Int'l Tax News

Final U.S. anti-inversion regulations thatwould follow up on temporary and proposed regs are forthcoming, butwhat this means for a prominent case currently on appeal is uncertain. The news came to light in a request from the government in its March 9 motion for a stay of briefing in its appeal to the Fifth Circuit in the closelywatched case, Chamber of Commerce v. IRS, No. 17-51063. The opening brief is due March 16, but the government is requesting a stay until the regs are published.

EU-based online merchants insist an upcoming European Commission digital tax proposal targeting online platforms such as Amazon and Airbnbwill drive sales out of Europe to non EU-based companies, especially those in China.

Multinational companies shifted profits through Ireland – an accounting technique designed to avoid corporation tax - equivalent to almost a quarter of the country's GDP between 2010 and 2015.

The U.S. Chamber of Commerce has identified many issues arising under the Tax Cuts and Jobs Act (P.L. 115-97) that require regulatory guidance or clarification, suggesting some solutions and urging Treasury and the IRS towork closelywith the business community as it implements the recent tax law changes.

In this article, the authors discuss Japanese 2017 tax reforms thatwill become effective in April, aswell as proposed 2018 reforms.

The launch of a joint tax risk assessment pilot has been successful, and lessons from the programwill eventually be sharedwith the inclusive framework on base erosion and profit shifting, an IRS official said.

While developing countries have cited sovereignty as a reason against adopting mandatory binding arbitration in the past, many are now taking await-and-see approach instead, according to the OECD's deputy tax chief.

This article contains Chapter 1 of a book that explores a topic that has been highly controversial in recent years: the use by multinational companies of "base erosion and profit shifting" tax planning structures to reduce their tax liabilities in countrieswhere they conduct business, including theworld's lower-income developing countries. In this installment, the author provides an introduction to BEPS and an overview of the book.

The Australian government has amended its proposed hybrid mismatch legislation to address branch mismatch arrangements and introduce a targeted integrity rule to neutralize the effects of arrangements intended to circumvent the proposed rules.

Multinational group financial data support the view that some EU countries ÔøΩ especially Ireland, Luxembourg, and the Netherlands ÔøΩ have increased their own tax bases at the expense of others, according to a European Commission report.

The IRS has provided answers to questions regarding return filing and payment obligations arising under the new section 965 transition tax, noting that the provision may give rise to a 2017 tax liability for a calendar year U.S. shareholder holding an interest in a calendar year specified foreign corporation.

In its updated paper on taxing digital companies, HM Treasury has tentatively recommended allowing countries to tax social media and search engine providers on a share of residual profit determined by a user-based allocation factor.

Brussels is preparing to hit tech giants such as Google, Facebook, Applewith a "digital tax" on EU turnover thatwill raise around ÔøΩ5bn a year, according to draft proposals seen by the Financial Times. The European Commissionwill unveil a three-pronged digital tax nextweek that targets revenues rather than profits, heeding calls in France, Germany and Britain for a tougher approach to tax avoidance by tech companies.

Vietnam quietly secured a pair of concessions in a new Pacific Rim trade deal, giving it greater leeway to regulate and tax digital commerce.

The European Parliament overwhelmingly approved terms for tax alignment between the EU and the U.K. once it leaves the bloc. Members of parliament have previously said the alignment is needed to prevent the U.K. from adopting corporate tax levels far below those in the EU, as many are expecting.

The European Commission has released the final report of its study of aggressive tax planning (ATP)which has as its aim to provide economic evidence of the relevance of ATP structures for all EU Member States. It says that a solid understanding of the extent and channels of ATP is fundamental to draw policy conclusion and recommendations for the fight against unfair tax practices. Among other conclusions, it finds consistently higher profitability in MNE groups if they are located in a relative low tax country.

Some features of Estonia's corporate tax system might be used by multinational companies for aggressive tax planning, says a new report by the European Commission.

The European Union has been pushing the OECD to develop solutions for taxing the digital economy ÔøΩ andwith the lack of clear direction, it's decided to take matters into its own hands. The European Commission's official report on a proposed EU approach to taxing tech companies is expected this month (although Politico leaked a draft outline in late February). The EU proposals are intended not just to direct members on how to tax digital profits, but also to shape the OECD's path; the organization's interim report on taxing the digital economy is due to the G-20 in April, and a final report is expected in 2020.

