January 17, 2021
U.S. International Tax This Week for January 15
Ernst & Young's U.S. International Tax This Week newsletter for the week ending January 15 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.
President-elect Joe Biden on 14 January announced a US$1.9 trillion coronavirus relief package titled the "American Rescue Plan," six days before he is inaugurated as the 46th US President. The President-elect described the package as the first step in a two-step plan of rescue and recovery, "to build a bridge to the other side of the crisis we face to a better, stronger, more secure America." The plan includes more than $400 billion to combat the pandemic through a national vaccination program, increased testing and tracing, and additional funding for schools to help them reopen safely, along with $350 billion in funding to state and local governments experiencing budget shortfalls. It also includes $1,400 in direct payments to individuals, enhanced unemployment benefits, federally mandated paid leave, and various other supports for individuals, small businesses, and communities.
The second step in the recovery plan will be released in February during a joint session of Congress and will cover investments in infrastructure, research and development, and clean energy.
Incoming Senate Finance Committee Chairman Ron Wyden this week also detailed his economic and tax priorities for the Committee. The new committee chairman said he wants to "roll back the corporate tax giveaways in the 2017 bill," end incentives to ship jobs overseas, reward companies that invest in the US, and address what he said are the "many problems" with the structure for taxing multinational corporations created in the 2017 Tax Cuts & Jobs Act (TCJA). Senator Wyden further said he is working on a framework for corporate taxes that he will be sharing "fairly shortly." He said there are many issues to deal with on the corporate side, including the tax rate and the treatment of multinational corporations.
An Internal Revenue Service (IRS) official this week said that guidance on the elective IRC Section 864(f) worldwide interest expense allocation is a top international priority for the agency in 2021. Among the issues likely to be addressed are how the IRC Section 864(f) election would operate and the worldwide group definition. The official noted there has not been much commentary on the provision and solicited taxpayer comments. The official also was quoted as saying the IRS has put out a set of foreign tax credit regulations every year since 2017 and there are plans to issue a set of proposed regulations this year.
The US Trade Representative (USTR) on 14 January announced its findings in Section 301 investigations of Digital Services Taxes (DSTs) adopted by Austria, Spain, and the United Kingdom, concluding that each of the DSTs "discriminates against US companies, is inconsistent with prevailing principles of international taxation, and burdens or restricts U.S. commerce." The USTR indicated it will not take any specific action regarding those jurisdictions' DSTs at this time. The latest findings follow similar conclusions announced on 6 January in regard to investigations of DSTs adopted by India, Italy and Turkey.
The Organisation for Economic Co-operation and Development (OECD) is holding a virtual public consultation meeting on the Base Erosion and Profit Shifting (BEPS) Pillar One and Pillar Two Blueprints on 14-15 January. Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration, told the first day's participants that the Inclusive Framework (IF) is continuing to fine-tune the pillar proposals while it waits for a new US Treasury tax policy team to be put in place. Saint-Amans said, "We are in a sense in waiting mode to get signals from the US." The next G20 Finance Ministers' meeting is scheduled for the end of February 2021, and the IF is now aiming to reach agreement on the proposals before the G20 Finance Ministers meeting on 9-10 July. Details regarding this week's OECD meetings will be available shortly.
Tax in the time of COVID-19 (January 22)
During this Thought Center Webcast, Ernst & Young professionals will provide updates on: (i) Elections, US economy and tax policy; (ii) What’s happening at the IRS; and (iii) Breaking developments.
EY Guides and Publications
Washington Dispatch 2020 Year-in-Review (January - December)
This is a special edition of Ernst & Young's Washington Dispatch - Year in Review. Prepared by Ernst & Young's International Tax and Transaction Services group, this newsletter summarizes recent developments in US international taxation.
Recent Tax Alerts
— Jan 13: USTR announces findings in Section 301 investigations on DSTs adopted by India, Italy, Turkey; suspends punitive tariff actions on French origin goods (Tax Alert 2021-0080)
— Jan 13: Nigeria's Government considers Petroleum Industry Bill 2020, a new framework for the oil and gas sector (Tax Alert 2021-0079)
— Jan 11: Kenya enacts significant tax measures for 2021 (Tax Alert 2021-0067)
Canada & Latin America
— Jan 14: Québec eliminates QST ITR restrictions for large businesses (Tax Alert 2021-0090)
— Jan 14: Dutch Government releases decree on fixed establishments for VAT purposes (Tax Alert 2021-0093)
— Jan 13: Luxembourg Tax Authorities issue guidance on interest limitation rules (Tax Alert 2021-0075)
— Jan 08: Spanish Parliament approves final legislation to implement MDR (Tax Alert 2021-0056)
— Jan 14: PE Watch | Latest developments and trends, January 2021 (Tax Alert 2021-0091)
Highlights of this edition include:
- US Congress passes coronavirus stimulus and omnibus spending package that includes extension of CFC look-through
- IRS issues final and proposed PFIC regulations that provide mix of favorable and unfavorable provisions
- Final and proposed regulations on passive foreign investment companies have both favorable and unfavorable implications for insurance companies
- Treasury to focus on other international projects, tax treaties as TCJA guidance nears completion
- Treasury’s FinCEN further extends certain signature authority reporting (FBAR, Form 114) over foreign financial accounts
Transfer Pricing News
- Transfer pricing enforcement remains priority even while TCJA provisions may negate adjustments
- IRS APMA seeing more queries on transfer pricing consequences of coronavirus pandemic
- OECD issues guidance on transfer pricing implications of COVID-19, hard- to-value intangibles
- OECD releases fourth peer review report on BEPS Action 5 on the Exchange of Information of Tax Rulings
- OECD’s FTA hosts virtual meeting of tax administration leaders
IRS Weekly Wrap-Up
Internal Revenue Bulletin
| ||2021-02||Internal Revenue Bulletin of January 11, 2021|
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.