Tuesday, June 06, 2006

HP Settles with IRS: $443 Million Profit booster

Bloomberg.com: U.S.: "June 6 (Bloomberg) -- Hewlett-Packard Co., the world's biggest printer maker and No. 2 personal-computer seller, revised its second-quarter profit to reflect the benefit of a $443 million tax settlement.
Net income was increased to $1.9 billion, or 66 cents a share, up from the $1.46 billion, or 51 cents, reported on May 16, Palo Alto, California-based Hewlett-Packard said today in a statement. The company also increased its forecast for annual net income to $2.02 to $2.06 a share.
The settlement with the Internal Revenue Service relates to an audit of Hewlett-Packard's federal tax returns for 1996 through 1998. Because the agreement was signed before the company filed its financial statements with the Securities and Exchange Commission, Hewlett-Packard was required to include the settlement in the second quarter, which ended April 30.
Profit excluding one-time items "

Tuesday, April 18, 2006

Symantec hit with $1 billion tax claim

"Uncle Sam says Symantec, the maker of Norton antivirus software, owes more than $900 million in back taxes as a result of its $10.25-billion acquisition of Veritas" (see RED HERRING Symantec Faces Hefty Tax Bill)

There is a separate claim from the IRS against Symantec for $100 million. Both claims do not include charges for interest and penalties, which can be extremely aggressive.

The IRS is contesting Symantec's Transfer Pricing scheme for an Irish subsidiary used to distribute products around the world. Ireland is a well known and well used tax haven that attracts a significant amount of business through tax statutes that are favorable to companies.

The IRS is claiming that Symantec undervalued its product as it sold (transfered) the product from the US to Ireland, where it was later marked up and resold around the world.

Transfer Pricing is a term that loosely translated can be viewed as transfering profits. As the price in one locale goes up, the profits go up. As the price goes down the profits go down. Revenue Agencies around the world square off with companies and each other to insure that they each get their fair share of the taxable base.

Thursday, April 06, 2006

Double Residency with 183 day Rule? – Trick Question


Hypothetically, its possible for a person to be resident in two countries that both define residency requirements as maintaining presence in each country for 183 days during a year.

Every 4 years, during a leap year, the year is 366 days long. During a leap year, its possible to be present in 2 different countries for 183 days. Expect to have fun with your taxes during a leap year!

Relevance of Liable to Tax Phrase set out in OECD Model Treaty

What is the importance of the term ‘Liable to Tax’ as set out in the OECD Model Treaty?

The resident in question could posses a tax liability .

Charities and or a government can be liable to tax and posses a tax liability that is later reduced or eliminated by provisions relating to their status.

For example, a charitable organization in the US could lose its favorable tax treatment status. Thus having to pay its actual tax liability.

A person who does not pay any tax because of loss carryovers or deductions is also liable to tax. Their losses or deductions serve to reduce their liability.

Dividing Line My Resident is your Non-Resident

Dividing Line: My Resident is your Non-Resident

Why do Governments make such a big deal about determining if a person is a Resident or Non-Resident?

The simple answer is that this parameter ic used to classify the potential source of taxable income and capital. Based on the binary answer provided for this parameter, many countries have different taxation rules that will apply for each group.

It addition, this parameter helps countries identify the taxable source status of people that operate within multiple jurisdictions, ergo one countries non-resident may be a different countries Resident. Both countries will take an active role in tracking and possibly taxing the income, capital, estate taxes associated with the person in question.