Int'l Tax News

The OECD April 29 issued its latest draft under action 8 (on aligning transfer pricing outcomeswith value creation related to intangibles) of the base erosion and profit-shifting project, proposing revisions to the OECD transfer pricing guidelines on cost contribution arrangements that support the use of value contributed over the costs incurred.
For the TNT story, go here. (subscription required)

In AM 2015-002 the IRS recently provided the most detailed guidance to date regarding the application of the 'tax rate disparity test' under the 'branch rule' of the foreign base company sales income (FBCSI) provisions.

For the PwC Insight, go here.

The OECD BEPS discussion draft under Action 8 on Cost Contribution Arrangements has now been published.

Action 8 ("Assure that transfer pricing outcomes are in linewith value creation: Intangibles") requires the development of "rules to prevent BEPS by moving intangibles among group members" and involves updating the guidance on cost contribution arrangements. The discussion draft sets out a proposed revision to Chapter VIII of the Transfer Pricing Guidelines and is intended to align the guidance in that chapterwith the other elements of Action 8 already addressed in the Guidance on Transfer Pricing Aspects of Intangibles released in September 2014.

For the discussion draft, go here.

The introduction of the UK's diverted profits tax (DPT) on April 1 2015 has dismayed tax practitioners and their multinational clients. Rushed through parliament, it has been roundly criticised for its breadth and complexity, for the speedwithwhich it has been introduced, for the lack of public consultation and parliamentary scrutiny, and for pre-empting the multilateral response to tax avoidance of the G20/OECD BEPS Project.
For the International Tax Review story, go here.

While Sweden may be seen as effectively preventing base erosion through limiting interest deductions, the effects on businesses and investments must be carefully scrutinised before being considered in other countries, argue Hussein Abdali and Tord Fredriksson of Grant Thornton.
For the International Tax Review story, go here.

Malaysia has released detailed guidelines on four new tax incentives revealed in its 2015 Budget, the most attractive ofwhich aims to encourage companies to establish headquarters in Malaysiawith a 0% - 10% corporate tax rate for 10 years.
For the International Tax Review story, go here.

The UK diverted profits tax (DPT) – dubbed the Google tax – has been in effect for almost a month, and Australia is looking at similar action to be included in its May 12 Budget speech, after signalling a desire to move "further and faster" than the OECD-led BEPS project. If other jurisdictions follow suit, this could drastically dilute the impact of multilateral efforts.
For the International Tax Review story, go here.

The Canadian government's latest budget suggests implementation of the Organization for Economic Cooperation and Development's project on base erosion and profit sharingwill balance the need to crack down on tax evasionwith ensuring the competitiveness of Canada's tax system, according to tax lawyers.
For the BNA DTR story, go here. (subscription required)

Patrick Driessen argues that stylized capital neutrality testingwith a two-dimensional twist favors a less drastic approach to the treatment of foreign income than offered in recent tax reform proposals.
For the Tax Notes viewpoint, go here. (subscription required)

While a host of topics ÔøΩ from the necessity and the proposed scope of corporate tax reform, to corporate rate reduction and corporate inversions ÔøΩ are of major concern to those engaged in international tax, the overriding issue is BEPS and its Action Plan agenda.
For the Accounting Today story, go here.

You can buy "fair trade" coffee andwork in an environmentally certified office building.
One day,will you be able to invest in companies that proclaim themselves good international taxpayers?
For the BNA DTR story, go here. (subscription required)

Foreign companies tempted by India's call to scale up manufacturing in Asia's third-largest economy need to consider one big potential headache: tax.

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

Peter M. Daub examines the conduit regulations and explains how 20 years after their finalization, these critical rules governing the U.S. taxation of cross-border financings leave many interpretative questions unresolved.
For the Tax Notes special report, go here. (subscription required)

A refund claim attributable to a net operating loss carryback expires three years after the due date of the return for the NOL yearÔøΩevenwhen the NOL is based on a timely amendment to the treatment of foreign tax payments in a return filed after that expiration date, the IRS Office of Chief Counsel said in a chief counsel advice memorandum.
For the BNA story, go here. (subscription required)

The United States is in dire need of sweeping tax reform. The House and Senate are both in the nascent stages of considering tax reform, characterized by committee-levelworking groups, discussions, and hearings. Both the House and Senate budget resolutions are based on a fundamental rewrite of the tax code.while promising, history indicates that there have only been a handful of tax overhauls of the modern code,which underscores tax reform as an intrinsically difficult and low-probability event.

