September 26, 2018

German Anti-Treaty Shopping Rule Infringes on E.U. Law

September 26, 2018/ Ruchelman P.L.L.C.

When do attacks on cross-border tax planning move from enough to too much? The European Court of Justice (“E.C.J.”) provided an answer in connection with German tax rules limiting access to the E.U. Parent Subsidiary Directive for dividends leaving Germany. For many years, German law provided an irrebuttable presumption of fraudulent or abusive tax planning when a multinational structure failed to meet a “one size fits all” set of factual parameters. The provision was struck down by the E.C.J. last year, modified slightly in response, and struck down again in July of this year. Pia Dorfmueller of P+P Pollath explains why the German tax law was found to violate European law – it provided a response that was not proportional to the alleged wrong-doing.

August 15, 2015

I.R.S. Plan to Reject Foreign Taxpayers' Refunds Criticized by I.R.S. Advisory Committee

August 15, 2015/ Ruchelman P.L.L.C.

The I.R.S. proposal to deny refunds of excess withholding tax in cases were the withheld tax is stolen by the withholding agent was harshly criticized by the Information Reporting Program Advisory Committee. It seems the I.R.S. does not have the authority to pass the loss onto the party that suffered withholding. Elizabeth V. Zanet and Andrew P. Mitchel discuss the issue in detail.

May 15, 2015

A Foreign Taxpayer’s Refund or Credit Could Be Limited by Upcoming Regulations

May 15, 2015/ Web Admin

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In Notice 2015-10 (the “Notice”), issued on April 28, 2015, the I.R.S. stated that it was concerned about cases in which persons subject to withholding under Code §§1441-1443 (“Chapter 3”) or Code §§1471 and 1472 (“Chapter 4”) are making or will make claims for refunds or credits in circumstances where a withholding agent failed to deposit the amounts required to be withheld under §6302.

If a withholding agent fails to deposit an amount withheld under Chapters 3 or 4, or reported as withheld on Form 1042-S, and the I.R.S. issues a refund or credit for the amount, the I.R.S. may not be able to recover that amount because the claimant, and in some cases the relevant withholding agent, may be outside the United States. The new regulations aim to reduce the risk that the I.R.S. may issue improper refunds or credits for fictitious withholding or amounts that have not been deposited and are difficult to collect.

As will be seen below, the new regulations would limit a foreign taxpayer’s refund or credit to the amount deposited by the withholding agent. Though collecting undeposited amounts from withholding agents located outside the United States may be difficult for the I.R.S., one wonders about the fairness of limiting a foreign taxpayer’s refund or credit when the I.R.S. could use its greater resources to collect against the withholding agent.