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New Italian Transfer Pricing Regulations Affect Multinational Enterprises

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New Italian Transfer Pricing Regulations Affect Multinational Enterprises

Italian transfer pricing documentation rules were introduced in 2010. The system affords taxpayers the possibility of penalty protection for transfer pricing adjustments, provided that qualifying transfer pricing documentation is maintained by the taxpayer. Late in 2020, new regulations were introduced. The new regulations contain several important changes for multinational enterprises based in Italy or having an Italian member. Marco Valdonio, a partner of Maisto e Associati, Milan, and Mirko Severi, an associate of Maisto e Associati, Milan, explain the principal revisions to the Italian rules. They address the changes that broaden the scope of companies required to maintain a master file, reductions in the scope of the exception to annual filing for certain local members of a foreign-based multinational group, and changes to the content of both the master file and the local file.

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European Union’s New Reporting Obligations for Tax Intermediaries: Key Features of the Belgian Administrative Guidance – D.A.C.6

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European Union’s New Reporting Obligations for Tax Intermediaries: Key Features of the Belgian Administrative Guidance – D.A.C.6

In their article entitled “European Union’s New Reporting Obligations for tax Intermediaries: Key Features of the Belgian Administrative Guidance – D.A.C.6,” Werner Heyvaert and Vicky Sheikh Mohammad of AKD Benelux Lawyers, Belgium, address key features of the Belgian administrative guidance and the list of Frequently Asked Questions recently published by the Belgian Revenue Service.

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Implementation of the Mandatory Disclosure Directive in the Netherlands – D.A.C.6

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Implementation of the Mandatory Disclosure Directive in the Netherlands – D.A.C.6

In his Article entitled “Implementation of the Mandatory Disclosure Directive in the Netherlands – D.A.C.6,” Paul Kraan of Van Campen Liem in Amsterdam, zooms in on a number of aspects and features of D.A.C.6 that are addressed in the Guideline, noting that there may be differences in interpretation between the various Member States with respect to the same provisions of the directive. Some are generic, others focus on specific Categories of Hallmarks such as B, C and E and the main benefit test. The article serves as a guide through a maze of troubling issues for which firm answers may not exist at this time.

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The Implementation of the D.A.C.6 E.U. Directive in Germany

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The Implementation of the D.A.C.6 E.U. Directive in Germany

Because German tax authorities have not yet published the final version of the administrative, commentary by German tax advisers have filled the gap pointing out open issues for which guidance should be provided. In their article for Insights entitled “The Implementation of the D.A.C.6 E.U. Directive in Germany,” Petra Eckl and Felix Schill of GSK Stockmann in Frankfurt, address the relevant issues, including covered taxes, tax arrangements, cross-border element, intermediary, hallmarks, main benefit test, and privilege.

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D.A.C.6 Implementation in Luxembourg – Risk of Multiple Reporting Obligations

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D.A.C.6 Implementation in Luxembourg – Risk of Multiple Reporting Obligations

In their article entitled “D.A.C.6 Implementation in Luxembourg – Risk of Multiple Reporting Obligations Exists,” Sonia Belkhiri and Jiar Al-Zawity of Wilson Associates, International Lawyers, Luxembourg, discuss official guidance to date and caution of the likelihood that exists for double counting reporting mechanisms. Their view is that the limited clarification within the commentaries to the draft law in Luxembourg and the State Council opinion have not been followed by the Luxembourg Government. Practical guidance from the Luxembourg tax authority has not been sufficient.

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D.A.C.6 – The Italian Way

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D.A.C.6 – The Italian Way

In their article entitled “D.A.C.6 – The Italian Way,” Fabio Chiarenza and @Carmen Adele Pisani of Gianni & Origoni, Rome, address the Italian rules implementing D.A.C.6. In comparison to advisers in other Member States who point out the areas in which guidance is sorely missed, the authors are able to take a deep dive into already issued Italian guidance, giving examples of how the guidance works in real life.

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French Administrative Pronouncements on D.A.C.6

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French Administrative Pronouncements on D.A.C.6

In their article entitled “French Administrative Pronouncements on D.A.C.6,” Mallory Labarriere and Anne-Lise Chagneau of Nexa Avocats, Paris, have prepared the ultimate guide to D.A.C.6 rules in France.

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Update on Spanish Mandatory Disclosure Regime – D.A.C.6

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Update on Spanish Mandatory Disclosure Regime – D.A.C.6

In their article entitled “Update on Spanish Mandatory Disclosure Regime – D.A.C.6,” José María Cusi, Juan Roda Moreno, and Cristina Rodríguez Lluch of CHR Legal, Barcelona, explain the problems encountered when Spanish law adopts D.A.C.6 terms that have no legal meaning in Spain, and do so without definition.

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D.A.C.6 in Ireland – Key Features of the Administrative Guidance

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D.A.C.6 in Ireland – Key Features of the Administrative Guidance

In his article entitled “D.A.C.6 in Ireland – Key Features of the Administrative Guidance,” Martin Phelan of Simmons & Simmons, Dublin, addresses the rules that apply to “cross-border arrangements” that will be reportable if one or more relevant “Hallmarks” are applicable. His F.A.Q.’s allow the reader to focus easily on the most important issues and answers.

