Int'l Tax News

Three bills introduced in the New Jersey Legislature target domestic corporations that become foreign-incorporated corporations, subsidiaries of a foreign corporation, or shift operations offshore. Precluding inverted companies from obtaining government contracts and state incentives could be a significant cost that companies shouldweigh in their decision to 'invert.'
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In a joint letter to Heads of State and Government of the European Union ahead of thisweek's European Council meeting, European Commission President Barroso and European Council President Van Rompuy inform about the key issues coming up for discussion at the G20 summit in Brisbane (Australia) on 15-16 November 2014.
For the release, go here.

This publication considers action 13 of the OECD's BEPS Action Plan, aimed at re-examining transfer pricing documentation requirements ÔøΩ and in particular providing for more information from taxpayers. Such informationwill offer useful indicators for risk assessment and allow tax administrations to better focus their limited resources.
For the updates, go here.

Six years after the onset of the economic crisis, French growth remainsweak. France faces great challenges as it seeks to boost its competitiveness and its medium-term growth potential and to transform its economic and social structures so as to preserve all that it has achieved in a context of heavy pressure on the public finances. The reforms that it undertakes todaywill determine its productivity tomorrow and its place in theworld economy.
Studies consistently show that, in order to improve business competitiveness, France should give priority to reforms in four areas.
For the study, go here.

Ireland adopts first mover advantage including commitment to a best-in-class knowledge development box – a clear roadmap for the future.

For the story, go here.

On the first floor of a rust-colored building near the main railway station, Marius Kohl spent years engineering this country's most valuable export: tax relief.
As head of a federal agency called Societes 6, Mr. Kohl approved thousands of tax arrangements for multinational corporations, sometimes helping them save billions.
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Modifications to subpart F rules included in the comprehensive tax reform draftreleased February 26 by Houseways and Means Committee Chair Dave Camp, R-Mich., could be changed and "fleshed out" in the future, Ray Beeman, former tax counsel and special adviser for tax reformwith the committee, said October 21.
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Italy's Ministry of Economic Development and the Italian Treasury announced a plan to change the calculation method of the value of trademarks, patents and some types of intellectual property, in order to lower the tax bill on those assets.
The plan is in response to the relocation of headquarters outside Italy by several large Italian companies,which left at least in part to save on their tax bills.
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The European Commission has referred Belgium to the Court of Justice for imposing a higher tax rate on foreign collective investment undertakings (CIUs) from other European Union member states than on those established domestically.
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A number of American corporations are making news, and not in a goodway.
They have announced mergerswith foreign companies so they can avoid paying U.S. taxes. They are seekingwhat is called a "tax inversion" and it allows an American corporation to mergewith a foreign corporation, move their headquarters overseas, andwith some accounting manipulations avoid paying most of their U S taxes.
For the article, go here.

Irish officials are examining the feasibility of a 6.25 per cent rate on a new corporate tax scheme as the Government moves to shore up inward investment after its decision to scrap the controversial "Double Irish" mechanism.
While this is one of several options under discussion, such a ratewould apply to a new "knowledge box" scheme inwhich a preferential ratewould be levied on assets such as patentswhich are managed from Ireland and located here.
For the story, go here.

Amendments to the Australian thin capitalization rules have been granted Royal Assent. The amendments are part of the Tax and Superannuation Laws Amendment (2014 Measures No. 4) Act 2014 (the act),which makes numerous changes first announced in the Australian Federal Budget released on May 14, 2013.

The thin capitalization measures apply to tax years commencing on or after July 1, 2014. This defers application of the rules for companieswith a calendar year-end for Australian tax purposes to tax years commencing January 1, 2015.

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The Irish government decided lastweek to get rid of a tax loophole that has helped big multinational companies like Apple and Google avoid paying billions in taxes to any government at all. But hold the champagne: Ireland couldwell replace one problematic tax policywith another, leaving aggressive tax avoidance pretty much intact.
For the editorial, go here.

Senate Finance Committee Chairman Ronwyden (D-Ore.) said hewill keep pushing legislation to curb corporate inversions, even as the Treasury Department's administrative moves may be quelling the tide.
In a statement Oct. 17,wyden said hewould continue discussions about inversion-related measures andwelcomed news that directors of AbbVie Inc. had abandoned a proposal to buy Dublin-based drugmaker Shire.

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With some companies reconsideringwhether to pursue inversions following Treasury's notice about forthcoming guidance to address the issue, Senate Finance Committee Chair Ronwyden, D-Ore., is monitoring the pace of inversion transactions to determinewhether stopgap legislation is still needed orwhether it canwait for comprehensive tax reform.

