Wealth & Risk Management Blog

William Byrnes (Texas A&M) tax & compliance articles

Tax Facts about Taxable and Non-Taxable Income

Posted by William Byrnes on February 16, 2016


All income is taxable unless a law specifically says it isn’t. Here are some basic rules you should know to help you file the 2015 – 1040 tax return due April 15, 2016.

  • Taxable income.  Taxable income includes money you earn, like wages and tips. It also includes bartering, an exchange of property or services. The fair market value of property or services received is normally taxable.

Some types of income are not taxable except under certain conditions, including:

  • Life insurance.  Proceeds paid to you upon the death of an insured person are usually not taxable. However, if you redeem a life insurance policy for cash, any amount you get that is more than the cost of the policy is taxable.
  • Qualified scholarship.  In most cases, income from a scholarship is not taxable. This includes amounts used for certain costs, such as tuition and required books. On the other hand, amounts you use for room and board are taxable.
  • Other income tax refunds.  State or local income tax refunds may be taxable. You should receive a Form 1099-G from the agency that paid you. They may have sent the form by mail or electronically. Contact them to find out how to get the form. Report any taxable refund you got even if you did not receive Form 1099-G.

Here are some items that are usually not taxable:

  • Gifts and inheritances
  • Child support payments
  • Welfare benefits
  • Damage awards for physical injury or sickness
  • Cash rebates from a dealer or manufacturer for an item you buy
  • Reimbursements for qualified adoption expenses

Tax Facts Online is the premier practical, useful, actionable, and affordable reference on the taxation of insurance, employee benefits, investments, small tax-facts-online
business and individuals. This advisory service provides expert guidance on hundreds of the most frequently asked client questions concerning their most important tax issues.

Many ongoing, significant developments have affected tax law and, consequently, tax advice and strategies. Tax Facts Online is the only source that is reviewed daily and updated regularly by our expert editors.

In addition to completely current content not available anywhere else, Tax Facts Online gives you exclusive access to:

  • Robust search capabilities that enable you to locate detailed answers—fast
  • Time-saving calculators, tables and graphs
  • A copy/paste capability that speeds the production of presentations and enables you to easily incorporate Tax Facts content into your workPlus, the recent addition of current news, case studies, commentary and competitive intelligence serves our customers well as the only tax reference that a non-professional tax expert will ever need.

Tax Facts Online Core Content

Tax Facts on Insurance provides definitive answers to your clients’ most important tax-related insurance questions, while offering insightful analysis and illustrative examples. Numerous planning points direct you to the most recent and important insurance solutions.

Tax Facts on Employee Benefits provides current in-depth coverage of important client-related employee benefits questions. Employee benefits affect most everyone2015_tf_triple_combo_cover-m, and your clients must know how to deal with often complex issues and problems. Tax Facts on Employee Benefits provides the answers in a direct, concise, and practical manner.

Tax Facts on Investments provides clear, detailed answers to your difficult tax questions concerning investments. You must know what investments best suit your clients from a tax standpoint. You will discover questions that directly provide insightful answers, comparison of investment choices, as well as how investments have changed in recent years.

Tax Facts on Individuals & Small Business focuses exclusively on what individuals and small buisnesses need to know to maximize opportunities under today’s often complex tax rules.  It is the essential tax reference for financial advisors, & planners; insurance professionals; CPAs; attorneys; and other practitioners advising small businesses and individuals.

  • Charles Calello Enterprise/Group Inquiries 201-526-1259 Email Me
  • Customer Service 800-543-0874 8am – 6pm ET Monday – Thursday 8am – 5pm ET Friday Email Customer Service

Posted in Taxation, Uncategorized | Tagged: , , | 2 Comments »

Can Employers Obtain Tax Advantages Complying with Obama Care?

Posted by William Byrnes on February 15, 2016


It has been several years since President Obama pushed the Patient Protection and Affordable Care Act of 2010 (the “ACA”), which is a health care overhaul aimed at providing millions of American with health insurance, through Congress. Read the article here.

According to the White House, the goal of the ACA is to improve health security by: (1) creating comprehensive health insurance reform that provides more ways to hold insurance companies accountable, (2) lowering health care costs, (3) guaranteeing more health care options, and (4) enhancing the overall quality of the American health care system.

As many American, corporations and small businesses are aware, the gateway to an improved healthcare system commenced October 1, 2013 with the implementation of the exchange system. However, some may not be aware of the potential tax benefits awaiting employers. This highlight will specifically address the tax incentives that are available to both large and small businesses.

Read the Mertens Highlight here.

Posted in Tax Policy, Uncategorized | Leave a Comment »

OECD Common Reporting Self Certification Tax Forms Now Available

Posted by William Byrnes on February 10, 2016


hat tip: Prof. Haydon Perryman: OECD Self-certification forms

The Business and Industry Advisory Committee to the OECD (BIAC) has drafted the following self-certification forms –  

Financial institutions should consult their advisers to ensure their CRS-related operations, including the self-certification forms collected from accountholders, comply with all applicable national laws. 

Guide to FATCA Compliance (New 2016 Edition includes) over 1,500 pages of analysis of the FATCA and CRS compliance challenges,  73 chapters by FATCA and CRS contributingOECDexperts from over 30 countries.  Besides in-depth, practical analysis, the 2016 edition includes examples, charts, time lines, links to source documents, and compliance analysis pursuant to the IGA and local regulations for many U.S. trading partners and financial centers.   The Lexis Guide to FATCA Compliance, designed from interviews with over 100 financial institutions and professional firms, is a primary reference source for financial institutions and service providers, advisors and government departments.  The 19 newest chapters include by example an in-depth analysis of designing a FATCA internal policy that is compliant with the initial two-year soft enforcement initiative, designing an equivalent form to the W-8, reporting accounts, reporting payments, operational specificity of the mechanisms of information capture, management and exchange by firms and between countries, insights as to the application of FATCA, CRS, and the IGAs within BRIC, SEA and European country chapters.

Posted in FATCA, Uncategorized | Tagged: , , | Leave a Comment »

New Tax Strategy Articles

Posted by William Byrnes on January 26, 2016


Exploring the Extent of the Like-Kind Nonrecognition Treatment (and its Potential Demise) | Mertens – Law of Federal Income Tax – Developments & Highlights

May a Proposed Expansion of Master Limited Partnerships’ (MLP) Tax Benefits for “Renewable” Energy Lead to America’s Energy Independence?| Mertens – Law of Federal Income Tax – Developments & Highlights

Tax Considerations of Foreign Individual Investors in U.S. Real Estate Investment |
Mertens – Law of Federal Income Tax – Developments & Highlights

Has the Individual Retirement Account Lost its Luster? Recent Scrutiny of Rollovers and Non-Spousal Inheritance Rights May Dull the Ira for Retirement and Estate Planning | Mertens – Law of Federal Income Tax – Developments & Highlights

Can Employers Obtain Tax Advantages Complying with the Affordable Care Act? |
Mertens – Law of Federal Income Taxation – Development & Highlights

Posted in Uncategorized | Leave a Comment »

Texas A&M Law Seeks to Recruit 2 Additional Law Librarians

Posted by William Byrnes on January 22, 2016


Texas A&M University School of Law seeks to expand our team of law library faculty by recruiting two dynamic and innovative law librarians who can successfully advance library TAMU-Law-lockup-stack-SQUAREinitiatives in one of two specialties.  Faculty rank and salary are commensurate with qualifications and experience; each position may be hired as either long-term contract or tenure-track.  Excellent benefits include a health plan and paid life insurance; several retirement plans including TIAA-CREF; paid holidays and vacation; no state or local income tax. Funding is available for professional travel and development activities.

Texas A&M University, founded in 1876, is one of only 17 triple federally designations “Land, Sea, and Space grant” research universities, and is one of only 62 US and Canadian lead research universities of the Association of American Universities.  Texas A&M University is the sixth largest university in the nation.  The signature Aggie Spirit captures and embodies the university’s traditions and core values: Excellence, Integrity, Leadership, Loyalty, Respect, and Selfless Service.  The university has an enrollment of more than 55,000 students and 2,800 instructional faculty, and over 6,000 foreign students and scholars.  Based on Vision 2020, Texas A&M’s goal is to be ranked among the top 10 public universities.

International Law Reference: Provides expertise in international law research and augments the Public Services Department’s ability to provide increased research and reference services to faculty and students. This position also aids collection development by identifying appropriate international materials to acquire in both paper and electronic formats.

Electronic Services: Leads not only the marketing of the faculty’s scholarship but also advertises the library’s electronic databases and instructs in using these databases. Also participates in reference services to the law school community. This position is the point person for overseeing the law school’s institutional repository of scholarship and its components.

Applications:  Applications received by February 23, 2016 will be given first consideration. The letter of application should identify the position for which you are applying and address the responsibilities, qualifications, and experiences listed for the position. Please submit application letter, vita, and the names, email addresses and telephone numbers of three professional references.  References will not be contacted without contacting the candidate first and verifying permission.  Send nominations and applications via email to Professor Joan Stringfellow, Chair of the Law Library Search Committee at libappointments@law.tamu.edu

Posted in Uncategorized | Leave a Comment »

Tax Facts for Choosing the Right Tax Filing Status

Posted by William Byrnes on December 14, 2015


Using the correct filing status is very important when filing a tax return. The right status affects how much is owed in taxes. It may even affect whether a tax return must be filed.

When choosing a filing status, keep in mind that marital status on Dec. 31 is the status for the entire year.  If more than one filing status applies, choose the one that will result in the lowest tax.

Note for same-sex married couples that new rules apply if legally married in a state or foreign country that recognizes same-sex marriage.  The same sex spouses generally must use a married filing status on the 2015 federal tax return and forward.  This is true even if the same sex spouses now live in a state or foreign country that does not recognize same-sex marriage.

Here is a list of the five filing statuses to help you choose:

1. Single.  This status normally applies if you aren’t married or are divorced or legally separated under state law.

2. Married Filing Jointly.  A married couple can file one tax return together. If your spouse died in 2013, you usually can still file a joint return for that year.

3. Married Filing Separately.  A married couple can choose to file two separate tax returns instead of one joint return. This status may be to your benefit if it results in less tax. You can also use it if you want to be responsible only for your own tax.

4. Head of Household.  This status normally applies if you are not married. You also must have paid more than half the cost of keeping up a home for yourself and a qualifying person. Some people choose this status by mistake. Be sure to check all the rules before you file.

5. Qualifying Widow(er) with Dependent Child.  If your spouse died during 2014 or 2015 and you have a dependent child, this status may apply. Certain other conditions also apply.

Tax Facts Online is the premier practical, useful, actionable, and affordable reference on the taxation of insurance, employee benefits, investments, small tax-facts-online
business and individuals. This advisory service provides expert guidance on hundreds of the most frequently asked client questions concerning their most important tax issues.

Many ongoing, significant developments have affected tax law and, consequently, tax advice and strategies. Tax Facts Online is the only source that is reviewed daily and updated regularly by our expert editors.

In addition to completely current content not available anywhere else, Tax Facts Online gives you exclusive access to:

  • Robust search capabilities that enable you to locate detailed answers—fast
  • Time-saving calculators, tables and graphs
  • A copy/paste capability that speeds the production of presentations and enables you to easily incorporate Tax Facts content into your workPlus, the recent addition of current news, case studies, commentary and competitive intelligence serves our customers well as the only tax reference that a non-professional tax expert will ever need.

Tax Facts Online Core Content

Tax Facts on Insurance provides definitive answers to your clients’ most important tax-related insurance questions, while offering insightful analysis and illustrative examples. Numerous planning points direct you to the most recent and important insurance solutions.

Tax Facts on Employee Benefits provides current in-depth coverage of important client-related employee benefits questions. Employee benefits affect most2015_tf_triple_combo_cover-meveryone, and your clients must know how to deal with often complex issues and problems. Tax Facts on Employee Benefits provides the answers in a direct, concise, and practical manner.

Tax Facts on Investments provides clear, detailed answers to your difficult tax questions concerning investments. You must know what investments best suit your clients from a tax standpoint. You will discover questions that directly provide insightful answers, comparison of investment choices, as well as how investments have changed in recent years.

Tax Facts on Individuals & Small Business focuses exclusively on what individuals and small buisnesses need to know to maximize opportunities under today’s often complex tax rules.  It is the essential tax reference for financial advisors, & planners; insurance professionals; CPAs; attorneys; and other practitioners advising small businesses and individuals.

  • Charles Calello Enterprise/Group Inquiries 201-526-1259 Email Me
  • Customer Service 800-543-0874 8am – 6pm ET Monday – Thursday 8am – 5pm ET Friday Email Customer Service

Posted in Compliance, Taxation | Tagged: , , , | Leave a Comment »

Deducting Moving Expenses

Posted by William Byrnes on December 9, 2015


If you move because of your job, you may be able to deduct the cost of the move on your tax return. You may be able to deduct your costs if you move to start a new job or to work at the same job in a new location. The IRS offers the following tips about moving expenses and your tax return.

