It’s been talked about for years, but finally there’s something to look at – members of the House Ways & Means Committee have produced a draft bill for an ‘innovation box’ for the USA (http://waysandmeans.house.gov/wp-content/uploads/2015/07/Innovation-Box-2015-Bill-Text.pdf).
It looks as though Asda and Wal*Mart have succeeded in getting HMRC and the IRS both to recognise a transfer pricing adjustment on royalties – as it’s a settlement, there isn’t a lot of information about, so it isn’t wholly clear whether this was the result of direct negotiation or through invoking the mutual agreement procedures. Either way, Asda has to pay another £115m in tax, whilst Wal*Mart will get a corresponding deduction.
Veritas Software Corp. v. Commissioner (US case 133 TC 14): The U.S. Tax Court has held that the IRS’s $1.675bn adjustment to a cost sharing buy-in payment received by Veritas Software Corp. from an Irish affiliate was “arbitrary, capricious, and unreasonable”.
The tax court also confirmed that Veritas’ use of the comparable uncontrolled transactions method (albeit with some adjustments imposed by the court) was the best way to calculate transfer pricing on the buy-in payment.
France and the USA have amended their tax treaty; amongst the amendments is the removal of withholding of tax on royalties for the use of intangible property. The change will come into force with effect from 1st January in the year in which both countries ratify the amendment – if they get a move on, royalties paid this year could be covered.
Amazon has lost the latest round in its attempt to get the state of New York to back down on a new law requiring out-of-state online companies to collect sales tax from customers in the state. Sales tax collection in a state is generally required by companies with sufficient connection with that state – but just what constitutes a connection varies from state to state.