Int'l Tax News

Two House lawmakers are adding their voices to concern about the U.S. implementation of the country-by-country reporting and other transfer pricing documentation recommended by the OECD's base erosion and profit shifting project in October.

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

If the European Commission decides that an EU member state should recover money from a company due to infringements of tax-related state aid rules, this money should be returned not to the same member state, but to member states that have suffered an erosion of their tax bases or to the EU budget, says the European Parliament in a resolution approved on Tuesday by 500 votes to 137,with 73 abstentions.
For the European Parliament release, go here.

In this report, Jack Cummings discusses the secretiveworld of Luxembourg preferred equity certificates. These hybrid instruments are so routinely used for outbound investments that even the general business tax practitioner must have aworking knowledge of how they function. The bottom line is a foreign interest deduction and no U.S. income inclusion.what could be better?
For the Tax Notes special report, go here. (subscription required)

In news analysis, Lee A. Sheppard looks at the state of dividend equivalentwithholding after the release of final temporary regulations on section 871(m).
For the Tax Notes article, go here. (subscription required)

In the first of a three-part series on the BEPS action 6 recommendations to combat treaty abuse, Mindy Herzfeld takes a closer look at the objective of the OECD's base erosion and profit-shifting project to end double nontaxation, focusing onwhether that goal is consistentwith important aspects of treaty policy.
For the TNI article, go here. (subscription required)

Loans made by controlled foreign corporations to foreign partnerships as part of routine operations should pass muster under proposed and temporary Section 956 regulations, the National Foreign Trade Council urged the government.

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A bipartisan group of senators, including the chairman and the ranking member of the Senate Finance Committee,wrote to the Department of Treasury blasting recent European Union "state aid" investigationsÔøΩand urging the administration to consider retaliatory tax hikes.

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On November 13 2015 the Australian and German finance ministers, Mathias Cormann andwolfgang Schauble, signed a new double tax agreement in Berlin. The agreement represents the first post-BEPS treaty agreed between two major economies.
For the ITR article, go here.

The top U.S. House and Senate taxwriters plan to start nextweek on a new effort to make significant changes to international corporate taxes.

For the Bloomberg Politics article, go here.

Stemming corporate inversions and bringing home corporate profits trapped abroadwill be two areas the Houseways and Means Committeewill focus on in 2016, the House's top taxwriter said January 14.
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The Treasury Department said it is "exploring discussions"with foreign jurisdictions to ease any administrative hassles or privacy concerns due to a one-year delay in the implementation of U.S. country-by-country reporting requirements.
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Work on an international tax code overhaulwill begin this year, butwhether Congress can pass a bill before 2017 remains unclear, Houseways and Means Chairman Kevin Brady (R-Texas) said.

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The European Commission's top tax official has said countries have "looked the otherway" in the face of serious tax avoidance and pledged to take action this year to improve transparency.
Speaking at a hearing on the European Parliament's special committee on tax rulings and economic and monetary affairs on Monday, Pierre Moscovici said corporate tax reform and fiscal transparency should be top of the commission's agenda this year.
For the Public Finance International story, go here.

The Treasury Department has received a number of comments on proposed regulations aimed at attacking "aggressive" tax positions on outbound transfers of intangibles under tax code Section 367, but none so far have offered a clearway forward on the difficult question of how to define foreign goodwill, a U.S. official said.
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Congresswill likely move forwardwith international tax reform legislation in 2017with a new president, House Budget Committee Chair Tom Price, R-Ga., said January 13, offering a more cautious prediction for the prospects for reform than the House's top taxwriter.
For the TNT story, go here. (subscription required)

Although tax reform appears unlikely to pass Congress before 2017, the Senate Finance Committee's ongoingwork on corporate integration could produce a discussion draft in the coming months, several tax lobbyists said January 13.
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The decision to delay IRS rules implementing country-by-country reporting requirements from the OECD is stoking fears of increased administrative complexity for the upcoming year.


