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February 14, 2021
2021-0329

U.S. International Tax This Week for February 12

Ernst & Young's U.S. International Tax This Week newsletter for the week ending February 12 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.

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Spotlight

The House Ways & Means Committee on 11 February approved along party lines a package of provisions that comprise about half of President Biden's $1.9 trillion COVID relief plan. The package would provide direct payments, a child tax credit expansion in the form of direct payments, earned income tax credit and child care tax credit enhancements, as well as an international tax change that would repeal the election for US affiliated groups to allocate interest expense on a worldwide basis beginning in 2021. Recall that IRC Section 864(f) was added to the tax code in 2004 but the provision had been deferred several times. Repeal of the worldwide interest allocation rules would raise roughly $22 billion over 10 years, according to a Joint Committee on Taxation estimate.

The Ways and Means package of provisions represents the Committee's portion of a Fiscal Year 2021 budget reconciliation bill. Other committees have considered or are considering their portions, and the combined package could be enacted within the next several weeks with solely Democratic support. House Speaker Nancy Pelosi said on 11 February she wants the House to pass the legislation by the end of February, which would then be taken up by the Senate. Congressional Democrats and the Biden Administration are seeking to have the COVID-19 package enacted before certain unemployment benefits are scheduled to expire.

According to the tax press, Treasury may soon open a project to revive transfer pricing aggregation regulations under IRC Section 482 that were issued in temporary form in 2015 but expired in 2018 without being finalized. When the 2015 temporary regulations expired in September 2018, taxpayers were left with a statutory aggregation rule under IRC Section 482 without further guidance for intangible property transfers occurring after 14 September 2018.

If Treasury does revive the 2015 temporary regulations, it is unknown how the new regulations will be issued. While it may be possible for Treasury to use the prior proposed regulations to directly promulgate final regulations, it is more likely that the new regulations would be issued as part of a larger regulation package. It is also possible that, given the comprehensive international tax overhaul from the Tax Cuts and Jobs Act (TCJA), Treasury will start from scratch and draft a more comprehensive overhaul of the transfer pricing regulations to incorporate other statutory changes from the TCJA, such as the new statutory definition for intangible property contained in IRC Section 367(d)(4). EY Tax Alert 2021-0276 for details.

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Upcoming Webcasts

Tax in the time of COVID-19: update on legislative, economic, regulatory and IRS developments (February 19)
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 Tax.Tech™ webcast series - The intelligent tax function: Data management and intelligent automation (February 23)
During this Thought Center Webcast, Ernst & Young professionals will focus on the very important aspect of data management and intelligent automation. Throughout our discussion, we will be featuring demos as we cover some of the tools and solutions that are relevant to this topic.

The outlook for global tax policy and controversy in 2021 (February 25)
During this Thought Center Webcast, Ernst & Young professionals will discuss the findings reported in the upcoming EY 2021 Tax Policy & Controversy Outlook, focusing on the most significant tax law and administration trends and highlighting leading practices for companies as they navigate tax developments around the world in the year ahead.

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Recent Tax Alerts

United States

— Feb 08: Argentina and US agree to exchange country-by-country reports on large multinationals (Tax Alert 2021-0288)

Africa

— Feb 11: Africa Union launches Africa Continental Free Trade Area: Status of trading among African countries (Tax Alert 2021-0309)

— Feb 05: Nigeria: Highlights of Finance Act 2020 (Tax Alert 2021-0280)

Asia

— Feb 09: India's Finance Bill 2021 clarifies scope of e-commerce Equalization Levy (Tax Alert 2021-0299)

— Feb 08: Taiwan amends Transfer Pricing Regulations (Tax Alert 2021-0285)

— Feb 05: Japan's immigration information as of February 3 provided (Tax Alert 2021-0278)

— Feb 01: Indian Fiscal Budget 2021 | Key tax proposals impacting individuals and employers discussed (Tax Alert 2021-0232)

Canada & Latin America

— Feb 11: Uruguay modifies when goodwill is not considered in corporate restructurings (Tax Alert 2021-0318)

— Feb 11: Uruguay enacts budget law for 2020-2024 (Tax Alert 2021-0317)

— Feb 11: Uruguay's Executive Power suspends withholding tax obligations for temporary leases of real estate for tourism purposes (Tax Alert 2021-0315)

— Feb 11: Uruguayan tax authorities update list of low- or no-taxation countries and jurisdictions (Tax Alert 2021-0312)

— Feb 10: Uruguay modifies the 'tax holiday' regime (Tax Alert 2021-0311)

— Feb 10: Uruguay's Executive Power regulates certain aspects of the investments law (Tax Alert 2021-0310)

— Feb 09: Costa Rica's Ministry of Treasury submits to Congress a bill establishing dual and global income tax rules (Tax Alert 2021-0293)

— Feb 05: Northwest Territories budget 2021–22 discussed (Tax Alert 2021-0269)

— Feb 01: Canada announces new international travel measures and restrictions (Tax Alert 2021-0231)

Europe

— Feb 11: PE Watch | Latest developments and trends, February 2021 (Tax Alert 2021-0323)

— Feb 11: Poland implements retail sales tax effective from 1 January 2021 (Tax Alert 2021-0322)

— Feb 11: German Ministry of Finance finalizes guidance on German extraterritorial taxation of intellectual property (Tax Alert 2021-0321)

— Feb 10: PE Watch | 2020 in review (Tax Alert 2021-0308)

— Feb 10: Luxembourg formalizes extension of certain filing deadlines (Tax Alert 2021-0307)

— Feb 10: Romanian Tax Authority publishes DAC6 guidance regarding national legislation on Mandatory Disclosure Rules (Tax Alert 2021-0306)

— Feb 09: Poland publishes new draft law on e-invoices (Tax Alert 2021-0298)

— Feb 08: Denmark proposes defensive measures against countries on EU's list of non-cooperative jurisdictions for tax purposes (Tax Alert 2021-0287)

— Feb 08: Poland announces consultation period for regulations on premium to be imposed on advertising activity (Tax Alert 2021-0286)

— Feb 05: Germany removes Tour Operators' Margin Scheme simplification for non-EU businesses (Tax Alert 2021-0279)

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Recent Newsletters

ITS/Washington Dispatch
   Highlights of this edition include:

  • US Treasury Secretary says no new taxes for now, commits to OECD BEPS discussions
  • New final regulations address application of Section 163(j) limitation to CFCs and partnerships, while reserving on certain provisions
  • IRS allows remote signing and submission of authorization Forms 2848 and 8821
  • IRS official says guidance on worldwide interest expense allocation is a top priority, proposed FTC regs in 2021

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IRS Weekly Wrap-Up

Internal Revenue Bulletin

 2021-06Internal Revenue Bulletin of February 8, 2021

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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.

 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

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