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16 September 2016

U.S. International Tax This Week for the Week Ending September 16

Ernst & Young's U.S. International Tax This Week newsletter for the week ending September 16 is now available. Prepared by Ernst & Young's International Tax Services group, this weekly update summarizes important news, cases, and other developments in international taxation.

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Spotlight

A bipartisan group of House Ways and Means Committee members met with Treasury Secretary Jack Lew on 14 September in another private meeting with tax writers that was devoted to concerns over the proposed Section 385 debt/equity regulations. After the session, Ways and Means Committee Chairman Kevin Brady (R-TX) called on the Administration to "slow the process down," make the necessary changes and implement a "true cost benefit analysis" that would gauge the economic impact of the final debt/equity rules.

Although he reportedly characterized the meeting as constructive, Chairman Brady said the Treasury Secretary indicated the Administration would continue toward finalization of the proposed regulations. No explicit timeline came out of the meeting, only that Treasury would address various concerns before releasing the final regulations.

Earlier in the week, a Treasury official on 12 September discussed some of the changes taxpayers may see when the proposed Section 385 regulations are finalized. The official reiterated earlier comments by officials that the regulations would be amended in regard to cash pooling, and said changes would also be made in respect to foreign-to-foreign loans. The official further was quoted as saying the Administration would amend the proposed regulations as they apply to banks and other regulated industries, as well as in respect to S corporations and real estate investment trusts (REITs).

Other areas Treasury reportedly is considering amending include the current year earnings rule and perhaps some simplification of the documentation requirements.

In other news, the IRS on 15 September released Notice 2016-52, announcing that the government plans to issue regulations under Section 909 that will identify two new splitter arrangements relating to Section 902 corporations that pay foreign income taxes pursuant to foreign-initiated adjustments. More specifically, the notice identifies as a foreign tax credit splitter arrangement under Section 909 certain transactions that are completed in advance of certain large, foreign-initiated tax payments and have the effect of separating the foreign taxes from the related income.

The notice explicitly refers to payments under European Union State aid law that may result in creditable foreign taxes. The forthcoming regulations will apply to foreign income taxes paid on or after 15 September 2016. An ITS Alert is forthcoming.

And, an IRS official this week confirmed that the government does not consider finalizing the recent anti-corporate inversion regulations issued in April 2016 a high priority at this time. The official reportedly said, however, that the temporary surrogate foreign corporation rules in Reg. Section 1.7874-4T will be finalized before they expire on 17 January 2017. Those regulations were issued in January 2014.

The official further indicated that high priority is being given to issuing temporary cross-border partnership transfer regulations under Section 721(c) that were announced in Notice 2015-54. Also on the front burner are final regulations under Section 367(d) on the outbound transfer of foreign goodwill. Proposed regulations were issued in September 2015. The tax press is reporting that both sets of regulations will be released after the final Section 385 debt/equity regulations.

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Upcoming Webcasts

Quarterly transfer pricing update
Recent changes in the transfer pricing documentation environment, driven primarily by the outputs of the OECD's BEPS Action Plan 13, and also from the activity of local country governments and tax authorities, has seen the largest overall change in the approach to documenting transfer pricing arrangements. Please join this Thought Center Webcast, the latest in our series of transfer pricing updates.

Brexit: Implications for the automotive sector
During this Thought Center Webcast, Ernst & Young professionals discuss possible implications for the automotive & transportation sector from compliance, tax, global trade, operations, supply chain and capital agenda perspectives.

BEPS impact on the Real Estate Fund industry
During this Thought Center Webcast, Ernst & Young professionals will discuss the BEPS developments that will impact the Real Estate Fund industry.

India: Implementing the new goods and services tax (GST) regime
The coming implementation of India's new GST regime on April 1, 2017, will require businesses operating in India, as well as overseas businesses liaising with their Indian counterparts, to overhaul their entire indirect tax processes. During this Thought Center Webcast, Ernst & Young professionals will discuss the GST implementation and next steps in detail..

BorderCrossings … With EY's transfer pricing and tax professionals
During this Thought Center Webcast, part of an ongoing monthly series, EY transfer pricing and tax professionals will help you stay informed and able to adopt a more proactive stance in developing and defending your transfer pricing policies and practices.

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Recent Tax Alerts

Africa

— Sep 13: Uganda implements Tax Procedures Code (Tax Alert 2016-1535)

Asia

Canada & Latin America

Europe

— Sep 12: The latest on BEPS as of September 12 (Tax Alert 2016-1533)

Middle East

— Sep 9: Egypt issues VAT Law no. 67 of 2016 (Tax Alert 2016-1519)

Oceania

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IRS Weekly Wrap-Up

Internal Revenue Bulletin

 2016-37Internal Revenue Bulletin of September 12, 2016

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Additional Resources

Ernst & Young Client Portal, the leading source for news, analysis, and reference materials for corporate tax professionals, has a variety of content of interest to international tax practitioners, including:

— International Tax Online Reference Service. Key information about, and important tax developments from, 56 foreign jurisdictions, including information on tax rates, interest rates and penalties, withholding, and filing dates.

— EY/Passport. EY/Passport is your guide to planning ventures in the global economy, offering a wealth of tax and business knowledge on more than 150 countries.

Because the matters covered herein are complicated, U.S. International Tax This Week should not be regarded as offering a complete explanation and should not be used for making decisions. Any decision concerning matters covered herein should be reviewed with a qualified tax advisor.

Document ID: 2016-1559

 

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