04 November 2016 U.S. International Tax This Week for the Week Ending November 4 Ernst & Young's U.S. International Tax This Week newsletter for the week ending November 4 is now available. Prepared by Ernst & Young's International Tax Services group, this weekly update summarizes important news, cases, and other developments in international taxation. —————————————————————————
Spotlight The IRS and Treasury this week issued a package of Subpart F regulations that includes final regulations (TD 9792) under Section 956 that adopt — with some changes — the temporary and proposed regulations published in September 2015. Temporary and proposed regulations published on the same date under Section 954 are also adopted as final, with no changes. The government further issued proposed regulations under Section 956 (REG-114734-16) outlining how to determine the amount of US property that a CFC holds through a partnership. Like the temporary regulations, the final regulations provide that the Section 956 anti-abuse rule may apply when a foreign corporation or partnership controlled by a CFC is funded by any means (not just by capital contributions or debt). The tax attributes (for example E&P and foreign taxes) associated with the Section 956 inclusion will be taken into account when determining the application of the anti-abuse rule. Examples have been added illustrating the regulations' scope. Final regulations have been issued regarding the treatment of partnerships for purposes of Section 956. Generally, a CFC partner in a partnership is treated as holding its attributable share of partnership property. A partner's attributable share is determined in accordance with the partner's liquidation value percentage. In certain cases, a partner's attributable share of property is determined solely by reference to the partner's special allocation with respect to the property in the absence of a principal purpose of avoiding Section 956. The accompanying proposed regulations provide exceptions to the rules regarding special allocations for controlled partnerships. The final regulations also provide rules regarding the application of Section 956 when a CFC funds a foreign partnership (or guarantees a borrowing by a foreign partnership) if the foreign partnership makes a distribution to a US partner that is related to the funding CFC. Also, like the temporary regulations, the final regulations provide that a CFC is not a developer for purposes of the active rents and royalties exception to the foreign personal holding company income rules unless its own employees and officers perform the required functions. Employees may also be located in more than one country in order to meet the active rents and royalties exceptions. In addition, a CFC cannot meet the active rents and royalty exception through cost-sharing arrangements, and cost-sharing payments will not be treated as active leasing or licensing expenses for purposes of determining whether an organization is "substantial." The final regulations generally apply to CFCs whose tax years end on or after the date the regulations are published in the Federal Register. Effective dates may vary, however, for specific provisions in the regulations. An ITS Alert is pending. In transfer pricing news, the IRS has agreed to exchange summaries of unilateral Advance Pricing Agreements (APAs) in accordance with the recommendations under OECD BEPS Action 5, "Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance." While the IRS has already agreed to the exchange of rulings issued on or after 1 April 2016, the IRS has also agreed that, before 31 December 2016, it will exchange rulings (such as unilateral APAs) issued after 1 January 2010 and still in effect as of 1 January 2014. The IRS is not expected to reach out to taxpayers to review the taxpayer's particular APA summary information. Therefore it is recommended that taxpayers be proactive and contact the IRS themselves as soon as possible to request a copy of their APA summary information in order to express any concerns regarding such information before it is exchanged with foreign jurisdictions. An ITS Alert provides details. |
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Tax Insights —————————————————————————
Upcoming Webcasts International tax talk quarterly series with the EY Global Tax Desk Network
With its January 1, 2019 effective date, the European Union's Anti-Tax Avoidance Directive might not appear as an urgent priority for US and other multinational companies with European operations. Complying with the directive, however, will require extensive changes to companies' information gathering and reporting systems. During this Thought Center Webcast, Ernst & Young professionals will discuss how the directive's provisions may affect multinational companies doing business in Europe. BEPS impact on the Private Equity Fund industry
During this Thought Center Webcast, Ernst & Young professionals will discuss: (i) the impact of BEPS Action 6 ("Treaty relief") on the design of fund and investment structures; (ii) changes to financing and underwriting of investments under BEPS Action 2 ("Hybrid mismatches"), Action 6 ("Treaty relief") and Action 4 ("Interest deductions"); and (iii) tax reporting and documentation requirements under BEPS Action 8-10 ("Transfer pricing documentation") and Action 13 ("Country-by-Country reporting"). Global VAT compliance: Is your company keeping up with the recent changes and trends?
The global tax policy and tax administration landscape is shifting at a quick pace. Staying up to date and compliant with these changes is a significant challenge for any multinational company. During this Thought Center Webcast, a panel of EY indirect tax professionals will address the potential risk areas companies are facing with respect to VAT compliance obligations and share leading practices around optimization of VAT compliance processes. BEPS impact on the automotive industry
Now that the OECD has formally released 15 recommendations for reorganizing global tax laws, attention is turning to the governments that are putting them into practice. In order to understand the impact of BEPS, OEMs and suppliers will need to reassess their organizations from top to bottom, including where they work, business and operational models, supply chain networks and IT systems. During this Thought Center Webcast, Ernst & Young professionals will evaluate BEPS implications for automotive multinational businesses. —————————————————————————
Recent Tax Alerts —————————————————————————
IRS Weekly Wrap-Up Internal Revenue Bulletin | | 2016-44 | Internal Revenue Bulletin of October 31, 2016 |
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Additional Resources Ernst & Young Client Portal, the leading source for news, analysis, and reference materials for corporate tax professionals, has a variety of content of interest to international tax practitioners, including: — International Tax Online Reference Service. Key information about, and important tax developments from, 56 foreign jurisdictions, including information on tax rates, interest rates and penalties, withholding, and filing dates. — EY/Passport. EY/Passport is your guide to planning ventures in the global economy, offering a wealth of tax and business knowledge on more than 150 countries. Because the matters covered herein are complicated, U.S. International Tax This Week should not be regarded as offering a complete explanation and should not be used for making decisions. Any decision concerning matters covered herein should be reviewed with a qualified tax advisor. Document ID: 2016-1868 | 
