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Who’s Got the B.E.A.T.? A Playbook for Determining Applicable Taxpayers and Payments

   Who’s Got the B.E.A.T.? A Playbook for Determining Applicable Taxpayers and Payments

Code §59A imposes tax on U.S. corporations with substantial gross receipts when base erosion payments to related entities significantly reduce regular corporate income tax. The new tax is known as the base erosion and anti-abuse tax (“B.E.A.T.”). In late December 2019, the I.R.S. proposed regulations that provide guidance for affected taxpayers. The proposed regulations provide a playbook for making required computations including (i) the gross receipts test to determine if the taxpayer meets the $500 million gross receipts requirement, (ii) the base erosion percentage test, (iii) how to apply the tests when a taxpayer is member of an Aggregate Group having members with differing year-ends, (iv) various computations to determine whether a non-cash transaction is considered to be a payment to a related party outside the U.S. or is outside the scope of the B.E.A.T., and (v) other exceptions from the B.E.A.T. In the first of a multi-part series, Rusudan Shervashidze and Stanley C. Ruchelman tell all.

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Insights Vol. 6 No. 2: Updates & Other Tidbits

Insights Vol. 6 No. 2: Updates & Other Tidbits

This month, Neha Rastogi and Nina Krauthamer look at interesting items of tax news from around the world: A new foreign investment law could ease the U.S.-China trade war, and another illegal State Aid investigation has been announced — this time over Dutch tax rulings issued to Nike and Converse.

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New Developments on the E.U. V.A.T. Regime of Holding Companies

New Developments on the E.U. V.A.T. Regime of Holding Companies

Like state and local tax in the U.S., where tax exposure can be underestimated by many corporate tax planners, the V.A.T. rules in the E.U. contain many pitfalls. This is especially true when it comes to recovery of V.A.T. input taxes by holding companies. A corporate tax adviser may presume that all V.A.T. input taxes paid by a holding company are recoverable. Yet, despite abundant jurisprudence, debate continues regarding the V.A.T. recovery rights of holding companies. The starting point in the analysis is easy to state: Holding companies that actively manage subsidiaries can recover V.A.T., while holding companies that passively hold shares cannot. The problem is in the application of the theory, where the line between active and passive behavior is blurred by seemingly inconsistent decisions. Bruno Gasparotto and Claire Schmitt of Arendt & Medernach, Luxembourg, explain the rules and how they have been applied by the C.J.E.U.

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2019 Welcomes New Finnish Interest Deduction Limitations

2019 Welcomes New Finnish Interest Deduction Limitations

Changes to the Finnish interest barrier regime have come into effect in 2019. They have been expected since 2016, when the E.U. released its Anti-Tax Avoidance Directive (“A.T.A.D.”), which sets forth the minimum standards for interest deduction restrictions within the E.U. The limitations affect E.B.I.T.D.A.-based rules (i.e., addressing earnings before interest, tax, depreciation, and amortization) adopted in 2014, which include the specific interest barrier rule affecting the deductibility of intra-group interest payments. Antti Lehtimaja and Sanna Lindqvist of Krogerus Ltd., Helsinki, explain the key elements of the new restrictions, including some considerations regarding the impact on Finnish taxpayers and investments in Finland.

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Additional Guidance on New Opportunity Zone Funds

Additional Guidance on New Opportunity Zone Funds

Days after Galia Antebi and Nina Krauthamer published “The Opportunity Zone Tax Benefit – How Does It Work and Can Foreign Investors Benefit,” the I.R.S. issued guidance in proposed regulations. Now, in a follow-up article, Galia Antebi and Nina Krauthamer focus on the new guidance as it relates to the deferral election and the Qualified Opportunity Zone Fund. In particular, they address (i) which taxpayers are eligible to make the deferral election, (ii) the gains eligible for deferral, (iii) the measurement of the 180-day limitation, (iv) the tax attributes of deferred gains, and (v) the effect of an expiration of a qualifying zone status on the step-up in basis to fair market value after ten years.

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