October 17, 2021
U.S. International Tax This Week for October 15
Ernst & Young's U.S. International Tax This Week newsletter for the week ending October 15 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.
Congress was mostly out of session this week, though there was continuing discussion over how to shrink the $3.5 trillion-plus House reconciliation bill to win the support of moderate Senators Joe Manchin and Kyrsten Sinema. The widely cited target is $2 trillion, with the primary options being to narrow the scope of the bill or retain the broad scope of policies but reduce the duration or benefits of provisions to lower the cost.
G-20 Finance Ministers this week endorsed the Base Erosion and Profit Shifting (BEPS) 2.0 Pillar One and Pillar Two agreement approved by a majority of the members of the Inclusive Framework on 8 October. A communiqué issued at the conclusion of their 13 October meeting called on the Inclusive Framework to "swiftly develop the model rules and multilateral instruments as indicated in and according to the timetable provided in the Detailed Implementation Plan, with a view to ensure that the new rules will come into effect at global level in 2023."
Treasury Secretary Janet Yellen earlier had said that she was "confident that what we need to do to come into compliance with the minimum tax [in Pillar Two] will be included in a reconciliation package." The press reported a Treasury official as saying this would consist of increasing the current global intangible low-taxed income (GILTI) rate to 15% and applying it on a country-by-country basis. It is the minimum tax part of the deal under Pillar Two that requires changing GILTI, as Democrats plan to do in the reconciliation bill.
Secretary Yellen said during a recent Senate Banking Committee hearing that Congress' implementation of Pillar One could be accomplished in "a number of ways" with Senate treaty approval being just one of those approaches. In response to Secretary Yellen's statement, the Ranking Members of the Senate Finance Committee, Senate Foreign Relations Committee, and Senate Banking Committee sent a letter to the Treasury Secretary dated 8 October saying, "we are extremely concerned with the Administration's recent suggestions it is considering circumventing the Senate's constitutional treaty authority in regard to implementation of Pillar One."
The press is also quoting senior Treasury officials as saying that the US is in discussions with various countries to roll back their digital services taxes as part of the BEPS 2.0 agreement. Details regarding those arrangements reportedly will be made available before the G-20 leaders' summit meeting in Rome on 30-31 October.
The Internal Revenue Service (IRS) this week announced in Notice 2021-59 its intention to defer by one additional year the applicability date of final regulations under IRC Section 987 and certain related final regulations. The affected regulations will be amended to apply to tax years beginning after 7 December 2022.
The Cypriot Tax Department on 7 October publicly announced that the US-Cyprus bilateral Competent Authority Agreement (CAA) for the exchange of Country-by-Country (CbC) reports, which is still under negotiation, is expected to be effective for Reporting Fiscal Years (RFYs) starting on or after 1 January 2021.
According to the release from the Cypriot Tax Department, "in the case where the Ultimate Parent Entity of a Multinational Group of Enterprises (MNEs) is tax resident in the United States of America, the secondary filing mechanism should be triggered for Reporting Fiscal Years starting on or after 1 January 2020 and before 1 January 2021." See EY Tax Alert 2021-1850 for details.
PE and Private Company quarterly tax webcast (October 21)
During this Thought Center Webcast, Ernst & Young professionals will discuss the recent global private equity (PE) industry trends and the outlook for US and international legislative and regulatory changes relevant to PE and alternative funds, transactions and portfolio companies.
Tax in the time of COVID-19: update on legislative, economic, regulatory and IRS developments (October 22)
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.
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.
BorderCrossings . . . With EY transfer pricing and tax professionals (October 28)
During this Thought Center Webcast, Ernst & Young professionals will discuss frameworks for assessing and inventorying customer-related data and valuing them across a spectrum of business models (i.e., data-enabled and data-enhanced models). We will also examine fair market valuations of data and cybersecurity from a transfer pricing perspective.
The indirect tax technology journey: Now. Next. Beyond (November 3)
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
— Oct 14: Kenya Revenue Authority issues guidelines on implementation of Value Added Tax (Electronic Tax Invoice) Regulations, 2020 (Tax Alert 2021-1868)
— Oct 08: Update provided on entry restriction to Indonesia and international travel health protocol for foreigners (Tax Alert 2021-1834)
Canada & Latin America
— Oct 14: Uruguay extends COVID-19 tax relief measures for certain taxpayers to October 31, 2021 (Tax Alert 2021-1871)
— Oct 14: Uruguay establishes application date for tax exemptions for leasing social interest housing (Tax Alert 2021-1870)
— Oct 14: Canada announces it will enact Digital Services Tax but says implementation is conditional (Tax Alert 2021-1864)
— Oct 11: General Directorate of Internal Taxes of Dominican Republic establishes payment programs for unpaid tax liabilities (Tax Alert 2021-1847)
— Oct 14: Ireland announces Budget 2022 (Tax Alert 2021-1867)
— Oct 14: Luxembourg’s Reverse Hybrid Entity Rule effective as from tax year 2022 (Tax Alert 2021-1863)
— Oct 14: PE Watch | Latest developments and trends, October 2021 (Tax Alert 2021-1862)
— Oct 13: Poland announces new, more lenient entry rules for certain business visitors and Turkish citizens (Tax Alert 2021-1859)
— Oct 13: Cyprus Tax Authority issues clarification regarding Competent Authority Agreement with the United States for exchange of CbC reports (Tax Alert 2021-1850)
— Oct 12: Denmark publishes bill relaxing transfer pricing documentation requirements in relation to domestic controlled transactions (Tax Alert 2021-1845)
— Oct 12: CJEU issues final decision confirming characterization of the Spanish tax amortization regime for financial goodwill as State aid (Tax Alert 2021-1844)
— Oct 11: OECD releases statement updating July conceptual agreement on BEPS 2.0 project (Tax Alert 2021-1840)
— Oct 08: 136 Inclusive Framework countries support global tax agreement (Tax Alert 2021-1839)
— Oct 08: French Government clarifies new requirement for transmission of electronic invoicing and payment data as from 1 July 2024 (Tax Alert 2021-1835)
— Oct 08: Ireland joins consensus on G20/OECD International Tax Proposals (Tax Alert 2021-1830)
— Oct 08: Jordan issues transfer pricing instructions (Tax Alert 2021-1831)
— Oct 13: Australia is reforming skilled migration as border restrictions ease (Tax Alert 2021-1852)
Highlights of this edition include:
- Congress fails to pass infrastructure and budget reconciliation legislation
- House Ways & Means Committee reports out reconciliation bill with major international tax proposals
- Senate Finance Committee Chairman releases partnership tax proposals
Treasury and IRS news
- Final foreign tax credit regulations will include jurisdictional nexus requirement, Treasury official says
- IRS allows taxpayer to reverse GILTI “gap period” transaction through late CTB election
- IRS articulates five-factor test in determining income inclusion of reimbursement payments
- IRS issues final regulations on treatment of qualified improvement property and provides guidance on foreign tax credits
- IRS seeing more billion-dollar MAP cases
- IRS lists jurisdictions with US information exchange agreements that allow reporting of certain deposit interest
- G7 Finance Ministers make progress on BEPS 2.0 issues in lead-up to October 2021 meetings
IRS Weekly Wrap-Up
Internal Revenue Bulletin
|Internal Revenue Bulletin of October 18, 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.