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Budget Resolution Tax Provisions Contain Reprisal Tax Aimed at O.E.C.D. Proposals

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Budget Resolution Tax Provisions Contain Reprisal Tax Aimed at O.E.C.D. Proposals

On Friday, May 22, 2025, the U.S. House of Representatives adopted a budget resolution containing provisions that would impose increased taxes for persons based in countries that impose taxes found to discriminate against U.S. companies or their subsidiaries. If a country is determined to have “crossed the line,” residents of that country and their subsidiaries would face up to a 20% increase in withholding taxes on U.S. source investment income, income taxes on income that is effectively connected to the conduct of a U.S. trade or business, and certain other taxes. In his article, Stanley C. Ruchelman lists the foreign persons that will be subject to the reprisal tax, the tax regimes that are expressly targeted, the implementation schedule, and the taxes that will be increased.

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The §245A D.R.D. Meets the I.R.S.: Only Loper Bright Might Provide Relief

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The §245A D.R.D. Meets the I.R.S.: Only Loper Bright Might Provide Relief

Alan Greenspan is an American economist who served as the 13th chairman of the U.S. Federal Reserve from 1987 to 2006. He is known to have authored the following quote: “I know you think you understand what you thought I said but I’m not sure you realize that what you heard is not what I meant.” This statement epitomizes the conflict between the I.R.S. and various taxpayers regarding the application of Code §245A to the computation of C.F.C. income for purposes of Subpart F. Code §245A allows a domestic corporation to reduce taxable income by means of a dividends received deduction (“D.R.D.”) for the foreign-source portion of a dividend received by a U.S. corporation from a ≥10%-owned foreign corporation. Treas. Reg. §1.952-2 requires that a C.F.C. must calculate its income for U.S. income tax purposes by using U.S. rules as though it were a domestic corporation. Finally, Code §245A(e)(2) expressly provides a rule for C.F.C.’s receiving hybrid dividends from a lower-tier subsidiary. The D.R.D. is expressly disallowed at the level of a C.F.C. receiving the hybrid dividend. Nonetheless, in C.C.A. 202436010, the I.R.S. enunciated its view that a C.F.C. could not claim a benefit from the D.R.D. Rather, the benefit is first claimed by a domestic corporation when it recognizes income. So, which position is correct? In his article, Wooyoung Lee discusses the law, the regulations, the C.C.A., and cases addressing the deference that should be given by courts to the views of an administrative agency when evaluating the interpretation of a statute.

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Double Dutch: A Unique Approach in the Netherlands to U.S. L.L.C.’s Owned by U.S. Trusts

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Double Dutch: A Unique Approach in the Netherlands to U.S. L.L.C.’s Owned by U.S. Trusts

Trusts play a crucial role in U.S. estate planning. However, the use of a U.S. trust in an international context can create a multitude of challenges. The Dutch tax system’s approach to the taxation of trusts poses a number of concerns for U.S. trust fund beneficiaries living in the Netherlands benefitting from a testamentary trust. In the not unusual set of circumstance where an L.L.C. is established to hold investments of the trust, double taxation without the benefit of foreign tax credits is more than a theoretical problem. In her article, Mignon de Wilde, a partner and tax adviser in the Amsterdam office of Arcagna Tax Consultants and Notaries, cautions that only two solutions seem to be available. Advance tax planning during the lifetime of the settlor is the preferred alternative. Seeking Competent Authority relief under the Netherlands-U.S. Income Tax Treaty is available in principle. Favorable authority exists in the Netherlands, less so in the U.S.

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Are Holding Companies so 20th Century? A Look at Recent Developments in France

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Are Holding Companies so 20th Century? A Look at Recent Developments in France

Historically, holding companies have been used by corporate groups to place certain assets in certain locations to serve certain markets. They have also been used by individuals for wealth management and estate planning purposes. Today, holding companies located in an E.U. Member State or elsewhere are likely to face challenges when interacting with group members in France. Claims of treaty benefits are regularly challenged by French tax authorities. Whether the benefit is a tax treaty related withholding tax exemption on dividends or royalties or access to E.U. Directives such as the Parent-Subsidiary Directive, French tax authorities regularly challenge claims of an entitlement to the anticipated tax benefit. In her article, Emilie Lecomte, a Partner in the Tax Department of SQUAIR Law Firm, Paris, explains the risks faced by a foreign holding company that expects to benefit from favorable tax regimes for French-source income. Recent cases are discussed

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Tax Neutral or Caught in the Net? The World of Luxembourg Securitization Vehicles

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Tax Neutral or Caught in the Net? The World of Luxembourg Securitization Vehicles

