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PDF Determining the Issue Price of a Debt Instrument: Final Treasury Regulations Clarify When Property Is Publicly Traded
September 2012
Raymond Simon, David H. Dreier

On September 12, 2012, the US Internal Revenue Service (the "Service") released final regulations (the "Final Regulations") detailing when property is publicly traded for purposes of determining the issue price of a debt instrument. The issue price of a debt instrument has important income tax consequences and is relevant for determining, among other things, original issue discount ("OID") associated with the instrument, cancellation of indebtedness ("COD") income of the issuer and the gain or loss on the sale of the instrument by a holder. The new rules should be of particular interest to borrowers and lenders in a variety of bank finance and capital markets transactions, including consent solicitations, debt-for-debt exchanges, recapitalization transactions, workouts, reopenings and any transaction that involves amendments or modifications to an existing debt obligation (including a bank loan) that results in a deemed reissuance of the debt obligation for US federal income tax purposes. These rules do not change the determination of the issue price of debt issued for cash.
PDF Gain or Loss on Termination
September 2012

Before 1981, commodity transactions were used to create "silver butterflies," "gold cash-and-carry transactions," and "T-bill rolls" to defer and convert ordinary income into capital gains. In June 1980, however, the process of tax reform in the commodity area began, and the butterflies began to take flight. The Economic Recovery Tax Act of 1981 (ERTA) enacted a set of new rules to reform the world of financial transactions, which at that time consisted mainly of commodity derivative transactions.
PDF FATCA's Legal Issues
August 2012
John T. Lillis

To address concerns that US taxpayers were failing to report income generated in offshore accounts, the US Congress adopted Sections 1471 through 1474 of the Internal Revenue Code, commonly referred to as "FATCA," in early 2010. FATCA constitutes an attempt by the US to recruit the assistance of non-US financial institutions to obtain information on offshore accounts held by US persons. The leverage employed by the US to encourage or compel information sharing with respect to such accounts is a requirement that persons making "withholdable payments" to a foreign financial institution or "FFI" generally withhold 30% of such withholdable payments, unless such FFI enters into an agreement with the IRS to provide information with respect to accounts maintained by US tax residents and by non-US entities that have substantial US ownership.
PDF The Curious ECJ Case of Eon Asset Management and Its Impact on Finance Leasing in the United Kingdom
August 2012
Peita Menon, Prabhu Narasimhan

Recently, the European Court of Justice (ECJ) delivered its judgment in Eon Aset Menidjmunt OOD v Direktor na Direktsia 'Obzhalvane i upravlenie na izpalnenieto' (C-118/11) which (save for capturing the attention of a few VAT practitioners) went largely unnoticed in the United Kingdom. This may have been due to many reasons – the value of the Bulgarian VAT at stake was modest at best, the primary issue on which the court's ruling was required related to the deductibility of VAT paid in respect of leases of cars to transport employees (which is an area of VAT littered with cases of a routine nature often of limited significance beyond the boundaries of the case in question); or perhaps it is the impenetrable English pronunciation of the Bulgarian tax authority that prevented many of us from daring to delve deeper into the case.
PDF Proposed FATCA Regulations Feature InterGovernmental Approach
June 2012
John T. Lillis

Sections 1471 through 1474, commonly referred to as the Foreign Account Tax Compliance Act (FATCA) were originally enacted as a part of the Hiring Incentives to Restore Employment Act on 3/18/10. FATCA requires foreign financial institutions to enter into reporting agreements with the US with respect to their US account holders or be subject to a new 30% withholding tax imposed on certain US source payments. This new withholding tax generally applies to US source payments of interest, dividends, and other fixed income, as well as gross proceeds from the sale or other disposition of property of a type that can produce interest or dividends from US sources. FATCA also applies to certain “passthru payments” made by a foreign financial institution that are US source payments or that are deemed attributable to the foreign financial institution’s US assets.
PDF Transfer Pricing and Its Impact on M&A Transactions
April 2012, Acquisition International
Sang I. Ji

In addition to a higher proportion of M&A transactions that implicate multiple jurisdictions, taxing authorities worldwide have become more sophisticated in their search for revenues and often assert transfer pricing issues in the face of otherwise technically sound transaction structures. For these reasons, transfer pricing issues are front and center in the minds of the Firm's tax practitioners focused on M&A transactions. This article discusses the reasons why transfer pricing issues have become more prominent in M&A transactions in recent years.
PDF Global Tax Report April 2012: International Tax Controversy
April 2012
Kim Marie Boylan, Andreas Knebel, Alexandre Ippolito, Aleš Zídek, Jakub Zavadil

