Int'l Tax News

Thisworking paper aims specifically to add value to the debate that is ongoing in the international community on MNE tax avoidance, providing an investment and development perspective.

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EU member states must be more transparent about their national tax rulings, because unfair tax competition distorts competition among companies and could lead to a "race to the bottom",warned many MEPs inwednesday's debatewith taxation Commissioner Pierre Moscovici.
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Swiss principal companies have long benefited from the rules of Swiss Federal Tax Administration (SFTA) Circular 8 (2001). On March 6, 2015, the SFTA confirmed, in an official letter to the cantonal tax authorities, that it has adopted new interpretations of Circular 8 that vary from those the SFTA issued in January 2014.

Existing Swiss principal companies may need to review their positionswith respect to the modified interpretation thatwill take effect in 2016.

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Joe Hockey, Australia's treasurer,warned taxpayers thisweek that his Budget on May 12will target corporate profit shifting, following the UK's diverted profits tax (DPT or so-called Google tax).
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In an effort to place itself at the centre of venture capital and private equity investment in Asia, the Hong Kong government introduced a Bill in its Legislative Council on March 25 to extend an exemption from the territory's 16.5% profits tax to include offshore private equity funds,which is already extended to other types of offshore funds.
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On March 30, Australia's treasurer Joe Hockey announced a tax reform discussion paper titled Re:think, in prelude to awhite paper expected late this year. Advisers say that reform of corporate and personal income tax hinges on changes to the rate and base of GST – an option that remains politically unpopular.
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Legislation implementing the U.K.'s diverted profits tax, dubbed the "Google tax," entered into force April 1, introducing a 25 percent tax on multinational company profits that are artificially diverted from the country.
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The country-by-country reporting mechanism mustworkwell for developing countries if the outcomes of the international project to combat base erosion are going to gain general acceptanceworldwide, the UN's top tax official said.

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Congress could ensure that U.S. corporations pay their fair share of public services and infrastructure investments by closing offshore "loopholes," ending deferral, and asking corporations to pay the taxes they owe on untaxed offshore profits, the Center for Effective Government and Institute for Policy Studies said in an April 1 report.
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The $2 trillion in U.S. corporate cash that is held, or "trapped," in locations overseas may be the most potent evidence for the case that the nation needs to switch to a territorial system for taxing multinational companies based here. Under the United States' so-calledworldwide tax system, U.S. MNCs face a 35% tax on cash repatriated to this country, minus credits for foreign taxes paid.
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Jasper L. "Jack" Cummings, Jr., explains the selection of a less-than-30-percent threshold for complete liquidation in a recent letter ruling, and he examineswhy the taxpayerwanted the outbound liquidation to be viewed as a liquidation rather than a section 355 split-up.
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James J. Tobin of Ernst & Youngwrites that the OECD's BEPS Action 4 discussion draft on interest deductions flows from a flawed premise and takes a biased view of multinational corporations as unfettered "manipulators" of the current global tax system. Given the drastic solution proposed in the draftÔøΩand the tight time constraints on the entire BEPS projectÔøΩTobinwrites that the result "is a radical, misdirected, unworkable proposal for allocating external group interest costswithin a global group."
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The Obama administration unwisely gave a preference to foreign investment by including an allowance for corporate equity (ACE) in its 19 percent minimum tax on foreign earnings budget proposal, argued Stephen E. Shay of Harvard Law School on March 27.
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Ray Beeman recently spokewith Tax Analysts' Luca Gattoni-Celli to discuss lessons he learnedwhilewriting a 900-plus-page tax reform discussion draft, Congress's tax reform efforts, and proposals for international tax reform.
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U.S. lawmakers on both sides of the aisle increasingly are finding appeal in an ambitious concept for overhauling the nation's income-tax system: a tax based on consumption, a tool long used around theworld.

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The Indian Central Board of Direct Taxes (CBDT) has issued a Circular clarifying that the offshore transfer taxation ruleswill not apply to dividends distributed outside India by an overseas entity evenwhen the shares of the offshore entity derive substantial value from assets located in India. Dividend distributions by offshore companies to overseas shareholders thereforewill not be taxable in India under the offshore transfer taxation rules.

