Int'l Tax News

Practitioners on April 26 debated the viability of cash pooling arrangements following the issuance of new proposed regulations thatwould recharacterize some related-party debt as equity.

For the TNT story, gohere.(subscription required)

TheU.S. governmentchalked up a big victory this monthwhen it stopped pharmaceutical giantPfizer Inc. from mergingwithAllergan PLCand shifting its address overseas to avoid U.S. taxes.

But there is at least one thing the Treasury Department still can't do: force Pfizer to book taxes on $80 billion in foreign profits the New York-based company has socked away overseas.

For thewall Street Journal story, go here.

On October 5, 2015, the Organization for Economic Cooperation and Development (OECD) issued final tax policy recommendations stemming from its Base Erosion and Profit Shifting (BEPS) project.

The reports, endorsed by the G20 Finance Ministers on October 8 and by the G20 leaders at their November 15-16 summit, consist primarily of recommendations for significant policy changes that affect fundamental elements of the framework used by OECD member countries to tax international activities.

These recommendations are designed to be implemented as changes to domestic law aswell as through treaty provisions. The OECD has an expectation that the suggested ruleswill be "implemented accordingly" by the countries that participated in the BEPS project.

For the Financial Executives Institute report, go here.On October 5, 2015, the Organization for Economic Cooperation and Development (OECD) issued final tax policy recommendations stemming from its Base Erosion and Profit Shifting (BEPS) project.

The reports, endorsed by the G20 Finance Ministers on October 8 and by the G20 leaders at their November 15-16 summit, consist primarily of recommendations for significant policy changes that affect fundamental elements of the framework used by OECD member countries to tax international activities.

These recommendations are designed to be implemented as changes to domestic law aswell as through treaty provisions. The OECD has an expectation that the suggested ruleswill be "implemented accordingly" by the countries that participated in the BEPS project.

For the Financial Executives Institute report, go here.

Diana Furchtgott-Roth compares a United States-based multinational and a foreign-based multinational investing $100 billion inwisconsin. She argues that the American tax system is biased against the United States-based multinational because it has to pay $35 billion in tax to bring $100 billion home from overseas,while the foreign multinational does not have to pay to invest in the United States.

This comparison is misleading at best.

For the New York Times letter, go here.

China's biggest tax overhaul in more than two decades starts May 1,with changes set to reduce the burden on services companies and encourage factories to upgrade and innovate.

For the DTR story, go here. (subscription required)

The Nigerian Tax Appeal Tribunal (Lagos TAT) on February 12 2016, in Vodacom Business Nigeria Ltd v. Federal Inland Revenue Service (FIRS), held that a Nigerian company that receives broadband services from a non-resident company must account for and pay value added tax (VAT) on those services. The TAT also held that because the non-resident company that provided the servicewas not bound by the VAT Act, the Nigerian company that received the service must self-charge and remit the VAT.

For the PwC Insight, go here.

by PwC

The Israel Tax Authority (ITA) on April 11, 2016, published Circular 4/2016 (the Circular),which addresses taxation of foreign companies that operate in Israel through e-commerce and online services (also known as the 'digital economy').

For the PwC Insight, gohere.

Now that corporate integration is back on Congress's agenda, this paper makes the case forwhy corporate integration is an important component of tax reform. It also outlines twoways to integrate the individual and corporate tax codes and discusses the opportunities and challenges presented by each.

For the Tax Foundation article, go here.

This Article focuses on a single organizing question, namely how should a dividend paid deduction regime be designed so that it achieves acceptable international tax outcomes. By focusing on the international tax implications attendantwith a dividend paid deduction regime, the author is not attempting to minimize the broader benefits of achieving shareholder-corporate integration. The dividend paid deduction proposal, as to distributed earnings,would equate the tax treatment of debt and equity, and in so doing itwould reduce distortions that current law createswith respect to debt and equity in the corporate context. Furthermore, recent economicworks suggest that the incidence of the corporate income tax burden is partially shifted to labor and away from shareholderswhereas a properly designed integration proposal puts the incidence of business taxation squarely on shareholders. Furthermore, shareholder-corporate integration for C corporations harmonizes the divergent tax treatment that currently exists between C corporations and pass-through entities. Thus, a corporate integration proposal provides a broad spectrum of potential benefits, and so not surprisingly significant scholarship has been dedicated towards how to best achieve shareholder-corporate integration. But, in today's era, the overwhelming tax policy problem that must be solved rests on finding a solution to the systemic international tax challenges that face the country, and so that iswhere this Articlewill focus.

For the paper, go here.

Lowell Yoder of McDermottwill & Emery examines the "substantial assistance" rules that can require a controlled foreign corporation's services income to be treated as Subpart F income. The best reading of Notice 2007-13 is that "only costs of assistance furnished by U.S. related persons that directly assists the CFC in performing the contracted-for services should be taken into account as assistance"when applying the 80-percent-cost test, hewrites.

For the BNA Insight, go here. (subscription required)

A senior Treasury Department official in charge of international tax policy is seeing a greater role being played by the Group of 20 finance ministers in setting the agenda for tax laws around theworld.

For the Accounting Today story, go here.

In the seventh in a series of articles on intangibles and finance, Tom Braukmann, Philip de Homont and Alexander Voegele, NERA Frankfurt, show how to implement a profit split system.

Bermudawill exchange country-by-country tax reportswith other countries beginning in 2017, after signing a multilateral information-sharing agreementwith the OECD.

Houseways and Means Committee Chairman Kevin Brady (R-Texas) seems to have one answerwhen asked about the prospects for an international tax draft this year.

"To be determined," Brady said April 20 as he emerged from a meetingwith Republican committee members. Brady had the same answerwhen askedwhether a revised patent box is part of the mix.

