Two months after announcing plans to address certain "inappropriate foreign tax credit transactions," (see International Tax Review, US Outbound Update, April 2004, p97), the US Treasury Department and the Internal Revenue Service (IRS) issued long-anticipated temporary and proposed regulations governing partnership allocations of creditable foreign taxes under Internal Revenue Code section 704(b). Under these regulations, an allocation of creditable foreign taxes cannot have substantial economic effect and as such the taxes must be allocated in accordance with the partners' interests in the partnership.
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Despite the relief, Brazil’s government has also presented a bill which seeks to re-impose a tax burden on companies’ payroll, one local tax specialist told ITR
While successful pillar two implementation will require collaboration across all units, a combination of internal and external tax advice is at the centre of the effort