Int'l Tax News

Financial sector backlash against UK tax changes continues to grow as revenue figures become clearer.
For the ITR story, go here.

The Treasury Department has pushed American-based corporations to lobby against a tax provision prized by their foreign counterparts, according to peoplewho have heard the pitch.

One senior Treasury official in particular, Danielle Rolfes, urged domestic companies to more aggressively target an incentive for interest expensing during a March tax conference in Florida, in a statement that one person in the room saidwas "almost unprecedented."
For the Hill story, go here.

The G-20 finance ministers and central bank governors called on the OECD to create a framework for the implementation of the OECD and G-20's base erosion and profit-shifting project outcomes by 2016,with input from non-G-20 jurisdictions, particularly developing countries.
For the TNT story, go here. (subscription required)

SMEs are important for their contribution to employment, innovation, economic growth and diversity. This report examines the tax treatment of SMEs, the case for SME preferences, and the use of tax preferences and simplification measures for SMEs in thirty-nine OECD and G20 countries.
For the OECD report, go here.

James P. Fuller comments on U.S. tax developmentswith international implications, focusing specifically this month on new competent authority and advance pricing procedures, transfers of property to partnerships, the Altera case, base erosion and profit shifting, and IRS international practice units.
For the TNI article, go here. (subscription required)

Mindy Herzfeld previews the final deliverables the OECD is expected to release October 5 under its base erosion and profit-shifting action plan and explainswhy the United States is unlikely to take any significant action on them.
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With the expiration of the highway bill at the end of October and pressure to move a tax extenders bill by year-end, congressional taxwriterswill be coming up on a series of deadlineswhen they get back towork after the August recess.
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In news analysis, Marie Sapirie discusses how renewed interest in spinoff transactions could lead to new guidance that answers some older questions.
For the Tax Notes story, go here. (subscription required)

The European Union plans to standardize some national tax and insolvency laws as part of its overhaul of the bloc's capital markets.
The European Commission, the EU's executive arm, identified divergent tax laws in the bloc's 28 countries as one of the obstacles to a capital markets union and cross-border investment, according to a preliminary commission paper. The Brussels-based commission may propose a "simplified and unified template" for the recovery ofwithholding tax, among other steps.
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The IRS is asking for public comment on a tax form used to report information about transactions between U.S. corporations that are 25 percent foreign owned, or foreign corporations engaged in U.S. trade or business, and related foreign parties.
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In economic analysis, Martin A. Sullivan looks at how a U.S. patent box might be as complicated to administer as the deduction for manufacturing under section 199.
For the Tax Notes article, go here. (subscription required)

The IRS on August 12 issued final guidance significantly revising prior procedures for obtaining assistance under US tax treaties from the US competent authority,which operates through the Advance Pricing and Mutual Agreement Program (APMA) and the Treaty Assistance and Interpretation Team (TAIT).
For the PwC Insight, go here.

A U.K. tax official, defending the U.K.'s recently enacted diverted profits tax, said the controversial tax is consistentwith the international project to combat base erosion and profit shifting.
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European Union member states are struggling to reach consensus on the mission of the Code of Conduct Group for Business Taxation.
Countries are split onwhether the group should examine foreign countries' corporate taxation schemes orwhether it should be taskedwith establishing an "effective level of minimum taxation" for companies in various sectors, including intellectual property rights.
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Alan Lederman of Gunster, Yoakley & Stewartwrites that the IRS's ruling in PLR 201515006, like PLR 201322009 before it, suggests that the Servicewill insist certain non-tax-avoidance indicia exist as a condition for favorably ruling that a foreign corporation seeking to avoid passive foreign investment company classification can utilize tax code Section 1298(b)(7) to treat, as a non-passive asset, the stock of a second-tier U.S. subsidiarywith significant passive income and assets.
For the BNA Insight, go here. (subscription required)

Varying degrees of lingering disenchantmentwith the OECD's base erosion and profit-shifting projectwere apparent during a September 2 International Fiscal Association panel discussion, as representatives of the United States and the business community expressed concerns about uneven implementation and uncertain outcomes.
For the TNT story, go here. (Subscription required)

Practitioners discussing the effects of the forthcoming October guidance from the OECD's project to combat base erosion and profit shifting said multinational companies are likely to move their cash box structures from zero-tax jurisdictions such as Bermuda to low-tax jurisdictions such as Ireland and Singapore.

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A U.S. Treasury official said some officials and practitioners in the international tax community have misunderstood the U.S. decision not to participateÔøΩat this timeÔøΩin the negotiation of a multinational tax treaty under Action 15 of the project to combat base erosion and profit shifting.

