Hedge Funds, Hearings, And International Developments
US Tax Court ruling a win for the IRS, so far. The Wall Street Journal reports hedge fund managers could be required to pay federal self-employment taxes of over 3 percent on their shares of their firms’ profits, as well as the fees they charge. At issue is the definition of “limited partners,” which the court ruled does not automatically qualify a hedge fund manager for certain exceptions from federal self-employment taxes. The tax court’s opinion will likely face additional legal challenges.
Next week on Capitol Hill. The House Ways & Means Committee will hold a hearing Tuesday with two IRS whistleblowers. On Wednesday, its Subcommittee on Oversight will hold a hearing on the price of federal debt and its impact on taxpayers. Also on Dec. 6, and its Subcommittee on Tax will hold a hearing on tax policies that can expand economic growth.
EU nears full implementation of global minimum tax in 2024. The global minimum tax of 15 percent on corporate earnings (referred to as Pillar Two of the global tax reform framework), should be in place in most members of the European Union next year. However, ratification and implementation efforts are much slower for Pillar One of the plan, which would reallocate taxing rights over some profits of large multinationals to market jurisdictions.
Meanwhile, Vietnam enacts global minimum tax. The Vietnamese government passed the measure to align its tax on corporate earnings to meet the 15 percent global minimum tax on multinational corporations. Its 15 percent tax for multinational firms (with total revenue of at least $800 million in two of the four most recent years) will go into effect Jan. 1, 2024. It estimates that 122 foreign companies will pay the tax. Six Vietnamese firms will have to pay a top-up corporate income tax on their overseas investments if the respective host countries do not levy the minimum tax.
Portugal extends tax breaks to foreign residents who move to the country. The Portuguese parliament extended tax breaks for these foreign residents, even though critics argue the provision has resulted in higher demand for limited affordable housing options for many Portuguese. The provision allows people to claim residency by spending more than 183 days a year in the country; eligible foreigners enjoy a 20 percent tax rate for ten years on Portuguese-sourced income derived from “high value-added activities,” such as doctors and university teachers.
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