(C) Tax Analysts 2016. All rights reserved. does not claim copyright in any public domain or third party content. Volume 82, Number 5 May 2, 2016 For more Tax Notes International content, please visit www.taxnotes.com. (C) Tax Analysts 2016. All rights reserved. does not claim copyright in any public domain or third party content. For more Tax Notes International content, please visit www.taxnotes.com. (C) Tax Analysts 2016. All rights reserved. does not claim copyright in any public domain or third party content. FROM THE EDITOR FEATURED PERSPECTIVES 409 LuxLeaks on Trial: Whose ‘Public 479 The Secrets to the Success of the Interest’ Will Prevail? Dutch Innovation Box by Stuart Gibson by Willem Bongaerts and Ivo IJzerman LUXLEAKS TRIAL 485 Examining the Proposed U.S. Country-by-Country Reporting Regs 411 LuxLeaks Trial Opens; by Lewis J. Greenwald and Lucas Giardelli PwC Data Breach in Spotlight by Teri Sprackland DATELINE: DEUTSCHLAND HIGHLIGHTS Germany’s 3 Great Tax Reforms 491 by Manfred Mössner 415 Cutting Through the Panama Rhetoric by Mindy Herzfeld PRACTITIONERS’ CORNER 418 Transfer Pricing Needs a Save Shot 495 Corporate Tax Considerations for by Lee A. Sheppard U.S.-Canadian Cross-Border Planning by Patrick Tchiengang 426 Who’s Afraid of Anti-Inversion Rules? by Amanda Athanasiou SPECIAL REPORT 430 Withholding on Conversion Ratio 503 The Post-BEPS World of Permanent Adjustments Establishment by Ajay Gupta by Kevin Cunningham Conversations: Marlies de Ruiter CALENDAR 434 by Stephanie Soong Johnston 511 CROSSWORD PUZZLE 435 Brexit Like Tax With No Benefit, 515 OECD’s Gurría Says COMING ATTRACTIONS by Santhie Goundar 493 437 TRANSFER PRICING ROUNDUP 471 TREATY WATCH Cover Photo of Antoine Deltour: Vincent Kessler/Reuters/Newscom TAX NOTES INTERNATIONAL MAY 2, 2016 • 407 For more Tax Notes International content, please visit www.taxnotes.com. (C) Tax Analysts 2016. All rights reserved. does not claim copyright in any public domain or third party content. NEWS AT A GLANCE AUSTRALIA LUXEMBOURG 439 Senate Panel Challenges International 450 Revised Tax Package Includes Transfer Pricing Regime Tax Fraud Law 440 Taxpayer Alerts Address Emerging MEXICO Profit-Shifting Schemes 450 Energy Trust Rules Amended to Lure 441 Senate’s Profit-Shifting Report Additional Investment At Odds With OECD MULTINATIONAL AUSTRIA 451 More Than 20 Countries Join Information 442 Austria Lobbying ECOFIN to Join Pilot Exchange Pilot Program Anti-VAT-Fraud Project 452 Coalition Hopes to Use ISIL’s Own Tax BRAZIL Regime Against It 442 Prospects for Tax Reform Dim as President 453 Governments Urged to Use Transfer Pricing Faces Impeachment Trial Values to Acquire IP ESTONIA PANAMA 444 Parliament Drafting Tax Framework Under 456 Panama Papers Data to Be Released May 9 ‘Uber Law’ 456 Panama and U.S. Sign FATCA Agreement EUROPEAN UNION THAILAND EU Court Tells France, Ireland, and Italy to 445 Philip Morris Pleads Not Guilty to Tax Recover State Aid 456 Evasion Charges 445 EU Study Targets Aggressive Tax Planning By MNEs UKRAINE 446 VAT Decision Addresses Valuation of Rights 457 Guidance Addresses Effect of Tax Haven on In Long-Term Lease Controlled Transaction 446 Academic Urges Caution on EU Tax Reform UNITED KINGDOM Proposals 457 HMRC Claims Victories in 2 Tax Avoidance 447 Value of Fiat and Starbucks State Aid Cases Decisions Questioned 458 Report Forecasts Decline in Corporate Tax FRANCE Revenues 448 Tax Authorities Take $338 Million Bite 459 Lawmaker Notes Snag in HMRC’s ‘Making Out of McDonald’s Tax Digital’ Plan GERMANY 460 U.K. Would Reopen Google Tax Settlement If New Evidence Arises 448 FX Loss From Liquidation of Foreign Partnership Nondeductible, Court Says UNITED STATES GREECE 461 Panama Papers Raise Publicity for U.S. Tax Enforcement Efforts VAT Rate Increased to 24 Percent 449 462 Cash Pooling Viability Debated Following INDIA Related-Party Debt Regs 449 India’s Panama Papers Investigations in 464 Treasury Hasn’t Ruled Out Inversion Regs Preliminary Stages Expansion 408 • MAY 2, 2016 TAX NOTES INTERNATIONAL For more Tax Notes International content, please visit www.taxnotes.com. (C) Tax Analysts 2016. All rights reserved. does not claim copyright in any public domain or third party content. FROM THE EDITOR LuxLeaks on Trial: Whose equivalent of a password consisting of the numbers 1234. Finally, it is almost certain that had these rulings ‘Public Interest’ Will Prevail? become public when they were issued, calls for greater tax transparency would have echoed throughout Eu- rope long ago, leading to greater openness and infor- by Stuart Gibson mation exchange