October 10, 2021
U.S. International Tax This Week for October 8
Ernst & Young's U.S. Tax This Week newsletter for the week ending October 8 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 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) on 8 October announced that they had reached agreement on a two-pillar solution to address the tax challenges arising from the digitalization of the economy. The agreed minimum tax rate under Pillar Two is set at 15%. The Organisation for Economic Co-operation and Development (OECD) issued a press release on the announcement, in which it said: "The landmark deal, agreed by 136 countries and jurisdictions representing more than 90% of global GDP, will also reallocate more than USD 125 billion of profits from around 100 of the world's largest and most profitable MNEs to countries worldwide, ensuring that these firms pay a fair share of tax wherever they operate and generate profits." The press release states that Ireland, Hungary, and Estonia joined the agreement.
The two-pillar solution agreement will be delivered to the G20 Finance Ministers meeting that will take place on 13 October in Washington. It will then be presented to the G20 Leaders' Summit in Rome at the end of October. An EY Tax Alert on this critical development will be issued shortly.
On the congressional front, Democrats' dispute over the size of the Build Back Better budget reconciliation bill continued this week with new discussions on the total cost, what provisions in the $3.5 trillion-plus House reconciliation bill should be reduced or cut entirely, or whether the scope should remain broad but with shorter duration and limited benefits. Senator Joe Manchin originally set a $1.5 trillion ceiling on a reconciliation bill last week, and this week reiterated that price tag to the consternation of progressives.
The press is reporting the widely-held view that budget reconciliation talks could spill into December, when Congress will again be confronting the expiration of government funding (3 December) and some tax provisions at year's end.
The budget reconciliation debate also continues to hold up enactment of the Bipartisan Infrastructure Framework. House Speaker Nancy Pelosi has set another self-imposed deadline for action on the bill by 31 October, the new expiration of the highway authorization.
The Senate on 7 October passed a $480 billion increase in the federal debt limit to allow Treasury to meet the nation's obligations into at least early December, setting up another must-act date on the issue within the range of the expiration of government funding on 3 December, as noted above. The House will take up the increase in the federal debt limit next week.
Republicans expect Democrats to need the reconciliation process to ultimately address the debt limit on a long-term basis. Senate Democrats have not yet embraced that approach, but if they do it would not impact the proposed budget reconciliation bill currently awaiting a House-Senate agreement over a topline spending number.
Returning to the OECD, the OECD recently published two opinions of the Conference of the Parties of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). The opinions seek to address questions arising as to the interpretation or implementation of the MLI to ensure its proper interpretation and application.
The first opinion addresses the application of the MLI provisions on the Mutual Agreement Procedure (MAP) where questions were raised on the compatibility of existing treaty rules with those provisions. The second opinion addresses the application of the entry into effect of Part VI (Arbitration) and seeks to clarify when the provisions of Part VI will apply to existing cases in specific situations. See EY Tax Alert 2021-1817 for details.
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.
BEPS 2.0: Beyond 2021 (October 28)
During this EY Webcast, Ernst & Young professionals discuss BEPS 2.0 and taxation of the digitalized economy updates after the October OECD/G20 Inclusive Framework meeting and the G20 Finance Ministers and Central Bank Governors meeting.
Recent Tax Alerts
— Oct 05: FinCEN provides FBAR relief to victims of recent natural disasters giving them until December 31, 2021 to file (Tax Alert 2021-1811)
— Oct 07: Hong Kong may implement substance requirements related to offshore claims (Tax Alert 2021-1818)
Canada & Latin America
— Oct 07: Brazil lifts prohibition on air travel from India, South Africa and the UK (Tax Alert 2021-1822)
— Oct 07: EY Canada's Tax Matters @ EY for October 2021 (Tax Alert 2021-1819)
— Oct 05: Salvadoran Minister of Finance filed draft bill to establish tax amnesty program (Tax Alert 2021-1807)
— Oct 05: Brazil issues new, temporary prohibition on travel from India, South Africa and the UK (Tax Alert 2021-1806)
— Oct 05: Argentina announces new entry rules for fully vaccinated citizens and residents of Bolivia, Brazil, Chile, Paraguay and Uruguay (Tax Alert 2021-1804)
— Oct 01: Argentine Government plans to eliminate duties on exports of services (Tax Alert 2021-1786)
— Oct 06: EU Member States adopt revised list of non-cooperative jurisdictions for tax purposes (Tax Alert 2021-1812)
— Oct 05: Spain deposits its instrument of ratification of the MLI (Tax Alert 2021-1802)
— Oct 05: UK updates guidance on invoicing for upcoming Plastic Packaging Tax (Tax Alert 2021-1801)
— Oct 04: The Netherlands announces changes to the taxable moment of employee stock options (Tax Alert 2021-1798)
— Oct 05: Poland plans to limit tax deductibility of payments considered hidden dividends (Tax Alert 2021-1796)
— Oct 01: Spanish National High Court issues favorable decision on dividend withholding tax reclaims by non-Spanish hedge funds (Tax Alert 2021-1781)
— Oct 05: Turkey proposes new tax bill (Tax Alert 2021-1797)
— Oct 07: OECD publishes two opinions of the Conference of the Parties of the MLI regarding MAP implementation and entry into effect of arbitration rules (Tax Alert 2021-1817)
IRS Weekly Wrap-Up
Internal Revenue Bulletin
|Internal Revenue Bulletin of October 12, 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:
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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.