This clarification by the Indian government - stating clearly the intent behind the offshore transfer rules - is awelcome step to provide certainty to foreign investors and multinational enterprises.

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Public comments are invited on a discussion draftwhich dealswith Action 12 (Mandatory Disclosure Rules) of the BEPS Action Plan.

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The recent Commission proposal for automatic exchange of tax rulings is "a revolutionary step towards international transparency on taxation and the fight against base erosion and profit shifting. Itwill change theway theworld economyworks for the better", said the Secretary-General of the OECD, Angel Gurria in a discussionwith members of the committees for Tax Rulings and Economic and Monetary Affairs on Tuesday morning.
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Officialswith the Treasury Department and the Organization for Economic Cooperation and Development say the OECDwill make significant changes to its recent discussion draft on risk, recharacterization and special measures.

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The Organization for Economic Cooperation and Development's top tax official has proposed a mechanism for peer reviewing countries' implementation of the mutual agreement procedure, as part of the international program addressing base erosion and profit shifting.
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Pascal Saint-Amans, director of the OECD Centre for Tax Policy and Administration, urged practitioners to be open to changes to transfer pricing in order to make the arm's-length principle sustainable.
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If the OECD's base erosion and profit-shifting drafts on risk and recharacterization and on profit splitswere final deliverables, "Iwould absolutely tell you that they're going too far," Brian Jenn, attorney-adviser in the Treasury Office of International Tax Counsel, said March 30.
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Australia Treasurer Joe Hockey released a long-awaited tax discussion paper on overhauling the country's tax system, throwing open the debate on how to modernize the existing tax structure to reduce the reliance on income taxes and manage the burden of an aging population.

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Pascale Colin, group tax manager at EFG Bank, tells Matthew Gilleard about the role of the tax director, her journey in getting there, and operating successfully in a rapidly-evolving Swiss, European and global tax environment.

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The United Nations Committee of Experts on International Cooperation in Tax Matters plans to issue a draft chapter on intangibles for the 2016 update to the UN Practical Manual on Transfer Pricing for Developing Countries, a UN official said.

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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.

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Hoping to curb base erosion and address intellectual property issues, Rep. Charles Boustany Jr. (R-La.) said hewasworking on bill language to overhaul the international portion of the tax code.

"This is my top priority," Boustany, a senior Houseways and Means Committee member, said March 26. "I'mworking on it as quickly as I can. It's difficult to put a time frame on it."

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Japan's parliament is expected to approve three tax amendments that address separate measures in the Organization for Economic Cooperation and Development's action plan on base erosion and profit shifting, including a plan to apply Japan's consumption tax to providers of cross-border digital services

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Houseways and Means Committee member Charlesw. Boustany Jr., R-La., said March 25 that he plans to introduce an international tax reform bill later this spring thatwould use the 2014 tax reform plan by formerways and Means Chair Dave Camp as a starting point.

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George Osborne, UK chancellor of the exchequer, has delivered his final Budget speech before the general election,withwelcome tax cuts for the UK's oil and gas industry and a reduction in the number of companies that have to submit information to HM Revenue & Customs about their liability, or not, for the controversial diverted profits tax (DPT).

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Changing to a "territorial" tax system in the United Stateswon't ultimately stem the exodus of U.S.-based multinationals to lower-tax countries and could come at a significant cost in terms of good corporate governance, a new study contends.
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After the conclusion of the OECD's base erosion and profit-shifting project in 2015, the next goal for the United Stateswill be to improve international tax administration through expanding mandatory arbitration and best practices, Robert Stack, Treasury deputy assistant secretary (international tax affairs), said March 24.
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A major consequence of the international project to combat base erosion and profit shifting (BEPS)will be heightened levels of transparency into the tax affairs of multinational companies, a Treasury official said.
The biggest change arising from the BEPS project over the next few yearswill be "much greater transparency for companies among tax jurisdictions," U.S. Deputy Assistant Treasury Secretary for International Tax Policy Robert Stack said March 24.
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Revising transfer pricing guidelines to favor use of value-based profit splits under the international action plan on base erosion and profit shiftingwould be "a dangerous road" to take, given current lack of agreement among global tax officials, a U.S. Treasury Department official said in Paris.
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The European Commission (EC) presented a 'Tax Transparency' package on March 18, 2015. The central feature is a transparency requirement for tax rulings. This means that tax authoritieswould be obliged to share a pre-defined set of information on all of their advance cross-border tax rulingswith all other Member States. Recipient Member Stateswould then be allowed to request more detailed information on a particular tax ruling if they believe that it is relevant to their own taxation rules.

