Int'l Tax News

Multinational companies in Switzerland are unlikely to leave the country en masse even if the nation's parliament abolishes preferential tax statuses for holding companies that earn their primary income abroad.
Although the shiftÔøΩspurred by increased pressure from the European UnionÔøΩcould prompt some companies to re-evaluate their Swiss residency, tax advisers told Bloomberg BNA there are more incentives for larger companies to stay.
For the BNA DTR story, go here. (subscription required)

The Swiss Federal Council on June 5, 2015, released the eagerly awaited updated draft bill of the Swiss Corporate Tax Reform III (CTR III) for further parliamentary discussion.with CTR III, the Federal Council aims to maintain and improve the international competitiveness of the Swiss corporate tax systemwhile eliminating certain preferential rules.

For the PwC Insight, go here.

On 12 May 2015, the Director-General for Taxation and Customs Union appointed the Members and the Chairperson of the EU Joint Transfer Pricing Forum (JTPF) for the next two year mandate starting on 1 April 2015 till 30 March 2017. For the first time since its set up in 2002, the European Commission has appointed organisations rather than individuals.

The new composition of the JTPF also includes non-governmental institutions alongside multinational enterprises, Professional Services Firms, industry organisations and government representatives of each Member State.

For the PwC Tax Policy Bulletin, go here.

The Italian tax authorities issued guidelines on June 3, 2015which address the anti-avoidance rules that apply to the notional interest deduction (NID) regime.

The guidelines take the position that contributions are taintedwhen they are made directly or indirectly (look-through approach) by tax-haven-resident investors. Based on thewording of the guidelines, the existence of a single 'black-listed' shareholder in the ownership chain potentially could taint the entire amount of the contribution, unless the funds are traced back to 'white-listed' (i.e., non-tax-haven investors).

This new stricter approach of the Italian tax authorities is likely to have a broad impact.

For the PwC Insight, go here.

The Organization for Economic Cooperation and Development's aggressive timeline for the base erosion and profit shifting project is leaving important business concerns unaddressed and encouraging countries to take unilateral actions, Dave Camp, former chairman of the Houseways and Means Committee,warned.
For the BNA DTR story, go here. (subscription required)

Congress could break a tax overhaul into two pieces, a senior Republican on the Houseways and Means Committee said, if lawmakers arewilling to tackle international aspects of the tax code first.
Rep. Charles Boustany Jr. (R-La.) said June 10 that he expects to release a proposal soon to revamp international provisions of U.S. tax policy, including moving toward a more territorial system and proposing a so-called "innovation box" to treat income from intangible property, for instance, more equitablywith systems in other countries.
For the BNA DTR story, go here. (subscription required)

Former Houseways and Means Committee Chair Dave Campwarned June 10 that delays in U.S. tax reform effortswould serve to broaden the amount of U.S. business income subject to tax because U.S. employerswould be "disproportionately impacted" by the OECD's base erosion and profit-shifting project.
For the TNT story, go here. (subscription required)

While noting that time is running outwith many issues yet unresolved, Michael McDonald, financial economist (business and international taxation), Treasury Office of Tax Analysis, said several of the more controversial aspects of the OECD risk and recharacterization draftwould improve the final report.
For the TNT story, go here. (subscription required)

Houseways and Means Committee member Charlesw. Boustany Jr., R-La., said June 10 that hewants to lower the cost of his international tax reform proposal,which includes an innovation box plan applicable to multiple industries.
For the TNT story, go here. (subscription required)

The Treasury Department believes it has the authority under existing law to implement country-by-country reporting and some of the other transfer-pricing-related action items being developed by the OECD's base erosion and profit-shifting project, Treasury International Tax Counsel Danielle Rolfes said June 10.
For the TNT story, go here. (subscription required)

Someone had to do it. U.S. multinationals hate the new British diverted profits tax, and someone had to give vent to their frustrations and say itwaswrong to get ahead of base erosion and profit-shifting agreements. That someonewas Robert Stack, Treasury deputy assistant secretary (international tax affairs).
For the TNT story, go here. (subscription required)

The Obama administration signed on to the BEPS Project in the expectation that itwould strengthen the American tax base and enablewashington to hold on to more corporate tax revenues. But as the project heads for its end-of-year deadline and the basic shape of the BEPS principles becomes clear, nobody inwashington is paying attention to a simple fact: The United States lost, and lost big.
For the New York Times article, go here.

