2016

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Country-by-Country Reporting: Are We There Yet?

byKimberly Tan Majure, Monica Zubler and John DerOhanesian
KPMG's Kimberly Tan Majure, Monica Zubler and John DerOhanesian look at the final country-by-country reporting regulations issued by the IRS, aswell as recent guidance from the OECD, and at the mechanics for reporting required under the new rules.
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Tax Foreign Companies on U.S. Intangibles Sales, IRS Says

by Alison Bennett
Foreign companies should face taxes if they sell intangibles or patents to U.S. companies that agree to pay only if those intangibles are productive, the IRS told its agents.
In those cases, that money should be treated as U.S.-source income, the agency said in new audit guidelines (RPW/CU/P_08.1_04(2016)a) released July 18.
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Rite Aiding the Debt-Equity Regulations

by Jasper J. Cummings, Jr.
In this report, Cummings anticipates litigation strategies for attacks on the section 385 regulations if they are adopted in final form. To help taxpayers identify the most favorable circuits, this report catalogs successful challenges to all federal agency regulations in the various courts of appeal. The D.C. Circuit emerges as the likelywinner, but, as the report shows, all circuitswill probably hold Treasury to the high standard of explaining itself.
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Blame Congress's Inaction for Debt-Equity Rules: Official

by Laura Davison
Congress's inability to address corporate inversions and lawmakers' insistence on punishing the IRS by cutting the agency's funding led to the debt-equity rules, a Treasury Department official said.
The proposal,whichwould allow government to recharacterize intercompany debt as equity, has come under fire from multinationals, business groups and lawmakerswho say these regulationswould disrupt how related companies manage their cash flow. Robert Stack, Treasury's deputy assistant secretary for international tax affairs, said the departmentwas leftwith little choice but to propose a "blunt instrument" rule to protect the U.S. tax base.
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Treasury Considering Changing Debt-Equity Regs in 4 Big Areas

by Lee A. Sheppard & Amy S. Elliott
Robert Stack, Treasury deputy assistant secretary (international tax affairs), said July 16 thatwhile he isn't inclined to add subjective prove outs to the controversial debt-equity regulations (REG-108060-15 2016 TNT 65-11: IRS Proposed Regulations), section 385 is a "blunt instrument" and he's considering four main areaswhere that blunt instrument "might have overdone it."
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Section 892: Form, Function, and Meaning, Part 2

by Kimberly S. Blanchard
This report is adapted from a prior version presented to the Tax Forum on February 1. Regulations under section 892 elevate form over function, resulting inwasteful planning and unnecessary obstacles to foreign governments seeking to rely on the exemption given by that section for income from stocks and securities, Blanchard says. After examining the history and purpose of section 892, Blanchard recommends that the regulations bewithdrawn and replacedwith rules that reflect the meaning and purpose of that section.
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News Analysis: Uncertainties and Costs of the Debt-Equity Regs

by Mindy Herzfeld
The comment period for the proposed section 385 regulations has expired, and the hundreds of technical comments submitted demonstrate the breadth and depth of the business and tax communities' concerns about the rules.
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Proposed Earnings Stripping Regs Do Not Align With BEPS Action 4

by David Chamberlain
David Chamberlain of Ernst & Young (China) Advisory Ltd. argues that the proposed section 385 regulations on earnings stripping potentially conflictwith the spirit of the best practices approach to limitations on interest deductions in the OECD's final action 4 report.
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Ireland Pins Growth Plan on U.S. Companies

by Paul Hannon
Close economic partners of the U.K. have braced for awave of possible fallouts after British voters sidedwith leaving the European Union:fewer of theirworkers in the U.K. and lower exports of machines and luxury cars, among other threats.
But no country has more at stake than Ireland,whose economy is connected to the U.K. in unusually intimateways. So in thewake of Brexit, Ireland is eyeing similarly close relations across the Atlantic --with corporate America.
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The Five Worst Tax Policy Proposals in the 2016 Republican Party Platform

by Richard Phillips
The Republican Party's official 2016 platform, released on Monday, iswholly out of touchwith reality. The planwould exacerbate the dual problems of rising inequality and continuous annual federal budget deficitswith tax cuts that essentially put more money into the pockets ofwealthy people and corporations and reduce federal revenues.
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Governments should use tax systems to drive inclusive growth agenda

