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Yearly Archives: 2017

IRS Agree On Tax Refund Due Amazon In $1.5B Dispute

July 10, 2017

we previously posted on March 27, 2017 Amazon Defends It's Pricing and Tax Court Issues the IRS its 2nd Large §482 Defeat On January 5, 2015 we where we discussed that the US Tax Court ruled against the IRS in this $1.5 billion transfer pricing dispute with Amazon, which currently has experts calling for a re-examination of the agency's valuation methodologies in order to prevent it from wasting its own resources and those of taxpayers.
Using methodologies the U.S. Tax Court had already knocked down in another transfer pricing lawsuit against Veritas Software Corp. in 2009, the IRS made substantial transfer pricing adjustments that reallocated more income from Amazon’s European subsidiary to its U.S. operations and assessed more than $234 million in deficiencies for the 2005 and 2006 tax years. The IRS’ position could have resulted in an overall tax liability of $1.5 billion, plus interest, Amazon estimated.
Now according to Law360,, the IRS agreed that it owes the online retail giant $9.5 million for the 2005 tax year, but that there is an income tax deficiency of $2.5 million from the following year.

In a stipulation entered by the court, the IRS and Amazon agreed that the company had overpaid its taxes in the amount of $9.55 million for the tax year ending on Dec. 31, 2005, and that there is a deficiency of $2.54 million in income tax due from Amazon for the tax year ending on Dec. 31, 2006. The computations do not include interest payments due.

Amazon had previously estimated that the IRS’ notices of proposed adjustments issued for a seven-year period, starting in 2005, could have resulted in a tax liability of $1.5 billion plus interest.

The case is Amazon.com Inc. & Subsidiaries v. Commissioner of Internal Revenue, case number 31197-12, in the U.S. Tax Court.

 
Have A Tax Problem? 
 
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Contact the Tax Lawyers at 
Marini & Associates, P.A.
for a FREE Tax Consultation
Toll Free at 888-8TaxAid (888 882-9243).

 

Read more at: Tax Times blog

Apple States That Its Irish Subsidiaries Should be Taxed in the US & US Gov't Agrees To Intervene In Apple's €13B EU Tax Case

July 7, 2017

Apple has published its defense to the European Commission's accusation that it obtained unfair commercial advantage from its corporation tax agreement with Ireland.
 
The company states that its profit-making activities were controlled and managed in the US, and so should be taxed there and not in Ireland; and that the Commission has breached Apple's 'fundamental rights' by ordering Ireland to charge it EUR13 billion in taxes.
 

Now the U.S. government is planning on intervening in Apple Inc.'s lawsuit challenging an approximately €13 billion ($14.85 billion) tax bill in Ireland ordered by the European Union’s competition watchdog, a source familiar with the case said Thursday.

Apple is appealing the European Commission’s August 2016 ruling, which concluded that it had entered into a sweetheart tax deal with the Irish government to “substantially and artificially” lower its taxes.

The commission’s investigations into Apple’s tax arrangements, as well as those of Starbucks Corp., had previously drawn the attention of the Obama administration, which complained that the commission appeared to be unfairly targeting U.S. businesses and that American taxpayers may end up having to foot the bill for foreign tax credits that the companies may be able to claim following a retroactive imposition of taxes.

A source confirmed to Law360 that the federal government has now filed an application with the European Union General Court to have its say on the retroactive application of state aid rules to Apple. The application has not been made publicly available.

The European Commission found that two tax rulings Ireland had issued to Apple in 1991 and 2007, allowing the software giant to allocate almost all of its sales profits to “head offices” that existed only on paper, were in violation of the EU’s state aid rules.

The allocation of profits to head offices, with no employees or physical locations, allowed Apple’s effective corporate tax rate to go down from 1 percent in 2003 to 0.005 percent in 2014 on the profits of the Irish-incorporated subsidiary Apple Sales International, the commission said.

Apple has refuted the commission’s findings, saying that the watchdog misunderstood Irish law and the role of its Irish units in developing intellectual property and failed to recognize that its main “profit-driving activities,” especially the development and commercialization of IP, were controlled and managed in the U.S.

The commission only considered the minutes of board meetings and did not properly assess “extensive expert evidence” that Apple’s profits were not attributable to activities in Ireland, the software giant said.

Have an International  Tax Problem?
 

 

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 for a FREE Tax Consultation Contact US at
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Sources:

MNE Tax
Tax-News
Law360 

Read more at: Tax Times blog

The US Is Now Revoking Passports of US Taxpayers Who Have Unpaid Taxes!

June 20, 2017

On March 1, 2017 we posted Another Travel Ban: Starting Next Month Your US Passport Will Be Revoked For Tax Debts!  where we discussed that the tax code now provides for authorities to revoke or deny the passport of any US taxpayer who has unpaid taxes in excess of $50,000 or who have not obtained or won’t provide a Social Security numbers.  We also discussed that the IRS updated it website on February 6, 2017 entitled Revocation or Denial of Passport in Case of Certain Unpaid Taxes to state that while the IRS had not yet started certifying tax debt to the State Department. However, Certifications to the State Department will begin in early 2017 and this webpage will be updated to indicate when this process has been implemented.

