An OECD discussion draft scheduled to be released this week includes a proposal to put limits on an MNE’s net interest deductions based on worldwide net third party interest expenses, OECD officials said December 15 during a webcast updating work on the OECD/G20 base erosion and profit shifting (BEPS) project. Officials also said that the OECD intends . . .
Canada’s Department of Finance has released proposed international tax legislation, including measures to implement the government’s 2014 budget, but said it decided to postpone action on anti-treaty shopping legislation.
The proposals, released on August 29, include amendments to Canada’s foreign affiliate dumping rules . . .
More analysis: KPMG
The Council of the European Union, on July 8, formally adopted an amendment to the parent-subsidiary directive to prevent multinational groups from achieving double non-taxation from hybrid loan arrangements. A political agreement on the matter was reached on June 20. States have until December 31, 2015, to add the amendment to their laws. Press release; Amendment to Council Directive: 10996/14, 11291/14, 11291/14 ADD1; Prior coverage
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The OECD’s Base Erosion and Profit Shifting (BEPS) initiative has increased tax controversies between nations and is likely to continue to do so in the future, Samuel Maruca, U.S. IRS Director of Transfer Pricing Operations said April 30.
“My fear is that some of our treaty partners view this as a license [and are] reaching out and helping [themselves] to the tax base,” said Maruca, who spoke during a webinar sponsored by EY. Maruca . . .
The US and India remain at loggerheads over the percentage of profit to be allocated to India subsidiaries of US IT and ITeS companies, with US pushing for a 12 – 13 percent rate and India unwilling to go below 18 percent, according to a an April 9 Financial Express article written by Santosh Tiwari. An unnamed official quoted by Tiwari suggested that “the way forward could be to tackle the existing cases at a higher rate and new cases at the rate closer to what the US wants.” Read More: Financial Express
The European Court of Justice on July 17 ruled that active holding companies may recover VAT on share acquisition costs and that German courts should determine the appropriateness of a German law that does not allow partnerships to be included in VAT groups . . .
The UK gained £1,137 (USD 1.7 billion) by successfully challenging multinational transfer pricing in fiscal year 2013–14, according to statistics released by HM Revenue and Customs on March 6. The goverment collected twice as much tax from transfer pricing . . .
The Chinese government has finalized administrative measures implementing its general antiabuse rule (GAAR), the State Administration of Taxation (SAT) announced December 12. The guidance implements GAAR rules introduced in 2008, addressing the law’s scope, judging criteria, adjustment methods, working procedures, and dispute resolutions, the SAT said in . . .
The UK government will introduce a new “diverted profits tax” to ensure that multinational corporations pay the correct about of tax, British Chancellor of the Exchequer, George Osborne, announced December 3 in his Autumn Statement. The UK also released a consultation on hybrid mismatches, and Osborne reaffirmed the UK’s intention to introduce country-by-country reporting for . . .
India’s Central Board of Direct Taxes (CBDT) and Central Board of Excise and Customs (CBEC) should immediately take steps to jointly handle tax service for large taxpayers and should aim to unify their management structures within five years, concluded a report issued by the Tax Administration Reform Commission (TARC),
The comprehensive report to newly…
Countries can legally use a multilateral instrument to amend existing bilateral tax treaties to implement the OECD’s base erosion and profit shifting (BEPS) initiative, Pascal Saint-Amans, Director, OECD Center for Tax Policy and Administration, said on May 26, during an update of OECD progress on the BEPS action plan.
Saint-Amans said that a team of international lawyers have found legal precedent in areas other than tax . . .
Russia’s Ministry of Finance, on March 18, published a bill introducing controlled foreign company (“CFC”) rules to the Russian tax laws. The bill also deems a foreign company as a Russian tax resident when the company’s management is in Russia and taxes sales of shares in an entity where the entity’s assets consist of indirectly owned Russian real property. For analysis, see CMS Bureau Francis Lefebvre, Laggan & Associates Ltd, Debevoise & Plimpton LLP, EY
HM Treasury and HM Revenue and Customs have released a position paper outlining the UK’s priorities for the ongoing work with G20 and OECD taking forward the 15 point Action Plan to counter Base Erosion and Profit Shifting.
