Strategizing International Tax Best Practices – by Keith Brockman

Archive for October, 2018

Hybrid arrangements: ATO guidance

The Australian Tax Office (ATO) has published guidelines addressing general anti-avoidance rules (GAAR) for restructures of hybrid arrangements.

This guidance is a valuable reference for taxpayers not only operating in Australia, although having hybrid arrangements that may need restructuring.

https://www.ey.com/Publication/vwLUAssets/Australian_Taxation_Office_issues_guidance_on_GAAR_and_restructures_of_hybrid_mismatch_arrangements/$FILE/2018G_011633-18Gbl_Australia%20-%20Guidance%20on%20GAAR%20and%20hybrid%20mismatches.pdf

https://www.ato.gov.au/law/view/view.htm?docid=%22COG%2FPCG20187%2FNAT%2FATO%2F00001%22

US guidance: Ready, set, go!

Alot of guidance is virtually rolling off the press!

  • PTI guidance for year-end financial statements
  • Foreign tax credits, including application of GILTI
  • Section 163(j) interest guidance
  • Proposed regulations on PTI application
  • BEAT
  • Section 250 guidance

The guidance will be complex and lengthy, and it represents only one step towards achieving more certainty into the complex nuances of the US Tax Act.  EY’s Global Tax Alert provides a summary for reference.

https://www.ey.com/Publication/vwLUAssets/Report_on_recent_US_international_tax_developments_-_19_October_2018/$FILE/2018G_011433-18Gbl_Report%20on%20recent%20US%20international%20tax%20developments%20-%2019%20Oct%202018.pdf

Sec. 965 Repatriation: TEI comments

The Tax Executives Institute (TEI) has provided numerous comments re: Sec 965 positions as written in the law, supplemented by additional guidance.

Summary of comments:

  1. Cash position definition
  2. Foreign Tax Credit, double-counting of Earnings & Profits
  3. Dividends paid from a CFC to another CFC or a third party
  4. Hovering deficit taxes
  5. Stock basis election should be extended to 180 days, vs. 90 days per IRS guidance
  6. Changes in methods of accounting
  7. Anti-abuse rules
  8. CFC attribute mismatches
  9. Foreign tax credit adjustment
  10. “Applicable percentage” guidance
  11. Average FX rate, vs. year-end spot rate, used for measurement
  12. 2017 overpayments applied automatically to transition tax (Still an issue!)
  13. Penalty protection

The letter provides background and examples related to the comment areas, and should be reviewed to gain a further understanding of the complex dynamics that will hopefully be mitigated via the suggestions.

https://www.tei.org/sites/default/files/advocacy_pdfs/TEI-Comments-Proposed-Section-965-Regulations-9%20October-2018.pdf

US int’l tax update

The latest US tax updates are summarized in EY’s Global Tax Alert, with a referenced link

  • Tax Reform 2.0: House is moving forward with three separate bills, hoping at least one will pass, although Senate will not review prior to Nov. midterm elections
  • GILTI: Additional rules re: interaction of Foreign Tax Credit and GILTI by Dec. 31, 2018  (It is hoped that the calculation of Sec. 163(j) interest limitations will be addressed re: application on a separate CFC basis, consolidated basis, or other method)
  • GILTI: Final regulations June 2019
  • IRS plans to establish separate webpages for the major international tax provisions enacted by the 2017 tax reform to provide informal taxpayer guidance. The webpages will follow a similar format that was adopted by the IRS to offer informal information regarding the TCJA’s transition tax.
  • IRS: Restructuring the Advance Pricing and Mutual Agreement program (APMA) to consolidate resources and improve internal processes, including economists.

There is still significant uncertainty re: Sec. 965 repatriation tax, GILTI, FDII and BEAT provisions by taxpayers.  It is hopeful that meaningful guidance will be issued shortly.      

https://www.ey.com/Publication/vwLUAssets/Report_on_recent_US_international_tax_developments_-_28_September_2018/$FILE/2018G_011226-18Gbl_Report%20on%20recent%20US%20international%20tax%20developments%20-%2028%20Sept%202018.pdf

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