2015

The IRS Chief Counsel's Office issued CCA 201516064 on April 17, 2015, addressing the application of Notice 88-108where a controlled foreign corporation made loans back to its US parent over two quarter-ends, both ofwhichwere repaidwithin 30 days, but also made a third loanwhich caused the CFC to be a creditor of the US Parent for more than 59 days during the year.

For the PwC Insight, go here.

As the ABA Tax Section celebrates its 75th anniversary, the authorwas asked to reflect on the Section's contribution in the international tax arena and on how the
Section's international community has grown.
For the ABA Tax Lawyer article, go here.

Former Houseways and Means Committee Chair Dave Camp said May 7 that Congress should notwait until 2017 to completework on comprehensive tax reform lest the growing trend of corporate inversions boost the number of U.S. companies moving abroad.
For the TNT story, go here. (Subscription required)

A draft legislative decreewas approved by the Italian Government on 21 April 2015which includes a large number of tax changes, many ofwhich are particularly relevant for companieswith international operations.
For the PwC Insight, go here.

Why doesn't Europe have its own Google or Facebook?
Many European policy makers say the region's homegrown Internet companies haven't made the big leagues at least in part because of a patchwork of tax, copyright and e-commerce rules that have stunted their growth.
For thewall Street Journal story, go here.

Popular opinion and high-profile domestic targets aside, it's not clear that Notice 2014-52, 2014-42 IRB 712 is responsible for increased foreign takeovers or even that foreign takeovers have increased.
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Michael Durst, former director of the IRS Advance Pricing Agreement Program, examineswhether a new transfer pricing method, suggested recently for use by developing countries, might be developed further to serve as an administratively streamlined transfer pricing method for countries of all levels of economic development.
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Poland has referred a case to the European Court of Justice (ECJ)which could dramatically impact insurance outsourcing activity across Europe.
For the International Tax Review story, go here.

The Peruvian tax authorities have changed the periodwithinwhich settlement must take place for income derived from financial derivatives to be considered sourced in Peru.
For the International Tax Review story, go here.

The IRS needs to address the complex foreign tax credit issues surrounding cloud computing, the American Institute of CPAs said in a range of recommendations for the agency's 2015-2016 Priority Guidance Plan.

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For Nigerian tax purposes recharges can be defined as costs reimbursed by a non-resident company to its Nigerian affiliate in respect of services provided by the affiliate in execution of a joint contract in Nigeria. Generally, this amount includes a profit mark-up for the affiliate, and the non-resident company is allowed the amount as a deduction in its income tax returns.
For the International Tax Review story, go here.

Partho Shome's 30-year career as a tax official and adviser to Indian governments and multilateral organisations may be at an end for now, but hewill still take a keen interest in tax policy, as this exclusive interviewwith International Tax Review reveals.
For the International Tax Review story, go here.

Leading congressional taxwriters in both parties are getting behind a major new tax break for corporate innovation as part of their continuing quest to identifyways to make the U.S. business-friendlier.
For thewall Street Journal story, go here.

The Organization for Economic Cooperation and Development's recent discussion draft on strengthening rules on controlled foreign companies is a missed opportunity to address base erosion and profit shifting, according to an official from the OECD's Business and Industry Advisory Committee.
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On 31 March 2015, interested partieswere invitedto comment on the discussion draft on Action 12 (Mandatory Disclosure Rules) of the BEPS Action Plan. The OECD is grateful to the commentators for their input and now publishes the comments received.
For the comments, go here.

On 3 April 2015, interested partieswere invitedto comment on the discussion draft on Action 3 (Strengthening CFC Rules) of the BEPS Action Plan. The OECD is grateful to the commentators for their input and is now publishing the comments received.
For the comments, go here.

Why did the EU Commission take so long to launch investigations into member states' tax rulings? Is its strategy to go only after small countries, such as Belgium, the Netherlands, Luxembourg and Ireland?will the instruments available to it suffice? And if not,whatwould it take to do awaywith unfair tax competition? These questionswere raised by MEPs in Tuesday's Special Tax Rulings Committee debatewith competition Commissioner Margrethe Vestager.
For the European Parliament news release, go here.