The paper includes proposals for new international rules to address cross-border business structures or finance transactions, a disclosure scheme for international tax schemes, and the creation of a single Large Business Directorate within HMRC.
G20 finance ministers and central bank governors, in a communique released following their September 5 meeting in Ankara, Turkey, called on the OECD to establish a framework by early 2016 on the implementation of OECD/G20 base erosion and profit shifting (BEPS) plan . . .
Update: See also: OECD Secretary-General Report To G20 Finance Ministers
US Treasury on May 20 released for public comment draft proposals that would significantly modify the US Model Income Tax Convention. Included are proposals to address stateless income, discourage corporate inversions, and permit expanded use of the treaty through a derivatives benefits rule. The next US model would also include a provision requiring dispute resolution . . .
Senior OECD officials defended draft changes to the OECD transfer pricing guidelines on risk, recharacterization, and special measures February 12, arguing that revisions to the guidelines are needed to strengthen the arm’s length principle and to properly align a transaction’s form with its substance. The discussion draft, released December 19, proposes significant . . .
The Obama administration, in its FY 2016 Budget, has proposed a minimum tax on US multinational corporation foreign income and a one-time14 percent tax on previously untaxed foreign deferred profits. Inversion transactions and earnings stripping were also among the targets of the $4 trillion FY 2016 budget . . .
The US Senate Finance Committee’s top Republican, on July 22, said that he would consider supporting legislation to stop corporate inversions, independent of comprehensive tax reform, as long conditions were met. . . .
The UN Subcommittee on Base Erosion and Profit Shifting (BEPS), on July 8, extended the deadline for developing countries to respond to a questionnaire on BEPS.
The subcommittee, established by the UN Committee of Experts . . .
The OECD’s Working Party 6 has tentatively decided on a number of modifications to the OECD’s discussion draft on transfer pricing documentation and country-by-country reporting, including the elimination of entity-by-entity reporting in favor of country-level reporting, said Joseph Andrus, head of OECD transfer pricing , on April 2 during a webcast updating the base erosion and profit shifting (BEPS) initiative. Pascal Saint Amans, the OECD’s director of tax work, said that BEPS deliverables were “on track” for 2014 and that work has already begun on 2015 deliverables. . .
The Italian goverment, on April 21, released draft legislation which “significantly reshapes the tax rules applicable to cross-border scenarios and redefines the concepts of abuse of law and tax avoidance,” writes EY in an April 27 tax alert. According to EY, the draft would replace Italy’s general antiavoidance rules with a new “abuse of law” provision and would expand types of matters that can be the subject of an advance tax ruling. Also included are proposals to modify the tax treatment of transactions with black list countries, the computation of the interest expense deduction cap, attribution of income to Italian permanent establishments, foreign tax credit and controlled foreign corporation rules, and provisions on consolidation between sister companies. See, EY.
UPDATE (05/07/2015): See, also PWC.
The US IRS on April 23 issued proposed regulations (REG-108214-15) defining the terms “active conduct” and “insurance business” for purposes of determining when a foreign insurance company’s income is excluded from the definition of passive income under section 1297(b)(2)(B). The regulations . . .
UPDATE: See, also PWC.
The OECD on March 31 released a discussion draft under the OECD/G20 base erosion profit shifting (BEPS) plan providing recommendations to tax administrations on how to structure mandatory disclosure rules to address aggressive tax planning. Included are recommendations on how to deal with international . . .
The OECD on November 21 released a discussion draft under Action 6 of the OECD/G20 base erosion and profit shifting (BEPS) plan relating to preventing abuse of tax treaties. The draft follows up on an OECD interim report, issued September 16, which reflects an agreement among countries to require minimum standards in tax treaties to prevent treaty abuse. The report states that treaties should include either a principle . . .
