2016

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OECD Discussion Draft Targets Branch Hybrid Mismatches

by Alex M. Parker
Countries may soon have new blueprints for how to nix tax exemptions for companies that use branches to create so-called hybrid mismatch arrangements after the OECD's latest discussion draft of legislative recommendations.
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OECD Releases Discussion Draft on Branch Mismatch Structures (1)

by Alexander Lewis
The OECD has released a public discussion draft that recommends improvements to domestic laws to dealwith several of the most common types of branch mismatch structures.
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Profit Split Should Be the Default Method, BEPS Group Says

by Ryan Finley
A simplified version of the profit-split method should be considered the best transfer pricing method unless the taxpayer can establish that a one-sided method is clearly more appropriate, according to a network of tax experts, nongovernmental organizations, and tax justice campaigners.
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News Analysis: The European Union's Vanishing Withholding Tax Regimes

by Ajay Gupta
In a move toward implementing action 14 2015wTD 193-31: Consultation Documents and Responses of the OECD's base erosion and profit-shifting project, Brazil's Federal Revenue Department (FRD) on August 19 issued a consultation document on rules for mutual agreement procedure (MAP) cases for disputes involving tax treaties.
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Transfer Pricing Officer Can't Use Entity-Level Reports, Mumbai Tribunal Rules

by Sherry Samuel Oommen
The transfer pricing officer (TPO) cannot adopt entity-level reports for benchmarking an international transaction if the taxpayer furnished segmental reports, the Mumbai Tribunal held in Paradigm Geophysical India Private Ltd. (IT Appeal No. 1878 (Mum.) of 2014), made public August 19.
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Brazilian tax authorities issue proposed ruling on the definition of 'significant economic activities' for purposes of 'gray list'

  • By PwC
by PwC
The Brazilian tax authorities on May 30, 2016, issued proposed ruling PC 007/2016, stating their view of the intended meaning of 'significant economic activities' for purposes of Article 2 of Normative Instruction 1,037/2010 (NI 1,037/2010).
NI 1,037/2010 names blacklisted countries and privileged tax regimes ('gray list') from a Brazilian tax perspective.
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News Analysis: Tax Transparency Is in the Eye of the Beholder

Mindy Herzfeld examines recent unsuccessful efforts by nongovernmental organizations to persuade the OECD and the IRS to require multinationals to make their country-by-country reports public and discusses the next battlegrounds for the fight to increase tax transparency: the SEC and the Financial Accounting Standards Board.

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Unprecedented ruling in Brazil boosts PIS and Cofins credits for businesses

The Federal Administrative Court of Appeals (CARF) has issued an unprecedented ruling, by majority vote, on PIS and Cofins credits related to the acquisition of inputs for commercial companies.

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Russia's VAT on digital services creates short timeframe for compliance

Businesses have just five months to prepare for Russia's new VAT rules that impose a tax on e-services from 2017.

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Republicans Take New Tack on Taxing Companies Overseas Profits

President Ronald Reagan once chided government's approach to the economy as following this mantra: "If it moves, tax it."

Today's Republicans are following Mr. Reagan's ideas by trying the exact opposite approach. The tax plans from House Republicans and presidential candidate Donald Trump stop aiming at the moving target of U.S. companies' foreign profits.

Their planswould alter existing rules so thoroughly that companieswould get little advantage from cross-border tax maneuvers they perfected over decades and move the U.S. toward taxing immobile parts of the economy.

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OECD releases discussion draft on branch mismatch structures under Action 2 of the BEPS Action Plan

  • By OECD

Interested parties are invited to provide comments on a discussion draftwhich dealswith branch mismatch structures under Action 2 (Neutralising the Effects of Hybrid Mismatch Arrangements) of the BEPS Action Plan.

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Corporate Income Tax Rates around the World, 2016

It iswell known that the United States has the highest corporate income tax rate among the 35 industrialized nations of the Organisation for Economic Co-operation and Development (OECD). However, it is lesswell known how the United States stacks up against countries throughout the entireworld.

