September 26, 2021
U.S. International Tax This Week for September 24
Ernst & Young's U.S. Tax This Week newsletter for the week ending September 24 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.
The White House and House and Senate Democratic leaders this week tried to navigate a path forward on the massive House-passed budget reconciliation bill that must be whittled down to address the concerns of Democratic moderates. In a letter to House Democrats on 20 September, House Speaker Nancy Pelosi wrote that they "must be prepared for adjustments" to the package. House Majority Leader Steny Hoyer on 21 September was quoted as saying, "If the Senate can't do $3.5 trillion, we've got to see what they can do."
In an attempt to bring the parties together, President Joe Biden met on 22 September with Congressional Democratic leaders and others, including Senator Joe Manchin, who said the President asked that moderates come up with a top line budget reconciliation number that they could support. The next day, Senate Majority Leader Chuck Schumer announced during a press conference with Speaker Pelosi that, "The White House, the House, and the Senate have reached an agreement on a framework that will pay for any final negotiated agreement. So, the revenue side of this, we have an agreement on." The framework reportedly will use the Ways & Means Committee's tax proposal reported out of committee, including international tax provisions, along with select Senate proposals that were not included in the House package.
Senator Schumer later called the deal a "menu of options." A top line spending number has not been agreed to, and that will determine how much tax revenue is needed and which options are included in a compromise bill. The spending and tax plans are still under discussion with moderate Democrats, whose support will greatly influence the final package.
In the background is Speaker Pelosi's commitment to moderate House Democrats to hold a vote on the Senate-passed $1 trillion infrastructure package on 27 September. Progressive Democrats continue to say they want a final deal on reconciliation before they will vote for the infrastructure bill.
The Director of the Internal Revenue Service Advance Pricing and Mutual Agreement (APMA) this week warned taxpayers from accepting unilateral relief by treaty partner jurisdictions, and said that taxpayers should instead stick with bilateral mutual agreement procedures. The Director was quoted as saying that companies accepting unilateral deals may not end up with full relief from double taxation, suggesting it may be considered a failure to exhaust all available remedies and result in denial of creditability of foreign taxes paid in the jurisdiction.
The Director also reiterated earlier comments that taxpayers need to cite more than general economic trends related to COVID to justify a change in the terms in an advance pricing agreement (APA). He said that the APMA program and their foreign counterparts have been able to come to mutually agreeable results when the taxpayer has shown that the pandemic has indeed changed the circumstances affecting the terms of an APA.
Recent Tax Alerts
— Sep 22: High Court of Kenya declares that minimum tax is unconstitutional (Tax Alert 2021-1714)
— Sep 20: Nigeria announces new entry guidelines for Indian citizens and India-outbound travelers (Tax Alert 2021-1695)
— Sep 23: China implements new, stricter requirements for obtaining health codes in 55 jurisdictions (Tax Alert 2021-1723)
— Sep 21: Singapore expands transfer pricing guidance (Tax Alert 2021-1705)
— Sep 20: China implements new, stricter requirements for Official Invitation (PU) letters sponsored by companies based in Shanghai (Tax Alert 2021-1694)
Canada & Latin America
— Sep 20: Brazil increases tax on financial transactions (Tax Alert 2021-1706)
— Sep 20: Colombia enacts 2021 tax reform (Tax Alert 2021-1698)
— Sep 17: Mexico's 2022 economic proposal focuses on eliminating loopholes (Tax Alert 2021-1688)
— Sep 23: Swiss Parliament acts to eliminate import customs duties on industrial goods as soon as 1 January 2022 (Tax Alert 2021-1726)
— Sep 23: The Netherlands publishes draft legislation on reverse hybrid entities as final part of ATAD II implementation (Tax Alert 2021-1725)
— Sep 22: Netherlands issues proposed legislation with unilateral measures against international transfer pricing mismatches (Tax Alert 2021-1717)
— Sep 22: The Netherlands publishes 2022 budget proposals (Tax Alert 2021-1713)
— Sep 21: Sweden implements new, stricter requirements for obtaining permanent residence (Tax Alert 2021-1712)
— Sep 21: Cyprus announces further extension of non-application of administrative fines for DAC6 submissions to 30 November 2021 (Tax Alert 2021-1709)
— Sep 20: Poland's major tax reform proposal moves to Parliament (Tax Alert 2021-1692)
— Sep 21: Israeli Tax Authority finalizes international tax reform package for further discussion and potential legislation (Tax Alert 2021-1710)
— Sep 22: The Latest on BEPS and Beyond | September 2021 edition (Tax Alert 2021-1708)
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:
— 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.