Int'l Tax News

European Union finance ministers are preparing to counterwhat they deem discriminatory elements of the U.S. tax reform law. At the behest of France, EU finance ministers Feb. 20will beginwork on a strategy to address provisions in the law such as the base erosion and anti-abuse tax (BEAT) and the global intangible low-taxed income scheme (GILTI).

Siemens AG expects to spend more on compliance as the German company adjusts its accounting in accordancewith the new U.S. tax law, the company's head of tax told CFO Journal. The maker ofwind turbines, trains and motorswill be subject to the new base erosion and anti-abuse tax ÔøΩknown as BEATÔøΩ starting from Oct. 1, said Christian Kaeser, Siemens' head of tax.

U.S. tax reform has bolstered GKN Plc's attempt to rebuff a 7.3 billion-pound ($10.2 billion) hostile takeover from Melrose Industries Plc in a sign the new law may play a key role in business deals.

Automobile manufacturers like Hyundai Motor India, Mercedes-Benz India, and General Motors Indiawill have to consider procuring auto parts domestically or face a higher tax bill, following a tax increase on imported parts.

Cisco Systems Inc. is the latest technology giant to bring home huge sums of cash held overseas, a beneficiary of the newU.S. tax law. The networking-gear maker saidwednesday itwould repatriate $67 billion of its foreign cash holdings to the U.S. this quarter, in one of the largest repatriation plans yet revealed. Cisco plans to spend much of the newly repatriated cash on share buybacks and dividends.

On February 3, 2018, China's State Administration of Taxation set out new rules on the disallowance of tax treaty benefitswhere an entity fails to demonstrate it is the beneficial owner of Chinese assets fromwhich passive income is derived.

Executives around theworld have embracedthe overhaul's big reduction in the federal corporate-tax rateÔøΩfrom 35% to 21%. Less-well-known provisions in the new code, however, could hurt some companies based outside the U.S. and doing business in the country. One of the biggest potential threats is the base-erosion and anti-abuse tax (BEAT).

President Donald Trump and Republicans are betting the 2017 tax overhaulwill invigorate the U.S. economy after a long but slow expansion, putting controversial economic theories about growth to a crucial test.

The amount of tax the U.K.'s tax authority collected from payroll investigations into the country's largest businesses increased by nearly one-third in the last year, totaling 503 million pounds ($694 million), according to figures released by law firm Pinsent Masons LLP.

The left-leaning Social Democrats' takeover of the country's powerful finance ministry for the first time in almost a decade is essentially the biggest tax overhaul in the newly formed coalition agreementwith the Christian Democrats, economists and tax attorneys told Bloomberg Tax. The agreement envisions a harder push toward tax harmonizationwithin the European Union, the gradual dismantling of decades-old tax treatments and heightened investments in digital infrastructure and social programs.

The Australian government has issued draft legislation to close a loophole involving the use of trusts and partnerships to circumvent anti-avoidance law targeting multinational companies.

China is the U.S.'s largest trading partner and theworld's second largest economy, so the largest tax reform in the U.S. since the 1980swill, of course, present both risk and opportunities for both countries.

President Trump said Monday that hewill propose a tax on imports as soon as thisweek in an effort to crack down onwhat he believes are unfair trade practices.

The Netherlands,which is one of the main gateways for American business to enter the EU market, faces tough tax competition from the US Tax Cuts and Jobs Act. But the US changes may have made things more difficult for the EU as awhole, negatively impacting the Dutch market.

A European Union action to combat hybrid mismatch structureswill take effect for some member nations in January 2022ÔøΩbut U.S. tax reform may have solved the problem already.

The Treasury Department is consideringwriting an exception to rules on the transfer of intangibles and acting on the earnings-stripping rules, an official told Bloomberg Tax. The government is considering a retroactive exception for corporate values known as "foreign goodwill" and "going concern" under the tax code Section 367 intangibles rules, according to a Treasury official.

Singaporewill pare back tax incentives covering intellectual property as part of a global fight against tax evasion, using new legislation to expand thewindow inwhich companies can qualify for other tax breaks.

U.S. tax reform is counteracting the higher costs that multinational companies are facing from the OECD's project to quash tax avoidance, according to an analysis of corporate filings by Bloomberg Tax.

