US

TP audit guide

An audit guide by Cindy Hustad and Keith Reams of Deloitte Tax LLP.

Market overview

The OECD's BEPS project has been the root of a lot of uncertainty over the past year, tax practitioners in the US report. As a member of the OECD, the US has signed up to follow the BEPS rules, however implementation has been slow as fears of a negative impact on multinationals have caused debate among the authorities and politicians.

"I think that the fear is that the US will be a loser if all of the BEPS recommendations were implemented, and many don't agree with all of the recommendations," said George Gerachis, head of tax at Vinson & Elkins.

Gerachis added that ultimately the US would go along with the programme regardless, but that the progress has been slow.

"The BEPS programme has been important lately, and it will continue to be very important," said David Noren, head of tax at McDermott Will & Emery Washington D.C.

The BEPS project has also caused the American tax authorities to take stronger positions in audits and prepare for a post-BEPS world as the recommendations are being implemented. Many practitioners also report a significant increase in transfer pricing examinations carried out by the tax authorities.

Not only has the amount of audits increased, but the intensity of the process is also much greater, according to Mark Martin, head of transfer pricing at McDermott Will & Emery Houston. "The audits are much more vigorous and we are seeing many more information document requests," he said.

Fabian Alfonso, BaseFirma's head of transfer pricing, agreed. "US corporations are feeling targeted by the IRS," said Alfonso.

As the tax authorities begin to implement BEPS, with legislation on country-by-country reporting (CbCR) finalised in June, practitioners see a lot more work coming from BEPS-inspired regulations.

"In the short to medium term I think the demand for tax planning would increase, if companies want to make changes to their structures – in part with CbCR in mind," said Noren.


Tax authorities

Internal Revenue Service
77 K Street NE
Washington DC 20002
Tel: +1 202-803-9000
Website: www.irs.gov/Businesses


Tax rates at a glance

(As of April 2016)

Corporate income tax rate 15% to 39% (a)
Corporate capital gains tax rate 15% to 39%
Branch tax rate 15% to 39% (a)
 
Withholding tax (b)
Dividends 30% (c)
Interest 30% (c)(d)
Royalties from patents, know-how, etc. 30% (c)
Branch remittance tax 30% (e)
 
Net operating losses (years)
Carryback 2 (f)
Carryforward 20 (f)

  1. In addition, many states levy income or capital-based taxes. An alternative minimum tax is also imposed on corporations.
  2. Rates may be reduced by treaty.
  3. Applicable to payments to non-US corporations and non-residents.
  4. Interest on certain "portfolio debt" obligations issued after July 18 1984 and non-effectively connected bank deposit interest are exempt from withholding tax.
  5. This is the branch profits tax applicable to non-US corporations.
  6. Special rules apply to certain types of losses and entities.

Source: EY 2016 Worldwide Corporate Tax Guide


Firm contact details

Fenwick & West
Morgan, Lewis & Bockius
WTS