In order to deduct moving expenses, your move must meet three requirements:

1. The move must closely relate to the start of work.  Generally, you can consider moving expenses within one year of the date you start work at a new job location. Additional rules apply to this requirement.

2. Your move must meet the distance test.  Your new main job location must be at least 50 miles farther from your old home than your previous job location. For example, if your old job was three miles from your old home, your new job must be at least 53 miles from your old home.

3. You must meet the time test.  After the move, you must work full-time at your new job for at least 39 weeks the first year. If you’re self-employed, you must meet this test and work full-time for a total of at least 78 weeks during the first two years at the new job site. If your income tax return is due before you’ve met this test, you can still deduct moving expenses if you expect to meet it.

If you can claim this deduction, here are a few more tips from the IRS:

  • Travel.  You can deduct transportation and lodging expenses for yourself and household members while moving from your old home to your new home.  BUT you cannot deduct your travel meal costs.
  • Household goods and utilities.  You can deduct the cost of packing, crating and shipping your things. You may be able to include the cost of storing and insuring these items while in transit. You can deduct the cost of connecting or disconnecting utilities.
  • Nondeductible expenses.  You cannot deduct as moving expenses any part of the purchase price of your new home, the cost of selling a home or the cost of entering into or breaking a lease. See Publication 521 for a complete list.
  • Reimbursed expenses.  If your employer later pays you for the cost of a move that you deducted on your tax return, you may need to include the payment as income. You report any taxable amount on your tax return in the year you get the payment.
  • Address Change.  When you move, be sure to update your address with the IRS and the U.S. Post Office. To notify the IRS file Form 8822, Change of Address.

Tax Facts Online is the premier practical, useful, actionable, and affordable reference on the taxation of insurance, employee benefits, investments, small tax-facts-online
business and individuals. This advisory service provides expert guidance on hundreds of the most frequently asked client questions concerning their most important tax issues.

Many ongoing, significant developments have affected tax law and, consequently, tax advice and strategies. Tax Facts Online is the only source that is reviewed daily and updated regularly by our expert editors.

In addition to completely current content not available anywhere else, Tax Facts Online gives you exclusive access to:

  • Robust search capabilities that enable you to locate detailed answers—fast
  • Time-saving calculators, tables and graphs
  • A copy/paste capability that speeds the production of presentations and enables you to easily incorporate Tax Facts content into your workPlus, the recent addition of current news, case studies, commentary and competitive intelligence serves our customers well as the only tax reference that a non-professional tax expert will ever need.

Tax Facts Online Core Content

Tax Facts on Insurance provides definitive answers to your clients’ most important tax-related insurance questions, while offering insightful analysis and illustrative examples. Numerous planning points direct you to the most recent and important insurance solutions.

Tax Facts on Employee Benefits provides current in-depth coverage of important client-related employee benefits questions. Employee benefits affect most2015_tf_triple_combo_cover-meveryone, and your clients must know how to deal with often complex issues and problems. Tax Facts on Employee Benefits provides the answers in a direct, concise, and practical manner.

Tax Facts on Investments provides clear, detailed answers to your difficult tax questions concerning investments. You must know what investments best suit your clients from a tax standpoint. You will discover questions that directly provide insightful answers, comparison of investment choices, as well as how investments have changed in recent years.

Tax Facts on Individuals & Small Business focuses exclusively on what individuals and small buisnesses need to know to maximize opportunities under today’s often complex tax rules.  It is the essential tax reference for financial advisors, & planners; insurance professionals; CPAs; attorneys; and other practitioners advising small businesses and individuals.

  • Charles Calello Enterprise/Group Inquiries 201-526-1259 Email Me
  • Customer Service 800-543-0874 8am – 6pm ET Monday – Thursday 8am – 5pm ET Friday Email Customer Service

Posted in Taxation, Uncategorized | Tagged: , | Leave a Comment »

Texas A&M University Law School Lowers Tuition 15%, Boosts Scholarship Budget by 65%, Improves Student to Faculty ratio of 11:1

Posted by William Byrnes on December 9, 2015


Texas A&M University has announced it will lower its full-time resident tuition and fees for the School of Law by more than 15 percent, beginning with the fall 2016 semester.

In embracing its public mission Texas A&M regularly reviews its tuition and fees to ensure affordability and quality. With the acquisition of the Texas A&M University School of TAMU-Law-lockup-stack-SQUARE (1)Law (TAMU Law) in 2013, recent evaluation of the tuition and fees has resulted in an announcement to lower full-time resident tuition and fees by 15.39% percent from $33,092 to $28,000, effective academic year 2016-2017.

“This is an important part of our transition of the law school from the private to public institution model,” Texas A&M University President Michael K. Young said. “By lowering tuition, we are working to ensure our students have much broader opportunities for serving the public at all levels once they graduate. This is an important part of our land-grant mission that benefits not just our students as individuals, but each of us across society.”

This adjustment will also benefit currently enrolled students. Beginning with the fall 2016 semester, Texas A&M Law will guarantee a locked tuition rate for entering and continuing law students. This annual tuition rate will be locked in for four academic years from the first date of enrollment. After the expiration of four academic years, students will pay the current year’s rates each term until completion; this is consistent with Texas A&M University’s approach and commitment to students enrolled in other academic programs including all undergraduate and select graduate degrees.

“Texas A&M University School of Law is transforming legal education in Texas while effectively managing resources entrusted by students and the state,” said John Sharp, Chancellor of the Texas A&M University System. “This decision is further evidence of how Texas A&M seeks to deliver the best education at the best value to parents, students and taxpayers.”

The move is the latest in a series of transitions demonstrating Texas A&M’s commitment to enhancing legal education for Texas.

“As the newest public law school in Texas, our focus is on adding value for our students and preparing them to lead. We embrace our University commitment to transforming the destinies of Texans by connecting with first-generation law students across the state, particularly from underserved communities,” Dean Andrew P. Morrisssaid. “This approach helps our state by building a legal profession that will make Texas even better.”

The school has boosted the overall scholarship budget by 65% and launched new programs. These include five clinics (Trademarks, Patents, Entrepreneurship, Wills & Estates, andInnocence), as well as a Professionalism & Leadership Program building on the Aggie Core Values of Excellence, Integrity, Leadership, Loyalty, Respect, and Selfless Service. TAMU Law has also reduced its entering class size and added 12 new faculty resulting in a dramatically improved student to faculty ratio of 11.1:1.

Posted in Uncategorized | Leave a Comment »

Starbucks’ Transfer Pricing & The EU Commission Decision

Posted by William Byrnes on December 7, 2015


Starbucks Manufacturing BV (SMBV), based in the Netherlands, is the only coffee roasting company in the Starbucks group in Europe. It sells and distributes roasted coffee and coffee-related products (e.g. cups, packaged food, pastries) to Starbucks outlets in Europe, the Middle East and Africa.

The EU Commission’s decision challenges the outcome of the Advanced Pricing Agreement (APA) between the Netherlands Tax Authority (Tax Authority) and SMBV. The Tax Authority respondedEU Commission that within the Dutch tax system profit is taxed where value is created. The Tax Authority concluded an Advance Pricing Agreement (APA) with SMBV which includes an arm’s length business remuneration for the roasting of coffee beans.  The Tax Authority collects taxes on profit made by SMBV for roasting coffee beans. Because the intellectual property rights of Starbucks are not located in The Netherlands, the royalties for the use of these cannot be taxed in The Netherlands.

The Tax Authority, acting in accordance with the international OECD framework for transfer pricing, agreed with Starbucks that it may apply the Transactional Net Margin Method (TNMM) to determine an arm’s length result to attach to its Netherlands based activities. The TNMM requires that members of multinational enterprises be treated as independently operating national enterprises: profits are taxed wherever value is created, attaching to the specific enterprise of the activity creating the value.

In its decision, the Commission establishes a unique interpretation the OECD guidelines concerning the choice and application of the globally accepted transfer pricing methods.  Based upon its interpretation, the Commission’s alleges that Starbucks should have applied the Comparable Uncontrolled Price (CUP) method to each activity of each enterprise instead of the TNMM. However, the Netherlands Tax Authority does not agree that the CUP method should have been applied in the Starbucks case in this fashion because of the absence of suitably similar, comparable data to the situation of Starbucks’ operations and value creating activities and assets. Starbucks graph

After its misapplication of CUP to Starbucks’ operations, the Commission then creates a new criterion for profit calculation.  While the methodologies and underlying criteria of application are not a closed universe for determining an arm’s length price, the Commission’s new criterion is incompatible with domestic regulations and the OECD framework. The Tax Authority will contend that the Commission does not adequately understand the nature and context of the value add of Starbucks’ myriad of activities.

The Commission states in its Starbucks decision that the arm’s length principle it has applied is not the same as the arm’s length principle stemming from Section 9 of the OECD treaty. The Commission’s application of a variant will cause confusion and uncertainty among tax authority of member states, among trade partners’ tax authorities, and the underlying enterprises subject to their audit authority.  For a tax authority, such uncertainty relates to the question of what rules are to be applied and in which fashion. And for enterprises, such uncertainly relates to the proper application of rules in rulings. So as to obtain more clarity and jurisprudence in this matter, the Dutch Cabinet has appealed the Commission’s Starbucks decision.

The Commission alleges that the methodological choices in the transfer pricing report provided by the tax adviser for Starbucks to the Netherlands Tax Authority, and agreed to in the APA between Starbucks and the Tax Authority, are not a reliable approach to a market result and thereby do not fulfil the arm’s length principle. The Commission alleges that the transactional net margin method (TNMM) is not the most appropriate method to forecast a taxable profit because the OECD guidelines and the Transfer Pricing Decree show a preference for the Comparable Uncontrolled Price Method (CUP).  The Commission determined that if the CUP had been applied to Starbucks’ coffee roasting of SMBV, the taxable profit would be substantially higher.

Most Appropriate Method?

The OECD adopted in 2010 a “most appropriate method” concept, similar to the U.S. “best method rule”. The most appropriate method concept replaced the previous OECD rule that transactional profit methods, profit split and TNMM were only to be leveraged as methods of last resort (with TNMM being in last spot). Regarding the “most appropriate method” the 2010 Guidelines states:

[T]he selection process should take account of the respective strengths and weaknesses of the OECD recognised methods; the appropriateness of the method considered in view of the nature of the controlled transaction, determined in particular through a functional analysis; the availability of reliable information (in particular on uncontrolled comparables) needed to apply the selected method and/or other methods; and the degree of comparability between controlled and uncontrolled transactions, including the reliability of comparability adjustments that may be needed to eliminate material differences between them. No one method is suitable in every possible situation, nor is it necessary to prove that a particular method is not suitable under the circumstances.

However, in spite of the foregoing, the 2010 Guidelines indicate a preference for traditional methods in applying the most appropriate method rule:

[W]here, taking account of the criteria described at paragraph 2.2, a traditional transaction method and a transactional profit method can be applied in an equally reliable manner, the traditional transaction method is preferable to the transactional profit method.

Comparability Analysis?

The 2010 OECD Guidelines for comparability analysis contains nine, non-linear, steps.

Step 1: Determination of years to be covered.

Step 2: Broad-based analysis of the taxpayer’s circumstances.

Step 3: Understanding the controlled transaction(s) under examination, based in particular on a functional analysis, in order to choose the tested party (where needed), the most appropriate transfer pricing method to the circumstances of the case, the financial indicator that will be tested (in the case of a transactional profit method), and to identify the significant comparability factors that should be taken into account.

Step 4: Review of existing internal comparables, if any.

Step 5: Determination of available sources of information on external comparables where such external comparables are needed taking into account their relative reliability.

Step 6: Selection of the most appropriate transfer pricing method and, depending on the method, determination of the relevant financial indicator (e.g. determination of the relevant net profit indicator in case of a transactional net margin method).

Step 7: Identification of potential comparables: determining the key characteristics to be met by any uncontrolled transaction in order to be regarded as potentially comparable, based on the relevant factors identified in Step 3 and in accordance with the comparability factors ….

Step 8: Determination of and making comparability adjustments where appropriate.

Step 9: Interpretation and use of data collected, determination of the arm’s length remuneration.

What Is the Value of Starbucks Roasting “Know How”?

The Commission alleges that the payment of royalties by SMBV to the Starbucks UK subsidiary (Alki) owning the “know-how” intellectual property rights does not provide a correct representation of the value of the intellectual property rights and therefore cannot be deemed to be arm’s length. This incorrect representation led Starbucks to exaggerate the value attaching to its coffee bean roasting “know-how”, in turn leading to an excessive royalty payment.

The royalty payment is based upon an “adjustment variable”, the level of which is determined by the accounting profits of SMBV subtracting the compensation agreed in the APA in the form of a fixed mark-up on the operational costs of SMBV.  The APA does contain a fixed method of being able to assess the arm’s length nature of the level of the royalties.

