Court Bars Tax Deduction on Sham Transaction

A U.S. District court has determined that a United States-based bank, having been denied foreign tax credits for UK taxes paid in connection with a Structured Trust Advantaged Repackaged Securities (STARS) transaction that was held to be a sham, couldn’t deduct those taxes. The U.S. District Court of Minnesota found that the bank had waived…

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Commercial Pilot Fails Tests for Foreign Earned Income Exclusion

The U.S. Tax Court has held that a commercial airline pilot stationed in South Korea failed both the “tax home” and the “bona fide residence” tests that determine whether a taxpayer qualifies for the foreign earned income exclusion. The pilot flew airplanes for Korean Air Lines (KAL) in 2011 and 2012. KAL considered him to…

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China Revises Transfer Pricing Rules

In a long-awaited announcement, China updated its special tax adjustment measures. The Special Tax Investigations, Adjustments and Mutual Agreement Procedures (Announcement 6) integrates elements of the Base Erosion and Profit Shifting (BEPS) transfer pricing work of the Organisation for Economic Co-operation and Development. Clarifying positions It should help taxpayers better understand the focus areas and…

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OECD Issues International VAT/GST Guidelines

The Organisation for Economic Co-operation and Development (OECD) released guidelines on applying Value Added Tax (VAT) and Goods and Services Tax (GST) to international trade transactions. Officially called the Recommendation of the Council on the Application of Value Added Tax/Goods and Services Tax to the International Trade in Services and Intangibles, the guidelines are aimed…

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IRS Explains How Foreign and Domestic Losses Affect Foreign Tax Credit

In a further indication of the IRS’s continued focus on international tax issues, the tax agency updated an International Practice Unit (IPU) summarizing the calculation and recapture of foreign and domestic losses and their impact on the foreign tax credit. Avoiding Double Taxation The United States taxes U.S. persons on their worldwide income, including their…

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