On September 12, 2016, we posted US Probe Resulted In EU Apple Tax Assessment, where we discussed that the European Commission’s probe into Apple, which resulted in an order for the tech giant to pay up to €13 billion ($14.5 billion) in back taxes to Ireland, was prompted by a U.S. Senate investigation, European Union Competition Commissioner Margrethe Vestager said on Friday.
The commission ordered Ireland to collect a staggering $14.5 billion in back taxes from Apple, and the Treasury said on September 15, 2016 that it now wants to prevent companies from taking steps to separate their foreign income tax for prior taxable years from the income the tax relates to.
The Treasury notice took direct aim at the European Union’s push to have its member states collect more taxes from U.S. companies’ overseas units, Treasury officials said they’re writing new rules that would restrict how corporations can use credits on their foreign tax payments to reduce their U.S. tax bills. The official notice puts corporate tax planners on notice that officials will challenge any strategies that violate their intended rules.
“Such foreign-initiated adjustments may arise under European Union state aid law, to the extent EU state aid payments result in creditable foreign taxes,” the department said.
Corporations may also make extraordinary distributions, so that undistributed earnings can be used to inflate the amount of foreign taxes paid, without repatriating the earnings and including them in U.S. taxable income, the Treasury said.
On order to prevent so-called splitter arrangements, or the separation of creditable foreign taxes from the underlying related income, the IRS is considering deferring the right to claim credits until the related income is included in U.S. taxable income.
Read more at: Tax Times blog