August 9, 2020
U.S. International Tax This Week for August 7
Ernst & Young's U.S. International Tax This Week newsletter for the week ending August 7 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.
As this week comes to a close and the Senate is scheduled to begin its August recess, talks over another coronavirus bill have continued, though US Treasury Secretary Steven Mnuchin told Senate Republicans on 4 August that Administration negotiators were no closer to reaching a deal with House Speaker Nancy Pelosi and Senate Democratic leader Chuck Schumer. White House Chief of Staff Mark Meadows said, "we are a long ways' away from striking any kind of a deal." Specifically, there is still a gulf between the two sides on longstanding issues like the amount of the unemployment add-on, and state and local government funding. Thus, how and when a deal may come together is unclear. Chief of Staff Meadows and President Trump have discussed executive action on issues like payroll tax relief, unemployment benefits and preventing evictions. Meadows said that Friday (7 August) is the target deadline after which the President may move forward with any executive orders.
Some Senators have called for the chamber to stay in session past the scheduled start of the August recess on 7 August. The House is out, with their recess already scheduled to begin, and members will receive 24 hours' notice prior to a vote related to coronavirus legislation. The relief bill talks make the August schedule uncertain.
With respect to this week's tax developments, final Base Erosion and Anti-Abuse Tax (BEAT) regulations are now under review by the Office of Management and Budget Office of Information and Regulatory Affairs (OIRA). According to OIRA's website, the final regulations were received for review on 3 August. The final rules would follow up on proposed regulations (REG-112607-19) released in December 2019. For background on the proposed regulations, see EY Tax Alert 2019-2154.
Also this week, there has been some discussion regarding the Global Intangible Low-Taxed Income (GILTI) regulations with an official from the IRS indicating that the Service may refine the Tested Unit Rule in the GILTI High-Tax Exclusion rules.
Final regulations (TD 9902) were released on 20 July, together with new proposed regulations (REG-127732-19) under IRC Section 954(b)(4) related to high-taxed subpart F income. The official noted that the tested unit concept borrows from concepts used in the Qualified Business Unit rules, branch basket rules, dual consolidated loss rules and the hybrid rules. The IRS "pulled a lot of those different concepts … and came up with this new tested unit concept." The official said that they believe it is a good standard. However, the official noted that the IRS is "very interested" in receiving comments on the new rule and "further refining this rule, if we can."
On the international front, a group of United Nations (UN) Tax Committee members from developing countries issued a proposal regarding the taxing of digital services income. The proposal differs significantly from the Organisation for Economic Co-operation and Development's Pillar 1 proposal, both in its scope and allocation methods. The proposal on new article 12B — Income from Automated Digital Services — will be considered during the Committee's meetings in October and November and could be added to the UN Model Tax Convention. The proposal is in the early stages of development and will be subject to further discussions and likely revisions.
EY Guides, Surveys, and Reports
Global Labor and Employment Law Strategic Topics | 2020 Edition 2
A newsletter prepared by EY's Labor and Employment Law Services group explores the rules and must-do advice for employers that require attention to ensure the health and well-being in the workplace in 2020. This edition of the newsletter, attached below, focuses on the labor and employment law challenges for companies in Returning to Work (or Not) in our Covid -19 world.
Recent Tax Alerts
— Aug 06: South African Government releases draft 2020 Tax Law Amendment Bills (Tax Alert 2020-2002)
— Jul 31: Zimbabwe presents 2020 mid-term budget proposals (Tax Alert 2020-1955)
— Aug 04: Korea announces 2020 tax reform proposals (Tax Alert 2020-1975)
— Jul 31: Vietnam issues decree amending loan interest deductibility cap and draft decree on related party transactions (Tax Alert 2020-1954)
Canada & Latin America
— Aug 06: Alberta announces Innovation Employment Grant to support R&D and reignite technology investment (Tax Alert 2020-2003)
— Aug 05: Uruguay further extends deadline for informing Central Bank of chain of ownership (Tax Alert 2020-1988)
— Aug 04: Colombia issues regulation on deferring income from private equity or collective investment funds, as well as rules on permanent establishments (Tax Alert 2020-1979)
— Aug 03: Uruguay extends deadlines for certain estimated tax payments due to COVID-19 (Tax Alert 2020-1967)
— Aug 03: Mexico amends customs rules for 2020, impacting maquiladoras and others (Tax Alert 2020-1966)
— Jul 31: Brazil's proposed federal VAT would increase tax rates for Brazilian banks and other financial institutions (Tax Alert 2020-1959)
— Jul 31: Canada's Department of Finance announces extension to incur flow-through qualifying expenditures (Tax Alert 2020-1950)
— Aug 06: Greece publishes Mandatory Disclosure Rules legislation: A detailed overview (Tax Alert 2020-2000)
— Aug 05: Cyprus postpones MDR reporting deadlines for six months (Tax Alert 2020-1987)
— Aug 05: Lithuania postpones MDR reporting deadlines for six months (Tax Alert 2020-1986)
— Aug 04: Italy approves legislation to implement Mandatory Disclosure Rules (Tax Alert 2020-1977)
— Aug 04: Portugal transposes EU ATAD Directives regarding hybrid mismatches into domestic tax law (Tax Alert 2020-1976)
— Jul 31: Ireland announces temporary reduction in VAT rate as part of July 2020 Stimulus Plan (Tax Alert 2020-1953)
— Aug 06: OECD report forecasts falling tax revenues in Asian and Pacific Economies as a result of COVID-19 pandemic (Tax Alert 2020-2001)
— Jul 31: OECD releases ninth batch of peer review reports on BEPS Action 14 related to improving dispute resolution (Tax Alert 2020-1951)
Highlights of this edition include:
The latest edition of Ernst & Young's Washington Dispatch is attached below. Prepared by Ernst & Young's International Tax and Transaction Services group, this monthly newsletter summarizes recent developments in US international taxation. Highlights of this month's edition include:
Treasury and IRS news
- IRS issues final and proposed interest expense limitation regulations
- Final and proposed GILTI regulations deliver few benefits and more than a few surprises
- Final FDII regulations retain proposed regulations’ structure, but reduce documentation burden, defer effective date and make important substantive changes to computation of Section 250 deduction
- IRS releases new draft partnership Schedules K-2 and K-3 for international tax reporting
- G20 Finance Ministers and Central Bank Governors’ meeting communiqué reiterates commitment to address digitalization tax challenges
- OECD releases new corporate tax statistics including anonymized and aggregated Country-by-Country report statistics
- OECD releases model rules for data reporting by platform operators for sellers in the sharing economy
IRS Weekly Wrap-Up
Internal Revenue Bulletin
| ||2020-32||Internal Revenue Bulletin of August 3, 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.