GILTI? IRS issues proposed regulations

Section 951A, which was added by the Tax Cuts and Jobs Act (TCJA) enacted in December, 2017, subjects a current US tax on a U.S. shareholder’s pro rata share of its global intangible low tax income (GILTI).

Under the TCJA, a U.S. person that owns at least 10 percent of the value or voting rights in one or more CFCs will be required to include its global intangible low-taxed income as currently taxable income, regardless of whether any amount is distributed to the shareholder. A U.S. person includes U.S. individuals, domestic corporations, partnerships, trusts and estates.

Per IRS news release 2018-186, the new reporting rules requires the filing of Form 8992. The Form would be helpful for U.S. Shareholder Calculation of Global Intangible Low-Taxed Income.

The new law applies to the first tax year of a CFC beginning after Dec. 31, 2017, and the U.S. shareholder’s year with or within which that year ends, and all subsequent tax years.

These proposed regulations do not include foreign tax credit computational rules relating to global intangible low-taxed income, which will be addressed separately in the future as the release further states.

CPA Global Tax team can help you navigate through to the maze of these complicated rules. Please email us for any assistance.

Advertisements

IRS says inverted companies won’t be allowed to access foreign earnings without paying US tax

IRS announced that it intends to issue regulations under Code Sec. 304(b)(5)(B), Code Sec. 367 , Code Sec. 7701(l), and Code Sec. 7874 with respect to corporate inversion transactions.

Among others, the regulations will prevent inverted companies from accessing a foreign subsidiary’s earnings while deferring U.S. tax through the use of creative loans, which are known as “hopscotch” loans (under section 956(e) of the code).

In general, the forthcoming regulations will prevent inverted companies from using certain techniques to access the overseas earnings of the U.S. company’s foreign subsidiaries without being subject to US tax. This would close a loophole to prevent inverted companies from transferring cash or property from a controlled foreign corporation to a new parent to completely avoid U.S. tax, and make it more difficult for U.S. entities to invert.

Notice 2014-52 further added that regulations will generally apply to transactions completed on or after Sept. 22, 2014.

Taiwan agrees to FATCA with United States

Taiwan’s Financial Supervisory Commission (FSC) and the Ministry of Finance (MoF), jointly announced their intent to pursue an intergovernmental agreement to facilitate the implementation of the Foreign Account Tax Compliance Act (FATCA) – RIA News.

Taiwan has created an interagency task force, including the FSC, the MoF, the Ministry of Justice and the Ministry of Economic Affairs to study compliance options under FATCA. Previous consultations between the U.S. Treasury and Taiwan were focused on reducing compliance costs associated with FATCA. In addition, efforts have been dedicated to assisting local financial institutions to comply with all the domestic legal requirements and to protecting the depositors as well as the investors.

“The Taiwan authorities are supportive of the underlying goals of FATCA, and are interested in exploring a framework for mutual cooperation to facilitate the implementation of FATCA,” the statement said.
“Both sides affirm their willingness to continue their consultations and actively seek to finalize the signing of an agreement.

Tax tribunal in India rules database access fees as royalty – implications for US companies

In the case, the taxpayer (ONGC) was an Indian resident company engaged in the exploration and development of natural oil and gas. ONGC subscribed to an online database maintained by Wood MacKenzie (WM), a U.K. resident company. The subscription, which provided information on the global oil and gas industry, required ONGC to pay a fee to WM in exchange for a license agreement that provided for an exclusive and non-transferable right to access and download information from the site. No right to sublicense was granted to ONGC under the license agreement and the use of the information was limited to what was specified in the agreement. The website was only accessible by select ONGC employees and WM provided two days of training per year to 20 ONGC employees on technical issues related to oil and gas exploration.

The Indian Income tax Appellate Tribunal ruled that the fees paid by ONCG are properly characterized as royalties, for Indian tax purposes, under both Indian domestic law and the India-UK double taxation treaty. It was therefore subject to the applicable withholding tax according to the treaty.

Number of U.S. based companies provide the database subscriptions services to the users in India. They should closely study amd monitor the case as this may have deep implications for them.