2016

The National Foreign Trade Council urged the IRS to consider accepting country-by-country reports during the 2016 so-called gap year, despite the agency's insistence that it isn't technically capable of starting the reporting system in time.

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Ireland is committed to implementing the final reports under the OECD's Action Plan on Base Erosion and Profit ShiftingÔøΩits international project to combat tax avoidance, a Department of Finance official said.

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In another move to discourage U.S. companies from redomiciling abroad, a top Senate taxwriter March 10 reintroduced legislation thatwould limit an inverted company's ability to strip its future domestic earnings.
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While the European Union has resumed efforts to create a common system for calculating the tax base of businesses operating in the EU, the European Commission doesn't plan to harmonize corporate tax rates across member states, an officialwith the commission's Directorate-General for Taxation and Customs Union said.

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Final UK regulations mandate UK-parented multinational entities (MNEs)with annual consolidated group revenue of ÔøΩ750 million or more to complywith new transfer pricing and transparency requirements,with the first country-by-country report (CBCR) due for fiscal years beginning on or after January 1, 2016. In certain circumstances, UK group entities (other than UK-parented MNEs) also may be obliged to file CBCRs.

For the PwC Insight, gohere

The introduction of tax measures such as so-called knowledge or patent boxes are not a goodway to foster the creation of intellectual property (IP), a leading global tax expert haswarned.
The head of the Paris-based OECD's centre for tax policy, Pascal Saint-Amans, told a conference organised by the Irish Tax Institute in Dublin on Thursday that such measures did little to incentivise companies.
For the Irish Times story, go here.

Conflicting court decisions and IRS notices in the past 15 years aboutwhether over-the-counter foreign currency options and swaps are foreign currency contracts under the mark-to-market provisions of the tax code give taxpayers the latitude to take the position that best suits them.

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A recent Sixth Circuit opinion inwhich the court looked past years of prior guidance in determining that over-the-counter (OTC) foreign currency options are subject to mark-to-market under section 1256, an issue affecting mostly hedge fund partners,was the subject of a March 9 debate overwhether it represents good law or a mistake by the court.
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The IRS told its agents to carefully scrutinize both how foreign corporations treat payments of fixed, determinable, annual or periodical (FDAP) income and how nonresident aliens claim deductions on income from a U.S. trade or business.
The guidance came in the form of two new international practice units released March 9 by the Large Business and International Division.

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Democrats have corporate inversions in their sights again.
Soon-to-be introduced legislation, if enacted,would establish an exit tax and the Treasury Department may soon release new anti-inversion regulations.

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The number of taxpayers seeking dealswith the IRS to lock in their transfer pricing jumped nearly 70 percent in 2015, according to an agency official,who attributed some of the increase to concerns about changes in international tax rules.

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Steven Hannes of McDermottwill & Emery looks at proposals in the OECD's base erosion and profit shifting report on transfer pricing and value creation, and how those proposals interactwith U.S. treaties and rules under tax code Section 482. Treasury and the IRS face a difficult situation if they try to adopt the type of prescriptive guidance proposed for intangibles pricing, hewrites, as "they run the significant risk of having a court invalidate the regulations as being inconsistentwith the arm's-length standard or for other (e.g., Procedure Act) reasons."

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The IRSwon't be able to accept optional country-by-country report filings in 2016 to help smooth over so-called gap year issues, according to U.S. officials.
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Global tax rules are changing, and changing rapidly. The final reports on the BEPS Action Plan have been released by the OECD and endorsed by the G20. These reports on the 15 BEPS Action Points recommend significant changes in international tax laws and treaties.

This guidewill provide readerswith practical guidance on how to handle the implications of BEPS.
For the ITR guide, go here.