  • By OECD
by OECD
Governments should use tax policy to drive forward economic agendas that seek to boost growthwhile sharing the benefits more evenlywithin society, according to a new OECD report.
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IRS International and FATCA Guidance Update

by Lee A. Sheppard
The government is in a hurry to finish several guidance projects before the end of the administration, according to Daniel McCall, IRS deputy associate chief counsel (international-technical),who spoke July 20 at the International Fiscal Association USA New York regional seminar.
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Move Away From Profit Split Won't Please All: Ex-OECD Official

by Kevin A. Bell
Economists at a transfer pricing conference praised the OECD's most recent discussion draft on applying the profit split method, but a former OECD officialwarned that the draft's reduced emphasis on the methodwon't please all stakeholders.
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OECD Approach to Arm's-Length Principle Called Pragmatic

by Ryan Finley
Despite their theoretical impurity, the principles for allocating risk and returns from intangibles adopted by the OECDwere necessary for an equitable andworkable version of the arm's-length principle, according to Andrew Hickman, former head of the OECD's transfer pricing unit.
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Stack Appeals to Tax Advisers' Self-Interest in System Integrity

by Ryan Finley
Practitioners' battle for technical purity in transfer pricingwill be meaningless if aggressive tax arbitrage causes countries to simply set aside the arm's-length standard and apply their own parallel tax systems, according to Robert Stack, Treasury deputy assistant secretary (international tax affairs).
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OECD Seeks to Avoid Conflict With EU on Tax Havens

OECD and European Union officials areworking to ensure that differences in their tax haven regimes don't create different compliance standards for countries, said Pascal Saint-Amans, head of tax at the Organization for Economic Cooperation and Development.
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It's All About the Ex Ante Price, Treasury Official Says

by Alexander Lewis
Get the ex ante, or anticipated, price of a contribution right and the residual return on investment can go anywherewithout abuse, according to Michael McDonald, financial economist (business and international taxation), Treasury Office of Tax Analysis.
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EU Tax Haven Blacklist Criteria to Target Low Tax Rates

by Joe Kirwin
A European Commission scoreboard to identify tax havens for the EU's upcoming blacklistwill target countrieswith low corporate tax ratesÔøΩand doing business in those countries could result in sanctions, according to a document obtained by Bloomberg BNA.
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U.S. Official: OECD Mention of Value Chain Analysis' Tentative

by Kevin A. Bell
The mention of a value chain analysis in the OECD's recent discussion draft on how companies should apply the profit split method isn't an excuse for tax administrations to apply that method, a Treasury Department official said.
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Changes to Foreign Goodwill Rules Will Steer Clear of Altera

by Ryan Finley
Mindful of its loss in Altera, the IRSwill ensure that its forthcoming final section 367 regulations complywith the reasoned decision-making standard and the Administrative Procedure Act, according to Russell Kwiat, senior manager of the IRS's advance pricing and mutual agreement program.
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News Analysis: Banks Affected by the Proposed Debt-Equity Rules

by Lee A. Sheppard
In news analysis, Lee A. Sheppard discusses banking issues raised by the recently proposed debt-equity regulations aswell as solutions proposed by practitioners and Treasury's consideration of those options.
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Austria implements transfer pricing documentation, country-by-country reporting requirements

  • By PwC
by PwC
The Austrian Parliament on July 14, 2016 enacted legislation that introduces mandatory transfer pricing documentation requirements as defined in Action 13 of the OECD's Action Plan on Base Erosion and Profit Shifting (BEPS). A corresponding Ministerial Ordinancewas published in draft on May 25, 2016.
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Ecuador significantly limits availability of income tax treaty benefits

  • By PwC
On 4 July 2016, the OECD published a discussion draft setting out proposed revisions to the guidance on the transactional profit split method, as set out in the Base Erosion and Profit Shifting (BEPS) Actions 8-10 ("Aligning Transfer Pricing Outcomeswith Value Creation"), 2015 Final Report, togetherwith a number of questions. The questions are intended to elicit responses to be taken into account byworking Party No. 6 in considering revisions to the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. The OECD has asked for comments by 5 September 2016 and intends to hold a public consultation on the proposed guidance 11 and 12 October 2016.
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IRS on Six-Year Scrutiny for Loan Recasts: We're Listening

