Int'l Tax News

Mark Leeds of Mayer Brown has asked Treasury to address some of the issues that have arisen in connectionwith the base erosion antiabuse tax under section 59A.

A think tank has recommended that G-20 leaders adopt a common minimum corporate tax rate and a common corporate tax base (CCTB) to reduce harmful tax competition and level the playing field for taxation and investment.

In this article, the author examines Swiss Tax Proposal 17, a major initiative thatwould abolish the special cantonal tax regimes, create research and development incentives, and otherwise change existing law. In addition to discussing the major points of the proposal, he evaluateswhether the changeswould complywith fundamental principles of Swiss law andwhether theywould effectively accomplish the dual goal of making Switzerland tax-attractive and ensuring it is compliantwith international tax standards.

Last year's tax-code overhaul slashed the rates companies pay, but limited an important break-ÔøΩthe deductibility of interest payments. Now, companies are exploringways to sidestep that change and billions of dollars in tax each year.

On May 25white House Director of Legislative Affairs Marc Short said the Trump administration isworkingwith Congress to draft a second phase of tax cuts and hopes to release a legislative package before the end of the summer. According to Short, this phase is "focused on the individual side." Most observers are skeptical that "Tax Reform 2.0"will be passed in 2018. And even if a second tax bill does make it through Congress this year, changes to the international provisions of the code aren't a priority. Still, it'sworthwhile to askwhat Congress could do to fix some of the damage to the international tax system caused by the TCJA.

Karen Sowell of the New York State Bar Association Tax Section has responded to a request for comments (Notice 2017-38) on burdensome tax regulations, offering suggestions on how to treat some provisions of the final and temporary debt-equity regs (T.D. 9790) issued in October 2016.

Finance ministers of the European Union's three Nordic countries have urged their partners to shelve a plan to tax large corporations for their digital turnover, saying it could damage the European economy.

Philippine President Rodrigo Duterte said hewill let lawmakers decidewhat to dowith a tax law that his administration lobbied for and is now being partly blamed for rising prices.

The renaissance in capital spending the tax cutwas supposed to bring about isn't showing up in the economic data.

The U.S., U.K., and India are among 28 countries that need to improve their domestic laws and regulations related to the first-ever exchange of global tax reports, the OECD said ahead of next month's exchanges. The OECD, in its first peer review of the reporting initiative released May 24, gave 28 jurisdictions one or more recommendations to modify specific parts of their legal and administrative framework.

The European Union's plans for a 3 percent digital transaction taxÔøΩon companies such as Alphabet Inc.'s Google, Amazon Inc. and Facebook Inc.ÔøΩis under fire for lacking legal backing because of problems identifying the location of consumers targeted by advertising.

The leading European Union business lobby group is accusing the European Commission of adopting a "guilty until proven innocent" approachwhen it comes to anti-tax abuse provisions in pending legislation designed to stop letterbox companies.

The Australian tax authority is preparing for a public court battle May 31,when itwill appeal a tax court's decision that favored global mining giant BHP Billiton Ltd. in a dispute over profit attribution under controlled foreign company rules.

Concerns are being raised that the Australian government's decision to go it alone and impose a new tax on multinational digital companies preempts multilateral efforts and could have adverse consequences.

European Union finance ministers have formally approved controversial rules thatwill require accountants, bankers, lawyers, and other tax professionals to report certain aggressive tax planning arrangements to national revenue authorities.

The European Commission's probe into a U.K. tax scheme may hit an unprecedented number of companies for its investigations on governments' specialized treatment of global businesses.

Foreign employees of non-resident companieswill be tax-liable regardless of the length of time they stay in the country, according to a draft proposal detailed by Sweden's Finance Ministry May 17. If, as expected, the proposal become law, foreign companies employingworkers in Swedenwill be required to deduct tax from salaries even if the company doesn't have a permanent establishment in the country.

