Int'l Tax News

The OECD has issued a report that reviews tax reforms in 35 OECD countries, highlighting corporate and personal income tax reductions, stabilization of VAT rates, and the introduction of new excise taxes to deter harmful consumption.

In this article, the author discusses the challenges of implementing the EU anti-tax-avoidance directive.

The gain allocated to prior years on the sale of passive foreign investment company stock that increases the current-year tax liability can't be used to extend the statute of limitations.

The OECD has issued peer review reports that evaluate how Australia, Ireland, Israel, Japan, Malta, Mexico, New Zealand, and Portugal are implementing BEPS minimum standards on improving tax dispute resolution mechanisms.

Polish companies making substantial dividend, royalty or interest payments to foreign entities face additional scrutiny as part of a fresh round of proposals designed to fight tax avoidance. These companieswill have to paywithholding taxes at full ratesÔøΩ19% for dividends, 20% for royalties and interestÔøΩand then request a refund pending official review of applicable tax exemptions and beneficial owner status of the recipient of payment.

Companies in Brazil landed an important court victory,when a Sao Paulo court ruled they can continue using corporate credits until the end of the year to cover monthly income tax payments.

Complex transfer pricing cases and a shortage of staffers have contributed to a dip in the number of advance pricing agreements India has signed in the past year, according to a report released Friday by the country's Income Tax Department.

The IRS has provided (Rev. Proc. 2018-36) the current list of countries towhich the interest reporting requirement in reg. section 1.6049-4(b)(5) and 1.6049-8(a) applies, effective for interest paid on or after January 1, 2019. The guidance also provides the current list of countrieswithwhich Treasury and the IRS have determined that it is appropriate to have an automatic exchange relationship regarding the information collected under the regulation.

Ecuador has enacted a law that raises the corporate tax rate and establishes new, progressive capital gains tax rates, among other things. Law SAN-2018-1358was published in the official gazette August 21,with immediate effect.

An Irish technology company has become the latest foreign multinational to cite the Tax Cuts and Jobs Act (P.L. 115-97) as a reason for retooling itself as a U.S. company.

The OECD's base erosion and profit-shifting projectwas built on the premise that multinationals' profits should be alignedwith value creation, a premise reemphasized by G-20 finance ministers at their July meeting.

Frank Hirth Plc has urged the IRS to provide transitional rules to permit taxpayers to apply credits in the general limitation "basket" carried forward from 2017 and prior years to offset tax on income in either the general category or foreign branch baskets from 2018 forward. The company asserts that allocating the carryovers freely among the post-Tax Cuts and Jobs Act (P.L. 115-97) foreign branch and general category baskets doesn't represent awindfall to those taxpayers.

Caroline Harris of the U.S. Chamber of Commerce has raised concerns that existing foreign tax credit carryforwards could be subject to mandatory allocation to new foreign income categories created by the Tax Cuts and Jobs Act (P.L. 115-97), suggesting that Treasury issue regulations that include prior FTC carryforward transition rules and provide a permissive allocation approach.

Treasury could issue proposed regulations soonwithdrawing the burdensome debt-equity documentation rules, but the fate of the anti-inversion, anti-interest-stripping distribution rules remains unknown.

While New Zealand and Australia are closing mutual agreement procedure cases quickly, other countries, especially Portugal, are lagging behind, according to the latest batch of OECD peer reviews on improving dispute resolution mechanisms.

Panasonic has cited the risk of Brexit upheaval for the decision to shift its European headquarters from the UK to the Netherlands in the autumn. The electronics company on Thursday justified its move by saying that Britain's departure from the EU may result in changes to the transfer of labour, product, materials, services and data, aswell as tax considerations and other"potential fiscal obstacles by the application of different rules and regulations between the UK and EU."

Some European Parliament members still have doubts about the proposed 3% tax on digital companies, like Amazon.com Inc. and Alphabet Inc.'s Google. One member calls for a higher tax rate,while others have doubts on how the system as awholewill be enforced. The tax is viewed as a key component in efforts to crack down on large digital companies.

