Int'l Tax News

Even as it overrules tax rulings on transfer pricing in European Union countries, a European Commission official said the executive body isn't looking to become the "fiscal super-authority" for the continent.

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In determiningwhen to use a residual profit split method for evaluatingwhether a related-party transaction is priced at arm's length, IRS agents should notewhether both parties have made "significant" nonroutine contributions to the deal, the Large Business and International Division advised in new internal guidance.
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There's nothing revolutionary about the EU's state aid rules and the companies receiving adverse tax rulings should have known they had been getting favorable treatment, said Karl Soukup, director of the European Commission's Directorate General Competition,who faced intense criticism from Treasury official Robert Stack at an event February 22.
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Ajay Gupta considerswhether the U.K. diverted profits tax may have affected the tax settlement between U.K. tax authorities and Google, and examines the prospects and implications of a state aid inquiry into that agreement.
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While the base erosion and profit-shifting project has been good news for countries seeking to protect their national tax bases, the OECD's measures do not fully address the specific needs of developing countries, IMF Managing Director Christine Lagarde said in a February 22 speech to the Arab Fiscal Forum in Abu Dhabi.
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Two House Democrats plan to introduce a billon Tuesdaythatwould seek to curtail a strategy used by former American companies to cut their United Statestaxbills.
The measure takes aim at so-called corporate inversions,where American companies move their headquarters overseas through a merger to save on taxes at home. The biggest such deal isPfizer's planned $150 billion mergerwithAllergan.
For the New York Times story, go here.

The OECD today agreed a new framework thatwould allow all interested countries and jurisdictions to join in efforts to update international tax rules for the 21st Century. The proposal for broadening participation in the OECD/G20 Base Erosion and Profit Shifting (BEPS) Projectwill be presented to G20 Finance Ministers at their next meeting on 26-27 February in Shanghai, China.
For the OECD release, go here.

The new U.S. model tax treaty may face an uncertain reception in other countries, practitioners said, despite Treasury'swork to narrow some of its anti-tax evasion provisions inwayswelcomed by the business community.
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Houseways and Means Committee Chair Kevin Brady, R-Texas, talked up the idea of international tax reform in 2016 forweeks after taking charge of the committee, but the biggest reassurance camewith the announcement that former Treasury International Tax Counsel Barbara Anguswould be the committee's new chief tax counsel.
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The Treasury Department released its long-awaited 2016 model income tax treaty,with provisions intended to curb the shifting of businesses and income around the globe to avoid taxes.
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European Tax Commissioner Pierre Moscovici urged European Parliament members to lobby their finance ministers to halt a German-led move to split apart his anti-tax avoidance proposal.

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Treasury has revised the U.S. model income tax conventionwith broad, sweeping revisions to provisions such as the limitation on benefits test, aswell as numerous small technical changes.
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House Republicans are talking about biting off a piece of a tax code overhaul this year, seeking changes in how U.S. companies' overseas profits are taxed as a first step toward a more ambitious bill next year.
The biggest U.S. companies may not be on board.
For thewall Street Journal Story, go here.

I recently attended the Capital Matters conference, presented by the Tax Council Policy Institute inwashington. The 2016 conference focused on how taxes influence the global creation, deployment, and mobility of capital. Thiswas my second year attending the conference,which showcases the best thinking of influential tax professionals and business leaders. And both years offered a glimpse into how the corporateworld views the taxworld.what a view!
For the Forbes story, go here.

The OECD recently released its final recommendations for a multi-step plan (sponsored by the G-20 governments) to reshape international tax rules. To the extent these recommendations are adopted by individual countries, the OECD's base erosion and profit shifting (BEPS) project, including its country-by-country (CbC) reporting requirements, likelywill spur the most significant changes in the tax treatment of multinational companies since the Tax Reform Act of 1986. These proposalswill require industrial products and services MNCs to reconsiderwhere to invest and how to structure their global business operations.
For the PwC Insight, go here.

New House legislation to limit earnings strippingwill follow a few familiar themes on interest deductibility, much like a number of bills and proposals offered in the past year or two.
Thenew measure, coming from Houseways and Means Committee ranking member Sander M. Levin (D-Mich.),would get rid of an existing debt-to-equity ratio ceiling of 1.5-to-1 and cut the allowable net interest expense to 25 percent from 50 percent of an entity's adjusted taxable income, according to text obtained by Bloomberg BNA.
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A recent report comparing the total amount of tax contributed to European countries' GDP has shown that tax revenue has been increasing in the EU since 2013.