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Inversions Lawsuit Could Change Tax Regulation Landscape

by Alison Bennett
The first legal action against the Treasury's rules to stop companies from changing addresses to reduce U.S. tax bills is highlightingwhat may be a sharp turning point for tax regulations going forward.
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Australia: Offshore marketing hubs - ATO releases draft discussion paper

  • By PwC
by PwC
On August 10, 2016, the Australian Taxation Office (ATO) released for public comment a 29 page draft discussion paper (DP) that outlines the ATO compliance approach to transfer pricing issues related to centralized operating models or 'hubs'. The focus of the DP is offshore marketing hubs but the ATO plans to issue guidance in relation to other hubs.
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The Potential Tax Effects of Brexit on Investors and Taxpayers in Ireland

Bloomberg

by Louise Kelly and Geraldine McCann
The U.K.'s decision to leave the EUwill inevitably cause a period of great uncertainty for businesses and individuals,write Louise Kelly and Geraldine McCann of Deloitte Ireland. The authors look at potential tax implications for investors and taxpayers in Ireland, particularly for thosewhere there is a close business relationshipwith the U.K.
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Is China's VAT Reform Helping the Economy?

  • By East Asia Forum
by East Asia Forum (Economywatch)
As of 1 May 2016, China has fully replaced its business taxwith a value-added tax (VAT) across all industries in a bid to streamline tax structures and reduce the tax burden.
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Treasury Releases Letter on Debt-Equity Rules Under FOIA

  • By FOIA
The Treasury Department released one outgoing letter under provisions of the Freedom of Information Act, for theweek ending Aug. 14.
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Intangible-Shifting to Foreign Partners Slows: Practitioners

Deals intended to avoid paying tax on appreciated property by shifting the property to overseas partners have slowed since the IRS issued guidance last year denouncing the practice, tax professionals said.
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BEPS Through an Indian Prism

India, as a rapidly growing economic power and member of the G-20 and the OECD, has been assessing the Base Erosion and Profit Shifting Action Plan. Bhavik Timbadia and Ganesh Krishnamurthy of BMR & Associates explore the country's response in detail.
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Apples Tim Cook set to battle for corporate tax reform

by Jennifer Booton (Marketwatch)
Apple Inc. CEO Tim Cook believes U.S. corporate tax reform is imminent, and he's not afraid to flex his muscles as the leader of the nation's most valuable company to make sure it happens.
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Russia's VAT on digital service create short timeframe from compliance

International Tax Review

by Joe Stanley-Smith

Businesses have just five months to prepare for Russia's new VAT rules that impose a tax on e-services from 2017.

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Practitioners: Use Dry Runs' to Work Out Global Tax Reports

Bloomberg

by Alex M. Parker
Companies should prepare a "dry run" to help navigate occasionally ambiguous and unclear information requirements in global tax reports now required by the IRS, practitioners from previous hitPricewaterhouseCoopers LLP said.
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Tougher compliance rules proposed for New Zealand foreign trusts

International Tax Review

by Anjana Haines

New Zealand's government has confirmed that foreign trustswill have to disclose more information to the tax authorities as it gets tough on tax in thewake of the Panama Papers.@

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Lawsuit on IRS Inversion Rules May Be Fascinating' Battle

Bloomberg

by Alison Bennett
The first lawsuit filed against hotly criticized rules to block transactions that move corporations' tax homes overseas to cut U.S. tax bills may face an uphill climb, even as more companies say deals fell apart because of the regulations.
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A World Tax Court: The Solution to Tax Treaty Arbitration

by Jake Heyka
Jake Heyka examines tax treaty arbitration standardswhile demonstrating that as a matter of fundamental justice, arbitration should be revamped; he proposes the creation of aworld tax court.
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Administration Exceeds Its Power With New Inversion Regs

by Diana Furchtgott-Roth
In this column, Furchtgott-Roth discusses the lawsuit brought against the IRS by the U.S. Chamber of Commerce and the Texas Association of Business over the inversion regulations. She concludes that lowering corporate rates is the optimalway to prevent inversions.
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Potential tax implications of Brexit on industrial products and services companies