The Treasury Department is reviewingwhether an obscure 1934 law allows the U.S. to retaliate against the European Union for the European Commission state aid investigations into U.S. companies, a Treasury official said in a letter to Congress.
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European Union member states reached a tentative "political agreement" thatwill require multinational companies and their subsidiaries doing business in the bloc to file extensive country-by-country tax reports to tax authorities thatwill enhance scrutiny of transfer pricing arrangements and ensure taxes are paid in the countrywhere profits are earned.
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Administrative guidance from the Treasury Department has helped slow the pace of corporate inversions, but Congress needs to act legislatively if the strategy is to be removed from the arsenal of tax avoidance, Treasury Secretary Jacob Lew told a Senate Appropriations subcommittee March 8.
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The EU Economic and Financial Affairs Council reached an agreement March 8 on the automatic exchange of country-by-country reports by tax authorities.
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Well-known multinational enterprises and tax haven jurisdictionswill be meetingwith the European Parliament's special committee on tax rulings (TAXE II committee) to discuss their tax arrangements on March 14 and 15.
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The Indian Finance Minister on February 29, 2016, presented the 2016 budget, the third budget released by the current government. The budget proposals continue to focus on development, improving the ability to conduct business in India, and attracting foreign investment.

Among the proposed amendments in the budget are: a reduction in domestic corporate tax rates for certain taxpayers, incentives for new start-up companies, the introduction of a patent box regime, requirements for country-by-country reporting (CbCR), and a new equalization levy in linewith the OECD's base erosion and profit shifting (BEPS) initiatives.

For the PwC Insight, gohere.

European Unionfinance ministers agreedon Tuesdayto new rules underwhich their countrieswill exchange information on thetaxaffairs of multinationals, a move aimed at ensuring that big companies pay their fair share into government budgets.
For the New York Times story, go here.

The revised US tax treaty model,which is the baseline text used by the US for treaty negotiations, places special consideration on bilateral treaties, aswell as adding a number of benefits for cross-border transactions.
For the ITR story, go here.

Luxembourg's long-awaited tax reform contains a staggered three percentage point corporate tax cut, but lobbyists stillwant a further drop to increase the country's competitiveness.
For the ITR story, go here.

In this article, Osborn and Khripounova examinewhy implementation of the OECD's base erosion and profit-shifting projectwill likely make bilateral advance pricing agreements more attractive than ever to multinational enterprises.
For the Tax Notes viewpoint, go here.(subscription required)

The US "fully expects" to have finalised its country-by-country reporting (CbCR) rules by June 30, according to Robert Stack, Treasury deputy assistant secretary for international tax affairs.
For the ITR story, go here.

Several politicians are looking forways to punish companies considering a specific corporate restructuring known as a corporate inversion (a type of acquisitionwhere a U.S. company purchases a foreign owned company and registers the new entity outside of the U.S.). Hillary Clinton's ill-conceived "exit tax" exemplifies the types of harmful policies that are being proposed.
But,whywould a company consider such a restructuring? The answer: the uncompetitive U.S. corporate income tax code.
For the Forbes article, go here.

The Treasury Department is reviewing an Internal Revenue Code provision that allows it to impose a double rate of tax on citizens and corporations of foreign countries engaging in discriminatory tax practices as it considers its response to recent European Commission state aid rulings.
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Country-by-country reports can provide an advantage that is often overlooked in the context of the global crackdown on tax avoidance by multinationals, Douglas O'Donnell, commissioner, IRS Large Business and International Division, said during a panel discussion in Redwood City, California.
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European Union member stateswill be taking a first step toward overhauling an important regulatory body that targets harmful corporate tax lawswithin and outside the EUÔøΩthe Code of Conduct Group for Business Taxation.
On March 8, the member states plan to agree on a set of measures to make the Code of Conduct'swork more transparent and efficient.
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Jenswittendorff details the shortcomings of the European Commission's new anti-tax-avoidance package, including its counterintuitive potential to facilitate tax avoidance byway of its exit taxation provision.
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One result of the OECD's project to combat tax avoidance is that U.S. multinationals deciding to move intellectual property to such jurisdictions as Ireland and Singaporewill need to move senior management employees there aswell, three practitioners told a recent tax conference.
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The Treasury Department says it is considering "all modes of engagement" to make it clear that the European Union should reconsider its approach to investigating tax breaks provided to U.S. companies.
The European Commission, the EU's executive body, has been investigatingwhether tax breaks that European countries have provided to American companies are illegal "state aid."
For The Hill story, go here.