For the ITR article, go here.

Global telecommunications company Vodafone Group Plc has said that multinational corporations shouldn't be blamed for taking advantage of tax incentives and rates available in countries around theworld because governmentsÔøΩnot corporationsÔøΩset the tax policieswhich multinational companies follow. For the DTR story, go here. (subscription required)

n this article, the authors reemphasize the need to reduce the U.S. tax incentives for inversion-type acquisitions and emphasize that Treasury has administrative actions available thatwould further reduce tax incentives for inversions and other foreign acquisitions of U.S. Corporations.

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The United States Council for International Business has asked both the OECD and the U.S. Treasury to support "last best offer" mandatory binding arbitration to resolve bilateral tax treaty disputes.

Businesses arewaging a fierce lobbying campaign against making new country-by-country reports public, saying details ofwhere profits are earned and taxes are paid by individual companieswould put them at a competitive disadvantage in the global economy.

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Treasury and the IRS issued revised Section 704(b) regulations on February 3, 2016. The new rules address certain situations involving partnerships' allocations of creditable foreign tax expenditures (CFTEs), expanding and clarifying regulations first issued in 2006 and revised in 2012. The basic purpose of those regulations is to ensure that partnerships allocate foreign taxes among partners in the same manner as they allocate the income towhich those taxes relate.

For the PwC Insight, gohere.

David Ernick of PricewaterhouseCooperswrites that the OECD's new transfer pricing guidelines incorporate significant changes to the circumstances inwhich tax authorities may disregard transactionsÔøΩchanges inconsistentwith existing regulations under Internal Revenue Code Section 482.
For the BNA Insight, go here. (subscription required)

"The more you tighten your grip, Tarkin, the more star systemswill slip through your fingers."
At the February 16 International Tax Institute meeting in New York, Philipwright of Bryan Cave LLP andwill Dixon of Citigroup Global Markets Inc. supplied their own intro in the form of a quote from Princess Leia in the original Starwars. The pair dissected the inversion notices and made arguments about their validity.
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A proposal by President Obama to impose a transition tax on offshore profits of U.S.-based multinational corporationswould provide a $97 billion tax cut to 10 corporations that use tax havens, and an alternative Republican proposalwould provide a $121 billion tax cut, Citizens for Tax Justice said in a February 16 release.
For the release, go here.

European Union efforts to prevent profit shifting moved forward as governments narrowed differences on the methodology and minimum rate level for a minimum effective tax (MET) thatwould be added to the EU Interest and Royalties Directive (IRD).
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Jeffrey Owens talks to Nina Olson, U.S. National Taxpayer Advocate, and Philip Baker QC,with Field Court Tax Chambers in Gray's Inn in London, about taxpayer rights in an age of transparency.
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Today, the Treasury Department issued a newly revised U.S. Model Income Tax Convention (the "2016 Model"),which is the baseline text the Treasury Department useswhen it negotiates tax treaties. The U.S. Model Income Tax Conventionwas last updated in 2006.

For the Treasury release, go here.

The Budget season is about to start in Asia. Ralph Cunningham believes finance ministers are likely to prioritise local or regional concerns rather than get involved in any deep discussions about base erosion and profit shifting.
For the ITR story, go here.

The Italian Budget Law for 2016 introduced a presumption of permanent establishment (Section 162 of Presidential Decree no 917/1986) in the land-based betting sector aswell as reacting to the OECD's base erosion and profit shifting (BEPS) action plan.

For the ITR story, go here.

Latin America's tax treaty network is undergoing serious reform as countries implement the BEPS project deliverables and incorporate these new strategies and frameworks into double taxation agreements (DTAs) to further the region's business opportunities. For the ITR article, go here.

House of Representativesways and Means Committee Chairman Kevin Brady (R – Texas) has disclosed that, under his leadership, the Committeewill immediately draft US international tax reform legislation,while laying the framework for more comprehensive tax reform in 2017.
For the Tax-News.com story, go here.

