"VAT, withholding, sourcing, thin capitalization, permanent establishment, apportionment, and tax credits have been challenges for tax executives for years," said Timothy McCormally, executive director, TEI. "FIN 48 issues are newer but now provide a complicating overlay to many problematic tax planning and compliance issues."

Linda Scheffel, Thomson Tax & Accounting vice president and publisher for Research & Guidance, observed: "The number and diversity of jurisdictions that these TEI experts work in, seems to be a significant factor. Simply stated, they are faced with many differences in rules, changes to those rules, and planning opportunities and pitfalls."

The issues that the TEI panel found most challenging, despite their significant expertise, were:

• Non-US transfer pricing rules and documentation requirements, especially relating to countries that use secret comparables;
• US transfer pricing rules, most notably transfer pricing exposures under FIN 48;
• FIN 48/Risk Control, involving the effective capture, measurement, reporting and updating of all material international tax issues;
• Treaty issues (US and non-US), including emerging issues related to server locations;
• International tax and accounting aspects of stock-based compensation;
• Tax management issues, including monitoring of law changes across multiple jurisdictions; the policing of risk management policies, and education of and communication with regional tax teams;
• Contract manufacturing issues;
• China-specific tax issues;
• Foreign exchange issues;
• Conversions of business form, especially from branches to CFCs;
• Foreign tax credits;
• VAT in cross-border transactions;
• Taxable presence of individuals in other countries;
• US expatriate taxation;
• US withholding;
• Sourcing of income and apportionment of expenses;
• Deductibility of overhead related to out-of-country operations/projects in other countries; and
• Worldwide thin-capitalization issues.

An in-depth article covering this TEI panel discussion of international issues will appear in the March 2008 issue of the Journal of International Taxation.