Int'l Tax News

The OECDwill present the latest developments in the OECD/G20 project to combat base erosion and profit shifting (BEPS) by multinational enterprises during a G20 Finance Ministers meeting on 9-10 February in Istanbul, Turkey.
For the OECD release, go here.

The European Commission has opened an in-depth investigation into a Belgian tax provision,which allows group companies to substantially reduce their corporation tax liability in Belgium on the basis of so-called "excess profit" tax rulings. In essence, the rulings allow multinational entities in Belgium to reduce their corporate tax liability by "excess profits" that allegedly result from the advantage of being part of a multinational group.

For the EC release, go here.

In a statement on the opening of an in-depth investigation into the Belgian excess profit ruling system, Commissioner Vestager said, "Today,we have opened another State aid investigation into the deals that EU tax authorities offer to certain companies – most notably to multinational corporations – that may go against EU state aid rules."

For the release, go here.

Patrick Driessen argues that the governing law requires that all forms of deferral, including deferral for foreign earnings, accrued but unrealized capital gains, and accelerated depreciation, be classified as tax expenditures.

For the viewpoint, go here. (subscription required)

by: Alex M. Parker (Bureau of Nationa Affairs)

The Treasury Department is looking at a "broader" approach to addressing earnings stripping, beyond simply tightening current prohibitions against over-leverage between related parties, an official said.

For the story, go here. (subscription required)

by: Richard Rubin (Bloomberg Business)

Republican lawmakers are doing something surprisingwith President Barack Obama's proposal to tax U.S. companies' overseas profits. They're calling it constructive.

For the story, go here.

by: Keith Bradsher (New York Times)

China's tax officials plan to step up efforts to collect taxes from multinational corporations in the latest of a series of moves in the last year, mostly againstwestern companies. The activities have included police raids on the headquarters of companies' China operations and heavy fines under antimonopoly law.

For the story, go here.

As part of the Government's aim to encourage innovation in the UK and increase tax competitiveness, a 10% tax rate now applies to profits fallingwithin the Patent Box. This provides a significant tax saving compared to the main rate of corporation tax in the UK.

Despite prospective changes to the regime, the Treasury believes that the UK Patent Box remains attractive for international groupswith significant operations in the UK aswell as for UK-based businesses. To this end, the UK tax authority (HMRC) arewilling to provide taxpayerswith some certainty over the basis, and hence, the quantum, of their Patent Box claims.

For the PwC Insight, go here.

by: Joe Kirwin (Bloomberg BNA)

Belgium became the latest European Union member state to face a legal challenge over beneficial tax regimes for multinational companies (MNCs)when the European Commission launched a probe into the country's "excess profit" tax rulings.

For the story, go here. (subscription required)

The diverted profits tax, recently announced by the U.K. chancellor of the exchequer to combat profit shifting by multinational enterprises earning large profits in the U.K. but not paying commensurate tax, has provoked myriad questions regarding its applicability andworkability. Paul Rutherford of DLA Piper assesses the draft legislation and guidance.

For the article, go here. (subscription required)

by: Aaron E. Lorenzo(BNA)

President Barack Obama's 14 percent repatriation tax rate proposal should be considered a starting point for negotiations, said a top aide on the Houseways and Means Committee's minority side.

A figure can be changed as talks progress, Aruna Kalyanam, Democratic tax counsel for the panel, said in response to criticism that 14 percent is not only too high but also fails to differentiate between corporate profits kept abroad in the form of cash or physically invested overseas.

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As more deals get caught up in the unsettled rules of the IRS's recent anti-inversion notice and as officials remain largely mum onwhat they'll clarify, some practitioners fear the government may keep its guidance vague to preserve the chilling effect the notice has had on tax planning.

For the story, go here. (subscription required)

President Obama on February 2 submitted an FY 2016 budget to Congress that reaffirms his support for 'business tax reform' thatwould lower the top US corporate tax rate to 28 percent,with a 25-percent rate for domestic manufacturing income. The budget also proposes to make permanent certain business tax provisions, including CFC look-through and Subpart F exceptions for active financing income.

Significant new international tax increase proposals include a one-time mandatory 14-percent tax on previously untaxed foreign income and a 19-percent minimum tax on future foreign income. The budget states that 'transition' revenue from the 14-percent toll taxwould go primarily to fund surface transportation programs.

For the PwC Insight, go here.

