U.S. International Tax This Week for May 26

26 May 2021

Ernst & Young's U.S. International Tax This Week newsletter for the week ending May 26 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 Senate Finance Committee hearing on four Treasury nominations on 25 May, including for Lily Batchelder as Assistant Treasury Secretary for Tax Policy, featured significant discussion of international tax changes proposed by President Joe Biden as well as the Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) 2.0 negotiations. Senator Rob Portman expressed concern about the Administration's proposal to double the global intangible low-taxed income (GILTI) rate to 21% — which, with the proposed retention of the 20% foreign tax credit haircut for GILTI, would make the rate 26%-plus, noting its impact on US competitiveness.

Ranking Member Mike Crapo expressed concerns about changing the GILTI rate ahead of an OECD agreement and, in a 24 May letter, asked Treasury Secretary Janet Yellen for more information regarding the OECD BEPS 2.0 Pillar One negotiations, including how many US companies would be affected, which companies would be treated as "in scope," the magnitude of profits that would be reallocated, and the effect on US tax revenues. Other senators on the committee asked about the effect of the 10% deemed return for tangible assets for companies building factories in high-tax jurisdictions and the importance of a global minimum tax, as well as voiced concerns about potential exemptions or carve-outs for some countries.

Coming up, President Biden's FY 2022 budget is set for release on 28 May, White House Press Secretary Jen Psaki confirmed on 21 May. The Treasury Green Book, expected to provide considerably more detail regarding the Administration's various tax proposals, will also be released.

With infrastructure negotiations among the White House and Senate Republicans appearing on hold after the Administration made a $1.7 trillion counteroffer proposal on 21 May, there are reports that Senate Republicans will offer President Biden a nearly $1 trillion infrastructure counterproposal on 27 May. The latest Republican offer reportedly would be paid for by repurposing unused coronavirus funds from prior COVID-19 bills. Senate Republicans are suggesting that President Biden indicated that $1 trillion is the minimum amount that he would consider in a slimmed down infrastructure bill.

Offering a timeline, Senate Majority Leader Chuck Schumer earlier this week was quoted as saying that he plans for the Senate to move an infrastructure bill in July, either on a bipartisan basis or through reconciliation. "The bottom line is very simple, that it has always been our plan regardless of the vehicle to work on an infrastructure bill in July," he said.

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Upcoming Webcasts

Tax in the time of COVID-19 : Update on legislative, economic, regulatory and IRS developments (June 4)
During this Thought Center Webcast, Ernst & Young professionals will provide updates on: (i) The US economy and tax policy; (ii) Breaking developments; and (iii) What’s happening at the IRS.

Tax in a dynamic global sustainability landscape: The challenges around the ‘E’ in ESG (June 8)
During this Thought Center Webcast, Ernst & Young professionals will focus on tax considerations and opportunities in the global effort to make the environment a top policy priority. The tax department is a critical voice in the environmental, social, governance (ESG) conversation and should work hand-in-hand with sustainability, operations and the C-suite as businesses both proactively develop strategies to align with the “E” in the ESG framework and respond to legislative and policy developments across the globe.

Telework and other employer challenges in 2021 and beyond (June 17)
During this Thought Center Webcast, Ernst & Young professionals will bring together their insights and experience to discuss how COVID-19 impacts continue to challenge employers, particularly around the demand for telework arrangements after state and local mandatory work-from-home orders have expired.

The indirect tax technology journey: Now. Next. Beyond. (June 23)
During this Thought Center Webcast, Ernst & Young professionals will share insights into how market-leading organizations are using technology to adapt to new legislation and market trends, and to effectively transform tax operations.

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Recent Tax Alerts

Africa

— May 26: Kenyan Government presents Finance Bill, 2021 to Parliament (Tax Alert 2021-1062)

Canada & Latin America

— May 25: Uruguayan Executive Power issues decree regulating new 10-year option under 'tax holiday' regime (Tax Alert 2021-1067)

— May 25: Argentina corporate legal authorities modify regime for foreign companies (Tax Alert 2021-1066)

— May 25: Peruvian tax authority establishes guidelines for application of new thin capitalization rules (Tax Alert 2021-1064)

— May 24: Uruguay extends reduced 13% value-added tax rate to operations in the tourism sector (Tax Alert 2021-1051)

— May 24: Argentine Chamber of Deputies approves bill that would raise corporate income tax rates (Tax Alert 2021-1050)

— May 21: Costa Rica's proposed bill creates new immigration category for remote workers and service providers (Tax Alert 2021-1038)

— May 21: Costa Rica's General Directorate of Customs authorizes a new category of goods that may be imported under the temporary import regime (Tax Alert 2021-1035)

Europe

— May 26: German Parliament advances several tax proposals (Tax Alert 2021-1060)

— May 26: Greece implements income tax reductions and other tax amendments (Tax Alert 2021-1056)

— May 24: EU General Court annuls Commission's decision on Luxembourg transfer pricing state aid case (Tax Alert 2021-1055)

— May 24: Tax M&A Update for April 2021 (Tax Alert 2021-1053)

— May 25: Sweden's open disclosures may be used to manage risks of tax penalties due to COVID-19 related transfer pricing adjustments (Tax Alert 2021-1047)

— May 21: Romania's draft law to create long-term "Digital Nomad" visa discussed (Tax Alert 2021-1039)

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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.

Document ID: 2021-1074