The action 2 report from the OECD's base erosion and profit-shifting project may be instructive for taxpayers attempting to interpret the phrase "other tax benefit" under the hybrid dividend rules in IRC section 245A. Speaking March 9 on a panel on international tax developments at the Tax Law Conference of the Federal Bar Association Section on Taxation inwashington, Douglas Poms, Treasury international tax counsel, said taxpayers evaluatingwhether a payment from a controlled foreign corporation to a U.S.-based C corporation is a hybrid dividend under section 245A(e) because of the CFC's receipt of a deduction or other tax benefit for the dividend in a foreign jurisdiction may find it helpful to review the BEPS action 2 report on hybrid mismatches.

Praising the OECD's base erosion and profit-shifting project overall, an official from Singapore's Inland Revenue Authority (IRA) has revealed reasons for the country's hesitation about some provisions of the multilateral agreement.

The BEA survey of global operations of U.S. multinationalswere relatively unchanged in the most recent in 2015 according to preliminary results from the 2015 Annual Survey of U.S. Direct Investment Abroad, although noteworthy differences in activity can be seenwhen these measures are viewed by geography and by industry.

Theworld Investment Report 2017 makes an argument for a comprehensive investment policy framework for the digital economy, attempting to demonstrate how aligning investment policieswith digital development strategieswill play a role in the gainful integration of developing countries into the global economy.

The United Nations Conference on Trade and Development has released a special edition of its Investment Trends Monitor on the implications of U.S. tax reform of international investment, saying that the U.S. reform includes changes to the corporate tax regime that are likely to have significant implications for global Foreign Direct Investment. The report says that the stimulus to investment in the U.S. provided by a lower tax rate and full investment expensing could lead to higher inward investment, and possibly to further re-shoring of manufacturing activity.

The OECD's Framework Programme for Research and Innovation has released a review of national R&D incentives and estimates of R&D tax subsidy rates for 2016. The report provides an overview of the main design features of R&D tax incentives in OECD, EU and other major economies based on data collected through the 2016 OECD-NESTI R&D tax incentive survey.

The European Commission has published its full redacted opinion of its decision that Luxembourg granted illegal state aid to Amazon of around ÔøΩ250 million, and that Luxembourg must now recover the illegal aid.

SpeakerPaul Ryan(R-Wis.) is fighting an uphill battle to keep the focus on the GOP's tax cuts and the economy in the face of a news cycle dominated byPresident Trump'swhite House.

Ryan has aggressively talked up the benefitsof the tax cuts, promoting the law lastweek in a conference callwith a group backed by GOP donors Charles and David Koch and in a visit to Home Depot's Store Support Center in Atlanta.

Big multinationals are paying significantly lower tax rates than before the 2008 financial crisis, according to Financial Times analysis showing that a decade of government efforts to cut deficits and reform taxes has left the corporateworld largely unscathed. Companies' effective tax rates ÔøΩ the proportion of profits that they expect to pay, as stated in their accounts ÔøΩ have fallen 9 per cent (two percentage points) since the financial crisis. This is in spite of a concerted political push to tackle aggressive avoidance.

A greater emphasis on mandatory binding arbitration under tax treaties is satisfying corporate taxpayersÔøΩwho see the move as increasing tax certaintyÔøΩbut leaving developing countries concerned, a UN official said.

Ohio-based auto parts supplier Dana Inc. plans to relocate its corporate address to the U.K. for tax purposes if a takeover bid announced Friday is successful, a move that comes justweeks after passage of U.S. tax legislation designed to discourage American companies from doing just that.

The EU is investigatingwhether Britain has failed to respect single market laws by not imposing enough tax on commodity derivatives trades, according to the UK Treasury.

The Internal Revenue Service is closely examining how companieswith complex structures can calculate a deduction for intangible income derived from serving foreign markets, an agency official said.

A pending legal dispute between a U.K.-based online auction company and the country's tax authorities illustrates the challenge of applying value-added tax in a burgeoning digital economy.

Sweeping cuts included in China's tax reform plan, totaling $126 billion,will be a major boon for multinational companies.

The U.K. government has cleared theway for the European Union to blacklist the Bahamas as a tax haven after British officials dropped their opposition to the move.

The European Commission has named and shamed seven of its own member statesÔøΩBelgium, Cyprus, Ireland, Hungary, Luxembourg, the Netherlands and MaltaÔøΩfor engaging in "aggressive tax planning."