  • By PwC
by PwC
The implications of the UK public vote to leave the European Union (EU) for the UK, the EU, and the rest of theworld depend to a substantial extent on the agreedwithdrawal terms, aswell as negotiationswith other countries. There are many misconceptions about how the referendum vote impacts taxes, but it causes no major tax legislative changes directly. However, the market volatility thatwe have seen since the vote could affect some tax-related issues. In addition, tax policy changes may, in time, result fromwhat takes place. This insight covers some areas of uncertainty that may impact multinational companies (MNCs) as a result of Brexit.
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Crisis and Deferral: How World Events Influence Subpart F

by Lukewagner
In this article, Lukewagner explains how global events have influenced the evolution of the subpart F regime, and he makes recommendations for future deferral reform.
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News Analysis: Freedom Fries: The House Republicans' Cash Flow Tax

by Lee A. Sheppard
In news analysis, Lee A. Sheppard examines the House Republicans' cash flow tax plan.
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Apple Won't Repatriate Earnings Until There's a 'Fair' Rate

by Andrew Velarde
Apple Inc. CEO Tim Cook indicated in a recent interview that the companywill not repatriate its billions in earnings currently sitting offshore and subject them to U.S. tax until the United States lowers its rate to one that is "fair."
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Subpart F: Revised Active Rents and Royalties Exception

by Lowell D. Yoder
Lowell Yoder of McDermottwill & Emery looks at temporary regulations (T.D. 9733) providing that only activities of a controlled foreign corporation's own employees can be taken into account for active business tests used to determinewhether rents or royalties are Subpart F income. The rules specify that cost-sharing arrangements can't be relied on to satisfy the active business tests, hewrites, but clarify that activities can be conducted in multiple countries.
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Inversions, Corporate Deals Sit Atop IRS Guidance Plan

y Laura Davison
The IRS is prioritizing inversion-related regulations in its annual priority guidance plan,which outlines the agency's goals for published guidance for the coming fiscal year.
The 281 projects on the plan include the controversial rules to curb corporate inversions and the regulations to stop earnings stripping. The 2016-2017 Priority Guidance Plan, issued Aug. 15, said the Internal Revenue Service plans to issue final rules in both areas.
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The high political drama of Obama's Section 385 rules

by Brandon Arnold
The post-convention season is in full swing, meaning that lawmakers are primarily focused on the election. Butwhilewashington is paying attention to political theater, in the realworld Americanworkers and businesses are feeling the economic pain caused by the broken the U.S. tax system.
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Culture, Language Challenge Multinational Audits

by Denise Lugo
Some challenges U.S. audit firms facewhen conducting multinational audits stem from cultural and language differences of a foreign jurisdiction, according to an American Accounting Association panel discussion in New York.
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The IRS must release new guidance on cloud transactions to respond to explosive industry growth and combat base erosion and profit shifting, according to attorneys. It can no longer be said that cl

by Allyson Versprille
The IRS must release new guidance on cloud transactions to respond to explosive industry growth and combat base erosion and profit shifting, according to attorneys.
"It can no longer be said that cloud computing has the mere potential to revolutionize theway consumers and businesses interactwith technology; potential has become a current reality," the American Bar Association Section of Taxation said in a letter to the Internal Revenue Service.
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Proposed Canadian Tax Changes Could Catch U.S. Firms Unaware

by Peter Menyasz
Canada is considering changes to its value-added tax that, if adopted,would expose U.S. limited partnerships to penalties for reporting requirements they likelywouldn't be aware even exist.
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OECD BEPS plan failing to combat tax avoidance, MPs warn

by Sinead Moore
A report by the All Party Parliamentary Group (APPG) on Responsible Tax said that the OECD's BEPS proposalswill not be successful in tackling global tax avoidance until full transparency is introduced into the tax system.
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India Races to Implement Epic Tax Reform

After Indian lawmakers took a decade to agree on the nation's biggest tax reform in modern history, Prime Minister Narendra Modi is racing to get it implemented in less than eight months.
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High-Level IRS Scrutiny in Debt-Equity Cases Raises Concerns