Northern Irelandwon't cut its corporate tax rate to 12.5 percent until at least April 2019 because of the ongoing political failure to restore the region's devolved parliament. The delay of at least one year is a major blow to the U.K.'s smallest country's ambitions of attracting more foreign investorswith a corporate tax rate thatwould match neighboring Republic of Ireland.

The IRS hopes a groundbreaking OECD pilot program designed to limit cross-border disputeswill help identify transfer pricing issues that can be removed from the audit process, an IRS official said. A group of eight tax administrations and multinational companies headquartered in Australia, Canada, Italy, the Netherlands, Japan, Spain, the U.K., and the U.S. are participating in the International Compliance Assurance Program (ICAP).

The IRS is "grappling"with the new tax law's base erosion and anti-abuse tax (BEAT), and how to dealwith it in situationswhere double taxation may arise, especiallywhen companieswork toward negotiating advance pricing agreements.

Singapore may unveil an e-commerce tax in nextweek's budget, setting the tone for a region that's grapplingwith online retail's assault on brick-and-mortar vendors.

The Australian government has proposed legislation thatwould incorporate approved articles of the OECD's multilateral instrument into domestic law, including rules on treaty abuse, permanent establishment avoidance, and mandatory binding arbitration.

Nine large companies, alongwith a group of major business leaders, have endorsed a set of "responsible tax principles" covering such issues as compliance, transparency, and business structure. The seven principles, released in a February 9 report, address accountability and governance, relationshipswith tax authorities, seeking and accepting tax incentives, and supporting effective tax systems. They also give businesses a framework to make their tax practices more responsible and transparent.

The OECD has recently launched a new program – the International Compliance Assurance Programme – being spearhead by the Forum on Tax Administration that is aimed at providing assurance to multinationalswith regards to their transfer pricing (TP) affairs.

The Indian Central Board of Direct Taxes on February 7 announced that it entered into its first ever bilateral advance pricing agreementwith a US firm, in cooperationwith authorities in the US.
In total, during January 2018, the CBDT entered into five unilateral APAs and two bilateral APAs.

The Tax Cuts and Jobs Act (TCJA) is expected to reduce taxes for the country's 500 largest companies by between $75 billion and $100 billion in 2018, boosting their profitability by 8 percent. Nearly 300 companies have announced bonuses, raises, or boosts to 401(k) contributions.
At first glance, this isn't just good news, its great news. But after the bonus buzz fades,whatwill companies dowith their extra money?will they use it to make more capital investments in the US to boost productivity, and eventually,workers'wages?

In yet another round of country-by-country reporting guidance, the OECD has offered further details on specific issues, including the definition of total consolidated group revenue. The inclusive framework on base erosion and profit shifting,which brings together more than 100 developed and developing countries to implement the OECD/G-20 BEPS project package, released the updated guidance on February 8 to address two topics.

French spirits maker Pernod Ricard SA expects a limited impact from the new U.S. tax law, according to the company's finance chief. The new law "won't have a significant impact" on Pernod's group tax rate, Chief Financial Officer Gilles Bogaert said Friday in an interviewwith CFO Journal. "The gains are entirely offset by the broadening of the tax base," Mr. Bogaert said.

A new global tax apportionment system backed up by minimum rates is needed to stop a corporate tax rate "race to the bottom" in thewake of the U.S. corporate tax reform, a report from a tax reform lobby group has said. The Independent Commission for Reform of International Corporate Tax is calling for a new "unitary" approach to corporate taxation, saying this is needed because the arm's length principle and transfer pricing rules have failed and the OECD's Base Erosion and Profit Shifting (BEPS) reforms are inadequate.

The increasingly aggressive pursuit by Germany of common European tax treatments is polarizing economists, attorneys and politicians,who either see the move as courageous or completely off-base.

Australia's long-awaited draft guidelines on applying the diverted profits tax law targeting multinational companies is being criticized for potentially creating an uncertain environment for large companies, tax adviser, and auditors.

China's State Administration of Taxation (SAT) has released a public notice providing new beneficial ownership rules to determine foreign taxpayers' eligibility for treaty benefits on Chinese-source dividends, interest income, and royalty income. Public Notice [2018] 9 (Public Notice 9, dated February 3) grants treaty benefits in cases inwhich there is no abuse of treaty intent and result, and adopts the results of action 6 of the OECD's base erosion and profit-shifting project to enhance the certainty of eligibility for treaty benefits and to more effectively prevent treaty abuse.