The Commission alleges that, on the basis of its application of an arm’s length transaction price via a CUP test, SMBV would not have been willing to pay any royalty for know-how.  The Commission’s allegation is based upon a comparison of Starbuck’s agreements for roasting coffee with other coffee roasters worldwide. Thus, Alki should not have been paid any royalties. Moreover, the Commission contends that the royalties, paid over for many years, cannot be arm’s length because SMBV does not appear to gain any business advantage from the use of the intellectual property in the area of roasting coffee.  An independent company, argues the Commission, will not pay for a license if it is unable to earn back the royalties paid.

Additionally, the Commission contends that payment for royalties does not represent a payment for Alki taking upon itself the risks of SMBV. The Commission dismissed the Tax Authority argument that Alki bore the economic risk of SMBV’s loss of stock (wastage).  The Commission points to Alki’s lack of  employees as justification that Alki’s capacity is too limited to actually bear such risk.  Finally, the Commission dismissed Alki’s payment for technology to Starbucks US as a justification of its royalty payment from SMBV.

What Is the Value of Starbucks Sourcing of Green Beans?

The Commission alleges that SMBV overpays Starbucks coffee sourcing operation in Switzerland (SCTC) for acquisition of ‘green beans’, which are then roasted by SMBV and distributed to Starbucks’ various national operations.  The purchase price of green beans paid by SMBV to SCTC is abnormally high and therefore does not comply with the arm’s-length principle.

The Commission alleges that Starbucks did not investigate an arm’s length relationship for which the transactions between SCTC and SMBV, being the purchase and delivery of green coffee beans.  Secondly, the Commission did not accept Starbucks’ underlying grounds for the justification of the significant increase from 2011 of the mark-up in the costs for the green beans supplied by SCTC.  Starbucks’ contends that SCTC’s activities became increasingly important from 2011 partly due to the evolving “C.A.F.E. Practices” program (e.g. ‘fair-trade’).  Comparing the costs of similar fair-trade programs, the figures provided by Starbucks in connection with its C.A.F.E. Practices program, argues the Commission, are problematic both in terms of consistency as well as the arm’s length nature. The Commission contends that the Tax Authorities should have rejected the additional deduction from the accounting profits. Moreover, the increased mark-up can be connected directly to the losses incurred by SMBV’s coffee roasting activities since 2010, which highlights the non arm’s length relationship of this mark-up.

Least complex function

The Commission posits a secondary argument that Starbucks misapplied the TNMM to its supply chain.  Firstly, the Commission alleges that Starbucks incorrectly categorized SMBV as the “least complex function” of the Starbucks’ value added supply chain, basically as a contract manufacturer, in comparison with Starbucks’ UK subsidiary that owns the manufacturing and processing “know how”.  This misapplication of the TNMM led Starbucks to incorrectly led Starbucks to select SMBV as the subsidiary to be the “tested party”.  Secondly, the Commission posits that when SMBV is compared to other market participants in the coffee trade sector, SMBV incorrectly applied two upward adjustments to its cost base.  Consequently, Starbucks inappropriately limited its Netherlands taxable basis.

Determining the least complex function takes place prior to the application of the TNMM as transfer price method. In order to determine the entity with the least complex function, a function comparison must be made. The outcome of the function comparison indicates an entity, to which the transfer price method can be applied in the most reliable manner and for which the most reliable comparison points can be found.

In its coffee roasting function, the Commission contends that SMBV does not only carry out routine activities. SMBV conducts market research reflected by its payments for market research.  Also, SMBV holds significant intellectual property reflected by the amortisation of intangible assets in its accounts.  Moreover, SMBV performs an important resale function. A routine producer is not involved in such activities. On the other hand, Alki activities are very limited. Alki does not have employees and it thus operates with limited capacity.  The Commission contends that the financial capacity of Alki is not the total financial capacity of the worldwide Starbucks Group.

StarbStarbucks_Coffee_Logo.svgucks Reaction?

Starbucks released a statement: “The dispute between the European Commission and the Netherlands as to which OECD rules we and others should follow will require us to pay about €20m to €30m on top of the $3 billion in global taxes we have already paid over the seven years in question (2008-2014).  Starbucks complies with all OECD rules, guidelines and laws and supports its tax reform process. Starbucks has paid an average global effective tax rate of roughly 33 percent, well above the 18.5 percent average rate paid by other large US companies.

Netherlands Government Reaction?

In October the European Commission has decided that the Netherlands provided State aid to Starbucks Manufacturing. The Commission decision is placed in the context of the fight against tax avoidance by multinationals.  The Dutch government greatly values its practice of offering certainty in advance. The Dutch practice is lawful and compliant with the international system of the OECD. However the European Commission’s verdict in the Starbucks case deviates from national law and the OECD’s system. In the end this will cause a lot of uncertainty about how to enforce regulations.

In order to get certainty and case law on the application of certainty in advance by way of rulings, the government appeals the Commission decision in the Starbucks case. The government is of the opinion that the Commission does not convincingly demonstrate that the Tax Authority deviated from the statutory provisions. It follows that there is no State aid involved.

AmCham Reaction?

OECD rules for setting internal transfer prices constitute an international standard whereby double taxation is prevented. These rules require that each transaction is assessed on the basis of the most appropriate transfer pricing method. The TNMM method can be used to establish an at arm’s length remuneration for production activities, such as those of the Dutch coffee roaster Starbucks Manufacturing BV, and is widely used internationally.

“This decision is a staggering,” says Arjan van der Linde, Chairman of AmCham’s Tax Committee and fiscal spokesman for AmCham. “By disregarding OECD rules, the European Commission is creating considerable uncertainty about the tax implications for foreign investment in the Netherlands. This has a direct effect on new investments and future employment. Uncertainty about such a fundamental component of an investment is unacceptable for many companies,” predicts Van der Linde.

He also highlights the expertise of the Dutch tax authorities, “The Dutch tax authorities have years of experience with the application of OECD rules and work thorough and carefully in considering transfer pricing requests.  A separate APA practice exists.  In addition, the Dutch tax authorities are consistent in their approach, with all sorts of coordination groups looking over the shoulder of the inspector. This thorough approach cannot simply be cast aside.”

 

Professor William Byrnes’ Reaction?

Starbucks represents the first salvo by the EU Commission to establish that it has the authority, under a State Aid premise, to step into the shoes of the national revenue authority and re-allocate profits of an enterprise according to the EU Commission’s interpretation and analysis of the arm’s length concept.  American attorneys will appreciate that this is a Marbury v Madison moment of Adam’s Federalists v. Jefferson’s Anti-Federalist.

The EU Commission’s finding of a range of two – three Euro million annual difference from its own assessment of the scenario versus the assessment of the Dutch revenue authority likely reflects its trepidation to venture into the area of interposing its own judgement call for that of a sovereign national revenue authority’s arm’s length determination, especially one memorialized in an advance pricing agreement (APA) with a taxpayer.  The trepidation probably results from several causes, including weaknesses of the EU Commission’s choice and implementation of an arm’s length methodology, justification thereof, and even more so, from the geopolitical ramifications of its decision.

The trepidation is exemplified by the very low adjustments the EU Commission found, after its nearly year of investigation.  The adjustments are enough to be noticed by the EU state authorities and the companies, but de minimis in the context of corporate annual profits, corporate profit accumulation over time (e.g. perpetual deferral), corporate tax reserves, and de minimis in the context of revenue collection for either The Netherlands or Luxembourg.

Starbucks’ potential 30 million Euro re-capture tax bill by The Netherlands (EU Commission required), dating back to accumulation from 2008, will, assuming the tax bill stands after Starbucks’ appeal and after Starbucks’ challenge the decision up through the EU Court Of Justice, be offset by a US tax credit of like amount.  Consequently, the low adjustment is a wash out, albeit could require a cash flow payment in the nearer future than the perpetual one under U.S. tax deferral accounting.  30 million Euro is too small to be noticeable to Starbucks shareholders or to the U.S. Treasury, especially when the tax credits are applied.  Viewed from an annual perspective though, the two to three million Euro per annum over 10-years finding against Starbucks annual three billion dollars paid in global taxes from a global effective tax rate of 33%, it is not even a rounding error.

Had the EU Commission found, as it alluded that it is able to, that the State Aid amounted to the hundreds of millions or even billions of Euro, the intensity of the EU Commission-National government conflict would have changed, and the EU Commission would have lost that battle with the stakes so high.  Fiat would have drawn Italy into the fray, to align with Netherlands, Ireland and Luxembourg.  As more advance pricing agreements are challenged, more national government would align against the EU Commission.  At some tipping point, the EU Commission would have to withdraw from the fight or face a bloodied nose.

Yet, more so a danger for the EU Commission, had the EU Commission’s decision been an exaggerated amount, then the U.S. Treasury would have been forced to act as if a trade war had broken out. Treasury beating up on Starbucks for transfer pricing out of the U.S. tax base is OK because Starbucks in a U.S. company, as far as the U.S. Treasury is concerned.  Starbucks represents potential U.S. deficit reduction tax dollars.

Had the EU Commission decided for a large amount well beyond any tax credit relief, thus which would have represented a significant subsidy from the U.S. to EU national budgets and/or a significant subsidy from US retirement system shareholders to EU budgets, one might imagine the joint-Republican Democratic Senate hearing called by Washington state’s two Democratic senators Patty Murray and Maria Cantwell. That hearing would conclude a joint statement to Treasury demanding it report back how it intends to implement a tit-for-tat strategy against EU companies to extract an equal amount to that the EU Commission pulled from the bowels of Starbucks reserves.

Throw in enough U.S. multinationals with HQs in the various states such as New York, Illinois, California and Texas,  Congress may actually in rare bipartisan stature pass tit-for-tat legislation by year end requiring Treasury to act.  Perhaps a $5 billion Section 482 adjustment against each of the top 50 European companies measured by revenues.  The EU would respond, and the U.S. retort, to and fro, until the weight of taxation slowed cross border investment to a trickle.

But the EU Commission instead chose to bark very loudly and withhold its bite.  Probably it has avoided the worst case scenarios of political warfare presented above.  With such a small award, the various stakeholders will let the appeals and ECJ process run its course before acting.  The US Congress and US Treasury may not understand the Marbury v Madison moment of the EU Commission’s decision – that the “perpetual deferral” reserves of U.S. MNEs such as Starbucks, Apple, Microsoft, Google, Amazon etc, may be put “up for grabs” by European revenue authorities to fill their bloated social spending expenditure gaps (instead of flowing into U.S. investment needs or back to U.S. institutional shareholders representing our collective national retirement savings).  [But Treasury has now released the below response to the EU Commission decision].

US Treasury Response

Treasury has followed the state aid cases closely for a number of reasons. First, we are concerned that the EU Commission appears to be disproportionately targeting U.S. companies.

Second, these actions potentially undermine our rights under our tax treaties. The United States has a network of income tax treaties with the member states and has no income tax treaty with the EU because income tax is a matter of member state competence under EU law.  While these cases are being billed as cases of illegal state subsidies under EU law (state aid), we are concerned that the EU Commission is in effect telling member states how they should have applied their own tax laws over a ten-year period.  Plainly, the assertion of such broad power with respect to an income tax matter calls into question the finality of U.S. taxpayers’ dealings with member states, as well as the U.S. Government’s treaties with member states in the area of income taxation.

Third, the EU Commission is taking a novel approach to the state aid issue; yet, they have chosen to apply this new approach retroactively rather than only prospectively. While in the Starbucks case, the sums were relatively modest (20 to 30 million Euros), they maybe substantially larger – perhaps in the billions – in other cases. The retroactive application of a novel interpretation of EU law calls into question the basic fairness of the proceedings. Fourth, while the IRS and Treasury have not yet analyzed the equally novel foreign tax credit issues raised by these cases, it is possible that the settlement payments ultimately could be determined to give rise to creditable foreign taxes. If so, U.S. taxpayers would wind up footing the bill for these state aid settlements when the affected U.S. taxpayers either repatriate amounts voluntarily or Congress requires a deemed repatriation as part of tax reform (and less U.S. taxes are paid on the repatriated amounts as a result of the higher creditable foreign income taxes).

Finally, and this relates to the EU’s apparent substantive position in these cases, we are greatly concerned that the EU Commission is reaching out to tax income that no member state had the right to tax under internationally accepted standards. Rather, from all appearances they are seeking to tax the income of U.S. multinational enterprises that, under current U.S. tax rules, is deferred until such time as the amounts are repatriated to the United States. The mere fact that the U.S. system has left these amounts untaxed until repatriated does not provide under international tax standards a right for another jurisdiction to tax those amounts. We will continue to monitor these cases closely.

Book CoverProfessor William Byrnes is the primary author of Practical Guide to U.S. Transfer Pricing that is used extensively by multinationals to cope with the U.S. transfer pricing rules and procedures, taking into account the international norms established by the Organization for Economic Co-operation and Development (OECD).

