Income Tax Treaty Practice for Tax Counsel: Planning and Structuring Transactions to Maximize Treaty-Based Benefits

Understanding and Applying Key Tax Treaty Provisions and the Coming Changes

Recording of a 90-minute CLE/CPE webinar with Q&A


Conducted on Wednesday, April 26, 2017
Recorded event now available


This CLE/CPE webinar will provide tax counsel with a solid overview and explanation of key tax treaty provisions that tax counsel must master in structuring cross-border ownership structures and transactions. The panel will focus on individual, small business, and middle-market positions and will enable tax counsel to advise clients in availing themselves of treaty-based positions.

Description

The United States has in force income tax treaties with over 60 countries. The treaties are intended to eliminate or reduce double income taxation. Benefits are available to non-U.S. enterprises and nonresident aliens (and, to a limited extent, to U.S. citizens living abroad) with respect to U.S. federal income taxes and to U.S. enterprises, citizens, and residents with respect to foreign country income taxes. Tax advisers working with nonresident aliens or non-U.S. enterprises with U.S. investments or business activities and U.S. individuals and enterprises with foreign source income need to know who is eligible for treaty benefits and the procedures for claiming and reporting treaty-based tax benefits.

While each income tax treaty has its own specific terms and requirements, common themes and terminology are found in all U.S. income tax treaties. For example, under most income tax treaties, U.S. taxpayers may claim exemption from source country taxation for personal services income. Other provisions include reduction or exemption of withholding taxes on interest and dividends, and royalties.

A critical component of both inbound and outbound multinational transactions is determining what treaty benefits and limitations apply. Tax counsel serving clients subject to multiple tax jurisdictions must be able to evaluate the impact of tax treaties to ensure clients take advantage of tax benefits.

The new 2016 Model Tax Treaty announced by Treasury, which serves as the baseline text the U.S. uses to negotiate and update tax conventions, includes several key provisions that may serve to limit or deny treaty benefits for income subject to preferential foreign tax regimes. Similarly, the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (sometimes referred to as the “Multilateral Instrument” or “MLI”) released by the OECD on November 24, 2016 will enable participating countries to rapidly implement changes to certain key terms of their tax treaties without the need to renegotiate the terms of each treaty. The MLI is intended to facilitate the implementation of treaty-related measures arising from the G20/OECD BEPS project. Tax attorneys involved in cross-border transactions need to understand these latest developments and coming changes to avoid costly tax consequences.

Listen as our experienced panel explains critical tax treaty provisions that tax counsel need to know in drafting and negotiating cross-border ownership structures and transactions for individual, small business, and middle-market clients.

Outline

  1. Purpose of income tax treaties and basic principles
  2. Conditions to benefits under U.S. income tax treaties (residence, limitations on benefits, anti-abuse rules)
  3. Treatment of personal services income
  4. Permanent establishment
  5. Taxation of dividends, interest, and royalties
  6. Recent developments (2016 U.S. Model, BEPS action items, MLI)

Benefits

The panel will review these and other key issues:

  • Purposes of income tax treaties
  • Persons who can claim benefits
  • Common residency provisions; tie breakers for dual residents
  • Savings clauses applicable to U.S. citizens
  • Limitations on benefits
  • Exemptions for personal services income
  • Permanent establishment (basic principles and proposed changes under BEPS)
  • Treatment of interest and dividends, and royalties
  • Recent developments (2016 U.S. Model, BEPS proposals and Impact of the MLI on tax treaties)

Learning Objectives

After completing this course, you will be able to:

  • Identify whether a taxpayer is a qualified resident eligible to receive benefits under a treaty
  • Determine whether a taxpayer has a permanent establishment based on tax treaty provisions
  • Discern how to apply the various limitation of benefits tests under treaties
  • Identify key treaty benefits for qualified residents
  • Recognize how mutual agreement procedure provisions function to resolve double taxation adjustments
  • Identify upcoming changes to certain treaty provisions affecting interpretation and application

Faculty

Bryan H. Kelly, Counsel
Venable, Los Angeles

Mr. Kelly has private practice and Big Four accounting firm experience advising clients on a multitude of tax matters, with an emphasis on the tax considerations relating to cross-border transactions. He advises both U.S.-based and non-U.S.-based multinational organizations across a number of industries, ranging from large, publicly traded companies to start-up ventures, on federal income tax considerations with respect to various inbound and outbound transactions. He has significant experience with inbound investment into the United States. In addition, he regularly coordinates with advisers across multiple jurisdictions to manage the global design and implementation of structuring and restructuring projects. 

Javier Salinas, JD, MBA, LLM, Managing Director, International Tax
BPM, San Francisco

Mr. Salinas focuses his practice on tax, including international tax. His international tax expertise includes, IP transfers and other complex cross-border planning and structuring under the anti-tax deferral provisions of Subpart F; cross-border supply chain planning, M&A, reorganizations and joint venture structuring; transfer pricing planning and compliance; interpretation of income tax treaty provisions and determination of tax treaty benefits; global repatriation planning, including maximization of foreign tax credit benefits and exclusions from gross income of previously taxed earnings and profits; and the IC-DISC U.S. export tax incentive provisions. Previously, he was the lead international tax specialist for Grant Thornton and before that was a member of Ernst & Young’s National Tax Department in the International Tax Services Group in Washington, D.C. 


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Tax Law Advisory Board

Robert S. Barnett

Partner

Capell Barnett Matalon & Schoenfeld

William H. Byrnes

Associate Dean, Special Projects

Texas A&M University Law

Robert A.N. Cudd

Senior Partner

Polsinelli

Patrick Derdenger

Tax Partner

Steptoe & Johnson

Janice Eiseman

Principal

Cummings & Lockwood

Lynn Fowler

Partner

Kilpatrick Townsend & Stockton

Edward Froelich

Of Counsel

Morrison & Foerster

Daniel L. Gottfried

Partner

Hinckley Allen

J. Leigh Griffith

Partner and Practice Group Leader - Tax

Waller Lansden Dortch & Davis

L. Andrew Immerman

Partner

Alston & Bird

Mark S. Lange

Partner

BakerHostetler

Joseph C. Mandarino

Partner

Smith Gambrell & Russell

Lori Mathison

Partner, Cross-Border Transactions Tax

Fraser Milner Casgrain

Christian M. McBurney

Partner

Arent Fox

Suzanne Ross McDowell

Partner, Tax-Exempt Organizations

Steptoe & Johnson

Todd Reinstein

Partner, Corporate Tax and Due Diligence

Pepper Hamilton

Alex Sadler

Partner

Morgan Lewis

Susan Seabrook

Shareholder

Buchanan Ingersoll & Rooney

Peter Stathopoulos

Managing Director, State and Local Tax Practice

Bennett Thrasher

Eric Tresh

Partner & Co-Chair, State & Local Tax Practice

Sutherland Asbill & Brennan

Amanda Wilson

Shareholder

Lowndes Drosdick Doster Kantor & Reed

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