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.
International Tax ArticlesNext
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.
More on Potential Tax Reform: A Primer From Congress’s Think Tank the Congressional Research Service
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…)
Final IRS Regs Kill Foreign Goodwill Exception and Limit Active Trade or Business Exception for Outbound Transfers of Intangibles
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…)
India’s Ministry of Finance recently amended service tax rules related to online information and database access or retrieval (OIDAR) services.
The government said it is imposing a 15% tax on downloads and purchases of digital goods from offshore retailers.
Here are some key changes, effective from December 1, 2016: (more…)
President-elect Donald Trump’s election win moves Apple, Pfizer, Microsoft and other big U.S. corporations much closer than they have been in years to winning a big tax break on approximately $2.6 trillion in foreign profits.
This article explains the mechanics of taxing foreign-source income, the 2004 repatriation holiday, proposals for another holiday, and the prospects of enacting a repatriation holiday under the Republican-controlled government.
U.S. corporations are taxed on a worldwide basis, meaning that they’re generally taxed on income that’s earned within and outside of the U.S. subject to certain exceptions; income earned outside the U.S. isn’t subject to U.S. tax until it’s brought back to the United States — in other words, until it’s repatriated. At that point, it’s included in the corporation’s gross income. To mitigate double taxation, U.S. corporations may elect to either deduct or claim a foreign tax credit for the foreign income taxes that were paid or accrued on the foreign earnings.
Most developed countries, on the other hand, have adopted a territorial tax system. Such countries generally only tax income derived from sources within their borders. (more…)
The IRS said it plans to modify the regs relating to certain triangular reorganizations involving foreign corporations.
Specifically, in Notice 2016-73, the tax agency announced it will alter the rules affecting the treatment of property used to acquire parent stock or securities in triangular reorganizations involving one or more foreign corporations, as well as describe the consequences to persons that receive parent stock or securities in those reorganizations. (more…)
Her Majesty’s Revenue and Customs (HMRC) warned in a tax guidance that overseas online retailers must pay VAT on items sold in the UK.
The tax agency said VAT liability applies to overseas sellers supplying goods already in the UK at the point of sale to consumers through an online marketplace. It also applies to:
- UK VAT representatives for overseas sellers, and
- Online marketplaces allowing sales by overseas sellers.