NEWS BRIEFS for May 16 2016
The latest headline news from Transfer Pricing Week includes: MEP calls for more action to fight aggressive corporate tax planning by multinationals and AG opinion in Masco Denmark.
MEPs calls for more action to fight aggressive corporate tax planning by MNEs
May 16 - Members of the European Parliament are calling for further “safeguards” to ensure competition in the single market is not distorted by tax deals with multinationals.a
The calls came as MEPS welcomed the European Commission’s proposal for national tax authorities to exchange tax information and fight aggressive corporate tax planning.
A report by Dariusz Rosati (pictured, homepage) – the first legislative proposal in the Commission's Anti-Tax Avoidance Package – was approved on 12 May by 567 votes to 30, with 53 abstentions, and sets out Parliament's recommendations to EU member states, which would have to decide unanimously on the Commission's proposal.
The proposal would oblige MNEs with total consolidated revenues of at least €750 million ($850 million) to file a country-by-country report in the jurisdiction in which the ultimate parent entity of the group is resident for tax purposes.
AG opinion in Masco Denmark and Damixa case: Danish rules are not a restriction
May 16 - Danish rules in the Masco Denmark and Damixa case are not a restriction on the freedom of establishment, the advocate general (AG) of the Court of Justice of the European Union found in her opinion on the referred questions.
The rules allow for a tax exemption on interest income if the corresponding interest deduction is denied because of thin capitalisation rules, but effectively only if the debtor company is resident in Denmark.
The differing treatment is not a restriction on the freedom of establishment, AG Juliane Kokott decided in an opinion published May 12. In addition, even if the difference was a restriction, it could be justified based on the balanced allocation of taxing rights as well as the coherence of the tax system, the AG said. The case is Masco Denmark ApS and Damixa ApS v Skatteministeriet case (C-593/14).
Robert Stack: countries in BEPS negotiations tried to ‘target’ US MNEs
May 16 - Countries hoped to rewrite international tax rules during BEPS negotiations so they could pocket extra tax revenue at the expense of the US, Robert Stack, a US Treasury Department deputy assistant secretary said at a Washington conference on May 13.
During negotiations involving intellectual property and the digital economy, countries were “more than happy to go after US multinationals who are US taxpayers because, after all, they don’t vote in those countries," Stack said, adding that the MNEs were a “sitting target.”
“One of the extraordinary ways the US did itself harm was to let this deferred income sit offshore and for every other country to think ‘by golly that must be mine, the US is not taxing it,'” he said according to a report in MNE Tax.
India’s Supreme Court agrees to hear Vodafone transfer pricing case
May 16 - India’s Supreme Court has agreed to hear an appeal challenging a favourable Vodafone India Services Pvt Ltd. ruling, according to reports in the Indian media.
The Bombay High Court earlier granted relief to Vodafone and set aside the tax authority’s demand in a transfer pricing tax dispute involving the sale of Vodafone’s call centre business to Hutchison Whampoa Properties and assignment of call options to Vodafone International Holdings BV.
IRS releases a practice unit involving section 482
May 16 – The Internal Revenue Service’s Large Business and International division has released a practice unit explaining that section 482 allows the IRS to make allocations so that taxpayers clearly reflect income attributable to controlled transactions and to prevent tax evasion.
In general, section 482 can only be used by the IRS, but taxpayers are allowed to invoke section 482 under certain situations.