European Commission President Jean Claude Juncker on November 12 said advance tax rulings issued by Luxembourg to multinationals while he was the country’s prime minister were legal even though the rulings helped multinationals avoid tax due other European nations. Juncker was responding the uproar over the release of leaked taxpayer private rulings and tax returns which were . . .
(Updated 10/15/2014) EU finance ministers on October 14 agreed to extend mandatory automatic exchange of information between tax administrations to interest, dividends, and other income, and to account balances and sales proceeds from financial assets.
The agreement amends directive 2011/16/EU on administrative . . .
On behalf of 32 civil society organizations, Eurodad has written to the European Commission protesting the Commission’s decision to hire PwC to assess the impact of proposals to require public disclosure of country-by-country reporting for banks
. . .
HM Revenue & Customs, on June 30, published draft regulations that simplify the determination of the market value of shares in listed companies and similar instruments for tax purposes. The draft responds to recommendations made by the Office of Tax Simplification, replacing complicated valuation methods such as the “quarter up” method with methods that require no calculation, such as, in the case of shares, the closing price of the shares on the relevant day. Comments on the draft are requested by August 22. Draft statutory instrument (PDF 103K), Draft explanatory memorandum (PDF 103K), Release.
The European Court of Justice (ECJ), on June 12, ruled in SCA Group Holding BV and other joined cases that the Netherlands may not deny single entity tax treatment to a resident parent company and its indirectly held Dutch subsidiary (sub-subsidiary) in cases where the sub-subsidiary’s parent is a not a Dutch . . .
-For implications of the ECJ opinion on Spain’s rules governing tax consolidation, see a June 17 report by EY
Pfizer Inc.’s attempted takeover of British pharmaceutical rival, AstraZeneca, if successful, could yield a massive loss to the U.S. Treasury as its offshore profits could permanently escape taxation. See, Jessie Drucker and Zachary R. Mider, Bloomberg; Richard Murphy, Tax Research U.K.; Liz Hoffman, Wall Street Journal; Jia Lynn Wang. Washington Post; Matthew Herper, Forbes
Yuval Navot, a partner with Herzog, Fox & Neeman, Tel Aviv, analyzes draft guidance released by the Israel Tax Authority on April 2 which specifies when a foreign Internet firm has a permanent establishment in Israel giving rise to corporate taxation and has business activity in Israel requiring VAT registration.
Masao Yoshimura, an Associate Professor of Tax Law at Hitotsubashi University’s Graduate School of International Corporate Strategy, analyzes a Japanese government proposal passed by the Lower House March 13 which would impose consumption tax on the supply of digital services by foreign providers. . .
Ireland’s Minister of Finance Micheal Noonan on March 11 signed an order to commence legislation that establishes the Irish collective asset-management vehicle (“ICAV”), a new Irish corporate vehicle for investment funds. The ICAV will be a corporate entity with . . .
The OECD will invite some developing nations to participate in OECD Committee on Fiscal Affairs (CFA) meetings, will hold regional consultations, and will work on capacity development in an effort to increase developing nation input in the OECD/G-20 base erosion profit shifting (BEPS) plan decision-making . . .
UPDATE: Philippines Joining OECD Committee on Fiscal Affairs: The Philippines will join the OECD Committee on Fiscal Affairs to work on a global response to BEPS beginning January 2015, the Philippines Department of Finance announced November 14. See, Philippines release.
Draft guidance released November 3 would modify the OECD transfer pricing guidelines to provide elective, simplified, transfer pricing rules for low value-adding intra-group services. The guidance was released in response to Action 10 of the OECD Base Erosion and Profit Shifting (BEPS) plan, which directs the OECD to develop transfer pricing rules or special measures “to provide protection against common types of base eroding . . .
The European Commission on Oct. 7 announced that it has opened an in-depth investigation into whether Luxembourg granted private rulings to an Amazon subsidiary with too favorable terms, potentially violating EU rules on state aid.
The 2003 tax ruling, which is still in force, sets a methodology for the payment of a tax deductible royalty by Luxembourg-based Amazon EU Sàrl to a related limited liability. . .
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