U.S. International Tax This Week for December 13

15 December 2019

Ernst & Young's U.S. International Tax This Week newsletter for the week ending December 13 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 9 December held a public consultation meeting on the Global Anti-Base Erosion (GloBE) Proposal under Pillar 2 of the ongoing project titled, “Addressing the Tax Challenges of the Digitalisation of the Economy.” The consultation began with the OECD Secretariat and the German Chair of the Inclusive Framework providing assurances that the Base Erosion and Profit Shifting (BEPS) 2.0 project will continue to move forward. With regard to Pillar Two, the OECD Secretariat laid out a timeline for future work on the GloBE proposal in the near term, including plans to issue an additional and more detailed consultation document on Pillar 2 early in 2020. The comments made by stakeholders during the consultation session reflected clear differences in views about the GloBE proposal between the business community and non-governmental organizations.

The public consultation took place against the backdrop of last week’s unexpected exchange of letters between US Treasury Secretary Steven Mnuchin and the OECD Secretary General, in which the Treasury Secretary said the US had “serious concerns” about the proposals under Pillar 1, which provide a new nexus concept and new and revised profit allocation rules. The Treasury Secretary suggested that the goals of Pillar 1 could be “substantially achieved” by making it a safe harbor regime. The tax press this week quoted Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration, as saying the letters created the need for “unplanned and urgent meetings.” Referencing the correspondence, Saint-Amans said, “We heard from the G-20 a pretty strong level of support and consensus to move this work forward.”

Saint-Amans also confirmed that the Inclusive Framework steering group would be meeting soon to develop a progress report for the broader Inclusive Framework group that will serve as the basis for reaching agreement at a planned meeting for the end of January 2020. The report is expected to include an update on Pillar 2, including recommendations on key design elements.

Another OECD official this week disclosed that the organization is engaged in ongoing economic modeling of the Pillar 1 and Pillar 2 proposals that will be released beginning in early 2020. The official was quoted as saying that while the OECD continues to refine its analysis, it appears that there would be modest global net tax revenue gains under Pillar 1, with low and middle income economies benefiting more than more advanced economies. The global net tax revenue gains under Pillar 2 would be greater than under Pillar 1, but those results are less certain due to the lack of details, including the minimum tax rate and whether some form of blending of income subject to varying tax rates would be adopted.

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Recent Tax Alerts

United States

— Dec 11: USTR proposes new tariffs on EU under Section 301; WTO Appellate Body set to disband (Tax Alert 2019-2176)

Africa

— Dec 10: Nigeria | Update on Finance Bill 2019 (Tax Alert 2019-2171)

Asia

— Dec 09: OECD releases Hong Kong's Stage 1 peer review report on implementation of BEPS Action 14 minimum standard (Tax Alert 2019-2161)

— Dec 06: Taiwan issues tax ruling on one-time transfer pricing adjustments (Tax Alert 2019-2152)

Canada & Latin America

— Dec 12: Peru issues regulations on indirect foreign tax credit (Tax Alert 2019-2194)

— Dec 12: Uruguay's Ministry of Economy and Finance announces tax benefits for certain economic sectors (Tax Alert 2019-2192)

— Dec 12: Brazilian National Attorney General regulates recently enacted conflict resolution system (Tax Alert 2019-2191)

— Dec 12: Mexico has enacted significant tax reform – is your company ready? (Tax Alert 2019-2174)

— Dec 10: Tax reform bill is approved in first debate by Colombian Congress (Tax Alert 2019-2173)

— Dec 09: Mexico has enacted significant tax reform – is your company ready? (Tax Alert 2019-2165)

— Dec 09: Mexican tax reform for 2020 enacted (Tax Alert 2019-2163)

— Dec 06: Ecuador's president proposes another tax reform bill (Tax Alert 2019-2151)

Europe

— Dec 12: Sweden publishes new draft legislation on Mandatory Disclosure regime (Tax Alert 2019-2189)

— Dec 12: EU Code of Conduct Group issues update report, including new guidance (Tax Alert 2019-2188)

— Dec 12: Luxembourg State Council publishes opinion on draft law implementing EU ATAD 2 on hybrid mismatch arrangements (Tax Alert 2019-2187)

— Dec 11: French Tax Authorities release final draft on new reporting of recalcitrant account holders for CRS purposes (Tax Alert 2019-2178)

— Dec 11: Luxembourg | 2019 year-end corporate tax action items (Tax Alert 2019-2175)

— Dec 10: Poland's draft decree proposes deferral of certain provisions of new withholding tax reform (Tax Alert 2019-2172)

— Dec 10: Belgium | 2019 year-end tax planning for MNEs (Tax Alert 2019-2167)

— Dec 05: Switzerland's work permit quota update for 2019 and outlook for 2020 (Tax Alert 2019-2135)

— Nov 26: Austria's new wage tax withholding obligation for foreign employers without a permanent establishment discussed (Tax Alert 2019-2100)

Middle East

— Dec 11: Israeli Court rules in favor of taxpayer on business restructuring ruling (Tax Alert 2019-2177)

— Dec 09: Turkey enacts law introducing new taxes and amending various tax laws (Tax Alert 2019-2162)

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Recent Newsletters

Washington Dispatch
Highlights of this edition include:

Digital Taxation

- OECD issues consultation document on technical design aspects of Pillar Two

Treasury and IRS news

- IRS issues final regulations on ownership attribution rules for CFC purposes

- IRS announces campaign to audit Section 965 transition tax compliance

- Treasury officials offer TCJA international guidance timeline

Transfer Pricing news

- Ninth Circuit denies en banc rehearing in Altera

- US Tax Court rules no Section 6662 penalties after IRS abused discretion in canceling APAs

- US government aware transfer pricing may be used to reduce TCJA tax liability

- Cyprus announces coming bilateral CbCR Competent Authority Agreement with United States

OECD Developments

- OECD holds public consultation on Pillar One of BEPS 2.0

- OECD releases database to provide insights on global profiles of individual multinational enterprises

- OECD releases additional guidance on spontaneous exchange of information by no or only nominal tax jurisdictions

- OECD releases additional guidance on CbC Reporting, summary of common errors made by MNE groups in preparing reports

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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: 2019-2198