July 12, 2020
U.S. International Tax This Week for July 10
Ernst & Young's U.S. International Tax This Week newsletter for the week ending July 10 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.
Treasury and the Internal Revenue Service (IRS) on 9 July released final regulations (TD 9901) under IRC Section 250, which allows an annual deduction to a domestic corporation for its foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI) inclusion. The final regulations are scheduled for publication in the Federal Register on 15 July.
The final regulations retain the basic approach and structure of the proposed regulations published in March 2019 but contain several significant, and mostly taxpayer-favorable, changes. For example, the final regulations:
- Modify the documentation requirements for establishing foreign use to no longer require taxpayers to obtain specific documentation to establish: (i) foreign person status; (ii) foreign use with respect to sales of certain property sold directly to end users; or (iii) the location of certain services provided to consumers
- Provide that the following are presumed made to a foreign person: (1) foreign retail sales; (2) sales of general property delivered to an address that is outside the United States; (3) other sales of general property to recipients whose billing address is outside the United States; and (4) sales of intangible property to recipients whose billing address is outside the United States
- Deem a sale of general property to be for a foreign use if: (i) the property is subject to manufacturing, assembly or other processing outside the United States; or (ii) the property is, in specified cases, delivered to an end user (e.g., a foreign retail sale, property delivered to a location outside the United States, or an electronic transfer of digital content outside the United States)
- Deem a sale of intangible property to be for a foreign use if the end user of the intangible is located outside the United States, including when the intangible is used to provide a service outside the United States
- Relax certain provisions that apply to limit a deduction for related-party sales that are followed by unrelated-party sales
The final regulations generally apply only to tax years beginning on or after 1 January 2021. For tax years beginning before 1 January 2021, taxpayers may apply the final regulations or rely on the proposed regulations (including the documentation transition rule whereby a transaction may be substantiated by any reasonable documentation maintained in the ordinary course).
In other Tax Cuts and Jobs Act-international guidance developments, the US Office of Management and Budget's Office of Information and Regulatory Affairs (OIRA) completed its review of final regulations on the GILTI high-tax exclusion under IRC Sections 951(b) and 951A. Along with the final regulations, OIRA also completed its review of proposed regulations under IRC Section 954(b)(4) on high-taxed subpart F income and proposed rules under IRC Section 964 related to earnings and profits of a foreign corporation.
The Director of the IRS Advance Pricing and Mutual Agreement program this week was quoted as saying there has been an uptick in multilateral advance pricing agreement (APA) requests. The official also said that multilateral APAs are representing a broader range of transactions and not limited to specific global financial transactions as in the past. The APMA Director noted that the IRS is seeing more multilateral APA requests that include a "sandwiched" foreign-owned US entity involving related transactions with the foreign parent and other foreign subsidiaries.
The Organisation for Economic Co-operation and Development (OECD) on 3 July released Model Rules for Reporting by Platform Operators with respect to Sellers in the Sharing and Gig Economy as approved by the OECD/G20 Inclusive Framework on BEPS on 29 June. The Model Rules lay out a system for requiring digital platforms to collect information on the income realized by those offering accommodation, transport and personal services through platforms and to report the information to tax authorities.
The release by the OECD of the Model Rules for reporting by platform operators will have significant implications. As the Model Rules are implemented by individual countries, tax administrations will obtain new access to information on the platform sellers. The release of the Model Rules will make it easier for interested countries to put information reporting regimes for platforms in place. The Model Rules are also expected to support a more uniform approach to the adoption of reporting obligations for platforms by individual countries. Potentially affected companies should follow developments and assess what changes to their processes and technology might be needed to enable reporting of the type contemplated in these projects.
Impact of the changing global tax landscape on Asia-Pacific (July 15)
During this Thought Center Webcast, Ernst & Young's global tax policy and controversy leaders will share their insights on the myriad of developments that are happening globally and how multinational companies need to respond to all these competing priorities.