The Israel Tax Authority stands to refund millions of shekels in VAT after two Israeli publishers successfully appealed the authority's decision to apply VAT to online advertising space used by Google.

Global corporate deal making is on fire. The danger is that a lot of value ends up getting burned. This year so far has seen an explosion of bidding activity and U.S. companies pursuing record volumes of deals at home and even more so overseas.

Global dividends grew by more than 10 percent in the first quarter of 2018, boosted by favourable exchange rates and as US companies started to pay outwindfalls from President Donald Trump's tax reforms.

Brazil's Senate has completed congressional approval of key legislation that expands thewindow periodÔøΩto 48 months from three monthsÔøΩduringwhich information technology and communications companies can receive tax incentives.

Amazonweb Services' decision to start collecting and remitting value-added tax in Israel through a local subsidiary could change theway multinational companies conduct business. It could also eventually satisfy the Israel Tax Authority's aim of collecting VAT and income tax from all foreign digital companies selling products and services in the country.

European Union finance ministerswill shrink the bloc's tax haven blacklist to seven countries from nine on May 25 by removing the Bahamas and Saint Kitts and Nevis. The change comes after both Caribbean island countries made commitments to conformwith EU transparency and fair corporate taxation criteria.

Chile, Malaysia, Turkey, and Uruguay abolished or amended tax regimes after theywere found to violate international measures that aim to counter base erosion and profit shifting, the OECD announced.

Australiawants comments on draft rules to tighten tax laws applying to foreign investorswho use an arrangement, called stapled structures, to convert trading income into more favorably taxed passive income.

Music or books downloaded from the internet are subject to taxation, Chile's tax authority ruled, but it hasn't decidedwho should pay.

The U.S. lost a bid to help Apple Inc.'s court fight against the European Union's order to pay Ireland a record 13 billion euros ($15.3 billion) in unpaid taxes.

German tax officialswant Airbnb Inc. to surrender all data on its German users to track down tax evaders, and have asked Irish authorities to help, a spokesperson from the Berlin Administration of Finance told Bloomberg Tax.

Excerpts are available of S. 2826, the Fair Tradewith China Enforcement Act, introduced by Sen. Marco Rubio, R-Fla.,whichwould eliminate the reducedwithholding rates for Chinese residents and impose a surtax on specific income from China, among other things.

Since December 2017, tax conferences in the United States have focused substantially on the H.R. 1 tax reform legislation. No surprise there ÔøΩ the 2017 changes are among the most significant in the past thirty years. But over the past five months, through attending numerous tax conferences featuring international tax practitioners, I've observed some interesting developments in the nature of the discussions and debates at these conferences. These changes are pretty revealing about the process of absorbing the true impact of the new tax law, particularly in international tax. Thisweekend's ABA May Tax Section Meeting inwashington, D.C. highlighted some of these trends.

The U.N. published on May 18 its updated model tax treaty,which features new provisions covering fees for technical services and entitlement to treaty benefits.

The code changes made by the Tax Cuts and Jobs Act (P.L. 115-97) havewreaked havoc on international rules, creating taxpayer uncertainty in how to apply the law and headaches for the government in how towrite interpretive rules. Much of the complexity comes from a single source: the delineation of global intangible low-taxed income as a separate basket under section 904(d). That construct brings expense allocation rules into play, potentially restricting U.S. multinationals' ability to claim foreign tax credits on GILTI in unexpectedways.

Shares of small U.S. companies climbed to a fresh recordwednesday, reflecting their gains in the recent tax overhaul and signs that U.S. growth once again looks more robust than that from overseas.

Large US technology companies are investing far more in their businesses as a percentage of revenues than many non-tech peers in spite of spending billions of dollars on share buybacks at the same time. US companies are expected by analysts at JPMorgan to buy back about $800bn of their stock this year,with corporate coffers boosted by corporate tax reform.

The European Union's top court has cleared theway for new taxes on cross-border broadcasting services, rejecting an appeal against the move from theworld's largest online television network.

