News › Weekly Alert Article
Time for year-end planning: a reflection on tax in 2013
Every year-end brings with it annual rituals and traditions, and even corporate tax departments are not immune. As multinationals start to prepare for 2014, Taxand USA considers the key tax highlights of 2013 at home and abroad.
This year did not bring with it any comprehensive US tax reform, since Congress continues the gridlock that has become its new normal. However the Internal Revenue Service did manage to finalise the regulations under the Foreign Account Tax Compliance Act (FATCA) and the tangible property regulations (Repair Regulations). There are also various tax provisions that, barring any last-minute deal, are set to expire on 31 December 2013 (eg bonus depreciation, Subpart F look-through rules and active financing exception, research and development credit etc).
The Service also published statistical results of the 2011 Schedule UTP filings. Not so surprisingly we learned that the top 2 uncertain tax positions related to research credits and transfer pricing, while a distant third was capitalisation. With regards to Service examinations, directive LB&I-04-0613-004 was issued in June requiring that agents discuss information document requests (IDRs) with taxpayers prior to issuance. More recently the Service issued a new directive, LB&I-04-1113-0009, which provides a rigid enforcement on new IDRs.
Abroad there seems to be more appetite or ability to implement tax reform. For example Mexico's Congress passed significant tax reform measures that impact companies with operations in Mexico. China is another country that continues to update and develop its tax system each year. China is implementing a VAT programme and is well on its way to having a tax code as complicated as the US tax code. The Organisation for Economic Co-operation and Development, or OECD, is also hard at work on its Base Erosion and Profit Shifting, or BEPS, project. However since countries compete to attract the local employment opportunities that multinational companies can offer, international tax arbitrage is likely to be with us for many years to come. At the same time, if multinationals continue to gain notoriety in the press for what is perceived as low effective tax rates on foreign earnings, the Governments may have to enact tax reforms or face political pressure.
T. +1 305 704 6735
Also published in Thomson Reuters' Taxnet Pro, 13 December 2013
Year-end planning can provide many opportunities for companies to mitigate tax exposures and capitalise on potential opportunities. Changes in the tax law or in the company's operations can serve as a source for both. Accordingly, it is up to the tax department through its year-end planning to prioritise new developments and assess the overall impact. It is also incumbent upon the tax department to reach out to the other business units within the company, to ascertain whether any business developments have taken place. Armed with this information, the company's tax department can set a course and plan ahead for the following year.