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14 April 2019

U.S. International Tax This Week for April 12

Ernst & Young's U.S. International Tax This Week newsletter for the week ending April 12 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

House and Senate tax leaders on 10 April issued a joint release urging countries to abandon unilateral measures to adopt digital tax proposals, and instead “focus on and engage productively in the OECD dialogue in order to reach measured and comprehensive solutions.” The statement by Senate Finance Committee Chairman Chuck Grassley and Committee ranking member Ron Wyden, and House Ways and Means Committee Chairman Richard Neal and Committee ranking member Kevin Brady came as G-20 Finance Ministers are meeting in Washington, DC. Discussions surrounding digital taxation are also expected at the margins of the World Bank/International Monetary Fund spring meetings being held on 12-14 April.

The IRS issued a correction to the final Section 965 regulations on 9 April, amending the preamble to dispense with a 60-day delay in the effective date of the regulations. The Congressional Review Act generally requires a 60-day delayed effective date for “major” rules, unless Treasury and the IRS determine that the 60-day delay is “unnecessary and contrary to the public interest.” The Office of Management and Budget’s Office of Information and Regulatory Affairs had determined that the regulation was a major rule, but Treasury and the IRS deemed the delay not necessary. The final Section 965 regulations (T.D. 9846) were published on 5 February, and were effective on that date.

Immediate action may be required: Pursuant to the December 2018 Form 5472 instructions, foreign-owned US disregarded entities (DREs) (e.g., US LLCs owned by one foreign person) that are required to file Form 5472, due to having transactions with related persons (reportable transactions), must file a separate extension to file Form 5472 beyond the regular due date for Form 1120 (a pro-forma From 1120 is used to transmit Form 5472 to the IRS). Consequently, foreign-owned US DREs must file Form 7004 on or before the regular due date for filing Form 1120 – generally 15 April 2019 for foreign-owned US DREs with a 31 December 2018 tax year end – by either faxing it to 1-855-887-7737 or mailing it to: Internal Revenue Service, 1973 Rulon White Blvd M/S 6112, Attn: PIN Unit, Ogden, Utah 84403 (Note: zip code changed from Form 5472 instructions).

A penalty of $25,000 may apply if Form 5472 is not timely-filed. Foreign-owned US DREs that did not timely-filed extensions for their 2017 tax year should ensure that Form 5472 is filed as soon as possible.

The United Nations Committee of Experts on International Cooperation in Tax Matters recently released a draft update to the “Practical Manual on Transfer Pricing for Developing Countries.” The updated release includes a new chapter on financial transactions and revised profit split guidance, among other changes.

The European Union (EU) and the United Kingdom (UK) this week agreed to a six-month extension of Article 50 to 31 October 2019, meaning that the UK will not leave the EU today, 12 April. The agreement allows the UK to leave the EU earlier than 31 October if it ratifies the Withdrawal Agreement ahead of that date. A “no deal” Brexit remains the default option on 31 October unless Article 50 is revoked or a Withdrawal Agreement is ratified by the British Parliament.

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EY Guides, Surveys, and Reports

Broader than digital | The OECD's latest proposals would impact most multinationals
The Organisation for Economic Co-operation and Development's (OECD) latest consultation document reaches far beyond a focus on digital taxation to present options that could sweep in many industries and companies that would not consider themselves "digital." This EY publication provides additional details and information.

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Upcoming Webcasts

The nexus debate and profit allocation rules and its business impact (April 18)
During this Thought Center Webcast, Ernst & Young professionals will discuss the OECD's proposed changes to the nexus and profit allocation rules and how these changes, if implemented, will affect where and how profits derived from global business operations will be taxed, and likely repercussions for the business operations of taxpayers.

Are your clients digitally savvy? Join EY’s People Advisory Services America’s Signature Webcast to help them transform HR (April 23)
During this Thought Center Webcast, Ernst & Young professionals will demonstrate how companies from different industries have transformed their HR functions – and their reputations — as critical leaders in the organization.

Key insights on India’s M&A environment with EY M&A and Tax professionals (May 2)
During this Thought Center Webcast, Ernst & Young professionals will discuss the following topics: (i) Overview of India’s transaction and corporate M&A landscape; (ii) Recent transaction trends in India; (iii) Typical characteristics associated with M&A activity in India; and (iv) Key tax and structuring considerations for M&A activity in India.

Global payroll challenges for US employers - Hosted by Ernst & Young LLP and Bloomberg Tax (June 25)
During this Thought Center Webcast, Ernst & Young professionals will discuss the international trends that are influencing payroll and HR systems and policies with a specific focus on the governing rules and how they are applied.

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Conferences

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Recent Tax Alerts

United States

Africa

Asia

Canada & Latin America

Europe

Middle East

Oceania

Multinational

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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: 2019-0757

 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

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