Int'l Tax News

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Country-by-Country Confusion: Narrow BEPS Queries Abound

Global governments battling tax avoidance increasingly are pushing multinational corporations for a bigger picture of how andwhere they pay taxes, leading to increasingly narrow questions from company tax officers.
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IRS Guide to Transfer Pricing Not Being Followed: IG Report

The IRS should step up communication and quality review to improve transfer pricing audits, according to a report from the Treasury Inspector General for Tax Administration.

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Australia Proposes Uniform Withholding Rate for Foreign Fund Investors

As part of its effort to attract investment and promote the domestic financial services industry, the Australian government is considering adopting a 5 percentwithholding rate for payments made from an Australian investment fund to foreign investors from any country, regardless ofwhere the fund's assets are located, according to a consultation paper released by the government.

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Final Foreign Partnership Loan Rules Still Have Broad Reach

Multinational companies didn't get any major newswhen the IRS finalized rules to curb controlled foreign corporations from loaning money to foreign partnerships as away to duck taxes.
But that's not necessarily a good thing, tax attorneys said.

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Common Law Factors Still Matter for Final Debt-Equity Regs

Common law debt-equity principles still apply alongwith the newly finalized section 385 debt-equity regulations (T.D. 9790 2016 TNT 199-5: IRS Final Regulations), though compliancewith the four documentation "super-factors"will likely go hand in handwith common law compliance, according to both a practitioner and an IRS official.

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CFC Partnership Final Regs Maintain Proposed Rules' Approach

Guidance finalized November 2 on property held by controlled foreign corporations connectedwith partnership transactions largely stays in lock stepwith previously released guidance that expanded the antiavoidance rule in section 956 of subpart F and adopted an aggregate approach toward partnerships.

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Heating Up Transfer Pricing's Turf Battle

In this article, Feinschreiber and Kent discuss the recent Apple state aid ruling and Treasury's reaction.

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Section 385 regulations summary chart

  • By PwC
US Treasury and the IRS released final and temporary Section 385 regulations on October 13, 2016. These regulations addresswhether certain instruments between related parties are treated as debt or equity.
PwC has created a one-page (11 x 17) summary chart to help you think through these very complex regulations. Note that this summary chart should be your first step in analyzing how the regulations might impact your company.

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Canada Poised to Crack Down on Tax Planning

Canadian multinational companies can expect increased government efforts to crack down on tax planning, particularly offshore tax structures, alongwith a review next year of the advance tax ruling process, if recommendations by a parliamentary committee are adopted.

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EU Financial Transaction Tax Negotiators Agree on Taxation of Shares

The proposed financial transaction tax (FTT) in the EUwould address territorial implementation issues by first harmonizing taxation for shares in participating member states and then extending it to all shares following a transition period, unless a member state opts not to participate, according to a statement released by the EU Council.

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Industry Development on Pause Pending Tax Signal, Pfizer CEO Says

Pfizer Inc.'s failed $160 billion inversionwith Allergan PLC and its September decision not to execute a long-deliberated business separation have put observers on high alert for its next strategic move. The company's CEO said November 1 that thewhole industry is pausing on major business developmentwhile it awaits the coming election's consequences for tax policy.

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OECD Reviewing U.S. Handling of Double-Tax Cases

The OECD has started to review how effectively the U.S. and five other countries handle cases inwhich multinational companies assert double taxation under the mutual agreement procedure of bilateral tax treaties.
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Holding Companies More Than Double Foreign Tax Credit Claims

Holding companies claimed more than double the amount of foreign tax credits in 2013 than a year before, showing an increased reliance on dividends from overseas subsidiaries to fund their U.S. operations, according to data from the IRS.

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CCCTB Good For Business, European Commission Paper Says

Despite its cool reception from the international business community, the European Commission's proposal for a common consolidated corporate tax base (CCCTB)would reduce the cost of capital for multinational enterprises, resulting in more investment, higherwages, and economic growth, according to a recentworking paper released by the commission.

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EU Kicks Off Corporate-Tax Overhaul

Many companies doing business in the European Union could face big changes as the EU moves aheadwith an effort to keep multinationals like Apple Inc. from taking advantage of discrepancies in tax codes across the 28-nation bloc.
The European Commission, the EU's executive arm, published a proposal lastweek for a uniform set of rules on taxing corporate profits. The initiativewould require multinational companies to pay taxes based onwhere their assets and employees are located andwhere their sales take place.
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U.S.' Lew sees growing consensus for corporate tax-infrastructure deal

U.S. Treasury Secretary Jack Lew said on Monday he sees a growing bipartisan consensus in the U.S. Congress for using revenue from the repatriation of overseas corporate profits to fund infrastructure.
For the Reuters story, gohere.
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IRS official: Controversial Treasury rules should survive legal challenge

The Treasury Department's controversial rules aimed at discouraging companies from moving offshore to avoid U.S. taxes should be able towithstand legal challenges, the Internal Revenue Service (IRS) associate chief counsel says.

