Int'l Tax News

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Companies Urged to Plan for Anti-Hybrid Mismatch Rules

by John Herzfeld
Companies must plan in the second half of 2016 for the prospect of national implementation of recommended steps to block a fairly common tax and treasury planning structure, the moderator of a panel of international tax practitioners said.
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South Africa releases draft tax law amendments

  • By PwC
by PwC
The South African National Treasury has released, for public comment, drafts of the 2016 Taxation Laws Amendment Bill (TLAB) and the 2016 Tax Administration Laws Amendment Bill (TALAB). These amendmentswould enact the 2016 Budget Review tax proposals. Comments are due by August 8, 2016.
The draft TLAB includes substantive changes to the tax laws. The proposed amendments could affect multinational companies doing business in South Africa.
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News Analysis: The Celtic Tiger's Last Roar?

by Ajay Gupta
Even as Ireland announced a staggering rate of growth in its 2015 GDP, handily beating estimates, its own finance ministry acknowledged that much of that growth reflected tax-driven corporate relocations, rather than real economic activity. Indeed, if Brexit leads to a taxwar to attract inbound investment, Ireland,which broke away from the United Kingdom nearly a century ago, couldwell end up following it out of the European Union.
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OECD Transfer Pricing Documentation Now Targets Multinationals

by Robert Feinschreiber &
The OECD, in promulgating action 13 2015wTD 193-30: Consultation Documents and Responses of its base erosion and profit-shifting project, replaced the Chapter V transfer pricing documentation guidelines in October 2015. This replacement rule shifted the onus of the documentation requirements to the multinational enterprise. The new documentation requirements diverge sharply from the OECD's 1995 neutrality approach between the tax administration and the MNE. This change in transfer pricing documentation ruleswill create tension between tax return preparers operating on a fixed-fee basis and their multinational clients.
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OECD seeks comments on new permanent establishment profit attribution guidance

  • By PwC
After the finalisation of Base Erosion and Profit Shifting (BEPS) Action 7 concerning the Permanent Establishment (PE) threshold, the OECD undertook to examinewhether its 2010 rules on attribution of profits to PEs, or the Authorized OECD Approach (AOA), require updating. The OECD issued a Public Discussion Draft (the paper) on 4 July 2016 soliciting comments by 5 September 2016, to be followed by a public consultation on 11-12 October 2016.
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U.S. Foreign Direct Investment, Irish GDP Both Surge in 2015

by Amanda Athansiou
Coincidence?
The U.S. Department of Commerce's Bureau of Economic Analysis (BEA) reported a 68 percent jump in new U.S. foreign direct investment (FDI) -- including from inversion transactions -- between 2014 and 2015 and named Ireland as the largest source country. Meanwhile, Ireland's GDP increased by 26.3 percent in 2015, dwarfing previous estimates.
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Economic Analysis: Border Adjustments Key to GOP Blueprint's Cash Flow Tax

by Martin A. Sullivan
Whowould have guessed that this campaign seasonwould raise deep and intellectually challenging questions about the future of corporate taxation? The meaty part of the debate is not between Democrats or Republicans but among Republicans.
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EU and global tax implications of UK public vote to leave the EU

  • By PwC
by PwC
In a 23 June 2016 referendum, the UK public voted to leave the EU. The implications depend to a substantial extent on the agreed exit terms, aswell as the negotiationswith other countries.
There are many misconceptions about how the referendum vote impacts taxes, but it causes no major direct legislative tax changes. However, the market volatility thatwe've seen post-vote could have tax impacts. In addition, tax policy changes may, in time, result fromwhat transpires. This bulletin briefly covers some areas of uncertainty and signposts to further materialswithout analysing the myriad scenarioswhich could play out.
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Narendra Modis Tax Overhaul Taxes India

by Raymond Zhong
A long-delayed revamp of India's messy tax system, envisaged as one of the country's farthest-reaching economic overhauls in decades, has another shot at becoming realitywhen Parliament reconvenes Monday.
But the tax plans have undergone so many changes and dilutions as they havewound through the political system that it could be many years before Asia's third-largest economy enjoys some of the advantages -- if they materialize at all.
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Obama to address tax evasion, money laundering at G-20, aide says

by Harvard Zhang
President Barack Obama is expected to address a growing sense of protectionism inworld markets by promoting stronger measures to dealwith global tax evasion and money laundering at a meeting ofworld leaders, awhite House aide saidwednesday.
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IRS to Agents: Scrutinize Foreign Currency Derivatives

