Int'l Tax News

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.

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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.
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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.
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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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The Costa Rican government unveiled legislation for a tax overhaul that includes an expanded value-added tax, a new permanent establishment definition, formal introduction of transfer pricing laws and a tax on the passiveworldwide income of local taxpayers.
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Ajay Gupta examines Etsy's about-face on its promise to deliver greater tax transparency and suggests energizing the investor base as away to discourage secretive tax planning.
For thewWTD story, go here. (subscription required)

With burgeoning middle class spending power and a maturing legal structure, China is more attractive to investors than ever.with the government fast-tracking economic and fiscal development,wang Jun, China's Tax Commissioner (ministerial level) provides insights into how he is bringing Chinese tax policy into linewith global standards, and the importance of taking care of the pond if youwant good quality fish.
For the ITR story, go here.

Mindy Herzfeld examines how cross-border tax issues may be resolved under bilateral investment treaties and suggests that these treaties might offer an alternative to the broken mutual agreement process employed in bilateral tax treaties.
For the TNI story, go here. (subscription required)

In news analysis, Marie Sapirie says the IRS's recent notice on transfers of property to partnershipswith related foreign partners confirms that the government intends to shore up the rules regarding transfers of property abroad, presenting potentially significant obstacles for taxpayers.
For the TNT story, go here. (subscription required)

Objectionable foreign tax credit transactions needed principled responses, and principled responseswere enacted in the midst of a scattergun attack on these objectionable transactions. However, the United States must have a principled foreign tax credit regime that balances the need to prevent international double income taxationwith the need to prevent abusive transactions. This Article addresses the disallowance provisions that have been added to section 901 as part of the government'swar against objectionable foreign tax credit transactions and assesseswhich of those provisions serve a continuing policy objective andwhich do not. The Article argues that U.S. tax lawwould be greatly improved if section 901 embodied a principled approach and if redundant provisions that create incoherent outcomeswere removed.
For the article, go here.

Australia's risk-differentiation approach to selecting large corporations for audit has delivered unexpected benefits, prompting greater transparency and changing behavior around tax policy, according to the officialwho spearheads the Australian Tax Office's dealingswith big companies.

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Cutting the corporate tax rate to the OECD average of 25 percent, to the British rate of 20 percent, or the Canadian rate of 15 percentwould improve economic growth and aidworkerswhile reducing problems caused by the high rate such as inversions and base erosion, Tax Foundation President Scott A. Hodge said in an August report.
For the report, go here.

Indonesia, Malaysia, and the Philippines have made progress in increasing tax revenue, but there is still room for those emerging economies to improve their tax administrations and further raise critical revenue, according to an OECD report released August 19.
For thewWTD story, go here. (subscription required)

Egypt's long-awaited VAT could be inching ever closer according to a statement by the head of the tax authority, but the high threshold being proposed could hand smaller businesses a competitive advantage.
For the ITR story, go here.

Aswork on the U.S. model treaty continues alongside the OECD's base erosion and profit shifting project, questions remain on how similarities and differences between the twowill play out, practitioners told Bloomberg BNA in a series of interviews.
"It's not clearwhether, as taxpayers,we're going to have to dealwith multiple regimes," said Fred Murray, a managing director at Grant Thornton LLP inwashington. "There may be a turbulent timewhilewe're sorting all this out."
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Draft language introduced in late July to create a U.S. innovation box takes a novel approach to avoid the rocky start a similar patent box tax system had in the U.K., but the nascent proposal still has its critics.

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A proposal in Congress promises multinational corporations lower taxes for income from patents, designs and other intellectual property. But software developers hoping to trim their tax bills may be in for a hard truth: A lot of software appears not to qualify, even though the proposal mentions it specifically.

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In the continuing series of Fireside Chats, Jeffrey Owens talkswith Michael D'Ascenzo and Jeffwestphal about tax and technology and the push to make tax systems function more effectively.
For the TNI interview, go here. (subscription required)

Mindy Herzfeld reviews three recently announced corporate inversions in the context of the United States' continuing efforts to ring-fence its corporate tax base through prescriptive regulations.
For the TNI article, go here. (subscription required)

Ajay Gupta argues that the United States' recent voluble disenchantmentwith the progress of the OECD's base erosion and profit-shifting project signals a return to the familiar state of discord in international tax policymaking, but this time in a much more fragmentedworld
For the TNI article, 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)

Draft legislative language intended to offer a sharply discounted 10 percent tax rate on money U.S. firms make from foreign sales of their most innovative products iswritten so broadly that it could apply to nearly anything sold.

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New Zealand's revenue minister has proposed new place-of-supply rules requiring foreign suppliers to register and pay goods and services tax on the digital services and products they sell to New Zealand consumers.

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The United States' high corporate tax rate, itsworldwide system of taxation, and its low prospects for comprehensive tax reform in the near future are causing American companies to invert so they can lower their tax burden,which in turn reduces U.S. jobs and tax revenues, Houseways and Means Committee staff said in an August 18 release.
For the release, go here.

