Int'l Tax News

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.
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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.
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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.

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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.
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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.
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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."

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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.
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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.

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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.

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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.

President Barack Obamawill revive his pitch to revamp business taxes in his budget vision on Monday ÔøΩ including a mandatory 14 percent tax on corporate profits now stashed abroad ÔøΩ to fix roads, bridges and other infrastructure, according to awhite House document.

Obamawill propose tapping taxes on the $2 trillion in profits sitting outside the U.S. to "to make critical new investments in our roads, bridges, transit systems and freight networks as part of a $478 billion, six-year surface transportation reauthorization," according to a summary of the plan.

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President Barack Obama is making an opening bid on overhauling corporate taxes and linking it to boosting infrastructure spending, a move that could clear a rare path toward common ground in a deeply divided capital.

Mr. Obamawants U.S. companies to pay a 14% tax on the approximately $2 trillion of overseas earnings they have accumulated, awhite House official said Sunday. Theywould face a 19% minimum tax on future foreign profits. Companies could reinvest those funds in the U.S.without paying additional tax.

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A senior Treasury Department official involved in the Organization for Economic Cooperation and Development's project to combat base erosion said the first draft on risk and recharacterization should be released in a "week or so"ÔøΩand that he anticipates significant areas of continued disagreement over it, including on issues of "moral hazard."
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The IRS is 'very confident' in its authority to issue guidance regarding inverted companies to prevent the avoidance of section 956 as enunciated in its recent anti-inversion notice (Notice 2014-52, 2014-42 IRB 712), an IRS official said December 11.
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The OECD might exempt taxpayerswith consolidated group sales below a threshold amount from country-by-country reporting requirementswhen it releases its CbC reporting implementation package, a Treasury official said December 11.
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The OECD included areas of non-consensus on risk and recharacterization in its base erosion and profit-shifting discussion draft to spur comments from stakeholders, according to Michael McDonald, financial economist (business and international taxation), Treasury Office of Tax Analysis.
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The European financial transaction tax (FTT) is unlikely to be implemented by January 1 2016 as planned.
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The Spanish government, on November 27, 2014, passed Laws Nos. 26 and 27 amending the Personal Income Tax Law, the Nonresident Income Tax Law, and the Corporate Income Tax Law. The new provisionswill generally come into force for tax years beginning on or after January 1, 2015.

While the amendments to the corporate income tax regime reduce the tax rate, they also introduce measures to limit the deductibility of certain costs and the use of net operating losses. The amendments also introduce some measures in linewith the OECD's base erosion and profit shifting (BEPS) project.

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The Canadian Parliament gave final approval to legislation containing measures intended to avoid erosion of the tax base by preventing the shifting of domestic income to no- or low-tax jurisdictions.
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The U.S. government should do more to stop abusive corporate inversions and earnings stripping, a coalition of organizations seeking "an honest and fair tax code" is urging the Treasury Department.

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The Obama administration's efforts to recoup more tax revenue from cross-border financial arrangements may be hard to coordinatewith other countries, the congressional Joint Committee on Taxation said.

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Public comments are invited on this discussion draftwhich dealswithwork in relation to Action 10 ("Assure that transfer pricing outcomes are in linewith value creation" in relation to "other high risk transactions") of theAction Plan on Base Erosion and Profit Shifting(BEPS).

For the OECD release, go here.

Public comments are invited on this discussion draftwhich dealswithwork in relation to Action 10 of the OECDAction Plan on Base Erosion and Profit Shifting(BEPS).

For the OECD release, go here.

The Organization for Economic Cooperation and Development has issued a discussion draft on the use of profit splits in the context of global value chains and another on the transfer pricing aspects of cross-border commodity transactions.
Both drafts, issued Dec. 16 under Action 10 of the international project to tackle base erosion and profit shifting (BEPS), have the support of developing countries and suggest a pendulum swing in favor of source-country taxation.
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New tax legislationwill be a prominent feature of the European Commission's 2015 legislative agenda,with a proposed law requiring European Union member states to automatically exchange information on corporate tax deals negotiatedwith multinational companies, and a reworking of a pending EU common consolidated corporate tax base (CCCTB) proposal that has been blocked for nearly five years.
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The Treasury Departmentwill continue focusing on a business tax overhaul and the Organization for Economic Cooperation and Development's base erosion and profit shifting project along parallel tracks in 2015, Treasury Assistant Secretary for Tax Policy Mark Mazur said.
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The Organization for Economic Cooperation and Developmentwill issue five discussion drafts on base erosion and profit shifting (BEPS) action items thisweek, an official said.
The OECD's Raffaele Russo, head of the BEPS project, said Dec. 15 that assuming the Committee on Fiscal Affairs approves the drafts thisweek, theywill be published by the end of theweek.
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The Organization for Economic Cooperation and Developmentwill issue a discussion draft Dec. 19 on how to prevent base erosion and profit shiftingwhen groups allocate interest expenses among their members, a Treasury Department official said.
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The Treasury Department is looking atwhether inverted groups are getting inappropriate treaty benefits as itworks to stop abusive corporate inversions, a department official said.
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An Internal Revenue Service official said the agency is looking at possible tweaks to the so-called skinny-down provisions included in the anti-inversion regulations first announced in September.
"It's a fair question.we have been thinking about this, and a lot of other questions, most ofwhich have been focused on the anti-slimming rule of the notice," said Daniel McCall, special counsel in the IRS's Office of Associate Chief Counsel (International). "We may verywell think about adding a de minimis rule."
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EY's Bob Carroll, Kevin Bloomfield and Meaghan Maherwrite that corporations from emerging economies are nowwell represented in the Fortune Global 500ÔøΩtheir numbers having grown from 21 in 2000 to 132 in 2014. The authors look at how the U.S. and other advanced economies are faring, China's outlook after a significant uptick in its share of the FG500 and trends in countries' corporate tax rates.
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by: Luca Gattoni-Celli

An unreleased Joint Committee on Taxation report

obtained by Tax Analysts shows that the United States gives more favorable tax treatment to passthroughs than other developed economies, complicating the prevailing narrative that a high corporate rate best illustrates U.S. tax uncompetitiveness.

