Int'l Tax News

Swiss-based multinationals like Cargill and Caterpillarwould have to pay higher taxes under a broad tax reform plan that, if approved in a popular referendum May 19,would become effective next year.

After the most turbulent start to a government in Brazil's recent history the country's congress gets down to business thisweekwith a controversial agenda, but alsowith a scandal to distract it. Jair Bolsonaro, the rightwing former army captainwho rose from political obscurity towin the presidency against a handful of establishment candidates, is hoping he has enough support in a traditionally fractious legislature to push through a radical slate of reforms. One of these reforms include simplifying the country's labyrinthine municipal, state and federal tax systems into single national rates of income and value added tax.

House Democrats arewilling to considerways to fix errors in the Republican tax law, but any changes are likely subject to "heavy negotiation" between the two political parties, the Houseways and Means Committee's chief tax counsel Andrew Grossman said.

The Jan. 31 deadline for transferring the chosen tax treatment of repatriated assetswill be postponed to 30 days after recently issued rules are published in the Federal RegisterÔøΩin "a couple days," a Treasury official said.

The IRS is taking another crack at proposed rules for preventing abuse of the 2017 tax overhaul's global intangible low-taxed income provision after hearing from tax professionals that the ruleswere too broad.

Countries have changed how they tax multinational companies' income from intellectual property in order to combat harmful tax practices, according to an OECD's head of international cooperation and tax administration Achim Pross. His remarks came during a Jan. 29 OECDwebcast, following the organization's same-day release of its 2018 progress report on preferential tax regimes.

Ireland became the 19th jurisdiction to ratify the multilateral instrument, the OECD's ambitious super-tax treaty designed to crack down on corporate base erosion and profit-shifting.

The OECD said itwill move beyond one of the bedrock principles of international taxation to tackle the problem of taxing corporations in a digital era.with many countries clamoring to collect more tax from multinational companies, especially tech giants, pressure is on the OECD towrite new tax rules that address those concernsÔøΩbut can still find common global agreementÔøΩby its 2020 deadline. Thatwill mean "going beyond" the arm's-length principle, the OECD said in a Jan. 29 statement.

Fund managers are pushing Australia to lowerwithholding tax rates and soften the rules for a proposed investment vehicle they hope could help the country attract foreign investment and become more competitive.

Part 1 of this two-part series summarized the latest 2018 version of Guide to Customs Valuation and Transfer Pricing released by theworld Customs Organization. Part 2 comments on the trends and observations in the interaction between customs valuation and transfer pricing from a China perspective.

Tax directors at Vivendi SA, GE's Baker Hughes, and Johnson & Johnson say they're still strugglingwith adjustment to the U.S. tax law, a year after passage of the tax overhaul.

The European Union's short-term tax targeted at digital advertising is aimed solely at U.S. tech companies Google Inc. and Facebook Inc. and enhances risks of trade retaliation, business tax lobbyists and researchers said.

The OECD has said there is growing consensus behind a US proposal for an overhaul of global corporate tax rules, as countries try to strike a deal on how to levy multinational companies in the digital era.

A planned cut in UK corporation taxwill cost the exchequer some £12bn by 2022, based on new estimates from HM Revenue & Customs that have enraged critics of the government's fiscal policy.

Two insurance trade groups have requested changes to proposed regulations (REG-104390-18) on global intangible low-taxed income to address issues unique to the life insurance industry, including the use of section 954 reserve computations, the full inclusion election, and the determination of net deemed tangible income return.

The National Association of Manufacturers, commenting on proposed global intangible low-taxed income regulations (REG-104390-18), has asked the IRS to clarify the scope of the pro rata share antiabuse rule, clarify that section 245A applies exclusively to subpart F dividend income received by domestic and controlled foreign corporations, to eliminate the mandatory basis requirement, and to adopt an elective high-tax exception.

