Int'l Tax News

The European Commission launched a public consultation October 26 seeking input on how the EU should address the taxation of the digital economy.The consultationwill help the commission develop policy proposals regarding changes to tax policy affecting the digital economy, according to the commission's consultation notice.

Large U.K.-based companieswill be able to submit claims to surrender carried forward losses using group relief under new proposals made by the U.K.'s tax office.

Airbnb Inc., Sony Corp., and Spotify Ltd. are among 50 companies thatwarned the OECD about how gross basis taxation could harm the digitalized economy,while also advising against unilateral actions by individual countries.Any industry-specific taxation of the digitalized economywould be counterproductive, they said in comments published by the OECD on October 25th.

BEPS Action 5 – Countering harmful tax practices more effectively by taking into account transparency and substance is one of the four BEPS minimum standards. To date, 102 jurisdictions have committed to its implementation, and 2017 is a decisive year in translating that commitment into action. Achim Pross, Kevin Shoom and Melissa Dejong of the OECD, discuss the first results of thework under BEPS Action 5, and its significance in achieving the goals of the BEPS project

The EU is to launch an investigation into a British government scheme that may help multinational firms pay less tax, the Guardian has learned.

Margrethe Vestager, the EU competition commissioner,will announce on Thursday that she is opening an in-depth investigation into a UK tax scheme that exempts multinationals from anti-tax avoidance measures. Officials think the special exemption for multinationals may break EU competition rules by allowing them to pay less tax than domestic-only rivals.

President Mauricio Macri, buoyed by a sweeping nationwide victory in midterm congressional elections Sunday, vowed to push aheadwith tax cuts and austerity measures aimed at overhauling Argentina's economy.

Today,we function in aworldwhere businesses are rapidly transforming their operations by adopting new technologies and solutions to enter new markets and expand their global business presence. The concept of Permanent Establishment (PE) is also evolving to keep pacewith this changing business environment – to facilitate reasonable and transparent taxation of cross-border transactions in this dynamic business landscape

In this report,we attempt to track the evolution of taxation of PEs in India – the how,when andwhy, and the consequences of establishing the PEs of foreign companies in the country. To do this,we first analyse the concept of PE in Indian tax legislations and India's bilateral tax treaties, and then examine international tax commentaries and landmark Indian judicial precedents, including some recent ones, to gain a clear perspective of how Indian jurisprudence has progressed over the years.we also assess the potential impact of BEPS AP 7 and the MLI on India's bilateral tax treaties and how this may affect companies doing andwanting to do business in the country.

The UnifiedFrameworkreleased byPresident Trump and the Big 6 tax negotiators on September 27, 2017, is intended to serve as a template for the tax-writing committees in Congress as they develop actual tax legislation, but is only a high-level document that leaves muchwork to be done by the committees in order to accomplish this potentially transformative shift from the existingworldwide and deferral tax system to a territorial regime.This article raiseskey issues that must be addressed by legislative drafters to bring about this transformational shift in the U.S. tax system and providesthoughts and observations on how the legislative drafters might address these key issues.

Awave of corporate inversions by U.S. firms over the past two decades has generated substantial debate,which hinges on a few key economic questions: Do U.S. tax laws disadvantage U.S.-domiciled companies relative to their foreign competitors? And, if so, do inversions improve the competitiveness of U.S. multinational firms both abroad and at home? This brief summarizes both old and new research that views these questions through the lens of corporations' global effective tax rates (ETRs), and finds that the stronger case seems to be that U.S.-domiciled corporations are often tax-disadvantaged and that they can improve their competitive position and increase their after-tax cash flow by inverting. Inversions indicate that something is fundamentallywrongwith the tax system. The brief concludes by discussing two feasible paths forward for reform.

Fromwhatwe have seen so far of the Republican tax plan, it appears itwill concentrate tax cuts on corporations and high-income households. Yet at the same time it is being marketed ÔøΩ to use President Trump'swords ÔøΩ as a "middle-class miracle." This seems like the political economy version of squeezing a square peg into a round hole. Butwith seismic political pressure to pass this tax cut, Republicanswill be less reluctant than usual to push the envelope on technical scoring issues. It is critical for Republicans to convince the public thatworkers, not shareholders,will benefit most from corporate tax relief.

