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A New Tax Regime for C.F.C.’s: Who Is G.I.L.T.I.?

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A New Tax Regime for C.F.C.’s: Who Is G.I.L.T.I.?

The T.C.J.A. introduces a new minimum tax regime applicable to controlled foreign corporations (“C.F.C.’s”).  It also provides tax benefits for incomefrom “intangibles” used to exploit foreign markets.  The former is known as G.I.L.T.I. and the latter is known as F.D.I.I.  Together, G.I.L.T.I. and F.D.I.I. change the dynamics of cross-border taxation and can be seen as an incentive to supply foreign markets with goods and services produced in the U.S.  Both provisions reflect a view that only two value drivers exist in business: (i) hard assets (such as property, plant, and equipment) and (ii) intangible property.  In a detailed set of Q&A’s, Elizabeth V. Zanet and Stanley C. Ruchelman look at the ins and outs of the new provisions.

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Tax 101: Virtual Currency – What Is It? And How Is It Taxed?

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Tax 101: Virtual Currency – What Is It? And How Is It Taxed?

With the recent launch of Bitcoin futures trading, this once obscure asset class may soon become a mainstream investment.  Alev Fanny Karaman delves into the details of virtual currency in the U.S. context.  She explains the blockchain computations that make Bitcoin and other cryptocurrencies attractive to investors and the U.S. tax treatment and reporting obligations of virtual currency holders.

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Austrian Guidance on Taxation of Bitcoin and Other Cryptocurrencies

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Austrian Guidance on Taxation of Bitcoin and Other Cryptocurrencies

While wild fluctuations in the value of Bitcoin are reported daily in global press and social media, the Austrian Ministry of Finance recently summarized its views on the tax consequences of investing in this relatively new asset class.  Niklas J.R.M. Schmidt and Eva Stadler of Wolf Theiss, Vienna, explain the real-life consequences of the transacting in virtual currencies.

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The U.K. Trust Registration Service: Impact for Trustees

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The U.K. Trust Registration Service: Impact for Trustees

The past few years have seen a steep increase in trust reporting obligations in the context of F.A.T.C.A. and the Common Reporting Standard.  Trustees must come to grips with a new set of record keeping and disclosure obligations introduced by the U.K. Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, which came into force from June 26, 2017.  Jennifer Smithson and Isobel Morton of Macfarlanes LLP, London, explain the wide-ranging effect of the regulations and the dividing line between non-U.K. trustees that fall inside the regime and those who are outside.

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Insights Vol. 4 No. 11: Updates & Other Tidbits

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Insights Vol. 4 No. 11: Updates & Other Tidbits

This month, Sheryl Shah and Nina Krauthamer look briefly at two I.R.S. actions: (i) the roll out of a long-awaited passport denial program and (ii) the end of favorable rulings on certain worthless stock deductions and spinoffs.

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Art and the Estate Part II – Nonresidents

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Art and the Estate Part II – Nonresidents

Foreign persons owning artwork physically located in the U.S. must be mindful of special income, estate, and gift taxes associated with that ownership.   In the second of a series, Rusudan Shervashidze and Nina Krauthamer look at issues such as use tax, which is the U.S. equivalent of a reverse charge of V.A.T., estate tax, and gift tax.

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Employment Tax Basics and Paths to Compliance

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Employment Tax Basics and Paths to Compliance

 When a company expands across a border, it faces a complex web of employment-related taxes.  Penalties for failure to properly comply with these rules can be severe.  Fanny Karaman looks at the U.S. rules that are applicable to the payment of wages and bonuses, the penalties that can be imposed on compliance failures, and the procedures that are available to cure errors.  The rules are not straightforward, guidance is often minimal, and an experienced advisor is extremely valuable.

