Int'l Tax News

Amendments to the Cyprus corporate and personal tax laws thatwill enhance the country's tax competitivenesswere published in the Cyprus Government Gazette on July 16, 2015. Key amendments include a tax deduction on corporate equity in the form of a notional interest deduction (NID). The NID amendment aims to reduce corporate debt by increasing the attractiveness of equity from a tax perspective. The NID amendment is retroactively effective on January 1, 2015.

For the PwC Insight, go here.

Read about the importance of matching contract terms to commercial substance in a post-BEPSworld.
For the ITR story, go here.

China's State Administration of Taxation is likely to release a draft of revised Circular No. 2 (2009) thatwould significantly revamp the nation's transfer pricing rules, adopting concepts from the international project to combat base erosion and profit shifting (BEPS), according to practitioners.

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

Companies continue to leave the U.S. through inversion deals, nearly a year after the Treasury Department clamped down on the tax-fueled mergers.

For thewall Street Journal story, go here.

The provisions in the tax codewith the most impact on manufacturing are deferral of the active income of controlled foreign subsidiaries, the research credit, research and experimentation outlay expensing, and accelerated depreciation for capital assets, according to an August 3 report by the Congressional Research Service.
For the CRS report, go here. (Subscription required)

The IRS and Treasury announced August 5 that they intend to issue regulations regarding transfers of property to partnershipswith related foreign partners to ensure that income or gain attributable to the propertywill be taken into account by the transferor either immediately or periodically.
For the TNT story, go here. (subscription required)

Senate Majority Leader Mitch McConnell, R-Ky., on August 6 reiterated his opposition to pairing international tax reformwith long-term highway funding and said he hopes passage of a tax extenders bill does notwait until the end of the year.
For the TNT story, go here. (subscription required)

The path to connecting international tax law changeswith highway funding continues to face a roadblock in the form of Senate Majority Leader Mitch McConnell (R-Ky.).

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

Further proving that inversion deals aren't a relic of the recent past, the U.S.-based fertilizer company CF Industries Holdings Inc. and OCI NV, a Netherlands-based fertilizer and industrial chemical company, announced August 6 that theywere entering into an inversion deal thatwould find them migrating to the United Kingdom.
For the TNT story, go here. (subscription required)

The US Tax Court on July 27, in Altera Corp. v. Commissioner, 145 T.C. No. 3 (2015), invalidated the portion of the Treasury regulations issued under IRC Section 482 requiring related-party participants in a cost-sharing arrangement (CSA) to share stock-based compensation (SBC) costs. If the IRS pursues an appeal of the final decision, the matterwould come before the Ninth Circuit Court of Appeals, the same court that decided Xilinx, Inc. v. Commissioner, 598 F.3d 1191 (9th Cir. 2010), holding that SBC costswere not required to be shared under the prior cost-sharing regulations.

For the PwC Insight, go here.

An Obama administration crackdown to stop US businesses pursuing takeovers that let them escape the country's high corporate tax regimewas dealt a sharp rebuke on Thursday, after two deals paved theway for more companies to move their domicile to Europe.

Bothwill create new UK-based companies in so-called tax inversion deals, highlighting corporate America's desire to move its tax base overseas.

For the Financial Times story, go here.

The Luxembourg government released bill 6847 (the Bill) on August 5, 2015. The Bill includes proposed tax measures for corporations and follows several recent announcements from Finance Minister Pierre Gramegna.

For the PwC Insight, go here.

It isn't surprising that Republican candidates all have tax cut proposals.Taxesare too high and America's tax system is hopelessly outdated, creating a drag on an economy that has sputtered for eight years.
For the Forbes story, go here.

In an August 5 release, U.S. Houseways and Means Committee staff expressed support for an exemption system of taxing foreign corporate profits, saying that the current system used by the U.S. "creates a big, costly lockout effect" that encourages U.S. companies to keep $2 trillion in capital overseas to avoid repatriation taxes.
For the release, go here.