Download Summary-of-the-decision-from-the-european-commission-concerning-the-starbucks-tax-ruling

Download Cabinet-response-to-the-european-commission-decision-on-starbucks-manufacturing-bv

EU State Aid – Starbucks Webpage

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Financial Law Professor Headlines

Posted by William Byrnes on December 2, 2015


 

US Will Revoke Passports of Tax Debtors from Jan 1, 2016

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Tax Justice Network’s Focus on Whistleblowers – download here

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Standard Bank’s Bribery of Tanzanian Officials Leads to UK’s first UK Deferred Prosecution Agreement

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EU Commission Updates Black Listed Countries by Member States

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Do Today’s Accreditation Executive Orders Spell End for High Risk Law Schools?

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Is FinCEN Becoming a Star Chamber? The Curious FBME case

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$95.5 Million Settlement for Deceptive Enrollment Practices, Violation of False Claims Act, with Owner of Western State College of Law

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US Returns Forfeited Public Corruption Assets of Past President to Korea

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Jury Says Ernst & Young Liable for Madoff Investor’s Losses

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Standard Chartered Bank (Switzerland) Pays $6.3 Million Fine for 22 U.S. Related Tax Non-Compliant Accounts

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Russian Federal Tax Service publishes draft blacklist

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FFIEC Risk Mitigation for Cyber Attacks Involving Extortion

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Switzerland Final Adopts New AML Law

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Which University May Be The 3rd (since 1986) to Default on Its Debts?

Posted by William Byrnes on November 17, 2015


University of Puerto Rico likely headed toward first credit default: S&P – Read the full story at Reuters.  Bankrupt

CNN reported that “The commonwealth paid a mere $628,000 toward a $58 million debt bill due in early August to creditors of its Public Finance Corporation.  This will hurt the island’s residents, not Wall Street. The debt is mostly owned by ordinary Puerto Ricans through credit unions.”

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Which University Paid Over $95 Million for Deceptive Practices & “Betrayal of Students’ Trust”?

Posted by William Byrnes on November 16, 2015


Argosy University includes Western State College of Law (at Argosy University).  Argosy’s parent EDMC has agreed to pay $95.5 million to resolve claims that it falsely obtained Justice logofederal and state education funds – making this the largest False Claims Act settlement with a for-profit educational institution in American history.  “EDMC’s actions were not only a betrayal of their students’ trust; they were a violation of federal law. ”

Excerpts from Attorney General’s Announcement this morning continue below:  

We have come together to discuss a historic step forward in our collective and ongoing fight against fraudulent and abusive practices in the for-profit education industry.  Today, we are announcing a landmark settlement with Education Management Corp., which became the second-largest for-profit education company in the United States.  Education Management Corp., also known as EDMC, operates chains of schools around the country under the brand names Argosy University, the Art Institutes, Brown-Mackie College and South University.  EDMC enrolls more than 100,000 students and approximately 90 percent of EDMC’s revenue comes from taxpayers in the form of federal education funding for EDMC students.

This case not only highlights the abuses in EDMC’s recruitment system; it also highlights the brave actions of EDMC employees who refused to go along with the institution’s deceptive practices.

Beginning in 2007, two EDMC employees blew the whistle on EDMC by alleging that it was running a high-pressure recruitment mill.  Essentially, the more students a recruiter induced to enroll, the more money that recruiter would receive.  These employees alleged that EDMC’s recruitment practices violated the Incentive Compensation Ban of Title IV of the Higher Education Act, which prohibits schools from basing recruiters’ pay on their success in securing new enrollees.  That ban is in place so that schools will account for the unique qualities and needs of potential students, rather than simply treating them as a vehicle for tapping into federal student aid funds.  Despite their alleged conduct, EDMC has certified its compliance with the ban to the Department of Education for over a decade.  Falsely claiming federal grant and loan money is a violation of the False Claims Act – and in 2011, the United States intervened in the case alongside five individual states: California, Florida, Illinois, Indiana and Minnesota.  Since that time, we have aggressively pursued justice in this case on behalf of the students and taxpayers that the Incentive Compensation Ban is designed to protect.

Under the settlement we are announcing today, EDMC has agreed to pay $95.5 million to resolve claims that it falsely obtained federal and state education funds – making this the largest False Claims Act settlement with a for-profit educational institution in American history.  The unprecedented size of the payment – and the stringent compliance measures EDMC has accepted – reflect the fact that this kind of abuse hurts not only taxpayers, but also the students – many of them non-traditional learners like veterans, older individuals and working parents – who trusted EDMC to provide an education that would address their individual needs.  EDMC’s actions were not only a betrayal of their students’ trust; they were a violation of federal law.

This resolution exemplifies the Justice Department’s deep commitment to protecting precious public resources; to promoting compliance with the law; and to standing up for those who are vulnerable to exploitation.  It is an extraordinary accomplishment both for the men and women who fought to achieve it and for future EDMC students – and students at educational institutions across the country – who will no longer be victimized by unacceptable recruitment practices.  In the days ahead, we will continue working with our invaluable partners at the Department of Education – through initiatives like the inter-agency task force on for-profit education – to ensure that our nation’s aspiring learners are finding and gaining access to educational opportunities that are right for them and that will help them thrive and achieve for many years to come.

Attorney General Loretta E. Lynch Delivers Remarks at Press Conference Announcing $95.5 Million Settlement with For-Profit College Company, Washington, DC Monday, November 16, 2015

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Judge grants FinCEN a “do over” for its FBME Bank determination, but will FinCEN release the evidence?

Posted by William Byrnes on November 10, 2015


Several of my blog readers have been following FinCEN’s first use (and abuse alleges the FBMEFinCEN-logo-shieldbank, defendant of this contentious matter) of the PATRIOT Act’s power allowing FinCEN to block a foreign financial institution from the US financial market.  Over the past year, FinCEN has published a couple press releases referring to its action against FMBE, and that its action is justified based on the nefarious behavior of some of FBME’s clients.  See FinCEN Cuts FBME Bank from Access to U.S. Financial System

But, there are generally two or more perspectives for any story.  FBME has fought back against FinCEN’s determination, and at least convinced a judge that there is more here going on than meet’s the eye.  See FBME Bank Obtains Preliminary Injunction Against FinCEN

On Friday, FinCEN agreed to a “do-over” of its determination with FBME, and to disclose ‘four’ items of the substantial evidence upon which it relied (but not the other evidence).  Of course this heightens the interest in the evidence that FinCEN will not disclose.

At the core of this case for FBME is whether FinCEN must disclose to FBME all the evidence that it relied upon to make a determination to ban FBME from the US financial system.  Who is to determine if such evidence is protected by national security interests?  FinCEN itself, or the judiciary?  Should a defendant have to defend against non-reviewed evidence?  What if the evidence is hearsay, by example – newspaper accounts?

So, now I am curious if the doctrine of due process has been afforded FBME bank?  And if the rules of evidence have been followed?

Some respondents will point out that a civil action, such as FinCEN, does not require the heightened protections of the doctrine of due process and the rules of evidence that apply to an individual’s criminal investigation.  “The government giveth the license to carry on commerce, and the government taketh away that license.”  Though I disagree with that bifurcation from a political philosophy and from a rule of law perspective, the Courts lean in the respondents’ favor.

In FBME’s situation, this FinCEN determination impacts FBME maintaining a correspondent banking relationship in the US, and also implies to other regulators that they should evaluate FBME’s activities in light of FinCEN’s determination.  It is the equivalent of a banking death sentence.

Given the public nature of FinCEN’s allegations, not sure how FBME can obtain a correspondent U.S. banking relationship in the future.  But BNP pled guilty to funding genocidal regimes and Iran, was given a setence of five year probabtion and nearly $10 billion in fines.  No BNP employees went to prison, or even paid a fine.  And BNP is operating in the US.  (see BNP Paribas Criminally Sentenced for Financing Sudan, Iran and Cuba)  A search of this blog will find numerous like situations of criminal activity at banks, a non-prosecution agreement, and the bank continues on.

Why is FBME being treated differently?  Should it be?  Questions that we cannot provide an opinion upon because we have limited information.

In consideration of the many other banks that have been fined for AML and/or OFAC transgressions, the FBME case stands out because of the severity of the sanction and the lack of background information about FinCEN’s action.

FBME states in its press releases that it has been cooperating with FinCEN over the course of FinCEN’s investigation.  However, alleges FBME, FinCEN has not been cooperating with FBME because FinCEN will not present the evidence at the heart of the matter upon which FinCEN bases it allegations against FBME upon.  FBME argues that it cannot defend against “secret” evidence.  FinCEN retorts that the evidence is required to remain secret as a matter of national security.  Sounds reminiscent of a Star Chamber.  I thought we don’t like Star Chambers in America?  

If this is national security protected evidence, should at least the FISA tribunal be presented with it and agree?  It’s not the correct forum, but better than a single executive branch serving as its own prosecutor, judge, and executioner.

Read the court documents and excerpts from the Judgement – Is FinCEN Becoming a Star Chamber? The Curious FBME case

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FATCA, CDOT, and CRS milestones represented on one page

Posted by William Byrnes on November 9, 2015


Prof. Haydon P. Perryman, CGMA

Source: Home

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Will the USA Follow the EU Commission and Create Tax Haven Black Lists? Ways & Means Ponders This Question.

Posted by William Byrnes on November 3, 2015


http://lawprofessors.typepad.com/intfinlaw/2015/11/will-the-usa-follow-the-eu-commission-and-create-tax-haven-black-lists-ways-means-ponders-this-quest.html

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OECD’s Exchange of Information Statement of Outcomes of October 29-30 Annual Meeting

Posted by William Byrnes on November 3, 2015


http://lawprofessors.typepad.com/intfinlaw/2015/11/oecds-exchange-of-information-statement-of-outcomes-of-october-29-30-annual-meeting-.html

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Starbucks and Fiat – EU Commission finds Transfer Pricing State Aid, Rules Must Pay Back Since 2008

Posted by William Byrnes on October 22, 2015


Both these cases (replicated below) represent the first salvo by the EU Commission to establish that it has the authority, under a State Aid premise, to step into the shoes of the national revenue authority and re-allocate profits of an enterprise according to the EU Commission’s interpretation and analysis of the arm’s length concept.  

But importantly, these cases also, I think, exhibit the trepidation  of the EU Commission because of several weaknesses in its arguments, and even more so, in the geopolitical ramifications.   The trepidation is illustrated by the very low adjustments the EU Commission made – enough to be noticed but de minimis in the context of corporate annual profits, corporate profit accumulation over time (e.g. perpetual deferral), and corporate tax reserves.  

Starbucks potential EU alleged 30 million Euro re-capture tax bill, dating back to accumulation from 2008, will  – if Starbucks did not challenge the decision up through the EU Court Of Justice which is highly unlikely – be offset by a tax credit of like amount and thus a wash out.  To small to be noticeable to Starbucks shareholders or to the US Treasury.

Had the EU Commission found, as it alluded that it is able to, that the State Aid amounted to the hundreds of millions or even a couple billion, the intensity of the EU Commission-National government conflict would have changed, and the EU Commission would have lost that battle with the stakes so high.  

More so a danger, the US Treasury would have been forced to act as if a trade war had broken out. Treasury beating up on Starbucks for transfer pricing out of the US tax base is OK because Starbucks in a US company, as far as the US Treasury is concerned.  Starbucks represents potential US deficit reduction tax dollars.  

Had the EU Commission decided for a large amount, which would have represented a significant subsidy from the US to EU national budgets and/or a significant subsidy from US retirement system shareholders to EU budgets, one might imagine the joint-Republican Democratic Senate hearing called by Washington state’s two Democratic senators Patty Murray and Maria Cantwell. That hearing would conclude a joint statement to Treasury demanding it report back how it intends to implement a tit-for-tat strategy against EU companies to extract an equally amount pulled from the bowels of Starbucks reserves.   Throw in enough US multinationals with HQs in the various states such as New York, Illinois, California and Texas,  Congress may actually in rare bipartisan stature pass tit-for-tat legislation by year end. 

But the EU Commission instead chose to bark loudly but withhold its bite.  Probably it has avoided the worst case scenarios of political warfare presented above.  With such a small award, the various stakeholders will let the inevitable ECJ process run its course.  Or maybe, the US Congress and US Treasury will understand that true ramifications of today’s EU Commission decisions, and even for one US dollar at stake, will go to the mat on behalf of Starbucks, Apple, Microsoft, Google, Amazon etc 

___________

Today the European Commission decided that Luxembourg and the Netherlands have grantedEU Commissionselective tax advantages to Fiat Finance and Trade and Starbucks, respectively. These are illegal under EU state aid rules.

Commissioner Margrethe Vestager, in charge of competition policy, stated: “Tax rulings that artificially reduce a company’s tax burden are not in line with EU state aid rules. They are illegal. I hope that, with today’s decisions, this message will be heard by Member State governments and companies alike. All companies, big or small, multinational or not, should pay their fair share of tax.”

Following in-depth investigations, which were launched in June 2014, the Commission has concluded that Luxembourg has granted selective tax advantages to Fiat’s financing company and the Netherlands to Starbucks’ coffee roasting company. In each case, a tax ruling issued by the respective national tax authority artificially lowered the tax paid by the company.

