19 January 2020

U.S. International Tax This Week for January 17

Ernst & Young's U.S. International Tax This Week newsletter for the week ending January 17 is now available. Prepared by Ernst & Young's International Tax and Transaction Services group, this weekly update summarizes important news, cases, and other developments in international taxation.

—————————————————————————
Spotlight

The Internal Revenue Service (IRS) reportedly may be scaling back the broad definition of interest in the 2018 proposed IRC Section 163(j) regulations, according to an IRS official this week. While the official defended the IRS's authority to provide an expansive definition of interest, she was also quoted as saying the IRS is considering trimming the list of items not normally considered interest. IRC Section 163(j), as amended by the Tax Cuts and Jobs Act, limits the deduction for business interest expense for tax years beginning after 31 December 2017. The proposed regulations, issued on 26 November 2018, include in the definition of interest many items that are not treated as interest under general Federal income tax principles, the Code or regulations, but that the IRS and Treasury viewed as "closely related" to interest and that "affect the economic yield or cost of funds of a transaction involving interest."

The final IRC Section 163(j) regulations are currently under review at the Office of Management and Budget's Office of Information and Regulatory Affairs.

The same IRS official also said that the IRS is considering amending the fair market value requirement in proposed regulations issued in early October 2019 to address the pending phase-out of the London interbank offered rate (LIBOR) and variant interest rates. The proposed regulations address tax issues resulting from the transition to the use of referent interest rates other than interbank-offered rates (IBORs) in debt instruments and other contracts. The transition from IBOR may impact debt instruments as well as many non-debt instruments that reference IBOR.

An IRS official this week was quoted as saying the IRS is willing to entertain issuing private letter rulings in the cryptocurrency space to address issues not covered in cryptocurrency guidance issued in October 2019. The IRS issued Rev. Ruling 2019-24 and frequently asked questions (FAQs) that expanded on guidance issued in Notice 2014-21. The official said that taxpayers interested in entering into a letter ruling should contact the IRS to request a pre-submission conference. Taxpayers may also send cryptocurrency questions to the IRS using a link in the cryptocurrency FAQs posted on the IRS website.

France will not eliminate its Digital Services Tax (DST) in the face of threats of US retaliatory tariffs, according to France's Finance Minister in an editorial in the Wall Street Journal on 14 January. The Finance Minister reiterated that the French Government is committed to withdrawing the 3% DST once an agreement is reached at the Organisation for Economic Co-operation and Development (OECD) on a digitalization tax plan. "There is a simple way out," the Finance Minister said, "Our American allies can suspend their [proposed tariff] proceedings and continue working toward an agreement on an international digital tax."

In regard to BEPS 2.0, the OECD is currently preparing for an upcoming meeting of the Inclusive Framework at the end of January. Following that meeting, the OECD will release a project update in advance of the mid-February G20 Finance Ministers' meeting.

—————————————————————————
Upcoming Webcasts

The Power of Technology in Global Trade (January 22)
During this Thought Center Webcast, Ernst & Young professionals will explain current key issues and trends on the Power of Technology in Global Trade, alongside some innovative technology demonstrations to show how analytics can support your business in the most efficient, agile and cost effective way.

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

United States

Africa

Asia

Canada & Latin America

Europe

Middle East

Multinational

—————————————————————————
Recent Newsletters

Washington Dispatch
   Highlights of this edition include:

— Tax Cuts and Jobs Act

— Subpart F

— Foreign tax credit

— Capital markets

— Partnerships

— Passive Foreign Investment Company (PFIC)

— Foreign Investment in Real Property Tax Act (FIRPTA)

— Tax treaties

— Transfer pricing

— Withholding

— Digital taxation

— Foreign Account Tax Compliance Act (FATCA)

— IRS forms

— Miscellaneous

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

Internal Revenue Bulletin

 2020-03Internal Revenue Bulletin of January 13, 2020
 2020-04Internal Revenue Bulletin of January 21, 2020

—————————————————————————
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: 2020-0120