Ireland's tax system, anchored by its 12.5 percent corporate tax rate, is a key factor in its strategy to keepwinning in the digitized "new, new economy," Finance Minister Paschal Donohoe said.

The Australian Taxation Office (ATO) has released draft guidelines on diverted profits tax (DPT) risk assessment, including guidance and examples onwhether an arrangementwill have sufficient economic substance to be exempt from the tax.

The two political parties seeking to form Germany's next governmentwant big companies to pay more tax, according to a coalition agreementwhose text singled out U.S. tech giants by name."We support fair taxation of large companies, in particular Internet concerns like Google, Apple, Facebook and Amazon," according to a brief passage in their 177-page coalition pact published onwednesday.

Allstate Corp. Chief Executive Officer Tomwilson said the insurer's $506 millionwindfall from the U.S. tax overhaulwill be used to invest in growth. "Firstwe're going to put more money into marketing, secondwe're going to expand distribution in the Allstate agencies and some of our other businesses,"wilson saidwednesday in an interview discussing fourth-quarter results.

The OECD released a list of approaches that 25 countries applyÔøΩor intend to applyÔøΩto multinational companies' global tax reporting. Companies and governmentswill be able to use the compilation of approaches to determinewhether a country requires a global tax report to be filed in a specific situation, the Organization for Economic Cooperation said in its document published Feb. 8.

Australia's government has appealed to lawmakers to back its flagship economic plan to cut corporate taxes as it seeks to respond to falls in US and UK company tax rates. Canberrawants to progressively cut corporate taxes from 30 per cent to 25 per cent by 2025 for all companies, in a bid to boost growth and compete for investment.

More EU member states are starting to express that they share Ireland's concerns about the EU's plans to tax the digital economy,which are now expected to come out in March. Irish Finance Minister Paschal Donohoe in a February 6 interviewwith Reuters said that based on his discussionswith EU colleagues since an informal meeting of the Economic and Financial Affairs Council in September 2017, a growing number of countries are starting to share Ireland's concerns about the taxation of the digital economy.

After encountering stiff resistance from brokerage firms, the South Korean government has suspended a proposed regulation setting a lower threshold forwithholding tax on share sales by foreigner investors.

Israel's government could help sustain a rebound in the Tel Aviv Stock Exchange by reducing red tape and aligning taxes on capital gainswith taxes on other investments like real estate, the head of the exchange told foreign reporters.

German tax legislation imposing stricter tax treatment for dividend income from subsidiaries in a foreign country, compared to those in Germany, violates European Union free movement of capital laws, the EU's highest court said.

The total value of global merger and acquisition deals involving U.S. targets reached $154.4 billion in January, the strongest start for any year since 2000, according to Bloomberg data compiled by Bloomberg Law. The recently enacted tax overhaul,whichwent into effect Jan. 1, is among the factors expected to drive more deal activity this year, practitioners said.

GlaxoSmithKline PLC's profitwill climb as a result of the lower corporate tax rate in the U.S., the company's single most important market, according to finance chief Simon Dingemans. The British drug maker derives close to 40% of its sales from the U.S. and expects to pay a smaller share of its profits to the U.S. government now that the corporate tax rate is 21%, down from 35% previously.

By: Kyle Pomerleau

The new tax code is projected to improve the United States' current ranking from 30th among the 35 Organisation for Economic Co-operation and Development (OECD) countries to 25th, an improvement of five places.

EU member nations are considering making bloc-wide research and development tax deductions optional, or eliminating them altogether, as part of changes to the pending Common Corporate Tax Base (CCTB).

Archer Daniels Midland reported sharply higher profits in the fourth quarter, as the benefits of US tax reform overcameweaker operating performance at the global grain merchant and processor.

Offshore tax evasion, international money laundering, and aggressive international tax planning significantly reduce government revenues. Governments struggle to enforce their tax laws to constrain these actions, and they are inhibited by a lack of information concerning international capital flows. The main international policy response to these developments has been to promote global financial transparency through heightened cross-border exchanges of tax information. The Article examines elements of optimal cross-border tax information exchange laws and policies by focusing on three key challenges: information quality, taxpayer privacy, and enforcement.

Hong Kong on February 2, 2018, ratified an Ordinance to enable the territory to soon join the OECD's Multilateral Convention on Mutual Administrative Assistance in Tax Matters and thereby more simply and more broadly agree to exchange tax informationwith other countries' tax authorities.