Tax rulings as such are perfectly legal. They are comfort letters issued by tax authorities to give a company clarity on how its corporate tax will be calculated or on the use of special tax provisions. However, the two tax rulings under investigation endorsed artificial and complex methods to establish taxable profits for the companies. They do not reflect economic reality. This is done, in particular, by setting prices for goods and services sold between companies of the Fiat and Starbucks groups (so-called “transfer prices”) that do not correspond to market conditions. As a result, most of the profits of Starbucks’ coffee roasting company are shifted abroad, where they are also not taxed, and Fiat’s financing company only paid taxes on underestimated profits.

This is illegal under EU state aid rules: Tax rulings cannot use methodologies, no matter how complex, to establish transfer prices with no economic justification and which unduly shift profits to reduce the taxes paid by the company. It would give that company an unfair competitive advantage over other companies (typically SMEs) that are taxed on their actual profits because they pay market prices for the goods and services they use.

Therefore, the Commission has ordered Luxembourg and the Netherlands to recover the unpaid tax from Fiat and Starbucks, respectively, in order to remove the unfair competitive advantage they have enjoyed and to restore equal treatment with other companies in similar situations. The amounts to recover are €20 – €30 million for each company. It also means that the companies can no longer continue to benefit from the advantageous tax treatment granted by these tax rulings.

Furthermore, the Commission continues to pursue its inquiry into tax rulings practices in all EU Member States. It cannot prejudge the opening of additional formal investigations into tax rulings if it has indications that EU state aid rules are not being complied with. Its existing formal investigations into tax rulings in Belgium, Ireland and Luxembourg are ongoing. Each of the cases is assessed on its merits and today’s decisions do not prejudge the outcome of the Commission’s ongoing probes.

Fiat

Fiat Finance and Trade, based in Luxembourg, provides financial services, such as intra-group loans, to other Fiat group car companies. It engages in many different transactions with Fiat group companies in Europe.

The Commission’s investigation showed that a tax ruling issued by the Luxembourg authorities in 2012 gave a selective advantage to Fiat Finance and Trade, which has unduly reduced its tax burden since 2012 by €20 – €30 million.

Given that Fiat Finance and Trade’s activities are comparable to those of a bank, the taxable profits for Fiat Finance and Trade can be determined in a similar way as for a bank, as a calculation of return on capital deployed by the company for its financing activities. However, the tax ruling endorses an artificial and extremely complex methodology that is not appropriate for the calculation of taxable profits reflecting market conditions. In particular, it artificially lowers taxes paid by Fiat Finance and Trade in two ways:

  • Due to a number of economically unjustifiable assumptions and down-ward adjustments, the capital base approximated by the tax ruling is much lower thanthe company’s actual capital.
  • The estimated remuneration applied to this already much lower capital for tax purposes is also much lower compared to market rates.

As a result, Fiat Finance and Trade has only paid taxes on a small portion of its actual accounting capital at a very low remuneration. As a matter of principle, if the taxable profits are calculated based on capital, the level of capitalisation in the company has to be adequate compared to financial industry standards. Additionally, the remuneration applied has to correspond to market conditions. The Commission’s assessment showed that in the case of Fiat Finance and Trade, if the estimations of capital and remuneration applied had corresponded to market conditions, the taxable profits declared in Luxembourg would have been 20 times higher.

Fiat graph

Starbucks

Starbucks Manufacturing EMEA BV (“Starbucks Manufacturing”), based in the Netherlands, is the only coffee roasting company in the Starbucks group in Europe. It sells and distributes roasted coffee and coffee-related products (e.g. cups, packaged food, pastries) to Starbucks outlets in Europe, the Middle East and Africa.

The Commission’s investigation showed that a tax ruling issued by the Dutch authorities in 2008 gave a selective advantage to Starbucks Manufacturing, which has unduly reduced Starbucks Manufacturing’s tax burden since 2008 by €20 – €30 million. In particular, the ruling artificially lowered taxes paid by Starbucks Manufacturing in two ways:

  • Starbucks Manufacturing pays a very substantial royalty to Alki (a UK-based company in the Starbucks group) for coffee-roasting know-how.
  • It also pays an inflated price for green coffee beans to Switzerland-based Starbucks Coffee Trading SARL.

The Commission’s investigation established that the royalty paid by Starbucks Manufacturing to Alki cannot be justified as it does not adequately reflect market value. In fact, only Starbucks Manufacturing is required to pay for using this know-how – no other Starbucks group company nor independent roasters to which roasting is outsourced are required to pay a royalty for using the same know-how in essentially the same situation. In the case of Starbucks Manufacturing, however, the existence and level of the royalty means that a large part of its taxable profits are unduly shifted to Alki, which is neither liable to pay corporate tax in the UK, nor in the Netherlands.

Furthermore, the investigation revealed that Starbucks Manufacturing’s tax base is also unduly reduced by the highly inflated price it pays for green coffee beans to a Swiss company, Starbucks Coffee Trading SARL. In fact, the margin on the beans has more than tripled since 2011. Due to this high key cost factor in coffee roasting, Starbucks Manufacturing’s coffee roasting activities alone would not actually generate sufficient profits to pay the royalty for coffee-roasting know-how to Alki. The royalty therefore mainly shifts to Alki profits generated from sales of other products sold to the Starbucks outlets, such as tea, pastries and cups, which represent most of the turnover of Starbucks Manufacturing.

Starbucks graph

Recovery

As a matter of principle, EU state aid rules require that incompatible state aid is recovered in order to reduce the distortion of competition created by the aid. In its two decisions the Commission has set out the methodology to calculate the value of the undue competitive advantage enjoyed by Fiat and Starbucks, i.e. the difference between what the company paid and what it would have paid without the tax ruling. This amount is €20 – €30 million for each of Fiat and Starbucks but the precise amounts of tax to be recovered must now be determined by the Luxembourg and Dutch tax authorities on the basis of the methodology established in the Commission decisions.

New investigative tools

In the two investigations the Commission has for the first time used information request tools under a Council decision by Member States of July 2013 (Regulation 734/2013). Using these powers the Commission can, if the information provided by the Member State subject to the state aid investigation is not sufficient, ask that any other Member State as well as companies (including the company benefitting from the aid measure or its competitors) provide directly to the Commission all market information necessary to enable it to complete its state aid assessment. These new tools form part of the State Aid Modernisation initiative launched by the Commission in 2012 to allow it to concentrate its enforcement efforts on aid that is most liable to distort competition.

Further background

Since June 2013, the Commission has been investigating the tax ruling practices of Member States. It extended this information inquiry to all Member States in December 2014. The Commission also has three ongoing in-depth investigations where it raised concerns that tax rulings may give rise to state aid issues, concerning Apple in IrelandAmazon in Luxembourg, and a Belgian tax scheme.

The fight against tax evasion and tax fraud is one of the top priorities of this Commission. In June 2015, the Commission unveiled a series of initiatives to tackle tax avoidance, secure sustainable tax revenues and strengthen the Single Market for businesses. The proposed measures, part of theCommission’s Action Plan for fair and effective taxation, aim to significantly improve the corporate tax environment in the EU, making it fairer, more efficient and more growth-friendly. Key actions included a framework to ensure effective taxation where profits are generated and a strategy to re-launch the Common Consolidated Corporate Tax Base (CCCTB) for which a fresh proposal is expected in the course of 2016. The Tax Transparency Package presented by the Commission in March also had its first success in October 2015 when Member States reached a political agreement on an automatic exchange of information on tax rulings following only seven months of negotiations. This legislation will contribute to bringing about a much greater degree of transparency and will act as a deterrent from using tax rulings as an instrument for tax abuse – good news for businesses and for consumers who will continue to benefit from this very useful tax practice but under very strict scrutiny in order to ensure a framework for fair tax competition.

The non-confidential version of the decisions will be made available under the case numbers SA.38375 (Fiat) and SA.38374 (Starbucks) in the State aid register on the DG Competition website once any confidentiality issues have been resolved. The State Aid Weekly e-News lists new publications of State aid decisions on the internet and in the EU Official Journal.

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New Lexis Advance® Tax Platform Now Available to Law School Faculty & Students; Cutting-Edge International Tax Titles

Posted by William Byrnes on October 22, 2015


On June 1, LexisNexis launched its new online tax research platform called Lexis Advance® Tax.

Already available to America’s law school faculty and students, it includes a rich, comprehensive package of nearly 1,400 sources, including tax news, primary law, journals and nearly 300 treatises, practice guides and forms products for both tax and estates lawyers.

Along with news, another strong area for L.A. Tax is its subpage devoted to International Tax. There, users will find a selection01701_11_1_cover of titles examining hot, cutting-edge issues like: Lexis Guide to FATCA Compliance, the Lexis global guide to anti-money laundering laws around the world, and the recently-revised Foreign Tax & Trade Briefs, 2nd Ed, which provides summaries of each country’s tax system and laws.

All of these titles are produced by a team of tax experts led by Professor William H. Byrnes, Associate Dean, International Financial Law, at Texas A&M University Law School, in Fort Worth, the newest law school in Texas. See https://law.tamu.edu/

Looking for Lexis Advance Tax?
Sign in to www.lexisadvance.com, look for the pull-down menu called “Lexis Advance Research” in the upper-left corner. Click the down arrow and select Lexis Advance Tax.

If you have questions or would like to schedule a short training, please contact your LexisNexis® Account Executive.

– See more at: http://www.lexisnexis.com/lextalk/legal-content-insider/f/21/t/2525.aspx?utm_content=2015-10-20+15:00:04#sthash.szct2yk6.dpuf

Posted in BEPS, FATCA, Financial Crimes, Money Laundering, Taxation, Transfer Pricing | Tagged: , , , | Leave a Comment »

Offshore Compliance Peetering Out

Posted by William Byrnes on October 20, 2015


read the analysis at International Financial Law Prof Blog

Posted in Uncategorized | Leave a Comment »

Medicare Premiums to Surge in 2016 for Some Seniors, But No Cost of Living Adjustments for Social Security

Posted by William Byrnes on October 19, 2015


Old age and survivors, disabled workers and SSI recipients — will not see a COLA increase in benefits next year for the third time since 2009.

But Social Security beneficiaries with higher incomes will see increases in their premiums for Medicare Part B, which pays for physicians’ bills, outpatient care, durable medical devices and other goods and services.

James J. Green explains the impact of the Medicare Part B premium cost increases for Seniors on ThinkAdvisor and the lack of increase of social security benefits.

Posted in Uncategorized | Leave a Comment »

International Tax News Headlines

Posted by William Byrnes on October 19, 2015


No Social Security Cost of Living Adjustment, 3rd Time Since 2009, But Medicare Premiums Surging for Some

James Green, Group Editorial Director, Investment Advisor Group analyzes the 2016 coming tragedy for a large segment of retirees – Medicare premiums will surge but the Social Security payment to pay it will not increase one cent. Read his analysis…

New OECD CRS web portal for automatic exchange of information opens

The OECD launched its new portal on Automatic Exchange of Information (AEOI). It provides a comprehensive overview of the work of the OECD and the Global Forum on Transparency and Exchange of Information for Tax Purposes in the area of…

EU Commission Updates Black Listed Countries by Member States

EU Commission Updates Black Listed Countries by Member StatesPosted: 16 Oct 2015 01:26 AM PDT

Another UBS Banker Avoids Jail

Bloomberg reported that the former UBS Swiss banker Hansruedi Schumacher who plead guilty to assisting US clients evade taxes will not go to jail. Instead, he will pay a $150,000 fine and be sentenced to probation in reward for testifying…

OECD BEPS Video & PPT

Senior members from the OECD’s Centre for Tax Policy and Administration (CTPA) commented on the final outputs of the OECD/G20 Base Erosion and Project Shifting Project, including the next steps and the involvement of developing countries. See yesterday’s post with…

OECD Releases All Final BEPS Reports – Links Herein

The OECD presented today the final package of measures for a comprehensive, coherent and co- ordinated reform of the international tax rules to be discussed by G20 Finance Ministers at their meeting on 8 October, in Lima, Peru. The OECD/G20…

U.S. Begins Reciprocal Automatic Exchange of FATCA Information With Foreign Governments

The Internal Revenue Service today announced the exchange of financial account information with certain foreign tax administrations, meeting a key Sept. 30 milestone related to FATCA, the Foreign Account Tax Compliance Act. To achieve this, the IRS successfully and timely…OECD launches report on greater co-operation and information sharing between government agencies to counter financial crimes

Vast amounts are lost to illicit financial flows, including tax evasion, money laundering, bribery and corruption. These crimes threaten the strategic, political and economic interests of both developed and developing countries. In a world of limited resources and increasing complexity,…

FATCA Deadlines Postponed Again – Notice 2015-66 Released

Extension of FATCA Transitional Rules for Gross Proceeds, Foreign Passthru Payments, Limited Branches and Limited FFIs, and Sponsored Entities; Reporting of 2014 Information under a Model 1 IGA; and Modification to Grandfathered Obligation Rule with Respect to Collateral Notice 2015-66…

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Higher Education 3.0 – Business Education Worldwide – Boom or Bust

Posted by William Byrnes on October 16, 2015


Dr. George Mentz writes: “After a review of the top 200 schools in the USA and an analysis of the top business schools and law schools, top educational institutions will either need to innovate or die. …” read his analysis on LinkedIn’s Blog

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Texas A&M University Law is seeking to hire two new admission department team members

Posted by William Byrnes on October 16, 2015


The two new positions and application procedures are:

1. https://jobpath.tamu.edu/postings/89638

2. https://jobpath.tamu.edu/postings/88388

Please pass on these positions to potential interested persons.

