Int'l Tax News

ITR haswritten a report on the 2015 India Budget.

The first full Budget from Narendra Modi's Indian governmentwas keenly awaited by corporates, partly because of the pro-business sentiment presented by Modi and his finance minister, Arun Jaitley. The two did not disappoint, bringing clarity to taxpayers and foreign investors on a number of fronts.

For the report, go here.

HM Revenue & Customs raked in £1.1bn from challenging the pricing of multinational companies' internal deals in 2013-14 ÔøΩ more than twice as much as in the previous year.

The increase came as HMRC stepped up its "transfer-pricing" investigations ÔøΩ scrutinising the prices charged on transactions between different parts of the same company ÔøΩ following a public outcry over multinational tax planning.

For the story, go here.

by International Tax Review

In the last quarter of 2007, the European Commission notified Spain of its decision to open a formal investigation procedure under article 88(2) of the EC Treaty concerning the tax regime for the amortisation of financial goodwill. Jose Maria Garcia-Valdecasas Alloza, partner of Balaguer – Morera & Asociados and associate lecturer at the University of Barcelona, explores the EC's "negative tax harmonisation."

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by Keith Brockman (International Tax Review)

Keith Brockman, global tax director at Mars, lecturer and author of the Strategizing Multinational Tax Risks blog, looks atwhy countries are enacting unilateral legislation to limit interest deductibility, the shift in focus from eliminating double taxation to eliminating non-taxation, andwhy, as a result, double taxation via interest limitations is here to stay.

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by International Tax Review

Taxpayers should beware of the knotty problems that can result from the supply of services by a non-resident to a New Zealand resident, explains Tim Stewart of Russell McVeagh.

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The U.S. Treasury Department is rethinking parts of its recent crackdown on " inversions" after complaints that the rules are crimping legitimate mergers in the insurance sector.

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by Tony Nitti (Forbes.com)

Hey, I've got a neatidea…why don'twe take a break from futilelyattemptingto understand theexisting tax law and devote sometime to futilelyattempting to understand proposed tax law thatwill, in all likelihood,never become a reality?Sound good? Great. Lastweek, Republican Senators Marco Rubio (Fla) and Mike Lee (Utah) released a fairly detailed plan to overhaul the existing Code. The creatively-coined "Rubio-Lee" planhasgarnered a lot of attention, and considering Republicans currently control both the House and Senate, itshould certainly be taken seriously.Let's take a look at the plan's most interesting talking points.

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Twenty jurisdictions are covered in the latest international updates from our correspondents around theworld. Topics include BEPS in South Africa; the US Budget; limited partnerships in Luxembourg and Italy's Patent Box regime.

For the updates, go here.

The Treasury Department and IRS have taken note of the existing authorities on adopting an aggregate or entity view of a partnership as they develop guidance on the section 956 rules on controlled foreign corporation loans to foreign partnershipswith U.S. partners, said Douglas Poms, acting Treasury deputy international tax counsel.

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Treasurywill consider a carveout from the cash box rule for upstream assets in regs thatwill follow the anti-inversion notice (Notice 2014-52, 2014-42 IRB 712), a Treasury official said March 6.

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by Alex M. Parker (Bureau of Nationa Affairs)

Government officials defended their plans to sharpen tax code Section 956 regulations to combat so-called post-inversion hop-scotching, claiming their proposed regulations arewellwithin their powers granted under Subpart F rules.

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by Lee A. Sheppard (Tax Analysts)

In news analysis, Lee A. Sheppard looks at the accounting rules that might affect how companies such as Apple dealwith the European Commission's state aid investigations.

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U.S. officials are concerned that the trillions of dollars companies park overseas are doing more than just helping them skirt taxes. They'reworried the practice leaves investors in the dark.

Whenwalt Disney Co. investorswere trying to anticipate the company's performance in late 2012, the company told them to expect taxes to take a bigger bite out of earnings than the previous year.

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Houseways and Means Committee member Lloyd Doggett, D-Texas, and Rep. Rosa L. DeLauro, D-Conn.,will continue their legislative effort to ban federal contracts from going to companies that invert, continuing last year's partially successful strategy of adding legislative riders to House spending bills.

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Following the momentum generated by recent meetingswith the US, India now has the opportunity to significantly improve investor confidence.

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Eight of the biggest U.S. technology companies added a combined $69 billion to their stockpiled offshore profits over the past year, even as some corporations in other industries felt pressure to bring cash back home.