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Texas District Court on Anti-Inversion Legislation – One Down but Not Out

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Texas District Court on Anti-Inversion Legislation – One Down but Not Out

The final months of the Obama administration saw the hurried adoption of temporary regulations in an attempt to extend its tax policy into the current administration.  However, reliance on temporary regulations that are adopted without a public comment period may have been misguided.  In October, a U.S. District Court struck down a provision under temporary anti-inversion regulations for violating the required notice and comment period under the Administrative Procedure Act.  Beate Erwin and Sheryl Shah explain the web of issues involved in the decision.

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Anti-Inversion Rules Are Not Just for Mega-Mergers – Private Client Advisors Take Note

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Anti-Inversion Rules Are Not Just for Mega-Mergers – Private Client Advisors Take Note

The U.S. has rules that attack inversion transactions, wherein U.S.-based multinationals effectively move tax residence to low-tax jurisdictions.  If successful, these moves allow for tax-free repatriation of offshore profits to the inverted parent company based outside the U.S.  However, the scope of the anti-inversion rules is broad and can also affect non-citizen, nonresident individuals who directly own shares of private U.S. corporations.  Attempts to place those shares under a foreign holding company as an estate planning tool may find that the exercise is all for naught once the anti-inversion rules are applied.  Elizabeth V. Zanet, Galia Antebi, and Stanley C. Ruchelman discuss the hidden reach of the anti-inversion rules to private structures.

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O.E.C.D. Releases Mutual Agreement Procedure Peer Review Report for the U.S.

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O.E.C.D. Releases Mutual Agreement Procedure Peer Review Report for the U.S.

The B.E.P.S. Action 14 Report, Making Dispute Resolution Mechanisms More Effective, acknowledged that the actions to counter B.E.P.S. must be complemented with effective dispute resolution mechanisms.  Participating countries agreed to have their compliance with the minimum standard reviewed by their peers.  The U.S. is among the first few countries that have been reviewed.  Neha Rastogi and Michael Peggs summarize the M.A.P. report card issued for the U.S. 

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The Sharing Economy Part 2: Governments Strike Back

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The Sharing Economy Part 2: Governments Strike Back

The sharing economy uses digital platforms to connect suppliers willing to provide services or use of assets with consumers.  Think of Uber and Airbnb.  These multinationals are structured to channel profits to low-tax jurisdictions.  As with Google and Microsoft, tax authorities have begun to challenge these business models.  In part two of this series, Fanny Karaman and Beate Erwin explain how these business models are being challenged.

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The New Transparency Register in Germany

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The New Transparency Register in Germany

October 1, 2017, was the due date for entering information on Germany’s beneficial owner registry.  The register brings transparency to all sorts of entities, including private law foundations and trusts, as data will be open to public inspection from December 27, 2017.  Dr. Andreas Richter of P+P Pöllath + Partners, Berlin, sheds light on the registration requirements.

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Brazil 2017: Tax Developments for Business Transactions

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Brazil 2017: Tax Developments for Business Transactions

In Brazil, the year 2017 saw many important developments regarding cross-border and intrastate business transactions.  These developments focus on the implemention of various B.E.P.S. actions, the categorization of software transactions, and subjecting certain intrastate transactions to competing levels of state and municipal tax, all done the Brazilian way by emphasizing gross basis taxation on consumption payments.  Erika Tukiama, Rogério Gaspari Coelho, and Nathália Fraga of Machado Associados, São Paulo, provide guidance on these developments.

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Insights Vol. 4 No. 10: Updates & Other Tidbits

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Insights Vol. 4 No. 10: Updates & Other Tidbits

This month, Sheryl Shah, Neha Rastogi, and Nina Krauthamer look briefly at certain timely issues: (i) Swiss nexus requirements to be eligible for treaty benefits, (ii) the impact of technology tax reporting and information sharing, (iii) an I.R.S. pilot program expanding the scope of letter rulings to Code §355 stock and security distributions, and (iv) recent application of the 2016 anti-inversion regulations issued by the Obama Administration under Code §7874.