Taxpayer concerns likely aren't falling on deaf ears about the six-year microscope multinational companies facewhile the government decideswhether to recast their loans to subsidiaries as stock under controversial earnings-stripping rules.
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PE Document Is About Interplay of OECD Model Treaty Articles

by Ryan Finley
The OECD's discussion draft on profit attribution is intended to illustrate that attributing profit to a permanent establishment under article 7 of the model tax convention and performing a transfer pricing analysis under article 9 may result in different allocations of profit, according to the former head of the OECD's transfer pricing unit.
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Australian federal election: What it means for tax

International Tax Review

by Amelia Schwanke

Malcolm Turnbull haswon the Australian federal election to remain as Prime Minister, but the lack of a strong majority is likely to giveway to political uncertainty around planned corporate tax measures. @

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OECD continues BEPS implementation, amends Transfer Pricing Guidelines; EU adopts CbC report exchange rules

  • By PwC

PwC

by PWC
The OECD continues to move forwardwith the implementation of its Base Erosion and Profit Shifting (BEPS)-related deliverables. Recent OECD announcements provide both an update and insight into its progress, aswell as anticipated areas of futurework ÔøΩ e.g., profit splits, attribution of profits to permanent establishments (PEs), and financial transactions guidance.
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EU VAT Action Plan: Heavier burden for businesses?

International Tax Review

by Joe Stanley-Smith

The European Commission's proposed VAT Action Plan is an ambitious attempt to reform the flailing regime. Joe Stanley-Smith picks through the details to look at the impact it could have on companies. @

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IMF Urges Action On US Corporate Tax Reform

by Mike Godfrey (Tax News)
The United States has been urged by the International Monetary Fund to overhaul its corporate income tax system, noting bipartisan acceptance that the regime is "broken."
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Will Country by Country Reporting change the way we do business

by Vasudaiva Kutumbakam(Forbes India)

Vasudaiva Kutumbakam– theworld is one family – a theory propounded centuries ago, is finding growing acceptance today. Ironically it is the business familywhich stands stoically by this philosophical theory. Businesses today are operating in multiple geographies creating a level-playing fieldwhere every person in every country could have equal opportunity to showcase their talent.

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Israel to slash tax rates to tech firms to fight tax havens

  • By Reuters
by Reuters
Medium and large technology companieswill pay sharply lower taxes in Israel starting next year as part of a global plan to combat firms shifting profits into tax havens.
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EU fiscal unity regimes called into questions

International Tax Review

by Joe Stanley-Smith

Fiscal unity regimes across EU member states could become more advantageous for corporations in cross-border fiscal groups. @

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Industries Assert Unique Harm Under Earnings-Stripping Rules

Bloomberg

by Alison Bennett
The government's controversial earnings-stripping ruleswould cut across a broad swath of industries,with oil and gas companies, manufacturers and financial services and insurance companies all saying theywould feel the bite in uniqueways.
The guidance is intended to stop multinational companies from shifting income out of the U.S. through loans to subsidiaries, but many companies say it sweeps in transactions that don't raise concerns of abuse and shouldn't be targeted.
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Businesses step up fight vs. Obama White House rules to target tax avoidance

by Kate Murar (Marketwatch)
Businesses are pushing back at Obamawhite House proposals aimed at eliminating corporate inversions, a controversial strategy inwhich companies mergewith foreign firms to escape higher U.S. corporate taxes.
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Whats the Best Corporate Tax? It Depends How You Define Best

by John Gimigliano (CFO)
The type of tax systemwe employ ÔøΩ income tax, VAT or otherwise ÔøΩ is less important thanwhywe employ it.
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ECOFIN adopts rules to tackle multinational tax avoidance

European finance ministers have adopted proposals to crack down on aggressive tax planning by multinationalswith the Anti-Tax Avoidance Directive.