Tax reformers and economists usually hate tax breaks. Theway they see it is like this: Unprincipled politicians can't resist giving away goodies. So our tax code is litteredwith complications designed to channel subsidies to thewell-connected. This makes a mess of the free market. The economy's efficiency suffers. And the rest of us are stuckwith higher tax rates.
There are rare exceptions, however, to the general rule. Sometimes ÔøΩ andwe must emphasize how rare it is ÔøΩ targeted tax breaks can help growth.
For the Forbes article, go here.

The Republicans leading the US Congress' two tax-writing committees have called on Jacob Lew, Treasury Secretary, to "remain engagedwith Congress" as proposals related to the OECD base erosion and profit shifting (BEPS) project continue to be developed.
For the International Tax Review story. go here.

Several leading multinational companies have come a longway towards dismantling structures they have used to minimise their tax bills, according to an official leading an international crackdown on avoidance.

The moveswere a sign that the "very aggressive tax planning of the past is over", said Pascal Saint-Amans, the top tax official at the Paris-based OECD.

For the Financial Times story, go here.

Oliver Hoor and Keith O'Donnell say the OECD's discussion draft on BEPS action 7 (preventing the artificial avoidance of permanent establishment status),which proposes broadening the definition of PE in the OECD model treaty, may have a major impact on global business models and the allocation of taxing rights over business profits.
For the Tax Notes International viewpoint, go here. (subscription required)

Members of EY's tax team discusswith Tax Analysts how multinationals are dealingwith the challenges of the U.K. diverted profits tax.
For the interview, go here. (subscription required)

The U.S. Senate Finance Committee international tax reformworking group is developing detailed policy proposals and is planning to make recommendations to the larger committee that could end up in legislation,working group co-chair Rob Portman, R-Ohio, said June 9.
For theworldwide Tax Daily story, go here. (Subscription required)

The European Parliament's Special Committee on Tax Rulings and Other Measures Similar in Nature or Effect is stepping up its "shame campaign" to get multinational enterprises to appear before the committee by naming companies that declined the invitations -- and publishing their excuses, according to a June 9 release.
For theworldwide Tax Daily story, go here. (subscription required)

Senate Finance Committee Chair Orrin G. Hatch, R-Utah, and Houseways and Means Committee Chair Paul Ryan, R-Wis., in a June 9 letter to Treasury Secretary Jacob Lew regarding the OECD's base erosion and profit-shifting project,warned that "precipitous decisions to impose constraints on U.S. policy . . . are not desirable."
For the letter, go here.

Leaders of congressional tax-writing committees are questioning the legal basis for U.S. involvement in the country-by-country reporting regime being developed by the Organization for Economic Cooperation and Development.
For the BNA DTR story, go here. (subscription required)

Rep. Paul D. Ryan (R-Wis.) still has hope for reaching a limited deal on U.S. tax policy this year.
"The question is: Canwe take a couple of steps in the right direction, particularlywith international tax laws and international tax rules?" Ryan, chairman of the Houseways and Means Committee, said June 9 in an interview on Bloomberg Television.
For the BNA DTR story, go here. (subscription required)

As if the BEPS project deadlines are not pressure enough, unilateral action by countries is causing additional complexity and uncertainty. After the UK legislated its diverted profits tax – known as the Google tax – Australia is taking action against multinational enterprises (MNEs) that are avoiding a taxable presence in Australia.
For the Economia story, go here.

Do you approve of Congress spending your hard-earned tax dollars on an international organization that lobbies governments, including the U.S. government, to raise taxes? The Organization for Economic Cooperation and Development (OECD)was originally created to collect and publish economic data, and to promote policies that encourage trade among its members. But over the last two decades, it has morphed into an organizationwhose principle focus is to push for higher taxes in both its member and non-member states.
For thewashington Times article, go here.

