) program, the CRA's mandatory service program designed to help taxpayers resolve cases of double taxation or taxation not in accordancewith the provisions of a tax convention. The report provides statistics on the performance of the MAP program and discusses how the program functions and the benefits of using the process.
For the PwC Insight, go here.

Top multinationals have contributed to a discussion document onwhat UK taxpayers should think aboutwhen disclosing information about their tax affairs.
For the ITR article, go here.

The Canada Revenue Agency (CRA) recently released its annual report on Canada's Advance Pricing Arrangement (APA) program covering the fiscal period ended March 31, 2015. The APA program is a proactive service offered by the CRA to assist taxpayers in resolving transfer pricing disputes that may arise in future tax years. In particular, the objective of the program is to provide increased certaintywith respect to future transfer pricing issues.

For the PwC Insight, go here.

This month's feature examines proposals for new tax information reporting requirements for large multinational businesses as part ofwider and ongoing changes to the international tax system – proposalswhich have been described by international tax experts as the most significant development in the field of transfer pricing since TP rules themselves first began to be introduced over 40 years ago.
For the Tax News story, go here.

Determiningwhether a nonresident alien has effectively connected income for U.S. tax purposes relies onwhether the person is engaged in a U.S. trade or business andwhat income is connectedwith that business, the IRS said in a newly released training unit for its examiners.
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The Costa Rican government unveiled legislation for a tax overhaul that includes an expanded value-added tax, a new permanent establishment definition, formal introduction of transfer pricing laws and a tax on the passiveworldwide income of local taxpayers.
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Ajay Gupta examines Etsy's about-face on its promise to deliver greater tax transparency and suggests energizing the investor base as away to discourage secretive tax planning.
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With burgeoning middle class spending power and a maturing legal structure, China is more attractive to investors than ever.with the government fast-tracking economic and fiscal development,wang Jun, China's Tax Commissioner (ministerial level) provides insights into how he is bringing Chinese tax policy into linewith global standards, and the importance of taking care of the pond if youwant good quality fish.
For the ITR story, go here.

Mindy Herzfeld examines how cross-border tax issues may be resolved under bilateral investment treaties and suggests that these treaties might offer an alternative to the broken mutual agreement process employed in bilateral tax treaties.
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In news analysis, Marie Sapirie says the IRS's recent notice on transfers of property to partnershipswith related foreign partners confirms that the government intends to shore up the rules regarding transfers of property abroad, presenting potentially significant obstacles for taxpayers.
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Objectionable foreign tax credit transactions needed principled responses, and principled responseswere enacted in the midst of a scattergun attack on these objectionable transactions. However, the United States must have a principled foreign tax credit regime that balances the need to prevent international double income taxationwith the need to prevent abusive transactions. This Article addresses the disallowance provisions that have been added to section 901 as part of the government'swar against objectionable foreign tax credit transactions and assesseswhich of those provisions serve a continuing policy objective andwhich do not. The Article argues that U.S. tax lawwould be greatly improved if section 901 embodied a principled approach and if redundant provisions that create incoherent outcomeswere removed.
For the article, go here.

Australia's risk-differentiation approach to selecting large corporations for audit has delivered unexpected benefits, prompting greater transparency and changing behavior around tax policy, according to the officialwho spearheads the Australian Tax Office's dealingswith big companies.

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Cutting the corporate tax rate to the OECD average of 25 percent, to the British rate of 20 percent, or the Canadian rate of 15 percentwould improve economic growth and aidworkerswhile reducing problems caused by the high rate such as inversions and base erosion, Tax Foundation President Scott A. Hodge said in an August report.
For the report, go here.

Indonesia, Malaysia, and the Philippines have made progress in increasing tax revenue, but there is still room for those emerging economies to improve their tax administrations and further raise critical revenue, according to an OECD report released August 19.
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Egypt's long-awaited VAT could be inching ever closer according to a statement by the head of the tax authority, but the high threshold being proposed could hand smaller businesses a competitive advantage.
For the ITR story, go here.

Aswork on the U.S. model treaty continues alongside the OECD's base erosion and profit shifting project, questions remain on how similarities and differences between the twowill play out, practitioners told Bloomberg BNA in a series of interviews.
"It's not clearwhether, as taxpayers,we're going to have to dealwith multiple regimes," said Fred Murray, a managing director at Grant Thornton LLP inwashington. "There may be a turbulent timewhilewe're sorting all this out."
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Draft language introduced in late July to create a U.S. innovation box takes a novel approach to avoid the rocky start a similar patent box tax system had in the U.K., but the nascent proposal still has its critics.

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A proposal in Congress promises multinational corporations lower taxes for income from patents, designs and other intellectual property. But software developers hoping to trim their tax bills may be in for a hard truth: A lot of software appears not to qualify, even though the proposal mentions it specifically.

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In the continuing series of Fireside Chats, Jeffrey Owens talkswith Michael D'Ascenzo and Jeffwestphal about tax and technology and the push to make tax systems function more effectively.
For the TNI interview, go here. (subscription required)

Mindy Herzfeld reviews three recently announced corporate inversions in the context of the United States' continuing efforts to ring-fence its corporate tax base through prescriptive regulations.
For the TNI article, go here. (subscription required)

Ajay Gupta argues that the United States' recent voluble disenchantmentwith the progress of the OECD's base erosion and profit-shifting project signals a return to the familiar state of discord in international tax policymaking, but this time in a much more fragmentedworld
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Robert Cassanos analyzes the OECD's final report on action 2 of its base erosion and profit-shifting project from a technical and policy perspective and suggestsways to make the hybrid mismatch rules more effective and easier to complywith.
For the Tax Notes special report, go here. (subscription required)

Draft legislative language intended to offer a sharply discounted 10 percent tax rate on money U.S. firms make from foreign sales of their most innovative products iswritten so broadly that it could apply to nearly anything sold.

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New Zealand's revenue minister has proposed new place-of-supply rules requiring foreign suppliers to register and pay goods and services tax on the digital services and products they sell to New Zealand consumers.

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The United States' high corporate tax rate, itsworldwide system of taxation, and its low prospects for comprehensive tax reform in the near future are causing American companies to invert so they can lower their tax burden,which in turn reduces U.S. jobs and tax revenues, Houseways and Means Committee staff said in an August 18 release.
For the release, go here.