Strategizing International Tax Best Practices – by Keith Brockman

Posts tagged ‘etr’

GILTI: Shareholder test

The global intangible low-taxed income (GILTI) provision in the US Tax Cuts and Jobs Act (Tax Act) was legislated based on the principal of each relevant US, or relevant, shareholder.  This contrasts with the US consolidated group approach for the Sec. 965 repatriation tax, thus will/should both be consistent?

Currently, a planning review of the US/relevant shareholders may be dictated based on the types of controlled foreign corporation (CFCs) in that particular shareholder chain.  However, there has been acknowledgment of this mismatch for ownership tests, and a possibility that the GILTI provisions may also conform to a US consolidated group approach.

Pending further guidance, it may be prudent to calculate the GILTI effect on both approaches and take advantage of the 1-year SEC measurement period for public companies for more definitive rules.  However, US public MNE’s should review the potential guidance to be issued for Q1, with clarity as to whether a reasonable amount will be calculated as part of the Annual ETR process, or omitted therefrom.

Based on the complexity of this provision, additional challenges are present if the current shareholder chain approach is not changed.  Notwithstanding this aspect, there are many complexities involved with this calculation to derive a reasonable amount or a number which is ultimately final and certain.

CTO Best Practices

KPMG’s Chief Tax Officer (CTO) Insights provides Best Practices for improving relations with key stakeholders, including sample metrics that are a valuable working tool.

http://www.kpmg-institutes.com/content/dam/kpmg/taxwatch/pdf/2015/CTO_%20Insights_Issue%20Spotlight_Oct15.pdf

Key points:

  • Regularly scheduled meetings should be scheduled.
  • Individualized dashboards should be presented for different stakeholders.
  • A Tax Value Report should be presented once or twice a year, including important metrics as cash tax savings, cash flow processes and people initiatives.
  • An on-boarding program for new stakeholders should be developed.
  • Sample metrics may include
    • Number of audits
    • Tax rates/effective tax rates/cash tax rates– Benchmarks relative to peers

      – Country-specific for global operations

    • Various internal measures regarding risk management
    • Provision-to-return changes
    • Tax exposures and tax opportunities
    • Partnering with the business

    Similar to a tax risk framework that is shared with the larger business and finance leaders, a CTO’s Best Practice tools provide win-win opportunities to interact with key stakeholders and provide assurance for the importance, and recognition, of the tax function in a multinational organizaiton.

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