January 23, 2022
U.S. International Tax This Week for January 21
Ernst & Young's U.S. Tax This Week newsletter for the week ending January 21 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.
President Joe Biden said during a 19 January press conference that he now supports breaking up his proposed Build Back Better (BBB) legislation into smaller bills. The President said: "It's clear to me we'll have to probably break it up" … "I think we can break the package up, get as much as we can now, come back, and fight for the rest later." He suggested that legislation could be signed into law before the mid-term elections in November. President Biden pointed to the clean energy provisions in the BBB legislation that could be brought forward and passed by Congress, but commented that extension of the enhanced child tax credit and spending for community colleges may not survive. Earlier, the press reported that that the Biden Administration was developing an alternative BBB proposal that will focus on climate provisions but without certain social spending proposals, although the White House denied that a specific proposal was being put forward.
Following the President's news conference, Senator Joe Manchin offered his view on a BBB substitute saying that discussions will have to begin "with a clean sheet of paper and start over." He also confirmed earlier reports that his $1.8 trillion BBB proposal from December is off the table. Senator Manchin said that he is always ready to talk, but indicated that no discussions are currently scheduled. Senator Manchin further explained his views on moving forward, saying the "main thing we need to do is take care of the inflation. Get your financial house in order. Get a tax code that works."
The Organisation for Economic Co-operation and Development (OECD) commentary related to the Base Erosion and Profit Shifting (BEPS) 2.0 Pillar Two model rules is forthcoming, perhaps in early February, according to an OECD official. The official recently was quoted as saying that when the Pillar Two commentary is completed, the Inclusive Framework will begin working on a multilateral instrument to coordinate implementation of the subject-to-tax rule. The official also confirmed that the Inclusive Framework is on schedule to complete the text of a multilateral convention to implement the Pillar One new taxing right, with both projects set for completion by the end of "first semester of this year."
Further, with the Biden Administration's BBB legislation stalled, there are concerns being raised as to how the US can enact the 15% global intangible low-taxed income (GILTI) rate and country-by-country calculation necessary to bring the US into compliance with the OECD-led global tax deal. According to a recent Wall Street Journal editorial, in order to avoid double taxation of US companies, "foreign governments will have to recognize Gilti (and tax payments made to Treasury under Gilti) as equivalent to the OECD minimum tax."
The OECD on 20 January released the 2022 Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. The latest OECD Transfer Pricing Guidelines include new guidance on the transactional profit method and guidance for tax administrations regarding hard-to-value intangibles. The 2022 edition also includes additional information with respect to transfer pricing for financial transactions.
How the UK AHC regime will impact the alternative investment funds landscape (January 24)
Please join our panel of professionals for our Webcast - a timely discussion of recent Tax industry trends and the outlook for changes relevant to US-based asset managers.
BorderCrossings . . . With EY transfer pricing and tax professionals (January 27)
Multinational companies often encounter related transactions – for example, the sale of tangible goods with the use of intangibles, or the sale of goods along with services being provided. This month’s BorderCrossings Webcast addresses these issues by focusing on the related “aggregation principle” in transfer pricing. The webcast will also include a brief update on recent activities around the OECD’s “Pillar One” and “Pillar Two” initiatives under BEPS 2.0.
Recent Tax Alerts
— Jan 20: Malaysia announces foreign-sourced income exemptions for resident taxpayers until 2026 (Tax Alert 2022-0106)
— Jan 14: Korea enacts 2022 tax reform bill (Tax Alert 2022-0082)
Canada & Latin America
— Jan 19: Ecuador modifies cross-border transaction rules (Tax Alert 2022-0109)
— Jan 19: Canada Revenue Agency provides update on home office expense deduction (Tax Alert 2022-0102)
— Jan 18: Brazil enacts legal framework for foreign exchange market (Tax Alert 2022-0097)
— Jan 14: Uruguay proposes excise tax on e-cigarettes (Tax Alert 2022-0089)
— Jan 14: Uruguay issues decree establishing threshold for net worth tax (Tax Alert 2022-0088)
— Jan 20: Italian Tax Authorities provide clarifications on VAT treatment of derivatives (Tax Alert 2022-0107)
— Jan 19: UK's new digital Right to Work check rules come into effect April 6 (Tax Alert 2022-0105)
— Jan 18: Poland's new law facilitating employment of foreigners to go into effect in late January 2022 (Tax Alert 2022-0094)
— Jan 14: Switzerland plans to implement OECD minimum tax rate for large multinational companies from 2024 (Tax Alert 2022-0087)
— Jan 14: European Commission builds on “Fit for 55” energy and climate package with new measures (Tax Alert 2022-0085)
— Jan 14: European Commission proposes new set of measures to address deforestation, waste management and soil health (Tax Alert 2022-0084)
— Jan 14: Italy issues 2022 Budget Law (Tax Alert 2022-0081)
— Jan 20: Turkey introduces bill that postpones inflation accounting and announces new corporate income tax exemptions on gains in case of conversions into Turkish Lira (Tax Alert 2022-0108)
— Jan 19: The Latest on BEPS and Beyond for January 2022 (Tax Alert 2022-0100)
— Jan 14: PE Watch | Latest developments and trends, January 2022 (Tax Alert 2022-0072)
Highlights of this edition include:
— Tax Cuts and Jobs Act
— Tax compliance
— Foreign tax credit
— Capital markets
— Tax treaties
— Transfer pricing
— BEPS 2.0 (US)
— Foreign Account Tax Compliance Act (FATCA)
— IRS forms
— United Nations
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.