July 19, 2020
U.S. International Tax This Week for July 17
Ernst & Young's U.S. International Tax This Week newsletter for the week ending July 17 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 14 July released draft redesigned partnership forms for 2021 (2022 filing season) that are intended to provide a standardized format designed to better align the information that partnerships provide on the schedules with the tax forms used by partners. According to the IRS press release, the changes would allow partners to more easily prepare their tax returns and the IRS to more efficiently verify taxpayer compliance. Specifically, the IRS released draft new Schedule K-2 (Form 1065), Partners' Distributive Share Items — International and Schedule K-3 (Form 1065), Partner's — Share of Income, Deductions, Credits, etc. — International, along with instructions. Domestic partnerships with no international items will not be affected by the proposed changes. Public comments on the redesigned forms are invited through 14 September.
Treasury and the IRS are also reportedly planning similar changes, as applicable, to Form 1120-S (U.S. Income Tax Return for an S Corporation) and Form 8865 (Return of U.S. Persons With Respect to Certain Foreign Partnerships) for the 2021 tax year. Comments are welcome on this project, as well.
Treasury on 16 July delivered two international tax-related regulatory projects to the Office of Management and Budget's Office of Information and Regulatory Affairs. One of the projects appears to be final regulations that would replace Temp. Reg. Section 1.245A-5T, with the second being an accompanying package of proposed regulations coordinating application of certain regulations under IRC Sections 245A and 951A.
The US Trade Representative (USTR) announced on 10 July that the US would take action against France's Digital Services Tax (DST) in the form of an additional 25% ad valorem duty on specified French-origin goods. The tariffs are scheduled to take effect on 6 January 2021, 180 days after the determination of action. The list covers 21 tariff subheadings, with an estimated trade value for calendar year 2019 of approximately US$1.3 billion. The announcement comes after the US withdrew from negotiations regarding DSTs at the Organisation for Economic Co-operation and Development (OECD) level in June.
Despite the COVID-19 pandemic, the OECD expects to have blueprints of proposals for both Pillar 1 and Pillar 2 of the Base Erosion and Profit Shifting (BEPS) 2.0 project ready by October 2020, according to Pascal Saint-Amans, Director of the OECD's Centre for Tax Policy and Administration. Saint-Amans said political discussions will have to take place between now and then, noting that a G-20 Finance Ministers meeting is scheduled for 18-19 July.
The OECD official did not downplay the difficulties in getting international consensus nor the impatience of certain countries in regard to the digital economy. "We understand that many countries will get a DST [Digital Services Tax] as of 2021, and they may suspend [payment collection], which would allow them to avoid the US trade sanctions while giving us another chance to conclude [negotiations] in 2021," Saint-Amans said.
The OECD on 8 July released the second edition of its annual Corporate Tax Statistics publication (the report) together with an updated database. For the first time, the database includes anonymized and aggregated Country-by-Country (CbC) reporting statistics, reflecting information for 2016 provided by 26 member jurisdictions of the Inclusive Framework on BEPS and covering about 4,000 multinational groups that operate across more than 100 jurisdictions worldwide. EY Tax Alert 2020-1800 has details. The OECD also published a list of Frequently Asked Questions on the aggregated CbC reporting data.
As highlighted in the press release accompanying the issuance of the report and the database, the OECD views the new statistics as suggesting some preliminary insights that, despite the data limitations, are indicative of the existence of BEPS behavior and reinforce the need to continue to address remaining BEPS issues as part of the Inclusive Framework's work on Pillar 2 of the BEPS 2.0 project.
Recent Tax Alerts
— Jul 16: US imposes new economic sanctions related to China and issues Executive Order on Hong Kong normalization status that will produce additional supply chain diligence responsibilities (Tax Alert 2020-1814)
— Jul 13: USTR formalizes duty actions regarding France's Digital Services Tax with deferred implementation to 2021 (Tax Alert 2020-1784)
— Jul 13: USTR announces delayed tariffs on French goods (Tax Alert 2020-1778)
— Jul 10: COVID-19 and US CARES Act implications on interim filings under IFRS (Tax Alert 2020-1771)
— Jul 10: US Government suspends defense exports and EAR export license exceptions for exports to Hong Kong (Tax Alert 2020-1769)
— Jul 10: Cape Verde amends certain tax regimes and introduces Country-by-Country Reporting (Tax Alert 2020-1767)
— Jul 15: Hong Kong enacts tax concession legislation for ship lessors and ship leasing managers (Tax Alert 2020-1802)
— Jul 14: Vietnam implements taxation of digital transactions (Tax Alert 2020-1793)
Canada & Latin America
— Jul 13: Chile ratifies Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (Tax Alert 2020-1777)
— Jul 16: Greece publishes draft proposal to implement Mandatory Disclosure Rules (Tax Alert 2020-1816)
— Jul 16: European Commission adopts package for fair and simple taxation (Tax Alert 2020-1815)
— Jul 16: European Commission publishes new rules for applying tariff quota in agricultural sector as of 1 January 2021 (Tax Alert 2020-1813)
— Jul 16: EU-Vietnam Free Trade Agreement enters into force as of 1 August 2020 (Tax Alert 2020-1807)
— Jul 15: UK Government releases guidance on moving goods between the EU and Great Britain as of 1 January 2021 (Tax Alert 2020-1803)
— Jul 15: European Court of Justice rules royalty paid for know-how required for manufacture of finished products in the EU may need to be added to customs value of imported semi-finished products (Tax Alert 2020-1801)
— Jul 14: European Commission publishes communication on Brexit readiness (Tax Alert 2020-1794)
— Jul 13: Netherlands | Opposition party proposes inclusion of an exit tax in the Dutch Dividend Withholding Tax Act (Tax Alert 2020-1786)
— Jul 13: Liechtenstein and Netherlands sign tax treaty (Tax Alert 2020-1783)
— Jul 10: Spain proposes amendments to MDR Bill to introduce extension of MDR filing deadlines (Tax Alert 2020-1770)
— Jul 13: Saudi Arabia exempts investment of oil and hydrocarbon producing companies into Saudi-listed companies (Tax Alert 2020-1785)
— Jul 10: Oman Tax Authority announces initiatives to reduce economic impact of COVID-19 for businesses (Tax Alert 2020-1768)
— Jul 15: OECD releases new corporate tax statistics including anonymized and aggregated Country-by-Country report statistics (Tax Alert 2020-1800)
IRS Weekly Wrap-Up
Internal Revenue Bulletin
| ||2020-29||Internal Revenue Bulletin of July 13, 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.