28 October 2018

U.S. International Tax This Week for October 26

Ernst & Young's U.S. International Tax This Week newsletter for the week ending October 26 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

The Treasury late this week sent proposed regulations under Section 163(j) arising from the Tax Cuts and Jobs Act (TCJA) to the Office of Management and Budget's Office of Information and Regulatory Affairs (OIRA) for review. OIRA review is generally expected to take 10 business days, although in certain circumstances it may take as long as 45 business days. After the OIRA review is complete, Treasury is expected to move quickly to send the proposed regulations to the Federal Register.

Treasury Secretary Steven Mnuchin issued a statement on 25 October, reiterating the US Government's opposition to any unilateral action taken by countries in the area of digital taxation, instead supporting a common solution agreed to within the Organisation for Economic Co-operation and Development (OECD). The Secretary's statement said the US opposes "unilateral and unfair gross sales tax that targets our technology and internet companies." The US supports a digital taxation framework that is "based on income, not sales, and should not single out a specific industry for taxation under a different standard."

The Treasury statement follows a letter sent by Senate Finance Committee Chairman Orrin Hatch, and Ranking Member Senator Ron Wyden on 18 October to the Presidents of the European Council and the European Commission, respectively, expressing their concern over the EC proposal to introduce a 3% digital services tax (DST) on revenues resulting from the supply of certain digital services. The US officials pointed to information that a European Union (EU) agreement in principle on the DST proposal could occur in the coming weeks. The Finance Committee leaders wrote that the EU DST proposal "discriminates against US companies and undermines the international tax treaty system." They urged the EU to abandon the DST proposal and delay any unilateral action, and instead focus their efforts on reaching a consensus on a digital tax framework within the OECD.

Treasury Secretary Mnuchin and his Israeli counterpart this week reportedly agreed to appoint a joint task force to review the existing US-Israel tax treaty with the goal of updating the convention. The two officials earlier were said to have agreed on the need to amend the existing treaty's withholding rates as well as to remove certain barriers to investment.

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Recent Tax Alerts

United States

Africa

Asia

Canada & Latin America

Europe

Middle East

Oceania

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IRS Weekly Wrap-Up

Internal Revenue Bulletin

 2018-44Internal Revenue Bulletin of October 29, 2018

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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: 2018-2138