by Alison Bennett
The IRS is cracking down on thosewho try to use financial derivatives to dodge taxes in deals involving foreign currency.
In guidelines issued July 21, the agency told its examiners to look closely at debt instruments, payables, receivables, forward contracts, futures contracts, options and similar instruments.
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A Shrinking World Spurs Calls to Rewrite the Tax Guidebook

by Adam Creighton
The Group of 20 has spouted the importance of "inclusive growth" for yearswithout spelling outwhat it really means or how to generate it. The Organization for Economic Cooperation and Development, at least,will be telling G-20 finance ministers in Chengdu, China, thisweekendwhat it thinks it should mean for taxation: less of it on low-incomeworkers and more on high-income shareholders.
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Tax policy should be used to fight inequality, says OECD

by Emma Rumney
Governments should use tax policy to boost growth and ensure the benefits of taxation are more equitably shared among citizens, the OECD has said.
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Pros and Cons of a Carbon Tax: Key Issues

by Johnwihbey (Yale Climate Connections)
It's a climate solution that could appeal to some liberals and conservatives. But, as always, the devil is in the details.
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China makes major changes to transfer pricing documentation and reporting rules for multinationals

by Daniel Chan,windson Li, and Henry Ji (Multinational Tax & Transfer Pricing News)

China's State Administration of Taxation ("SAT") on 13 July released on itswebsite guidance that makes substantial changes to multinationals' transfer pricing compliance obligations, effective for the 2016 fiscal year.
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Investing in India: How structuring dynamics change to keep pace with tax policies

International Tax Review

by Sanjay Sanghvi and Ritu Shaktawat

Sanjay Sanghvi and Ritu Shaktawat, partner and principal associate at Khaitan & Co in India, investigate how India's revised DTAs and evolving tax laws are changing theway various structures are used for foreign direct investments in India. @

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Why India's 'Biggest Tax Reform' GST Is Still Stuck

by Rupak De Chowdhuri(Huffington Post)
It's slated to be India's 'biggest tax reform' thatwill simplify theweb of of taxes across India. Even as the main opposition party Congress has approved a five-hour debate on the Goods and Services Tax (GST) bill, there are several thorny issues and caveats that the BJP and opposition parties are expected to iron out before the bill,which is pending in the Rajya Sabha, is approved.
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Chile releases guidance on amended income tax law

International Tax Review

by Ameila Schwanke

Chile has released guidance on amendments made by circulars 39 and 40,which aim to simplify Chile's corporate tax regime as enacted by legislation in 2014. @

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Debt-Equity Rules Put Brakes on Distributions: JPMorgan

by Alison Bennett
Financial services giant JPMorgan Chase & Co. has "striven mightily" to avoid triggering the government's earnings-stripping regulations, the company's top tax adviser said.
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Debt-Equity Rules on States' Radar, Though No Changes Yet

Bloomberg

As the Treasury Department moves toward finalizing its divisive debt-equity rules, states are in the early stages of determining how the new federal regimewill trickle down.

During the New York University Summer Institute in Taxation July 21, a panel of practitioners from eight revenue departments underscored that states and cities are closelywatching as the draft regulations move through the promulgation process.
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Loan Repayments Are Question Under Debt-Equity Rules: IRS

by Alison Bennett
The treatment of loan repayments under controversial earnings-stripping rules remains a question mark, an IRS official said.
The issue could be a big one under the proposed rules (REG-108060-15),which are intended to curb multinational companies from shifting income out of the U.S. via loans to subsidiaries. Theywould allow the government to recharacterize loans as equity instead of debt, causing interest deductions to disappear and possibly imposing heftywithholding taxes.
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Country-by-Country Reporting: Are We There Yet?

byKimberly Tan Majure, Monica Zubler and John DerOhanesian
KPMG's Kimberly Tan Majure, Monica Zubler and John DerOhanesian look at the final country-by-country reporting regulations issued by the IRS, aswell as recent guidance from the OECD, and at the mechanics for reporting required under the new rules.
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Tax Foreign Companies on U.S. Intangibles Sales, IRS Says

by Alison Bennett
Foreign companies should face taxes if they sell intangibles or patents to U.S. companies that agree to pay only if those intangibles are productive, the IRS told its agents.
In those cases, that money should be treated as U.S.-source income, the agency said in new audit guidelines (RPW/CU/P_08.1_04(2016)a) released July 18.
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Rite Aiding the Debt-Equity Regulations

by Jasper J. Cummings, Jr.
In this report, Cummings anticipates litigation strategies for attacks on the section 385 regulations if they are adopted in final form. To help taxpayers identify the most favorable circuits, this report catalogs successful challenges to all federal agency regulations in the various courts of appeal. The D.C. Circuit emerges as the likelywinner, but, as the report shows, all circuitswill probably hold Treasury to the high standard of explaining itself.
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Blame Congress's Inaction for Debt-Equity Rules: Official

