On January 01, 2017, China Mainland and Hong Kong will adopt Common Reporting Standards (CRS) –– a new method used by governments around the world to create transparency on cross-border information. CRS was introduced by the Organization for Economic Co-Operation and Development in 2014 as part of the standard for Automatic Exchange of Financial Account Information.

Once China implements CRS, Chinese banks will be required to collect additional information from current and new customers, including foreign bank accounts and the following assets:

  • Depository Accounts
  • Custodial Accounts
  • Special insurance contracts,
  • Annuity contracts,
  • Interest in shares of financial institutions

China’s CRS adoption is a clear sign of the country’s consent to participate in combating international tax evasion and global tax compliance.

To date, more than 100 jurisdictions have adopted or committed to implement CRS; however, the United States is the only major economy to refuse it in favor of its own standard, the Foreign Accounts Tax Compliance Act.

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After two years of negotiations, the SAT and the IRS have announced a new transfer pricing methodology intended to expedite open Advanced Pricing Agreement (“APA”) applications for maquiladora operations.

In an attempt to apply fair tax methodologies and avoid double taxation for US companies with subsidiaries located in Mexico operating under the maquiladora structure, the SAT and IRS have announced a new transfer pricing methodology for pending APA agreements.  The new methodology is expected to expedite the resolution of more than 700 pending APA requests.

The SAT will provide qualifying taxpayers with pending unilateral APA requests the option to apply a specific transfer pricing framework. Under the joint agreement, both the IRS and SAT will accept the results of the new methodology. This will provide transfer price certainty to taxpayers on the computation of income tax and reduce the risk of double taxation.

The SAT is in the process of establishing the general rules and procedures related to this new methodology. We expect that the SAT will contact all qualifying Mexican taxpayers which have pending APA applications that may qualify for the election with more details. Further guidance is expected in the next 4–6 weeks.

Companies that are contemplating an APA application or have a pending APA application should contact the Plante Moran international consulting team for additional details. Please don’t hesitate to contact us if you have any questions or concerns.

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Mexican court ruling may have significant impact on certain tax structures

September 15, 2016

A recent Mexican court ruling may have significant impact on certain operating structures A Mexican court has recently issued a ruling intended to clarify the rules surrounding certain personal services structures commonly used in Mexico (e.g. outsourcing, insourcing, and subcontracting services). Companies that utilize a dual Mexican entity structure or a third party outsourcing company […]

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Apple ruling spells uncertainty for European cross-border tax planning

September 9, 2016

In a tax ruling handed down by the European Union, Ireland must recover unpaid taxes from Apple equivalent to 14.6 billion U.S. dollars. The European Commission’s ruling finds fault with the company’s perceived diversion of profits to two Irish home office “shell” companies, which paid little or no taxes under the specific provisions granted by […]

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M&A investment opportunities in Latin America

August 29, 2016

Increased labor and logistics costs have made it less attractive for U.S. companies to manufacture consumer goods in China and Southeast Asia –– instead, companies are setting their sights on Latin America (LATAM). While regions like Brazil and Argentina are facing economic uncertainty, they offer opportunities for both strategic acquirers and long-term private equity investors. […]

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Disregarded entities required to comply in new proposed regulations to section 6038A

July 8, 2016

The IRS has released proposed regulations expanding the scope of business entities that must comply with section 6038A to include previously disregarded entities. The proposed regulations would strengthen rules requiring informational reporting and record maintenance. Section 6038A subjects domestic corporations that are 25% or more foreign-owned to informational reporting and record maintenance requirements. Currently, certain […]

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How can U.S. businesses begin preparing for the impact of Brexit?

June 29, 2016

The immediate impact of Brexit to US businesses with UK operations has been a large drop in the global equity markets and an approximately 12% devaluation of the British Pound sterling against the US dollar.  From a tax perspective, however, the impact of Brexit remains very uncertain and will take a longer period for US […]

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Proposed Section 385 regulations: What you need to know

June 8, 2016

As part of an initiative to curb tax inversions, the IRS and Treasury recently released proposed regulations to Section 385, which authorizes the Secretary of the Treasury to determine if financial instruments should be considered stock or indebtedness. Prior to these regulations, case law was the primary source of guidance. In addition to provisions dealing […]

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From business tax to value-added tax: the transition is complete in China

May 27, 2016

As of May 1, China completed the transformation from business tax (BT) to value-added tax (VAT) (the “B2V Reform”). The B2V Reform aims to reduce the tax burden to taxpayers in China, including established enterprises of foreign entities, such as a wholly foreign owned entity. For many years, China has operated a dual indirect tax […]

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China eliminates prohibited export subsidies, leveling playing field

May 12, 2016

As a result of a complaint filed by the United States, the Chinese government now recognizes that export subsiding is prohibited by the World Trade Organization (WTO). On April 14, 2016, China and the U.S. signed an agreement to eliminate the subsidizing of Chinese companies that meet certain export performance targets. According to the Office […]

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