Strategizing International Tax Best Practices – by Keith Brockman

Archive for May, 2018

Dutch TP decree

The Dutch Finance Secretary published a new transfer pricing (TP) decree, generally in alignment with OECD’s 2017 guidelines, with some caveats.

Observations:

  • The 2017 OECD changes were clarifying in nature, thus the guidelines apply to prior years
  • Aligned with OECD concept of (non) recognition of controlled transactions
  • The OECD Guidelines refer to the development, enhancement, maintenance, protection and exploitation (DEMPE) functions, although the development and enhancement functions will receive a higher rating
  • New guidance on a purchase of shares, followed by a restructuring
  • Public database results for economic analyses will be subject to further review
  • Simplified approach of cost + 5% is adopted for intra-group services

As some of the above concepts will be reviewed, and adopted, by other countries the new decree is a must read for TP professionals.

EY’s referenced Global Tax Alert provides additional details.

https://www.ey.com/Publication/vwLUAssets/Dutch_Finance_Secretary_publishes_new_Decree_on_application_of_the_arms-length_principle_and_OECD_Guidelines/$FILE/2018G_02953-181Gbl_TP_Netherlands%20arms-length%20principle%20and%20OECD%20guidelines.pdf

US Int’l developments

The IRS is pursuing many avenues of guidance this year and next, including:

  • Proposed rules for US Tax Act Sec. 965 in August 2018, which should be just in time for the 1-year SAB 118 period that ends Q3 for calendar-year taxpayers.
  • Proposed rules for Foreign Tax Credit of the US Tax Act in August 2018
  • Proposed rules for GILTI in Sept. 2018 (hopefully this will allow consolidated calculation vs. separate shareholder chain rule currently written in the law)
  • Proposed rules for BEAT in October 2018
  • Other rules should follow in 2019

This guidance will hopefully clarify the above provisions to allow relevant tax planning, based on the certainty of the US Tax Act provisions.

EY’s Global Alert highlights these developments

http://www.ey.com/Publication/vwLUAssets/Report_on_recent_US_international_tax_developments_-_11_May_2018/$FILE/2018G_02785-181Gbl_Report%20on%20recent%20US%20international%20tax%20developments%20-%2011%20May%202018.pdf

US: Int’l developments

The confusion over details of the US Tax Act continues, among them:

GILTI: Literal application of the Sec. 78 gross-up component to the general basket (As a calendar-year public company nears the end of the year, this decision will become more significant as millions of dollars in tax liabilities and income tax provisions are in play)

GILTI: Vagaries into the US expense allocations, including interest and R&D

Interest: Interpretation (proposed regulations to be issued although no timeline, different types of business, gross receipts test

Upcoming Bluebook for issues needing technical correction, although political agreement may be difficult for such guidance

Technical corrections: slim chance this year

EY’s Global Alert provides additional details of these issues,

http://www.ey.com/Publication/vwLUAssets/Report_on_recent_US_international_tax_developments_-_4_May_2018/$FILE/2018G_02657-181Gbl_Report%20on%20recent%20US%20international%20tax%20developments%20-%204%20May%202018.pdf

EU State Aid: Tax rulings/investigations

The referenced link provides information to the state of play re: EU State Aid rulings and investigations.

The list of final decisions adopted since 2014 concerning tax planning practices and the list of formal ongoing investigations is presented.

The letters provide comprehensive detail into the background of the investigations and rulings, providing insight for potential transactions that may be under review in the future.

http://ec.europa.eu/competition/state_aid/tax_rulings/index_en.html

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