Strategizing International Tax Best Practices – by Keith Brockman

Archive for June, 2018

US tariffs: update

On 15 June 2018, the President of the United States (US) announced that the US will move forward and implement a 25% tariff on US$34 billion of goods from China that contain industrially significant technologies.

The proposed list of April 3 has been updated to the latest list as of June 15.

The deadline for submitting comments for the latest set of proposed items is 20 July 2018, while the deadline for filing requests to appear at the public hearing is 29 June 2018.

EY’s Global Tax Alert includes details on this latest listing, and also provides the following Best Practices on this topic:

  • Mapping the complete, end-to-end supply chain to fully understand the extent of products impacted, potential costs, alternative sourcing options, and to assess any opportunities to mitigate impact.
  • Identifying strategies to defer, eliminate, or recover the excess duties such as bonded warehouses, Foreign Trade Zones, or substitution drawback and their equivalent under China customs regulations.
  • Exploring strategies to minimize the customs value of imported products subject to the additional duties, re-evaluating current transfer pricing approaches, and for US imports, considering US customs strategies, such as First Sale for Export.

As this this latest round of tariff battles ensue, transfer pricing and other aspects of international tax are directly and indirectly impacted.  Thus, it is imperative to monitor the latest developments while developing possible plans of action.

https://www.ey.com/Publication/vwLUAssets/US_imposes_first_set_of_tariffs_on_China_origin_products_-_publishes_list_of_34_billion_in_goods_subject_to_additional_25_percent_duty_effective_6_July_2018/$FILE/2018G_03201-181Gbl_Indirect_US%20imposes%20first%20set%20of%20tariffs%20on%20China%20origin%20products.pdfUS

US Repatriation Tax; IRS clarity(?)

IRS recently updated its previously published Q and A’s re: application of Sec. 965 deemed repatriation tax instructions re: estimated tax payments for 2018.  The prior version still has a debatable Question 14 that applied a 2017 overpayment to the entire amount of deemed repatriation tax (not just the first installment) prior to application for the first estimated payment of federal income tax generally due April 15th.

As Question 14 was issued literally just prior to the first installment date, corporations may have missed this point and thereby would be subject to interest and penalty for late payment.

The latest update obviates such penalties if the second estimated payment is a cumulative catch-up amount for both the first and second estimates.  

However, what was not fixed is the apparent ability by IRS to apply the overpayment solely to deemed repatriation tax in its entirety prior to applying it to estimated federal income tax liability due.  This is still a question in the minds of many.  

EY’s Global Tax Alert highlights this development.

https://www.ey.com/Publication/vwLUAssets/US_IRS_updates_Section_965_transition_tax_FAQs_to_include_late-payment_penalty_and_filing_relief_-_action_may_be_needed_by_15_June_2018/$FILE/2018G_03498-181Gbl_US%20IRS%20updates%20Section%20965%20transition%20tax%20FAQs.pdf

US/EU/OECD tax developments

EY’s Global Tax Alert details several important global developments worth watching:

  • Phase 2 US tax reform – individual taxes, what else?
  • OECD’s first peer review reporting on BEPS Action 13: TP Documentation and County-by-Country (CbC) reporting (attached herein for reference)
  • EU Directive on cross-border reportable arrangements, reporting to commence in 2020 although effective date will be June/July 2018.  

The reportable arrangements are a must read for international tax colleagues to understand the impact of arrangements planned for currently that may become a transparent arrangement to be reported in the EU.

The OECD CbC report is also helpful to understand the trend that CbC reports will generate ongoing, and the viewpoint of the countries that administer this process.

The OECD BEPS Actions, including CbC reporting, significantly impact international tax compliance burdens and challenges going forward.  Additionally, US tax reform still has experts deliberating their practical application, notwithstanding future legislation.

https://www.ey.com/Publication/vwLUAssets/Report_on_recent_US_international_tax_developments_-_1_June_2018/$FILE/2018G_03277-181Gbl_Report%20on%20recent%20US%20international%20tax%20developments%20-%201%20June%202018.pdf

https://read.oecd-ilibrary.org/taxation/country-by-country-reporting-compilation-of-peer-review-reports-phase-1_9789264300057-en#page1

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