US: New guidance for Competent Authority assistance

US: New guidance for Competent Authority assistance

The IRS today released two revenue procedures that offer guidance on the process for taxpayers to request and obtain the assistance of the U.S. Competent Authority under the U.S. network of income tax treaties and that provide guidance regarding the advance pricing agreement (APA) program.

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Rev. Proc. 2015-40 [PDF 245 KB] provides guidance on the process of requesting and obtaining assistance under U.S. tax treaties from the U.S. Competent Authority, acting through the Advance Pricing and Mutual Agreement Program and the Treaty Assistance and Interpretation Team of the Deputy Commissioner (International) Large Business and International Division of the Internal Revenue Service. 

Rev. Proc. 2015-40 updates and supersedes Rev. Proc. 2006-54, and was issued along with Rev. Proc. 2015-41 [PDF 241 KB] as guidance with respect to advance pricing agreements (APAs).

The following provides an initial overview of the 80+ page Rev. Proc. 2015-40.

Rev. Proc. 2015-40

A proposed version of the revenue procedure was released for public comment in Notice 2013-78. Today’s release is the final version of the revenue procedure, and was issued following IRS and Treasury Department consideration of public comments. Rev. Proc. 2015-40 also reflects modifications based on continuing internal monitoring of the administrative procedures of the U.S. Competent Authority with respect to the administration of U.S. tax treaties.

Rev. Proc. 2015-40 states that the principal differences between this final revenue procedure and the proposed version in Notice 2013-78 are as follows:

  • Rev. Proc. 2015-40 limits mandatory pre-filing procedures only to requests involving taxpayer-initiated positions. 
  • So that taxpayers have broad access to the U.S. Competent Authority to resolve disputes under U.S. tax treaties, taxpayers will not be required under Rev. Proc. 2015-40 to expand the scope of a competent authority request to include interrelated issues as a condition of receiving competent authority assistance. Taxpayers may still be required to provide information that will allow the U.S. Competent Authority to evaluate the appropriateness of the relief sought under the applicable U.S. tax treaty in light of the taxpayer's positions on interrelated issues. 
  • Rev. Proc. 2015-40 clarifies that the U.S. Competent Authority may consult with taxpayers with respect to certain additional issues that may arise in connection with competent authority requests, such as issues relevant to the determination of foreign tax credits and repatriation payments. 
  • Rev. Proc. 2015-40 provides additional guidance on requesting discretionary determinations under the limitation on benefits (LOB) articles of U.S. tax treaties.
  • Consistent with the objective of providing taxpayers with broad access to the U.S. Competent Authority to resolve disputes under U.S. tax treaties, the U.S. Competent Authority will not condition assistance on the taxpayer's notification of the U.S. Competent Authority, or on obtaining its concurrence, with respect to signing a standard Form 870 with IRS Examination. Similarly, a taxpayer will not be required to obtain the U.S. Competent Authority's agreement prior to entering into a closing agreement or similar agreement with IRS Examination, but in these cases the assistance provided by the U.S. Competent Authority will be limited to seeking correlative relief from the foreign competent authority, thus potentially not eliminating double taxation. 
  • Rev. Proc. 2015-40 provides additional information about the process followed by the U.S. Competent Authority in conducting its review under the simultaneous appeals procedure.
  • Rev. Proc. 2015-40 clarifies and refines the bases on which the U.S. Competent Authority may decline to accept a competent authority request or may cease providing assistance.
  • The user fee for requests for discretionary LOB relief is increased.
  • Rev. Proc. 2015-40 substantially restructures the proposed guidance in Notice 2013-78 to improve clarity, readability, and organization.

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