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August 16, 2020

U.S. International Tax This Week for August 14

Ernst & Young's U.S. International Tax This Week newsletter for the week ending August 14 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.


The Senate adjourned on 13 August for the August recess and will formally reconvene on 8 September. The House has also adjourned and will return to Washington on 14 September. Both Senators and House members will be given at least 24 hours' notice to reconvene if the Trump Administration and congressional Democrats are able to negotiate a coronavirus aid deal.

The Office of Management and Budget (OMB) Office of Information and Regulatory Affairs (OIRA) on 7 August completed its review of final rules on the limitation on the dividends received deduction (DRD) for dividends received from certain foreign corporations and amounts eligible for the IRC Section 954 look-through exception.

In June 2019, Treasury and the IRS released proposed and temporary regulations under IRC Sections 245A and 954(c)(6). Those regulations deny, in whole or in part, the IRC Section 245A DRD to dividends (or gain treated as dividends under IRC Section 1248(a)) sourced from earnings and profits (E&P) generated from certain transactions occurring after 31 December 2017, but before the close of a tax year to which the provisions of IRC Section 951A do not apply (the GILTI gap period). They also deny, in whole or in part, the IRC Section 245A DRD to dividends sourced from E&P generated from tested income or subpart F income that would have been included in a US shareholder's income under IRC Sections 951(a) or 951A(a), but for the transfer or dilution of that shareholder's direct or indirect interest in a controlled foreign corporation (CFC). The regulations apply retroactively to dividends paid after 31 December 2017. The regulations provide rules that would also, in similar circumstances, deny the application of the IRC Section 954(c)(6) deduction, in whole or in part, for dividends paid to CFCs.

OIRA also completed its review of proposed regulations coordinating the application of certain regulations under IRC Section 245A and Section 951A. The OMB website describes the Tax Cuts and Jobs Act-related proposed rules as coordinating the disqualified basis rules of Reg. Section 1.951A-2(b) and the extraordinary disposition rules of Reg. Section 1.245A-5(c) and (d), generally to prevent excess taxation that could otherwise occur when the rules are applied to the same transaction.

IRS officials this week reiterated that the recently released draft Schedules K-2 and K-3 for the 2021 tax year IRS Form 1065, U.S. Return of Partnership Income were guided by the need to standardize format, rather than to request additional information. One official was quoted as saying that the information was already being reported to partners in various formats and added that the changes were necessitated by amendments to the international tax regime by the Tax Cuts and Jobs Act.

Recent Tax Alerts

United States

— Aug 07: US imposes 10% punitive tariff on Canadian-origin aluminum; Canada announces countermeasures in response (Tax Alert 2020-2019)


— Aug 11: Japanese tax authorities reorganize tax audit teams into single unit to cover domestic, international and transfer pricing issues (Tax Alert 2020-2037)

Canada & Latin America

— Aug 13: Panamanian Tax Authority includes a new category for foreign companies that act as legal representatives of Panamanian corporations within the Registry of Taxpayers and the e-tax 2.0 system (Tax Alert 2020-2052)

— Aug 11: Colombia issues regulations on the income tax credit for the VAT paid on Real Productive Fixed Assets (Tax Alert 2020-2038)

— Aug 07: Ecuador issues regulations on VAT on digital services (Tax Alert 2020-2017)

— Aug 07: Brazil's tax reform proposal would affect taxpayers participating in certain special regimes, including customs incentives (Tax Alert 2020-2016)


— Aug 13: Portugal postpones MDR reporting deadlines for six months (Tax Alert 2020-2057)

— Aug 13: Slovakia postpones MDR reporting deadlines for six months (Tax Alert 2020-2056)

— Aug 13: Greece amends taxation of legal entities (Tax Alert 2020-2055)

— Aug 12: Russia and Cyprus reach consensus over tax treaty (Tax Alert 2020-2048)

— Aug 12: Belgium's Tax Authority publishes MDR FAQs (Tax Alert 2020-2046)

— Aug 07: Greece introduces new tax dispute resolution mechanisms (Tax Alert 2020-2014)

Middle East

— Aug 10: Saudi Arabia extends economic relief initiatives for three months (Tax Alert 2020-2023)


— Aug 12: Australian Taxation Office issues final guidance on thin capitalization arm's-length debt test and draft guidance on "outbound" interest-free loans (Tax Alert 2020-2047)

— Aug 10: Australia's border restrictions and quarantine arrangements to remain in place (Tax Alert 2020-2025)

— Aug 10: Australia announces changes to broaden JKP eligibility criteria (Tax Alert 2020-2024)


— Aug 13: PE Watch | Latest developments and trends, August 2020 (Tax Alert 2020-2058)

IRS Weekly Wrap-Up

Internal Revenue Bulletin

 2020-33Internal Revenue Bulletin of August 10, 2020
 2020-34Internal Revenue Bulletin of August 17, 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.