by Laura Davison
Congress's inability to address corporate inversions and lawmakers' insistence on punishing the IRS by cutting the agency's funding led to the debt-equity rules, a Treasury Department official said.
The proposal,whichwould allow government to recharacterize intercompany debt as equity, has come under fire from multinationals, business groups and lawmakerswho say these regulationswould disrupt how related companies manage their cash flow. Robert Stack, Treasury's deputy assistant secretary for international tax affairs, said the departmentwas leftwith little choice but to propose a "blunt instrument" rule to protect the U.S. tax base.
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Treasury Considering Changing Debt-Equity Regs in 4 Big Areas

by Lee A. Sheppard & Amy S. Elliott
Robert Stack, Treasury deputy assistant secretary (international tax affairs), said July 16 thatwhile he isn't inclined to add subjective prove outs to the controversial debt-equity regulations (REG-108060-15 2016 TNT 65-11: IRS Proposed Regulations), section 385 is a "blunt instrument" and he's considering four main areaswhere that blunt instrument "might have overdone it."
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Section 892: Form, Function, and Meaning, Part 2

by Kimberly S. Blanchard
This report is adapted from a prior version presented to the Tax Forum on February 1. Regulations under section 892 elevate form over function, resulting inwasteful planning and unnecessary obstacles to foreign governments seeking to rely on the exemption given by that section for income from stocks and securities, Blanchard says. After examining the history and purpose of section 892, Blanchard recommends that the regulations bewithdrawn and replacedwith rules that reflect the meaning and purpose of that section.
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News Analysis: Uncertainties and Costs of the Debt-Equity Regs

by Mindy Herzfeld
The comment period for the proposed section 385 regulations has expired, and the hundreds of technical comments submitted demonstrate the breadth and depth of the business and tax communities' concerns about the rules.
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Proposed Earnings Stripping Regs Do Not Align With BEPS Action 4

by David Chamberlain
David Chamberlain of Ernst & Young (China) Advisory Ltd. argues that the proposed section 385 regulations on earnings stripping potentially conflictwith the spirit of the best practices approach to limitations on interest deductions in the OECD's final action 4 report.
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Ireland Pins Growth Plan on U.S. Companies

by Paul Hannon
Close economic partners of the U.K. have braced for awave of possible fallouts after British voters sidedwith leaving the European Union:fewer of theirworkers in the U.K. and lower exports of machines and luxury cars, among other threats.
But no country has more at stake than Ireland,whose economy is connected to the U.K. in unusually intimateways. So in thewake of Brexit, Ireland is eyeing similarly close relations across the Atlantic --with corporate America.
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The Five Worst Tax Policy Proposals in the 2016 Republican Party Platform

by Richard Phillips
The Republican Party's official 2016 platform, released on Monday, iswholly out of touchwith reality. The planwould exacerbate the dual problems of rising inequality and continuous annual federal budget deficitswith tax cuts that essentially put more money into the pockets ofwealthy people and corporations and reduce federal revenues.
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Governments should use tax systems to drive inclusive growth agenda

  • By OECD
by OECD
Governments should use tax policy to drive forward economic agendas that seek to boost growthwhile sharing the benefits more evenlywithin society, according to a new OECD report.
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IRS International and FATCA Guidance Update

by Lee A. Sheppard
The government is in a hurry to finish several guidance projects before the end of the administration, according to Daniel McCall, IRS deputy associate chief counsel (international-technical),who spoke July 20 at the International Fiscal Association USA New York regional seminar.
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Move Away From Profit Split Won't Please All: Ex-OECD Official

by Kevin A. Bell
Economists at a transfer pricing conference praised the OECD's most recent discussion draft on applying the profit split method, but a former OECD officialwarned that the draft's reduced emphasis on the methodwon't please all stakeholders.
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OECD Approach to Arm's-Length Principle Called Pragmatic

by Ryan Finley
Despite their theoretical impurity, the principles for allocating risk and returns from intangibles adopted by the OECDwere necessary for an equitable andworkable version of the arm's-length principle, according to Andrew Hickman, former head of the OECD's transfer pricing unit.
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Stack Appeals to Tax Advisers' Self-Interest in System Integrity

by Ryan Finley
Practitioners' battle for technical purity in transfer pricingwill be meaningless if aggressive tax arbitrage causes countries to simply set aside the arm's-length standard and apply their own parallel tax systems, according to Robert Stack, Treasury deputy assistant secretary (international tax affairs).
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OECD Seeks to Avoid Conflict With EU on Tax Havens

