November 15, 2020
U.S. International Tax This Week for November 13
Ernst & Young's U.S. Tax This Week newsletter for the week ending November 13 is now available. Prepared by Ernst & Young's National Tax Department in Washington, D.C., this weekly update summarizes important news, cases, and other developments in U.S. taxation.
Joe Biden has been projected as the winner of the US Presidential election, although President Trump has refused to concede the election as of this writing. Tax, healthcare, immigration and climate policy are key areas where the incoming Biden Administration likely will diverge significantly from the Trump Administration. The election results will not be certified by the Electoral College until 14 December, and several state recounts and legal challenges are ongoing.
Although President-elect Biden had previously signaled that tax increase plans would be implemented on "Day 1," it now appears that such plans may wait until after the coronavirus and its effects are addressed. The likelihood and scope of any such changes will become clearer only after control of the Senate is decided by two run-off elections in Georgia on 5 January 2021; the composition of the incoming Senate now stands at 48 Democrats to 50 Republicans.
On taxes, the President-elect has said he would raise the top corporate income tax rate to 28% from 21%. He also proposed taxing capital gains and dividends as ordinary income for those with annual incomes of more than US$1 million and setting a 15% minimum tax on the book income of corporations with book income greater than US$100 million. These changes are proposed to pay for increased spending on infrastructure, healthcare, education and the environment, not to reduce the debt or deficit. Biden may face a Congress reluctant to raise taxes or increase spending, however.
With regard to international tax, President-elect Biden indicated he supports measures that would discourage off-shoring and encourage on-shoring. To that end, Biden has proposed increasing the tax rate on profits earned by foreign subsidiaries of US firms by increasing the GILTI tax rate to 21% and applying the regime on a per-country basis. He has also proposed creating a "Made in America" tax credit to offset 10% of investments geared toward creating jobs in the US and introducing a surtax on certain goods and services imported into the US. For more details, see recent EY articles on tax and trade policy under a Biden Administration and how the outcome of the Senate races could shape policy in 2021. The Internal Revenue Service (IRS) has updated the website that includes a listing of the jurisdictions with which the US Competent Authority has entered into a Competent Authority Agreement (CAA) for the automatic exchange of Country-by-Country (CbC) reports and the jurisdictions that are in negotiations for a CAA. Most recently, the IRS added Singapore to the list of countries with which the US has signed a CAA for the automatic exchange of CbC reports. The US Competent Authority also released a joint statement with the French Competent Authority, explaining that France is negotiating a CAA with the US to allow for the automatic exchange of CbC reports. The Joint Statement indicates that with respect to fiscal years of multinational enterprise groups commencing on or after 1 January 2019 and before 1 January 2020, the Competent Authorities intend to spontaneously exchange CbC reports.
BorderCrossings (November 19)
During this Thought Center Webcast, Ernst & Young professionals will discuss the complexities posed not only by federal tax reform, but also by the recent election, developments in global finance and the digitalization of the economy.
Recent Tax Alerts
— Nov 11: Trade Watch | Issue 3 2020 (Tax Alert 2020-2670)
— Nov 10: USTR suspends GSP for certain Thai origin goods, Commerce issues preliminary determination on Vietnam CVD case (Tax Alert 2020-2665)
— Nov 06: Ghana publishes Transfer Pricing Regulations 2020 (Tax Alert 2020-2643)
— Nov 09: Singapore's Jobs Growth Incentive program discussed (Tax Alert 2020-2652)
Canada & Latin America
— Nov 11: Canada releases draft legislation for the Canada Emergency Rent Subsidy (Tax Alert 2020-2672)
— Nov 10: Incentive deduction for the commercialization of innovations in Quebec discussed (Tax Alert 2020-2660)
— Nov 09: Brazilian Supreme Court holds software sales will not be subject to state value-added tax (Tax Alert 2020-2653)
— Nov 06: Canada introduces Bill C-9 to implement new rent subsidy and amend current wage subsidy (Tax Alert 2020-2644)
— Nov 06: Ontario budget 2020-21 discussed (Tax Alert 2020-2641)
— Nov 12: PE Watch: Latest developments and trends, November 2020 (Tax Alert 2020-2683)
— Nov 11: EU imposes countermeasures on US origin goods (Tax Alert 2020-2674)
— Nov 10: France proposes new e-invoicing and e-reporting obligations from 2023 (Tax Alert 2020-2664)
— Nov 10: UK implements new e-commerce VAT rules effective 1 January 2021 (Tax Alert 2020-2663)
— Nov 06: German Ministry of Finance publishes guidance on German taxation of extraterritorial intellectual property (Tax Alert 2020-2647)
— Nov 06: Post Brexit UK-Switzerland immigration perspective provided (Tax Alert 2020-2633)
— Nov 10: Australian Government introduces new Payment Times Reporting Scheme (Tax Alert 2020-2666)
— Nov 12: OECD releases Spain Stage 2 peer review report on implementation of Action 14 minimum standard (Tax Alert 2020-2682)
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.