As we are now Midway through 2017 ...
Any US Taxpayer who would like
to Travel Unimpeded this Summer
Should currently Address Their Tax Deficiencies
Prior to scheduling their Summer Vacations!
 
If you have seriously delinquent tax debt, IRC § 7345 authorizes the IRS to certify that to the State Department. The department generally will not issue or renew a passport to you after receiving certification from the IRS. Upon receiving certification, the State Department may revoke your passport. If the department decides to revoke it, prior to revocation, the department may limit your passport to return travel to the U.S.
 
Seriously delinquent tax debt is an individual's unpaid, legally enforceable federal tax debt totaling more than $50,000* (including interest and penalties) for which a:

  • Notice of federal tax lien has been filed and all administrative remedies under IRC § 6320 have lapsed or been exhausted or

  • Levy has been issued
 
Before denying a passport, the State Department will hold your application for 90 days to allow you to:
  • Resolve any erroneous certification issues

  • Make full payment of the tax debt

  • Enter into a satisfactory payment alternative with the IRS
 

"There Is No Grace Period For Resolving
The Debt Before The State Department Revokes A Passport."

All the existing remedies for addressing an IRS lien or levy continue to apply! Therefore, this new provision of denying a passport will not apply to taxpayers who have entered into installment agreements or offers-in-compromise, or who have requested collection due process hearings or innocent spouse relief.

 US citizens living abroad should ensure that their IRS tax affairs are in order to ensure that they do not have any issues with their US passport when traveling.
  
Owe The IRS Money?

 Want To Keep Your US Passport and Travel in Peace?

 

Contact the Tax Lawyers at 
Marini & Associates, P.A.

 

 
for a FREE Tax Consultation

Toll Free at 888-8TaxAid (888)882-9243.

Read more at: Tax Times blog

IRS Targeting Foreign Corporations Which Do Not File!

June 15, 2017

On February 7, 2017 we posted IRS Has 13 New Compliance Campaigns for LB&I Taxpayers where we discussed that Tax practitioners will face new questions from examination teams as the IRS selects compliance risks based on data, in the Large Business and International Division's (LB&I) move from individual audits of multinationals to broader considerations involving risk assessment and that LB&I released on February 1, 2017 their series of 13 new campaigns aimed at cracking down on tax evasion; including #12 which covers Form 1120-F Non-Filer Campaign.

Foreign companies doing business in the U.S. are often required to file Form 1120-F (U.S. Income Tax Return of a Foreign Corporation).

  • LB&I has data suggesting that many of these companies are not meeting their filing obligations.
  • In this campaign, LB&I will use various external data sources to identify these foreign companies and encourage them to file their required returns.
  • The approach for this campaign will involve soft letter outreach.
  • If the companies do not take appropriate action, LB&I will conduct examinations to determine the correct tax liability.

The goal is to increase voluntary compliance by foreign corporations with a U.S. business nexus.

This will especially affect Canadian and Mexican corporations that receive payments from U.S. sources but do not file a U.S. tax return. Foreign corporations, including Canadian and Mexican corporations, are generally required to file a U.S. tax return if they have a "trade or business" in the United States. Although "trade or business" is not explicitly defined, it may apply to a corporation with a low level of activity. Therefore, Canadian and Mexican companies with U.S. customers that attend U.S. meetings or trade shows or with any U.S. connection could likely be considered to be have a U.S. trade or business.

Many Canadian & Mexican corporations, which take advantage of NAFTA and as a result have a U.S. trade or business are not actually subject to U.S. tax, as they do not have a permanent establishment. The Canada-U.S. as well as the Mexican–U.S. treaties usually limits the United States' right to tax the profits from a Canadian or Mexican company's U.S. trade or business to the profits generated from a U.S. permanent establishment of the  company. However, these corporations are still required to file U.S. form 1120-F "U.S. Income Tax Return of a Foreign Corporation" to assert the treaty claim and failure to file can result in penalties.

The IRS can impose a $10,000 per year penalty for failing to disclose a treaty-based position on a timely filed return.

Therefore, a Canadian or Mexican company with U.S.-based sales could be assessed a $10,000 penalty for each year that it was doing business in the United States and did not file a return.

Since no returns were filed, the IRS can assess penalties for all open tax years in which the Canadian company had U.S. sales, which could result in a significant penalty.

 
Have US Sales, But No PE?  
 
 

 
Need US Tax Filing Advise?  
 

 

 
 

Contact the Tax Lawyers at
Marini & Associates, P.A.
 
 for a FREE Tax Consultation Contact US at
www.TaxAid.com or www.OVDPLaw.com
or Toll Free at 888-8TaxAid (888 882-9243).

 

 

 

KPMG

Vinson & Elkins LLP
Lexology

Read more at: Tax Times blog

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