The Luxembourg securitization vehicle (“Lux S.V.”), governed by the Securitization Law of 22 March 2004 remains a core pillar in structured finance and asset repackaging across Europe. As Luxembourg continues to implement E.U. directives such as A.T.A.D. I & II, D.A.C.6., and the O.E.C.D.’s B.E.P.S. action plan – Including Pillar Two and substance-driven anti-abuse frameworks – Lux S.V.’s face growing scrutiny. In their article, James T. O’Neal, Co-head of Maples and Calder (Luxembourg)‘s Tax Team, and Naima Bouzago Ouali, an Associate in Maples and Calder (Luxembourg)’s Tax Team, analyze how A.T.A.D. I & II’s Hybrid Mismatch Rules and A.T.A.D. I’s Interest Limitation Rules can be successfully navigated in the appropriate set of facts, thereby preserving their tax neutrality. Hybrid mismatch rules, investor payment tax treatment, and interest limitation rules that include the single company worldwide group exception are addressed.

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Prenuptial Agreements in the Context of an International Couple – Views from France and Spain

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Prenuptial Agreements in the Context of an International Couple – Views from France and Spain

Choosing a life partner is a complex decision. It becomes even more complex if the parties are not of the same nationality or if one of the parties moves to another country in order to avoid a two-city lifestyle. Many couples in France and Spain are unaware that, in the absence of a duly executed prenuptial agreement, the rules that determine how property will be distributed if the marriage is dissolved due to divorce or death will be the rules of the first country of residence after their marriage becomes official. Conversely, other couples believe that they are protected by the provisions of a prenuptial agreement signed in France or in Spain that generally provides for separation of property. However, the contract may not be followed in common law countries such as England and United States, meaning that each spouse is entitled to one-half of the marital assets. All this and more are explained in the article authored by Delphine Eskenazi, a Partner of Libra Avocats, Paris, and Maria Valentin, of Counsel to Libra Avocats, Paris. The takeaway is that life can be about more than tax planning.

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New Belgian Federal Government Announces Significant New Tax Measures

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New Belgian Federal Government Announces Significant New Tax Measures

The most recent general election in Belgium took place in June, but a new government was not sworn in until February, when the five-member coalition government agreed to a federal government agreement, a document of 200 pages in a single language containing many significant tax measures. Tax items addressed include, inter alia, (i) the replacement of a dividends received deduction by a simple exclusion, (ii) the modernization of the group contribution regime, the Belgian equivalent of group relief, making it more flexible and simpler to coordinate, (iii) the simplification of the investment deduction rules, the Belgian equivalent of investment credits in the U.S., (iv) the adoption of accelerated depreciation rules for CAPEX investments, (v) the adoption of a “solidarity contribution,” a 10% capital gains tax on financial assets held by individuals, allowing a basis step-up to current value as of the effective date of the tax, (vi) simplification of disallowed expense rules, and (vii) the adoption of carried interest rules for managers of investment funds. Werner Heyvaert, a senior international tax lawyer based in Brussels and a partner at AKD Benelux Law Firm explains these and other tax provisions. The takeaway is that Belgium is modernizing its tax rules.

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French Budget 2025 – Significant Provisions Affecting Individuals

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French Budget 2025 – Significant Provisions Affecting Individuals

The French Budget for 2025 reflects significant political instability reflecting two factors. The first is the fragmentation of the French Parliament after elections last summer. The second is a significant budgetary deficit. It was adopted with limited debate on February 14, 2025, after an earlier Finance Bill was rejected in December 2024, resulting in a change of government. Key measures to note include, inter alia, (i) Introduction of enhanced social contribution on high incomes, with an instalment that was due in December 2025, (ii) reform of the tax and social security treatment of management packages, including those already in existence, (iii) an overhaul of the tax framework for the B.S.P.C.E., one of the main employee shareholding tools, (iv) tax incentives for gifts received to acquire a new primary residence or to finance energy-efficient renovations, (v) Introduction of a special reassessment period in cases of misreported tax residence, (vi) clarification on the supremacy of treaty law in determining tax residency, (vii) additional social contributions for companies with revenues over a €1 billion, and (vii) a tax on capital reductions linked to share buybacks by companies with revenues exceeding a €1 billion. Philippe Stebler, the founder of Stebler Avocats, Paris, explains these and other provisions. The takeaway is that, if you thought French taxes in 2024 could not get any higher, you were mistaken.

