Strategizing International Tax Best Practices – by Keith Brockman

Posts tagged ‘TEI’

GILTI Reg’s: TEI’s response

The Tax Executives Institute (TEI) provided insgihtful comments to the recently issued GILTI Proposed Regulations, addressing the following main points:

  • Proposed regulation section 1.951A-3(h)(1) (the “temporarily held property rule”) provides that temporarily held property acquired with “a principal purpose” of reducing a U.S. shareholder’s GILTI inclusion will be disregarded
  • Basis adjustment rule for tested losses
  • Only used tested losses should increase Subpart F E&P
  • Basis reductions should only apply to actual transfers of stock
  • Deemed Sec. 367(d) expense should reduce tested income
  • Prop. Reg. § 1.951A-2(c)(5) anti-abuse rule (and authority to issue such rule)

TEI’s comments are well reasoned and should be reviewed to further understand the complexities, and need for added clarification going forward.

 

https://www.tei.org/sites/default/files/advocacy_pdfs/TEI%20Comments%20-%20Proposed%20GILTI%20Regulations%20Section%20951A%20-%20FINAL%2026%20November%202018.pdf

OECD TP Guidelines: TEI’s comments

Tax Executives Institute (TEI) recently submitted a letter in response to requested comments by the OECD re: revisions to its transfer pricing guidelines.  The submission is well drafted and articulate, generally urging OECD to improve current practices rather than adopting new complex mechanisms.

An example of several suggestions is provided:

TEI suggests a number of elements should be included in future guidance to improve transfer pricing compliance practices. First, tax authorities should share their risk assessments with taxpayers so taxpayers can improve their compliance processes where appropriate, or engage in a discussion with tax authorities regarding their view of the taxpayer’s compliance risk. Second, to avoid transfer pricing disputes, Chapter IV should urge tax authorities to focus audit activity on transactions that are more likely to be tax motivated (i.e., between high and low tax jurisdictions), rather than simple intercompany transactions where the taxpayer makes reasonable efforts to price the transactions and where the possibility of a tax motivation is remote. For example, head office cost allocations between countries with relatively comparable tax rates should be viewed as low risk. Finally, the OECD should encourage countries to consider halting interest and penalties if dispute resolution takes longer than two years and if the country does not have a mandatory arbitration procedure.

 

TEI’s submission should be read in its entirety to further understand the direction of OECD and possible remedies in the complex world of transfer pricing.

https://www.tei.org/sites/default/files/advocacy_pdfs/TEI%20Comments%20-%20OECD%20TPG%20-%20Chapter%20IV%20and%20VII%20-%20FINAL%20to%20OECD%2019%20June%202018.pdf

TEI”s comments: accounting for BEAT/GILTI/FDII

The Tax Executives Institute, Inc. (TEI) previously issued excellent comments regarding divergent views of the Big 4 accounting firms for US GAAP tax accounting issues for the new US Tax Act aspects.

These views are still divergent today as we approach the end of March, and further issues continue to develop that impact the cash tax and tax reporting aspects for the US Tax Act.  Accordingly, the same facts may provide a different repatriation tax liability and tax accounting for different multinational companies, certainly a difficult variable for comparison by tax experts and, most importantly, by investors.

As these positions may continue to diverge, position papers and discussions with the audit firm, Audit Committee of the Board of Directors and the company should be scheduled to ensure there are no surprises as earning release dates are emerging.  

https://www.tei.org/sites/default/files/advocacy_pdfs/TEI%20Letter%20re%20ASC%20740%20treatment%20of%20BEAT%20and%20GILTI.pdf

Offshore indirect transfers: TEI’s comments

On October 19, 2017, Tax Executives Institute (TEI) filed a letter with the Platform for Collaboration on Tax, a joint initiative of the World Bank, OECD, International Monetary Fund, and United Nations, regarding the Platform’s draft toolkit on the taxation of offshore indirect transfers.  TEI’s comments focused on the need for the Platform’s toolkit to educate and provide options to nations considering taxing offshore indirect transfers, rather than prescribing a preferred approach, among other things.