Proposed new obligations on multinationals to produce country-by-country reports on their financial affairswill have a "massive impact" on them, a leading member of the Organisation for Economic Development and Cooperation has said.
For the Irish Times story, go here.

The leaders of the G7 group of developed countries have reiterated their commitment to reform the international tax system and pledged to come forwardwith "concrete and feasible recommendations" for change later this year.
For the Public Finance International story, go here.

Lawmakers seeking progress on tax reform are considering a new incentive for innovation thatwould help companies that already pay comparatively little in taxes.
The preference, called a "patent box" or "innovation box," essentially gives companies a tax break on income from their intellectual property, making it especially attractive to high-tech and pharmaceutical businesses.
For the Hill story, go here.

Whatwould you think about a corporate income tax regime underwhich the bigger a company's profit margin, the lower its tax rate? Or a system that applies a special low tax rate to profits from selling products onwhich a company enjoys a legal monopoly? Or partial tax exemptions for companieswithwell-known brand names? Such odd tax schemes and variants thereof have recently become popular among lawmakers in many European countries. Now big American companies are calling for the same special tax breaks in the United States. And, unfortunately, some politicians are suggesting that they'd bewilling to oblige.
This paper describes some of the reasons a "patent box" is a bad policy idea.
For the CTJ report, go here.

The OECD has published a discussion draft on the arm's length pricing of intangibleswhen valuation is highly uncertain at the time of the transaction or the intangibles are hard to value[GJ1] . The discussion draft, released 4 June 2015, is part of Action Item 8 of the OECD's Base Erosion and Profit Shifting (BEPS) Action Plan. Action Item 8 is focused on assuring that transfer pricing outcomeswith respect to intangibles are in linewith value creation.

For the PwC Insight, go here.

For the first time in Turkish law, a Court of First Instance declared that the use of secret comparable data to evaluate the arm's length nature of intercompany transactions violates a taxpayer's right to a fair trial and "equality of arms" pursuant to the European Court of Human Rights (Heinrich v. France).
For the PwC Insight, go here.

The OECD isworking toward consensus on outstanding items and is on target to complete the base erosion and profit-shifting projectwith approval by the Committee on Fiscal Affairs on September 22 or 23, according to Pascal Saint-Amans, director of the OECD Centre for Tax Policy and Administration.
For the TNT story, go here. (subscription required)

India's goal of a friendlier tax regime for global companies to help power China-beating economic growth is hitting a manpower hurdle.
Fewer than 20 officials face the complex task ofworkingwith hundreds of multinationals on advance pricing agreements for transfer pricing, people familiarwith the matter said, asking not to be identified as the staffing data aren't public.
For the BNA DTR story, go here. (subscription required)

The Organization for Economic Cooperation and Development is on schedule towith the remaining deliverables due under its international project to combat base erosion and profit shifting, the OECD's tax chief said.
The remaining papers for the 15 BEPS action itemswill be presented to the Group of 20 finance ministers at their Oct. 8 meeting in Lima, Peru, said Pascal Saint-Amans, director of the OECD's Center for Tax Policy and Administration.
For the BNA DTR story, go here. (subscription required)

Finalizing the first major piece of its project to combat base erosion and profit shifting (BEPS), the Organization for Economic Cooperation and Development released an "implementation package" for its country-by-country reporting template.
For the BNA DTR story, go here. (subscription required)

In another exclusive article for International Tax Review, Keith Brockman, EMEA tax director of Mars, discusseswhat other countries may do to achieve the objectives of the UK's diverted profits tax (DPT),whichwas developed as a two-pronged attack: on transactions having insufficient economic substance and the avoidance of permanent establishment (PE).
For the article, go here.