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The OECD is trying to determine the appropriate return for intangible assets in various action items of its base erosion and profit-shifting project.
Action item 8 on intangibles has proved so controversial that the OECD has had to postpone part of the project until later this year. In the report on harmful tax practices, the OECD has determined that a preferential intellectual property regime should not be considered harmful if its tax benefit depends on the performance of substantial activities in the relevant jurisdiction. However, the OECD members have not been able to agree onwhat substantial activities means.
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PayPal's announced spinoff from parent company eBay could open the door to one or both resulting entities moving offshorewith foreign merger partners. Each of these expatriations, however,would encounter statutory and regulatory hurdles -- including those presaged in Notice 2014-52, 2014-42 IRB 1.

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The much-awaited ruling of the Bombay High Court (HC) in the context of thewrit Petition filed by Vodafone India Services Private Limited (VISPL or the taxpayer) has been released.
For the PwC Insight, go here.

The "anti-dilution" provisions under tax code Section 7701(l) in the government's notice to put the brakes on inversions are intended to stop companies from "hemorrhaging" earnings and profits before the deals, a senior IRS official said.
The governmentwants to "ringfence" the E&P, Internal Revenue Service Associate Chief Counsel (International) Steven Musher said at a corporate tax conference sponsored by the Practising Law Institute Oct. 16.
Under Section 7701(l), transactionswould be recast to ensure a company's earnings and profits are appropriately taxed, Musher said.
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Breaking his silence on the anti-inversion notice issued September 22, Steven Musher, IRS associate chief counsel (international), on October 16 answered numerous practitioner questions on how to interpret the notice and, in particular, on the mechanics of the so-called 36-month rule in the excess distribution test.
Notice 2014-52, 2014-42 IRB 712, directs taxpayers to disregard some distributions for purposes of applying the 80 percent and 60 percent ownership fraction tests. The 36-month rule provides that non-ordinary course distributions made by the inverting company during the 36 months preceding the acquisition date are disregarded.
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Despite Treasury guidance intended to slow inversions, the guidance only addresses some reasonswhy corporations invert,which iswhy Congress should take legislative action to more fully address inversion incentives and avoid litigation that could challenge Treasury actions, Citizens for Tax Justice said in an October 16 release.

For the release, go here.

The Obama Administration keepswonderingwhy businesses don't invest more andwhy it gets no credit forwhat it claims is itswonderful economic recovery. Look no further than its new and increasingly successful campaign to prevent money that corporations earn overseas from returning to the United States. That's the practical economic impact as so-called corporate-inversion deals die in thewake of Treasury's September tax raid on cross-border mergers.
For the editorial, go here.

In a decision that could give relief to more than 20 other pending cases, the Bombay High Court has ruled in favour of Vodafone that in the absence of income, a share issue transaction cannot be subjected to transfer pricing.
For the story, go here.

Apple, Amazon and Starbucks are now on high alert: Europe, unlike more plodding U.S. tax authorities, is swiftly moving to blast heavyweight corporations for playing shell games to skirt taxes on billions in profits.

In the past severalweeks alone, the European Commission accused Apple of manipulating the company's tax rate, and it called out Amazon for using royalty payments to avoid taxation in Luxembourg. The crackdown is putting pressure on low-tax European countries like Ireland ÔøΩwhich has attracted big name companieswith tax benefits ÔøΩ to tighten the rules.

"The EU has sort of justwoken up to the fact thatwithin its midst are a bunch of countrieswhose existences depends on luring" companies away from each otherwith sweet tax deals, said David Rosenbloom, director of the international tax program at New York University.

For the story, go here.

The Irish government announced yesterday that itwas moving to close the infamous "Double Irish" tax loophole. The tax arrangement,which has sparked endless controversy for multinational corporations, involves royalty payments for intellectual propertywhich can be transferred from one Irish-registered subsidiary to anotherwith no corporate income taxes.

For the story, go here.

On October 14, 2014 the Minister for Finance announced the Irish Budget 2015. As part of this process he also published a policy statement entitled 'A Road Map for Ireland's Tax Competitiveness,'which provides some overall international tax strategy context for the Budget announcements. The package of tax measures including 'grandfathering' of existing arrangements and a new intangible property (IP) regime should provide certainty on the Irish tax regime for both existing and new investors.
These announcements should enable Ireland to remain competitive and attractive as a location inwhich to align IP, profits, and substance.
For the PwC Insight, go here.

