EY’s Global Tax Alert summarizes recent US developments, including (expected) pushback by the EU from the Tax Act’s FDII legislation. The pushback is based upon WTO rules and OECD’s Article 24 on non-discrimination.
One elemental argument against the Foreign Derived Intangible Income (FDII) legislation is that it violates the World Trade Organization (WTO) rules.
“The tax press is reporting that the EU has requested that the Organisation for Economic Co-operation and Development (OECD) Forum on Harmful Tax Practices conduct a “fast track” review of certain of the TCJA’s provisions. The request reportedly came after a meeting of EU Finance Ministers in which the Ministers discussed how to react to the tax reform law and whether to take action in the WTO. According to the report, a recent EU document states that the new base erosion and anti-abuse tax may contravene the OECD Model Tax Convention’s Article 24 on non-discrimination.”
To the extent that the FDII is found to violate the WTO rules, the timing for this benefit is a short-term (i.e. 3-5 years) period. Accordingly, relevant restructuring may avail this benefit in the next few years with a long-term strategy based on its revocation.
Click to access 2018G_01364-181Gbl_Report%20on%20recent%20US%20international%20tax%20developments%20-%209%20March%202018.pdf
The World Customs Organization (WCO) has published a new Guide to Customs Valuation and Transfer Pricing.
The Guide will:
- Provide a policy/audit/control tool for Customs officials
- Cross reference transfer pricing documentation that may be relevant for customs purposes
- Address transfer pricing misconceptions
- Reconfirm “transaction value” as the starting point for customs valuation
- Encourage consideration of transfer pricing studies
- Encourage consistency of transfer pricing adjustments
- Encourage the provision of advance customs valuation rulings
- Provide Best Practices for business, integrating customs and transfer pricing documentation/discussions
A succinct summary by DLA Piper, and the Guide, are provided for reference:
The Guide should also be used as a proactive tool to review reporting structures of transfer pricing and customs employees/advisors, functional integration, etc. to address the new changes in transfer pricing and the possible effect on customs valuations and documentation going forward.