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OECD releases schedule for Action 14 peer reviews and invites taxpayer input

  • By OECD
On 20 October, the OECD released the key documents thatwill form the basis of the Mutual Agreement Procedure (MAP) peer review and monitoring process under Action 14 of the BEPS Action Plan. In accordancewith the Assessment Methodology, the reviewswill be conducted in batches,with the first batch commencing in December 2016. The first schedule of reviews is now available.

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Economic analysis predicts EU would benefit from CCTB, CCCTB

Economic modelling suggests that recent EU proposals for a common corporate tax base (CCTB) and a common consolidated corporate tax basewith formula apportionment (CCCTB)would result a fairer and more efficient tax systemwhilst maintaining, and perhaps improving GDP andwelfare, a paper released by the EU Commission October 27 concludes.

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The Effect of Financial Constraints on Income Shifting by U.S. Multinationals

Using a new methodology for measuring income shifting, the authors find, consistentwith predictions, that financially constrained firms shift less income from the U.S. to foreign countries than their unconstrained peers.

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Multibillion Apple tax bill spurs calls for reform

Lawmakers are seizing on the European Union's multi-billion dollar ruling against Apple to push their case for tax reform.

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Courts Likely to OK Debt-Equity Rules: IRS Attorney

Controversial earnings-stripping rules should survive the lawsuits that are almost certain to be filed under the Administrative Procedure Act, a top IRS official said.

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U.S. Will Continue Advocating in EU State Aid Cases

The Treasury Departmentwill continue to argue vigorously that the European Commission's state aid investigations, including the probe into Apple's tax structure, are a massive mistake.

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Flawed System Contributes to U.S. Multinationals' Tax Woes

Tax authorities around theworldwill continue targeting U.S. multinationals as long as the corporate tax system permits indefinite deferral of tax on their foreign earnings, according to Robert Stack, Treasury deputy assistant secretary (international tax affairs).

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News Analysis: The Backlash Against Tax Treaties and Free Trade

While bilateral tax treaties have long served as the building blocks of the international tax system, doubts are being raised about their value, particularly for developing countries. Some in academia and the nonprofitworld (aswell as organizations like the IMF and theworld Bank) are urging developing countries to reconsider the value of entering into bilateral tax agreements, arguing that they give away more than they getwhen they enter into a tax treatywith a developed country.

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U.N. to Revise Model Double Tax Convention Between Developing and Developed Countries

The United Nations has published a proposed version of revisions to its Model Double Tax Convention Between Developed and Developing Countries that are intended to bring it in linewith the OECD's base erosion and profit-shifting project's recommendations. The modelwas last revised in 2011.
For thewWTD story, gohere. (subscription required)
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Country-by-Country Data Under Microscope: IRS

The IRS has a message for taxpayers giving data to the U.S. and to other jurisdictions under the country-by-country reporting regime: Be consistent and be careful.

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Poland planning significant VAT changes in 2017

Serious amendments to Poland's VAT Law are likely to be implemented on January 1 2017. The modifications are mostly aimed at preventing tax fraud and increasing tax collection.

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VAT omitted from Finland's banking services to corporates

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EU Proposes Plans to Resolve 900 Double Tax Disputes

The European Commission has put forward binding measures using national courts and quicker time frames to finally resolve 900 outstanding cases of double taxationworth more than $10 billion in the European Union, alongwith changes targeting tax avoidance involving hybrid mismatches.

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Would a Territorial Tax System Squeeze IRS Coffers?

If U.S.-based multinational companies didn't have to pay any U.S. tax on profits earned in other countries ÔøΩ as some current proposals advocate ÔøΩ how much incomewould such firms shift outside the United States?
Not nearly as much as you might think, according to new research.
For the CFO story, gohere.
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Here's Why America Is Becoming a Worse Place to Do Business

In the past year, it's gotten easy to start and run a business in a record 137 countries.
The United States, however,wasn't one of them. Onwednesday, theworld Bank released its annual Ease of Doing Business report. This year America fell in the rankingsÔøΩone slotÔøΩagain.

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Tax Reform Could Lead to More Profit Shifting by Multinationals

Multinational corporations could end up shifting even more of their income to low-tax countries under some tax reform proposals, according to a new study.
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Some Banks Still at Risk Under Debt-Equity Rules

The financial industry isn't entirely free and clear under final earnings-stripping rules despitewelcome major exceptions, tax practitioners and others said.
Carve-outs in the final rules (T.D. 9790) for regulated financial companies and regulated groups are reasons for great relief compared to the controversial proposed regulations, they said, but closer examination is needed as the industry begins toworkwith the final rules in real life.

