Mastering U.S. Permanent Establishment Tax Under New OECD Guidance vs. General Tax Treaty Approach

Navigating Income Attribution Rules in the U.S. Model Income Tax Convention and Recently Signed Tax Treaties

A live 110-minute CPE webinar with interactive Q&A


Thursday, April 20, 2017
1:00pm-2:50pm EDT, 10:00am-11:50am PDT


This CPE webinar will provide U.S. tax advisers and corporate tax executives with a practical guide to navigating the permanent establishment rules for foreign corporations conducting business in the United States. The panel will discuss the evolving standards for determining whether a foreign entity has a U.S. taxable presence and offer useful guidance in identifying and calculating income associated with that presence. The webinar will detail the recent OECD guidance on treaty-based attribution rules and contrast this approach with the application of U.S. domestic tax law and other U.S. income tax treaties.

Description

An often complex challenge for U.S. corporate tax advisers of foreign companies is the allocation of U.S. taxable income arising from a “permanent establishment” (PE) in the United States. The critical first step in calculating such income and resulting U.S. tax obligations is determining what standards apply in deciding whether a foreign corporation has a PE that would create a taxable presence. U.S. domestic tax law often conflicts with specific tax treaty provisions, creating both risk and opportunity for corporate tax advisers, and recent OECD guidance likely will create further complications.

Foreign-based multinational companies conducting business in the United States face varied tax treatment of their income and activities, depending on whether the corporation’s country of residence has an income tax treaty with the United States. All U.S. bilateral income tax treaties contain a “permanent establishment” provision, which exempts a nonresident corporation’s business profits from taxation unless the profits are attributable to a permanent establishment within the host country. Depending on the tax rates in the treaty countries, creating a PE in the United States can either reduce or increase a foreign-based multinational’s foreign tax expense, and may be a useful planning tool.

The recent guidance from OECD would further complicates the process of calculating profits attributable to a PE. Under the OECD “authorized approach,” multinationals will be required to treat business units with a PE as “functionally separate entities” which will use arm’s length transfer pricing standards to calculate business profits subject to host country tax. Tax advisers to foreign-based multinationals need to have a working knowledge of the risks and opportunities involved with the OECD permanent establishment approach.

Our experienced panel will provide a practical and thorough approach to the evolving permanent establishment rules for foreign-based multinational companies with U.S. branch operations to minimize costly withholding, reporting requirements and significant tax and penalties.

Outline

  1. Effectively connected income vs. permanent establishment
  2. Business profits attributable to a permanent establishment under U.S. Treaties
  3. Authorized OECD approach
    1. Transfer-pricing guidelines
    2. Comparison to the 2016 U.S. Model Treaty
    3. Permanent establishment treated as “functionally separate entity”
  4. Forgoing treaty benefits
    1. A treaty’s reduction (possibly to 0%) of the Code’s standard 30% withholding tax on dividends, interest and royalties
    2. Future impact of forgoing treaty benefits
    3. Consistency principle

Benefits

The panel will review these and other key issues:

  • What factors should tax advisers to multinationals consider when deciding what standard to use in determining whether to avail the branch of treaty benefits under a permanent establishment analysis?
  • What are the possible advantages of the new OECD “authorized approach” to multinationals with U.S.-based permanent establishment branches
  • When should a multinational elect to forego treaty benefits?

Learning Objectives

After completing this course, you will be able to:

  • Identify the benefits and burdens of new OECD “autorized approach” vs. existing U.S. treaty approach in calculating business profits directly attributable to a U.S. branch deemed to have a PE in the United States
  • Recognize when a U.S. branch of a foreign-domiciled multinational should consider foregoing tax treaty benefits
  • Ascertain when the OECD approach can lessen U.S. tax exposure through development of an integrated transfer pricing model
  • Determine filing requirements under various approaches to calculating and reporting business profits attributable to a U.S. permanent establishment.

Faculty

William K. Norman, J.D., LL.M. (Taxation), Partner
Ord & Norman, Los Angeles

Mr. Norman practices as a tax lawyer. He limits his practice to international tax planning and compliance for high net worth individuals, corporations and joint ventures. He regularly works with U.S. businesses expanding overseas, foreign based businesses establishing operations in the United States, and multinational families on wealth transfer matters. He assists in-house staff of businesses and their outside tax professionals with filings, audits and appeals involving international tax issues and represents individuals in Overseas Delinquent Filings, Voluntary Disclosures and Streamlined Filing Procedures.

Dan Cassidy, CPA, Principal
Clark Nuber, Bellevue, Wash.

Mr. Cassidy focuses his practice on tax compliance and planning, stock options and equity compensation, international compliance and consulting, and mergers and acquisitions for technology, real estate and manufacturing industries. He is particularly well-known for his expertise in the international arena, including tax planning, investment, and intellectual property issues. He concentrates on structuring for inbound and outbound international business expansion and investment, consulting on domestic and international acquisitions and divestitures, planning with respect to the development and utilization of intellectual property, and tax planning and compliance for corporations and pass-through entities.


Registration per Person for Live Event

Live Webinar $247.00

Live Webinar & CPE Processing $282.00


CPE per Person on Live Event

Continuing Professional Education credit processing is available for an additional fee. CPE processing must be ordered prior to the event. To qualify for CPE you may not listen via the telephone.

This program is eligible for 2.0 CPE credits.

  • Field of Study: Taxes.
  • Level of Knowledge: Intermediate.
  • Advance Preparation: None.
  • Teaching Method: Seminar/Lecture.
  • Delivery Method: Group-Internet (via computer).
  • Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of verification codes announced throughout the presentation.
  • Prerequisite: Three years+ business or public firm experience at mid-level within the organization, preparing complex tax forms and schedules; supervisory authority over other preparers/accountants. Specific knowledge and understanding of the authorized Organisation for Economic Co-operation and Development (OECD) approach, a specific set of income attribution rules contained in the 2006 and 2016 United States Model Income Tax Conventions and recently enacted U.S. treaties.

NOTE: CPE credit processing for all attendees must be ordered by 2pm Eastern the day of the program to receive a Certificate of Attendance within 24 hours.


Recordings

Recorded Event

Includes full event recording plus handouts (available after live webinar).

Note: Self-study CPE and EA credits are not offered on recorded events.

Recorded Webinar Download $247.00
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Live Webinar & Webinar Download $344.00

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DVD (Slide Presentation with Audio) Only $97.00 with Registration/DVD Combo


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Customer Reviews

I liked the clear and concise manner in which the topics were presented.

Angelina Johnson-Brown

General Electric Company

The webinar was fast paced and comprehensive.

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SAP

Coverage was practical and straightforward. Well done.

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I especially liked the examples illustrating the topics concepts.

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Holly

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Federal Income Tax Advisory Board

David Bowen

Principal

Grant Thornton

Joseph Calianno

Partner, National Tax Practice

Grant Thornton

Edward Froelich

Of Counsel

Morrison & Foerster

George Manousos

Partner

PricewaterhouseCoopers

Christian McBurney

Federal Tax Partner

Nixon Peabody

Alex Sadler

Partner

Ivins, Phillips & Barker

Susan Seabrook

Partner

Bingham McCutchen

Tom Windram

Managing Director & National Leader, Federal Tax Credits & Incentives

RSM McGladrey

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