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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: The decision of the Dutch Court of Appeals regarding the deduction of cross-border forex result Changes in the Brazilian transfer pricing rules The US Internal Revenue Service's release of R&D credit regulations on internal use software China's public notice regarding certain corporate income tax matters on indirect transfer of properties by non-tax resident enterprises

To read this issue, go here.

Abhishek Shah, of Caterpillar in Asia, explainswhere he thinks the Indian Budget should have gone further on indirect tax.

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Onwednesday morning, senators Marco Rubio and Mike Lee releasedtheir long-awaited plan to overhaul both the individual and corporate tax codes. Like traditional Republican plans, it consolidates tax brackets, lowers the top rate, and eliminates a host of deductions. Rubio and Lee have put forward a credible, conservative tax proposal that could lay the groundwork for comprehensive tax reform in the futureÔøΩwith one glaring flaw.

For the article, go here.

The Indian Budget 2015was the new government's first and focuses on growth and creating an enabling environment.

On the tax front, the government addressed concerns of multinational companies. This includes clarifying certain aspects of offshore share transfer taxation, deferring the implementation of general anti-avoidance rules to provide certainty and a non-adversarial environment, and announcing the intent to simplify the law and reduce the corporate tax rate to 25% over four years.

For the PwC Insight, go here.

Are multinational companies paying their fair share of taxes?while the European Commission launched a series of inquiries in all EU member states, the Parliament has set up its own special committee to investigate into tax rulings involving large international companies.we talked to committee chair Alain Lamassoure, a French member of the EPP group, to find out his views and expectations.

For the report, go here.

The smart money alwayswagers against tax reform, but 2015 may be the year that the sucker bet pays off, at least for business taxes. The driver could be the outdated corporate tax system: The current 35 percent rate is out of stepwithworld norms and holds back investment in the U.S.

For the blog post, go here.

by Laura Tyson (Project Syndicate)

Corporate tax reform has emerged as an area of potential bipartisan action in the United States Congress over the next few months. But fundamental questions about the right approach remain.

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by Achim Pross (International Tax Review)

Achim Pross, head of the International Cooperation and Tax Administration division at the OECD, and architect of the new automatic exchange of information standard and the multilateral competent authority agreement, discusses the progress made in 2014 and looks at opportunities and challenges ahead.

For the story, go here.

by Vanessa Houlder (Financial Times)

George Osborne's flagship policy of cutting taxation on companies has cost nearly £8bn a year but further UK fiscal incentives are needed to stimulate investment and equity financing, an independent think-tank said on Thursday.

The Institute for Fiscal Studies defended corporation tax cuts against the charge that they amounted to a 'tax break for big business'. It said the burden of taxes ultimately fell on people rather than companies,with a "substantial share" falling onworkers. It said: "As such, lower corporate taxes may feed through into higherwages in the medium term."

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Continuous budget cuts have forced the Internal Revenue Service to "re-engineer" its approach to international audits, including an experimentwith a centralized approach to issue identification, an agency official said.

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by Amanda Athanasiou (Tax Analysts)

While Salix Pharmaceuticals Ltd. and Auxilium Pharmaceuticals Inc. have foundways around Notice 2014-52, 2014-42 IRB 712, the guidance hasn't failed to make re-domiciling more difficult, according to observers.

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India aims to cut the corporate tax rate by 5 percentage points over the next four years, replace thewealth taxwith a surcharge on thewealthy and introduce measures to combat tax evasion. Presenting the Finance Ministry's 2015 budget planto parliament Feb. 28, Minister Arun Jaitley said the governmentwants to reduce the corporate tax rate from 30 percent to 25 percent.

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by Eric J. Lyman (Bureau of Nationa Affairs)

An ongoing tax investigation into the Italian activities of California-based Internet giant Google Inc. is just "one of many" against multinational online companies, Italian prosecutors told Bloomberg BNA.

Prosecutors are looking intowhether Google broke tax laws in Italy by illegally classifying income earned in the country as income in Ireland or other low-tax jurisdictions. Prosecutors have reportedly obtained internal Google documents to help make their case.

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Intense media focus and political controversy surrounding international tax structures hasn't changed the substance of tax planning, several corporate tax directors saidÔøΩbut it has changed how they approach it.

