2016

If Apple Inc. is any barometer, U.S. multinationals' proclivity to create jobs in low-tax jurisdictionswill continue and likely expand after BEPS: By mid-2017 the company expects to add 1,000 sales and tech support, distribution, customer care and manufacturing jobs to its existing staff of 4,000 in Ireland.
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The coming year promises to be an active one for transfer pricing litigation in the U.S. Tax Court,with three major cases scheduled for trial and decisions pending in three others.
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Corporate inversion deals are likely to continue in 2016 despite a challenging tax landscape and big questions surrounding the treatment of earnings stripping,while the outlook for legislation remains bleak.

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When the OECD released its final recommendations on combating base erosion and profit shifting in October, it ended a years-long debate on how to patch an allegedly leaky international tax system.
One of the uncompleted tasks, howeverÔøΩfine-tuning the attribution of profits rules to apply to the new definition of permanent establishmentÔøΩcould be as knotty as the BEPS discussion itself, and reopen many of the key issues that dominated those debates, according to many practitioners.
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Following the European Commission's decision that tax rulings issued under Belgium's "excess profit" scheme represent illegal state aid, some of the companies affected have publicly voiced their disagreement.
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The European Commission has received more than 170 submissions on its proposal for a revised common consolidated corporate tax base (CCCTB) ahead of its re-launch later this year.
For the Irish Times story, go here.

The European Union'swar on supposed corporate-tax cheats kicked up another gear Monday, and this time European companies are in the cross hairs. Competition Commissioner Margrethe Vestager called foul on a Belgian tax law the commission says unfairly saved 35 companiesÔøΩmost of them EuropeanÔøΩsome ÔøΩ700 million ($763.3 million) in taxes since 2005. Belgiumwill now have to collect those taxes if it doesn't appeal, or loses in court.
For thewall Street Journal story, go here.

It iswith dismay thatwe read about the complex tax package Congress passed in December. It is hard to believe, but true, that Congress made permanent, for example, an unjustified tax loophole for corporations (the active financing exception) that lets corporations pay no taxes on income "earned" in foreign countries provided they keep that income offshore. That means that either money doesn't come back to the U.S to support jobs or our economy or that money is returned to the U.S. untaxed through various complex devices that disguise its origin. Eitherway it's a $78 billion loss to the U.S. economy that could pay for pre-K for all low and moderate-income children in the country for 10 years.
For the Hill article, go here.

After several false starts, the U.S. government finally seems to have succeeded in its attempt to invoke section 482 in a distressed asset/debt (DAD) shelter case. Austin Investment Fund LLC v. United States, No. 1:11-cv-02300 , if affirmed on appeal, virtually guarantees the imposition of accuracy-related penalties in these cases and may constitute a more forceful attack on loss importation shelters than relying on narrow statutory fixes.

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On December 22, 2015, the Italian Parliament approved the 2016 Finance Act,which includes provisions introducing country-by-country (CbC) reporting for Italian-parented multinational enterprises (Italian MNEs) in linewith Action 13 of the OECD's Base Erosion and Profit Shifting (BEPS) project.

Italian MNEswith consolidated annualized group revenue of EUR 750 million or more must comply by filing a CbC report annually that includes specific financial data covering key measures of economic activity by territory.

For the PwC Insight, gohere.

Houseways and Mean Committee Chairman Kevin Brady (R-Texas) said his committeewill vote this year on legislation overhauling the international tax code, allowing companies to repatriate overseas profits at a reduced rate.


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The European Union is resuming efforts to create a common system for calculating the tax base of businesses operating in the EU, and aims to adopt the OECD BEPS package by the end of the Dutch EU presidency in June, a top official said.

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Belgium's "excess profit" tax scheme is illegal under EU state aid rules because it confers tax advantages upon multinational corporations at the expense of smaller competitors, the European Commission said, adding that as a result, Belgium must recover ÔøΩ700 million from at least 35 multinationals based primarily in the EU.
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2016 should be the year of corporate tax reform and fiscal transparency, tax Commissioner Pierre Moscovici told MEPs from the Special Committee on Tax Rulings and the Economic and Monetary Affairs Committee at a hearing on Monday evening. "We have a serious problemwith tax avoidance and lack of transparency. Too many people have looked the otherway", Mr Moscovici said.
For the European Parliament release, go here.