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Draft Canadian legislation to deny deductions for inter-corporate dividends on shares involving synthetic equity arrangements pose a significant risk to the ability of Canadian public companies to offer employees incentive-based compensation, the Tax Executives Institutes Inc.warned.

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Ajay Guptawonderswhether the European Commission maywield its power to conduct state aid reviews as a backup in the event that the OECD's base erosion and profit-shifting project turns out to be a damp squib
For thewWTD story, go here. (subscription required)

In long-awaited proposed guidance, the IRS and Treasury propose adopting an aggregate approach to controlled foreign corporation loans to foreign partnershipswith U.S. partners under section 956.
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The chairman of an OECD focus group taskedwith overseeing the negotiation of a multilateral tax treatyÔøΩunder an international project to combat base erosion and profit shiftingÔøΩhas identified the four action items the treatywill cover.

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European Union member stateswill challenge the European Parliament over amendments thatwould require listed EU companies to report revenue earned and taxes paid on a country-by-country basis, according to confidential documents obtained by Bloomberg BNA.

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International tax practitioners returning to their desks after the August lull face a rapidly evolving regulatory landscape as countries rush to rewrite their international tax rules in response to the OECD's two-year project to combat base erosion, now entering its final stage.

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The Internal Revenue Service issued long-awaited proposed and temporary rules to make it harder for controlled foreign corporations to use loans to partnerships to avoid income inclusions under tax code Section 956.

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A tax policy advocacy group called for online retailer Etsy Inc. to be stripped of a certification awarded to companies that adhere to strict standards for transparency and social accountability unless it dismantles its offshore tax-cutting structure.
For the Bloomberg story, go here.

The key issue for multinational pharmaceutical companies decidingwhere to locate a new research facility iswhether the jurisdiction has a research and development credit that is available for contract aswell as proprietary research, a Novartis AG official said.

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Early October guidance under Action 5 of the international project to combat base erosion and profit shiftingwill adopt a "nexus approach," requiring intellectual property regimes to only grant preferential tax benefits in proportion to the taxpayer's research and development expenditures, an OECD official said.

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Action 13 of the OECD's Action Plan on Base Erosion and Profit Shifting (BEPS) strives to enhance transparency for tax administrations by providing themwith adequate information to conduct transfer pricing risk assessments and examinations through increased transfer pricing documentation requirements, specifically including a new country-by-country report (CbC report) and a master file.

The OECD has recommended that the first CbC reports be required to be filed for multinational enterprises' (MNEs) fiscal years beginning on or after January 1, 2016. The OECD also recommends that MNEs be allowed one year from the close of the fiscal year towhich the CbC report relates to prepare and file it, meaning that the first reportswould be filed by December 31, 2017, for companieswith fiscal years starting January 1, 2016.

Even if the United States does not implement CbC reporting, or delays implementation for one year, US-parented MNE groupswill be required to file reports by the end of 2017 if the group includes entitieswith operations in a foreign country inwhich CbC reporting requirements have been implemented.
For the PwC Insight, go here.

China and Taiwan have agreed a double tax treaty after talks between the Taipei-based Straits Exchange Foundation (SEF) and Beijing-headquartered Association for Relations Across the Taiwan Straits (ARATS).
For the ITR story, go here.

As governments around theworld assess the bestway to attract – and tax – R&D and
intellectual property investment, Giulia Cipollini and Bianca Macrina ofWithers inMilan look
at the incentives taxpayers can avail in Italy, tracking the nuances of the Italian Patent Box
regime from introduction to operation.
For the ITR article, go here.

Consultationwith an economist can help an examiner determinewhether a taxpayer is using the best transfer pricing method andwhether the price meets the arm's-length standard, according to examiner training materials released by the Internal Revenue Service.
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Brazilian government officials confirmed their intention to restore a controversial tax on financial transactions, provoking angry reactions from business leaders and economists.
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When a transaction occurs that moves property from a controlled foreign corporation to a foreign corporation, IRS agentswill be looking first atwhether the controlled foreign corporation ceased to exist after the dealwas done.
In training materials provided to its examiners and released publicly Aug. 28, the Internal Revenue Service's Large and Mid-Size Business Division looks at the potential tax effects of certain foreign-to-foreign transactions on U.S. corporate shareholderswho are making an exchange in the deal.
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Though details on a plan to lower tax rates on income from intellectual property emergedweeks ago, a fair bit of silence has followed.
Mum has been theword for manywould-be advocates and opponents alike.
They seem to be holding back in anticipation of other proposals to change taxes on international profits in concertwith the reduced rate for intellectual property, some observers said. Those added details are still to come, according to Houseways and Means Committee members and their staffers.
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nternational Tax News is designed to help multinational organisations keep upwith the constant flow of international tax developmentsworldwide.
For this month's issue, go here.