At first glance the OECD's Base Erosion and Profit Shifting (BEPS) project is difficult to understand.
There has been no decline in corporate tax revenues in recent years, and nations already possess a variety of tools to respond to erosionwhen needed. BEPS is thus drawing an inordinate amount of global attention and resources for apparently low expected returns. The onlyway to thus explain the project is to recognize that it represents a new front in the OECD's long runningwar on tax competition.
For the Cayman Financial Review story, go here.

There is growing talk of Congress creating an "innovation box" instead of focusing on broad business tax reform. Thiswould be a mistake. An innovation box, often called a patent box in Europe, offers lower tax on certain types of income derived from intellectual property, or IP. Such boxes pickwinners and losers and are not substitutes for sound policies like a lower business tax rate and a territorial tax system to replace today'sworldwide system. Congress needs to refocus on passing business tax reform to revive economic growth instead.
For the Heritage Foundation backgrounder, go here.

Major corporate tax changes have been proposed in Luxembourg,whichwould bring the Grand Duchy into linewith recent changes to the Parent-Subsidiary Directive and remove certain exemptions for companies.
For the ITR story, go here.

The Treasury Department should clarify that a proposed change to the U.S. model income tax treatyÔøΩone thatwould deny benefits if a treaty partner adopts a "special tax regime"ÔøΩdoesn't apply to business income, the New York State Bar Association Tax Section said in a letter and report to the government.
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A recent decision in Altera Corporation vs Commissioner has seen a portion of treasury regulations relating to cost-sharing agreements (CSAs) on stock-based compensation ruled as invalid.
For the ITR story, go here.

The IRS on August 6 issued Notice 2015-54 (the Notice), announcing its intention to issue regulations significantly changing the treatment of partnershipswith US and foreign partners that are related parties.

For the PwC Insight, go here.

Contributing intangible property to a partnership is similar to contributing pre-existing intangible rights to a cost-sharing agreement that could indicate how government officials are conceptualizing regulations targeting appreciated property transfers to foreign partners, a practitioner said.
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International tax reform is urgently needed because companies are holding $2 trillion overseas to avoid U.S. taxes, the corporate tax base is shrinking, and U.S. companieswill likely be pressured to move more research capital overseas to take advantage of foreign patent boxes, the Houseways and Means Committee staff said in an August 13 release.
For the release, go here.

Cisco, like other tech giants, is banking on Uncle Sam to help it make better use of its cash.
In an interview following fiscal fourth-quarter earnings, CFO Kelly Kramer said the San Jose-based Cisco iswaiting for a change to tax laws to bring the majority of its $60.4 billion in cash back to the U.S.
For The Street story, go here.

The European Commission said itwill update its controversial list of uncooperative tax havens by the end of 2015 but it insisted that, to date, none of the 30 countries or independent territories on the list has been removed.
The "blacklist," released in June, has been the source of intensive lobbying by the Organization for Economic Cooperation and Development, aswell as a host of listed jurisdictions.
For the DTR story, go here. (subscription required)

The IRS finalized a pair of revenue procedures explaining the process for multinational taxpayers seeking advance pricing agreements or treaty assistance from the U.S. competent authority.
"Between notice and finalizationwe took into account the many public commentswe received, butwe also took into account the greater global tax administration environment," said David Varley, acting director of transfer pricingwith the IRS's Large Business & International Division (LB&I).
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Tax administrations continue to face the challenges of improving their performancewhile reducing costs, decreasing compliance burdens for taxpayers tackling non-compliance. Improving taxpayer services,while making non-compliance harder, is helping revenue bodies increase their efficiency and allowing governments to finance important programmes thatwill further benefit their citizens.
For the OECD report, go here.

South Korea is joining other countries rolling out the OECD's global standards on transfer pricing documentation,with additional disclosures to be required on the international transactions of domestic and foreign companies for income years beginning on or after Jan. 1, 2016, an official said.
For the DTR story, go here. (subscription required)

Christopher J.worek examines the recommendations in action 1 of the OECD's base erosion and profit-shifting project, explainswhy one is superior, and modifies and integrates them into aworkable alternative.
For the TNI article, go here. (subscription required)

Tax administrations are making positive strides, improving management of large taxpayers, decreasing outstanding tax debts, and enhancing efficiency, but they continue to face budgetary constraints and unrealized potential, especially in the area of voluntary disclosure, the OECD said in an August 11 report.
For the TNT story, go here. (subscription required)

Fear of losing tax sovereignty is one of the biggest obstacles to U.S. and other countries' support of the Organization for Economic Cooperation and Development's plan to combat base erosion and profit shifting, said a tax consultant at London-based law firm Allen & Overy LLP.
As away of "overcoming divergence of tax systems" and combating multinationals' profit shifting, the BEPS initiative "is a thoughtful and impressive response" and "shows international tax cooperation at its best," Stephen Fiamma said at an Aug. 10 media briefing.
For the DTR story, go here. (subscription required)

Patrick Cheung and Johnny Foun, of Deloitte China, go through the significant aspects of the BEPS action plan and local legislation to explore how these policies could affect multinationals' outbound payments from China.
For the ITR story, go here.

Read how taxpayers can take measures to protect themselves in a risk and recharacterisation context as global legislation realigns.

For the ITR story, go here.