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N.H.R. 2.0 in Portugal – a Better Regime for Skilled Workers and Their Employers

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N.H.R. 2.0 in Portugal – a Better Regime for Skilled Workers and Their Employers

Following the unexpected termination of the N.H.R. regime to newly arrived residents as of December 31, 2023, a new regime was offered, known as N.H.R. 2.0. The new regime attracts working individuals, investors and international groups planning on setting up Portuguese subsidiaries. N.H.R. 2.0 is now fully operational for those within scope of eligible activities, which is very wide. João Luís Araújo, a Partner in the Porto Office of Telles, and Sara Brito Cardoso, an Associate in the Porto Office of Telles, explain why N.H.R. 2.0 provides a better result for newly arrived skilled personnel and their employers. The takeaway is that Portugal is very much open for business and keen to attract talent, companies, and investment.

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French Tax Investigations Target H.N.W. Individuals

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French Tax Investigations Target H.N.W. Individuals

Tax evasion and avoidance have been significant concerns for governments worldwide, and France is no exception. In recent years, the French government has ramped up efforts to investigate high net worth individuals (“H.N.W.I.’s”) suspected of tax evasion, particularly as global scrutiny increases over the wealthy’s financial practices. France, with its robust tax system and a tradition of enforcing tax compliance, utilizes a range of investigative techniques to target H.N.W.I.’s. The article delves into how French tax investigations are carried out, focusing on methods, legal framework, and high-profile cases involving the wealthy. Sophie Borenstein, a partner of attorneys Klein Wenner, Paris, explains all. The takeaway is that the footprint of an H.N.W.I. is large and is being looked at in detail by the tax authorities.

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When Baskets Go Beyond Weaving – Understanding Foreign Tax Credit Baskets Under the Look-Through Rules

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When Baskets Go Beyond Weaving – Understanding Foreign Tax Credit Baskets Under the Look-Through Rules

While the word “basket” may trigger a mental image of a bicycle with a daisy basket that is a gift in early childhood, the term has a totally different connotation in the tax world. It denotes “foreign tax credit baskets” to an international tax geek in the U.S. The foreign tax credit provisions are among the most complicated areas of U.S. and become further complicated when a “U.S. Shareholder” of a Controlled Foreign Corporation includes income in one year but receives distributions in another. In their article, Neha Rastogi and Stanley C. Ruchelman explore the labyrinth of the foreign tax credit provisions that are designed to ensure that (i) income and (ii) related foreign taxes are reported in the same foreign tax credit basket. The takeaway is that, if the exercise is not computed properly, double taxation of income is sure to arise.

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New B.O.I. Regulations Under the C.T.A. are Issued by FinCEN

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New B.O.I. Regulations Under the C.T.A. are Issued by FinCEN

On Friday, March 21, 2025, the Financial Crimes Enforcement Network (“FinCEN”) submitted an interim final rule narrowing the existing beneficial ownership information (“B.O.I.”) reporting requirements under the Corporate Transparency Act (the “C.T.A.”). Entities previously defined as “domestic reporting companies” now are exempted from the reporting requirements. They do not have to report B.O.I. to FinCEN, or update or correct B.O.I. previously reported to FinCEN. With limited exceptions, the interim final rule does not change the existing filing requirement for foreign reporting companies. As a service to our readers, particularly those based outside the U.S., Insights has published significant excerpts from the preamble of the FinCEN interim regulations, with footnotes deleted. The preamble explains the change in rules, and does so in plain English.

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Another Taxpayer Allowed Treaty-Based Foreign Tax Credit Against N.I.I.T.

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Another Taxpayer Allowed Treaty-Based Foreign Tax Credit Against N.I.I.T.

The application of the foreign tax credit to the net investment income tax (“N.I.I.T.”) has been a recurring battle in courtrooms in recent years. In the most recent installment, the taxpayer in Bruyea v. U.S. prevailed in claiming a foreign tax credit under the Canada-U.S. income tax treaty. The N.I.I.T. is a 3.8% tax on certain items of passive income that is levied on U.S. individuals whose gross income is above certain thresholds. The position of the I.R.S. is that the foreign tax credit cannot be claimed to reduce the amount of N.I.I.T. that is due. In the facts of the case, the Canada-U.S. Income Tax Treaty clearly provided that the foreign tax credit applies to all U.S. taxes based on income whether in existence at the time the treaty came into force and effect or afterwards. Wooyoung Lee explains all.

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Insights Volume 12 Number 1: Updates & Other Tidbits

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Insights Volume 12 Number 1: Updates & Other Tidbits

This month, Tidbits returns to Insights. One tidbit addresses the on-again / off-again status of the Corporate Transparency Act. A second tidbit addresses a rare win for an individual who challenged taxation at the state level.