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New Lexis Advance® Tax Platform Now Available to Law School Faculty & Students; Highlights Include Cutting-Edge International Tax Titles

Posted by William Byrnes on October 15, 2015


On June 1, LexisNexis launched its new online tax research platform called Lexis Advance® Tax.

Already available to America’s law school faculty and students, it includes a rich, comprehensive package of nearly 1,400 sources, including tax news, primary law, journals and nearly 300 treatises, practice guides and forms products for both tax and estates lawyers.

Along with news, another strong area for L.A. Tax is its subpage devoted to International Tax. There, users will find a selection01701_11_1_cover of titles examining hot, cutting-edge issues like: Lexis Guide to FATCA Compliance, the Lexis global guide to anti-money laundering laws around the world, and the recently-revised Foreign Tax & Trade Briefs, 2nd Ed, which provides summaries of each country’s tax system and laws.

All of these titles are produced by a team of tax experts led by Professor William H. Byrnes, Associate Dean, International Financial Law, at Texas A&M University Law School, in Fort Worth, the newest law school in Texas. See https://law.tamu.edu/

Looking for Lexis Advance Tax?
Sign in to www.lexisadvance.com, look for the pull-down menu called “Lexis Advance Research” in the upper-left corner. Click the down arrow and select Lexis Advance Tax.

If you have questions or would like to schedule a short training, please contact your LexisNexis® Account Executive.

– See more at: http://www.lexisnexis.com/lextalk/legal-content-insider/f/21/t/2525.aspx?utm_content=2015-10-20+15:00:04#sthash.szct2yk6.dpuf

Posted in BEPS, book, FATCA, Money Laundering | Tagged: | Leave a Comment »

IRS Implementing FATCA Compliance, TIGTA Audit Concludes

Posted by William Byrnes on October 14, 2015


A TIGTA audit was initiated to assess the IRS’s progress in implementing the FATCA.  TIGTA found that the IRS has taken steps to provide information to affected stakeholders thatTigtalogo explains the FATCA requirements and expectations.

However, TIGTA identified improvements that are required to ensure compliance and to measure performance for foreign financial institutions.  TIGTA also identified some limitations with the processing of paper Forms 8938.  Specifically:

  • Transcribed data are not validated to ensure accuracy.
  • Data on Form 8938 continuation statements (used to report additional foreign accounts or other foreign assets) are not transcribed.
  • Losses reported by taxpayers cannot be input as negative amounts.

If these issues are not properly addressed, it could limit management’s ability to make informed decisions and achieve the IRS’s compliance objectives related to the FATCA.

TIGTA recommended that the IRS:

  1. update the compliance activities in the FATCA Compliance Roadmap for identifying noncompliance by foreign financial institutions;
  2. initiate a periodic quality review process for the processing of paper Forms 8938 to ensure the accuracy of the data being transcribed; and
  3. ensure that the transcription issues identified in this report are addressed.

The IRS agreed with the first two recommendations but disagreed with some programming changes related to the third recommendation due to budgetary constraints, limited resources, and competing priorities.  The accuracy of the data obtained from Forms 8938 is a critical component for the success of the IRS’s compliance activities with implementing the FATCA.  As such, TIGTA believes that the IRS should make these programming changes a priority.

Lexis Guide to FATCA Compliance – 2015 Edition 

1,200 pages of analysis of the compliance challenges, over 54 chapters by 70 FATCA contributing experts from over 30 countries.  Besides in-depth, practical analysis, the 2015 edition includes examples, charts, time lines, links to source documents, and compliance analysis pursuant to the IGA and local regulations for many U.S. trading partners and financial centers.   The Lexis Guide to FATCA Compliance, designed from interviews with over 100 financial institutions and professional firms, is a primary reference source for financial institutions and service providers, advisors and government departments.  No filler of forms and regs – it’s all beef !  See Lexis’ order site – http://www.lexisnexis.com/store/catalog/booktemplate/productdetail.jsp?pageName=relatedProducts&prodId=prod19190327

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Dr. Chris Odionu joins Texas A&M Law

Posted by William Byrnes on October 13, 2015


Texas A&M University School of Law announces the hiring of Dr. Chris Odionu as the Director of Odionu
Distance Education Programs and adjunct professor teaching project management. His prior positions include director of the System-Wide Center for Distributed Learning at California State University, chief information officer and associate professor of technology at Alabama A&M University. He also served as chief information officer at a number of institutions including University of Detroit Mercy, St John’s University in Jamaica – Queens, New York, and the Minnesota Community College System at Normandale Community College.

“Chris’ multi-disciplinary reach of engineering, IT, project management and a doctorate in education is going to propel Texas A&M Law’s pedagogical approach to the frontier for career based law programs, said William Byrnes, Executive Professor and Associate Dean. “By example, Texas A&M’s Business Law focus is to mentor the Aggie to add value and generate revenue.  The process requires the Aggie to learn a business by studying its language, its industry, and commonalities among all business such as supply chain and project management.  Dr. Chris Odionu is a distinguishing hire by a law school because he brings these perspectives to the table.”

“I am excited joining the TAMU School of Law and working with Professor Byrnes to establish world-class graduate law programs,” replied Dr. Odionu. “It is interesting to see law schools finally using the strengths offered by technology to deliver courses and degree programs online.”

Chris is a fellow of the American Academy of Project Management (AAPM), and certified in the governance of enterprise information technology, and in risk and information systems control (CRISC). He received his bachelor’s degree in technology, MBA, and doctorate in educational technology and administration from the University of Houston. He served as an administrative fellow in a year-long academic program at Harvard University where he earned a certificate in administration.

“Chris’ hands-on understanding of big data and data warehouse techniques combined with his background as an associate professor of information systems is going to distinguish Texas A&M’s curriculum, particularly in tax and business,” added Andrew P. Morriss, Dean and Anthony G. Buzbee Dean’s Endowed Chair.  “His background will also immediately translate into a project management course for law students and lawyers, which is fast becoming a crucial skill for lawyers.  And he will be providing a unique exposure for our students to the best practices in tax risk management.”

Chris has two children – Janelle, a student at Cornell University, and Christian, Jr., who plays high school basketball.

Posted in Education Theory | Tagged: , , | 2 Comments »

EU Agrees on the Automatic Exchange of Tax Rulings – Transfer Pricing Audits Expected

Posted by William Byrnes on October 8, 2015


European Union (EU) Ministers for Economy and Finance met in Luxembourg EU Commissionfor an ECOFIN Council chaired by the Luxembourg Minister for Finance Pierre Gramegna. The Ministers expressed their political agreement on a proposed Directive on the automatic exchange of information (AEI) on tax rulings.

On the basis of a compromise agreement brokered by the Luxembourg Presidency, the Council expressed its political agreement on a proposed Directive designed to improve transparency in the context of advance cross-border tax rulings, by making their automatic exchange between tax administrations compulsory.

The proposed Directive [Download EU AEOI TP] is part of a series of measures presented in March 2015 which aim to prevent tax avoidance and aggressive tax planning by companies. It aims to modify Directive 2011/16/EU on administrative cooperation in the field of taxation, which defines the practical terms and conditions for exchanging information in order to include advance tax rulings.  The Directive requires Member States to proceed with AIE in the field of advance cross-border tax rulings, as well as advance pricing agreements. The Commission will implement a secure central directory, accessible to all Member States and the Commission, where the information exchanged will be stored.

Posted in BEPS, Transfer Pricing | Tagged: , | Leave a Comment »

The Best U.S. News Voter Swag: Texas A&M

Posted by William Byrnes on October 7, 2015


TaxProf Blog provides news, information and resources for tax professors.

Source: TaxProf Blog

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OECD BEPS Explanatory Video & PPT (90 minutes)

Posted by William Byrnes on October 6, 2015


Senior members from the OECD’s Centre for Tax Policy and Administration (CTPA) commented on the final outputs of the OECD/G20 Base Erosion and Project Shifting Project, including the next steps and the involvement of developing countries.  See yesterday’s post with the download link for each BEP report: OECD Releases All Final BEPS Reports – Links Herein

—> Download PPT “Beps-webcast-8-launch-2015-final-reports”.

Posted in BEPS, OECD | Tagged: , | Leave a Comment »

OECD Releases All Final BEPS Reports – Links Herein

Posted by William Byrnes on October 5, 2015


The OECD presented today the final package of measures for a comprehensive, coherent and co- OECDordinated reform of the international tax rules to be discussed by G20 Finance Ministers at their meeting on 8 October, in Lima, Peru.  The OECD/G20 Base Erosion and Profit Shifting (BEPS) Project provides governments with solutions for closing the gaps in existing international rules that allow corporate profits to « disappear » or be artificially shifted to low/no tax environments, where little or no economic activity takes place.

READ THE REPORTS

Arrow actions 13 2015 Explanatory Statement 2015 (EN / FR / ES / DEU)
Arrow Action 1 Action 1: Addressing the Tax Challenges of the Digital Economy
Arrow Action 2 Action 2: Neutralising the Effects of Hybrid Mismatch Arrangements
Arrow Action 3 2015 Action 3: Designing Effective Controlled Foreign Company Rules
Arrow Action 4 2015 Action 4: Limiting Base Erosion Involving Interest Deductions and Other Financial Payments
Arrow Action 5 Action 5: Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance
Arrow Action 6 Action 6: Preventing the Granting of Treaty Benefits in Inappropriate Circumstances
Arrow action 7 2015 Action 7: Preventing the Artificial Avoidance of Permanent Establishment Status
Arrow Action 8 Actions 8-10: Guidance on Transfer Pricing Aspects of Intangibles
Arrow actions 11 2015 Action 11: Measuring and Monitoring BEPS
Arrow actions 12 2015 Action 12: Mandatory Disclosure Rules
Arrow Action 13 Action 13: Guidance on Transfer Pricing Documentation and Country-by-Country Reporting
Arrow actions 14 2015 Action 14: Making Dispute Resolution Mechanisms More Effective
Arrow Action 15 Action 15: Developing a Multilateral Instrument to Modify Bilateral Tax Treaties

Revenue losses from BEPS are conservatively estimated at USD 100-240 billion annually, or anywhere from 4-10% of global corporate income tax (CIT) revenues. Given developing countries’ greater reliance on CIT revenues as a percentage of tax revenue, the impact of BEPS on these countries is particularly significant.

“Base erosion and profit shifting affects all countries, not only economically, but also as a matter of trust,” said OECD Secretary-General Angel Gurría. “BEPS is depriving countries of precious resources to jump-start growth, tackle the effects of the global economic crisis and create more and better opportunities for all. But beyond this, BEPS has been also eroding the trust of citizens in the fairness of tax systems worldwide. The measures we are presenting today represent the most fundamental changes to international tax rules in almost a century: they will put an end to double non-taxation, facilitate a better alignment of taxation with economic activity and value creation, and when fully implemented, these measures will render BEPS-inspired tax planning structures ineffective,” Mr Gurría said.

Undertaken at the request of the G20 Leaders, the work to address BEPS is based on the 2013 G20/OECD BEPS Action Plan, which identified 15 actions to put an end to international tax avoidance. The plan was structured around three fundamental pillars: introducing coherence in the domestic rules that affect cross-border activities; reinforcing substance requirements in the existing international standards, to ensure alignment of taxation with the location of economic activity and value creation; and improving transparency, as well as certainty for businesses and governments.

The OECD will present the BEPS measures to G20 Finance Ministers during the meeting hosted by Turkey’s Deputy Prime Minister Cevdet Yilmaz on 8 October, in Lima, Peru.

Following delivery of the BEPS measures to G20 Leaders during their annual summit on 15-16 November in Antalya, Turkey, the focus will shift to designing and putting in place an inclusive framework for monitoring BEPS and supporting implementation of the measures, with all interested countries and jurisdictions invited to participate on an equal footing.

The final package of BEPS measures includes new minimum standards on: country-by-country reporting, which for the first time will give tax administrations a global picture of the operations of multinational enterprises; treaty shopping, to put an end to the use of conduit companies to channel investments; curbing harmful tax practices, in particular in the area of intellectual property and through automatic exchange of tax rulings; and effective mutual agreement procedures, to ensure that the fight against double non-taxation does not result in double taxation.

The BEPS package also revises the guidance on the application of transfer pricing rules to prevent taxpayers from using so-called “cash box” entities to shelter profits in low or no-tax jurisdictions, and redefines the key concept of Permanent Establishment, to curb arrangements which avoid the creation of a taxable presence in a country by reliance on an outdated definition.

