Daily Tax Update - November 3, 2014: OECD Issues Discussion Drafts on Permanent Establishment Status and Transfer Pricing Action Plans

OECD Issues Discussion Drafts on Permanent Establishment Status and Transfer Pricing Action Plans:  The OECD has released two discussion drafts.  The first responds to Action 7 of the BEPS Action Plan, which addresses issues related to the artificial avoidance of permanent establishment (PE) status.  Action 7 calls for the development of changes to the definition of PE to prevent the artificial avoidance of PE status in relation to BEPS, including through the use of commissionaire arrangements and specific activity exemptions.

The second OECD discussion draft responds to Action 10 of the BEPS Action Plan.  Action 10 calls for transfer pricing rules to provide protection against common types of base eroding payments, such as management fees and head office expenses.  This discussion draft proposes to do this by identifying a wide category of common intra-group services commanding a very limited profit mark-up on costs, applying a consistent allocation key for all recipients, and providing greater transparency through specific reporting requirements

Senator Paul Calls for Repatriation Holiday:  Senator Rand Paul (R-KY) has stated that his number one priority for the next term of Congress is to pass a bill enacting a repatriation holiday.  He stated: “The number one thing I want to pass in January is, there is $2 trillion worth of American profit overseas.  I want to invite that… money to come home and create American jobs.  We could have a stimulus in January.”  Senator Paul stated that there is bipartisan support for this bill and that he believes it can pass. 

IRS Releases Draft Instructions for Form 1120S:  The IRS released draft instructions for Form 1120S, the US income tax return for an S corporation.  New information in the draft instructions includes information reporting requirements for health insurance coverage and offers, changes for some filers of the Form 1120S that file the Form M-3, and clarifications for activity based reporting.