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Monthly Archives: July 2017

IRS Agree On Tax Refund Due Amazon In $1.5B Dispute

we previously posted on March 27, 2017 Amazon Defends It's Pricing and Tax Court Issues the IRS its 2nd Large §482 Defeat On January 5, 2015 we where we discussed that the US Tax Court ruled against the IRS in this $1.5 billion transfer pricing dispute with Amazon, which currently has experts calling for a re-examination of the agency's valuation methodologies in order to prevent it from wasting its own resources and those of taxpayers.
Using methodologies the U.S. Tax Court had already knocked down in another transfer pricing lawsuit against Veritas Software Corp. in 2009, the IRS made substantial transfer pricing adjustments that reallocated more income from Amazon’s European subsidiary to its U.S. operations and assessed more than $234 million in deficiencies for the 2005 and 2006 tax years. The IRS’ position could have resulted in an overall tax liability of $1.5 billion, plus interest, Amazon estimated.
Now according to Law360,, the IRS agreed that it owes the online retail giant $9.5 million for the 2005 tax year, but that there is an income tax deficiency of $2.5 million from the following year.

In a stipulation entered by the court, the IRS and Amazon agreed that the company had overpaid its taxes in the amount of $9.55 million for the tax year ending on Dec. 31, 2005, and that there is a deficiency of $2.54 million in income tax due from Amazon for the tax year ending on Dec. 31, 2006. The computations do not include interest payments due.

Amazon had previously estimated that the IRS’ notices of proposed adjustments issued for a seven-year period, starting in 2005, could have resulted in a tax liability of $1.5 billion plus interest.

The case is Amazon.com Inc. & Subsidiaries v. Commissioner of Internal Revenue, case number 31197-12, in the U.S. Tax Court.

 
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Read more at: Tax Times blog

Apple States That Its Irish Subsidiaries Should be Taxed in the US & US Gov't Agrees To Intervene In Apple's €13B EU Tax Case

Apple has published its defense to the European Commission's accusation that it obtained unfair commercial advantage from its corporation tax agreement with Ireland.
 
The company states that its profit-making activities were controlled and managed in the US, and so should be taxed there and not in Ireland; and that the Commission has breached Apple's 'fundamental rights' by ordering Ireland to charge it EUR13 billion in taxes.
 

Now the U.S. government is planning on intervening in Apple Inc.'s lawsuit challenging an approximately €13 billion ($14.85 billion) tax bill in Ireland ordered by the European Union’s competition watchdog, a source familiar with the case said Thursday.

Apple is appealing the European Commission’s August 2016 ruling, which concluded that it had entered into a sweetheart tax deal with the Irish government to “substantially and artificially” lower its taxes.

The commission’s investigations into Apple’s tax arrangements, as well as those of Starbucks Corp., had previously drawn the attention of the Obama administration, which complained that the commission appeared to be unfairly targeting U.S. businesses and that American taxpayers may end up having to foot the bill for foreign tax credits that the companies may be able to claim following a retroactive imposition of taxes.

A source confirmed to Law360 that the federal government has now filed an application with the European Union General Court to have its say on the retroactive application of state aid rules to Apple. The application has not been made publicly available.

The European Commission found that two tax rulings Ireland had issued to Apple in 1991 and 2007, allowing the software giant to allocate almost all of its sales profits to “head offices” that existed only on paper, were in violation of the EU’s state aid rules.

The allocation of profits to head offices, with no employees or physical locations, allowed Apple’s effective corporate tax rate to go down from 1 percent in 2003 to 0.005 percent in 2014 on the profits of the Irish-incorporated subsidiary Apple Sales International, the commission said.

Apple has refuted the commission’s findings, saying that the watchdog misunderstood Irish law and the role of its Irish units in developing intellectual property and failed to recognize that its main “profit-driving activities,” especially the development and commercialization of IP, were controlled and managed in the U.S.

The commission only considered the minutes of board meetings and did not properly assess “extensive expert evidence” that Apple’s profits were not attributable to activities in Ireland, the software giant said.

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Sources:

Read more at: Tax Times blog