Recent Tax Alerts
— Jul 06: Kenya enacts Finance Act, 2020 (Tax Alert 2020-1717)
— Jun 26: Rwanda presents National Budget for financial year 2020/2021 (Tax Alert 2020-1685)
— Jul 08: Indonesia issues implementing regulations for VAT collection on digital transactions (Tax Alert 2020-1740)
Canada & Latin America
— Jul 09: Canada delivers its 2020 Economic and Fiscal Snapshot (Tax Alert 2020-1747)
— Jul 07: Federal Court of Appeal rejects Crown appeal of Tax Court of Canada decision in Cameco transfer pricing case (Tax Alert 2020-1721)
— Jun 26: Colombia issues regulations on tax incentives for agricultural activities (Tax Alert 2020-1678)
— Jul 09: Poland defers MDR deadlines for cross-border and other tax arrangements (Tax Alert 2020-1753)
— Jul 09: UK Tax Authority introduces temporary cut in VAT rate for hospitality and tourism sector (Tax Alert 2020-1751)
— Jul 09: Cyprus | Reduced VAT rate of 5% applies to hotel accommodation, restaurant and catering and transportation services on a temporary basis (Tax Alert 2020-1750)
— Jul 08: Luxembourg enacts law amending CRS and FATCA laws and submits draft law extending 2019 reporting deadlines (Tax Alert 2020-1739)
— Jul 08: Sweden extends MDR reporting deadlines for six months (Tax Alert 2020-1738)
— Jul 08: Luxembourg publishes draft legislation extending MDR reporting deadlines for six months (Tax Alert 2020-1737)
— Jul 08: Germany announces no postponement of MDR reporting deadlines (Tax Alert 2020-1733)
— Jul 07: Poland introduces new levy on VOD platforms (Tax Alert 2020-1727)
— Jul 07: Poland's implementation of EU ATAD 2 anti-hybrid measures enters into force from 1 January 2021 (Tax Alert 2020-1726)
— Jul 06: The Spanish Constitutional Court confirms minimum interim payment on account of Corporate Income Tax is unconstitutional (Tax Alert 2020-1718)
— Jul 06: Dutch Tax Authority issues guidance on reportable cross-border arrangements (Tax Alert 2020-1706)
— Jul 06: Luxembourg introduces new law on company meetings in light of COVID-19 social distancing measures (Tax Alert 2020-1705)
— Jul 06: Austria publishes two draft bills: The Economic Strengthening Act 2020 and the Investment Premium Act (Tax Alert 2020-1704)
— Jul 06: Finland publishes official tax guidelines on Mandatory Disclosure Rules (Tax Alert 2020-1703)
— Jul 06: Germany's Presidency of the Council of the EU publishes its program (Tax Alert 2020-1702)
— Jun 26: Spanish Central Tax Court applies doctrine of ECJ Danish cases to deny withholding tax exemption on dividend payments to EU shareholders (Tax Alert 2020-1686)
— Jun 26: Netherlands issues new MAP decree (Tax Alert 2020-1684)
— Jun 26: USTR proposes carousel tariff retaliation on EU goods under Section 301 (Tax Alert 2020-1683)
— Jul 09: PE Watch | Latest developments and trends, July 2020 (Tax Alert 2020-1752)
— Jul 08: OECD releases model rules for data reporting by platform operators for sellers in the sharing economy (Tax Alert 2020-1741)
Highlights of this edition include:
- US Supreme Court declines to hear Altera case
- US Treasury Secretary calls for 'pause' in BEPS 2.0 Pillar 1 discussions
- USTR initiates investigations into digital services taxes either adopted, or under consideration, by 10 jurisdictions
- IRS LB&I official offers insights to TCJA compliance campaign
- IRS seeks 2020 — 2021 Priority Guidance Plan recommendations
- OECD releases Platform for Collaboration on Tax toolkit on taxation of offshore indirect transfers of assets
IRS Weekly Wrap-Up
Internal Revenue Bulletin
| ||2020-27||Internal Revenue Bulletin of June 29, 2020|
| ||2020-28||Internal Revenue Bulletin of July 6, 2020|
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.