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The government is considering more guidance onwhat it means to be a tax resident as itworks on regulations to make it harder for U.S. companies to invert, according to Treasury Department official Brenda Zent.

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In this article, Bill Parks and Jerrywegman explore the benefits of using apportionment as away to repatriate U.S. multinationals' untaxed overseas profits.
For the Tax Notes viewpoint, go here. (subscription required)

Treasury Assistant Secretary for Legislative Affairs Annewall has advised Rep. Ted Lieu, D-Calif., that initiating tax treaty negotiationswith Armenia is not a top priority since no U.S. companies have reported unrelieved double taxation on their investments in Armenia and because it's not Treasury's policy to conclude income tax treaties as a means of promoting commercial relations or enhancing job creation.
For the letter, go here. (TNT subscription required)

If Apple Inc. is any barometer, U.S. multinationals' proclivity to create jobs in low-tax jurisdictionswill continue and likely expand after BEPS: By mid-2017 the company expects to add 1,000 sales and tech support, distribution, customer care and manufacturing jobs to its existing staff of 4,000 in Ireland.
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The coming year promises to be an active one for transfer pricing litigation in the U.S. Tax Court,with three major cases scheduled for trial and decisions pending in three others.
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Corporate inversion deals are likely to continue in 2016 despite a challenging tax landscape and big questions surrounding the treatment of earnings stripping,while the outlook for legislation remains bleak.

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When the OECD released its final recommendations on combating base erosion and profit shifting in October, it ended a years-long debate on how to patch an allegedly leaky international tax system.
One of the uncompleted tasks, howeverÔøΩfine-tuning the attribution of profits rules to apply to the new definition of permanent establishmentÔøΩcould be as knotty as the BEPS discussion itself, and reopen many of the key issues that dominated those debates, according to many practitioners.
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Following the European Commission's decision that tax rulings issued under Belgium's "excess profit" scheme represent illegal state aid, some of the companies affected have publicly voiced their disagreement.
For thewWTD story, go here. (subscription required)

The European Commission has received more than 170 submissions on its proposal for a revised common consolidated corporate tax base (CCCTB) ahead of its re-launch later this year.
For the Irish Times story, go here.

The European Union'swar on supposed corporate-tax cheats kicked up another gear Monday, and this time European companies are in the cross hairs. Competition Commissioner Margrethe Vestager called foul on a Belgian tax law the commission says unfairly saved 35 companiesÔøΩmost of them EuropeanÔøΩsome ÔøΩ700 million ($763.3 million) in taxes since 2005. Belgiumwill now have to collect those taxes if it doesn't appeal, or loses in court.
For thewall Street Journal story, go here.

It iswith dismay thatwe read about the complex tax package Congress passed in December. It is hard to believe, but true, that Congress made permanent, for example, an unjustified tax loophole for corporations (the active financing exception) that lets corporations pay no taxes on income "earned" in foreign countries provided they keep that income offshore. That means that either money doesn't come back to the U.S to support jobs or our economy or that money is returned to the U.S. untaxed through various complex devices that disguise its origin. Eitherway it's a $78 billion loss to the U.S. economy that could pay for pre-K for all low and moderate-income children in the country for 10 years.
For the Hill article, go here.

After several false starts, the U.S. government finally seems to have succeeded in its attempt to invoke section 482 in a distressed asset/debt (DAD) shelter case. Austin Investment Fund LLC v. United States, No. 1:11-cv-02300 , if affirmed on appeal, virtually guarantees the imposition of accuracy-related penalties in these cases and may constitute a more forceful attack on loss importation shelters than relying on narrow statutory fixes.

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

On December 22, 2015, the Italian Parliament approved the 2016 Finance Act,which includes provisions introducing country-by-country (CbC) reporting for Italian-parented multinational enterprises (Italian MNEs) in linewith Action 13 of the OECD's Base Erosion and Profit Shifting (BEPS) project.

Italian MNEswith consolidated annualized group revenue of EUR 750 million or more must comply by filing a CbC report annually that includes specific financial data covering key measures of economic activity by territory.