Mayer Brown, commenting on proposed regulations on global intangible low-taxed income (REG-104390-18), has requested the elimination of reg. section 1.951A-2(c)(5)'s application to section 197 amortization deductions for purposes of determining tested income or tested loss.

Theworking Group for Competitive International Taxation has commented on proposed regulations (REG-104390-18) that provide guidance on global intangible low-taxed income, addressing three areas in computing GILTI and other issues regarding foreign-to-foreign dividends, pro rata antiabuse rules, and lower-tier controlled foreign corporation stock basis from previously taxed income.

EY, on behalf of several global insurance corporations, has asked that proposed global intangible low-taxed income regulations (REG-104390-18) clarify that a controlled foreign corporation's tested income or loss should be determinedwithout regard to a CFC's Subpart F income after applying any election in effect under section 952(c)(1)(B)(vii)(l).

In this article, the authors discuss tax reform efforts and the challenge of taxation and value creation in a digital economy.

The Japanese government has submitted a draft law introducing significant new base erosion and profit-shifting measures, including a stricter interest expense cap and special rules for transfers of hard-to-value intangibles (HTVIs).

The Securities Industry and Financial Markets Association has commented on proposed foreign tax credit regulations (REG-105600-18), addressing issues regarding interest expense, disregarded and intercompany transactions, carryovers, and accrual of foreign taxes.

Deborah Paul of the New York State Bar Association Tax Section has submitted a report on proposed foreign tax credit regulations (REG-105600-18), identifying some clarifications and changes to further the policies underlying the foreign tax credit regime.

The Information Technology Industry Council and National Foreign Trade Council have expressed concerns that some revisions to Form 5471, "Information Return of U.S. Personswith Respect To Certain Foreign Corporations,"will result in significant and costly administrative and compliance burdens, suggesting changes and a delay in the revised form's effective date.

In this article, the authors discuss recent U.S. international tax developments, including proposed anti-hybrid regulations and forthcoming regulations regarding foreign corporationswith previously taxed earnings and profits.

An EU trade group has approached the European Commission to complain about a new Slovak turnover-based retail tax,which it argued is incompatiblewith EU law and discriminates against foreign-owned companies.

Although the Tax Cuts and Jobs Act gave the IRS a clear statutory basis for transfer pricing interpretations historically rejected by the courts, the amendments' language and prospective effects suggest that taxpayer challengeswill continue.

An IRS official stopped short of statingwhether guidance could target a "troublesome" situation inwhich a controlled foreign corporation stock sale avoids tax on subpart F income and global intangible low-taxed income tested income.

The IRS isn't contemplating easing restrictions implemented by its anti-inversion regs in thewake of the Tax Cuts and Jobs Act.

A group representing European Union retailers said Monday that it had filed complaints to the European Commission against a turnover tax in Slovakia, saying the rule affects only non-Slovak businesses and constituted unlawful state aid. The group, EuroCommerce, said the Slovak retail tax violated the EU's rules on state aid and discriminated against companies' rights of freedom of establishment. The group said it had lodged two complaintswith the commission.

A plan expected to save Puerto Rico nearly $18 billion by restructuring debt carried by the Puerto Rico Sales Tax Financing Corp., or COFINA, got the go-ahead on Monday from the judge overseeing the U.S. territory's bankruptcy-like proceedings.

Is the 2017 tax reform paying for itself? It's a complicated question, but the critics have made up their minds. Outlets like the Tax Policy Center claim the Tax Cuts and Jobs Act has diminished federal revenue rather than increase it as some supporters predicted. Other skeptics lament surging government deficits and debt. Some point to last year's brief economic spurt as evidence of the law's failure to drive long-term growth. Even if one accepts these arguments, none of them offers a conclusion aboutwhether the tax cutwasworth its cost.

With earnings season in full swing, investors are starting to learnwhich companieswere overly optimistic about their tax cuts. Casino chain Las Vegas Sands Corp. has already taken a $727 million hit to its fourth-quarter profit, after a corporate tax regulation proposed in November made the 2017 tax overhaul less favorable than the company expected. International Business Machines Corp. said the same provision reduced its profit by $1.9 billion in the fourth quarter. As more companies report year-end results in comingweeks, investors can expect more dents in more bottom linesÔøΩplus, presumably, at least a few pleasant surprises.