Thewhite House's Office of Management and Budget finished its evaluation of a proposal to remove regulations imposing documentation requirements on multinationals. The proposed ruleswithdrawing regulations for tax code Section 385. The Section 385 rules are intended to stop multinationals from moving money out of the U.S. via loans to subsidiaries and raking in tax benefits of interest payments on those loans.

Chinawill exempt foreign institutions from paying some taxes on interest gains in the onshore bond market as part of efforts to support the economy. The exemptionwas announced after a State Council meeting presided over by Premier Li Keqiang on Thursdaywhich covered corporate income and value-added taxes for a period tentatively set at three years.

In a recent ruling, the Authority for Advance Rulings has pronounced that Mastercard Asia Pacific Pte Ltd, a global payments solution provider,would be deemed to have a permanent establishment in India. This article discusses the case and how multinational taxpayers should plan for the futurewith this decision in mind.

The National Tax Information center, the issuing body of all individual tax interpretations in Poland, categorized computer servers as industrial equipment in response to a recent question aboutwhether payments for foreign data-hosting services are subject towithholding tax. This allows the tax authority to claim that the payments amount to license fees,which are typically subject to a 20 percentwithholding tax. Until now, foreign data-hosting services have generally been considered free fromwithholding tax.

France's biggest employer federation said it's "not a good sign" that the governmentwill make themwait an extra nine months to get a promised tax cut. Economy Minister Bruno Le Maire said the "extra" 4 percentage point reduction that the government promised employers on their socialwelfare taxes for minimumwage salarieswill take effect in October 2019, rather than Jan. 1, 2019.

Poland's Proposals to introduce an exit tax may unintentionally raise costs for some businesses that regularly operate across borders,warn practitioners.

Law 360 - ByNatalie Olivo

The European Union's proposal to tax online activities based on a digital platform's users and data ÔøΩ rather than a physical presence ÔøΩ presents logistical hurdles in attempting to split profits based onwhere value is created, a practitioner saidwednesday.

This article gives insight into the recently released proposed tax code Section 965 transition tax regulations. One item of interest relates to the basis consequences that flow from treating earnings and profits that are offset by shared deficits in determining a taxpayer's net accumulated earnings and profits subject to tax under Section 965 as previously taxed income for purposes of Section 959. The statutory language under Section 965 is unclear as towhether a U.S. shareholder is entitled to increase its basis in a specified foreign corporation for the amount of such earnings and profits. As a practical matter, this could preclude a U.S. shareholder from repatriating cash held by its specified foreign corporationwithout incurring taxable gain in the U.S., particularly if the U.S. shareholder has a low basis in the shares of its specified foreign corporation.

This second part of a two-part articlewill consider how the Luxembourg draft law introduces a new framework to tackle hybrid mismatches, and the exit taxation rule.

This article looks for the positive aspects of a federal appeals court's decision to send the 'Medtronic' transfer pricing case back to the Tax Court. KPMG professionalswho analyzed the first 'Medtronic' case come together to analyze and comment on the recent decision.

Panama's National Assembly is considering a draft bill thatwould revise the computation of qualifying income under the intellectual property tax regime.

The European Commission's digital economy taxation plan needs clarity regarding the definition of digital services and member states' ability to set higher tax rates, the European Parliament's Economic and Monetary Affairs Committee rapporteurs said.

With trade tensions between the United States and other countries escalating, a think tank says the EU should respondwith both negotiations and retaliatory measures, and that future deals should address tax optimization and evasion.

As a clarification of existing rules, newly released guidance on the profit-split method incorporating recent revisions to the OECD transfer pricing guidelineswill apply both prospectively and retrospectively, according to Sweden's tax administration.

In this article, the author examines the theoretical background of value chain analysis and some of the approaches that multinational enterprises could use to perform the analysis.

In this article, the author examines Canada's tax reform efforts, or absence thereof, comparing Canada's approachwith tax reform efforts in other countries, particularly the United States. After reviewing the status quo, he makes recommendations regarding how Canada can maintain its tax competitivenesswhile also supporting its approach to socialwelfare.

Proposed transition tax regs may provide a significant amount of computational and definitional detail, but the rules' spartan guidance on notional cash pools has left practitionerswith an unclear picture on that matter.