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Treasury is still evaluatingwhether the U.K. government's proposed diverted profits taxwould be creditable under section 901 andwhether the taxwould be a candidate for additional guidance under the section 909 foreign tax credit splitter rules, according to Jason Yen, attorney-adviser, Treasury Office of International Tax Counsel.

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by Kevin A. Bell (Bureau of National Affairs)

Three U.S. government officials have said the Organization for Economic Cooperation and Development is likely to adopt a "combination test" to determine the deductibility of interest on related-party debt involving group-wide interest allocation.

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Regulations to implement the anti-inversions Notice 2014-52 remain a top priority even as the Internal Revenue Service must take a "tiered" approach to guidance in the face of budget cuts, officials said.

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The U.S. isworking on a revision to its model tax treaty and plans to release it in draft form to obtain public commentary, a Treasury Department official said.

Danielle Rolfes, international tax counselwith Treasury, saidwork on an international project to combat base erosion and profit shifting (BEPS) has caused the U.S. "to spend a lot of time looking at our tax treaties and how they are functioning."

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The Treasury Department isn't sayingwhen guidance on covered asset acquisitions under tax code Section 901(m)will be released.

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The administration's budget proposal for a minimum tax on foreign earnings serves as "a sort of compromise, split-the-baby approach" to taxing those earnings in away thatwould protect the U.S. tax base, Treasury International Tax Counsel Danielle Rolfes said.

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Treasurywould prefer to develop the text of a model limitation on benefits provision rather than simply describing the general elements of a model LOB under action 6 of the OECD's base erosion and profit-shifting project, Quyen Huynh, Treasury associate international tax counsel, said February 26.

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Robert Stack, Treasury deputy assistant secretary (international tax affairs), addressed base erosion and profit shifting and energetically advocated the rights of U.S. multinationals to fair administration of the rules at the International Fiscal Association USA annual conference inwashington February 26.

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The U.S. is committed to a limitation-on-benefits test to prevent treaty shopping, despite expectations that few countries participating in an international project to combat base erosionwill adopt such a test, a Treasury official said.

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A top Treasury Department official said the U.S. is presenting a "bold, radical, proposal" on controlled foreign corporations to the countries participating in the international project to combat base erosion and profit shifting.

Robert Stack, deputy assistant secretary for international tax policy at Treasury, said Feb. 26 the U.S. is making a proposal on BEPS Action 3 toworking Party No. 11 of the Organization for Economic Cooperation and Development, that is similar to the Obama administration's minimum tax budget proposal. BEPS Action 3 tasks the OECDwith strengthening the rules on CFCs.

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by John Herzfeld (Bureau of National Affairs)

U.S. policy makers should take a fresh look at international tax treaties to make sure their provisions stillwork in the national interest and aren't misused in unintendedways, a Treasury Department official said.

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An animated Danielle Rolfes, Treasury international tax counsel, regaled the tax attorneys attending the New York State Bar Association Tax Section annual meeting in New York February 24 on issues involving U.S. treaty policy, saying itwas necessary to look beyond section 7874 and Notice 2014-52, 2014-42 IRB 712, to address the inversion problem.

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In news analysis, Lee A. Sheppard reports on a February 24 discussion at the New York State Bar Association Tax Section meeting on the U.S. role in shaping the OECD base erosion and profit-shifting initiative.

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As the OECD's base erosion and profit-shifting project moves forward, IRS officials on February 24 voiced concerns about the implementation of country-by-country reporting.

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Martin Lobel argues for a return to a genuinely conservative position inwhich the market picks thewinners in business; the elimination of all business tax subsidies; and an economic structure that allocates capital efficiently, instead of one that lets thewealthy and powerful influence policies that are destructive to middle-income Americans.

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Practitioners and taxpayer representatives blasted recent investigations by the European Commission intowhether some tax arrangements violate European Union laws against state aid for companies, claiming that the enforcement of the rules could prove to be baffling.

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In news analysis, Mindy Herzfeld discusses the challenges the OECDwill face getting the United States and other countries to implement country-by-country reporting.

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With the Indian Budget fast-approaching, Subhankar Sinha, senior vice president, head of tax for the South Asia region at Siemens, looks at the tax measures that could be used to incentivise the government's 'Make in India' campaign.

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by Abi Briggs and Jon Tilson (Internationa Tax Review)

Abi Briggs and Jon Tilson of Deloitte analyse recent developments regarding indirect taxation of the digital economy, taking into account OECD discussions and unilateral actions being proposed.

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