Author: Ray Polantz

As a result of the Tax Cuts and Jobs Act (TCJA), U.S. shareholders of controlled foreign corporations (CFCs) could see a significant change in their tax bill beginning in 2018 — and not for the better. Absent strategic tax planning efforts, the new law will currently tax global intangible low-taxed income, or GILTI.

The GILTI provisions are some of the most significant steps taken by the TCJA to broaden the U.S. tax base and prevent taxpayers from shifting value outside the U.S. borders, namely through holding intangible assets, such as patents and tradenames, in foreign subsidiaries. However, the provisions are much broader and also cover “soft” intangibles like workforce in place and general know-how.

Read more: 3 GILTI Planning Options Non-C Corporations Should Consider Before Year-End

Author: Fuad S. Saba

Congress introduced the GILTI tax with the TCJA at the end of 2017.  The tax applies to tax years beginning after December 31, 2017. GILTI is defined as the income of a “Controlled Foreign Corporation” (CFC) that exceeds the CFC’s “net deemed tangible income return.”  The latter is defined as a 10% return on the tax basis of the tangible assets of the CFC that are used in the CFC’s business, adjusted for the CFC’s interest expense.  Thus, the term GILTI is a misnomer because any CFC that earns a relatively high return on its business assets can have GILTI, even if intangible assets are not directly a factor in the production of its income.  Note that the GILTI tax applies with respect to the annual income of a CFC regardless of any distributions of that income by the CFC.

Read more: Do You Have a “GILTI” Tax for 2018, and What Are You Doing About It?

Author: Jeffrey Brown

In the shadow of the recent Wayfair decision, more and more Canadian remote sellers now have to deal with state and local sales tax collection responsibilities. All too many are still thinking they can play the catch me if you can game, erroneously citing the US Canada Tax Treaty or assuming the states can’t or won’t come to Canada for enforcement. In my 15 plus years advising clients in Canada, I’ve represented many clients in state sales tax audits and enforcement actions. Not only do they come to Canada, they love to come to Canada, not just for poutine, but for cross-border tax enforcement.

Sales tax compliance can be a costly pain in the butt. Registering as a vendor in each state. Securing exemption certificates from customers who insist they’re not subject to tax. Computing the amount of tax to collect from customers. And not just state taxes; often and more confusingly, local sales taxes as well. Paying over collected taxes to the authorities. Filing tax returns.

Read the entire article.

Author: Kurt Baker

The Australian Taxation Office (“ATO”) recently issued final ruling TR 2018/5 setting out the Commissioners position on how to apply the central management and control tests when determining the tax residency of a foreign company.

The ruling and its accompanying draft practical compliance guidance, is a direct response to the decisions in Bywater Investments Limited and Hua Wang Bank Berhad cases and sees a change in the historical interpretation of provisions that have been in play since 2004.

Read more: Central Management and Control of Foreign Corporates in Australia

Author: David Prichard

The long-awaited Division 7A amendments have been released as a consultation paper with submissions closing on 21 November 2018. The proposals in the consultation paper do not exclusively follow the Board of Taxation review proposals and there still appears to be inconsistency around Unpaid Present Entitlements which appears to go against the concept of making the law simpler to apply.

The proposals include a new benchmark interest rate being the Small Business; Variable; Other; Overdraft – Indicator Lending rate published by the RBA which is approximately 3% higher than the existing rate.

The amendments are proposed to apply from 1 July 2019.

Read more: Proposed Division 7A Amendments in Australia