Strategizing International Tax Best Practices – by Keith Brockman

Posts tagged ‘FATCA’

US int’l developments

Proposed Regulations were issued for cloud computing and digital transactions; this is an especially important area re: sourcing of income, definitions, etc. especially in light of France and others looking to implement a digital services tax.

Publication 5188 was revised re: FATCA data reporting.

OECD released Peer 2 review reports re: re: BEPS Action 14 (dispute resolution).  Interestingly, some US treaties include a MAP provision, although not all are consistent with the minimum standard.

https://www.ey.com/Publication/vwLUAssets/Report_on_recent_US_international_tax_developments_-_16_August_2019/$FILE/2019G_003793-19Gbl_Report%20on%20recent%20US%20international%20tax%20developments%20-%2016%20Aug%202019.pdf

US developments/OECD toolkit

Recent international tax developments include the following:

  • OECD is progressing on a Digital Strategy, with planned consensus in 2020 (hopefully separate countries will have added patience for a coordinated approach)
  • US Previously Taxed Income (PTI) regulations are due this summer/fall
  • Foreign Account Tax Compliance Act (FATCA) final regulations were issued, effective March 2019 and expanding the definition of “responsible person”
  • India and the US reached agreement to exchange Country-by-Country (CbC) reports, thus alleviating any need to provide separate India CbC reports for US taxpayers
  • OECD released a Beneficial Ownership Toolkit (reference attached) to assist developing countries in identification of ultimate beneficial owners

EY’s Global Tax Alert is also attached for reference.

http://www.oecd.org/tax/transparency/beneficial-ownership-toolkit.pdf

https://www.ey.com/Publication/vwLUAssets/Report_on_recent_US_international_tax_developments_-_22_March_2019/$FILE/2019G_000806-19Gbl_Report%20on%20recent%20US%20international%20tax%20developments%20-%2022%20March%202019.pdf

US int’l tax developmentsUS

Significant tax developments have recently transpired for US / international tax.

  • Section 965 Proposed Regulations have been issued, including discussion of potential stock basis elections that are critical to review (reference link).
  • Proposed Regulations issued for capital expensing provisions of US Tax Act (reference link)
  • IRS has published its statutory interpretation of their previously issued FAQ Q&A that 2017 overpayments of federal income tax are allocated solely to transitional tax liability in its entirety prior to allocating such amount to its 2018 federal income tax liability without transition tax.  In summary, the reasoning is that the transition tax is a 2017 liability, notwithstanding the ability to make an election to pay in installments. Considerable debate is currently ongoing re: this latest development, as it seemingly obviates the election methodology solely for one instance of overpayments, yet preserving the ability of deferred payments if a prior year overpayment is not present.
  • The Ninth Circuit Court of Appeals has reversed the Tax Court’s holding in Altera v. Commissioner, and upheld a 2003 regulation that requires participants in a cost sharing arrangement (CSA) to treat stock-based compensation costs (SBC costs) as compensable.  The Appellate Court concluded that the regulations were valid under general administrative law principles and that under current law, SBC costs should be treated as shared by participants in a CSA. It is important to note that the Tax Court’s taxpayer-favorable opinion is still precedent and authority for taxpayers located in geographical areas outside of the Ninth Circuit’s jurisdiction.

  • The IRS Foreign Account Tax Compliance Act (FATCA) certification portal is now live. The FATCA Registration System has been updated to allow for the completion and submission of the certification of pre-existing accounts and periodic certifications. The IRS is recommending that all FATCA registered entities should monitor their message board for notifications. The registration system allows for the establishment of an online account for financial institutions to register with the IRS, renew their agreement, and complete and submit FATCA certifications.

EY’s Global Tax Alert discusses some of the latest developments.

Technical and lengthy documentation re: the above highlights will need critical reading and review in the very near future for US / international tax professionals.

https://www.ey.com/Publication/vwLUAssets/Report_on_recent_US_international_tax_developments_-_3_August_2018/$FILE/2018G_010605-18Gbl_Report%20on%20recent%20US%20international%20tax%20developments%20-%203%20August%202018.pdf

https://s3.amazonaws.com/public-inspection.federalregister.gov/2018-16476.pdf

https://s3.amazonaws.com/public-inspection.federalregister.gov/2018-16716.pdf

Tax avoidance strategies: Int’l human rights law violations? – IBA report

The facilitation of tax avoidance strategies could constitute a violation of international human rights law, according to a new report by the International Bar Association.

http://www.ibanet.org/Article/Detail.aspx?ArticleUid=4A0CF930-A0D1-4784-8D09-F588DCDDFEA4

The International Bar Association’s Human Rights Institute (IBAHRI) Task Force on Illicit Financial Flows, Poverty and Human Rights was convened to reflect upon these pressing questions from the perspective of international human rights law and policy. This innovative report:
  • provides a detailed overview of tax abuses and secrecy jurisdictions
  • investigates the links between tax abuses, poverty and human rights
  • draws on case studies from Brazil, Jersey and the SADC region
  • evaluates responsibilities and remedies to counter tax abuses affecting human rights
  • delivers unique recommendations for states, business enterprises and the legal profession

For the purposes of this report, tax abuses include the tax practices that are contrary to the letter or spirit of domestic and international tax laws and policies. They include tax evasion, tax fraud and other illegal practices − including the tax losses resulting from other illicit financial flows such as bribery, corruption and money laundering. The term ‘tax abuse’ also includes tax practices that may be legal, strictly speaking, but are currently under scrutiny because they avoid a ‘fair share’ of the tax burden and have negative impacts on the tax revenues and economies of developing countries.

This report covers developments in international tax cooperation on issues such as automatic exchange of information, and base erosion and profit-shifting. It also assesses trends in international development policy which are increasingly focused on strengthening good tax governance in developing countries – thereby reducing dependency on foreign aid and improving development outcomes. It demonstrates the evolution of international human rights law and policy, whilst highlighting tax abuses as a pressing human rights concern.

The Task Force’s goals and objectives are:

1. To publish an innovative report containing findings and a set of recommendations on the interaction between illicit financial flows, poverty and human rights.

2. To widely disseminate the report with the view of pushing the issue of tax evasion and human rights onto global policy agendas, and sustaining discussion thereafter.

3. To incite multi-level policy changes in the area of tax evasion and economic, social and cultural rights adjudication to help end global poverty.

The report cites the following topics for relevance in its comprehensive discussion:

  • OECD BEPS Action Plan
  • OECD Anti-Bribery Convention
  • OECD “Tax Inspectors Without Borders” initiative (refer to 9 June posting)
  • G8 and G20 countries
  • US FATCA rules
  • US Dodd Frank legislation
  • UK House of Commons
  • UN Guiding Principles on Business and Human Rights
  • EU Accounting and Transparency Directives
  • Extractive Industries Transparency Initiative (EITI) (39 countries have signed up)

This report provides interesting insights into the complex relationship of international taxes and non-tax principles and objectives, for which all international tax executives should be aware.  Appendices of the report provide suggested recommendations for States, international business  and the legal profession to help combat today’s conflicts.

 

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