The Organization for Economic Cooperation and Development's discussion draft on mandatory disclosure rules, if adopted,will lead to "differing disclosure regimes across jurisdictions," a Tax Executives Institute Inc. official said.
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The $1.22 trillion in foreign profit from U.S. multinationals is in good companyÔøΩnearly two-thirds of it is parked in a handful of countries, according to data analyzed by the Congressional Research Service.
Seven of the top 10 countries are considered "tax havens," according to a CRS report that looked at 2012 data.
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Mike Gaffney argues that the OECD discussion drafts on permanent establishment status and transfer pricingwill likely lead to increased uncertainty and more double taxation disputes in the short term, especially if tax authorities are allowed to depart from the arm's-length principle.
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Japan recently announced that itwill be lowering its corporate tax ratewith further planned cuts over the next five years.while other countries are actively improving their corporate tax code, the United States seems stuck in the discussion phase. Much talk has focused on our burdensome and complex domestic corporate tax code, but Congresswould be remiss to gloss over the same problems that existwithin our international tax system.
For thewashington Examiner article, go here.

One significant consequence of the international project to combat base erosion and profit shifting (BEPS) is that the boards of multinational companieswill spend more timeweighing the risks of engaging in international tax planning, a U.S. Treasury official said.

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In news analysis, Lee A. Sheppard discusses how unregulated investment funds are attempting to escape the treaty benefits crackdown contemplated in the OECD base erosion and profit-shifting project.
For the Tax Notes article, go here. (Subscription required)

The IRS has nearly completed regulations intended to halt certain tax-avoiding loans by controlled foreign corporations to foreign partnerships, a senior agency official said.
Jason T. Smyczek, Internal Revenue Service senior technical reviewer, Branch 4, associate chief counsel (International), called the long-awaited Section 956 guidance project a "high priority" for the government. Smyczek said April 30 that the regulationswould be released "very soon."
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In recent years, corporate tax strategies have become the focus of some high-profile public debates. Last year, for example, tax inversion deals received scorching criticism from regulators and lawmakers. One prominent critic ÔøΩ President Barack Obama ÔøΩ likely helped spur the Treasury Department to issue rules discouraging such maneuvers.
In the long shadow of a financial crisis that ushered in the phrase "too big to fail," the public has become more attuned to ÔøΩ if not downright suspicious of ÔøΩ corporate motivations for tax strategies.

For the CFO Magazine story, go here.

International Tax News is designed to help multinational organizations keep upwith the constant flow of tax developmentsworldwide. Among the topics featured in this month's edition are:
The proposed amendments to the Brazilian tax legislation regardingwithholding tax on dividend payments
The UK Finance Act of 2015
The OECD BEPS proposals regarding controlled foreign companies
Swiss Corporate Tax Reform III

For the latest issue of International Tax News, go here.

The Australian government on April 28, 2015, released exposure draft legislation that reflects amendments to the Australian tax consolidation regime first announced in the 2013-2014 and 2014-2015 Federal Budgets. The proposed new rules are aimed at restoring integrity to the consolidation regime. Most significantly, the ruleswould remove perceived 'double benefits' or 'double detriments'when an Australian target or subsidiary joins a tax consolidated group.

For the PwC Insight, go here.

Multinational enterprises involved in the development and use of intangibles under cost contribution arrangements (CCAs) should note the 29 April 2015 discussion draft proposals under Action 8 of the Base Erosion and Profit Shifting (BEPS) Action Plan. The discussion draft proposes fundamental modifications to Chapter VIII of the OECD Transfer Pricing Guidelines.

For the PwC Tax Policy Bulletin, go here.

All companies need to be thinking about taxes globally as international commerce expands around theworld, an EY LLP practitioner told Bloomberg BNA.

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The OECD April 29 issued its latest draft under action 8 (on aligning transfer pricing outcomeswith value creation related to intangibles) of the base erosion and profit-shifting project, proposing revisions to the OECD transfer pricing guidelines on cost contribution arrangements that support the use of value contributed over the costs incurred.
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In AM 2015-002 the IRS recently provided the most detailed guidance to date regarding the application of the 'tax rate disparity test' under the 'branch rule' of the foreign base company sales income (FBCSI) provisions.

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The OECD BEPS discussion draft under Action 8 on Cost Contribution Arrangements has now been published.

Action 8 ("Assure that transfer pricing outcomes are in linewith value creation: Intangibles") requires the development of "rules to prevent BEPS by moving intangibles among group members" and involves updating the guidance on cost contribution arrangements. The discussion draft sets out a proposed revision to Chapter VIII of the Transfer Pricing Guidelines and is intended to align the guidance in that chapterwith the other elements of Action 8 already addressed in the Guidance on Transfer Pricing Aspects of Intangibles released in September 2014.

For the discussion draft, go here.

