Implementation of BEPS in the U.S.

  • Author: Hans F. W. Flick
  • Category of article: Feature Articles
  • Field of Law: International fiscal law, Einkommens----Gewinnsteuer
  • Citation: Hans F. W. Flick, Implementation of BEPS in the U.S., ASA 86 (2017/2018)
The BEPS Initiative was especially important for U.S. taxpayers and the U.S tax authorities. Firstly, American corporate groups have a particular global presence and secondly, they frequently play a leading role in the digital economy, which found special interest by BEPS (see, e.g., action item 1). Another special aspect for the Americans is their current tax law, which avoids international double taxation by crediting (Foreign Tax Credit) instead of exemption. Hence, one concern of the U.S. negotiation delegation was to assure a fair treatment of American corporate groups by BEPS. In general, the BEPS negotiations results satisfied the American delegation. Implementations in the U.S. tax law were primarily required and made regarding action item 13 (Country by Country Reporting). In other areas, the U.S. tax authorities’ perception was that consisting or simultaneously occurring legislative amendments (e.g. tax deductibility of interest; IRC Section 385) were meeting the BEPS principles. The USA has not signed the Multilateral Agreement (action item 15) and, contemporarily, have no interest to do so in future. (ah)

Content

  • 1. Introduction
  • 2. International tax planning by U.S. MNCs
  • 2.1. Existing foreign operations
  • 2.2. Expanding operations abroad
  • 2.3. Moving the parent company (inversions)
  • 3. Perspective of the U.S. tax authorities
  • 4. Pending U.S. tax reform
  • 4.1. Legislative process
  • 4.2. Content of potential legislation
  • 4.3. Administrative restrictions
  • 5. U.S. implementation of BEPS action items
  • 5.1. Country by country reporting (action item 13)
  • 5.2. Ensure transfer pricing outcomes are in line with value creation (action items 8, 9 and 10)
  • 5.2.1. Foreign goodwill and going concern value
  • 5.2.2. Value, synergies and income methods
  • 5.3. Limit base erosion via interest deduction (action item 4)
  • 5.3.1. Documentation rules
  • 5.3.2. The recast rules
  • 5.4. Multilateral Instrument (MLI)
  • 6. Conclusion