December 5, 2021
U.S. International Tax This Week for December 3
Ernst & Young's U.S. Tax This Week newsletter for the week ending December 3 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.
Congress returned from the Thanksgiving recess this week to face looming government funding and debt limit deadlines (a deal averting a government shutdown was reached on 2 December) and Democratic hopes to pass a Build Back Better budget reconciliation bill before the end of the year. The House last week passed the Build Back Better Act (H.R. 5376), which Senate Democrats will now work to amend in order to be able to garner the 50 votes necessary for passage. Senate Majority Leader Chuck Schumer this week said he wants to bring a Build Back Better bill to the Senate floor for consideration the week of 13 December. The Majority leader also said: "my goal is to have the Senate take action to debate and pass the President's Build Back Better legislation before we hit Christmas day. As soon as the necessary technical and procedural work with the Senate Parliamentarian has been completed … the Senate will take up this legislation … ."
The first set of eagerly anticipated final foreign tax credit regulations was sent to the Office of Management and Budget's (OMB) Office of Information and Regulatory Affairs (OIRA) for review on 29 November, according to the OIRA website. A Treasury official this week was quoted as saying the US hopes to release the regulatory package before the end of the year. The same official earlier said the final rules were expected to come in at around 400 pages. Treasury and the Internal Revenue Service issued proposed foreign tax credit regulations in November 2020. The official again confirmed that the final regulations will include the jurisdictional nexus requirement, albeit with simplified application, as well as the core foreign tax credit provisions that were included in the proposed rules. A second set of final foreign tax credit regulations are expected to be released sometime in 2022.
On 24 November, the Government of India issued a Press Release stating that India and the US have agreed on a transitional approach to the treatment of the current Indian e-commerce Equalization Levy (EL) during the interim period before the new Base Erosion and Profit Shifting (BEPS) Pillar One rules come into effect. The transitional treatment includes the continuation of the 2% EL charge by India, subject to a partial future credit to the multinational enterprise (MNE) against that MNE's future "Pillar One Amount A" tax liability. The US agreed to terminate its proposed trade actions against India with respect to the current 2% EL. The Indian-US agreement follows on the heels of recent similar agreements with Turkey and five European countries related to their unilateral digital taxes and US trade actions, with the same terms applying to India as to the other six nations. For additional details, see EY Tax Alert 2021-2168.
India introduced the 2% EL on e-commerce supplies or services undertaken by nonresident e-commerce operators without a permanent establishment in India, beginning 1 April 2020.
The technical aspects of the model rules for OECD BEPS Pillar Two are complete and will be released soon, according to Pascal Saint-Amans, Director of the Organisation for Economic Co-operation and Development (OECD) Centre for Tax Policy and Administration, but "formal processes" must still be completed before their publication. Saint-Amans, who spoke at a 29 November virtual conference, added that while the technical work is done with regard to Pillar Two, discussions are continuing. He said the model rules "reflect the balance between the countries and the clarification and the need for as simple a solution as possible." The commentary to the model rules, the official said, will take more time to complete.
The OECD is also looking to squeeze in a public consultation on the BEPS 2.0 Pillars and is considering how to include a comment period in the implementation timeline. Saint-Amans noted that the OECD has received certain negative comments from business stakeholders suggesting that implementation of the BEPS Pillars will be extremely complex. The OECD official said the future consultation will not be held in a traditional format. Saint-Amans may have been referring to a recent 16 November letter by Business at OECD that expressed their "significant concern with the lack of interaction between business and the Inclusive Framework (IF) since the release of the Blueprints and the subsequent consultations in January 2021," as well as businesses "inability to informally engage with … the OECD Secretariat on the Project."
EY Guides, Surveys, and Reports
Latest Business Tax Policy Barometer available
The Tax Council (TTC) and Ernst & Young LLP periodically produce the Business Tax Policy Barometer, providing insights on the business community's perceptions on a variety of business tax and other key policy issues. This 20th Barometer tracks the views reported from October 20 through November 2, 2021. Results show that the potential for tax increases is the top concern for the business community for 2022.
