June 6, 2021
U.S. International Tax This Week for June 4
Ernst & Young's U.S. International Tax This Week newsletter for the week ending June 4 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 Treasury on 28 May released its FY 2022 explanation of the Biden Administration's revenue proposals (the Green Book), offering new details on the various proposals included in the President's "Made in America" tax plan.
The Made in America tax plan was first released in March 2021 and was followed by a Treasury report detailing the Administration's corporate tax proposals, including increasing the corporate tax rate from 21% to 28% and significant changes to international tax provisions.
The significant international tax proposals include:
- Increased tax rates and other changes to the regime for Global Intangible Low-taxed Income (GILTI)
- Country-by-country limitations on foreign tax credits
- Repeal of the deduction for Foreign-derived Intangible Income (FDII)
- Replacement of the Base Erosion and Anti-abuse Tax (BEAT) with a newly proposed "SHIELD" (Stopping Harmful Inversions and Ending Low-tax Developments)
- Expanded rules targeting inversions
- A new minimum tax on book income
- Limits on interest deductions for disproportionate borrowing in the US
- Treatment of dispositions of "specified hybrid entities" as stock sales for certain purposes
Most of the proposals would be effective for tax years beginning after 31 December 2021, though several are proposed to be effective for transactions completed after the date of enactment. The proposal to repeal BEAT and introduce SHIELD would be effective for tax years beginning after 31 December 2022. See EY Tax Alert, Treasury Green Book offers new details on international tax proposals, dated 28 May 2021 for details.
President Joe Biden and Senate Environment & Public Works Ranking Member Shelley Moore Capito met this week without an announced breakthrough on bipartisan infrastructure talks, and will meet again on 4 June. At this point, Senate Republicans, led by Senator Capito, have offered a US$928 billion infrastructure counterproposal to President Biden's US$1.7 trillion proposal, with disagreement continuing as to the size, scope and how to pay for a possible infrastructure deal. The President reportedly is floating a smaller infrastructure package although details are limited at this time.
White House press secretary Jen Psaki confirmed that President Biden is focusing on proposals like a 15% minimum tax on corporate book income to pay for infrastructure to generate bipartisan support. The President's proposal to pay for infrastructure includes increased IRS enforcement of and compliance by wealthy individuals and corporations. The Administration is also signaling they will not wait much longer for a deal and want progress by the time Congress returns on 7 June from this week's recess.
The US Trade Representative (USTR) on 2 June announced additional tariffs on goods from Austria, India, Italy, Spain, Turkey, and the United Kingdom (UK) stemming from Section 301 investigations of Digital Services Taxes (DSTs) from those countries. The USTR suspended the tariffs for up to 180 days, however, "to provide additional time to complete the ongoing multilateral negotiations on international taxation at the Organisation for Economic Co-operation and Development (OECD) and in the G20 process." For details, see EY Tax Alert, USTR announces 25% punitive tariffs on six specific countries in response to their Digital Services Taxes; Suspends tariffs for 180 days, dated 4 June 2021.
Officials from the Group of 7 (G-7) are meeting in London on 4-5 June, during which they are expected to pledge support for the Base Erosion and Profit Shifting (BEPS) 2.0 talks, including possibly a global minimum tax. A draft communique by the G-7, which consists of the US, Canada, France, Germany, Italy, Japan and the UK, is being reported in the press. The draft statement reportedly says: "We commit to reaching an equitable solution on the allocation of taxing rights and to a high level of ambition on the rate for a global minimum tax." The Biden Administration in April floated a 15% corporate minimum tax to the OECD/G20 Steering Group of the Inclusive Framework on BEPS.
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.
Recent Tax Alerts
— Jun 01: Travel of US Citizens with expired passports discussed (Tax Alert 2021-1088)
— Jun 03: Changes to immigration rules designed to restrict entry of foreigners into Vietnam and manage spread of COVID-19 discussed (Tax Alert 2021-1109)
Canada & Latin America
— Jun 03: EY Canada's Tax Matters @ EY for June 2021 (Tax Alert 2021-1104)
— Jun 01: Colombia reopens borders with several neighboring countries; ends ban on flights from UK; announces new restrictions on flights from India (Tax Alert 2021-1093)
— Jun 01: Newfoundland and Labrador budget 2021-22 discussed (Tax Alert 2021-1087)
— Jun 02: Italy enacts exceptional 15% Notional Interest Deduction or equivalent tax credit for 2021 (Tax Alert 2021-1096)
— Jun 02: EU co-legislators reach agreement on public CbCR (Tax Alert 2021-1097)
— May 26: Italy extends accounting step-up election to financial year 2021 (Tax Alert 2021-1080)
— May 26: OECD: Conference of the Parties of the MLI approve opinion for MLI interpretation and implementation (Tax Alert 2021-1079)
— May 26: Portugal clarifies VAT rules related to nonresident taxable persons (Tax Alert 2021-1078)
— May 26: Poland proposes optional e-invoicing from 1 October 2021 (Tax Alert 2021-1077)
— May 26: Italy postpones plastic packaging tax to 2022 (Tax Alert 2021-1076)
— May 26: UK's 2021 to 2025 immigration priorities announced (Tax Alert 2021-1075)
IRS Weekly Wrap-Up
Internal Revenue Bulletin
| ||2021-22||Internal Revenue Bulletin of June 1, 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.