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08 March 2020

U.S. International Tax This Week for March 6

Ernst & Young's U.S. International Tax This Week newsletter for the week ending March 6 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 Internal Revenue Service (IRS) will not be issuing regulations that align the transfer pricing rules to changes introduced by the Tax Cuts and Jobs Act (TCJA) in relation to the definition of intangible property before 2021, an IRS official said this week. The official was also quoted as saying a regulation that addresses the valuation of transactions on an aggregate basis is expected to be released sometime in 2020. The TCJA moved the definition of intangible property (IP) from IRC Section 936(h)(3)(B) to IRC Section 367(d)(4) and included goodwill, going-concern value and workforce in place within the definition. The law also confirmed the position the IRS has taken that the Secretary can require IP transfers to be valued on an aggregate basis or on the basis of the realistic alternatives to the transaction.

A group of House Congressional Republicans recently urged Treasury Secretary Steven Mnuchin to withdraw Section Two of Notice 2007-55, relating to the treatment of liquidating distributions of a real estate investment trust (REIT). In Notice 2007-55, the IRS announced that it would challenge transactions in which a foreign government or other foreign shareholder claimed that distributions received from a REIT or regulated investment company were exempt from taxation under IRC Section 892 or otherwise not subject to IRC Section 897(h)(1). The House legislators claimed in a letter that the provision "subjects a liquidating distribution made by a REIT to a foreign taxpayer (which is essentially the sale of shares of stock in the REIT) to a punitive tax that is not levied on other similar types of investments." According to the legislators, the notice has been a major impediment to foreign investment in US commercial real estate and infrastructure.

A similar letter was sent to the Treasury Secretary by a bipartisan group of Senators last December.

The UK Government this week announced that it would "consider" US opposition to unilateral digital services taxes (DSTs) in the lead up to trade talks with the US. The UK planned to introduce a 2% DST from April 2020 that would be imposed on revenues from search engines, social media platforms and online marketplaces, with details coming as early as next week when the UK Budget is presented. The US has vowed retaliation against countries that unilaterally impose a DST on US companies.

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Recent Tax Alerts

Africa

Asia

Canada & Latin America

— Feb 28: Alberta budget 2020-21 (Tax Alert 2020-0461)

Europe

Middle East

Oceania

Multinational

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Recent Newsletters

Washington Dispatch
   Highlights of this edition include:

Treasury and IRS news

  • Treasury Secretary confirms DST deal with France; all major TCJA guidance expected by October 2020
  • IRS officials elaborate on limited relief for Section 965 transition tax, BEAT PLR option

Transfer pricing news

  • Altera Corporation files petition for writ of certiorari with US Supreme Court

OECD news

  • OECD announces preliminary impact assessment and economic analysis of BEPS 2.0 project proposals
  • OECD releases consultation document on review of Country-by-Country Reporting
  • OECD releases final transfer pricing guidance on financial transactions
  • OECD issues draft rules on platform operators for sellers in sharing and gig economy
  • OECD releases eighth batch of peer review reports on BEPS Action 14

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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: 2020-0511

 

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