Bloomberg

by Alison Bennett
xpanded IRS scrutiny could make it tougher for companies trying to convince the agency that their deals involve tax-favored debt rather than expensive equity.
The IRS announced July 26 that all debt-equity caseswill have to go to a high level of legal reviewÔøΩa move that might reduce taxpayers' ability to argue individual cases, tax attorneys told Bloomberg BNA.
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Multinationals May Challenge Debt-Equity Rules: Attorneys

Bloomberg

by Alison Bennett
Companies may pursue big legal challenges to the Treasury Department's controversial earnings-stripping rules unless the government makes significant changes, tax attorneys told Bloomberg BNA.
The question is a critical one as the governmentworks to finalize rules intended to keep multinationals from shifting income out of the U.S. via loans to subsidiaries.
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Denmark Issues Detailed Technical Ruling On PE Analysis Applicable to Data Centers

Bloomberg

by Gary D. Sprague
Gary D. Sprague of Baker & McKenzie looks at a new ruling from the Danish tax authority analyzingwhether a data center constitutes a permanent establishment for an affiliated nonresident entity that supplies the digital goods or services to the market. Spraguewrites that the ruling "is the most complete expression in the public domain of the technical reasons"why a data center entity doesn't constitute a PE.
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Luxembourg proposes new corporate tax measures

  • By PwC

PwC

by PWC
The Luxembourg Government on July 26, 2016, introduced a billwith proposed tax measures for corporations (the Bill) for the 2017 tax year. The proposed changes are in linewith the announcements made by the government earlier this year.
Although the Bill has not been finalized, multinational enterprises operating in Luxembourg should start considering how the proposed measures, if enacted, could affect them.
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Tax obligations for China's oil and gas upstream sector

It is absolutely necessary to plan aheadwhen operating in China's oil and gas upstream sector,which allows international oil companies (IOCs) to participate in and operate the exploration development and production of petroleum resources in China.

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Spain: Participation exemption in 'pure holding companies'

The Spanish Corporate Income Tax Law (CIT Law) contains a tax exemption for income obtained by Spanish entities from the transfer of ownership interests in companies,whether resident or non-resident.

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Inversion Rules Lawsuit Shows Need for Tax Overhaul: Brady

by Alison Bennett
Houseways and Means Committee Chairman Kevin Brady (R-Texas) said a new lawsuit against IRS anti-inversion rules shows they hurt companiesÔøΩand demonstrates the need for the tax overhaul Republicans plan to keep pushing.
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What Goes Around Comes Around: Proposed Regulations Treating U.S. Disregarded Entities as Corporations

by Edward Tanenbaum
Edward Tanenbaum of Alston & Birdwrites proposed rules (REG-127199-15) thatwould treat foreign-owned U.S. disregarded entities as corporations for information reporting purposes are an extension of the anti-tax evasion efforts countries have initiated in thewake of the Foreign Account Tax Compliance Act. Among other factors, Tanenbaum says, the rules are "prompted by the need to clean up the U.S.'s reputation as a tax haven."
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Economic Analysis: Difficulties With the House GOP's Business Cash Flow Tax

by Martin A. Sullivan
In economic analysis, Martin A. Sullivan explainswhy a business cash flow tax doesn't prevent all profit shifting and base erosion.
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News Analysis: The FTT -- Revenue Raiser or Social Policy Tool?

byMindy Herzfeld
Mindy Herzfeld outlines global proposals for a financial transaction tax and the arguments for and against the tax, concluding that itwill be difficult to design a good FTT that could be a social policy tool.
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The Poison Pill of BEPS: M&A and Intercompany Financing Transactions

by Jenswittendorff
Jenswittendorff examines the OECD's new transfer pricing rules on risk allocation and the potential consequences if the risk is reallocated from the creditor to another group company.
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Business groups sue IRS over offshore tax rules

by Naomi Jagoda
The U.S. Chamber of Commerce and the Texas Association of Business on Thursday filed a lawsuit challenging Treasury Department and Internal Revenue Service (IRS) rules aimed at curbing offshore tax deals.
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