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May 24, 2019

An Overview of the Proposed Regs on the FDII and GILTI Deduction

In March, the IRS issued proposed regulations that cover determining the amount of the deduction for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI). The regs also coordinate the FDII and GILTI deduction with other tax provisions. Here’s an overview.

Background

The Tax Cuts and Jobs Act (TCJA) established a “participation exemption system” under which certain earnings of a foreign corporation can be repatriated to a corporate U.S. shareholder without U.S. tax. (This occurs under Internal Revenue Code Section 245A.) (more…)

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Categories: International Business Issues, Spring 2019
Tags: Domestic Corporation, FDII, GILTI, international tax,
March 29, 2018

IRS to End Offshore Voluntary Disclosure Program in September

The IRS announced it will begin to ramp down its Offshore Voluntary Disclosure Program (OVDP) and close it on Sept. 28, 2018. This gives taxpayers with undisclosed foreign financial accounts time to still use the program.

“Taxpayers have had several years to come into compliance with U.S. tax laws under this program,” said Acting IRS Commissioner David Kautter. “All along, we have been clear that we would close the program at the appropriate time, and we have reached that point. Those who still wish to come forward have time to do so.” The current OVDP began in 2014 and is a modified version of the OVDP launched in 2012, which followed similar voluntary programs offered in 2011 and 2009. The programs have enabled U.S. taxpayers to voluntarily resolve past noncompliance related to failure to report foreign financial assets and file foreign information returns. (more…)

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Categories: International Business Issues
Tags: FATCA, international tax, offshore voluntary disclosure program, OVDP,
January 31, 2018

New Law Includes Loophole That Lets Taxpayers Reduce Tax on Repatriated Income

A loophole in the Tax Cuts and Jobs Act (TCJA) could allow multinational corporations like Apple to avoid paying billions of dollars in taxes on profits stashed overseas.

The TCJA imposes a transition tax on untaxed foreign earnings of foreign subsidiaries of U.S. companies by deeming those earnings to be repatriated. But the law contains a loophole that allows taxpayers to convert income that would otherwise be taxed at 15.5% (cash holdings) into income that is taxed at 8% (more illiquid investments).

And multinationals could have leeway to shift foreign earnings into the 8% tax bracket. (more…)

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Categories: International Business Issues
Tags: international tax, multinational corporations, Tax Cuts and Jobs Act, TCJA,
December 13, 2017

EU Commission Wants Tech Companies to Pay Fair Share of Taxes

Digital companies in the European Union (EU) pay less than half the amount of tax that other companies pay, the European Commission said in a report. The EU needs a modern tax framework to seize digital opportunities, while also ensuring fair taxation, the report added.

Within the EU, international businesses typically pay a 10.1% tax rate while traditional companies pay 23.3%, due largely to the difficulty of taxing digital assets, which are typically Internet-based. This is particularly important given that more than half of the world’s top 20 companies are technology-based. The Commission stated that the best solution to address this distortion would be on a global level, but in the absence of sufficient progress, the EU should move ahead alone. (more…)

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Categories: International Business Issues
Tags: Corporate Inversion, digital economy, equalization tax, international tax, OECD,
November 7, 2017

Commercial Pilot Fails Tests for Foreign Earned Income Exclusion

The U.S. Tax Court has held that a commercial airline pilot stationed in South Korea failed both the “tax home” and the “bona fide residence” tests that determine whether a taxpayer qualifies for the foreign earned income exclusion.

The pilot flew airplanes for Korean Air Lines (KAL) in 2011 and 2012. KAL considered him to be stationed in Incheon, Korea, which meant that Incheon was the airport he most frequently operated from. (more…)

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Categories: International Business Issues
Tags: bona fide residence, foreign earned income exclusion, international tax, Sochurek standard, tax home,
August 18, 2017

Definition of ‘Willful’ Is Unclear in FBAR Case in District Court

The U.S. District Court for the Eastern District of Pennsylvania denied summary judgment to both the IRS and a taxpayer with regard to his Swiss bank account. In the case, the IRS slapped the maximum penalty on the taxpayer for willfully failing to file a Report of Foreign Bank and Financial Accounts (FBAR).

The Court concluded that whether the taxpayer willfully failed to submit an accurate FBAR was an inherently factual question and that genuine disputes existed as to what the taxpayer knew about his reporting requirements and when he knew it.

(more…)

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Categories: International Business Issues
Tags: District Court, FBAR, international tax, Rob Trammell, tax returns,
August 16, 2017

OECD Moves to Limit Treaty Shopping

The Organization for Economic Co-operation and Development (OECD) released the key document that forms the basis of the peer review of the base erosion and profit shifting (BEPS) minimum standard on preventing inappropriate treaty shopping.

(more…)

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Categories: International Business Issues
Tags: Action 6, BEPS, Inclusive Framework, international tax, OECD, Organisation for Economic Co-operation and Development, treaty shopping,
August 2, 2017

Returned Tax Payments Were Refunds for Purposes of Foreign Tax Credit

The Tax Court ruled that certain payments received by a U.S. citizen working abroad from a foreign taxing authority were in fact refunds under the Internal Revenue Code.

Facts of the case

A U.S. citizen worked for the London office of Goldman Sachs and received employee compensation from which United Kingdom income tax was withheld. The taxpayer filed both U.S. and UK income tax returns for each year at issue. On a timely filed U.S. return for each year, she claimed a foreign tax credit in an amount equivalent to the UK tax withheld by her employer.

(more…)

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Categories: International Business Issues
Tags: foreign tax credit, Internal Revenue Code, international tax, returned tax payments,
May 31, 2017

How the U.S. Stacks up Against Foreign Competition and Corporate Tax Rates

The Congressional Budget Office (CBO) updated its report comparing the corporate income tax rates of the U.S. and other G20 countries.

The report examines not only the statutory top rates, of which the U.S. has the highest, but also provides information on the average and effective corporate tax rates, including insight as to how certain corporate decision-making is influenced by each. (more…)

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Categories: International Business Issues
Tags: Corporate Tax Rate, income tax rates, international tax, Michael McAndrews, President Trump,
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