October 3, 2021
U.S. International Tax This Week for October 1
Ernst & Young's U.S. International Tax This Week newsletter for the week ending October 1 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.
House Democratic leaders late on 30 September postponed a floor vote on the Senate-passed infrastructure bill, acknowledging they did not have the votes to pass the legislation. Congressional Democrats and the White House this week had sought to reach agreement on a framework for a budget reconciliation bill that would convince progressive House Democrats to vote for the infrastructure bill, but no deal came to fruition. The stalemate comes as progressive Democrats are trying to push forward on a $3.5 trillion "human infrastructure" reconciliation bill but are stymied by Congressional Democratic moderates who are seeking a smaller bill.
The negotiation over a budget reconciliation framework was further complicated when leading moderate Senator Joe Manchin on 30 September announced that he would support a $1.5 trillion budget reconciliation package, considerably smaller than the $3.5 trillion bill favored by progressives and included in the August budget resolution passed by both the House and Senate. In justifying his position, Sen. Manchin said he did not want "to change our whole society to an entitlement mentality."
It was also disclosed that the Senator signed a memorandum of understanding with Senate Majority Leader Chuck Schumer at the end of July that included his $1.5 trillion spending limit, and that was a precondition for his support of the August budget resolution. Senator Manchin announced his top line number as progressive Democrats said they could not move forward on budget reconciliation without knowing what he and fellow Democratic moderate Senator Kyrsten Sinema would support. Senator Manchin, who had earlier suggested that a final reconciliation package should be delayed until 2022, also said that he could envision a budget reconciliation package being passed by the Congress this year.
The size and scope of the reconciliation bill ultimately will dictate the amount of pay-fors, including tax increases.
Speaker Nancy Pelosi said the House would vote on the infrastructure bill on 1 October, the third attempt this week.
G-7 Finance Ministers this week reportedly reached agreement on some of the outstanding issues surrounding the Base Erosion and Profit Shifting (BEPS) 2.0 Pillar One and Pillar Two reform proposals. The Inclusive Framework on BEPS is scheduled to meet on 8 October with the aim of reaching final agreement on the BEPS Pillars. Assuming agreement is reached and an implementation plan is finalized, G-20 Finance Ministers will be in a position to approve the plan at their 12-13 October meeting in Washington. A G-20 Finance Ministers summit is also scheduled for 30-31 October in Rome.
The Treasury also confirmed that progress had been made on BEPS 2.0 at the G-7 meeting. According to the Treasury September 29 readout, "A common understanding was reached on some of the important open issues, to support reaching final political agreement within the OECD Inclusive Framework in October."
With regard to Pillar One, Treasury Secretary Janet Yellen told a Senate Banking, Housing, and Urban Affairs Committee hearing on 28 September that she thought that US implementation of Pillar One may not require a treaty and ensuing Senate assent and ratification. "I believe there are a number of ways in which Congress could implement it … Ratification of a treaty would be one way," the Treasury Secretary said. Secretary Yellen earlier had said the Biden Administration may look to begin implementing Pillar One in spring 2022.
The Internal Revenue Service this week issued Revenue Procedure 2021-32, listing those jurisdictions with which the US has an information exchange agreement for purposes of reporting certain deposit interest paid to those jurisdictions. The reporting requirement is found in Reg. Sections 1.6049-4(b)(5) and 1.6049-8(a). The revenue procedure also lists those jurisdictions with which there would be automatic exchange of the deposit interest information collected.
Tax in the time of COVID-19: update on legislative, economic, regulatory and IRS developments (October 8)
During this Thought Center Webcast, Ernst & Young professionals will discuss how businesses can navigate the tax policy environment and continue to effectively operate their tax function in this time of crisis and change. Panelists will provide updates on: (i) the US economy and tax policy; (ii) breaking developments; and (iii) what’s happening at the IRS.
BorderCrossings: Trends driving new supply chain structures and multi-hub operating models (October 12)
During this Thought Center Webcast, Ernst & Young professionals will discuss the non-tax and tax considerations of more flexible, distributed hubs owing to several factors like the “war for talent,” the work-from-anywhere model and difficulty securing visa permits due to the ongoing COVID-19 crisis.
Recent Tax Alerts
— Sep 28: IRS modifies list of countries that have information exchange agreements with US (Tax Alert 2021-1762)
— Sep 28: USCIS extends flexibility for responding to agency requests (Tax Alert 2021-1757)
— Sep 24: United States to ease foreign air travel restrictions (Tax Alert 2021-1747)
— Sep 29: Kenya Revenue Authority issues public ruling to withdraw guidance note issued on treatment of tax losses (Tax Alert 2021-1764)
— Sep 29: India Tax Administration extends applicability of transfer pricing safe harbor rules to financial year 2020-21 (Tax Alert 2021-1766)
Canada & Latin America
— Sep 30: Brazilian tax authority rules withholding tax does not apply to cross-border insurance premiums paid by Brazilian customers to a Norwegian insurance company (Tax Alert 2021-1771)
— Sep 24: Costa Rica introduces Digital Nomad Visas (Tax Alert 2021-1744)
— Sep 29: EU Member States adopt public CbCR Directive (Tax Alert 2021-1763)
— Sep 28: Higher taxes for Polish taxpayers and some foreign companies discussed (Tax Alert 2021-1761)
— Sep 28: Poland plans to introduce tax on shifted profits (Tax Alert 2021-1758)
— Sep 28: Russia refines application of VAT reverse charge mechanism (Tax Alert 2021-1756)
— Sep 27: Sweden extends deadline for UK citizens to apply to retain their right of residence in Sweden; announces updated entry rules and restrictions (Tax Alert 2021-1755)
— Sep 28: French Government releases draft Finance Bill for 2022 (Tax Alert 2021-1754)
— Sep 24: United Kingdom announces new entry rules for international travelers (Tax Alert 2021-1741)
— Sep 27: Israeli Court rules on reclassification of trademark transaction between a shareholder and its company and the arm’s-length return on R&D services (Tax Alert 2021-1746)
— Sep 27: New Zealand issues Operational Statement on Administration of imported hybrid mismatch rule (Tax Alert 2021-1751)
IRS Weekly Wrap-Up
Internal Revenue Bulletin
| ||2021-40||Internal Revenue Bulletin of October 4, 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:
— 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.