The Obama administration's fiscal 2016 budget, released February 2, proposes changes to the U.S. international tax system thatwould result in a quasi-territorial regimewith a per-country minimum tax of 19 percent on current foreign income to act as a backstop and a mandatory 14 percent transition tax on previously untaxed foreign income.

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by: Alex M. Parker (BNA)

Pressure from all sides, including from taxpayers, might help break the logjam of treaties awaiting ratification by the Senate, a Treasury Department official said.

"Itwould be too simplistic to say, 'Well, call your congressperson, and ask them to put pressure on the right people to express your dissatisfaction,' " Douglas Poms, senior counsel in Treasury's Office of International Tax Counsel, said Jan. 30 at an American Bar Association Section of Taxation meeting in Houston.

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The IRS is taking comments on a host of issues as itworks on regulations to implement the anti-inversions Notice 2014-52, an agency official said.

It is too soon to saywhen those regulations might be completed or offer insight as to their technical content, although the rules remain a "substantial priority," said David Levine, an attorney in Branch 4 of the Internal Revenue Service Office of Chief Counsel (International).

For the story, go here. (subscription required)

The two new taxes on foreign income proposed by the administration as part of its fiscal year 2016 budgetwould significantly change how the offshore earnings of U.S. multinationals are taxedÔøΩand may raise concerns for business, practitioners said.

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Bermudawill adopt a public beneficial ownership register onlywhen its major trading partnersÔøΩparticularly the U.S., the U.K. and CanadaÔøΩdo so, Finance Minister E.T. Richards said.
Richards told Bloomberg BNA on Nov. 24 that after U.K. Prime Minister David Cameron's call for British Overseas Territories to set up full, publicly available central registries to ensure corporate transparency, Bermuda undertook a comprehensive consultationwith stakeholders over several months.
For the story, go here. (subscription required)

Russian authorities revised provisions of the nation's tax code related to the taxation of controlled foreign corporations.
According to a Nov. 25 statement from the presidential press-service, President Vladimir Putin signed into law Federal Law No. 376-FZ to amend parts 1 and 2 of the Russian Tax Code to counter the use of tax havens for gaining unfair tax preferences.
For the story, go here. (subscription required)

Thailand has extended the corporate and personal income tax rate cuts by Royal Decrees to apply beginning in 2015. The 7% value added tax rate has also been extended for an additional year to September 30, 2015.

The Board of Investment announced a new seven-year plan and a revamp of the incentives promotion packages on August 19, 2014. The Board is expected to release specific details later this year. However,we expect the Board to scale back the tax incentives.

For the PwC Insight, go here.

PwC recently conducted an informal Base Erosion and Profit Shifting (BEPS) survey internally among a number of our PwC firms. Their overall view of the PwC partners surveyed is that it provided some useful indicators of the approaches being taken by different countries. That includes an analysis of some trends depending onwhether they are a member of the G20, the 34 OECD member states, the 44 BEPS participating countries or none of these.

For the report, go here.

Mixing a few new revenue-raising ideaswith recycled proposals, President Barack Obama's latest budget blueprint includes provisions thatwould change theway many businesses pay taxes,while financing infrastructure through new taxes on top earners and overseas earnings.

For the story, go here. (subscription required)

A European Union tax official said it may be necessary for EU member states to adopt a common consolidated corporate tax base (CCCTB) in order to combat base erosion.
Hartmut Foerster, a national expertwith the European Commission's Taxation and Customs Union, said Nov. 27 that once EU member states implement the Organization for Economic Cooperation and Development's guidance on base erosion and profit shifting, the key questionwill be, "Is all of this sufficient?"
For the story, go here. (subscription required)

The Congressional Research Service in a December 2 report examined basic concepts and issues relevant to the U.S. international corporate tax system, including fundamental tax system structures; deferral, subpart F income, and active financing; the foreign tax credit; cross-crediting; base erosion and profit shifting; and tax rate comparisons.
For the report, go here. (subscription required)

Guidance meant to curb corporate inversions does little to stop the practice and instead harms the nation's business competitiveness, the U.S. Chamber of Commerce said in comments submitted to the Treasury Department and the Internal Revenue Service.
In its Dec. 4 letter, the Chamber said the guidance didn't address the core problem driving inversionsÔøΩtheworldwide tax system used by the U.S. and a 35 percent corporate tax rate.
Those factors are causing companies to move their headquarters overseas to reduce their tax bills, the Chamber said.
For the story, go here. (subscription required)