This article considers the IRS's continued efforts in litigation under reg. section 1.482-7A(g)(2), despite the Tax Court's rejection of the IRS's position in Veritas. The article asserts that the IRS's approach is flawed, that Veritaswas correctly decided, and that the IRS should consider refocusing its efforts.

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A subcommittee of the United Nations Committee of Experts on International Cooperation in Tax Matterswill recommend that the committee, at its annual meeting Oct. 27 in Geneva, delete a controversial paragraph from the Article 9 Commentary of the U.N. Model Tax Convention, according to a subcommittee member.
The paragraph recommends that countries follow the principles set out in the Organization for Economic Cooperation and Development transfer pricing guidelines in applying the arm's-length principle to determine the correct prices for the transfer pricing of goods, technology, trademarks and services between associated enterprises and the methods that may be applied.
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The OECD's recent transfer pricing guidance on intangibles, issued as part of the base erosion and profit-shifting project's deliverables,with large portions unfinalized, is unlikely to be finalized anytime soon. Thatwas the takeaway from a seminar, titled "Tax Issues Relating to Intangibles," held October 15 at the 68th annual Congress of the International Fiscal Association in Mumbai.

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Europe's top antitrust official criticizedwhat he called the "defensive" and "irrational" response by European politicians to his investigation of Google Inc., and said separately that his department may launch more probes into alleged sweetheart tax deals for multinational companies.
Spanish-born Joaquin Almunia --who is preparing to step down as the European Union's competition commissioner in a fewweeks -- said the political pressure that preceded his decision to reopen the four-year-old Google case for a fourth timewas unprecedented. The commission has rejected three settlement offers by the U.S.-based Internet giant.
For the story, go here.

A simple tweak to the "Double Irish" tax structure might be enough to prolong its lifespan, advisers said as they pondered new strategies to replace the high-profile tax planning scheme axed by Ireland's government on Tuesday.

Dublin's decision to bow to international pressure by phasing out the Double Irishwas hailed as awatershed in the international crackdown on corporate tax avoidance. The structure has allowed companies such as Microsoft, Google and Abbott to route profits to tax havens such as Bermuda by exploiting different definitions of corporate residency in Ireland and the US.

But the promise to axe the "Double Irish" by 2020was greeted calmly bywall Street,where analysts noted itwould be phased out over six years and forecast itwould have, at most, a modest impact on earnings.

For the story, go here.

The Irish government is to scrap the so-called double-Irish structure and introduce an income-based system for the taxation of intellectual property,which it is calling a knowledge development box.
For the story, go here.

On August 6 the Korean Ministry of Finance announced initial plans to tax corporations on excess cash reserves. The government hopes the extra tax revenuewill stimulate growth but there is a risk the move could cause Korean firms to move excess reserves offshore.
For the story, go here.

Taxpayers got some mixed news from this year's Malaysia budget, the last before goods and services tax (GST) comes into effect next April.

For the story, go here.

According to the European Commission - the executive body of the European Union - perceived 'aggressive tax planning' is contrary to the principles of the EU's internal market. Fair competition is one of these principles. EU Member States cannot grant 'aid' - e.g. subsidies or tax reliefs - to certain companies on the internal marketwithout prior authorisation by the European Commission. If such aid is grantedwithout authorisation, the aid is unlawful. Unlawful aid has to be repaid by the companies concerned. Recently, the European Commission has made a link between State aid and BEPS. Following are answers to key questions on State aid.
For the PwC bulletin, go here.

Bono may front theworld's most popular rock band, but the U2 singer did not earn many new fanswhen he recently defended Ireland's controversial tax policies,which arewidely seen as helping multinationals to avoid paying their fair share. Norwas his support for this low-tax regime enough to save the "Double Irish", the biggest of the loopholes,which Ireland's government outlined plans to close on October 14th.

For the story, go here.

Ireland adopts first mover advantage including commitment to a best-in-class knowledge development box – a clear roadmap for the future.

For the story, go here.

In a special report, Mike Goral and Tatyana Lirtsman complete their two-part series on state tax issues facing foreign corporationswith an examination of sourcing of income to the taxing state and how income should be apportioned.

For the report, go here.