For the American Action Forum article, go here.

The U.S. Treasury Department took steps in September to make it harder for American companies to pursue overseas mergers that move their legal addresses abroad and produce tax benefits. The new rules put a damper on the practice and led drugmaker AbbVie Inc. to scrap its more than $50 billion deal for Shire Plc.

Even so, the door isn't shut entirely.

For the Bloomberg story, go here.

The debate overwhether multinational companies have a moral duty to pay their fair share of taxes can get more complicated in a transfer pricing context, inwhich the decision over how to allocate profitswill likely result in some countries thinking that they got the short end of the stick, panelists said April 24.
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Both developing and developed countries have a common interest in the success of the Organization for Economic Cooperation and Development's project to combat base erosion and profit shifting, an OECD official said.
Grace Perez-Navarro, deputy director for tax policy and administrationwith the OECD, said the BEPS issue "is important for developing countries because in general developing countries tend to rely on corporate tax revenues much more than developed countries."
For the BNA story, go here. (subscription required)

Once the country-by-country reporting system recommended by the OECD is underway, the U.S. might considerwithholding informationÔøΩusing the reciprocity principle in use through information exchange agreementsÔøΩfrom countries that don't supply similar information, according to an IRS official.

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

Overhauling the U.S. tax code isn't likely until someone new occupies thewhite House, said a former Houseways and Means Committee staffer.

There simply isn't enough time left in office for President Barack Obama to shepherd such an agreement, something he has largely stayed away from until now anyway, saidwarren Payne, former Republican policy director for the committee.

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

The Organization for Economic Cooperation and Development's most recent discussion draft under its action plan on base erosion and profit shifting proposes seven possible indicators for judging the effectiveness of measures designed to combat BEPS.
The document, issued April 16, proposes a "dashboard" of seven possible BEPS indicators, based on both aggregate and firm-level data, to show "the general scale of BEPS."
For the BNA story, go here. (subscription required)

The IRS advance pricing and mutual agreement programwill become key to a healthy transfer pricing operation as double taxation disputes increase in thewake of the OECD's base erosion and profit-shifting initiative, according to J. David Varley, acting director of transfer pricing operations, IRS Large Business and International Division.

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The European Commission's investigations into EU member states' tax arrangementswith multinational companies might lead to retroactive tax adjustments reaching back as far as 10 years, practitioners speaking on a recent panel said.

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

The OECD's most recent discussion draft on analyzing and measuring the size and scope of base erosion and profit shifting is drawing mixed reactions from stakeholders,with some praising the OECD for tackling a difficult task and others criticizing it for not addressing the issue more thoroughly before launching the BEPS project in 2013.
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The Indian government is attempting to promote a more taxpayer-friendly environment, but is not being helped by demands from the tax authorities for more revenue from multinational companies. Vodafone received a notice thisweek relating to tax assessments for 2009-2010 and 2010-2011.
For the International Tax Review story, go here.

The introduction of the UK's diverted profits tax (DPT) on April 1 2015 has dismayed tax practitioners and their multinational clients. Rushed through parliament, it has been roundly criticised for its breadth and complexity, for the speedwithwhich it has been introduced, for the lack of public consultation and parliamentary scrutiny, and for pre-empting the multilateral response to tax avoidance of the G20/OECD BEPS Project.
For the International Tax Review story, go here.

The Canadian government aims to boost manufacturing research and investment through a proposed 10-year tax incentive financed under a C$100 million ($82 million) fund in its proposed budget for fiscal 2015-16.

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

While Sweden may be seen as effectively preventing base erosion through limiting interest deductions, the effects on businesses and investments must be carefully scrutinised before being considered in other countries, argue Hussein Abdali and Tord Fredriksson of Grant Thornton.
For the International Tax Review story, go here.