The European Parliament agreed to draw up two reports on tax avoidance in the European Union in thewake of the revelations about hundreds of sweetheart tax agreements multinational companies signedwith Luxembourg in the past two decades.
The Dec. 4 approval for two reports by the leaders of the political groups in the European Parliament falls short of a request by the European Green Party and others for a special committee to probe the issue.
For the story, go here. (subscription required)

The U.S.will keepworkingwith other countries to ensure multinational corporations don't face double taxation as global efforts to share tax information across borders multiply, Internal Revenue Service Commissioner John Koskinen said.
The risk is increasing as governments around theworld take part in such efforts as the Organization for Economic Cooperation and Development'swork to combat base erosion and profit shifting and the creation of a new standard for automatic exchange of information by the OECD and the Group of 20 nations, Koskinen said Dec. 4.
For the story, go here. (subscription required)

Investors can respond to Vietnamese laws restricting foreign stakes in certain companies by using spinoffs, a form of corporate restructuring that is gaining traction for its tax advantages, attorneys say.
Spinoffs, or demergers, allow buyers to acquire one division of a companywhile retaining the parent company's already-established tax breaks.

For the story, go here. (subscription required)

The European Union is investigating Belgium's tax dealswith multinational corporations, potentially dragging dozens more companies intowidening probes of sweetheart fiscal pacts handed out by national governments.

The European Commission is targeting Belgium's so-called excess-profit rulings. Companies could get deductions on 50 percent of the profits covered by the Belgian agreements and in some cases, as much as 90 percent, the regulator said in an e-mailed statement.

"This is a scheme for multinationals, not only American multinationals," EU Competition Commissioner Margrethe Vestager told reporters at a press conference. "It's not for standalone businesses and it's not for Belgian groups."

For the story, go here.

European Union nations that offer "patent box" tax breaks should retool their laws so that only deserving companies can claim benefits tied to technical innovations, according to a draft report from a European Unionworking group.

Countries that use this kind of technology tax break should start legislativework next year on redesigning their rules so they can phase out the old system, according to the report,whichwill be discussed by EU finance ministers on Dec. 9. The group recommends that existing tax breaks be closed to new entrants as of June 30, 2016, followed by a total shift to revamped rules by mid-2021.

For the story, go here.

George Osborne's crackdown on companies "that go to extraordinary lengths" to cut tax billswill impose a new charge on multinationals that make "inflated" payments to tax havens.

Under draft legislation to be published onwednesday, the new "diverted profits tax", unofficially dubbed the 'Google tax', is designed to side step Britain's treaty obligations by introducing a new charge thatwould fall outside the corporate tax system.

For the story, go here.

The US ambassador to London said on Tuesday he believed Facebook, alongwith other US companies such as Amazon, Google and Starbucks,were doing nothingwrong by using legal methods to cut corporation tax bills in the UK.

For the story, go here.

When this commentary is beingwritten (in mid-December), several recent developments and comments from important people have made it modestlyworthwhile to discuss the prospects for enactment of international tax reform during the 114th Congress. It's still an exercise in crystal ball gazing, of course, but at least there are a few fuzzy signalsworth analyzing. Perhaps the most important question to analyze iswhether business/corporate-only tax reform has a chance.
For the story, go here.

Discussions of corporate tax policy involve a lot of rhetoric aboutwhether it encourages companies to move overseas.
What some of those discussions are really about is "shipping jobs overseas." But that's off base.
For the blog post, go here.

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:

2015 Korean tax law changes
The Irish Knowledge Development Box consultation process
The Netherlands new decree regarding cross border fiscal unities
The OECD releases six more BEPS discussion drafts

For the latest edition, go here.

President Barack Obama's proposed 2016 budget calls for aone-time 14%tax on companies' overseas earnings. Futureforeign profitswould incur a 19% tax, lower than the current 35% rate. Finance chiefswith overseas operationswill have to adjust their balance sheets should the budget be approvedwith this provision in its current form.
CFO Journal is talking to finance executives today about the proposed budget and, if passed, the implications it could have for their companies going forward.
For the story, go here.

Sometimes, a tax increase saves jobs.

President Obama's fiscal year 2016 budget introduces a one-time 14 percent tax on approximately $2 trillion of so-called unrepatriated foreign earnings. The taxwould raise about $248 billion over the next five years,whichwould be used to help pay for infrastructure projects and replenish the Highway Trust Fund.

For the article, go here.

Earlier thisweek, President Barack Obama released details of his proposed federal budget for the fiscal year ending in 2016. The proposal includes a one-time "transition tax" on the offshore profits of all U.S.-based multinational corporations. The President's planwould tax these profits at a 14 percent rate immediately, rather than at the 35 percent rate that should apply absent the "deferral" loophole.
For the CTJ report, go here.