Royal Bank of Scotland and Deutsche Bank AG display the most potential for base erosion and profit shifting of the 26 European banks surveyed in a report released August 5.
For thewWTD story, go here. (subscription required)

The IRS gave its agents information on how to approach issues relating to branch-level interest taxes and non-services fixed, determinable, annual or periodical (FDAP) income in two new international practice units.
The units, released Aug. 4,were developed by the Internal Revenue Service's Large & Mid-Size Business Division to serve as job aids and training materials for examiners dealingwith cross-border transactions.
For the BNA DTR story, go here. (subscription required)

The OECD and country representatives inworking Party 11 (WP11) are likely to recommend in the base erosion and profit shifting (BEPS) action plan that local interest limitation rules should focus primarily on an interest/ EBITDA cap. AswP11 held intensive meetings on various BEPS action points to allow the OECD to prepare a final version in the comingweeks for proposal to the G20 in early October, it is understood that an important part of these discussionswas around Action 4. The purpose of Action 4 is to develop best practice for countries on local interest limitation.
For the PwC Tax Policy Bulletin, go here.

Senate Republicans insist they're deeply skeptical of Rep. Paul Ryan's push for an agreement on international tax reform, but acknowledge a planwith bipartisan supportwould be hard to turn aside.
For the Hill story, go here.

What's going on in theworld of tax for global companies investing in the USA today? PwC's Tax and Investment in the US examines recent issues and events relevant to your business.

Our second quarter issue of 2015 examines:
Proposed changes to US model income tax treaty
Senate Finance Committee tax reformworking groups issue reports
Insourcing reception
Doing business in the US: new edition available
PwC - OFII US Inbound Tax Roundtables

For the PwC publication, go here.

On Tuesday another foreign corporation announced another mega-bid to move control of a U.S. company offshore. Irish drug maker Shire PLC launched an unsolicited offerworth more than $30 billion to buy Illinois-based Baxalta,which is so far resisting the offer as too low. And you guessed it, the proposed transaction has a "compelling tax profile," according to Shire,which figures a combined company could enjoy an effective tax rate of 16% or 17%, down from Baxalta's recent rate of roughly 23%.
The Shire offer adds to a mountain of evidence that an un-competitive tax system has made the U.S. an undesirable location for corporate headquarters and investment. The hopeful news for U.S.workers and taxpayers is that Congress is finally paying attention.
For thewall Street Journal article, go here.

U.S. based industrial companies paid an average 28.6 percent effective tax rate over the past three years, slightly above the 25.9 percdent rate foreign companies in the sector pay, according to a PricewaterhouseCoopers LLP analysis of 2014 data.

The difference between domestic and international companies narrowed from 3.3 percentage points in 2013 to 2.1 percentage points in 2014 as U.S. effective rates dropped and non-U.S. rates increased, the study said. PwC pulled public data from 320 industrial and automotive corporations, 143 ofwhich are U.S.-based.

For the BNA DTR story, go here. (Subscription required)

Joe Stanley-Smith talks to Sue Cooper, group head of tax at global asset management company Schroders, about the financial transaction tax and other challenges facing the financial services sector.
For the ITR story, go here.

The European Commission (EC)will put forward plans to radically change the VAT Directive by allowing member states to introduce their own reduced rates of VAT, International Tax Review understands. No official announcement has been made.
For the ITR story, go here.

In this interviewwith the Tax Foundation, Dr. Gary Hufbauer dissects the profit shifting phenomenon, highlighting the reasons as towhy profit shifting is beneficial and how the current debate concerning the taxation of multinational enterprises is both misconceived and misdirected.
For the interview, go here.

The OECD on August 3 released new tax compliance peer review reports for 12 jurisdictions, including two supplementary reviews for Austria and the British Virgin Islands, both ofwhich improved their compliance ratings after making significant reforms toward greater tax transparency.

For thewWTD story, go here. (subscription required)

Robert Cassanos analyzes the OECD's final report on action 2 of its base erosion and profit-shifting project from a technical and policy perspective and suggestsways to make the hybrid mismatch rules more effective and easier to complywith.
For the Tax Notes special report, go here. (subscription required)

On July 11, 2015, Spain's Ministry of Finance published the Royal Decree 634/2015, of July 10, 2015 approving Corporate Income Tax Regulations (the Regulations) that mandate new transfer pricing documentation requirements,which now incorporates the need for a Country-by-Country Report (CbC Report) in addition to the Master File and Local File.