Mounting pressures on tax authorities to generate increased tax revenues have led to more aggressive implementation of tax laws and procedures in resolving tax disputes around the world. Taxpayers must stay informed of these changes and other global tax developments that may impact their global tax risk management, including their tax-planning decisions.
PDF Supply: Differences between goods & services
March/April 2012, VAT Digest
Prabhu Narasimhan, Peita Menon

This issue of VAT Digest considers the meaning of the VAT concept of ‘supply’, its classification into supplies of goods and services (and, complicatedly enough, into supplies which are neither, as well as a new emerging court imposed fictional concept of a ‘nonsupply’) and examines the rules which dictate where supplies of goods and/or services are treated as taking place for the purposes of VAT.
PDF Proposed Tax Changes in India may have a significant impact on International Investors
April 2012
Nandan S. Nelivigi, John T. Lillis, David M. Eisenberg, George Cyriac

On March 16, 2012, India's Finance Minister presented the country's budget for the fiscal year beginning April 1, 2012, which included proposed legislation that seeks to reverse the decision of (India's) Supreme Court in the Vodafone case and makes several other significant amendments to (India's) Income Tax Act, 1961 ("IT Act"). Many of the proposed amendments take effect retroactively from April 1, 1962.
PDF An Intergovernmental Approach to FATCA: US Treasury Issues Joint Statement From the United States, France, Germany, Italy, Spain and the United Kingdom in Connection With the Issuance of Proposed FATCA Regulations
March 2012
John T. Lillis, Raymond Simon, Barrye L. Wall

On February 8, 2012, the Department of Treasury (the "Treasury") and the Internal Revenue Service (the "Service") issued proposed regulations under the Foreign Account Tax Compliance Act ("FATCA"). FATCA establishes a new US information reporting regime that requires foreign financial institutions ("FFIs") to agree to provide the United States with specific information about their US account holders or be subject to a 30 percent withholding tax on various categories of US source payments and certain passthru payments received from other FFIs. The proposed regulations incorporate, refine and modify prior FATCA guidance as well as provide guidance on topics not previously addressed.
PDF Tax Journal – TOGC & ‘immediately consecutive transfers’ of business
February 2012, Tax Journal
Peita Menon, Prabhu Narasimhan

A transfer of a business as a going concern (TOGC) is, subject to conditions, outside the scope of VAT. HMRC takes the view that the TOGC treatment is not available where there is a series of immediately consecutive transfers of business. However, neither the UK TOGC legislation nor Article 19 of the Directive expressly provide for any such restriction. The authors contend that where all parties are fully taxable, if an intermediate owner (B) of a business (transferred from A to B and then from B to C) can demonstrate that it intended to carry on the business in the interim period between the transfers (and can evidentially demonstrate that such business was in fact carried on, practice being the best evidence of intention), then the UK VAT TOGC treatment should apply to both the transfers (provided that the other TOGC conditions are met) irrespective of what time period the business is carried on for by B.
PDF Supreme Court of India's Vodafone Judgment: Implications for International Investors
February 2012
Nandan S. Nelivigi, John T. Lillis, David M. Eisenberg

On January 20, 2012, the Supreme Court of India (the "Supreme Court") delivered a landmark judgment in Vodafone International B.V. v. Union of India & Anr. ruling that the transfer of shares of a company incorporated outside India from a seller resident outside India to a buyer resident outside India is not taxable by the Indian tax authorities even if such transfer indirectly transfers an asset in India.
PDF Cross-Border Merger Taxation in Japan
January 2012

As the world economy has become more integrated, global M&A has become an important strategic option for multinational corporations. Japan introduced qualified triangular mergers, qualified triangular stock exchanges and qualified triangular stock transfers ("qualified triangular mergers, etc.") in 2007 with anticipation of more investments into Japan by foreign corporations. The most well-known case is the 2008 Nikko Cordial Corporation and Citibank triangular stock transfer, where a US bank acquired a Japanese securities brokerage house without paying cash. After sub-prime issues and with excessive liquidity in China, Chinese companies acquired several Japanese companies using triangular mergers to make them wholly owned subsidiaries of Chinese-controlled companies. Today, with a strong yen exchange rate and weak domestic consumption, Japanese companies are considering cross-border M&A using qualified triangular mergers.