February 20, 2022
U.S. International Tax This Week for February 18
Ernst & Young's U.S. International Tax This Week newsletter for the week ending February 18 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.
The Senate this week pivoted from discussions regarding the Build Back Better Act to what can be done to address inflation and who will support it. The press is reporting that Senate Democrats plan to bring forward legislation in March that would reduce expenses for American households, with possible options that include a gas tax holiday and lowering the cost of prescription drugs. Senate Majority Leader Chuck Schumer suggested that separate bills would be brought up, not combined or attached to a legislative package. Congress is out next week, with both chambers returning on 28 February in time for President Biden's State of the Union address on 1 March, which should provide some clarity as to the Administration's priorities going forward.
The Internal Revenue Service (IRS) on 16 February released Frequently Asked Questions (FAQs) on transition relief for certain domestic partnerships and S corporations completing new Schedules K-2 and K-3. According to the IRS, the new schedules K-2 and K-3 "improve reporting by standardizing international tax information to partners and flow-through investors, making it easier for them to report these items on their tax returns." The FAQs on Schedules K-2 and K-3 provide details on additional transition relief to make it easier for those domestic partnerships and S corporations to change to and prepare the schedules. An exception for tax year 2021 to file the Schedules K-2 and K-3 for certain domestic partnerships and S corporations may be available if certain requirements are met. For more information, see the IRS press release.
In an 11 February letter to six Senators, the Treasury Assistant Secretary for Legislative Affairs wrote that future proposed regulations on cryptocurrency reporting requirements for brokers based on the recently enacted infrastructure legislation would be limited to those with access to certain information. Last year's Infrastructure Investment and Jobs Act applied information reporting requirements to digital assets (including cryptocurrency) and updated the definition of broker to reflect the realities of how digital assets are acquired and traded, by adding to the definition "any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person."
The Treasury official wrote, "ancillary parties who cannot get access to information that is useful to the IRS are not intended to be captured by the reporting requirements for brokers." As examples of who would not be covered by the proposed regulations, the official pointed to those "validating transactions through a consensus mechanism" as well as individuals "selling storage devices used to hold private keys or persons who merely write software code." Treasury will study the extent to which others in the digital asset market, including centralized exchanges, decentralized exchanges and peer-to-peer exchanges should be treated as brokers, the official said.
The period to provide comments on the Organisation for Economic Co-operation and Development's (OECD) BEPS 2.0 draft Pillar 1 consultation document (draft model rules for revenue sourcing and nexus) released on 4 February closes on 18 February. The press this week quoted Pascal Saint-Amans, Director of the OECD's Centre for Tax Policy and Administration as saying: "We fully acknowledge the complexity of the rules and the frustration of a number of players not to have been consulted in more detail." Saint-Amans was quoted as saying the OECD is trying to reduce some of the complexity. In regard to collection of the necessary data, Saint-Amans said there are no plans for a central database containing company data that governments would be able to access. Rather, the OECD plans to develop a mechanism that uses the information in a company's country-by-country report and that are exchanged under Base Erosion and Profit Shifting (BEPS) Action 13.
Addressing the BEPS 2.0 negotiations, Republican Senate Finance Committee members wrote to Treasury Secretary Janet Yellen on 17 February, highlighting their concerns and underscoring the need for bipartisan discussions with Congress over the plan. The Republican committee members wrote that the BEPS Pillar Two global minimum tax model rules released in December 2021 apply "far more broadly and adversely" to US companies than foreign competitors. According to the letter, other countries appear to have "negotiated more successfully to protect their domestic tax laws and companies" to receive exemptions from a global minimum tax. The Senators wrote: "It is one thing for the Administration to advocate for higher taxes as part of its domestic tax agenda, but quite another to explicitly negotiate an international agreement that would subject U.S. companies to double taxation unless Congress acts accordingly."
On 18 February, the OECD released Draft Rules for Tax Base Determinations under Amount A of Pillar One. The OECD/G20 Inclusive Framework on BEPS has agreed to release this public consultation document for public comments, but the draft rules do not reflect consensus regarding the substance of the document. Interested parties are invited to send their written comments by 4 March.
BorderCrossings (February 24)
During this EY Webcast, part of an ongoing monthly series, EY transfer pricing and tax professionals will help you stay informed and able to adopt a more proactive stance in developing and defending your transfer pricing policies and practices.
The outlook for global tax policy and controversy in 2022 (March 1)
During this EY Webcast, the panelists will discuss the findings reported in the EY 2022 Tax Policy & Controversy Outlook, focusing on significant tax law and administration trends and highlighting leading practices for organizations as they navigate tax developments around the world in the year ahead.
The indirect tax technology journey - Now. Next. Beyond. (March 2)
During this EY 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
— Feb 17: Thailand signs Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (Tax Alert 2022-0284)
— Feb 17: Vietnam signs Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (Tax Alert 2022-0280)
Canada & Latin America
— Feb 17: Uruguay's Executive Branch increases income limit to apply for simplified personal income tax regime (Tax Alert 2022-0287)
— Feb 17: Uruguay extends application of reduced VAT rate (Tax Alert 2022-0286)
— Feb 17: Canada's Department of Finance releases proposed measures regarding avoidance of tax debts and audit authorities (Tax Alert 2022-0285)
— Feb 15: The Latest on BEPS and Beyond for February 2022 (Tax Alert 2022-0269)
— Feb 14: Ukraine implements new VAT rules for nonresidents supplying electronic services to Ukrainian customers (Tax Alert 2022-0265)
— Feb 14: Spain’s Tax Audit Plan for 2022 reveals intensified focus on conduit entities and beneficial ownership along with an increased use of technology (Tax Alert 2022-0264)
— Feb 11: OECD releases Pillar One public consultation document on draft nexus and revenue sourcing rules (Tax Alert 2022-0254)
— Feb 11: Spain proposes improvements to tax treatment of carried interest and inpatriates regime (Tax Alert 2022-0252)
— Feb 15: Australian Parliament passes bill to reform electronic signing of documents, virtual and hybrid meetings (Tax Alert 2022-0268)
— Feb 11: Australia introduces bill on 17% patent box for medical and biotech technologies (Tax Alert 2022-0256)
IRS Weekly Wrap-Up
Internal Revenue Bulletin
| ||2022-08||Internal Revenue Bulletin of February 22, 2022|
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.