The IRS and Treasury released final regulations under Section 7874 for determiningwhen an expanded affiliated group (EAG)will be considered to have substantial business activities in a foreign country. The final regulations, issued June 3, 2015, adopt,with certain modifications, the temporary regulations issued in 2012 and retain the bright-line rule for determining substantial business activities in a foreign country.
For the PwC Insight, go here.

First therewere patent trolls, now there are patent boxes.
The discussion over how to best overhaul the U.S. tax system has taken a sudden and, to some, unexpected turn toward a tax incentive policy that already is ubiquitous in Europe: the patent box.
To understand the policy andwhy it has suddenly gotten so much focus is to understand how much the ground has shifted in the global tax debate.
For the Bloomberg BNA story, go here.

Pushing forward efforts to boost transparency in international tax matters, the OECD today released a package of measures for the implementation of a new Country-by-Country Reporting plan developed under the OECD/G20 BEPS Project.
For the OECD release, go here.

The United States should simplify the tax system by capping or eliminating personal income tax deductions, removing tax preferences from the business tax, and changing the tax treatment of multinationals to limit base erosion and profit shifting, the IMF said in Article IV mission-concluding comments released May 28.
For the IMF comments, go here.

In news analysis, Lee A. Sheppard reports on a recent conference in Milan that discussed the future of the OECD's base erosion and profit-shifting proposals in Europe.

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

Fundamental reform of the entire tax codewill likely remain elusive until after President Barack Obama leaves office.while he has never indicated awillingness to lead such an effort, he has indicated openness to reforming corporate taxation, proposed his own plan, and in­cluded it in his past two budgets. House and Senate leaders have indicated interest in business-only reform,which includes corporations and pass-through businesses. Given this opening, there is the chance for a deal. Business tax reform is necessary because the U.S. has the highest corporate tax rate in the developedworld and is one of the only countries that taxes businesses on their foreign income.

For the Heritage report, go here.

Australia sees the OECD'swork on transfer pricing under the base erosion and profit-shifting project as key to completing itswork on fighting corporate tax avoidance, Rob Heferen, executive director of the Australian Treasury's Revenue Group, told members of the Australian Senate Economics Legislation Committee June 2.
For theworldwide Tax Daily story, go here. (subscription required)

Under the United Kingdom's current financial position, "it is very criticalwe do everythingwe can to tackle tax avoidance," David Gauke, member of Parliament and financial secretary to the Treasury said in London on June 1.
For theworldwide Tax Daily story, go here. (subscription required)

The Netherlands,which has already implemented the EU directive that banks and financial institutions include country-by-country (CbC) financial results in their annual reports, has announced its support of an EU move toward requiring public CbC reporting for all multinational enterprises.
For theworldwide Tax Daily story, go here. (subscription required)

In a June 4 report, the Congressional Research Service described the current system of taxing international businesses in the U.S. and examined alternative proposals for international tax reform.
For the CRS report, go here. (subscription required)

The OECD on June 4 proposed a new section D.3 to Chapter VI of the transfer pricing guidelines on the pricing of hard-to-value intangibles and the use of ex post information for limited purposes to address information asymmetry.
For the TNT story, go here. (subscription required)

The Organization for Economic Cooperation and Development's discussion draft on "hard-to-value intangibles" represents a victory for U.S. officialswho had opposed the use of special measures to set a price for such transactions.
For the BNA DTR story, go here. (subscription required)

The United States has the most damaging business tax system in the developedworld because it taxes its businesses at high rates, taxes them on theirworldwide income and denies them the ability to deduct the cost of their investments at the time they make them.
Yet rather than focus on fixing these problems, Congress is reportedly dithering by trying to createwhat is known as a "patent box."
For the Daily Signal story, go here.

Argentina and Chile have signed a new double tax treaty to replace the agreement unilaterally terminated by Argentina in 2012. Ignacio Rodriguez and Andres Edelstein of PwC in Argentina outline the new structuring opportunities that are available for taxpayers.
For the International Tax Review article, go here.

An independent global tax overhaul panel issued a report calling for formulary apportionment to replace the arm's-length standard as the system for allocating income among related companies.
For the BNA DTR story, go here. (subscription required)