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…)
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.
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.
The IRS Large Business and International (LB&I) division has released its widely anticipated new audit strategy known as “campaigns.”
The LB&I is moving toward issue-based examinations. “This approach makes use of IRS knowledge and deploys the right resources to address those issues,” the IRS stated.
In a further indication of the IRS’s continued focus on international tax issues, the tax agency updated an International Practice Unit (IPU) summarizing the calculation and recapture of foreign and domestic losses and their impact on the foreign tax credit.
In an International Practice Unit (IPU), the IRS outlined the steps its auditors should take when issuing a recordkeeping and reporting summons to a U.S. corporation that is 25% owned by a foreign shareholder.
The tax agency also elaborated on what to do when the U.S. corporation doesn’t substantially comply with the summons.
With Donald Trump firmly in office as the U.S. president and a Republican majority in Congress, it’s widely expected that 2017 will bring significant tax reform.
The Congressional Research Service (CRS) recently published a report highlighting several considerations that lawmakers may take into account in tax reform discussions.
Although tax reform often seems like a moving target, congressional Republicans and President Trump have each set out a number of ideas about how to modify the U.S. international corporate system.
Reports indicate that the President and congressional Republicans have begun tax reform discussions. However, what will ultimately be introduced as proposed laws remains to be seen. (more…)
Moscow enacted a law ordering certain foreign companies engaged in online sales of electronic content in Russia to pay the value-added tax (VAT). (Foreign providers of electronically supplied services.)
The law, informally known as the “Google Tax,” stipulates the introduction of an 18% VAT for foreign companies providing services to Russians in electronic form. Foreign companies will need to register on the Russian tax service’s special electronic index and pay taxes on an equal footing with Russian companies operating in the same market segment. Before the law was passed by the Russian Parliament, no VAT was imposed on electronic services supplied by foreign companies. This tax break wasn’t available to Russian companies.
If a foreign company has a Russian division or a contractor in the country, it will be responsible for paying the tax irrespective of whether it has an appropriate agreement with foreign corporations or not.
If the buyer carries out activities on the territory of the Russian Federation and acquires the “services in electronic form,” the place of supply of these services is the territory of the Russian Federation. Delivery of physical goods ordered over the internet is not subject to the VAT. (more…)
The IRS issued final regs that affect U.S. taxpayers who transfer property to foreign corporations in nonrecognition transactions.
The regs are aimed at preventing taxpayers from avoiding recognition of gains or income attributable to high-value intangible property by claiming that a large share of the transferred property’s value is foreign goodwill or going concern value.
The regulations contain the following changes to Section 367 of the Internal Revenue Code. They: (more…)