29 August 2013
Americas Tax Center Weekly Roundup
Latest news — Americas
Canada launches consultation on measures to prevent treaty shopping
On 12 August 2013, the Canadian Department of Finance released a consultation paper titled “Treaty shopping – the problem and possible solutions.” The paper notes that the government has been unsuccessful in attacking treaty shopping in the courts, including under the general anti-avoidance rule, which applies to misuses or abuses of Canada’s tax treaties, or the concept of “beneficial ownership.” The paper contemplates whether anti-treaty shopping rules should be contained in domestic law or in each of Canada’s many tax treaties. Any new measures regarding treaty shopping will likely impact both new and existing investment structures into Canada, and are likely to have a more significant impact on the private equity and resource sectors. A Tax Alert has details.
Online FATCA registration for US and foreign financial institutions – detailed Alert available
The opening of the FATCA online registration system is a key development for foreign financial institutions (FFIs), US financial institutions and other entities that will have registration, withholding, due diligence or reporting obligations under FATCA. The IRS's User Guide issued in conjunction with the system also clarifies certain issues, such as the fact that all FFIs are generally expected to register with the US Internal Revenue Service (except exempt beneficial owners or certain certified deemed compliant FFIs), and all FFIs are generally expected to appoint a responsible officer (including Model 1 FFIs) as part of this registration process. A detailed Tax Alert is now available.
US releases final cost sharing regulations
On 26 August 2013, the US Internal Revenue Service and Treasury issued final regulations on the determination of taxable income in cost-sharing arrangements. The regulations provide additional guidance on evaluating the results of an application of the Income Method, in which different discount rates are applied to the cost sharing and licensing alternatives. The temporary and proposed regulations were finalized without change. A Tax Alert has details.
EY global mergers & acquisitions reports cover power, tech and consumer products sectors
Three new EY global mergers & acquisitions quarterly reports are now available on the power, technology and consumer products sectors. Power transactions and trends charts the return of transformative transactions to the power sector, which saw deal values rising 30% from the first quarter. Global technology M&A update offers a mixed picture for the sector: a decline in total deal volumes, while private equity deal-making soared. Consumer Products Deals Quarterly: Activity levels miss expectations reports an unexpected second-quarter drop in sector deal activity.
EY Working Capital reports available on pharmaceutical and automotive industries
EY’s Working Capital group has released two new reports for the pharmaceutical and automotive sectors. Cash on the road reports that 2012 was another challenging year for the automotive supply industry, with sharply diverging trends in automotive production between regions, continuing pricing pressures from original equipment manufacturers, an ongoing shift in global demand toward rapid-growth markets, and volatility in commodity prices and exchange rates.
Cash on Prescription contains the results from our analysis of major pharmaceutical companies performance in 2012, reporting a further, albeit more modest, deterioration from the prior year, with cash-to-cash (C2C) increasing by 1%, after rising by 3% the year before.
This week's tax treaty news in the Americas
- Brazil and Luxembourg: social security treaty details available
- Colombia and El Salvador, Guatemala, Honduras: Colombia amends rate tables for implementation of free trade agreement with El Salvador, Guatemala and Honduras
- Mexico and Belgium: protocol to tax treaty signed
- Mexico and Belize: intention to negotiate tax treaty
- Mexico and Belize: intention to negotiate investment protection agreement
- Mexico and Guatemala: intention to negotiate tax treaty
- Mexico and Guatemala: free trade agreement between Costa Rica, El Salvador, Guatemala, Honduras, Mexico and Nicaragua enters into force between Mexico and Guatemala
- Uruguay and Luxembourg: social security treaty details available
- US and Czech Republic: intention to negotiate protocol to social security treaty
This week’s Global Tax Alerts
- Mexican Tax Authority increases focus on auditing supply chain structures (28 August 2013)
- New Luxembourg-Saudi Arabia tax treaty published (27 August 2013)
- IRS releases final cost sharing regulations (27 August 2013)
- Australian Federal Court grants summary judgment against taxpayer in LILO financing structure based on GAAR (27 August 2013)
- Bangalore Tribunal rules on applicability of transfer pricing provisions to assignment of contract (26 August 2013)
- Panama approves Executive Decree regarding transfer pricing, attribution of income to permanent establishments, and tax residency (23 August 2013)
- IRS opens online FATCA registration system for financial institutions, issues related guidance (22 August 2013)
- Tanzania requires business licenses in place by 31 December 2013 (22 August 2013)
- Canadian Government proposes changes to foreign affiliate dumping rules (22 August 2013)
- Delhi Tribunal overturns transfer pricing adjustment for excess advertising expenses in the case of a distributor (21 August 2013)
- International Tax Talk quarterly series to discuss interest deductibility and related issues (10 September)
The deductibility of interest on borrowings has recently come under greater scrutiny in many countries and is seen as a cornerstone issue in the current base erosion and profit shifting (BEPS) debate. In this quarter’s International Tax Talk webcast, our Global Tax Desk team focuses on thin capitalization and the related debt/equity characterization issues that may arise under select foreign tax regimes in relation to related and non-related-party borrowings. The countries/regions to be discussed include: Germany, Benelux, India and China. Register here.
- Managing risk in the US and Canada – EY’s 2013 global transfer pricing survey (12 September)
EY’s 2013 global transfer pricing survey reveals companies are placing a higher priority on managing risk associated with transfer pricing in reaction to heightened scrutiny by tax authorities. In an upcoming webcast, an experienced panel of former government officials will discuss the survey results with a focus on the US and Canadian implications of: (1) the increased taxpayer focus on risk management, (2) how taxpayers implement and document their transfer pricing policies, (3) key trends in controversy concerns and (4) taxpayers’ experiences in resolving transfer pricing disputes. Register here.
EY industry, service and issue publications
Banking and Capital Markets
Government and Public Sector
- Citizen Today: delivering a digital future
Mining and Metals
- Riesgos comerciales en la industria minera y metalífera 2013 - 2014
M and M Business risks 2013 - 2014 Spanish translation