The Platform for Collaboration on Tax (the Platform), a joint initiative of the Organisation for Economic Co-Operation and Development, International Monetary Fund, United Nations, and World Bank, released a document entitled The Taxation of Offshore Indirect Transfers – A Toolkit (the Draft Toolkit or Toolkit) on 1 August 2017. The Draft Toolkit was designed to help developing countries address the complexities of taxing offshore indirect transfers of assets, which the Platform states is a practice by which some multinational corporations try to minimize their tax liability.

The toolkit and TEI’s submission paper are referenced herein for review

Highlights of TEI’s comments include the following points:

  • There should be symmetry and neutrality as compared to direct asset transfers
  • Status of toolkit is unclear, and is not a source of authoritative guidance
  • The goal of the draft toolkit is unclear
  • A capital gains tax can distort economic transactions
  • Gains and losses should be the subject of the toolkit
  • Most indirect transfers are made for economic, not tax, reasons
  • The general treaty definition of immovable property seems to have been abandoned with no reason

The toolkit can be applauded for launching a multi-organizational approach with some good ideas, although such ideas should be further challenged and developed prior to an overall vision and detailed rules promulgated

 

https://www.oecd.org/tax/discussion-draft-toolkit-taxation-of-offshore-indirect-transfers.pdf

 

https://www.tei.org/sites/default/files/advocacy_pdfs/TEI-Comments-Offshore-Indirect-Transfers-Oct192017.pdf

US Accounting Standards

The Tax Executives Institute (TEI) has provided comments to the FASB’s proposed changes to disclosure requirements for the reporting of income taxes.  As the increased transparency demands continue, the attached views exemplify the theoretical and practical considerations for new standards re: added benefits for the readers of financial statements.

As the world of tax increases in complexity, public disclosures should avoid subjective and forward looking projections, as well as avoiding any potential conflicts with strategic forecasts and confidential information.

TEI’s comments are well written and should be welcomed by the tax and financial community looking to increase the transparency and practicality of financial statement times without duplication or non value-added actions.

http://www.tei.org/Documents/Comment-Letter-on-Proposed-Updates-to-ASC-740-Disclosures-PostedJan122017.pdf

TEI: European Commission’s VAT Expert Group (re)appointment

As a long-standing advocate of Tax Executive Institute’s (TEI’s) expertise and peer networking for all executive tax members of multinationals, their reappointment as a member of the VAT Expert Group is a sound testament to their advice for the international tax community.

Additionally, TEI’s training programs, and opportunities to be a guest speaker, should be taken advantage of if one has the opportunity.

TEI Appointed as Member to the European Commission’s VAT Expert Group
TEI Staff

On September 30, 2016, the European Commission reappointed TEI as a member of the VAT Expert Group for a three-year term. The VAT Expert Group was established in 2012 for the purpose of “advis[ing] the Commission on the preparation of legislative acts and other policy initiatives in the field of VAT” and “provid[ing] insight concerning the practical implementation of legislative acts and other EU policy initiatives in the field of VAT.” The VAT Expert Group’s next meeting will take place on October 17, 2016 in Brussels.

TEI has participated as a member of the VAT Expert Group since its inception. Allard van Nes will continue to continue to serve as TEI’s primary representative and Lorry G. Limbourg will serve as Mr. van Nes’ alternate. TEI wishes to thank Lynne Clare for her work as the alternate representative during TEI’s prior terms.

OECD’s Multilateral Instrument: TEI comments

Tax Executives Institute, Inc. (TEI) has recently submitted comments in response to OECD’s public discussion draft on Action 15 re: technical issues for the upcoming Multilateral Instrument.

A link to TEI’s excellent comments are provided for reference:

http://www.tei.org/Documents/TEI-Comments-BEPS-Action-15-Tax-Treaty-Related-Measures-June-29-2016.pdf

Highlights:

  • Mandatory binding arbitration was not included, thus the increase in MAP cases seem inevitable.
  • A “baseball” type of arbitration is recommended.
  • All MAP cases should be eligible for arbitration.
  • All signatories should adopt the Action 14 minimum standard.
  • Countries should have the ability to choose what treaty-related BEPS measures it will adopt.
  • Countries should have the ability to choose what treaty partners and relevant tax treaties would apply for various BEPS provisions.
  • The modified provisions are only effective upon official ratification.
  • A new peer process should be adopted for treaty interpretation.

The multilateral instrument is key to the consistent application of BEPS Actions, and the well-written TEI comments are highly recommended for all interested parties.

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