and less tax avoidance within the Eu- ropean Union. ax Analysts was founded 45 years ago to promote Ttransparency and open government in tax policy At its core, the trial pits two views of the public in- and administration. For us the LuxLeaks trial that be- terest against each other. On one side is the public in- gan last week may represent the quintessential battle terest in the people’s right to be secure in their prop- between darkness and light, secrecy and openness. We erty, including digital property. Advocates of this view are pleased to provide coverage from Tax Analysts’ would argue that respect for private property represents Teri Sprackland, who is reporting on the trial from in- a bedrock value of a democratic society, perhaps citing side the courtroom. (Coverage of the LuxLeaks trial the Fourth Amendment to the U.S. Constitution. On begins on p. 411.) the other side is the public interest in open govern- ment, and the people’s right to know how their repre- On one side are the Luxembourg prosecutors, sup- sentatives develop and implement public policy. Sup- ported through the criminal investigation and at trial porters of this view would argue that it is critical to the by global accounting firm PwC, whose records were public interest to protect whistleblowers who expose taken and leaked to the press. They are trying to prove the secret inner workings of government to the public. that former PwC employees Antoine Deltour and They would cite Daniel Ellsberg’s release of the Penta- Raphaël Halet and journalist Edouard Perrin commit- gon Papers as helping end the United States’ involve- ted criminal violations of Luxembourg’s strict business ment in the Vietnam War. privacy laws. At the end of the trial the judges hearing the case On the other side are the defendants, their lawyers, will have to weigh these competing views, apply the and much of the public. Some prominent people have laws of Luxembourg, and arrive at a decision. What- recently voiced their support for Deltour, who was ever they decide, we hope they will acknowledge the awarded the 2015 European Citizen’s Prize by the Eu- importance of both sides, and not unduly punish indi- ropean Parliament. French Finance Minister Michel viduals who were, at least in the view of many, doing Sapin shortly before the start of the trial delivered an the right thing. impassioned speech on the floor of the French legisla- ture supporting the defendants (all of whom are Much has been written about the Panama Papers French). Two German members of the European Par- since the International Consortium of investigative liament, Sven Giegold and Fabio De Masi, are testify- Journalists (ICIJ) disclosed information about them last ing for the defense at trial. month. Expect more controversy when the ICIJ re- leases a searchable database of the documents on May There can be little doubt that the three defendants 9. Mindy Herzfeld reviews the responses of the tax improperly took from PwC and made public copies of community to the leaks and cautions against knee-jerk tax rulings issued by the Luxembourg finance ministry responses that could backfire (p. 415). to about 340 multinational clients of PwC — that is a crime by almost anyone’s standards. There is also little doubt that the accounting firm’s computer systems ♦ Stuart Gibson is editor of Tax Notes were secured — if you can call it that — by the digital International. TAX NOTES INTERNATIONAL MAY 2, 2016 • 409 For more Tax Notes International content, please visit www.taxnotes.com. tax notes international® (C) Tax Analysts 2016. All rights reserved. does not claim copyright in any public domain or third party content. Copyright 2016, Tax Analysts ISSN 1048-3306 President and Publisher: Christopher Bergin Deputy Publisher: David Brunori Editor in Chief: Jeremy Scott Editor in Chief: Cara Griffith Deputy Editor in Chief: Chuck O’Toole Editor: Stuart Gibson Chief Correspondent: Amanda Athanasiou Deputy Editor: Cathleen Phillips Reporters: J.P. Finet, Ryan M. Finley, William Hoke, Stephanie Soong Johnston, Alexander Lewis, Teri Sprackland Legal Editors: Laura Breech, Claire Pendergast Managing Editor: Doug Smith Copy Chief: Betsy Sherman Assistant Editor: Kristen Langsdorf Editorial Staff: Zachary Abate, Monica Anderson, Julie Brienza, Editorial Assistant: Daniel Xu Amanda Chan, Patrice Gay, Eben Halberstam, James Hebblethwaite, Mick Heller, Andrew Hellerstein, Contributing Editor: Lee A. Sheppard Sarah Karney, Jenny Nguyen, Jessica Pritchett, Kristen Rethy, Chief Economist: Martin A. 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