Businesses are preparing themselves for cuts to prized tax breaks for corporate debt, in a Budget crackdown thatwould raise hundreds of millions of pounds a year.

The move to reduce tax deductions for interest costs is likely to hit scores of multinationals, aswell as companies in the utilities, property and private equity sectors.

For the Financial Times story, go here.

Treasury Secretary Jack Lew is accusing European Union officials of disproportionately targeting U.S. companies in a sweeping corporate tax investigation.

Lew leveled the heavy criticism against the EU for a new and expansive interpretation of rules aboutwhether companies are unfairly receiving state aid. He said the approach raises "serious concerns about fundamental fairness and the finality of tax rulings throughout the entire European Union."


For the Hill story, go here.

Insistence on revenue neutrality shouldn't limit efforts to remake the U.S. tax code, especially given the benefits of dynamic scoring, Houseways and Means Committee Chairman Kevin Brady (R-Texas) said.

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Kimberly S. Blanchard ofweil, Gotshal & Manges examines the IRS's updated "inversion" guidance in Notice 2015-79, outlining rules designed to characterize more transactions as inversions and new rules applicable to 60 percent to 80 percent inversions.while practitioners had expected the Service to issue regulations fleshing out provisions in prior guidance, the new notice instead presents more unresolved questions, the authorwrites.
For the BNA Insight, go here. (subscription required)

With new reporting requirements bound to cause more public outrage about tax planning, preparation is key to navigating potential controversies, a tax executive from Microsoft Corp. said.
"We have some history of our profit allocations being published in the press. And so, the benefit of that is, you have a little history, you have a little data onwhat the downstream impacts of that are," saidwilliam Sample, corporate vice president ofworldwide tax for Microsoft.
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U.K. Chancellor of the Exchequer George Osborne said the European Union needs to make a push for companies to publish their country-by-country tax bills.
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The U.K.will accept "surrogate" filings of the country-by-country reporting template for 2016 accounting periods by U.K. subsidiaries of U.S. multinationals, a U.K. official said.
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In economic analysis, Martin A. Sullivan discusseswhy corporate integration is incompatiblewith a switch to a territorial system.

For the Tax Notes article, go here. (subscription required)

Although interest stripping has been garnering much of the attention lately, there are more difficult inversion-related problems to solve, Danielle Rolfes, Treasury international tax counsel, said February 12.
For the TNT story, go here. (subscription required)

Houseways and Means Committee Chair Kevin Brady, R-Texas, continued his steady drumbeat on the need for international tax reform at a speech February 12, saying his committeewill move immediately to draft international tax reform legislationwhile alsoworking on a blueprint for comprehensive tax reform this year.
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Tax officials from the U.S., Canada, and the U.K. are optimistic that countrieswill be able to effectively coordinate implementation of country-by-country reporting, but the U.S. and U.K. governments disagree onwhether U.S. multinationals have been disproportionately targeted by the European Commission's state aid investigations.
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Jeffery M. Kadet explains the origin and objectives of the OECD base erosion and profit-shifting project, and he considers how the project may proceed.
For the Tax Notes special report, go here. (subscription required)

Mindy Herzfeld analyzes the details of the recently announced merger and inversion involving Tyco and Johnson Controls, and explains how that deal could serve as a roadmap for future successful inversions.
For the TNI article, go here. (subscription required)

The EU Councilwill support only a "phased approach" to fighting corporate tax evasion focused on limited legislative proposals such as country-by-country reporting of multinational enterprises' tax data, Eurogroup President and Dutch Finance Minister Jeroen Dijsselbloem said at an Economic and Financial Affairs Council meeting.
For thewWTD story, go here. (subscription required)

Anna Binder, Laura Turcan, and Viktoriawöhrer of the Vienna University of Economics and Business summarize the topics discussed at the 11th session of the U.N. Committee of Experts on International Cooperation in Tax Matters, aswell as the international tax topics of relevance beyond developed countries' agendas.
For the TNI Viewpoint, go here. (subscription required)

Auditors examining payments between foreign corporations and U.S. brokerages should consult IRS counselwhen determiningwhether the foreign entity is engaged in a U.S. trade or business, the agency said.

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Brazil's multinational corporations are being harmed by a lack of effective bilateral double tax treatieswith other nationsÔøΩincluding the U.S. and U.K., says an EY LLP study.

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