U.S. International Tax This Week for January 25

27 January 2019

Ernst & Young's U.S. International Tax This Week newsletter for the week ending January 25 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.

—————————————————————————
Spotlight

The Organisation for Economic Co-operation and Development (OECD)'s Business and Industry Advisory Committee (BIAC) on 21 January, released 11 principles to guide tax reform for the digital economy. According to the BIAC, the recommendations are to ensure that "reforms to existing tax principles are coherent, pro-growth, and do not inhibit the innovation and digitalization that is transforming our world." The BIAC underscored that the OECD Base Erosion and Profit Shifting (BEPS) project itself recognized that it would be "difficult, if not impossible, to ring-fence the digital economy from the rest of the economy for tax purposes," which is one of the BIAC's recommendations.

Among the positions taken, the BIAC says that any tax reform in the context of the digital economy should be based on "well-founded underlying principles of international taxation including taxation of net income, nexus, permanent establishment, and transfer pricing based on the arm's length standard." They add that any revised framework should apply to all digitalizing business and be flexible enough to address future business models. Among other things, the BIAC takes a strong stand against countries taking unilateral action, suggesting that the OECD is the only forum that can garner global support and point to the agreed-to international timeline of reaching consensus by 2020.

The BIAC's recommendations come as the OECD is trying to develop a consensus-based, "comprehensive" solution to address the tax challenges of the digital economy. It is becoming clear that the OECD approach will address more than just digital business activity, however, potentially impacting other IP-intensive business models. This comprehensive approach reportedly will address two key pillars: profit allocation and nexus rules, underpinned by additional measures to address BEPS challenges associated with the digital economy. At least some elements of the proposals are said to have the support of policymakers in G7 countries, including the United States, Germany and France.

The BEPS Inclusive Framework met in Paris on 23-24 January. An OECD communication coming out of this meeting may provide further details on the contemplated changes to international tax policy. Pascal Saint-Amans, Director of the OECD's Centre for Tax Policy and Administration, said last December that the OECD would release an update on its work on the taxation of the digital economy by the end of January.

—————————————————————————
Upcoming Webcasts

BorderCrossings ... with EY transfer pricing and tax professionals (January 31)
During this Thought Center Webcast, Ernst & Young professionals will help you stay informed and able to adopt a more proactive stance in developing and defending your transfer pricing policies and practices.

Global tax policy and controversy in 2019 (February 11)
The global tax environment in 2019 continues to be uncertain, with controversy on the rise. Disruptions abound and the tax landscape is changing as technological advances bring taxpayers and tax administrations new ways of doing business. Trade policy also continues to disrupt the business landscape. During this Thought Center Webcast, Ernst & Young professionals will talk through the most significant trends and discuss some leading practices for responding.

Global oil and gas transactions review 2019 (February 14)
With positivity in the transactions market and a focus on portfolio restructuring, observers expected 2018 to be a busy year for deals. But as the year played out, oil price volatility, geopolitical tension and questions around oversupply likely disrupted some deal completions. Expectations for 2019 include an increase in private equity investment and cross-sector M&A, driven by technology and digital. But will oil and gas companies continue to look closer to home for their deals? During this Thought Center Webcast, Ernst & Young professionals will discuss these issues.

Transparency transformation and its business implications (February 14)
During this Thought Center Webcast, Ernst & Young professionals will cover the changes to the transparency environment and how these changes subsequently impact the controversy environment and taxpayers at an operational level.

—————————————————————————
Recent Tax Alerts

Africa

— Jan 23: Algeria's 2019 Finance Bill introduces new tax measures (Tax Alert 2019-0203)

— Jan 21: South Africa enacts tax amendment bills (Tax Alert 2019-0189)

— Jan 21: Chad enacts 2019 Finance Law (Tax Alert 2019-0187)

Asia

— Jan 24: Philippine Government issues new rules on post clearance audit and Prior Disclosure Program (Tax Alert 2019-0213)

Canada & Latin America

— Jan 21: Mexico releases draft Miscellaneous Tax Regulations on tax incentives for northern border zone (Tax Alert 2019-0184)

— Jan 21: US federal income tax considerations for taxpayers and QBUs using the Argentine peso as their functional currency and for certain Argentine peso-denominated transactions (Tax Alert 2019-0182)

Europe

— Jan 24: France passes bills with significant changes to taxation of non-residents with French source income (Tax Alert 2019-0216)

— Jan 24: New rules surrounding the posting of foreign workers to France discussed (Tax Alert 2019-0215)

— Jan 24: Italy recognizes VAT reduced rate for medical devices used for therapeutic and prophylactic purposes (Tax Alert 2019-0212)

— Jan 24: Spain approves rules on tax information to be included in non-financial reporting (Tax Alert 2019-0205)

— Jan 21: EU-identified low/no corporate income tax jurisdictions enact new substance requirements: Implications for the financial services sector (Tax Alert 2019-0193)

— Jan 21: Swedish Tax Committee proposes Mandatory Disclosure Regime (Tax Alert 2019-0191)

— Jan 21: Spain introduces transitional period for fund reclassifications due to MiFID II regulations (Tax Alert 2019-0190)

— Jan 21: Netherlands: Key considerations for final VAT return of 2018 (Tax Alert 2019-0188)

— Jan 18: Romania publishes Government Emergency Ordinance introducing new tax measures for 2019 (Tax Alert 2019-0179)

— Jan 18: French Finance Bill for 2019 modifies French annual trust reporting requirements (Tax Alert 2019-0176)

—————————————————————————
Recent Newsletters

Washington Dispatch
Highlights of this edition include:

— Legislation
— Tax Cuts and Jobs Act
— Corporate
— Subpart F
— Foreign Account Tax Compliance Act (FATCA)
— Capital markets
— Transfer pricing
— Country-by-Country Reporting (CbCR)
— Tax treaties
— Digital taxation
— Withholding
— IRS forms
— Miscellaneous
— OECD
— United Nations

—————————————————————————
IRS Weekly Wrap-Up

Internal Revenue Bulletin

2019-05

Internal Revenue Bulletin of January 28, 2019

—————————————————————————
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: 2019-0223