The BEPS package offers governments a series of new measures to be implemented through domestic law changes, including strengthened rules on Controlled Foreign Corporations, a common approach to limiting base erosion through interest deductibility and new rules to prevent hybrid mismatch arrangements from making profits disappear for tax purposes through the use of complex financial instruments.

Nearly 90 countries are working together on the development of a multilateral instrument capable of incorporating the tax treaty-related BEPS measures into the existing network of bilateral treaties. The instrument will be open for signature by all interested countries in 2016.

The BEPS measures were agreed after a transparent and intensive two-year consultation process between OECD, G20 and developing countries and stakeholders from business, labour, academia and civil society organisations.

“Everyone has a stake in reversing base erosion and profit shifting,” Mr Gurria said. “The BEPS Project has shown that all stakeholders can come together to bring about change. Swift implementation by governments will ensure a more certain and more sustainable international tax environment for the benefit of all, not just a few.”

Examples of BEPS schemes to be eliminated

 

 

Previous webcasts

» Webcast 7: An update on the project (8 June 2015)

» Webcast 6: Update on 2015 Deliverables (12 February 2015)

» Webcast 5: Update on 2014 Deliverables (15 December 2014)

» Webcast 4: Update on 2014 Deliverables (16 September 2014)

» Webcast 3: Update on BEPS Project (26 May 2014)

» Webcast 2: Update on BEPS Project (2 April 2014)

» Webcast 1: Update on 2014 Deliverables (23 January 2014)

FATCA Update

Download FATCA chapter 1 from SSRN here.  4th edition FATCA and CRS Updates will be posted on SSRN in December 2015.

Posted in BEPS, OECD | Tagged: , | Comments Off on OECD Releases All Final BEPS Reports – Links Herein

U.S. Begins Reciprocal Automatic Exchange of FATCA Information With Foreign Governments

Posted by William Byrnes on October 2, 2015


The Internal Revenue Service today announced the reciprocal exchange of financial account information with FATCA_rollcertain foreign tax administrations, meeting a key Sept. 30 milestone related to FATCA, the Foreign Account Tax Compliance Act.

Read the full post at International Financial Law Prof Blog

Posted in Uncategorized | Leave a Comment »

Court Clears Path for Medicaid-Compliant Short-Term Annuities

Posted by William Byrnes on October 1, 2015


Medicaid compliant annuities can play a powerful role in a client’s long-term care plan if used carefully ThinkAdvisorso that the client does not run afoul of the strict Medicaid resource rules. Clients have often purchased these annuities only to find themselves challenged on the grounds that the annuities represent available resources that can prevent Medicaid eligibility.

In recent weeks, however, a Third Circuit appeals court has taken an important step toward ensuring that long-term care expenses can be met using annuities—even if the annuity in question is a short-term annuity purchased specifically to cover expenses incurred during periods when the client is ineligible for Medicaid coverage.

Read the full analysis at Think Advisor

Posted in Uncategorized | Leave a Comment »

Non-Participating FFI

Posted by William Byrnes on September 30, 2015


Source: Non-Participating FFI

Posted in Uncategorized | Leave a Comment »

FATCA YouTube Webinar – Video Now Available

Posted by William Byrnes on September 28, 2015


Posted in FATCA | Tagged: | Leave a Comment »

Why are Financial Institution Legal Entity Identifiers (LEIs)? twice that of FATCA GIINs? 

Posted by William Byrnes on September 25, 2015


The LEI was established by the G-20 through the Financial Stability Board (FSB), the 2009 successor of the Financial Stability Forum (FSF).  Regulators globally recognized the lack of transparency to identify parties to transactions across markets, products, and regions. G-20 authorities, through the FSB, working with the private sector, developed the framework of a Global LEI System (GLEIS) that, through the issuance of unique LEIs, unambiguously identify entities engaged in financial transactions.  Why are so many LEIs issued and so few GIINs – same institutions, just not seeking a FATCA GIIN?

read about the LEI v GIIN issue on Kluwer’s Tax Blog: http://www.kluwertaxlawblog.com/blog/2015/09/25/fatca-giins-versus-legal-entity-identifiers-leis/ 

Posted in Uncategorized | Leave a Comment »

Switzerland Changes Money Laundering Crime To Include Tax Crimes, Will SARs be Filed on Clients?

Posted by William Byrnes on September 24, 2015


See the Full Story on : International Financial Law Prof Blog

Posted in Uncategorized | Leave a Comment »

Texas A&M University School of Law Hires 12 New Faculty & Expands Programs

Posted by William Byrnes on September 23, 2015


Texas A&M University School of Law is quickly distinguishing itself as an institution to watch.

At a time when most schools are cutting back, Texas A&M University has made an unparalleled investment in the future of legal education for Texas, the nation and beyond by attracting an unprecedented 12 new faculty members for its School of Law located inFort Worth.

TAMU-Law-lockup-whiteFive of the new faculty focus on intellectual property issues, adding strength to the school’s Center for Law and Intellectual Property and building on A&M’s strong reputation in engineering and life sciences. These hires cover all aspects of intellectual property, including patents, copyrights, trademarks, and trade secrets. Together with two existing scholars in the field, A&M Law is now in contention to have one of the country’s top intellectual property law programs.

“This extensive concentration of intellectual property faculty offers students comprehensive coverage, allowing them to develop specialized training based on their individual interests and career paths,” said intellectual property expert and incoming professorPeter Yu. “Our newly expanded program offers an unparalleled focus and makes A&M Law immediately stand out in the intellectual property field.”

Among A&M Law’s seven additional hires are thought leaders with strong backgrounds in legal ethics, commercial law, legal writing, law and economics, tax and international law. They include the newly appointed President of Texas A&M University, Michael K. Young, whose two decades as a legal scholar and dean at Columbia Law included the development of internationally recognized programs in Japanese and Korean legal studies and authorship of numerous briefs, articles and books on U.S. trade law and policy.  Given his leadership, including presidency at two leading universities and service, it is fitting that he will hold tenure in both Texas A&M’s School of Law and the George H. W. Bush School of Government & Public Service.

“I’m pleased to be joining Texas A&M University at this exciting time of my career and their history,” offered Young. “It is a wonderful bonus, to also join my colleagues in the transformation of this law school, legal education nationally and our contributions as scholars to the continued dynamic vitality of Texas.”

“As not only a top tier, public research university, but also a land grant institution, we have a special obligation to bring the academy to the public, and these folks are going to help us expand our efforts to do that,” Dean Andy Morriss said. “We’re particularly excited to have long time bar leaders like legal ethicist Susan Fortney, former Uniform Law Commission Executive Director Bill Henning, and former American Society of International Law Executive Director Charlotte Ku joining us.”

These incoming faculty join the existing academic team, now 55 members strong and punctuated by an ethos of market-disruptive thinking and scholarship. In 2015 alone, A&M Law faculty members have gained national attention for policy papers and commentary on topics including the intersection of water and energy law, developments in intellectual property, law reform in the Middle East, and the changing face of the death penalty.

And in an era when many law schools are cutting staff and faculty as enrollments fall nationally, A&M Law has only enhanced its commitment to lead by expanding curricular options, improving student services, attracting the very best talent and aligning to Texas A&M University’s mission tenet of service to the state, nation and beyond.

One such example is a $370,000 grant awarded to the School of Law from the Access Group. With the grant, A&M Law’s Milan Markovic will serve as principal investigator of the Texas Lawyers Study, examining professional satisfaction and income levels of nearly 88,000 members of the State Bar of Texas. This study will generate an extraordinary amount of data on the economics of the legal profession and the working lives of lawyers that can inform the decision-making of prospective law students and lawyers.

“We’re proud of our work to date, and are inviting all to see how far we’ve come and to take a look at where we are heading,” Morriss said. “By attracting new talent to compliment our strong foundation of scholars, A&M Law is leading by example.”

https://law.tamu.edu

Posted in Courses | Tagged: , , , | 2 Comments »

Costa Rica’s ‘Wet Noodle’ Regulations Perpetuate Call Center Scams

Posted by William Byrnes on September 22, 2015


“Stamping out call center boiler room scams has been described like a continuous game of Whack-A-Mole. Costa Rica’s weak regulation and lack of resources is making it a hot spot for such scams.”

Read Journalist  expose and interview of Professor William Byrnes about Costa Rica’s Call Center industry at her Nearshore Article

Source: International Financial Law Prof Blog

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FATCA Deadlines Postponed Again – Notice 2015-66 Released

Posted by William Byrnes on September 21, 2015


This notice announces that the Department of the Treasury (Treasury) FATCA_rolland the Internal Revenue Service (IRS) intend to amend the regulations under chapter 4 (sections 1471-1474) to extend the period of time that certain transitional rules will apply. Specifically, the amendments will extend:

(1) the date for when withholding on gross proceeds and foreign passthru payments will begin;

(2) the use of limited branches and limited foreign financial institutions (limited FFIs); and

(3) the deadline for a sponsoring entity to register its sponsored entities and redocument such entities with withholding agents.

In addition, in order to reduce compliance burdens on withholding agents that hold collateral as a secured party, this notice announces that Treasury and the IRS intend to amend the regulations under chapter 4 to modify the rules for grandfathered obligations with respect to collateral.

Finally, this notice also provides information on the exchange of information by Model 1 IGA jurisdictions with respect to 2014.

Full analysis and impact of each deadline extension at International Financial Law Prof Blog

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HMRC Guidance notes on the CRS

Posted by William Byrnes on September 17, 2015


FATCA & CRS Training. Advice. Consultancy.

Link

The guidance covers the Common Reporting Standard (CRS) and the incorporation of the CRS into EU law by the European Union Directive on Administrative Cooperation (2011/16/EU, as amended by 2014/107/EU). Once finalised is intended to incorporate amended and updated versions of the existing guidance on FATCA and the CDOT arrangements. The guidance is directed at HM Revenue and Customs (HMRC) staff, but will be publicly available and is intended to be of use to financial institutions and their agents. This draft has been developed in close working with UK financial institutions and representative bodies as well as tax advisors.

There is already extensive external guidance available in the Commentary to the CRS on how the UK will implement the OECD Common Reporting Standard under the Directive.

This guidance does not replace or override the CRS Commentary, but brings together the key concepts and provides additional…

View original post 73 more words

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Spotlight Special: Professor William Byrnes on FATCA & Our Webinar | TaxLinked.net

Posted by William Byrnes on September 10, 2015


Professor William Byrnes, Associate Dean at Texas A&M University’s School of Law, discusses his career in tax, FATCA and his many publications!

Source: Spotlight Special: Professor William Byrnes on FATCA & Our Webinar | TaxLinked.net

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FATCA webinar – complementary – all Q&A from the audience

Posted by William Byrnes on September 9, 2015


TaxLinked announces a FATCA webinar on September 16 at 14:00 EDT or 19:00 BST.

latest blog post covers the range of questions to be discussed and introduces you to our esteemed panel of experts.

If you have any questions for them, make sure to submit them by September 11 on the forum HERE.

Please visit its Registration Page to sign up for what’s shaping up to be a great event.

Taxlinked announces the fourth in its series of webinars. This episode will cover the US’s ForeignFATCA_rollAccount Tax Compliance Act (FATCA), a regulation that requires US persons to report on an annual basis their non-US financial accounts, as well as non-US financial institutions to report US persons’ assets and identities in their records to the US Treasury.

William Blum, Partner at Solomon Blum Heymann LLC in New York, has served as counsel to the Governor of the United States Virgin Islands, and is the leading expert on the territory’s status as a tax haven for non-U.S. persons.

Haydon Perryman is a London FATCA, CRS, DAC2 and CDOT Consultant with five years of practical hands-on experience of lead compliance for FATCA and CRS systems for tier 1 financial institutions. Haydon has a detailed understanding of FATCA regulations and the practical strategies involved in ensuring and evidencing FATCA compliance.

Robert Ladislaw is an attorney and certified public accountant with Solomon Blum Heymann LLC in New York serving clients for over 20 years for federal and state income and estate tax examinations and offshore tax compliance matters.

William Byrnes, Professor and Associate Dean at Texas A&M School of Law  is the primary author of the 1,200 page analysis: LexisNexis® Guide to FATCA Compliance (download Chapter 1:).

 

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Meet us at IFA in Basel next week?

Posted by William Byrnes on August 26, 2015


Dr. Andrew Morriss (Dean, Texas A&M & international tax economist) and I look forward toLogo_IFA_Basel_2015meeting other academics and professionals at international tax 69th IFA Congress held in the city of Basel  from Sunday, August 30 to Thursday, September 3.

Email me so that we can link up at the Congress.

The International Fiscal Association (IFA) was established in 1938 with its headquarters in the Netherlands. It is the only non-governmental and non-sectoral international organisation dealing with fiscal matters.   12,000+ government officials, MNE counsel, senior partners, and academics from 111 countries.

Its objects are the study and advancement of international and comparative law in regard to public finance, specifically international and comparative fiscal law and the financial and economic aspects of taxation.