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Corporate Matters: Ending a Business Relationship – A Time Consuming and Drawn-Out Process

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Corporate Matters: Ending a Business Relationship – A Time Consuming and Drawn-Out Process

Often the realities of a business arrangement can be quite different than a plan conceived between optimistic partners. Market conditions can change, and commitments made can become difficult to deliver, sometimes through no lack of trying. As business attorneys, we have seen situations where one partner brings technical and production know-how, and another brings the promise of market introductions and sales contacts. In an article based on many years of practice, Simon Prisk advises that breaking up a business partnership can be difficult and emotional. If the organizational documents are simply taken from a form book, the partners will face a time of uncertainty as off-the-shelf documents rarely provide helpful solutions.

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Reading Tea Leaves – What May Be In Store For Tax Legislation

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Reading Tea Leaves – What May Be In Store For Tax Legislation

President Trump made several tax proposals in the course of his winning campaign for the White House. In her article, Nina Krauthamer lists proposals made by the President and the likely responses of Democrats in Congress followed by a general analysis of various positions. What becomes clear is that when political parties are in power, proposals to spend money are plentiful. Yet, when they are voted out of office, the same parties object to every tax cut as ultimately being profligate. 

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Hooray for New Math: Is It Really a Simplified Transfer Pricing Approach for 2025?

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Hooray for New Math: Is It Really a Simplified Transfer Pricing Approach for 2025?

As promised before the end of 2024, the I.R.S. has outlined its approach to the codification of Amount B, a component of the O.E.C.D. Pillar One approach to controlled distribution transactions of tangible property. Notice 2025-04 allows taxpayers to elect to use the streamlined, simplified approach (“S.S.A.”) for corporate tax years beginning on or after January 1, 2025.  If a valid election is made, the I.R.S. will consider the S.S.A. to be the best method under the Treas. Reg. §1.482-1(c). While touted as a method that brings simplicity to transfer pricing, in practice simplicity is achieved at the price of certain important concepts fundamental to the arm’s length standard codified in tax law. Michael Peggs does yeoman’s work in taking the reader through the steps to be followed, the conditions to be applied, and the variable values that pop out of the S.S.A. machine. To readers who have given transfer pricing advice over the years, Amount B may seems to be based on concepts of the command economy of bygone days rather than market transactions.

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Dynasty in the Details – U.S. Estate Planning Considerations for Global Families

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Dynasty in the Details – U.S. Estate Planning Considerations for Global Families

In the United States, creating “dynasty trusts” has become common planning tool for many estate planners. A dynasty trust is a trust that may continue for generations. If done well, it provides a myriad of benefits for strategic income, estate and gift tax planning, creditor protection and ensuring family inheritance. Nonetheless, life choices have a way of interfering with preset plans. A beneficiary moves to a different country. A trustee who is a U.S. resident, but not a citizen decides to move home. A foreign parent of a U.S. spouse wishes to make a gift to the next generation of beneficiaries. These seemingly trivial details could unintentionally cause severe tax and other planning consequences in the U.S. and abroad. Based on her experience, Allison Dolzani leads the reader through a cycle of cross border issues that must be addressed as life progresses.

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U.S. Tax Planning for Israeli Investment in U.S. Real Estate: A Tale of Scylla and Charybdis

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U.S. Tax Planning for Israeli Investment in U.S. Real Estate: A Tale of Scylla and Charybdis

U.S. real estate remains a favored asset class for foreign investment by Israeli residents. With the Israeli shekel currently being relatively strong against the U.S. dollar, investments in the U.S. have become even more attractive. And while personal use property in cities like Miami and New York City remain a privilege of high net worth individuals, fractional investments in multifamily residential and commercial property have become available to many investors. Whether investing in high end property or in development projects, hidden traps exist. Knowing where they pop up, the ways to best resolve issues in one country without creating problems in the other, and how to manage client expectations while maneuvering between the “Scylla” and “Charybdis” of the laws of each country requires the experience of an Odysseus. Galia Antebi takes a deep dive into the planning alternatives that are available, identifying the pluses and minuses of each alternative.

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B.V.I.: Beneficial Ownership Reporting and Consultation on Access to Beneficial Ownership Information

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B.V.I.: Beneficial Ownership Reporting and Consultation on Access to Beneficial Ownership Information

As of January 2, 2025, a new beneficial ownership reporting regime has come into effect. This regime replaces the previous beneficial ownership reporting framework. New entities must identify and file adequate, accurate, and up-to-date beneficial ownership reports within 30 days of registration Existing Entities have until Julyl 2, 2025, to comply. On January 17, 2025, the B.V.I. Government launched a consultation on a draft policy regarding rights of access to the Register. In line with its commitments, access to information will be granted to persons demonstrating “legitimate interest” to information. The period for responses to the Consultation closes on February 28, 2025. Joshua Mangeot, a partner in the B.V.I. office of Harneys, explains how the new system addresses major issues, including the definition of a “legitimate interest” and circumstances in which disclosure will be viewed as posing a disproportionate serious risk for affected U.B.O.’s.

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