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The government is looking atways to address concerns raised by insurance companies and others on new guidance to curb corporate inversions, a Treasury Department official said.

Possible changes to the "cash box" and "skinny-down" rules under the anti-inversions Notice 2014-52 are under consideration, Douglas Poms, senior counsel in Treasury's Office of International Tax Counsel, said Jan. 30.

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by: Joint Committee on Taxation

A Joint Committee on Taxation report from October 2013, obtained by Tax Analysts andwritten at the request of the Senate Finance Committee, outlines data on the taxation of passthrough entities in Australia, Canada, Germany, Japan, and the United Kingdom.

The JCT built on reports by the OECD in 2009 and summarized the use of passthroughs by size and industry in each country. The report breaks down the data for each country according to tax rates and different business structures permitted in each country, and it summarizes influences on the choice of entity in each country.

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In news analysis, Lee A. Sheppard discusses how the European Union might dealwith the competing intellectual property tax regimes used by its members. For the article, go here. (subscription required)

by: Steven Mufson

President Obama's budget request set for release Monday includes plans for a six-year, $478 billion publicworks program thatwould be paid forwith a one-time 14 percent tax on overseas corporate profits. For the story, go here.

by: Keith Brockman

Keith Brockman, global tax director at Mars and author of the International Tax Best Practices blog, analyses BEPS Action 6 on preventing treaty abuse, calling for more balance in seeking to avoid double taxation and double non-taxation, and more guidance on the interplay between domestic law and treaty interaction. For the story, go here.

by: Joe Stanley- Smith

The 11 EU member states involved in the financial transaction tax (FTT) aim to broaden its base and lower its rates, in a bid to get the initiative back on track.For the story, go here.

President Barack Obamawill propose that U.S.-based companies pay a minimum 19 percent tax on their future foreign earnings, capturing profits that are now often beyond the government's reach.

Obamawill also seek a 14 percent mandatory tax on about $2 trillion in stockpiled offshore profits, said two people familiarwith his budget proposals, declining to be named because the documentwon't be made public until Feb. 2. Companieswould pay that tax regardless ofwhether they bring the money back to the U.S., the two said, creating a revenue stream the presidentwould use to pay for roads, bridges and other infrastructure projects.

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The OECD's December 19 discussion draft on risk, recharacterization, and special measures "is not a document that the United Stateswould agree to in its current form," Brian Jenn, attorney-adviser, Treasury Office of International Tax Counsel, said January 30.
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The administration proposal to tax foreign earnings U.S. companies have parked offshore fills in important details of a plan that officials have been discussing in broad terms for several years.
One prominent feature is that itwould be mandatory. Instead of relying on ultralow tax rates to induce companies to bring their money home voluntarily, as some lawmakers have recently proposed, President Barack Obamawants to impose a 14% tax on those profits. He alsowould tax future foreign profits at 19% -- far lower than his proposed 28% top rate for corporate profits and the existing 35% top rate.
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Claiming troublesome chapters could undermine the arm's-length principle, a Treasury Department official said the U.S.won't support the current issued by the OECD under its Base Erosion and Profit Shifting (BEPS) plan.
"This isn't a consensus document," said Brian Jenn, an attorney-adviser in Treasury's Office of International Tax Counsel and a U.S. delegate to the Organization for Economic Cooperation and Development's BEPS project.
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In addition to espousing various principles to guide the enactment of comprehensive tax reform, Spitzer askswhywe should only lightly tax an activitywe seek to discourage (consumption of carbon-based sources of energy)while heavily taxing an activitywe seek to encourage (employment). The views expressed here are strictly his own.
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The Swedish tax agency haswarned that tax planning undertaken by companies involving external loans related to acquisitions may pose a threat to the Swedish corporate tax base.
In 2009, Sweden introduced rules imposing restrictions on the deductibility of interest on intragroup loans used for intragroup acquisitions of shares. In 2013, these ruleswere tightened so that under the main rule, tax deduction for interest payments on all loans from affiliated companies may be denied
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Spain's secretary of state for the Treasury announced that in 2015 the governmentwill adopt the Organization for Economic Cooperation and Development's proposed country-by-country reporting template, under Action 13 of the international project to combat base erosion and profit shifting (BEPS), according to EY LLP.
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European Union finance ministers completed an overhaul of EU parent-subsidiary legislation designed to eliminate double taxation from hybrid loan mismatches aswell add an anti-abuse rule to curb tax avoidance and aggressive tax planning by corporate groups.
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by European Commission

With the Council's adoption of the anti-abuse clause of the Parent Subsidiary Directive today, the European Union is living up to its pledge of tackling tax evasion and aggressive tax planning. Today,we are building on the existing EU legislative framework to ensure a level-playing field for honest businesses in the EU's Single Market andwe are closing down loopholes that could be exploited for aggressive tax planning. This achievement paves theway for other measures in this area. In particular,we are committed to extending the automatic exchange of information on tax rulings andwewill present a legal proposal by Spring 2015," said Pierre Moscovici, European Commissioner for Economic and Financial Affairs, Taxation and Customs.

For the release, go here.

Thomas J. Brennan and Robert L. McDonald show that the delta test in prop. reg. section 1.871-15 can be affected by superficial labeling, and they propose improved alternatives.
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