The European Commission (EC) has launched an infringement procedure against France concerning its 3% tax on dividend distributions made by companies liable for French corporation tax.
For the International Tax Review story, go here.

Businesses hoping to see an overhaul of the U.S. corporate income taxwill get their answer in the next few months, a Treasury Department official said.
Mark J. Mazur, assistant secretary for tax policy at the department, said April 21 that the "fundamentals for tax reform are as good as they've been since 1986."
For the BNA story, go here. (subscription required)

"The business tax system today is inefficient, overly complex, and too riddledwith loopholes," said Mark Mazur, assistant secretary for tax policy at the U.S. Department of Treasury.
So much so, in fact, that it can't fulfill its function to be aworld-class system, he noted.
For the Accounting Today story, go here.

The continued public outcry about U.S. companies keeping profits overseas in order to avoid U.S. taxes has obscured an interesting fact about much of that money. In fact, about half of the "overseas" cash that businesses are declining to repatriate is already in the U.S. – it's just not taxable.
For the Fiscal Times story, go here.

Onwednesday, China's State Administration of Taxation issued a notice containing regulations governing payments to related parties. The new transfer-pricing rules require that payments to related foreign entities be arm's-length in nature. They also specify four types of payments not considered as such. The four types,which are ruled to be non-deductible, generally include transfers to parties not having business operations and unable to discharge their obligations, payments for labor not conferring economic benefit on Chinese-based payors, royalties for intangible assets not adding value, and royalties for "fringe benefits" relating to capital market activity.

Beijing's attempt to halt questionable related-party payments comes amid the OECD's ongoing "Base Erosion and Profit Shifting" initiative and just days after new policies issued by the European Union, Britain, and Australia.

For the Forbes story, go here.

Atlas Air isn't a household-name airline – that'swhat happenswhen you mostly carry cargo – but it buys a lot of big planes. In recent years, it acquired nine new Boeing 747s and six 777s, at a total cost of about $2.5 billion. "Our business has been growing tremendously," said Spencer Schwartz, the company's chief financial officer. "For us to really grow,we need to add capacity,we need to add aircraft, andwe expect to keep doing that."

Schwartz isworried that Congress might soon make it harder for him to invest as much as he likes – by reducing how much of that investment he can quicklywrite off his taxes. It's a valid fear, and it's shared by many companies that are investing in American-made products right now.

It's also a pretty good explanation ofwhywashington isn't anywhere close to getting tax reform done.

For thewashington Post story, go here.

Multinational enterprises (MNEs)will be interested in the results of thework done by economists and others under Action 11 of the Base Erosion and Profit Shifting (BEPS) Action Plan.

There are some firm conclusions about indicators of BEPS in the discussion draft published on 16 April under Action 11. There is also recognition that assessing the extent of BEPS is 'severely constrained' and no attempt is made in the draft to ascertain an overall figure for total BEPS. Two approaches are put forward as alternativeways of seeking to measure BEPS:

• extrapolating from studies assessing the impact of tax rate differentials on the movement of profit from one location to another, and
• adding the amounts identified for each separate BEPS channel (per the Action Plan)with an adjustment for interactions between them.

Existing data sources are considered but questions remain as towhether there are other sources andwhether the datawill be adequate to perform reliable analyses.

For the PwC Tax Policy Bulletin, go here.

Australia and the U.K.will collaborate onways to stop multinational companies diverting profits and avoiding taxes, according to Australian Treasurer Joe Hockey.
For the Bloomberg story, go here.

The IRS Office of Chief Counsel in a chief counsel advice memorandum said an all-or-nothing rule applies in application of the short-term obligation exception under Notice 88-108 for controlled foreign corporations holding obligations that constitute U.S. propertywithin the meaning of tax code Section 956.
For the BNA story, go here. (subscription required)

In news analysis, Marie Sapirie emphasizes thatwriting a rule that applies equally to the instruments and circumstances that should be considered dividend equivalents is challenging.
For the Tax Notes article, go here. (subscription required)

Participants in an April 17world Bank presentation on tax evasion and avoidance stressed the need for developed countries to assist developing countries in improving information exchange and improving the capacity of tax authorities.
For the TNT story, go here. (subscription required)

In news analysis, Lee A. Sheppard reports on the April 17 remarks of Robert Stack, Treasury deputy assistant secretary (international tax affairs), about the transfer pricing, permanent establishment, and multilateral agreement actions of the OECD base erosion and profit-shifting project.
For the Tax Notes story, go here. (subscription required)

Business is braced for a slew of new anti-avoidance measures after the UK general election next month as politicians compete on promises to raise billions of pounds from closing tax loopholes.