This is a significant development for Spain in the context of transfer pricing, and a direct result of the recent guidance set forth by the Organisation for Economic Co-operation and Development (OECD) as part of its base erosion and profit shifting (BEPS) initiativewith respect to Action Plan 13: Guidance on the Implementation of Transfer Pricing Documentation and Country-by-Country Reporting.

For the PwC Insight, go here.

Jim Fuller comments on U.S. tax developmentswith international implications, focusing specifically this month on the Microsoft, Illinois Toolworks, and YA Global cases; inversions; comment letters addressing base erosion and profit-shifting discussion drafts; and the U.K. diverted profits tax.
For the TNI story, go here. (subscription required)

Ireland's knowledge development boxwill be designedwithin the parameters of the OECD's modified nexus approach, but also aims to be "the most competitive in class," according to a Department of Finance "feedback statement" published July 30 in response to a recent consultation on the proposed tax regime.
For thewWTD story, go here. (subscription required)

A European Parliament committee formed in thewake of the LuxLeaks disclosures has issued a report that includes a proposal to require recoveries of illegal state aid to be paid to the EU member stateswhose tax baseswere eroded as a result of the aid.
For thewWTD story, go here. (subscription required)

In Part I of a two-part series, Mindy Herzfeld reviews the views of U.S. andwestern businesses on the state of BEPS Action 10, use of the profit-split method; in Part II, shewill contrast those viewswith their counterparts from Communist nations such as China.
For the TNI article, go here. (subscription required)

Ajay Gupta reviews the Tax Court's decision in Altera Corp. v. Commissioner and concludes that barring a statutory change, the case spells the end of the IRS's efforts to require U.S. corporations to include stock-based compensation awards in cost-sharing poolswith foreign affiliates.
For the TNI story, go here. (Subscription required)

In a July 31 letter to Senate lawmakers, a coalition of 56 organizations criticized the Senate Finance Committee's international tax reformworking group report, saying that the proposalwould raise insufficient revenue and incentivize U.S. corporations to shift profits overseas, allowing them to pay a lower tax rate on their offshore profits.
For the TNT story, go here. (subscription required)

Even a company that named its top beer after a hero of the American Revolution may eventually forsake its home country.
Boston Beer Co., the maker of Samuel Adams beer and Angry Orchard hard cider,would beworth more to a foreign owner unburdened by the U.S. tax structure, founder Jim Koch told a Senate committee July 30. Because of that, Koch says he regularly gets pitches from investment bankers looking to strike a sale. He's been turning them downÔøΩfor now.
For the BNA DTR story, go here. (subscription required)

Several tax-writing senators and an industry advocate reacted positively to lastweek's innovation box proposal from Rep. Charles Boustany, Jr. (R-La.) for a lower tax rate on income from intellectual property, though all said morework is needed.
Boustany himself said as much, soliciting feedback on the draft legislationwhen he and Rep. Richard E. Neal (D-Mass.) jointly released it July 29. The proposed 10 percent rate andwhatwould qualify for that 71 percent discount from the statutory corporate rate of 35 percent are clearly up for debate.
For the BNA DTR story, go here. (subscription required)

Afterweeks of hinting about an "innovation box" tax proposal, U.S. Reps. Charles Boustany, Jr. (R-LA) and Richard Neal (D-MA)wednesday released draft legislation thatwould provide a massive giveaway for high-tech and pharmaceutical companies aswell as other industries that generate income from patents and copyrights. The details of the legislation raise the very serious concern that the "innovation box" could be the tax break minnow that swallows the corporate income taxwhale.
For the Tax Justice blog article, go here.