Chinawill allow multinationals to self-assesswhether they are eligible for preferential tax rates offered to industries the governmentwants to promote, a move tax professionals in China cautiouslywelcomed, since it alsowon't protect taxpayers from future tax probes.

The U.K. government's receipts from "Google tax" charges on global businesses have increased 60 percent, a signal the measure may beat its original forecasts for a second straight year. The U.K. government's diverted profits tax, or DPT, forms part of its attempts to combatwhat it perceives as abusive cross-border tax planning from global companies.

If the U.S. doesn't agree by June 2019 to exchange the bank account details of non-U.S. citizenswith governments around theworld, itwill be placed on the European Union's tax haven blacklist.

US companies' pile of bond investments is shrinking as they prepare to radically change theway they spend their excess cash.

The Organization for Economic Cooperation and Developmentwill scrutinize part of the new U.S. tax law, specifically the FDII provisions, in the fall to see if it violates international standards, a U.S. Treasury official said. The U.S.will defend the law, Doug Poms, international tax counsel at the U.S. Treasury Department, said May 11.

A proposed tax on financial transactions in 10 European Union countries could generate about 19.6 billion euros ($23.5 billion) of annual revenue, though Brexit could make collection more difficult, according to a new estimate.

The European Union's tightened company ownership transparency rules crossed the final legislative threshold May 14when EU member states backed the measures. Therules, among theworld's toughest, are meant to expose shell companies used for tax evasion and money laundering.

An expansion of a Brazilian tax incentive program for information technology and communications firms has passed its first congressional hurdle. Under the government's program, companies are exempted from paying Brazil's PIS and Cofins social contribution taxes and excise taxes on their investments in research, development, and innovation. To qualify, companies must demonstrate they are investing at least 5 percent of their gross revenues in these areas.

Practitioners are eagerly awaiting guidance from Treasury specifying how new international tax provisionswill apply in the context of consolidated groups, but some provisions are piquing more interest than others.

Two critical chapters of the OECD's transfer pricing guidelines are ripe for revision, an OECD official said. The OECD announced May 9 it is considering starting two new projects to revise the guidance in Chapter IV of the guidelines on administrative approaches to resolving transfer pricing disputes, and Chapter VII on pricing intra-group services.

Tax guidance from the Australian tax office could trigger a structural review of foreign parent companies' Australia-based subsidiaries, if these had been consolidated for tax purposes. In May 9 draft guidance, the Australian Tax Office set out details of the circumstances underwhich a foreign entityÔøΩwhich has joined a consolidated groupÔøΩwon't have its tax costs reset.

The European Union moved closer to agreement on provisions for a new destination-based VAT system after a contentious element of the planwas dropped. EU presidency holder Bulgaria dropped the controversial "certified taxable person" provision from the four pending "quick fix" provisions proposed in October 2017, according to a confidential EU document seen by Bloomberg Tax. The provisionwould allow qualified companies to continue using the current value-added tax scheme that relies on reverse charging for cross-border sales.

Four industriesÔøΩtechnology, pharmaceutical, manufacturing, and banking and financial servicesÔøΩare among those that could lose foreign credits and other tax benefits under a new tax on income from intangible assets, like patents and trademarks, and other kinds of assets overseas.

States normally excuse corporate income taxes on foreign income. Mechanically, these exclusions usually involve a special state-level dividends received deduction for foreign dividends and deemed dividends. So states that startwith federal taxable incomewill first include GILTI in the state tax base, then apply their DRD for foreign dividends to GILTI. State DRDs generally do apply to federal deemed dividends. But a state DRD may not cover 100 percent of the dividend; often there is a sliding scale based on proportionate ownership.

Digital-economy companies affected by international tax reform are not limited to thewell-known GAFA (Google, Amazon, Facebook, Apple) tech giants. Video game companies share many characteristicswith GAFA companies andwill be similarly affected by tax reform.