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EC probes Belgian, French corporate tax exemptions

Belgium and France are under scrutiny by the European Commission (EC) for offering corporate tax exemptions that distort competition.

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News Analysis: Tailoring the Proposed Debt-Equity Regulations

by Lee A. Sheppard
In news analysis, Lee A. Sheppard examines the arguments that the New York State Bar Association Tax Section and other commentators have made about the proposed section 385 regulations,with emphasis on the recast rule; some of the comments strike at the basic structure of the proposed rules,which Treasury seems disinclined to reverse.
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Replace Corporate Tax With a Cash Flow Tax, Economists Say

by Ryan Finley
The economic distortions and tax avoidance incentives created by the current international tax system could be significantly reduced by switching to a tax on cash flows applied in destination countries, according to a panel of economists and tax policy experts.
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Tax Official: Inversion Rule Is Blunt Instrument Prompted by Congressional Inaction

by Tara Jeffries
A senior Treasury Department official on Thursday defended a proposed rule that aims to stem corporate tax avoidance by reclassifying some debt as equity,while adding that congressional inaction played a role.
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Debt-Equity Rules Face Attacks, Possible Legal Challenges

by Alison Bennett
Controversial earnings-stripping rules faced sharp attacks on grounds ranging from legal authority to business harm at a packed IRS hearingwhere most of the 18 speakers had one overarching message on the regulations: Yank them.
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Deloitte Finds Concern About Scrutiny of Tax Structures

by Alex M. Parker
An accounting firm's survey of in-house tax and finance officers indicates taxpayers are increasingly concerned about heightened media and government scrutiny of tax structuresÔøΩbut not everyone is respondingwith new resources for their tax departments yet.
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Biz groups press IRS to withdraw proposed offshore tax rules

by Naomi Jagoda
Business groups and other stakeholders at a public hearing Thursday urged the Obama administration towithdraw, or at least narrow the scope of, proposed regulations aimed at curbing offshore tax deals.
"In this case, the damage dwarfs the benefits," PwC's Pam Olson said at a hearing at the Internal Revenue Service headquarters.
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UK asks Canada for advice on trade model post-Brexit

UK Brexit Minister David Davis has said he favours the Canadian economic trade modelwith Europe but could that cause trouble for Britain's lucrative financial services industry and manufacturers?

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EU VAT Action Plan: Heavier burden for businesses

  • By ITR
by International Tax Review
The European Commission's proposed VAT Action Plan is an ambitious attempt to reform the flailing regime. Joe Stanley-Smith picks through the details to look at the impact it could have on companies.
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Congressional Inaction Forced Treasury's Hand on Section 385

byAaron E. Lorenzo
Congress gave the Treasury Department no choice but to take a broad swing at companies' earnings-stripping practices, a top department official said.
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Notable state income tax implications of international operations

  • By PwC
by PwC
There are several aspects of state taxation that are particularly important to US and non-US companieswith international operations, including (1) nexus, (2) filing methodology, (3) tax return starting point, (4) treatment of foreign source income, (5) income apportionment, and (6) powers to adjust income. To complicate matters, there are no uniform rules among the states.
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Tax Reform Blueprint Sets the Stage for 2017

by Davidwilliams (Morning Consult)
While the public comment period for the Section 385 regulations has already closed, it's not too late for the Administration to reconsider such drastic action especiallywhen another alternative is available. That alternative is comprehensive tax reform. Specifically, the recently released GOP tax reform blueprint.
The plan, titled "A Betterway for Tax Reform,"was unveiled by House Speaker Paul Ryan (R-Wis.) and Houseways and Means Committee Chairman Kevin Brady (R-Texas) at the end of June.
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Beware of a Tax Reform Revolution

by Philip G. Cohen (CFO)
Tax reform proposals made by politicians should be scrutinized carefully and implemented gradually.
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Little Dialogue, Lots of Venting at Debt-Equity Reg Hearing

by Amy Elliott (Tax Notes)
By the end of the three-hour-long July 14 hearing on the debt or equity regs, many of the nearly 200 individualswho filled the IRS auditorium to capacity had clearly got the message following repeated calls for fullwithdrawal or -- failing that -- broad exemptions and generous transition rules as the government panelists largely remained silent.
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