U.S. Senate Focuses on Dividend Withholding Tax Abuse: Are Changes on the Way?
(September 23, 2008)
The U.S. Senate Permanent Subcommittee on Investigations (the “Subcommittee”) held a hearing on September 11, 2008, entitled “Dividend Tax Abuse: How Offshore Entities Dodge Taxes on U.S. Stock Dividends.” ...
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New Withholding Tax Audit Guidelines
(August 15, 2008)
The IRS published guidelines on August 7, 2008, for their examiners to follow when conducting withholding tax audits of U.S. withholding agents other than Qualified Intermediaries (“Guidelines”) ...
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GAO report on Qualified Intermediary ("QI") Program and U.S. Withholding Agent ("USWA") Compliance
(March 18, 2008)
Eight years ago, the IRS allowed foreign institutions to hold securities on behalf of their clients and obtain a reduced withholding rate without disclosing their client’s identity, provided the institution agreed to become a QI...
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US Income Tax Treaties with Belgium, Denmark, Finland & Germany
(February 1, 2008)
On January 2, 2008, the Treasury Department announced the entry into force of Protocols amending existing income tax treaties with Germany, Denmark and Finland and a new income tax treaty and protocol with Belgium...
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Due Diligence Needed for All M&A
(January 11, 2008)
Recent experience shows that financial institutions (“FIs) and multi-national corporations (“MNCs) who acquire companies do not adequately review the tax withholding and information reporting activities of the acquiree as part of their due diligence...
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Proposed NRA Withholding Regulations on Redemptions of Actively Traded Stock
(October 24, 2007)
The Treasury and the IRS issued proposed regulations (“Prop. Regs.”) on October 24, 2007, regarding a U.S. financial institution’s NRA withholding and reporting obligations on distributions in redemption of actively traded stock.
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The Electronic Form W-8: A Potential Cure For Your Compliance Headaches?
(July 30, 2007)
Each year, Withholding Agents (“WAs”) spend countless hours collecting and validating paper Forms W-8. Worse yet, getting a valid Form can take a number of tries, frustrating both the customer and the WA. Now, there is an easier, more accurate, and less expensive way to comply...
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IRS Issues Draft Form W-8BEN and Instructions
(July 9, 2007)
The IRS recently issued a draft version of Form W-8BEN tentatively dated January 2008. The instructions to the draft form provide many clarifications of the positions that the IRS has taken in that past, as well as new positions and requirements.
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Proposed Tax Shelter Disclosure Regulations
(January 12, 2007)
The Treasury and IRS issued proposed regulations ("Regs") on November 2, 2006 that when finalized, will significantly modify the tax shelter disclosure regulations.
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Tax Arbitrage: A Mixed Message
(October 31, 2006)
Although developed country tax authorities are focusing on tax arbitrage -- transactions that exploit the different treatment of the same cross-border transaction in two or more countries -- the US has not defined acceptable arbitrage versus abusive tax avoidance.
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Dramatic New Expansion of US Tax Withholding and Reporting Rules?
(September 19, 2006)
Congress recently held hearings to look into the effectiveness of the US backup withholding and reporting rules to police offshore tax shelter abuses by US taxpayers: Congress did not like what it heard.
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Proposed Foreign Tax Credit (“FTC”) Regulations Affect Popular Tax Structures
(August 14, 2006)
Recently proposed regulations define which US person may claim FTCs by “clarifying” which person or entity is legally liable for the foreign tax subject to credit.
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U.S. Zero Withholding on Dividends
(October 7, 2005)
The U.S. Treasury Department just released its most recent Treaty Protocol that eliminates U.S. taxation on dividends paid by U.S. subsidiaries of foreign companies.
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What Should You Make of the Tax Court’s Transfer Pricing Decision in Xilinx?
(September 8, 2005)
How much discretion does the IRS have to determine what tax return positions “clearly reflect income”? One would think quite a lot because § 482 provides sweeping authority to the IRS to make this determination and the IRS regularly uses it to attack tax abuses.
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Practical Insights into IRS Goals for International Audits
(June 27, 2005)
Senior IRS officials recently described 3 main goals of their international tax audits: 1) to audit more taxpayers; 2) to assign more staff to issues most likely to lead to sustainable adjustments; and 3) to make their audits more current.
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Qualified Intermediary (QI) External Audits: Meeting with IRS (17/5/05)
(May 27, 2005)
The IRS met with representatives of the Big 4 accounting firms and Burt, Staples & Maner (BSM) on May 17, 2005, to discuss external audits of QIs. Two items bear particular mention.
