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2016 Model Treaty – Introduction

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On February 17, 2016, the Treasury Department released its 2016 Model Treaty. The model serves as the baseline from which the U.S. initiates treaty negotiations. Various provisions are discussed in detail in this month’s Insights.  

Stanley C. Ruchelman examines several provisions, pointing out various areas of super-complexity that are encountered in the 2016 Model Treaty in order to prevent double non-taxation. This shift in policy is a byproduct of the O.E.C.D.’s B.E.P.S. initiative.

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U.S. Treasury Announces New U.S. Model Income Tax Treaty

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On February 17, 2016, the Treasury Department released its 2016 Model Treaty. The model serves as the baseline from which the U.S. initiates treaty negotiations. Various provisions are discussed in detail in this month’s Insights.

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Exchange of Information: Israel Inches Toward International Norms

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The State of Israel depends on immigration for growth in population and capital. Favorable tax rules and confidentiality rules are key pillars of the policy to promote immigration. In a world that is obsessed with B.E.P.S., Israeli policy towards confidentiality is experiencing change. Boaz Feinberg and Ofir Paz of ZAG-S&W, Tel Aviv discuss the scope of that change.

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India Budget 2016-17

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On February 29, 2016, the Indian Finance Minister presented Budget 2016-17 and Finance Bill, 2016 to the Indian Parliament. Significant amendments to the tax law reflecting several B.E.P.S. recommendations and key economic policy proposals were announced. Jairaj Purandare, the Founder and Chairman of JPM Advisors Pvt. Ltd. explains the winners and losers.

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Insights Vol. 3 No. 2: Updates & Other Tidbits

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This month, Insights looks at the latest development in the deferred prosecution agreement with Swiss banks, a property tax increase in Jerusalem for “ghost apartments,” Canadian procedures to exempt foreign employers from withholding tax on salaries paid to certain individuals that are resident outside of Canada but work in Canada from time to time, and the adverse effect outside the U.S. of deferred CbC reporting for U.S.-based multinationals.

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Insights Vol. 3 No. 2: F.A.T.C.A. 24/7

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This month, Insights looks at the I.G.A. experience in Mexico; updated Form W-8BEN-E and instructions; an announcement on forthcoming regulations that will ease burdens on F.F.I.’s; new I.G.A. competent authority arrangements signed with Norway, Barbados, Romania, Spain, Italy, and Costa Rica; a new I.G.A. with St. Lucia; and the most recent list of I.G.A. partner countries.

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Field Procedures for Handling Foreign-Initiated “Specific” Requests Under E.O.I. Agreements

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Once again, Insights looks at the I.R.S.'s International Practice Units, this time focusing on how the I.R.S. deals with information exchanges at its field level. Sheryl Shah and Stanley C. Ruchelman explain the procedures followed by the Large Business & International (LB&I) division.

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Tax 101: Corporate Reorganizations Part I – Types A & B

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Tax 101 is back, this time addressing the basic concepts of tax-free A- and B-reorganizations. The first relates to statutory mergers and the latter relates to share-for-share exchanges. Rusudan Shervashidze and Andrew P. Mitchel explain the basic concepts for non-tax savvy readers.

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3M Case to Test “Foreign Legal Restrictions” Regulations Under Code §482

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Who knows best, the I.R.S. or the U.S. Supreme Court? Refusing to give up on its position that Code §482 trumps a foreign law that caps amounts used in related-party transactions, the I.R.S. is challenging 3M, a corporation that is acting in compliance with Brazilian law. Elizabeth V. Zanet and Galia Antebi delve into a legal issue that most adviser though was settled years ago by the U.S. Supreme Court.

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A Concise Guide to Acquisition Vehicles for Purchase of U.S. Real Estate by Foreign Individuals

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Question: How many ways are there to structure an investment in U.S. real property by a foreign person? Answer: Many. Nina Krauthamer describes five.

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Partnership Tax Traps and Recent Guidance

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At the end of 2015, the I.R.S. issued a notice designed to limit the instances in which contributions of property to foreign partnerships benefit from nonrecognition of gain. In January, the I.R.S. came under pressure to modify its announced position in final regulations that are currently being developed. Philip R. Hirschfeld explains.

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Apple in Europe – The Uphill Battle Continues

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U.S. multinationals are the target of a global trade war initiated by the European Commission, resulting from its attack on State Aid in the form of advance rulings. Christine Long and Beate Erwin explain the latest developments and the brewing response in the U.S. Congress.

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B.E.P.S. Initiative Spawns Unfavorable Permanent Establishment Court Decisions

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Two court cases in different parts of the world attack tax plans premised on the absence of a permanent establishment. Pertinent U.S. income tax treaties, with Japan and India respectively, were effectively ignored in each case. Taketsugu Osada, Christine Long, and Stanley C. Ruchelman explain.

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International Practice Unit: I.R.S. Releases Subpart F Sales and Manufacturing Rules

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Beate Erwin, Kenneth Lobo, and Stanley C. Ruchelman explain how the branch rule works when a C.F.C. operates a manufacturing or selling branch in another country. While the concept is easy to explain, the computations are somewhat confusing. The article explains all.

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International Practice Unit: What the I.R.S. Looks for When Deciding if a U.S. Shareholder Has an Interest in a C.F.C.

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Rusudan Shervashidze and Stanley C. Ruchelman explain the tests the I.R.S. applies to determine whether a foreign corporation is a C.F.C. and a U.S. person is a “U.S. Shareholder” potentially subject to tax under Subpart F. They explain the tax forms that examiners are encouraged to look for and the telltale signs of direct, indirect, and constructive ownership of shares by U.S. persons.

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International Practice Unit: License of Intangible Property from U.S. Parent to a Foreign Subsidiary

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Christine Long explains how I.R.S. examiners are encouraged to determine whether foreign subsidiaries are paying fair compensation for using I.P. owned by U.S. parent companies.

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International Practice Unit: Monetary Penalties for Failure to File Form 5471

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The I.R.S. has initiated increased enforcement efforts to ensure compliance with information reporting obligations. Such efforts include increased assessment of penalties. Galia Antebi explains.

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International Practice Unit: Deemed Annual Royalty Income Under Code §367(d)

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Christine Long delves into the world of I.P. contributions to foreign subsidiaries. She explains how Code §367(d) works and how the regulations have been revised recently to attack goodwill and going concern contributions.

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The Peripatetic Client: What to Expect When a Foreign Settlor Becomes a U.S. Tax Resident→

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Published in GGi Insider No. 81, January 2016 (p.35).

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Taxpayers Take Note: I.R.S. Publishes Audit Guides for International Examiners

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U.S.-based companies facing an I.R.S. examination of international operations may secretly wish to obtain an advance look at how I.R.S. examiners plan to carry out the examination. After all, what better way to prepare for a test than to get the questions in advance? Surprise – the Large Business & International (LB&I) Division of the I.R.S. has published its training guides for examiners.

LB&I is responsible for examining tax returns reporting international transactions, and it is in the process of revising the method by which returns are chosen for examination and the the process by which those examinations are conducted. Several aspects of the guidance will be addressed through out this edition of Insights. Stanley C. Ruchelman explains.

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