The High Court's recent ruling on quantification in the controlled foreign company (CFC) and dividend group litigation order (GLO) clarifies that the test claimant is entitled to recover compound interest on claims for unlawful corporation tax paid both in open and closed accounting periods. However uncertainty remains aboutwhen, and bywhich court or tribunal, the test claimant may recover the sums due.
For the story, go here.

The European Court of Justice (ECJ) has ruled that the UK's cross-border relief rules are compatiblewith European legislation, and threw out the European Commission's (EC's) case against the country.
For the story, go here.

by:Katherine Chiglinsky and Thomas Black

U.S. companies including General Electric Co., Microsoft Corp. and Pfizer Inc.would pay $506 billion over the next decade under President Barack Obama's proposal to encourage them to bring back profits held overseas.

That trio tops the list of Standard & Poor's 500 Index companies in earnings reinvested outside the U.S., according to Bloomberg Intelligence analysts Brian Friel and Tiffany Young. Obama's budget estimates the stockpile of corporate earnings outside the U.S. at about $2 trillion.

For the story, go here.

Britainwon a court fightwith European Union regulatorswho claimed its tax relief rules discriminate against companieswith cross-border units.
The European Court of Justice in Luxembourg ruled Feb. 3 that the EU failed to back up claims that the U.K. makes it "virtually impossible" for parent companies in the country to use losses on foreign subsidiaries to cut their British tax bill.
For the story, go here. (subscription required)

The European Union authorities on Tuesday broadened their drive against tax avoidance by multinational companies, opening an investigation into theway Belgium appeared to grant unfair state aid.
European officials declined to discusswhich companies they suspected of cutting special tax dealswith the Belgian government. But the inquiry is part of awider investigation intowhether other countries and multinational companies have broken European Union competition rules through tax-cutting deals not available to all businesses in those countries.
For the story, go here.

by: Amy Thomson (Bloomberg BNA)

Indian authoritieswon't appeal a court ruling that sidedwith Vodafone Group Plc in a tax dispute, as Prime Minister Narendra Modiworks to reassure foreign investors about governance rules in the country.

By accepting the Bombay High Court's October decision in the mobile phone operator's favor, the government hopes to "bring greater clarity and predictability for taxpayers aswell as tax authorities," the Cabinet said in a statement. "Thiswill also set at rest the uncertainty prevailing in the minds of foreign investors and taxpayers."

For the story, go here. (subscription required)

Lee A. Sheppard discusses alternative investment funds and the relief they seek from the OECD base erosion and profit-shifting project and examines remarks from the Treasury Department questioningwhether and how that relief should be granted.
For the article, go here. (subscription required)

by: Michael Tasselmyer (National Taxpayer Union Foundation)

Policymakers should look to address income inequality through broad, system-wide tax reform thatwould benefit many, rather than the redistributive tax policies and government transfers recommended by the OECD thatwouldwork against only a few, the National Taxpayers Union Foundation said in a January 28 review of an OECD report.

For the report, go here.

by: Frank Clemente (American For Tax Fairness)

A proposal from Sens. Barbara Boxer, D-Calif., and Rand Paul, R-Ky., to cut taxes on repatriated earnings and use the revenue for the Highway Trust Fundwill fail because prior repatriation tax cuts have failed to raise revenue, create jobs, or increase research investment, Americans for Tax Fairness said in a January 29 release.

For the report, go here.

by: Luca Gattoni-Celli (Tax Analysis)

Congress's top two taxwriters on January 29 dismissed the idea of replenishing highway fundingwith a corporate repatriation tax holiday following the release of different bipartisan proposals in the Senate and the House to do so.

For the story, go here. (subscription required)

The Italian Budget Law for 2015, effective January 1, 2015, introduces several tax law changes relevant to multinational companies. In addition, recently enacted legislation,while still subject to Italian parliament approval, favorably changes the Italian patent box regime.

For the PwC Insight, gohere.

by: Megan Murphy, Vanessa Houlder and Sam Fleming (Financial Times)

President Barack Obamawill propose raising $238bn by levying a one-off tax on the cash piles held by US companies overseas to repair the US's crumbling roads and bridges. The measure, a key plank of the US president's budget to be outlined on Monday,would impose a 14 per cent "transition" tax on the estimated $2tn in earnings US companies have amassed overseas, thewhite House said on Sunday. For the story, go here.