With the Tax Transparency package the EC aims to re-establish the link between taxation and real economic activity and tackle corporate tax avoidance.
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Some lawmakers have their eye on a new silver bullet to keep companies paying taxes in the United States ÔøΩ borrowing an idea from Europe in a so-called patent box.

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Delegates from over 90 jurisdictions have gathered at the OECD Conference Centre in Paris in two meetings devoted to discussing solutions to base erosion and profit shifting (BEPS). The Global Forum on Transfer Pricing and the Task Force meetings built on the structured dialoguewith developing countries and complement the direct involvement in the CFA's BEPSwork and theregional meetingson BEPS held in Seoul, Lima, Libreville, Ankara and Pretoria.

For the OECD release, go here.

The Australian government on March 12, 2015, released revised exposure draft legislation for the third and final element of the Investment Manager Regime (IMR 3). Broadly, the revised exposure draft exempts foreign funds (including eligible US onshore and offshore funds) from Australian tax on Australian-source gains. The revised draft also addresses a number of industry concerns regarding previous exposure drafts, by better aligning the draft IMR3 provisionswith the UK's Investment Manager Exemption (IME) equivalent. Consultation on the revised exposure draft legislation closes on April 9, 2015.

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It's the hottest trend among tax collectors, raising a gusher of revenue for spendthrift governmentsworldwide.we refer to the value-added tax (VAT), and a new report from accounting firm Ernst & Young says that VAT "systems are spreading" around theworld and "rates are rising." Americans, bewarned.

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An AstraZeneca Plc official explained in a Paris Organization for Economic Cooperation and Development consultation how the arm's-length principle in the pharmaceutical industry measures related-party "reward to capital" and "reward to capability."

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Participants in Paris for the March 20 OECD consultations on the base erosion and profit-shifting project's action item 10 drafts on transfer pricing for low-value services and commodities agreed that more guidance is needed, but they differed onwhether flexibility should be sacrificed for simplicity.
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In news analysis, Lee A. Sheppard examines how the foreign base company rules apply to intragroup services.
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While participants at the OECD's March 20 consultation on transfer pricing matters agreed that more guidance is needed on the application of profit-split methods to supply chains, they differed onwhether to expand on the situationswhere a profit split should be used.
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U.S.-based multinationals booked a ticket home last year for an estimated $300 billion in foreign profits -- the most in nearly a decade -- chipping away at an enormous offshore cash pile that has drawn scrutiny from regulators and lawmakers.

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Business representatives at a March 19 OECD transfer pricing consultation in Paris acknowledged that there's room in the OECD's draft for additional guidance onwhen contractual arrangements should be respected, but urged that the final report on risk, recharacterization, and special measures not diminish the importance of contracts.

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A new group of developing countrieswill participate in upcoming meetings to discuss transfer pricingwork under the Organization for Economic Cooperation and Development's plan to fight base erosion and profit shifting, the organization's top tax official told Bloomberg BNA.

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An Organization for Economic Cooperation and Development official questioned business delegates to the organization's Paris transfer pricing consultation about the bestway to allocate risk among related parties.

Andrew Hickman, head of the OECD's transfer pricing unit, said during the March 19 Paris consultation that "there is a feeling among the country delegates that someway of being able to verify allocation of risk is necessary to implement the transfer pricing rules."

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The Obama administration just can'twin. Despite a crackdown on foreign mergers that help American firms slash their tax bills, a slew of overseas takeovers continue to rob the Treasury Department of tax revenue.
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Inward investors have expressed concern about proposals that Chinawill levy a 10% capital gains tax on profits earned by foreign investors,with no opportunity to deduct for losses.while some tax adviserswelcomed the clarity, some funds may struggle to pay the higher-than-expected tax bills on gains earned over five years between 2009 and 2014.
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The United Kingdom is set to introduce a 25 percent tax on multinational companies' profits that are diverted from the country by the end of March.

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