The European Union has tasked the OECD's forum on harmful tax practiceswith reviewing U.S. tax reform, the latest step in the bloc's scrutiny of the new law. The EUwants the OECD to conduct a "fast-track" review of the U.S. tax changes, following February discussions among EU finance ministers on how to react to the law, andwhether to mount retaliatory measures in theworld Trade Organization, an EU diplomat told Bloomberg Tax.

Tax practitioners predict that Australia's proposed changes to hybrid mismatch arrangementsÔøΩwhich exploit tax deduction differences between different jurisdictionsÔøΩwill have far-reaching implications for loan structures from low-tax jurisdictions.

Senate Democrats onwednesday proposed repealing major pieces of thejust-passed tax law, in a plan thatwould raise taxes on corporations, estates and high-income households to pay for $1 trillion in new infrastructure spending. The proposalwould set the corporate tax rate at 25%, up from today's 21% but stillwell below the 35% thatwas in place until President Donald Trump signed the new tax law in December.

Multinational companies have made such extensive use of Ireland to funnel royalties ÔøΩ a commonway to shift profits and avoid tax ÔøΩ that these payments averaged 23 percent of the country's annual gross domestic product between 2010 and 2015, according to a European Commission report seen by the Financial Times.

In December 2017, Congress enacted the most sweeping set of tax changes in a generation, lowering statutory tax rates for individuals and businesses and altering the tax base. The law generated substantial debate on many issues, notably about its long-term impact on the capital-labor ratio, GDP perworker, realwages and, in the transition to the new steady state, economic growth. Prior to enactment of the tax law, one of the authors (Robert) joined a group of economists to argue that the corporate-tax part of the tax reformwould have substantially positive long-term effects in all of these dimensions. The other author (Jason)was a consistent critic of the law. Since enactment, the authors prepared this joint analysis of themacroeconomic consequences of the tax changes. The authorshave different interpretations of the results and their implications for public policyÔøΩwhich are discussed in separate concluding sections.

The recent changes to the U.S. tax lawwill increase economic growth modestly but not fast enough to pay for themselves, according to a new estimate from a pair of economists from different sides of the political spectrum. In otherwords, the additional government tax revenue generated by higher growthwon't be enough to offset the drop in revenuedue to tax cuts.

U.K.-listed companieswill pay $910 million in tax from a one-off U.S. levy on multinational corporations' overseas earnings, according to an analysis of corporate filings by Bloomberg Tax.

Dutch plans to implement an EU tax-avoidance directivewill spur higher tax bills for companies thatwere leftwith a large volume of debt following acquisitions by private equity groups, practitioners say.

The European Unionwill demand that the U.K. avoid "undercutting" member nations' tax rates after next year's Brexit, as part of any post-departure trade agreement between the EU and the U.K. The EUwill insist on terms to preventwhat it fearswould be unfair corporate taxation, including rates in the U.K. dependent territories.

The American Investment Council has urged Treasury to clarify the scope of the Tax Cuts and Jobs Act (P.L. 115-97),which repealed section 958(b)(4), saying that the legislative history of section 958 shows that Congress did not intend to expand the controlled foreign corporation rules to apply to foreign corporations thatwere not controlled by U.S. persons.

Pam Olson of PwC has asked Treasury to address two anomalies that have occurred in measuring the cash position under section 965's transition tax, the first ofwhich involves cash contributed or lent by the U.S. parent to its foreign subsidiaries in completing an acquisition and the second is Treasury's authority to promulgate regulations carrying out section 965's purpose.

Germany hopes to see some progress on a "Joint Corporate Taxwith France" by the end of 2018, said Chancellor Angela Merkel.U.S. corporate tax cuts have reinvigorated thework of Germany and France on a common corporation tax, Merkel said during herweekly video podcast March 3. A common corporation taxwould allow Germany and France to agree to a joint corporation assessment basis, she said.

Corporate tax managers are scrambling to keep their foreign related-party payments below the 3 percent BEAT threshold, as the discussion at IFA demonstrated. Some tax managers have even asked that all related-party payments be approved by the tax department. No onewants to be the personwho approved a payment that tipped the company into BEAT. C.N. "Sandy" Macfarlane of Chevron Corp. called the BEAT "draconian" and said hewould appoint an internal BEAT coordinator. David Lewis of Eli Lilly fretted about the possible state reaction to BEAT.