Practitioners are trying to figure out how to take advantage of a favorable Tax Court decision preventing the government from using a revenue ruling to impose new rules for the taxation of capital gains of nonresident partners on sales of interests in U.S. trade or business partnerships. The taxpayer, a Greek corporation, had its interest in a U.S. partnership engaged in a U.S. trade or business completely redeemed.The court heldthat none of the gain on the redemptionwas effectively connected income taxable in the United States, refusing to defer to Rev. Rul. 91-32 (Grecian Magnesite, Mining, Industrial and Shipping SA v. Commissioner,149 T.C. No. 3 (July 13, 2017))

After months of negotiations, on October 10, 2017, a new business-minded Dutch government announced its political plans for the upcoming four years. These plans include various corporate tax proposals.

The relevant items for multinational enterprises (MNEs) doing business in the Netherlands are the reduction of the general Dutch corporate income tax (CIT) rate to 21% and elimination of the dividendwithholding tax. The government also is planning to introduce various measures to further counter international tax avoidance that alignwith EU and OECD BEPS recommendations.

Ireland's Department of Finance on October 19 published the Finance Bill 2017,whichwould implement changes announced by Finance Minister Paschal Donohoe in his budget speech aswell as additional antiavoidance measures. The finance bill also includes amendments to begin the process of implementing the OECD's Multilateral Instrument (MLI). The text of the finance billwas released alongwith an explanatory memorandum. A release by the Department of Finance also includes a list of Finance Bill 2017 provisions.

The Estonian presidency of the EU Council said it sees three short-term alternatives to an equalization tax on digital companies' turnover: amending member states' bilateral tax treaties, amending the anti-tax-avoidance directive (ATAD), or adjusting the European Commission's common consolidated corporate tax base (CCCTB) proposal.

The OECDwill likely have the five ratifications required for its multilateral instrument (MLI) to enter into force by early 2018, an OECD official said.Speaking during the OECD's seventh installment of the Tax Talkswebcast series on October 17, Sophie Chatel,whowas appointed the new head of tax treaty unit at the Centre for Tax Policy and Administration (CTPA) in July, said the OECD had received the first MLI ratification from Austria.

Tax measures announced by the new Dutch governmentwill benefit retail and manufacturing companies,while high-tech and leveraged companieswill bear the brunt of the compensatory measures, practitioners say. Although the surprise reduction of the headline rate and the abolition of the 15 percent dividendwithholding tax announced October 10thwere quick to draw praise from business lobbies and companies, practitioners are nowwarning that the government also plans to implement several measures thatwill cost companies money.

Washington is softening its position on European plans to impose taxes on US tech giants such as Apple and Google, officials said thisweek

The evolving attitude in recent dayswould mark a stark shift from American officials' frustration at previous efforts by European authorities to collect taxes from Silicon Valley firms.

Important progress is being made toward the elimination of harmful tax practices pursuant to the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project. The OECD/G20 BEPS Project delivers solutions for governments to close the gaps in existing international rules that allow corporate profits to "disappear" or be artificially shifted to low or no tax environments,where companies have little or no economic activity. Revenue losses from BEPS are conservatively estimated at USD 100-240 billion annually, or the equivalent of 4-10% of global corporate income tax revenues.

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Debates overwhether the right to tax residual profits of multinationals belongs to source or residence countries have traditionally pitted developing countriesagainst developed countries. Developing countries have been arguing for greater source-based taxation for years. Developed countries, meanwhile, have generally resisted big changes to the international tax system, holding firm to historical principles that give residence countries strong claims of tax, including the existing transfer pricing system.

In late 2015 the OECD and G-20 released their final base erosion and profit-shifting proposalswith 15 actions to provide governmentswith tools to combat BEPS. The actions include new or more stringent international standards and are meant to improve the coherence of international tax rules, reinforce focus on economic substance, and increase tax transparency.The German legislature has reactedwith the Anti-BEPS Implementation Actwhich focuses on aligning German transfer pricing documentation legislationwith OECD requirements, and includes a number of other measures.

The Irish government invites businesses and practitioners to provide feedback on its plans to update its international tax strategy, including how Ireland should incorporate the OECD's transfer pricing guidelines into national law and implement the EU's anti-tax avoidance rules. The government announced immediate changes in the budget, including a new limit to the amount of income againstwhich capital allowances for intangible assets businesses can deduct in a tax year, aswell as an increase on stamp duty on commercial transactions. The deadline for comment is the end of January, 2018.

Houseways and Means Committee Republicans agree that a foreign minimum tax on overseas corporate earningswill likely be a necessary part of moving to a territorial tax system. The Tax Reform Framework proposes taxing U.S. multinational companies at a reduced rate and taxing their foreign profits "on a global basis."white House and congressional leaders have been hesitant to call the provision a foreign minimum tax, an idea that many multinational corporations have opposed in previous tax reform bills.