17 March 2019

U.S. International Tax This Week for March 15

Ernst & Young's U.S. International Tax This Week newsletter for the week ending March 15 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 US Treasury official this week said that the final global intangible low-tax income (GILTI) regulations will be released by this summer and the loss stock basis adjustment rules in the proposed Section 951A regulations will be part of a further "round 2" project. He was quoted as saying that the delay should not be interpreted as meaning the US is stepping back from the original proposal rules, noting the rationale behind the loss stock basis adjustment rules remains intact. The official added that when those rules are finalized, they will be prospective.

The European Union (EU) has commented to Treasury and the IRS on the proposed regulations under the Section 59A Base Erosion and Anti-abuse Tax (BEAT). The European Commission wrote that although they support the BEAT objective to reduce tax avoidance and aggressive tax planning, the proposed regulations "introduce trade distortions or discrimination that would appear to be incompatible with World Trade Organization (WTO) rules and other international commitments taken by the US." More specifically, the Commission contends that the BEAT is "discriminatory in a manner that is inconsistent with the … WTO requirement of national treatment in trade in services because it would in effect only apply to outbound payments to foreign related companies, and would not apply to comparable payments to US related companies." Section 59A, enacted by the Tax Cuts and Jobs Act, is currently under review by the Organisation for Economic Co-operation and Development (OECD) Forum on Harmful Tax Practices, which has indicated it will not issue any decisions until the related final regulations are released.

On the digital taxation front, a senior Treasury official this week said he is confident that OECD negotiations on tax issues related to the digital economy will lead to consensus on new international principals for allocating taxing rights. The comments came in the lead up to the 13-14 March public consultation on the proposals in the recent OECD consultation document released in February. The official was quoted as saying that the momentum in the ongoing negotiations makes a final agreement probable.

An OECD official this week was quoted as saying that the immediate goal is to finalize a digital taxation work plan that will be presented to G-20 Finance Ministers and leaders in June. The OECD working parties will then be tasked with the necessary technical work that will continue through the rest of the year. In the meantime, the head of the Tax Policy and Statistics Division at the OECD Centre for Tax Policy and Administration confirmed on 13 March that the organization is studying the economic impact of various digital taxation proposals.

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Upcoming Webcast

BorderCrossings ...With EY transfer pricing and tax professionals (March 28)
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.

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Recent Tax Alerts

United States

Asia

Canada & Latin America

Europe

Middle East

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IRS Weekly Wrap-Up

Internal Revenue Bulletin

 2019-12Internal Revenue Bulletin of March 18, 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: 2019-0547