2016

The U.S. Treasury's new anti-inversion rules should come as a surprise to no one, Treasury Secretary Jacob Lew said April 14.

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Scott Semer of Torys critiques the IRS's proposed rules (REG-108060-15) under tax code Section 385,which in part provide that instruments issued in certain transactionswon't be treated as debt for tax purposesÔøΩeven if they clearly establish a debtor-creditor relationship. Those rules "have nothingwhatsoever to dowith distinguishing debt versus equity," Semerwrites. "Instead, they are a regulatory attempt to impose new earnings-stripping rules."

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Three days after President Barack Obama held a news conference pledging to close "loopholes" that allow U.S. corporations to claim they're foreign for tax purposes, the IRS blessed one of the biggest corporate expats.

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Lawmakers' plans to release international tax overhaul legislation by mid-July look to be slipping further, making prospects less clear than ever.

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After challenging its inversion on audit, IRS Appeals gave Delphi Automotive PLC the all-clear April 8, concluding that section 7874(b)won't apply to treat the company as domestic for U.S. federal income tax purposes, Delphi announced April 13.
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Darrin Litsky, Sanjay Kumar, and Eric Lesprit look at strategies for combatting controversy risks and double taxation and questionwhether mutual agreement processes are a taxpayer's only option.
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John Henshall and Philippe G. Penelle, describe the relationship between intellectual property and controversy in tax and transfer pricing.
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The European Commission is today leading theway towards greater corporate tax transparency by introducing public reporting requirements for the largest companies operating in the EU.
For the EU press release, go here.

The international community should call time on all remaining holdoutswho have yet to implement internationally agreed tax transparency standards, OECD Secretary-General Angel Gurría said in a new report to the G20.
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European Union officials on Tuesdaywaded into the fight against international tax dodging, calling for theworld's biggest companies to disclose more data about their tax arrangementswith the bloc's member governments and to share information about offshore havenswhere they shelter money.
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The Treasury Department's new corporate ruleswill reach far beyond the few companies that moved their legal addresses to low-tax countries, forcing many firms based in the U.S. to change their internal financing strategies and tax planning.
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Country-by-country reports can spot the mismatch betweenwhere firms do business andwhere they are taxed but by themselves theywill not end tax avoidance.

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A tax policy battle between European Union member states and the EU Parliament looms after the European Commission proposed sweeping public country-by-country tax and profit reporting by multinationals that pleases neither institution.

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Final tax regulations to curb inversions could be done by the Labor Day holiday in early September, IRS Commissioner John Koskinen indicated.
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Singapore is a top-tier candidate for U.S. multinational companies seeking to relocate existing structures or create new foreign principal structures that hold, and use, group intellectual property.
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The appointment of Marjorie Rollinson as the IRS's top international tax lawyer has raised questions among practitioners about how the agency's approach to international disputes might change under her leadershipÔøΩparticularlywhen it comes to transfer pricing.
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States are intensifying efforts to combat corporate tax avoidance amid a slow federal campaign to rein in perceived tax dodgers.
Several state proposals to curb income shifting overseas have surfaced this 2016 legislative session in Kansas, Kentucky, Maine and Minnesota. If enacted, the regimeswould add to a body of tax haven legislation in six states and the District of Columbia, all targeting profits held offshore by U.S. companies.
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Following the political uproar caused by the Panama Papers revelations, the European Commission has included a country-specific reporting requirement for tax haven jurisdictions in its final proposed directive on public country-by-country reporting.
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Large multinationals operating in theEuropean Unionwill have to publish details of profits andtaxbills generated in countries considered to be "taxhavens," the bloc's executive arm saidTuesday, as it toughened proposals for fightingtaxavoidance following the "Panama Papers" leak.
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Treasury's new regulations limit the ability of foreign-based multinationals to reduce taxable profits on U.S.-source income. This is a major expansion for the Obama Administration,which had previously targeted only so-called "inversions" – transactions inwhich U.S.-based firms have sought through mergers to "re-domicile" themselves as foreign-based companies.
For the Tax Policy Center article, go here.

On April 4, 2016, the Treasury Department (Treasury) and the Internal Revenue Service (IRS) issued proposed and temporary regulations (T.D. 9761) under five Code Sections that limit cross-border merger transactions that the government characterizes as 'inversions' and certain post-inversion transactions. The temporary regulations incorporate rules Treasury and the IRS had previously announced in Notice 2014-52 and Notice 2015-79 (the Notices),with some modifications and changes. However, the temporary regulations also include several new rules. The text of the proposed regulations is the same as that of the temporary regulations.

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New U.S. reporting requirements are expected to shed unwelcome light on corporations' use of Dutch holding companiesÔøΩand could result in many of the holding companies being dissolved.

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Legislation the European Commission plans to propose April 12 thatwould require large multinational companies to publicly report profits and taxes paid on a country-by-country basiswill be expanded to cover jurisdictions that are deemed tax havens.

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Thomas Bissell, CPA,writes that tax code Section 4985's "anti-inversion" excise tax contains no exception for nonresident alien "insiders," although the eventual income that is realized by an NRA insider may be partially or entirely exempt from U.S. income tax under general tax principles. He considers arguments that extraterritorial application of the excise isn't appropriate.
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The European Commission has released a fact sheet on public country-by-country reporting for multinational enterprises.

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EC Commissioner Jonathan Hill delivered a speech on tax transparency rules for multinationals on April 12.
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The European Commission on April 12 proposed public reporting requirements for the largest companies operating in the EU and in tax havens.
For the EC release, go here.

