U.S. International Tax This Week for February 1

03 February 2019

Ernst & Young's U.S. International Tax This Week newsletter for the week ending February 1 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 Organisation for Economic Co-operation and Development (OECD) on 29 January released a press release and Policy Note in relation to its work on Addressing the Tax Challenges of the Digitalisation of the Economy. The policy note confirms that a two-pillar approach will be pursued in developing comprehensive changes to international tax policy.

The Policy Note states that there is now agreement among the 127-jurisdiction strong Inclusive Framework on Base Erosion and Profit Shifting (BEPS) to examine proposals involving two pillars which could form the basis for consensus. The first pillar addresses the broader challenges of the digitalized economy and focuses on the allocation of taxing rights among countries, including nexus issues. The second pillar would address remaining BEPS issues. The OECD believes that a two-pillar approach would be effective in recognizing that the digitalization of the economy is pervasive, raises broader issues, and is most evident in, but not limited to, highly digitalized businesses.

In terms of a timeline, a more detailed but still high-level consultation document is expected to be released in February, prior to a public consultation on 13-14 March in Paris as part of the meeting of the Task Force on the Digital Economy, which will be co-chaired by US Treasury Deputy International Tax Counsel Brian Jenn. An update is expected to be presented to the G20 during the 8-9 June finance ministers meeting in Japan. The OECD is aiming for "reaching a consensus-based, long-term solution in 2020." Tax Alert 2019-0253 has details.

The OECD on 29 January also released Harmful Tax Practices — 2018 Progress Report on Preferential Regimes (the 2018 Progress Report), approved by the Inclusive Framework on BEPS which held a meeting last week. Tax Alert 2019-0262 has details. The purpose of this document is to provide an update to the 2017 Progress Report and to report the results of the review of all Inclusive Framework members' preferential tax regimes that have been identified.

In a related development, Senate Finance Committee Chairman Chuck Grassley and ranking member Ron Wyden sent a 29 January letter to Treasury Secretary Steven Mnuchin, reiterating US concerns over unilateral action by some European countries to enact some form of digital services tax. The Senate tax leaders described those efforts as "designed to discriminate against U.S.-based multinational companies." The letter was also sent to the European Council and the European Commission.

Separately, congressional Democrats reportedly are considering using tax technical corrections as leverage to broker a legislative deal that includes more generous tax incentives, such as the child tax credit and the earned income credit. According to press reports, Democrats are not planning to use the draft technical corrections legislation that was released by ranking House Ways and Means Committee minority member Kevin Brady in early January as a starting point, given it was drafted without their input. It is unclear when House Democrats may introduce legislation.

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Upcoming Webcasts

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.

International tax talk quarterly series with the EY Global Tax Desk Network (February 12)
During this Thought Center Webcast, Ernst & Young professionals will provide you with information on major tax law changes in the countries and jurisdictions covered by our US-based Global Tax Desk Network.

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.

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Recent Tax Alerts

United States

— Jan 30: OECD moves beyond digital tax approach; could produce multilateral GILTI-like tax (Tax Alert 2019-0256)

— Jan 28: The latest on BEPS as of January 28 (Tax Alert 2019-0239)

Africa

— Jan 28: Chad introduces new transfer pricing return obligation for 2018 (Tax Alert 2019-0237)

— Jan 25: Cameroon enacts 2019 Finance Law (Tax Alert 2019-0227)

Asia

— Jan 30: New social security requirements for foreign workers in Malaysia and changes to employees’ provident fund contributions discussed (Tax Alert 2019-0255)

— Jan 29: Taiwan's uniform invoice regulations require action by foreign e-commerce operators (Tax Alert 2019-0246)

— Jan 25: Philippines issues regulations on period for processing VAT refunds (Tax Alert 2019-0229)

Canada & Latin America

— Jan 31: Argentina establishes the procedure to pay temporary duties on exports of services (Tax Alert 2019-0274)

— Jan 31: Costa Rica proposes bill to modify the Free Trade Zone Regime (Tax Alert 2019-0268)

— Jan 30: Panama signed the Multilateral Competent Authority Agreement for Country-by-Country Reporting (Tax Alert 2019-0252)

Europe

— Jan 31: The Netherlands publishes draft Mandatory Disclosure Rules (Tax Alert 2019-0273)

— Jan 31: Cyprus Tax Authorities publish 10-year government bond yield rates for NID purposes (Tax Alert 2019-0272)

— Jan 31: Cyprus Tax Department releases circular clarifying VAT treatment of long-term immovable property leases (Tax Alert 2019-0271)

— Jan 30: Russia | Foreign suppliers to register for VAT by 15 February 2019 – action required (Tax Alert 2019-0264)

— Jan 30: Poland significantly revises transfer pricing law from 1 January 2019 (Tax Alert 2019-0263)

— Jan 30: OECD releases 2018 Progress Report on Preferential Regimes under BEPS Action 5 (Tax Alert 2019-0262)

— Jan 30: CJEU issues judgment on VAT recovery of global support costs (Tax Alert 2019-0261)

— Jan 30: Cyprus Supreme Court finds company directors liable for entity's VAT obligations (Tax Alert 2019-0260)

— Jan 30: OECD's new insights describe growing support on comprehensive changes to international tax policy, beyond digital (Tax Alert 2019-0253)

— Jan 29: Spain sends bill on Digital Services Tax to Parliament for approval (Tax Alert 2019-0245)

— Jan 29: Netherlands enacts new CFC legislation: Impact on multinational enterprises (Tax Alert 2019-0244)

— Jan 29: The Czech Parliament proposes amending Investment Incentives Act: Taxpayers should consider investment under current Act (Tax Alert 2019-0243)

— Jan 25: Turkey signs Competent Authority Agreements on Automatic Exchange of Information with Latvia and Norway (Tax Alert 2019-0230)

— Jan 25: Hungary introduces corporate income tax group (Tax Alert 2019-0228)

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IRS Weekly Wrap-Up

Internal Revenue Bulletin

2019-06

Internal Revenue Bulletin of February 4, 2019

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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: 2019-0276