TheEuropean Commissionsaid on Monday that a corporatetaxbreak that Belgium granted to at least 35 companies, amounting to total reductions equivalent to about $765 million,was illegal.
For the New York Times story, go here.

Just about every American chief executive has the same dream: to get out from under the corporate income tax. For many, that means lobbying Congress to change the tax code. But for a growing number, it also involves increasingly creative ÔøΩ and successful ÔøΩ tricks to avoid their liability.
For the New York Times article, go here.

The U.S. House of Representatives' top taxwriterwants a vote this year on legislation moving the United States to a territorial-style tax system aimed at exempting the earnings of American companies abroad from U.S. taxation.
For the Reuters story, go here.

The biggest corporate deal of 2015was also, in the view of many, the shadiest: Pfizer's $160-billion mergerwith the Irish drug company Allergan. It's a "tax inversion"ÔøΩPfizerwill in effect be reconstituting itself as an Irish company, in order to lower its taxesÔøΩand that'swhy so many people found it so offensive. Hillary Clinton said that ending inversionswasn't just about fairness but about "patriotism"; Donald Trump called the deal "disgusting." It's got to make youwonderwhen even Trump finds your moneymaking schemes repugnant.

For the New Yorker story, go here.

U.S. multinationals preparing their country-by-country reports under new federal regulations may find they have to pull in data from a broad range of sources and not just from forms already being filedwith the Internal Revenue Service, practitioners said.

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There is rising interest in increasing shareholder taxes and using that revenue to reduce the burden of the corporate tax by providing shareholder credits or by cutting the corporate rate. Butwhat are the implications of these changes for cross-border investment and profit shifting?which approach is preferable?
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How extensively the country-by-country (CbC) reporting regime affects U.S. businesses and tax revenuewill depend on how vigorously the U.S. competent authority defends the arm's-length standard.
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Itwill be critical for multinational enterprises to prepare transfer pricing documentation that portrays their global operations in away that supports the allocation of profit in their country-by-country (CbC) reports, according to a panel that included David Varley, former acting director of transfer pricing operations at the IRS.
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Mindy Herzfeld reviews Australia's first public disclosures of tax information,whichwere made last month, and discusseswhy the information reported may be more likely to mislead the public than to inform it.
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Multinational enterprises that fail to complywith Australia's recently adopted country-by-country reporting requirements are subject to financial penalties, prosecution and court orders, but a number of MNEs are expected to pay the penalties rather than complywith the new requirements.
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Itai Grinberg proposes that the U.S. Treasury consider applying a little-known, never used U.S. tax law to counter the European Commission's pending "discriminatory" state aid investigations.
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Kyle Pomerleau of the Tax Foundation describes the International Tax Competitiveness Index,which measureswhether OECD tax systems are competitive and neutral, and gives examples of good and bad country models.
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The European Commissionwill force Belgium to claw back about ÔøΩ700 million from at least 35 multinational companies, claiming the country's tax rules amounted to illegal state aid and hurt smaller peers.

The Commission did not name the companies but said more than halfwere European and their sharewas ÔøΩ500 million of the total unpaid taxes. It is now up to the Belgian government to determinewhich companies got overly generous tax breaks.

For the Politico story, go here.

European Competition Commissioner Margrethe Vestagerwill announce that the Belgian 'excess profits' tax scheme is illegal in a press conference today.
For the ITR story, go here.

Corporationswill continue towork around Treasury Department guidance restricting inversions if Congress doesn't overhaul corporate tax law, a National Foreign Trade Council executive said.
"Treasury rules are going to make it very restrictive ofwhat you can do," Catherine Schultz, vice president for tax policy at the NFTC, told reporters Jan. 7. "There are a lot of very good tax lawyers out therewho are going to look atwhat Treasury is going to put out and seewhere the lines are being drawn and how they are going to change it."
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Companies holding foreign profits abroad shouldn't expect a reduced tax rate for repatriating those earnings this year, said a top Republican House staffer.

