04 August 2019

U.S. International Tax This Week for August 2

Ernst & Young's U.S. International Tax This Week newsletter for the week ending August 2 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 United States (US) President, Donald Trump, weighed in this week on France's recently enacted 3% Digital Services Tax (DST), posting a tweetthreatening US retaliation for the new French tax. "We will announce a substantial reciprocal action on [French President] Macron's foolishness shortly," the President tweeted. The press quoted President Trump as sayinghis Administration was working on a new potential tax on French wine. A White House official later called France's enactment of the DST an indication of France's "lack of commitment to the ongoing OECD negotiations" on digital taxation. In response to the possible US tax on French wine, France's Finance Minister said the new DST would be withdrawn "as soon as there will be an international solution on the taxation of digital activities."

The US President's ire follows reports in mid-July that Europe had won aconcession from the US that changes to tax rules should address "highly digitalized business models." At a G7 Finance Ministers and Central Bank Governors meeting in Chantilly on 17-18 July, the parties agreed that "it is urgent to address the tax challenges raised by the digitalization of the economy and the shortcomings of the current transfer pricing system" and supported the Organisation for Economic Co-operation and Development (OECD)/G20 Inclusive Framework on Base Erosion and Profit Shifting two-pillar solution. The Chair's Summary of the meeting described the pillars of the OECD/Inclusive Framework work plan, saying that under Pillar I, new nexus rules should be developed to address new business models, such as highly digitalized business models, allowing companies to do business in a territory without any physical presence.

The Internal Revenue Service (IRS) this week announced that it has begun ending letters to virtual currency owners that potentially failed to report income and pay the resulting tax from virtual currency transactions or did not report their transactions properly. The letters advise the virtual currency owners to pay back taxes and file amended returns. IRS Commissioner Charles Rettig warned that "taxpayers should take these letters very eriously by reviewing their tax filings and when appropriate, amend past returns and pay back taxes, interest and penalties." The Commissioner indicated the IRS is expanding its efforts involving virtual currency, including the increased use of data analytics. According to the IRS, over 10,000 letters will be sent before the end of August.

IRS Notice 2014-21 provides that virtual currency is considered property for federal tax purposes and instructs that general federal tax principles apply to virtual currency transactions. Additional IRS guidance is expected in the near future.

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

Africa

Asia

Canada & Latin America

Europe

Middle East

Oceania

Multinational

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

Internal Revenue Bulletin

 2019-31Internal Revenue Bulletin of July 29, 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: 2019-1399