Recent developments relating to Section 482 and tax treaties

Article Abstract:

Section 482 of the IRC describes how revenues of US corporations with a foreign parent are to be allocated to determine income tax. The phrases 'at arm's length' and 'comparable profit interval' are used in making these determinations, and the difficulties involved in applying such vaguely defined notions will continue to give rise to litigation. The position the IRS has maintained in application of IRC Section 304 that a foreign related corporation may be a domestic withholding agent may encounter enforcement difficulties.

International aspects, Allocation (Taxation), Tax allocation

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Investing in Mexico: from a Mexican practitioner's view

Article Abstract:

US investors should examine Mexico's tax laws and the 1992 income tax treaty between the US and Mexico before investing in the country. Under Mexican law, nonresidents are taxed for the income they earn from Mexican-located sources. Income is defined for numerous categories, including salary, fees, time-sharing services, transfer of shares, interest, and royalties. To claim treaty benefits, investors need proof of residency.

Tax Law, Public Finance Activities, Laws, regulations and rules, Investments, Mexico, Tax policy

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Tax Court rejects IRS sourcing rule for royalty income

Article Abstract:

The 1996 SDI Netherlands case ruling holds that US withholding taxes are not applicable to royalty payments made by an intermediary or affiliated corporation. The Tax Court's decision may lead to changes in the IRS anti-conduit regulations since the ruling rejects the traditional IRS royalty income sourcing rule. That rule derives from Rev. Ruling 80-362, the IRS's attempt to curb treaty shopping abuses and conduit schemes.

Cases, Affiliated corporations, Royalties, Royalties (Intellectual property), Withholding tax, international

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