On July 27, 2015, the U.S. Tax Court issued a stunning rebuke to the IRS by invalidating the part of the Internal Revenue Services' (IRS) cost-sharing regulations under code section 482 that says taxpayers have to take into account, among other costs, the costs of stock-based compensation.The Altera decision should also support the many taxpayerswho have questioned the separate section 482 regulatory requirement that cost-based transfer pricing (e.g., cost-plus pricing for services) must include the cost of stock-based compensation.
For the National Law Review article, go here.

The Global Forum on Transparency and Exchange of Information for Tax Purposes published new peer review reports today for 12 countries or jurisdictions, moving further aheadwith its goal to implement global standards on transparency and exchange of information for tax purposes.
For the OECD release, go here.

With an $8 billion, three-month Highway Trust Fund extension on itsway to the president's desk, congressional attention is turning toward how to pay for a multiyear deal onwhich both chambers can agree.

The Senate passed the bill July 30 on a 91-4 vote, sending H.R. 3236 to thewhite House for signature.

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

Houseways and Means Committee members Charles Boustany (R-LA) and Richard Neal (D-MA) on July 29, 2015, released a discussion draft on an 'innovation box' tax regime thatwould provide a 10.15% effective US federal income tax rate for income derived from certain types of intellectual property (IP). The Boustany-Neal discussion draft also includes a proposal intended to facilitate repatriation of IP held in foreign affiliates by providing tax-free treatment. The Boustany-Neal discussion draft does not address other areas of international tax reform.

For the PwC Insight, go here.

The U.S. Tax Court's July 27 ruling in Altera Corp. v. Commissioner could have implications that go far beyond the immediate issue in the case, forcing radical changes in Treasury's rulemaking process andÔøΩsome practitioners sayÔøΩraising fundamental questions about the utility of the arm's-length standard.

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

To improve competitiveness the U.S. needs a 25 percent corporate tax rate and a modernized international tax system, Mark A.weinberger of the Business Roundtable said in a July 30 statement in response to a Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations hearing.

For the BRT statement, go here.

European Union member states' "excessively" complex national tax codes allow large multinational company base erosion and profit shifting that is undermining the EU single market, according to an EU Parliament tax committee draft report.

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

International Tax News is designed to help multinational organisations keep upwith the constant flow of international tax developmentsworldwide. Among the topics featured in this month's edition are:

For this month's issue, go here.

This month, the Senate Finance Committee's tax reformworking groups released their long-awaited and much-anticipated recommendations for fixing our broken tax code. This is awelcome development, because make no mistake: The time for action is very much upon us, and troubling evidence of this fact is all around.

For the US News story, go here.

Supporters of comprehensive tax reformwere given a glimmer of hope July 8when theSenate Finance Committee released a series of reports providing a framework for a much needed overhaul to our antiquated tax code.The U.S. Chamber of Commerce has long supported and repeatedly called on Congress to enact comprehensive tax reform that promotes economic growth and creates jobs, and there's a flicker of optimism thatwith these reports,we might be moving in the right direction.

For the Forbes story, go here.

bywalter Galvin (The Hill)

Millions ofwords have beenwritten about tax reform in the United States;whywe need it, how to do it, the risks of not doing it and so forth. After awhile, the concept of tax reform blurs into an abstraction, making it more difficult to grasp the issue and properly address it. But very often a case study can cut through the clutter by illuminating a problem and clearing a path toward fixing it.

For the Hill story, go here.

Guidelines set down by the OECD leave Ireland no flexibility in its design of a new patent-based tax regime aimed at multinationals, the Irish finance department said on Thursday.

For the Reuters story, go here.

In a thoroughly laid out investigation on corporate taxation, the Permanent Senate Subcommittee on Investigations on Thursday used Valeant Pharmaceuticals , Burger King's parent company, Restaurant Brands International and Budweiser -maker AB InBev to lay bare how U.S. tax laws have created an un-level playing field for America's largest and most recognizable companies.

For the Forbes story, gohere.

Congress today completed action on a three-month extension of federal highway and transit program authorization,which had been set to expire on July 31. President Obama is expected to sign the short-term highway bill,whichwill allow more time for Congress to continueworking on a long-term highway bill that could include international tax reform provisions.

For the PwC Insight, go here.