Latin American tax trends and expectations for 2022 (December 8)
Several Latin America countries recently enacted or proposed significant tax changes that may affect multinational companies operating in the region. Changes include increased tax rates, the introduction of new withholding taxes and measures aimed at increasing tax enforcement and collection. During this EY Webcast, Ernst & Young professionals will discuss the significant changes and actions being taken by businesses to address these changes.
Global Withholding Tax Reporting (December 8)
During this EY Webcast, Ernst & Young professionals will discuss recent global withholding tax reporting industry trends, developments, and outlook. We look forward to your participation for what will be an insightful discussion on cross-border investing and updates from the US, Latin America, and Europe.
BEPS 2.0: Focus on Pillar Two (December 14)
This EY Webcast continues the series of EY Global webcasts addressing BEPS 2.0 developments. Please join us for a timely discussion of the Pillar Two model rules scheduled to be released at the end of November. Panelists will discuss the key elements of the Pillar Two model rules, highlighting what is new with this latest release. They also will share perspectives on how the European Union and other jurisdictions plan to incorporate these model rules into domestic law.
Tax aspects of the LIBOR transition: What to consider for year-end (December 16)
During this EY Webcast, Ernst & Young professionals will discuss tax considerations of the London Interbank Offered Rate (LIBOR) transition and what steps multinational companies can take before the year-end to prevent disruption.
Recent Tax Alerts
— Dec 01: US travel restrictions suspend entry of noncitizens from certain countries (Tax Alert 2021-2164)
— Dec 02: India and US agree on transitional approach for India’s 2% Equalization Levy prior to implementation of Pillar One rules (Tax Alert 2021-2168)
Canada & Latin America
— Dec 02: EY Canada's Tax Matters @ EY for December 2021 (Tax Alert 2021-2175)
— Dec 02: Costa Rica's General Directorate of Customs establishes two new categories of temporary importation for vessels (Tax Alert 2021-2173)
— Dec 01: Argentina announces new, heightened entry rules for individuals traveling from Africa (Tax Alert 2021-2167)
— Dec 01: Canada introduces new measures to address COVID-19 Omicron variant (Tax Alert 2021-2166)
— Dec 01: Brazil imposes temporary ban on travel from Botswana, Eswatini, Lesotho, Namibia, South Africa and Zimbabwe (Tax Alert 2021-2163)
— Nov 30: Argentine Government issues new regulations on tax on financial transactions (Tax Alert 2021-2157)
— Dec 02: Russia announces temporary ban on travel from Botswana, Eswatini, Hong Kong, Lesotho, Madagascar, Mozambique, Namibia, South Africa, Tanzania and Zimbabwe (Tax Alert 2021-2172)
— Dec 02: EU Public CbCR Directive enters into force on 21 December 2021 (Tax Alert 2021-2171)
— Dec 02: Spain’s amendments to CFC rules and participation regime may require action by multi-tier international structures under Spanish holdings (Tax Alert 2021-2169)
— Nov 30: Cyprus Administrative Court rules on Correction of Error request related to overpayment of VAT later assessed in another EU Member State (Tax Alert 2021-2154)
— Nov 29: Denmark adopts new rules relaxing transfer pricing documentation requirements for domestic controlled transactions and addressing application of benchmarking (Tax Alert 2021-2152)
— Nov 29: Belgium and France sign new double tax treaty (Tax Alert 2021-2151)
— Nov 29: Poland ratifies protocol to revise tax treaty with the Netherlands (Tax Alert 2021-2150)
— Nov 30: Australia's international borders to begin reopening December 15 in order to reinvigorate skilled migration (Tax Alert 2021-2158)
— Nov 29: Australia introduces proposed Corporate Collective Investment Vehicle tax and regulatory laws (Tax Alert 2021-2153)
— Nov 30: OECD releases 2020 mutual agreement procedure statistics and 2020 mutual agreement procedure awards (Tax Alert 2021-2155)
IRS Weekly Wrap-Up
Internal Revenue Bulletin
|Internal Revenue Bulletin of November 22, 2021
|Internal Revenue Bulletin of November 29, 2021
|Internal Revenue Bulletin of December 6, 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.