OECD and European Union officials areworking to ensure that differences in their tax haven regimes don't create different compliance standards for countries, said Pascal Saint-Amans, head of tax at the Organization for Economic Cooperation and Development.
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It's All About the Ex Ante Price, Treasury Official Says

by Alexander Lewis
Get the ex ante, or anticipated, price of a contribution right and the residual return on investment can go anywherewithout abuse, according to Michael McDonald, financial economist (business and international taxation), Treasury Office of Tax Analysis.
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EU Tax Haven Blacklist Criteria to Target Low Tax Rates

by Joe Kirwin
A European Commission scoreboard to identify tax havens for the EU's upcoming blacklistwill target countrieswith low corporate tax ratesÔøΩand doing business in those countries could result in sanctions, according to a document obtained by Bloomberg BNA.
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U.S. Official: OECD Mention of Value Chain Analysis' Tentative

by Kevin A. Bell
The mention of a value chain analysis in the OECD's recent discussion draft on how companies should apply the profit split method isn't an excuse for tax administrations to apply that method, a Treasury Department official said.
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Changes to Foreign Goodwill Rules Will Steer Clear of Altera

by Ryan Finley
Mindful of its loss in Altera, the IRSwill ensure that its forthcoming final section 367 regulations complywith the reasoned decision-making standard and the Administrative Procedure Act, according to Russell Kwiat, senior manager of the IRS's advance pricing and mutual agreement program.
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News Analysis: Banks Affected by the Proposed Debt-Equity Rules

by Lee A. Sheppard
In news analysis, Lee A. Sheppard discusses banking issues raised by the recently proposed debt-equity regulations aswell as solutions proposed by practitioners and Treasury's consideration of those options.
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Austria implements transfer pricing documentation, country-by-country reporting requirements

  • By PwC
by PwC
The Austrian Parliament on July 14, 2016 enacted legislation that introduces mandatory transfer pricing documentation requirements as defined in Action 13 of the OECD's Action Plan on Base Erosion and Profit Shifting (BEPS). A corresponding Ministerial Ordinancewas published in draft on May 25, 2016.
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Ecuador significantly limits availability of income tax treaty benefits

  • By PwC
On 4 July 2016, the OECD published a discussion draft setting out proposed revisions to the guidance on the transactional profit split method, as set out in the Base Erosion and Profit Shifting (BEPS) Actions 8-10 ("Aligning Transfer Pricing Outcomeswith Value Creation"), 2015 Final Report, togetherwith a number of questions. The questions are intended to elicit responses to be taken into account byworking Party No. 6 in considering revisions to the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. The OECD has asked for comments by 5 September 2016 and intends to hold a public consultation on the proposed guidance 11 and 12 October 2016.
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IRS on Six-Year Scrutiny for Loan Recasts: We're Listening

Taxpayer concerns likely aren't falling on deaf ears about the six-year microscope multinational companies facewhile the government decideswhether to recast their loans to subsidiaries as stock under controversial earnings-stripping rules.
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PE Document Is About Interplay of OECD Model Treaty Articles

by Ryan Finley
The OECD's discussion draft on profit attribution is intended to illustrate that attributing profit to a permanent establishment under article 7 of the model tax convention and performing a transfer pricing analysis under article 9 may result in different allocations of profit, according to the former head of the OECD's transfer pricing unit.
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Australian federal election: What it means for tax

International Tax Review

by Amelia Schwanke

Malcolm Turnbull haswon the Australian federal election to remain as Prime Minister, but the lack of a strong majority is likely to giveway to political uncertainty around planned corporate tax measures. @

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OECD continues BEPS implementation, amends Transfer Pricing Guidelines; EU adopts CbC report exchange rules

  • By PwC

PwC

by PWC
The OECD continues to move forwardwith the implementation of its Base Erosion and Profit Shifting (BEPS)-related deliverables. Recent OECD announcements provide both an update and insight into its progress, aswell as anticipated areas of futurework ÔøΩ e.g., profit splits, attribution of profits to permanent establishments (PEs), and financial transactions guidance.
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EU VAT Action Plan: Heavier burden for businesses?

International Tax Review

by Joe Stanley-Smith

The European Commission's proposed VAT Action Plan is an ambitious attempt to reform the flailing regime. Joe Stanley-Smith picks through the details to look at the impact it could have on companies. @

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IMF Urges Action On US Corporate Tax Reform

by Mike Godfrey (Tax News)
The United States has been urged by the International Monetary Fund to overhaul its corporate income tax system, noting bipartisan acceptance that the regime is "broken."
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