The European Commissionwelcomes today's political agreement by Member States on the automatic exchange of tax-related financial information of multinational companies, known as country-by-country reporting, subject to UK parliamentary scrutiny.
For the EC press release, go here.

Cross-border deals such as corporate inversions have increased urgency among taxwriters to overhaul the international tax code, and election-year politics shouldn't get in theway of a deal, a top tax official said.
"It's a challenge in an election year, but it shouldn't necessarily be an elimination of possible action," Mark Prater, chief tax counsel for the Senate Finance Committee's Republican majority, said March 4 at the Federal Bar Association Tax Law Conference.
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The European Union is expected to adopt its first OECD base erosion and profiting shifting measure March 8,when EU finance ministers are set to amend the EU Administrative Cooperation Directive and require tax authorities to automatically exchange country-by-country reports on company tax and profits.
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An unanswered question arising from the OECD's project to combat base erosion and profit shifting is exactlywhen new guidelines on transfer pricing are to take effect.
It isn't a minor point, according to practitioners attending the Pacific Rim Tax Institute in Redwood City, Calif., March 3-4.

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Country-by-country reporting promises far greater transparency about business activities than tax authorities have known in the past, but there are no guarantees countrieswill interpret the data in any uniform fashion, a panel of former and current tax officials said.

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Ninety-five jurisdictions and the OECD are attempting towrite a multilateral instrument implementing the treaty-related changes in the organization's guidance on combating base erosion and profit shifting that "balances flexibilitywith clarity," an OECD official said.
Grace Perez-Navarro, deputy director of the OECD's Center for Tax Policy and Administration, said March 4 that there are tremendous technical challenges in designing an instrument "that isworkable and meets the needs of flexibility thatwewill need to have in order to satisfy the different interests and options that countrieswant to choose."
For the DTR story, go here. (sbuscription required)

A report by global charity ActionAid claims that tax treaties are making the poorest countries powerless in taxing multinational corporationswhen agreements are heldwith theworld's richest countries.
The "Mistreated" report, published March 4, states that tax treaties are playing "a facilitating role" in many tax avoidance strategies used by multinational corporations to lower their tax bill.
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Before the Treasury Departmentwill agree to changes in the standard for creating a permanent establishment, a global understanding on the rules for attributing profit to a PE must be reached, according to Danielle Rolfes, Treasury international tax counsel.
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Multinational corporations need to avoid creating artificial structures to segregate activities and functions from their core businesses because the base erosion and profit-shifting project has raised auditor awareness of the practice, said Grace Perez-Navarro, deputy director of the OECD Centre for Tax Policy and Administration.
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The OECD's final action 3 report on controlled foreign company rules "was not one of our biggest successes," but it "was the bestwe could do" considering the lack of agreement in that area, Grace Perez-Navarro, deputy director of the OECD Centre for Tax Policy Administration, said March 4.
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Mindy Herzfeld reviews recent proposals to adopt a minimum tax in the United States and the EU, and discusses the advantages and disadvantages of each proposal, aswell as the questions they raise.
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James Fuller comments on U.S. tax developmentswith international implications, focusing this month on the revised U.S. 2016 model income tax treaty, concerns regarding the European Commission's recently proposed base erosion and profit-shifting measures, country-by-country reporting, and various regulations and cases.
For the TNI article, go here. (subscription required)

The concern that led Treasury and the IRS to eliminate the exception for foreign goodwill and going concern value in the proposed section 367 regulationswas the amount of value taxpayerswere attributing to them, and not the exception itself, according to Brenda Zent, special adviser, Treasury Office of International Tax Counsel.
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The introduction of language in the temporary section 482 regulations requiring taxpayers to account for "all value provided" and the "full value of compensation"was not meant to introduce a new concept, but to describewhat's required by the arm's-length standard, according to an IRS official.
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The IRS is analyzing potential problems that could arise if U.S. multinational companies opt for surrogate filing of the country-by-country reporting template, an agency official said.

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