Proposed rules intended to curb companies' "stripping" of income out of the U.S. through tax-favored loan transactions from foreign companies to U.S. subsidiarieswill have an "intense" comment period, a Treasury Department official said.

The European Commission has developed a proposal for a directivewhich, if approved by the European Parliament and Council of Ministers,will require public country-by-country reporting (CbCR) of tax and other financial data by large companies in the European Union (EU). The proposed directivewill amend the existing EU Accounting Directive.

The OECD's action plan for an international project to combat tax base erosion and profit shiftingwill fuel the "growth business" of mutual agreement procedures between tax authorities, practitioners said.

Whether the tax authoritieswill have the resources to keep upwith the growth, however, remains uncertain at best, they told those attending a tax conference in New York on April 19.

The U.S. Treasury has yet to receive comments addressing the revised "active trade or business test" under the 2016 U.S. Model Tax Convention's limitation-on-benefits test, a Treasury official said.

For the DTR story, go here. (subscription required)

Despite their concurrent release on April 4, Treasury's new anti-inversion rules may not necessarily be finalized simultaneouslywith its debt-to-equity reclassification rules, a Treasury official said April 19.

For the TNT story, go here. (subscription required)

Practitionerswrestlingwith new proposed regulations thatwould recharacterize some related-party debt as equity for federal tax purposes questioned Treasury officials April 19, focusing in large part on the transaction rules that have potential application to debt instruments issued today.

For the TNT story, go here. (subscription required)

In news analysis, Lee A. Sheppard analyzes recent comments by Robert Stack, Treasury deputy assistant secretary (international tax affairs), regarding the new section 385 regulations and state aid procedures.

The OECD's action plan for an international project to combat tax base erosion and profit shiftingwill fuel the "growth business" of mutual agreement procedures between tax authorities, practitioners said.

Whether the tax authoritieswill have the resources to keep upwith the growth, however, remains uncertain at best, they told those attending a tax conference in New York on April 19.

Tax practitioners seeking to understand the direction of international tax policy should carefully parse communications from the Group of 20 finance ministers, including itsApril 15 missivedescribing the continuation of the global recovery, a Treasury Department official said.

Deputy Assistant Secretary for International Tax Affairs Robert Stack said April 19 thatwhile the communiquesÔøΩissued four times a year after the G-20 finance ministers meetÔøΩcontain "a lot of inside baseball," they are also "very predictive ofwhere things are going."

With its headline corporate tax rate of 12.5 percent, a generous research and development credit, a new knowledge development box and robust protection of intellectual property rights, Ireland has much to offer as a location for holding intellectual property.

The governmentwon't recharacterize transactions immediately under controversial new regulations designed to stop companies from "stripping" income out of the U.S., a Treasury Department official said.

Millions of families are filing their 1040s this extended Tax Day, and,while the entire tax code certainly needs reform, there's an especially pressing tax problem that affects nearly all Americans.
The problem is that our corporate tax system puts American businesses at a competitive disadvantage against the rest of theworld, suppressing U.S. capital investment, economic growth, and reducing jobs andwages. The money U.S. companies earn from their foreign operations is "stranded" overseas rather than being deployed at home for new factories, research, and hiring. To access those profits and to compete on a level playing fieldwith foreign companies some U.S. firms have turned to a process known as inversion, mergingwith companies based abroad and moving headquarters to a foreign country.
For the Real Clear Markets story, go here.

Multinational corporations operatingworldwide businesses managed from their U.S. offices may have inadvertently created a partnership for U.S. tax purposes in connectionwith their profit-shifting strategies.when this happens, foreign group members treated by the IRS as partnerswill be engaged in a trade or business in the United States,which is the threshold test for application of the effectively connected income rules. Kadet and Koontz argue that affected multinationals and their auditors should reexamine existing tax structures to determine if they canwithstand an assertion by the IRS that the arrangement constitutes a partnership and therefore results in taxable ECI.
For the Tax Notes special report, go here. (subscription required)

In this report,webber explains the Fama-French model and assesseswhether that model is appropriate for determining a cost-sharing agreement's discount rate.
For the Tax Notes special report, go here. (subscription required)

A group of 18 former US Treasury Department officials today sent a letter to Treasury Secretary Jacob Lew, urging the government to reconsider recently issued tax regulations aimed at stopping US companies from inverting.
For the MNE Tax story, go here.

The government should drop controversial guidance to curb corporate inversions and push for tax overhaul instead, 18 former Treasury Department officials urged Treasury Secretary Jacob J. Lew.
Calling the regulations "a route that bypasses the legislative process" in atax day letter, the officials said the guidancewon't fix the problem of U.S. companies changing their tax residence to lower their tax bills, and "will likely make mattersworse."
For the DTTR story, go here. (subscription required)

Lawmakers from both the European Parliament and the legislatures of European Union member states backed a raft of new tax legislation designed to implement the OECD's recommendations under its project to combat tax base erosion and profit shifting, but insisted the U.S. also must adopt the measures.
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Companies should prepare for public country-by-country reportingÔøΩat least in Europe, according to practitioners.

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A cadre of former Treasury officials, mostly from previous Republican administrations going back more than 40 years, is urging Secretary Jacob Lew to reconsider Treasury's recent anti-inversion guidance and instead pursue international tax reform.
For the TNT story, go here. (Subscription required)

Ajay Gupta finds parallels between the United Kingdom's Google tax and Puerto Rico'swal-Mart tax, and suggests that the invalidation of the latter may bode ill for the former.
For thewWTD story, go here. (subscription required)

Popular anger against an unfair or opaque tax system is fueling the growth of politicalwill,which could lead to the creation of a new tax haven blacklist, according to Stephen Quest, director general of the European Commission's Directorate-General for Taxation and Customs Union.
For thewWTD story, go here. (subscription required)