The twotop Republican taxwriters in Congress arewarning the Treasury Department not to get ahead of Congress as it negotiatesnewinternational tax rules, questioningwhether the administration is seeking towield power it does not have.
For thewashington Post story, go here.

The latest in a series of tax measures enacted by Brazil's government that reinstate socialwelfare tax contributions on financial income for about 80,000 large companies took effect and already has provoked legal challenges.

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Sen. Orrin G. Hatch (R-Utah) and Rep. Paul D. Ryan (R-Wis.) sent another letter to the Department of Treasury questioning its authority to implement the Organization for Economic Cooperation and Development's country-by-country reporting standardsÔøΩand demanding that the department respond by Aug. 31.

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

India's Department of Revenue is close to resolving tax disputeswith almost 120 U.S. companies inwhat analysts hope is an indication of the authorities' positive intentions and shift toward a more cooperative approach.
Revenue Secretary Shaktikanta Das told a conference in New Delhi on Aug. 21 that the government isworking to settle tax-related disputeswith the U.S.-based companies, aswell as those from Japan and elsewhere. Das stressed that the government doesn't intend to double-tax foreign entities in India.
For the DTR story, go here. (subscription required)

GOP presidential front-runner Donald Trump said hewould favor repatriating trillions of dollars of corporate profits at a lower tax rate in order to create U.S. jobs and stem the tide of corporate inversions.
For the TNT story, go here. (subscription required)

In a letter today, Senate Finance Committee Chairman Orrin Hatch (R-UT) and Houseways and Means Committee Chairman Paul Ryan (R-WI) outlined concerns regarding the country-by-country (CbC) reporting requirements that are being considered by the Treasury Department and called on Secretary Jack Lew to respond to their earlier request for information on the Base Erosion and Profit Shifting (BEPS) project that is being developed by the Organization for Economic Cooperation and Development (OECD).
For the letter, go here.

The turbulent times in global stock markets are giving rise a controversial idea: Tax the traders. Proponents sayslapping a tiny tax on financial transactionswould discourage the sudden sell-offs and volatiletrading that are causing the Dow Jones Industrial Average'swild swingsthisweek.
For the International Business Times story, go here.

Foreign businesses rendering services in South Africa should consider the aggregated time ofworkers in calculatingwhether they have a permanent establishment now that the tax court in Johannesburg has rendered one of the first decisions on the tax treaty concept of a PE, practitioners tell Bloomberg BNA. The tax court finds the taxpayer's presence in South Africa constituted a PE under the country's double tax agreementwith the U.S.when the overall time spent by its employees in South Africawas factored in aggregate, rather than on an individual basis.
For the DTR story, go here. (subscription required)

Law of Ukraine No. 609-VIII (the Law) dated July 15, 2015, introducing changes to Ukraine's Tax Code regarding transfer pricingwas officially published on August 10, 2015, and came into force from August 11, 2015.

The introduced amendments are aimed at bringing the Ukrainian transfer pricing regulations in linewith international practice and the OECD guidelines.
For the PwC Insight, go here.

The Canada Revenue Agency (CRA) recently released its 2015 annual report on the Canadian Mutual Agreement Procedure (MAP) program, the CRA's mandatory service program designed to help taxpayers resolve cases of double taxation or taxation not in accordancewith the provisions of a tax convention. The report provides statistics on the performance of the MAP program and discusses how the program functions and the benefits of using the process.
For the PwC Insight, go here.

Top multinationals have contributed to a discussion document onwhat UK taxpayers should think aboutwhen disclosing information about their tax affairs.
For the ITR article, go here.

The Canada Revenue Agency (CRA) recently released its annual report on Canada's Advance Pricing Arrangement (APA) program covering the fiscal period ended March 31, 2015. The APA program is a proactive service offered by the CRA to assist taxpayers in resolving transfer pricing disputes that may arise in future tax years. In particular, the objective of the program is to provide increased certaintywith respect to future transfer pricing issues.

For the PwC Insight, go here.

This month's feature examines proposals for new tax information reporting requirements for large multinational businesses as part ofwider and ongoing changes to the international tax system – proposalswhich have been described by international tax experts as the most significant development in the field of transfer pricing since TP rules themselves first began to be introduced over 40 years ago.
For the Tax News story, go here.

Determiningwhether a nonresident alien has effectively connected income for U.S. tax purposes relies onwhether the person is engaged in a U.S. trade or business andwhat income is connectedwith that business, the IRS said in a newly released training unit for its examiners.
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