Some tax directors are unimpressed by the direction of the OECD's digital tax proposals,with onewarning theywill bring "awhole newworld"withwide ranging implications.

The U.S. Chamber of Commerce has forwarded to the IRS a chart identifying problems in proposed foreign tax credit regulations (REG-105600-18) and the group's recommended solutions, asking in part for the expansion of the rules for specified partnership loans and additional guidance on the subpart F income group rules.

The EU Code of Conduct Group (Business Taxation) haswritten Barbados, Belize, Curacao, Mauritius, Saint Lucia, and Seychelles, requesting that they replace harmful preferential tax regimes to avoid being named on the EU Council's list of non-cooperative jurisdictions for tax purposes.

Some aspects of the U.S. international tax regime seem reasonably straightforward, conceptually speaking, but become confusingwhen applied to particular facts. One area that tends to fall into this category is the treatment of gains from the sale of property by foreign persons, as demonstrated by the U.S. Tax Court decision in Grecian Magnesite v. Commissioner.

Developing countries' interests are playing into the global conversation toward consensus on the allocation of taxing jurisdiction in the digital era.

The EU has informed the governments of six countries that legislation recently enacted to avoid the EU's blacklist of noncooperative tax jurisdictions fails to eliminate the harmful features of prior law.

Missouriwill treat global intangible low-taxed income as a dividend for purposes of the state's corporate income tax.

The Swedish government has proposed legislation designed to transpose the 2017 EU directive on hybrid mismatches in away that prevents abusive practiceswithout creating excessive administrative burdens thatwould deter cross-border investment.

EU finance ministers are considering a digital advertising tax (DAT) as an alternative to the digital services tax proposed by the European Commission.

The United Stateswill not join in any consensus on taxing the increasingly digitalized economy that adopts an approach targeting only narrowly defined digital platforms, according to a top Treasury official.

Americans have a bunch of problemswith EU competition policy, not least ofwhich is that it cramps the style of U.S. multinationals,which believe they are entitled to establish quasi-monopolieswherever they go and not pay any tax anywhere. After all, that'swhat they got awaywith in the United States for years, until the Tax Cuts and Jobs Act began clawing back some of their foreign income and questions started being asked about their monopolies. It's estimated that U.S. consumers buy most of their goods and services from 10 gargantuan companies.

In contrast to the global intangible low-taxed income regime and the base erosion and antiabuse tax,which have receivedwidespread attention since enactment, the anti-hybrid rules enacted in the Tax Cuts and Jobs Act have received relatively little. That's partly because of the complexity of GILTI and the BEAT,which had immediate, significant consequences on multinational taxpayers' 2018 earnings and tax calculations; the anti-hybrid statutory provisions are brief and mostly needed Treasury guidance to become effective.

In this article, the author uses a panel regression analysis, alongwith other economic and statistical tests, to investigatewhether reducing the statutory corporate tax rate actually results in an increase in foreign direct investment. He also examines the connection between other variables, including a country's GDP growth rate and human development index score, and the level of foreign direct investment.

Qualcomm has positioned itself to avoid base erosion and antiabuse tax and the tax on global intangible low-taxed income by reclassifying its foreign subsidiaries for U.S. tax purposes.

Denmark's highest court has affirmed a 2018 ruling in Microsoft's favor regarding the company's transfer pricing arrangements, holding that a Danish subsidiary maintained adequate documentation and used an appropriate revenue base for calculating its commission.

Investors are giving serious consideration to their targets' corporate tax policies before agreeing on the deal, but there are a number of companies that still have no such policy in place.

The European Commissionwarned that Spain's planned digital tax may not raise as much revenue as Madrid estimates, casting new doubts over the country's ability to meet its deficit targets this year.