International Tax Compliance
3402(t) Is Looming on the Horizon
With the ink barely dry on your company’s 2010 taxes, it’s time, once again, to start looking down the road at upcoming tax planning issues. The American Recovery and Reinvestment Act of 2009 delayed the implementation of withholding requirements, for business that provide goods and services to federal, state, and local governmental entities for one additional year. While that may have been considered “good news” at the time, it is important to keep in mind what may be inevitable. Effective January 1, 2012, all payments made to contractors by the federal government, including all federal agencies; state governments, including the District of Columbia; and local governments with. Read More.
DoD General Counsel Issues Guidance on Tax Exemptions for Contractors and Contractor Personnel in Iraq and Afghanistan
The United States is bound by two distinct international agreements which contain specific provisions regarding the tax exemptions afforded to U.S. contractors and U.S. contractor employees in Iraq and Afghanistan. In Afghanistan, the Status of Forces Agreement (SOFA) was entered into force on May 28, 2003. In Iraq, the U.S.-Iraq Security Agreement was entered into force on January 1, 2009. Both agreements provide broad tax exemptions for U.S. government personnel, including contractors and contractor employees doing business on behalf of the U.S. government. The terms of the agreements generally do not provide tax exemptions for persons or legal entities normally. Read More.
IRS to Increase Scrutiny of Transfer Pricing
During the Tax Executives Institute’s 61st Midyear Conference in Washington, D.C. last week, IRS Deputy Commissioner (International) Michael Danilack announced that the IRS will soon name a new director for transfer pricing, and will initiate a new transfer pricing practice in the near future. Danilack also noted that the IRS will bring in more transfer pricing experts. Before the creation of the separate transfer pricing practice, transfer pricing experts were scattered within the IRS. This new division will bring all the transfer pricing experts together to better focus their efforts, and ensure that transfer pricing regarding U.S. entities is performed. Read More.
Afghanistan, U.S. Debate Taxability of U.S. Contractors
As U.S. military involvement in Afghanistan continues, the two countries are discovering limitations and conflicts within their agreed-upon treaties and policy. As the Washington Post reports, one of the most recent involves the taxation of U.S. contractors and subcontractors. While U.S. law and several accords declare U.S.-Afghan assistance as “tax-exempt,” the penurious Afghan government is seeking means to collect on the investment in its borders. The government’s position is that the various accords regulating the foreign presence in Afghanistan, including taxation, do not cover anyone without a direct government contract. According to a recent Finance Ministry letter to primes on the taxation. Read More.
HIRE Act Contains Several New Tax Incentives to Promote Job Creation
Last week, President Obama signed into law the Hiring Incentives to Restore Employment (HIRE) Act (HR 2847) . The law includes several major tax provisions designed to promote job creation as the nation’s economy continues to recover from recession. The Act introduces the “ Hire Now Tax Cut ” to qualified employers both in the form of payroll forgiveness for Social Security taxes paid for qualified new hires, as well as a tax credit for keeping those employees on payroll for 52 consecutive weeks. Click here to read CB&H’s recent Tax Bulletin on the HIRE Act for more information about these provisions. The Act also extends enhanced Code Sec. 179 expensing threshold levels through December 31, 2010. This extension means that the previous limits of $125,000 with a $500,000 cap will. Read More.
Legislation Introduced to Crack Down on Offshore Tax Abuse
Congressman Charles Rangel (D-NY), Chairman of the House Committee on Ways and Means, recently introduced the Foreign Account Tax Compliance Act of 2009 . The bill would serve as a comprehensive clamp down on individuals seeking to avoid taxes through the use of offshore banks . The Joint Committee on Taxation (JCT) estimates this action will recoup $8.5 billion in U.S. tax over the next 10 years. “Shortly after taking office, I laid out a set of proposals to crack down on illegal overseas tax evasion,” President Obama said in a statement supporting the legislation. “I look forward to working with Congress to turn these proposals into law so that honest Americans no longer shoulder the burden of the few individuals. Read More.