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D.A.C.6 Implementation in Cyprus

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D.A.C.6 Implementation in Cyprus

In her article entitled “D.A.C.6 Implementation in Cyprus,” Nairy Merheje, of Der Arakelian-Merheje LLC in Nicosia, explains how Cyprus intends to overcome these challenges so that the Cyprus government can target and capture potentially aggressive tax planning arrangements resulting in tax base erosion of one or more E.U. Member States.

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Brace Yourself, Pilots: Your Tax Home Does Not Fly With You

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Brace Yourself, Pilots: Your Tax Home Does Not Fly With You

The concept of a “tax home” is somewhat difficult to explain to persons resident outside the U.S. It has its origin in case law involving taxpayers who work at a temporary location for a finite, but long, period of time. Could the taxpayer deduct living costs incurred in the temporary location when the assignment bears a resemblance to a business trip, albeit for a much longer period of time. From there, it morphed into a requirement for U.S. expats wishing to claim the benefit of the foreign earned income exclusion and its companion provision, the housing deduction. In the case of a pilot who flies between a rotation of airports, and in many instances, between a rotation of countries, what test is used to determine the pilot’s tax home? Is it where the pilot happens to be at any time as is the rule for an itinerant worker? Is it where the pilot lives with his family? Is it the starting place for an outbound journey? Is it another place? Gianluca Mazzoni, who holds an S.J.D. ‘20 and L.L.M. ’16 from the University of Michigan Law School, analyzes Cutting v. Commr., a case involving a pilot. The article address the terms “bona fide resident” and “place of abode,” each of which has a meaning for expats claiming the benefits mentioned above.

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What is the Corporate Transparency Act and What Does it Mean for Business and Incorporators?

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What is the Corporate Transparency Act and What Does it Mean for Business and Incorporators?

The Corporate Transparency Act (“C.T.A.”) was signed into law during the waning days of the Trump Administration. When effective, the C.T.A. will require businesses to disclose Beneficial Owner information to FinCEN at the time of company formation and when material changes are made in a subsequent year. Roxana Diaz, Corporate Administrator in the Miami Office of Corpag Registered Agents (USA), Inc., answers the eleven most important questions that affect persons incorporating a business and the professionals providing advice or assistance in the incorporation process.

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French Treatment of Foreign Trusts

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French Treatment of Foreign Trusts

The French Trust Register was introduced in December 2013 by a law enacted to stop tax fraud and serious economic and financial crimes. In October 2016, the French Constitutional Court ruled that public access to the Trust Register was unconstitutional. In the period since that decision, French authorities have issued two rulings allowing a broad class of persons to gain access to trust data. including tax officers, customs officials, professionals having compliance duties to combat money laundering and terrorist financing, journalists, and N.G.O.’s. Dimitar Hadjiveltchev, Partner, Adea Meidani, Counsel, and Loïc Soubeyran-Viotto, Associate, all of CMS Francis Lefebvre Avocats in Paris, address recent events regarding French tax treatment of foreign trusts and beneficiaries. They begin with the trust register – who must report, what must be reported and who have access – and move on to explain the myriad of taxes that may be imposed on trusts, settlors, and beneficiaries including income tax on distributions, inheritance and gift taxes, and real estate wealth tax.

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Continued D.A.C.6 Reporting Obligations After Brexit

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Continued D.A.C.6 Reporting Obligations After Brexit

At midnight on the December 31, 2020, the U.K. left the E.U., having secured a Free Trade Agreement (“F.T.A.”). The farewell headline grabber in the drawn-out departure process relates to D.A.C. 6, the Mandatory Disclosure Reporting (“M.D.R.”) rule that applies to Intermediaries. Beginning in 2021, the only reporting that will be required in the U.K. will involve the Category D Hallmark. It applies to fact patterns that are designed to hide ownership. Here, reporting will be required to maintain the integrity of the O.E.C.D. M.D.R. Gary Ashford, a Partner (non-lawyer) of Harbottle and Lewis L.L.P., London, explains the Category D Hallmark and the ongoing reporting requirements that apply to U.K.-based intermediaries after Brexit.

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Exchanges of Information in Tax Matters and Fundamental Rights Of Taxpayers – E.C.J. Delivers Landmark Ruling in the Aftermath of Berlioz

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Exchanges of Information in Tax Matters and Fundamental Rights Of Taxpayers – E.C.J. Delivers Landmark Ruling in the Aftermath of Berlioz

In a post B.E.P.S. world, tax transparency is a mantra among stakeholders in government, media, and nongovernmental organizations. The taxpayer may own the funds, but the stakeholders wish to ensure that a chunk of the funds are spent as they deem appropriate. In this environment, governments have a stake in obtaining information on where taxpayers hold their funds and exchanges of information between governments has become a regular occurrence. In the European Union, questions arise as to whether an information request violates a taxpayer’s fundamental rights, and in the event of a fishing expedition, whether the taxpayer has an effective remedy. In a recent decision issued by the E.C.J., the court held that financial institutions holding information have rights to intervene, but not taxpayers must wait until a tax authority assesses tax. Werner Heyvaert, a partner in the Brussels Office of AKD Benelux Lawyers and Vicky Sheikh Mohammad, an associate in the Brussels Office of AKD Benelux Lawyers, explain the rationale of the court and question the validity of its conclusion.

