December 23, 2021
U.S. International Tax This Week for December 23
Ernst & Young's U.S. International Tax This Week newsletter for the week ending December 23 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.
On 19 December, Senator Joe Manchin said on a Sunday morning news show that he will not support the proposed Build Back Better Act (BBBA), saying: "I cannot vote to continue with this piece of legislation. I just can't. … This is a no on this legislation." In a "Dear Colleague" letter that followed Senator Manchin's announcement, Senate Majority Leader Chuck Schumer said the Senate will vote on a "modified version" of the House-passed BBBA early in the new year "so that every Member of this body has the opportunity to make their position known on the Senate floor, not just on television." The Majority Leader also indicated that the Senate will "keep voting until we get something done." The Majority Leader's plan to hold a vote on a "modified version" of the BBBA apparently indicates Democrats will try to strip out certain provisions to win Senator Manchin's vote in favor of the bill.
The Organisation for Economic Co-operation and Development (OECD) on 20 December released the eagerly awaited Model Rules on the Pillar Two Global Minimum Tax, as approved by the G20/OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS). The Model Rules cover the scope and mechanics of the Income Inclusion Rule and the Undertaxed Payments Rule, collectively referred to as the Global Anti-Base Erosion (GloBE) rules. Together with the Model Rules, the OECD also released a summary of the rules (The Pillar Two Model Rules in a Nutshell), an overview of the key operating provisions of the GloBE rules (Fact Sheets) and a Frequently Asked Questions document.
The OECD press release indicates that it expects to release the Commentary relating to the Model Rules and to address the interaction with the US Global Intangible Low-Taxed Income (GILTI) rules in early 2022. In addition, the Inclusive Framework is developing the model treaty provision for the Subject to Tax Rule, which is the third element of the Pillar Two global minimum tax framework, and a multilateral instrument for its implementation, which the OECD expects to release in the early part of 2022 with a public consultation event on it to be held in March 2022. Finally, the OECD noted the work to be done on development of an implementation framework addressing administration, compliance and coordination matters related to Pillar Two and announced that a public consultation event on the implementation framework will be held in February 2022.
The Model Rules provide a substantial update to the Pillar Two Blueprint released in October 2020. Implementation of the Model Rules will lead to significant changes to the overall international tax rules under which businesses operate and will introduce new filing obligations that will require gathering additional data and adaption of companies' internal processes and systems.
Companies need to evaluate the potential impact of the proposed global tax changes and monitor activity in relevant countries related to the implementation of new rules through changes in domestic tax rules and bilateral and multilateral agreements, especially given the very ambitious implementation timeline. In particular, companies should monitor developments in the US with respect to the GILTI rules as well as the announced plans for implementation of Pillar Two in the European Union (EU) through an EU Directive.
EY Tax Alert 2021-2299 provides details. The Model Rules will be the focus of the upcoming EY Webcast BEPS 2.0: Focus on Pillar Two on 12 January 2022. Click here to register for the webcast.
BEPS 2.0: Focus on Pillar Two (January 12)
During this EY Webcast, Ernst & Young professionals 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.
Private Equity and Private Capital - Navigating transformative global and US legislative change (January 18)
During this EY Webcast, Ernst & Young professionals will discuss 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 (January 21)
During this EY Webcast, Ernst & Young panelists will provide updates on: (i) the US economy and tax policy; (ii) breaking developments; and (iii) what’s happening at the IRS.
Recent Tax Alerts
— Dec 17: Japan releases 2022 tax reform outline (Tax Alert 2021-2271)
Canada & Latin America
— Dec 22: Ecuador enacts tax reform (Tax Alert 2021-2309)
— Dec 22: Inactive entities in Costa Rica must file a Simplified Income Tax Return starting on January 1, 2022 (Tax Alert 2021-2297)
— Dec 20: Peruvian Tax Authority challenges deduction of intercompany charges (Tax Alert 2021-2284)
— Dec 20: Costa Rica's Tax Authority publishes 'Plan to Enhance the Tax Compliance' (Tax Alert 2021-2282)
— Dec 22: European Commission proposes tax Directive for implementing BEPS 2.0 Pillar Two Model Rules in the EU (Tax Alert 2021-2305)
— Dec 22: European Commission publishes draft Directive for preventing the misuse of shell entities (UNSHELL) (Tax Alert 2021-2304)
— Dec 22: European Commission proposes that green levies and Pillar One help finance EU recovery fund (Tax Alert 2021-2301)
— Dec 22: French Parliament approves Finance Bill for 2022 (Tax Alert 2021-2298)
— Dec 21: The Latest on BEPS and Beyond for December 2021 (Tax Alert 2021-2295)
— Dec 21: Switzerland updates list of occupations for which Swiss employers must advertise vacancies with a Regional Employment Center (Tax Alert 2021-2290)
— Dec 21: First Impressions | OECD releases Model Rules on the Pillar Two Global Minimum Tax (Tax Alert 2021-2287)
— Dec 20: Switzerland announces work permit quotas for 2022; Croatians to benefit from unrestricted freedom of movement starting in 2022 (Tax Alert 2021-2278)
— Dec 20: UK issues updated guidance and regulations on Plastic Packaging Tax (Tax Alert 2021-2277)
— Dec 20: Italy updates VAT electronic invoicing requirements (Tax Alert 2021-2276)
— Dec 17: OECD releases 2020 peer review report on BEPS Action 5 on the Exchange of Information of Tax Rulings (Tax Alert 2021-2272)
— Dec 23: Cyprus amends definition of corporate tax residency and introduces withholding tax on payments of dividends, interest and royalties to companies in non-cooperative jurisdictions (Tax Alert 2021-2311)
— Dec 22: Turkey temporarily reduces the withholding tax rate on income and gains derived from government bonds, treasury bills and lease certificates (Tax Alert 2021-2303)
— Dec 22: Turkey reduces withholding tax rate on dividend distributions to 10% (Tax Alert 2021-2300)
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.