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Treasury Turns Back the Clock on 2016 Tax Regulations

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Treasury Turns Back the Clock on 2016 Tax Regulations

On October 4, the “other shoe dropped” on eight regulations issued by the Obama administration in 2016 and January 2017.  These eight measures, which were first identified in an interim report to the president as unnecessary, unduly complex, excessively burdensome, or failing to provide clarity and useful guidance, will be withdrawn, revoked, or modified.  Stanley C. Ruchelman, Sheryl Shah, and Neha Rastogi identify the targets and explain the plans of the Treasury Department.

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Art and the Estate: Why Planning is Important, Part I – U.S. Taxpayers

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Art and the Estate: Why Planning is Important, Part I – U.S. Taxpayers

Taxpayers holding valuable works of art receive different tax treatment, depending on the characterization of the individual.  Is the individual the artist, a dealer, an investor, or a collector?  Rusudan Shervashidze and Nina Krauthamer examine various planning tools available, focusing mostly on the collector.

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When Does an Aged Account Receivable Give Rise to a Deemed Repatriation?

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When Does an Aged Account Receivable Give Rise to a Deemed Repatriation?

One form of taxation under Subpart F is an “investment in U.S. Property.”  The law treats the investment as a form of taxable repatriation of earnings.  Under certain circumstances, aged accounts receivable may be seen as a form of taxable investment in U.S. property.  Most U.S. tax advisers look to a 60-day rule under which the account receivable is treated as a loan if not settled by the last day of the second month following a sale.  However, that is a safe harbor.  I.R.S. private letter rulings and Tax Court cases have addressed fact patterns in which the account receivable remains open for a much longer time.  Some taxpayers win and others lose.  Elizabeth V. Zanet and Stanley C. Ruchelman explain.

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Swiss Federal Council Opens Consultation Process on Tax Proposal 17

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Swiss Federal Council Opens Consultation Process on Tax Proposal 17

When Swiss voters rejected the Corporate Tax Reform Act III (“C.T.R. III”) in a referendum on February 12, 2017, Swiss tax reform was not derailed, only delayed.  Events that took place in September have moved the process forward. Existing cantonal tax privileges will be abolished, as agreed with the E.U., and replaced by mandatory introduction of a patent box regime in all cantons, voluntary introduction of additional deductions for research and development (“R&D”) expense, and a step-up in basis of hidden reserves created under the old tax regimes or before immigration to Switzerland.  Reto Heuberger, Stefan Oesterhelt, and Martin Schenk of Homburger AG, Zurich, explain the most important aspects of these and other aspects of T.P. 17.

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O.E.C.D. Receives Public Comments on Proposed Changes to the Model Tax Convention

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O.E.C.D. Receives Public Comments on Proposed Changes to the Model Tax Convention

In August, the O.E.C.D. released public comments on proposed changes to the Model Tax Convention.  Beate Erwin and Stanley C. Ruchelman examines the suggestions received by the O.E.C.D. and provides observations on the interplay between the O.E.C.D. proposed changes and existing U.S. approaches to these issues.  Areas covered include whether competent authority agreements can define undefined terms thereby removing the interpretation from local courts, whether a limitation on benefits (“L.O.B.”) clause or a principle purpose test (“P.P.T.”) is the better approach to limit treaty shopping, and whether a home that is leased to others can be a permanent home for purposes of applying the residence tiebreaker provision in a treaty. 

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The Sharing Economy Part 1: New Business Models + Traditional Tax Rules Don’t Mix

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The Sharing Economy Part 1: New Business Models + Traditional Tax Rules Don’t Mix

The current international tax system was established on principles dating back to the first half of the 19th century, when a nation’s retail economy consisted mostly of brick-and-mortar stores.  As the purchase of services and goods was gradually dematerialized and internet giants such as Google or Microsoft appeared, governments struggled adapt tax rules to keep up with new business models.  Now, governments around the world have shifted their focus to a relatively new part of the digital economy called the “sharing economy.”  Fanny Karaman and Beate Erwin look at recent tax developments in the world of Airbnb and Uber.

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