For the PwC Insight, gohere.

Houseways and Mean Committee Chairman Kevin Brady (R-Texas) said his committeewill vote this year on legislation overhauling the international tax code, allowing companies to repatriate overseas profits at a reduced rate.


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The European Union is resuming efforts to create a common system for calculating the tax base of businesses operating in the EU, and aims to adopt the OECD BEPS package by the end of the Dutch EU presidency in June, a top official said.

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Belgium's "excess profit" tax scheme is illegal under EU state aid rules because it confers tax advantages upon multinational corporations at the expense of smaller competitors, the European Commission said, adding that as a result, Belgium must recover ÔøΩ700 million from at least 35 multinationals based primarily in the EU.
For thewWTD story, go here. (subscription required)

2016 should be the year of corporate tax reform and fiscal transparency, tax Commissioner Pierre Moscovici told MEPs from the Special Committee on Tax Rulings and the Economic and Monetary Affairs Committee at a hearing on Monday evening. "We have a serious problemwith tax avoidance and lack of transparency. Too many people have looked the otherway", Mr Moscovici said.
For the European Parliament release, go here.

TheEuropean Commissionsaid on Monday that a corporatetaxbreak that Belgium granted to at least 35 companies, amounting to total reductions equivalent to about $765 million,was illegal.
For the New York Times story, go here.

Just about every American chief executive has the same dream: to get out from under the corporate income tax. For many, that means lobbying Congress to change the tax code. But for a growing number, it also involves increasingly creative ÔøΩ and successful ÔøΩ tricks to avoid their liability.
For the New York Times article, go here.

The U.S. House of Representatives' top taxwriterwants a vote this year on legislation moving the United States to a territorial-style tax system aimed at exempting the earnings of American companies abroad from U.S. taxation.
For the Reuters story, go here.

The biggest corporate deal of 2015was also, in the view of many, the shadiest: Pfizer's $160-billion mergerwith the Irish drug company Allergan. It's a "tax inversion"ÔøΩPfizerwill in effect be reconstituting itself as an Irish company, in order to lower its taxesÔøΩand that'swhy so many people found it so offensive. Hillary Clinton said that ending inversionswasn't just about fairness but about "patriotism"; Donald Trump called the deal "disgusting." It's got to make youwonderwhen even Trump finds your moneymaking schemes repugnant.

For the New Yorker story, go here.

U.S. multinationals preparing their country-by-country reports under new federal regulations may find they have to pull in data from a broad range of sources and not just from forms already being filedwith the Internal Revenue Service, practitioners said.

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

There is rising interest in increasing shareholder taxes and using that revenue to reduce the burden of the corporate tax by providing shareholder credits or by cutting the corporate rate. Butwhat are the implications of these changes for cross-border investment and profit shifting?which approach is preferable?
For the Tax Notes article, go here. (subscription required)

How extensively the country-by-country (CbC) reporting regime affects U.S. businesses and tax revenuewill depend on how vigorously the U.S. competent authority defends the arm's-length standard.
For the Tax Notes article, go here. (subscription required)

Itwill be critical for multinational enterprises to prepare transfer pricing documentation that portrays their global operations in away that supports the allocation of profit in their country-by-country (CbC) reports, according to a panel that included David Varley, former acting director of transfer pricing operations at the IRS.
For the Tax Notes article, go here. (subscription required)

Mindy Herzfeld reviews Australia's first public disclosures of tax information,whichwere made last month, and discusseswhy the information reported may be more likely to mislead the public than to inform it.
For the TNI article, go here. (subscription required)

Multinational enterprises that fail to complywith Australia's recently adopted country-by-country reporting requirements are subject to financial penalties, prosecution and court orders, but a number of MNEs are expected to pay the penalties rather than complywith the new requirements.
For thewWTD story, go here. (subscription required)

Itai Grinberg proposes that the U.S. Treasury consider applying a little-known, never used U.S. tax law to counter the European Commission's pending "discriminatory" state aid investigations.
For the TNI viewpoint, go here. (subscription required)