Mindy Herzfeld examines the push for public disclosure of country-by-country reports and compares the information to be disclosed under BEPS action 13with rules that FASB is now considering to increase the amount of foreign tax information that companies are required to disclose.
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Here's how American democratic capitalism shouldwork: U.S. corporationswould have a duty to maximize shareholder profit andwould be free to pursue that duty, including by mergerswith foreign firms. These mergerswould be driven by economic fundamentals, not a desire to game the U.S.taxsystem. In turn, U.S.taxlawwould provide the appropriate incentives, as adjusted through regular legislation, not episodic, politically driven executive action.
For thewashington Post editorial, go here.

The UK Chancellor of the Exchequer delivered his Budget on March 15, 2016. The accompanying Finance Billwas published on March 24.

A new 'Business Tax Roadmap' sets out the government's plans for business taxes through 2020 and beyond. It contains a number of proposals in a range of tax policy areas, including the UK's response to recommendations from the OECD's base erosion and profit shifting (BEPS) action plan.

For the PwC Insight, gohere.

On April 4, 2016, the Treasury and IRS issued proposed and temporary regulations that limit cross-border merger transactions that the government characterizes as 'inversions' and certain post-inversion transactions. The regulations incorporate rules previously announced in Notice 2014-52 and Notice 2015-79,with some modifications. However, the temporary regulations also include several new rules. The text of the proposed regulations is the same as that of the temporary regulations.

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While the U.S. government's new rules may have killed the tax-inversion deal, cross-border merger activity is likely to continue unabated, analysts and traders said.
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European companies aren'tworried about the U.S. invoking retaliatory measures to protestwhat American lawmakers say are unfair probes into tax deals between U.S. multinationals and European Union member states, European Commissioner for Competition Margrethe Vestager said.
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The new U.S. model income tax convention includes some novel changes that represent a significant policy shift and underscore the various functions of the model treaty.
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The collection of taxes that are owed for past years because of illegal state aid does not amount to retroactive taxation, EU Competition Commissioner Margrethe Vestager said April 8 during her visit towashington.
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While controversy over the European Commission's alleged unfair targeting of U.S. multinational corporations -- andwhat to do about it -- rages on, behavioral effects of the commission's state aid investigations are already evident among taxpayers and administrators.
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Large multinational companies such asAlphabet Inc.'sGoogle,IKEAandAmazon.com Inc.will be forced to publishprofits andtaxbills fromEuropean Unioncountries inwhich they operate, under plans the bloc's executivewill bring forward nextweek.
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The administration's far-reaching guidance to curb corporate inversions and earnings stripping casts a broad net that could catch common planning deals not intended to avoid taxes, practitioners told Bloomberg BNA.
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Packaged and sold as part of a larger effort to combat inversions, Treasury's new proposed regulations under section 385 show just how far the agency iswilling to go to rethink how to combat earnings stripping through interest deductions -- and that it's not about to have limitations dictated to it by section 7874 and inverters.
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U.S. companies may rethink their plans to re-domicile after Treasury issued temporary regs on April 4 that contain several new rules not previewed by the prior anti-inversion notices aswell as changes to the rules in the notices.
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While all but five EU member states make use of tax rulings,with some issuing a few a year and others issuing thousands, "the good news is most of the rulings are not about aggressive tax planning," EU Competition Commissioner Margrethe Vestager said.
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Taxlawyers at the Treasury Department have grappled in recent yearswith the many corporations findingways to mergewith overseas ''inversion'' partners and, as a result of the merger or acquisition, move their legal residence offshore to reducetaxpayments.
TheTreasury's new administrative guidance thatwas releasedon Mondaytackles awide range oftaxissues related to inversions, including new approaches to multistep acquisitions and earnings-stripping. The new guidance also revises and completes rules the Treasury had previously proposed in 2014 and 2015.
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You can tell it's an election year, because the Obama Administration is moving again to blame U.S. companies for trying to remain competitive despite the developedworld'sworst corporatetaxburden. No less than President Obama himself appeared in thewhite House press roomTuesdayto praise newTreasuryrules, issued the day before, that sandbagPfizer Inc. and other companies using foreign takeovers to reduce theirtaxburden.
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When Iwrote in my most recent column that I hoped the Treasurywould swing for the fences to try to limit corporate inversions, it never occurred to me that itwould issue rules remotely as tough as the ones it unveiledon Monday.
For that matter, I had no idea that the ruleswould be issued just three days after my columnwent online and the day after it ran in theSundaypaper. But as they say, timing is everything.
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The U.S. Treasury department's announcement on Monday of new rules to discourage U.S. companies from resorting to "inversion deals" to relocate to lower-tax countries has shaken the corporateworld by its unprecedented force and reach.
For the Knowledge@Wharton release, go here.

The pastweek has arguably been one of the most significant in burnishing President Obama's legacy in the businessworld.
The administration took its toughest actions yet against tax deals known as "corporate inversions," and finally pushed through strict new rules on retirement investment.
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Pfizer Inc. and Allergan Plc have terminated their $160 billion merger in an abrupt end to the largest-ever health-care deal after the U.S. government cracked down on corporate tax inversions.
The Treasury Department's proposed new rules to deter companies from using acquisitions to shift their tax addresses overseas drove the decision, the companies said April 6 in a statement.
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The Treasury Department's tough new guidance to curb inversions and earnings strippingwon't stop some kinds of deals, practitioners and academics said.

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