Posted tagged ‘tax treaties’

Can Foreign Governments Obtain Taxpayer Information From State and Local Revenue Agencies?

February 28, 2012

By Jonathan Prokup

During a course that I taught about tax treaties at last week’s TEI Houston Tax School, one audience member asked whether the exchange-of-information provisions of U.S. tax treaties apply not only to the federal government but also to state and local governments.   I had to confess that I did not know the answer of the top of my head.  However, I took a quick look at the question later in the week.

By way of background, in each income tax treaty with foreign jurisdictions, the United States negotiates an “exchange of information and administrative assistance” provision.  This provision generally obligates the governments to share information with one another “as may be relevant for carrying out the provisions of this Convention or of the domestic laws of the Contracting States concerning taxes of every kind imposed by a Contracting State….”  United States Model Income Tax Convention (“Model Treaty”), art. 26, ¶ 1 (Nov. 15, 2006). (more…)

Treasury Finalizes Conduit Financing Regulations Under Section 881

January 9, 2012

By Jonathan Prokup

On December 9th, the IRS issued final regulations under Code section 881 that treat a disregarded entity as a person to determine whether a “financing arrangement” exists for purposes of applying the conduit financing regulations.  The finalized regulations may deny tax benefits otherwise available from U.S. tax treaties when a multi-party financing transaction is executed with a disregarded entity serving as an intermediary. (more…)

The Benefits Of Seeking Competent Authority Relief For Proposed Transfer Pricing Adjustments

June 20, 2011

By David L. Bernard

TaxBlawg’s Guest Commentator, David L. Bernard, is the former Vice President of Taxes for Kimberly-Clark Corporation, a past president of the Tax Executives Institute, and a periodic contributor to TaxBlawg.

My last blog post suggested that the best defense against transfer pricing assessments is the adoption of a globally consistent transfer pricing policy supported by appropriate documentation. Near the conclusion of that post, I noted that the Competent Authority (CA) process and Advance Pricing Agreements (“APAs”) were tools that could be employed if your company faced transfer pricing adjustments.

Although the goal of your transfer pricing policy and related documentation is to manage risk and avoid tax assessments, the nature of the beast is such that there is no precise price one can pinpoint in transfer pricing matters that can completely eliminate the risk of a tax authority’s challenge. Rather, there is usually a range of potential prices that may be appropriate. A tax authority may be inclined to pick a price at the end of the range most favorable to its country from a revenue perspective, leaving the Chief Tax Officer (CTO) to consider a menu of potential remedies, including administrative appeals, litigation, APAs, or perhaps a request for CA assistance.

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Curiouser and Curiouser: The Sourcing of Guarantee Fees Rises Again

November 8, 2010

By Jonathan Prokup

It seems that one of our favorite topics is back in the news: the sourcing of guarantee fees.  As reported in today’s Tax Notes, Robert Driscoll, withholding technical advisor for LMSB, was recently quoted as saying that guarantee fees might not be considered U.S.-source income if the guarantor is a qualified resident of a treaty country.  Amy S. Elliott, “Guarantee Fees May Not Be U.S.-Source if Guarantor Resides in Treaty Country, Official Says,” 2010 TNT 215-4 (Nov. 8, 2010).  According to the article, discussions within the IRS National Office have suggested that guarantee fees would probably fall under the “other income” article of the relevant treaty and thus would not be considered U.S.-source income in most cases.  Id.

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