Israel's Tax Authority has created a "preferred" income stream for some software development companies, entitling them to preferred enterprise tax breaks under Israel's Law for the Encouragement of Capital Investment.
Taxes on income that qualifies for the new category could be as low as 9 percent,while income that does notwill continue to be taxed at regular rates, according to the conditions and limits outlined in ruling 6827/14, issued Sept. 28.
The resulting tax breakwill be of "great interest to many multinational tech concerns," according to Israeli tax consultant Leon Harris.
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Ireland's government on Tuesday responded to the clamorous criticism of its business-friendly tax arrangements by closing a loophole used by multinational giants like Google.
The European Union and the Obama administration have been increasingly vocal about the tax-avoidance strategies of multinational companies and the countries that enable them. The European Commission is conducting a broad investigation into the relationships between multinationals and perceived tax havens like Ireland, Luxembourg and the Netherlands.
For the story, go here.

"Whatwe have now is a mess," Robert Peroni, a professor at the University of Texas School of Law, said October 10, referring to the international tax system.
Heads nodded in agreement at a conference on reforming entity taxation hosted by Boston College Law School in Newton, Massachusetts, and cosponsored by Tax Analysts. A discussion of how to go about cleaning up that mess pitted multilateralism against a U.S.-first approach. Panelists appeared to share the realpolitik view thatwhatever course is followed, dominant actors have called the shots for decades andwill probably continue to do so.
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Americans for Tax Reform has joined a coalition of taxpayer and free market groups that oppose multilateral tax agendas, signing a letter that criticizes the financial transaction tax and excise taxes ahead of theworld Health Organization's October 13 meeting.

For the letter, go here.

The United Kingdomwas able to stop corporate inversions by cutting its corporate tax rate and shifting to a territorial tax system, indicating that U.S. lawmakers should enact similar tax reform to stop inversions by U.S. corporations, Tax Foundation chief economistwill McBride said in an October report.

For the report, go here.

Irish Finance Minister Michael Noonan announced October 14 that Irelandwill eliminate the ability of new companies to use the "double Irish" tax arrangement, effective January 1, 2015, by changing residency rules to require all companies registered in Ireland to be Irish tax residents aswell.
Noonan provided the details of a roadmap setting forth the government's international tax strategy in a financial statementfor the 2015 budgetthat calls for attracting and retaining foreign direct investmentwhile staying in alignmentwith measures being developed on a global scale to reduce base erosion and profit shifting.
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The Irish government moved on Tuesday to close one of theworld's best-known corporate-tax loopholes, in a step that could boost overseas income tax for awide range of U.S. companies, particularly in the technology sector.

Irelandwill change its tax code to require that all Irish-registered companies be tax residents in Irelandwithin the next six years, slowly ending a tax-optimization structure known as the "Double Irish," Irish Finance Minister Michael Noonan said in a parliamentary address to introduce the 2015 budget.

For the story, go here.

The European Union expanded its crackdown on illegal tax breaks, ordering Spain to recover money from companies that benefited from rules that encouraged merger activity outside of the country.

The European Commission said the Spanish measures unfairly rewarded companies for buying stakes in foreign competitors. Telefonica SA (TEF) last year lost a court bid to challenge a related EU probe into Spanish tax breaks.

For the story, go here.

As executives pore over the slow death of the "Double Irish" tax shelter favored by U.S. companies, the reaction seems to be: keep calm and carry on.

The tax break,which allows companies to avoid paying levies on much of their income,will be closed to new entrants from January, Irish Finance Minister Michael Noonan said in parliament in Dublin yesterday, as he laid out the 2015 budget. Companies already enjoying the tax break can continue to do so until the end of 2020, he said.

For the story, go here.

A transfer pricing analysis has a significant advantage over the adoption of "special measures" to tackle base erosion and profit shifting (BEPS) situations involving the outsourcing of research and development to a related party, or a cost-sharing arrangement, a Dutch Ministry of Finance official said.
Harry Roodbeen, director of international tax and consumer tax, said Oct. 13 that "the arm's-length principle has the huge advantage that it can be subject to a mutual agreement procedure. Special measures are much more difficult."
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The Organization for Economic Cooperation and Development's new approach to hybrid entities, under the international plan to combat base erosion and profit shifting, doesn't conflictwith the organization's 1999 partnership report, an OECD official told the International Fiscal Association's annual congress in Mumbai.
Jacques Sasseville, head of the OECD's tax treaty unit, attempted to clarify the relationship between the OECD's Sept. 16 draft report on BEPS Action 2,which includes a proposed new model tax treaty provision for addressing hybrid mismatch arrangements, and the organization's 1999 report, "The Application of the OECD Model Tax Convention to Partnerships."
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The screw is being turned on American companies that use complex structures towhittle down their tax bills. But is the latest EU probe a paper tiger or a game changer?

For the story, go here.