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Panamawill decidewhether to adopt or reject BEPS by March, a government official said, adding that the tax haven has established a multidisciplinary committee to assess the Organization for Economic Cooperation and Development tax avoidance program's potential effects on its flagship services economy.

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The interest deductibility restrictions proposed under action 4 of the OECD's base erosion and profit-shifting project may significantly affect valuations in private equity deals, according to a panel of transfer pricing and mergers and acquisitions tax practitioners.
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The 2015 Amended Finance Act and the 2016 Finance Act include other tax measures that are beyond the scope of this Insight.
For the ITR article, go here.

On December 22, 2015, the Dutch Senate approved a new lawwhich entered into force January 1, 2016 containing detailed transfer pricing documentation requirements in linewith Action 13 of the OECD's 'Base Erosion and Profit Shifting' (BEPS) initiatives.

For the PwC Insight, go here.

Reuven S. Avi-Yonah reviewsThe Rise of the Value-Added Taxby Kathryn James and discusses the possibility of a VAT being implemented in the United States.
For the Tax Notes book review, go here. (subscription required)

Kimberly Tan Majure and Monica Zubler of KPMG follow up on their previous article regarding country-by-country reporting for partnerships to examine new regulations (REG-109822-15) proposed by Treasury and the IRS in December. "In our view, the proposed regulations are a bit of a mixed bag for U.S.-based groups; the regulations provide some very helpful guidance, but leave significant challenges on the table for U.S. MNEs," the authorswrite.
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Stewart Karlinsky examines recent tax developments in S corporations, C corporations, the international area, and the partnership area.
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Robertw.wood and Huy C. Luu discuss tax planning for U.S. investors in emerging ASEAN economies.
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The Luxembourg Parliament on December 17, 2015, enacted Bills 6847, 6891, and 6900 relating to the 2016 Luxembourg budget. The enacted bills,which have changed little from earlier versions, introduce new tax measures that affect both corporations and individuals.

For the PwC Insight, gohere.

International Tax News is designed to help multinational organisations keep upwith the constant flow of international tax developmentsworldwide. Among the topics featured in this month's edition are:

The 2015 Irish Finance Bill
The OECD's final report on BEPS Action 4
The UK tax authority's updated guidance on the Diverted Profits Tax
Kenya reintroduces capital gains tax on transfers of Kenyan property

For this month's edition, gohere.

James Fuller comments on U.S. tax developmentswith international implications, focusing this month on STARS transaction cases, the U.S. Treasury's announcement of additional inversions regulations, BEPS developments, and proposed revisions to the U.S. model treaty.
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With the release of the OECD's base erosion and profit-shifting final reports last October, the fiscal stakeswere high for all countries involved during 2015. Representing the United States and its interests at the BEPS negotiating tablewas Robert Stack, Treasury deputy assistant secretary (international tax affairs) and lead U.S. delegate to the OECD's Committee on Fiscal Affairs. Because of his role in shaping the final BEPS reports and protecting U.S. interests, Stack isTax Notes' 2015 person of the year.
For the Tax Notes article, go here. (subscription required)

In news analysis,william Hoke examines the tax implications of conducting business from an imaginary, self-sufficient cruise ship called the SS Stateless.
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Jesse Eggert, Liz Chien, and Eric Robert explainwhy the digital economy cannot be ring-fenced for tax purposes.
For the ITR story, go here.

One of the most significant events of 2015was the release of the final reports on the OECD's base erosion and profit-shifting project,which the G-20 endorsed at its summit in November.
Although the final reports have been heralded as a major accomplishment in the effort to address BEPS, they have drawn criticism for straying from established principles and for retaining a fundamentally flawed system. The project now enterswhatwill likely be a turbulent implementation phase.
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