Chuka Umunna, the shadow business secretary told a conference that constituentswere "very, very angry indeed" about avoidance by large companies. Nick Boles, Conservative business minister, said therewas "further to go" on tackling avoidance by big global corporations.

For the Financial Times story, go here.

Keeping track of tax law changes around theworld has increasingly become a challenge for businesses. Companies are rapidly expanding their geographic footprint at a timewhen the evolution and developments in jurisdictional tax laws are undergoing nearly constant change. Naturally, changes in tax law have an impact on tax planning, tax return preparation and, ultimately, tax cash flows. Those consequences, however, are often preceded by the impact of such changes on company financial reporting.
This is the third edition of our global publication on tax law enactment and substantive enactment dates. This edition has been updated to include information on 17 additional jurisdictions. It also reflects any changes in our understanding of the lawmaking processes of jurisdictions presented in the previous edition.

For the PwC Tax Accounting Services publication, go here.

Therewas a moment on Tuesday evening – hours before the first public hearing of the Senate inquiry into corporate tax evasion –when Treasurer Joe Hockey and his advisers should have sensed a firestorm approaching.

Sandwiched between a story on a Gold Coast diet blogger accused of pinching other people's recipes and and the tale of a solicitorwho fleeced a dementia patient, Channel Nine's A Current Affair entered the debate on Australia's company tax system. Itwas unusual terrain for the tabloid TV show to cover.

More than a million peoplewatched the segment titled "Tax dodgers named and shamed". Itwas the moment the festering issue of corporate tax dodging jumped from the pages of the financial and broadsheet press and firmly into the mainstream.

For the Sydney Morning Herald story, go here.

by Zachary Mider (Bloomberg)

When it comes to taxes, corporate America is getting a bit less corporate. And a bit less American.

Fueled by awave of inversions, a record 54 companies in the Standard & Poor's 500 Index of leading U.S. firms are now at least partially exempt from the corporate income tax. That's more than twice the number four years ago.

For the Bloomberg story, go here.

by Steven Johnson and Madison Marriage (Financial Times)

Listed companies in developed markets are avoiding at least $82bn of tax a year by using tax havens and other minimisation strategies, according to detailed analysis of more than 1,000 businesses.

The revelation comes as campaigners and investors have increased their focus on the impact of corporate tax avoidance on public finances at a time ofwidespread austerity.

For the Financial Times story, go here.

The European Commissionwill review its 2015 changes to VAT paid on business-to-consumer (B2C) supplies of digital services,whichwere implemented on January 1 2015. MOSS critics say that if the review takes too long, it could leave the digital single market "dead in thewater".
For the International Tax Review story, go here.

Dermot Donegan, head of VAT policy at the Irish tax authority (Revenue), speaks exclusively to ITR about the EU's place of supply ruleswere finalised during the Irish presidency of the EU Council, his thoughts around their implementation and the possibility of expanding the mini one-stop shop (MOSS) to cover goods and other services.
For the International Tax Review story, go here.

The international project to fight base erosion and profit shifting made a "political mistake" by focusing too much on U.S. multinationals, undermining American support for BEPS plan outcomes, a Treasury Department official said.
For the BNA story, go here. (subscription required)

At the American Bar Association Section of Taxation/International Bar Association conference in Munich on April 16, the questionwas raisedwhether base erosion and profit-shifting solutions being proposed through the OECDwould not overwhelm tax administrators.
For the TNT story, go here. (subscription required)

The Treasury Department is putting a significant amount of effort into international tax overhaul and believes there is still a possibility for movement, Treasury International Tax Counsel Danielle Rolfes said.
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