The introduction of the UK's diverted profits tax (DPT) on April 1 2015 has dismayed tax practitioners and their multinational clients. Rushed through parliament, it has been roundly criticised for its breadth and complexity, for the speedwithwhich it has been introduced, for the lack of public consultation and parliamentary scrutiny, and for pre-empting the multilateral response to tax avoidance of the G20/OECD BEPS Project.
For the International Tax Review story, go here.

While Sweden may be seen as effectively preventing base erosion through limiting interest deductions, the effects on businesses and investments must be carefully scrutinised before being considered in other countries, argue Hussein Abdali and Tord Fredriksson of Grant Thornton.
For the International Tax Review story, go here.

Malaysia has released detailed guidelines on four new tax incentives revealed in its 2015 Budget, the most attractive ofwhich aims to encourage companies to establish headquarters in Malaysiawith a 0% - 10% corporate tax rate for 10 years.
For the International Tax Review story, go here.

The UK diverted profits tax (DPT) – dubbed the Google tax – has been in effect for almost a month, and Australia is looking at similar action to be included in its May 12 Budget speech, after signalling a desire to move "further and faster" than the OECD-led BEPS project. If other jurisdictions follow suit, this could drastically dilute the impact of multilateral efforts.
For the International Tax Review story, go here.

The Canadian government's latest budget suggests implementation of the Organization for Economic Cooperation and Development's project on base erosion and profit sharingwill balance the need to crack down on tax evasionwith ensuring the competitiveness of Canada's tax system, according to tax lawyers.
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Patrick Driessen argues that stylized capital neutrality testingwith a two-dimensional twist favors a less drastic approach to the treatment of foreign income than offered in recent tax reform proposals.
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While a host of topics ÔøΩ from the necessity and the proposed scope of corporate tax reform, to corporate rate reduction and corporate inversions ÔøΩ are of major concern to those engaged in international tax, the overriding issue is BEPS and its Action Plan agenda.
For the Accounting Today story, go here.

You can buy "fair trade" coffee andwork in an environmentally certified office building.
One day,will you be able to invest in companies that proclaim themselves good international taxpayers?
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Foreign companies tempted by India's call to scale up manufacturing in Asia's third-largest economy need to consider one big potential headache: tax.

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Peter M. Daub examines the conduit regulations and explains how 20 years after their finalization, these critical rules governing the U.S. taxation of cross-border financings leave many interpretative questions unresolved.
For the Tax Notes special report, go here. (subscription required)

A refund claim attributable to a net operating loss carryback expires three years after the due date of the return for the NOL yearÔøΩevenwhen the NOL is based on a timely amendment to the treatment of foreign tax payments in a return filed after that expiration date, the IRS Office of Chief Counsel said in a chief counsel advice memorandum.
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The United States is in dire need of sweeping tax reform. The House and Senate are both in the nascent stages of considering tax reform, characterized by committee-levelworking groups, discussions, and hearings. Both the House and Senate budget resolutions are based on a fundamental rewrite of the tax code.while promising, history indicates that there have only been a handful of tax overhauls of the modern code,which underscores tax reform as an intrinsically difficult and low-probability event.

For the American Action Forum article, go here.

The U.S. Treasury Department took steps in September to make it harder for American companies to pursue overseas mergers that move their legal addresses abroad and produce tax benefits. The new rules put a damper on the practice and led drugmaker AbbVie Inc. to scrap its more than $50 billion deal for Shire Plc.

Even so, the door isn't shut entirely.

For the Bloomberg story, go here.

The debate overwhether multinational companies have a moral duty to pay their fair share of taxes can get more complicated in a transfer pricing context, inwhich the decision over how to allocate profitswill likely result in some countries thinking that they got the short end of the stick, panelists said April 24.
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Both developing and developed countries have a common interest in the success of the Organization for Economic Cooperation and Development's project to combat base erosion and profit shifting, an OECD official said.
Grace Perez-Navarro, deputy director for tax policy and administrationwith the OECD, said the BEPS issue "is important for developing countries because in general developing countries tend to rely on corporate tax revenues much more than developed countries."
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Once the country-by-country reporting system recommended by the OECD is underway, the U.S. might considerwithholding informationÔøΩusing the reciprocity principle in use through information exchange agreementsÔøΩfrom countries that don't supply similar information, according to an IRS official.

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Overhauling the U.S. tax code isn't likely until someone new occupies thewhite House, said a former Houseways and Means Committee staffer.

There simply isn't enough time left in office for President Barack Obama to shepherd such an agreement, something he has largely stayed away from until now anyway, saidwarren Payne, former Republican policy director for the committee.

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