Strategizing International Tax Best Practices – by Keith Brockman

Archive for July, 2018

US Tax Reform 2.0: Listening framework

House Ways and Means Committee Chairman Kevin Brady (R-TX) released a listening session framework for “Tax Reform 2.0.” This framework launches the listening sessions that will occur with lawmakers and constituents back home as Ways and Means Republicans work to make our new pro-growth tax code even stronger for our families and Main Street businesses.

Upon releasing this framework, Chairman Brady said:

“Every day, businesses wake up and ask themselves ‘how do we become more competitive, innovative, and better?’ That practice has always been foreign to Washington—that ends now. With this framework, we are taking the first step to change the culture in Washington D.C. where tax reform only happens once a generation. We plan to work off this framework to build on the growing successes of the Tax Cuts and Jobs Act and ensure this energized economy continues moving forward.” 

The listening session framework is attached for reference:

https://waysandmeansforms.house.gov/uploadedfiles/tax_reform_2.0_house_gop_listening_session_framework_.pdf

US int’l developments

Tax changes are continuing, both from prior and proposed legislation on several fronts:

  • “Phase 2” tax reform bill to be released next week; House vote Sept, mid-term Nov elections may be an obstacle
  • Proposed regulations for Section 965 Tax Act guidance now in review, issuance this fall
  • Guidance for GILTI, FDII and BEAT to be issued this fall; a consolidated approach is likely for GILTI and BEAT
  • Country-by-Country (CbC) reports are being reviewed for risk profiles
  • States are continuing to issue prospective, and retroactive, guidance on Sec. 965 and  the new 2018 Tax Act provisions

The EY Global Tax Alert provides additional details of the above points for reference:

https://www.ey.com/Publication/vwLUAssets/Report_on_recent_US_international_tax_developments_-_20_July_2018/$FILE/2018G_010372-18Gbl_Report%20on%20recent%20US%20international%20tax%20developments%20-%2020%20July%202018.pdf

ATO: Tax Risk Governance

The referenced link is a Best Practices portrayal of tax risk management and governance overview as published by the Australian Tax Office (ATO).

The outline summarizes:

  • Director’s Summary
  • Board-level responsibilities
  • Managerial level responsibilities
  • Tax control framework
  • Testing of controls
  • Self-assessment procedures

The outline is a valuable review of the tax processes and controls that demand a more formal approach, with the advent of subjective guidelines, anti-avoidance rules, etc.  

https://www.ato.gov.au/Business/Large-business/In-detail/Key-products-and-resources/Tax-risk-management-and-governance-review-guide/

 

OECD: Financial instruments draft

Under the mandate of the Report on Actions 8-10 of the BEPS Action Plan (“Aligning Transfer Pricing Outcomes with Value Creation”), Working Party No. 6 (“WP6”) has produced a non-consensus discussion draft on financial transactions.

Comments are due by September 7, 2018.  The treasury function, guarantees, intra-group loans, cash pooling transactions and captive insurance are the broad agendas discussed.

The guidance is not intended to prevent countries from implementing approaches to address capital structure and interest deductibility under domestic legislation, nor does it seek to mandate accurate delineation under Chapter I as the only approach for determining whether purported debt should be respected as debt.

As this guidance is critical for establishing if an instrument is true debt, as well as transfer pricing implications for financial relationships, this discussion draft is critical to review and provide relevant comments.

The OECD’s discussion draft is referenced herein for review.

 

http://www.oecd.org/tax/transfer-pricing/BEPS-actions-8-10-transfer-pricing-financial-transactions-discussion-draft-2018.pdf

OECD: New guidance on profit-split and hard-to-value intangibles

The OECD published the final report on revised guidance to apply the transactional profit split method, as part of BEPS Action 10.  This guidance provides the final text, based on comments received.

Additionally, OECD published final guidance for tax administrations for determining the proper approach to apply for hard-to-value intangibles.  This text is included as an annex to Chapter VI of the Transfer Pricing Guidelines.  This approach should promote consistency and, hopefully, minimize double taxation.

The text of these reports are provided for reference, as they are a must read for transfer pricing professionals.

http://www.oecd.org/tax/transfer-pricing/revised-guidance-on-the-application-of-the-transactional-profit-split-method-beps-action-10.pdf

http://www.oecd.org/tax/transfer-pricing/guidance-for-tax-administrations-on-the-application-of-the-approach-to-hard-to-value-intangibles-BEPS-action-8.pdf

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