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Are You Ready for Simultaneous Multi-Country Audits of Your Cross Border Structures and Transactions?
(May 13, 2005)
The US, UK, Canada and Australia formally launched their Joint International Tax Shelter Information Center (“JITSIC”) on May 4, 2004, to allow the four countries to coordinate – and accelerate – their attacks on “abusive” cross border transactions.
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Maximize the New US Domestic Production (§ 199) Deduction (“DPD”)
(April 21, 2005)
Congress gave companies a new deduction for “domestic production” in 2004 to compensate them for the tax benefits they had under the FSC export regime.
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IRS Denies Treaty Benefits to Prevent Double Non-Taxation
(March 25, 2005)
The IRS is targeting transactions that use U.S. tax treaties to obtain unintended tax benefits, such as simultaneously avoiding tax in both treaty countries (“double non-taxation”). IRS Commissioner Everson identified the prevention of double non-taxation as a key enforcement concern.
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IRS Voluntary Compliance Program (“VCP”): Underpayment Interest News
(March 4, 2005)
The IRS will not assess underpayment interest on remedied accounts for financial institutions participating in the VCP, calling off Treas. Reg. 1.1441-1(b)(7)(iii). Financial institutions have yet another compelling reason to consider the VCP in addition to the liberalized application of the withholding tax and penalty provisions outlined in our letter of November 2004.
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Draconian Penalties and Second Opinions
(February 17, 2005)
Congressional reaction to the marketing of tax shelters has led to what can only be described as two draconian anti-tax avoidance penalties in the recently passed "Jobs Act" ("Act").
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Transfer Pricing Preparation and Audit Review (“TPPAR”) Program Update
(February 10, 2005)
The press has been filled with stories of the IRS’s increasingly aggressive transfer pricing audit and litigation activity. It is not difficult to understand why.
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“Cargo Cult” Tax Opinions Won’t Stop IRS Push for International Penalties
(October 28, 2004)
A “cargo cult” is a belief that if one goes through the proper rituals – building a runway and control tower on a remote South Sea island, for instance – that the results one wants (e.g., planes full of cargo) are destined to occur.
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BNA International Article on Transfer Pricing
(August 31, 2004)
Enclosed is an article I wrote entitled, "Are You Ready for the New U.S. Approach to Compliance?", which appears in the August edition of BNA International. The article describes the increasingly strict transfer pricing environment in the United States and gives some practical advice on what steps to take now to help avoid problems with the I.R.S. later.
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Increasing IRS Pressure on Transfer Pricing Audits
(July 1, 2004)
The “softer, gentler” IRS is gone. IRS enforcement is becoming much tougher, and one of the main areas of toughening is transfer pricing audits.
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Interpretation of New US-UK Tax Treaty
(May 4, 2004)
We, along with many others in the tax community, wonder why the US provided a number of far more generous terms in the new US-Japan Tax Treaty than in the new US-UK Tax Treaty, even though only a year separates the two.
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Key Points From IRS Meeting in New York
(April 22, 2004)
The IRS met with the Big Four accounting firms and Burt, Maner, Miller & Staples on April 20, 2004, in New York to hear from key QI practioners about how the external audits are going and to give them a progress report. You should be aware of several points.
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New Crackdown on Abusive Cross-Border Tax Transactions: Broader, Faster and Wider
(March 26, 2004)
IRS Commissioner Everson announced on March 15 that the IRS will form a task force with the U.K., Canada and Australia to identify and close down “abusive” cross-border transactions.
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How to Persuade the I.R.S. and Treasury to Change Their Mindsroposed Schedule M-3: Giving the IRS a Roadmap to Questionable Transactions
(March 19, 2004)
How a recent change in the U.S. withholding tax rules came about is worth considering.
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Proposed Schedule M-3: Giving the IRS a Roadmap to Questionable Transactions
(February 4, 2004)
The I.R.S. proposed Schedule M-3 last week, a new, highly detailed schedule for the tax returns of corporations with assets of $10 million or more. The schedule will highlight the book-tax differences of more than 80 specified categories of income and expense – an easy roadmap for the I.R.S. quickly to identify, not just tax shelters, but many questionable tax positions.
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Treaty Abuse – Doctrine Into Practice
(January 13, 2004)
Any cross-border financing (“CBF”) is at risk of attack if it relies on a treaty for a result not intended by the two negotiating governments. We have recommended that our clients keep this basic principle in mind when assessing any current or potential CBF, because a US court may well consider it in deciding if a CBF is legitimate.
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