STUDY 1:  TAX INCENTIVES ON RESEARCH AND DEVELOPMENT (R&D)

STUDY 2: PRACTICAL PROTECTION OF TAXPAYERS’ FUNDAMENTAL RIGHTS

SEMINAR A: “PATENT BOXES”

SEMINAR B: THE TAXATION OF EXPATRIATES

SEMINAR C: CROSS-BORDER SUPPLY OF SERVICES AND VAT/GST: DEVELOPMENT OF IFA PROPOSALS

SEMINAR D: PRACTICAL PROTECTION OF TAXPAYERS IN THE EXCHANGE OF INFORMATION PROCESS

SEMINAR E: CROSS-BORDER MERGERS OF COMPANIES

SEMINAR F: IFA/EU: “STATE AID REVIEW AS A MEANS TO COMBAT AGGRESSIVE TAX PLANNING”

SEMINAR G: IFA/OECD

SEMINAR H: THE TAXATION OF GLOBAL FAMILIES

SEMINAR I: EFFECTIVENESS OF PARTICIPATION EXEMPTION

SEMINAR J: RECENT DEVELOPMENTS IN INTERNATIONAL TAXATION

SEMINAR K: PRACTICAL PROTECTION OF TAXPAYERS IN THE TAX LITIGATION PROCESS

SEMINAR L: TIMING ISSUES IN THE APPLICATION OF TAX TREATIES

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Aggie Law’s orientation week wraps up

Posted by William Byrnes on August 25, 2015


12th Man SIgned Tshirt

Aggie Law’s orientation week just wrapped up – and mine as well as one of the 11 new Texas A&M law faculty.  The Dean, Andy Morriss, hosted an incoming Aggie BBQ – and Texas BBQ is good BBQ.

139 new Texas Aggies hailing from more than 60 universities, already greeting me in the ‘Howdy’ tradition at every turn.  Friendliest folk – not a whippersnapper among them.

I’m looking forward to engaging with Aggie diversity – one-fifth the first member of the family to graduate from college, quarter ethnically diverse, and majority female.

Just watched the Aggie incoming student interviews.  Quotes like “Aggie land is home”, “I feel like I could walk up to anyone and start a conversation with them” and “It’s like a big family here” – think I am going to fit in.

Especially after my first Aggie football game – against the Arkansas Razorbacks – Sept 26th.

Howdy Aggie 1Ls and GigEm!

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IRS Isn’t Confident FATCA Will Work?

Posted by William Byrnes on August 24, 2015


Dr. Jack Manhire gets a tip of the hat for pointing out the following blog post on Federal Tax Crimes

  • The IRS might use a summons (presumably John Doe Summons) to obtain offshore creditIrs_logocard information to track and identify U.S. offshore account depositors through correspondent banks.
  • The IRS may reinstitute a broker initiative to issues summons to brokers to identify U.S. beneficial owners of foreign corporations with U.S. brokerage accounts.

What this information indicates to  me?

(1) The IRS is not so certain that FATCA reporting will be effective to catch the non-compliant taxpayers.

(2) The IRS estimates that many Americans with foreign accounts are noncompliant.

Given that the IRS has forced billions in spending in four years to bring about FATCA compliance, I find it disturbing that it may not think it is working.  Worse is that this tool was always at the IRS disposal, just like the credit card John Doe Summons, and it is a good tool.  So why not ask for funding to use it back in 2009 instead of FATCA?

It appears that the strategy for bringing non-compliant taxpayers into compliance is hodge podge, without thought to the ramifications of each, as a whole, and without addressing underlying problems, like taxpayer education and easy to file FBAR.  At least Treasury modified the FBAR date to coincide with the 1040 filing date.  But the forms are still uncoordinated with different questions, different filing procedures, different penalties.  Just not good administration techniques.

See Treasury’s Taxpayer Advocate discloses FATCA Imposes Unnecessary Burdens, Will Not Improve Compliance

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Update on Voluntary Disclosure Programmes: A Pathway to Tax Compliance

Posted by William Byrnes on August 18, 2015


OECDThis second edition reflects the wealth of practical experience gained by 47 countries gained in relation to voluntary disclosure programmes. In addition, the guidance on the design and implementation of the programmes has been updated, particularly taking into account the views of private client advisers.

 When the OECD published the first edition its report on Voluntary Disclosure Programmes in 2010, it was just 18 months after the G20 Leaders had declared the end of the era of banking secrecy and called upon countries to implement the standard on exchange of information on request. In that very short time, considerable progress in the global fight against offshore evasion had been made, with more than 500 tax information exchange agreements having been put in place that comply with the standard.

 The work of the Global Forum on Transparency and Exchange of information for Tax Purposes was reorganised to deliver a robust programme of peer reviews to ensure that agreed standards were being effectively implemented. At the same time, the OECD has always recognised the importance of offering taxpayers the opportunity to become compliant and has encouraged governments to enable people who want to regularise their tax affairs to declare the income and wealth they have concealed in the past. Voluntary disclosure programmes offer such taxpayers a way to do this and for governments a way to secure payment of missing revenue, using relatively limited administrative resources.

 Since 2010, a very substantial amount of further progress has been made in the area of international exchange of information and transparency in tax matters. The Global Forum now has more than 125 members and an impressive body of results from the ongoing programme of peer reviews.

Another major milestone in tax transparency was reached in 2014 with the adoption of the OECD Standard for Automatic Exchange of Financial Account Information in Tax Matters. Most financial centres have publicly committed to implementation and are working on a specific and ambitious timetable leading to the first automatic information exchanges in 2017 or 2018.

 With the implementation of the Standard being underway and providing the basis for a new level of transparency in tax matters, the time is right to update the guidance on voluntary disclosure programmes published in 2010.

 This updated report reflects the wealth of practical experience gained by 47 countries gained in relation to voluntary disclosure programmes. In addition, the guidance on the design and implementation of the programmes has been updated, particularly taking into account the views of private client advisers.

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Retirement: Pros, cons, commissions and costs of fixed-index annuities

Posted by William Byrnes on August 17, 2015


Fixed index annuities are the current flavor and will remain so while consumers perceive the market indexes potentially rising,” says William Byrnes, an associate dean at Texas A&M University School of Law in Fort Worth.

Sales of FIAs rose 14% to $38.7 billion in 2013 and another 24% to $48 billion in 2014, or about 21% of all annuity sales …

read the USA Today analysis of Fixed Index Annuities at USA Today and whether these are a good fit for a retirement plan.

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IRS 2015 APA for Transfer Pricing Final Rev Proc 13 Key Differences from 2013 Version

Posted by William Byrnes on August 13, 2015


This morning the US Treasury released the long awaited Advanced Pricing Agreement Procedures.IRS_logo

The 13 principal differences between these final revenue procedures and the proposed version of Notice 2013-79 are:

1. The final revenue procedure clarifies that if APMA requires, as a condition of continuing with the APA process, that the taxpayer expand the proposed scope of its APA request to cover interrelated matters (interrelated issues in the same years, covered issues or interrelated issues in other years, and covered issues or interrelated issues in the same or other years as applied to other countries), APMA will do so with due regard to considerations of principled, effective, and efficient tax administration and only after considering the views of the taxpayer and the applicable foreign competent authority. Further, APMA will communicate to the taxpayer any concerns about interrelated matters and possible scope expansion as early as possible.

2. In the interest of efficient tax administration, rollback years may be formally covered within an APA. A rollback will be included in an APA when a rollback is either requested by the taxpayer and approved after coordination and collaboration between APMA and other offices within the IRS or, in some cases, is required by APMA, after coordination and collaboration with other offices within the IRS, as a condition of beginning or continuing the APA process.

3 The final revenue procedure provides expanded guidance as to when an APA request will be considered complete.

4. The required contents of APA requests that were specified in the Appendix of the proposed revenue procedure have generally been retained.

5. Taxpayers are required to execute consent agreements to extend the period of limitations for assessment of tax for each year of the proposed APA term, and the required consent could be either general or restricted.

6. User fees are increased for APA requests but provides that total user fees may be reduced for multiple APA requests filed by the same controlled group within a sixty-day period. Also, user fee for requests for discretionary LOB relief are increased.

7. The final revenue procedure limits the scope of requests to which mandatory -pre-filing procedures apply to requests involving taxpayer-initiated positions.

8. To ensure that taxpayers have broad access to the U.S. competent authority to resolve disputes under U.S. tax treaties, taxpayers will not be required under the final revenue procedure to expand the scope of a competent authority request to include interrelated issues as a condition of receiving competent authority assistance. Taxpayers may still be required to provide information that will allow the U.S. competent authority to evaluate the appropriateness of the relief sought under the applicable U.S. tax treaty in light of the taxpayer’s positions on interrelated issues.

9. The final revenue procedure clarifies that the U.S. competent authority may consult with taxpayers with respect to certain additional issues that may arise in connection with competent authority requests, such as issues relevant to the determination of foreign tax credits and repatriation payments.

10. The final revenue procedure provides additional guidance on requesting discretionary determinations under the limitation on benefits articles of U.S. tax treaties, including time frames for taxpayers to provide notification of material changes in fact or law and the introduction of a triennial statement procedure to maintain a favorable grant of discretionary benefits.

11. Consistent with the objective of providing taxpayers with broad access to the U.S. competent authority to resolve disputes under U.S. tax treaties, the U.S. competent authority will not condition assistance on the taxpayer’s notification of the U.S. competent authority, or on obtaining its concurrence, with respect to signing a standard Form 870 with IRS Examination.

Similarly, a taxpayer will not be required to obtain the U.S. competent authority’s agreement prior to entering into a closing agreement or similar agreement with IRS Examination, but in these cases the assistance provided by the U.S. competent authority will be limited to seeking correlative relief from the foreign competent authority, thus potentially not eliminating double taxation.

12. The final revenue procedure provides additional information about the process followed by the U.S. competent authority in conducting its review under the simultaneous appeals procedure.

13. The final revenue procedure clarifies and refines the bases on which the U.S. competent authority may decline to accept a competent authority request or may cease providing assistance, consistent with U.S. tax treaty policy that taxpayers should have broad access to the U.S. competent authority to resolve instances of taxation not in accordance with the applicable U.S. tax treaty.

Procedures for Advance Pricing Agreements  Download APA New Procedures Rev Proc 15-40

Procedures for Requesting Competent Authority Assistance under Tax Treaties  Download APA New MAP Procedures Rev Proc 15-41

William Byrnes is the primary author of Lexis’ Practical Guide to US Transfer Pricing which provides 3,000 pages of in-depth analysis and practical examples for the corporate transfer pricing counsel and risk manager.

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New IRS Procedures to Ensure Effectiveness of Civil FBAR Penalties

Posted by William Byrnes on August 12, 2015


The purpose of the IRS interim guidance is to implement procedures to improve the administration of the Service’s FBAR compliance program.

When asserting an FBAR penalty, the burden is on the IRS to show that an FBAR violation occurred Irs_logoand, for willful violations, that the violation was in fact willful. The FBAR penalty provision of Title 31 establishes only maximum penalty amounts, leaving the IRS to determine the appropriate FBAR penalty amount based on the facts and circumstances of each case.

Read the May 13, 2015 IRS FBAR Guidance

Prof Jack Townsend, on his federal tax crimes blog, discusses the recent Moore v United States (W.D. WA 2015) in which the Court “admonishes the IRS and imposes a cost for misleading the taxpayer” about a FBAR assessment.

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OECD Releases 3 New Reports to Combat Offshore Tax Evasion

Posted by William Byrnes on August 8, 2015


The OECD today releases three new reports to help jurisdictions and financial institutionsOECDimplement the global Standard for automatic exchange of financial account information.

  • Common Reporting Standard Implementation Handbook (the CRS Handbook): this first edition provides practical guidance to assist government officials and financial institutions in the implementation of the Standard. It sets out the necessary steps for implementation and will help financial institutions and governments implement the Standard more efficiently by promoting the consistent use of optional provisions, identifying areas for alignment with FATCA and addressing the operational and transitional challenges resulting from the staggered implementation of the Standard. It also contains answers to frequently asked questions (FAQs) received from business and governments, with a view to furthering the effective implementation of the Standard. The Handbook is intended to be a “living” document and will be updated on a regular basis.

  • Offshore Voluntary Disclosure Programmes: this second edition contains a wealth of practical experience from 47 countries in relation to their voluntary disclosure programmes. The guidance on the design and implementation of such programmes has been updated, particularly taking into account the views of private client advisers. The limited time left until the automatic exchange of information under the Standard becomes a reality will in many instances be the last window of opportunity for non-compliant taxpayers to voluntarily disclose. This is therefore a crucial moment to update the publication and reflects OECD policy of encouraging countries to examine voluntary compliance strategies that enable non-compliant taxpayers to come forward.

The Standard calls on jurisdictions to obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis. Over 90 jurisdictions have committed to implement the Standard, with the first exchanges starting in 2017/2018, subject to the completion of necessary legislative procedures.

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