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Foreign-Owned U.S. Companies Continue to Increase: IRS Data

Foreign ownership of U.S.-based companies continues to rise despite higher-than-average corporate tax rates, indicating that international investors view the U.S. as a stable market.

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Swiss Federal Council Touts Corporate Tax Reforms Before Referendum

The Swiss Federal Council on October 27 laid out its reasons forwhy awide-ranging package of corporate tax reforms passed by the Federal Assembly in June should be approved in a referendum to be held early next year.

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EU's Moscovici Releases CCCTB Plan to Mixed Reviews

EU Tax Commissioner Pierre Moscovici on October 26 officially introduced to the European Parliament his two-step plan to implement a common consolidated corporate tax base (CCCTB) for the EU single market.

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France Can't Subject Cross-Border Mergers to More Conditions Than Domestic Mergers, AG Says

French legislation requiring a taxpayer to show that cross-border mergers aren't for the purposes of avoiding tax before it can use the common system of taxation should be found to violate EU lawwhen domestic mergers are not subject to the same requirement, Advocate General Melchiorwathelet recommended.

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AG Upholds Belgium's Withholding Tax on Profits Sent to Dutch Parent

by J.P. Finet (Tax Notes)
Belgium'swithholding tax on profits distributed to a parent company in the Netherlands,where the collective investment undertaking (CIU) pays zero corporation tax, isn't barred by EU law because the profits should be treated as exempt and therefore outside the scope of rules barring restrictive tax provisions, Advocate General Manuel Campos Sánchez-Bordona recommended.

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Hong Kong Proposes to Codify BEPS Standards, Enhance Double Tax Safeguards

To provide certainty and limit the risk of double taxation, codifying the OECD's minimum standards and transfer pricing guidance should be accompanied by an expanded foreign tax credit and statutory advance pricing agreement and dispute resolution procedures, according to new proposals issued by the government of Hong Kong.

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South Africa to hike taxes over next two years

South African Finance Minister Pravin Gordhan said the governmentwill raise an additional $3.1 million through tax measures over the next two years,with several changes thatwill have a significant impact on domestic and foreign businesses operating in the country.

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Malta: Release of the 2017 budget

The main theme of the Malta's 2017 budget, from a commercial perspective, is to incentivise the markets, boost business creation and attract foreign direct investment. At the core of the budget document are a number of tax measures and incentives.

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Chile: Tax treatment for cloud computing services provided without a license

In June 2016, the Chilean tax authority (IRS) issued a private ruling for the first time regarding payments for the provision of cloud computing services that are not offered by granting a license.

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IKEA Handel og Eiendom loses Supreme Court of Norway tax case

  • By ITR Correspondent

IKEA has lost an important tax battle that could have implications for other multinationals deducting interest on inter-company debt.

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Build, buy or outsource: Managing withholding tax reclamation

  • By Contributed

Some investors and advisers still believe that the globalwithholding tax reclamation process is so complex and labour-intensive that it outweighs the advantages, but this is simply not true. Bill Salva, global business development manager at Goal Group looks at the options for reclaimingwithholding tax.

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MEPs welcome Commissions corporate tax proposals

  • By European Parliament

MEPswelcomed the EU Commission proposal for a common consolidated corporate tax base (CCCTB) in a debatewith Commissioner Pierre Moscovici on Tuesday evening.

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U.S. Companies Still at Risk of Debt-Equity Loan Recasts

U.S. multinationals aren't home freewhen it comes to having loans recast as equity under final earnings-stripping rules (T.D. 9790), despite major rollbacks, practitioners said.

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European Commission's Proposed CCCTB Seeks Common Tax Base First

To prevent its proposals for a "one-stop shop" and formulary apportionment systemwithin the EU from delaying progress on tax base harmonization, the European Commission has issued its proposals for a common consolidated corporate tax base (CCCTB) in the form of two separate directives, according to a commission announcement.

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French National Assembly Approves Tax-Slashing Budget Measures

Companieswith turnover below ÔøΩ50 millionwould pay 15 percent corporate tax as of 2019, and other companieswould see their rate reduced to 28 percent by 2020 under budget proposals passed by the French National Assembly, according to local news sources. The budget also contains a 50 percent increase in the financial transaction tax (FTT) and about ÔøΩ1 billion in tax cuts for middle-income households.

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EU relaunches ambitious corporate tax reform

  • By Channel NewsAsia
The European Commission on Tuesday (Oct 25) relaunched an ambitious corporate tax reform package it sayswill boost the economy and reduce abuses after a series of high-profile tax cheating scandals sparked public uproar.

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