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Watch Out Whirlpool: The I.R.S. Has Put 50 Million Wrinkles in Your Permanent Press Cycle

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Watch Out Whirlpool: The I.R.S. Has Put 50 Million Wrinkles in Your Permanent Press Cycle

As 2020 comes to a close, Subpart F is approaching its 59th anniversary as part of the Internal Revenue Code. During that period of time, various portions have been revised, but by and large, the branch rule has remained untouched. Under that rule, a C.F.C. based in a country that exempts income of a permanent establishment can be treated as two companies where manufacturing takes place in one country and selling activity takes place in a different country. From a U.S. viewpoint, the same abusive tax planning can be undertaken between the head office and the branch as can be undertaken between brother-sister or parent-subsidiary C.F.C.’s. Nonetheless, no taxpayer ever lost a case brought by the I.R.S. until this year. In Whirlpool Financial Corp. v. Commr., Whirlpool Corporation determined that the branch rule regulations were invalid when manufacturing operations were conducted by the branch and selling activities were conducted by the head office. Arguing that the law permitted the loophole because a single corporation conducted the manufacturing operations, Whirlpool became the first U.S. Shareholder to lose a case in which the I.R.S. asserted the application of the branch rule to a manufacturing branch. Gianluca Mazzoni, S.J.D. 2020 and L.L.M.2016 International Tax, University of Michigan Law School, explains the plan that was adopted, the argument presented by the taxpayer, the decision of the court, and the likely issues that will be addressed on appeal.

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Final Regs Implement Changes to Source-of-Income Rules for Inventory Sales

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Final Regs Implement Changes to Source-of-Income Rules for Inventory Sales

In late 2019, the I.R.S. proposed regulations modifying rules for determining the source of income from sales of inventory property produced by a taxpayer outside the U.S. and sold within the U.S., or produced by the taxpayer within and sold without the U.S. Final regulations were published in October. The regulations implement changes made by the Tax Cuts and Jobs Act provide guidance under Code §865(e)(2) regarding sales of inventory through a U.S. office or fixed place of business. In her article, Léa Verdy, an attorney admitted to practice in New York and Paris, presents the sourcing rules for sales of inventory before the T.C.J.A, the changes implemented by the T.C.J.A., the guidance offered by the I.R.S., and the consequences of the regulations for taxpayers.

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Home Thoughts from Abroad: When Foreigners Purchase U.S. Homes

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Home Thoughts from Abroad: When Foreigners Purchase U.S. Homes

Remember when tax planning was an exercise in solving two or three potential issues for a client? Memorandums ran eight pages or so. Those days are long gone, especially when planning for a non-U.S. individual’s purchase of a personal use residence in the U.S. A myriad of issues pop up once the property is identified, so that planning which begins at that time often misses significant tax issues encountered over the period of ownership and beyond. Michael J.A. Karlin, a partner of Karlin & Peebles, L.L.P., Los Angeles, and Stanley C. Ruchelman, address the big-picture issues in an article that exceeds 50 pages. Included are issues that arise leading up to the acquisition, during ownership and occupancy, the time of disposition, and at the conclusion of life. The article is the “go-to” document for tax planners.

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U.K. Mandatory Disclosure Regime (DAC6)

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U.K. Mandatory Disclosure Regime (DAC6)

DAC6, adopted by the European Commission and enacted into law in the U.K., imposes a mandatory obligation on intermediaries, or individual or corporate taxpayers, to make disclosures to H.M.R.C. of certain cross-border arrangements and structures that could be used to avoid or evade tax. It also provides for automatic exchanges of information among E.U. Member States. Intermediaries know a cross-border arrangement is reportable when it meets certain hallmarks. In his article, Gary Ashford, a non-lawyer partner of Harbottle & Lewis, London, explains in plain English all the key terms and obligations. The European Commission has proposed that Member States defer the start date for reporting, however, the U.K. Government has not made any public announcement. This article is timely for those who are intermediaries in a reportable transaction.

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Taxation of Real Estate Investment in Israel

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Taxation of Real Estate Investment in Israel

In almost every country, the way real estate investments are taxed depends on a wondrous blend of factors, including the status of the owner of the property (individual or corporation), the nature of the asset (residential property, commercial property, land) and the purpose of investment (producing rental income or entrepreneurial profit). Israel is no different. In their article, Anat Shavit, a partner of Fischer Behar Chen Well Orion & Co. in Tel Aviv, and Ofir Fartuk, a senior associate at the same firm summarize the main factors one should take into consideration when contemplating real estate-related investments in Israel.

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