Law 360 - By Joshua Rosenberg

A vote on the next round of tax overhaul legislationwill likely not take place in the Senate until the end of the year, the Senate's third-ranking Republican leader told Law360 on Tuesday. Because Senate GOP leaderswill probably need to persuade at least nine Democrats to vote for their "tax reform 2.0" legislation in order to reach the 60-vote threshold, a year-end tax bill that includes bipartisan priorities is the most likely vehicle, said Sen. John Thune, R-S.D.

The Court of Justice of the European Unionwill consider a case (C-405/18) onwhether the EU freedom of establishment precludes the Czech Republic from denying loss deductions incurred in another EU state that are claimed by an entity relocating its place of business or place of management to the Czech Republic.

The Tax Court of Canada in Devon Canada Corporation v. The Queen, 2018 TCC 170, held that surrender payments made to holders of unexercised options during a corporate takeover are deductible capital expenditures because the transaction extinguished the options.

The South African Revenue Service (SARS) is reestablishing its Large Business Unit and Illicit Economy Team,whichwill focus on high-net-worth individuals and large businesses.

The Inland Revenue Department (IRD) has issued draft guidance on its interpretation of New Zealand's recent anti-profit-shifting legislation, including the interaction between domestic laws and OECD guidance on transfer pricing and permanent establishment avoidance.

The United States' existing and pending tax treaties potentially conflictwith the base erosion and antiabuse tax, but Congress's silence about its intent to override the treaties cloudswhat ÔøΩ if any ÔøΩ action Treasury should take.

Although the Tax Cuts and Jobs Act reduced the corporate tax rate, several offsetting revenue raiserswill affect the insurance industry: Companies are expected to revisit their risk profiles and investment asset decisions and consider mergers and acquisitions. The law makes significant changes to tax provisions affecting both property and casualty (P&C) and life insurance.

The Tax Cuts and Jobs Act (P.L. 115-97) reversed Grecian Magnesite v. Commissioner, 149 T.C. 3 (2017), in a new statute for taxation of effectively connected gain on a foreign partner's disposition of a partnership interest (section 846(c)(8)).withholding is required on the entire gross proceeds of the sale. Literally, the newwithholding obligation is not imposed proportionally to the partnership's ECI (section 1446(f)).

Law 360 - By Molly Moses

The IRS on Monday announced itwould postpone the start of the 2019 application period for its Compliance Assurance Process program ÔøΩ a voluntary prefiling program for some of the largest U.S. companies ÔøΩ by one month, to Oct. 1, to give the companies time to assess other changes to the program. The voluntary program, known as CAP,will now require companies to submit a preliminary list of material issues, including specified information about transfer pricing issues.

Law 360 - By Natalie Olivo

Ever since the Tax Cuts and Jobs Actwas enacted in December, officials at the U.S. Department of Treasury and Internal Revenue Service have assured practitioners and accountants that regulationswould clear up questions under the tax law's complex international measures ÔøΩ including how to calculate global intangible low-taxed income, or GILTI. Proposed rules for GILTI are expected to be floated this fall, but specialists say some issues under this provision and others are outside Treasury's regulatory scope.

Practitioners continue to voice concerns over the operation of the transition tax's antiabuse rules, arguing that their implementation could lead to bizarre consequences.

The focus of this paper is the relationship of the Base Erosion and Anti-Avoidance Tax (the BEAT) to the income tax conventions in force towhich the United States is a party.

This article suggests the need for a rethink of thewidely accepted tax policy goal that multinationals' global profits should be alignedwith value creation, a concept underlying the OECD's base erosion and profit-shifting project.

PricewaterhouseCoopers LLP, on behalf of DefCo Holdings Inc., has urged Treasury and the IRS to provide a transition rule thatwill allow U.S. taxpayers to carry forward some excess general category foreign taxes under section 904(c) to the new foreign branch income category in the first year of its existence.

PricewaterhouseCoopers LLP has requested guidance indicating that a controlled foreign corporation may be eligible for the deduction under section 245A, as amended by the Tax Cuts and Jobs Act (P.L. 115-97), to the extent that the dividend received from a specified 10-percent owned foreign corporation constitutes subpart F income.