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February 27, 2022

U.S. International Tax This Week for February 25

Ernst & Young's U.S. Tax This Week newsletter for the week ending February 25 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.


The G20 Finance Ministers and Central Bank Governors recently re-endorsed the previously announced ambitious Base Erosion and Profit Shifting (BEPS) 2.0 timeline, including having a final multilateral instrument, model rules for inclusion in domestic legislation, and a commentary completed by the middle of 2022. To meet this deadline, the Organisation for Economic Co-operation and Development (OECD) has released initial blocks of these rules as drafts for consultation purposes along with very quick turnaround deadlines for comments.

During a Tax Talks webinar on 21 February, OECD officials discussed plans for future releases, but conceded that stakeholders have become increasingly frustrated with the rush to develop these rules. One official said, "we are trying to address them … with as much engagement as is possible within the overall timelines that we have."

BEPS 2.0 drafts have been released on nexus and revenue sourcing and tax base determinations for Amount A, and an OECD official said it is expected that other blocks of Pillar One will be released on a rolling basis once the scoping rules are "stabilized."

OECD officials also provided an overview of the Pillar Two global minimum tax rules (or GloBE rules) that confirmed the basics of the rule — a 15% jurisdictional effective rate, assessed generally on a top-down approach. However, the ordering for the qualified domestic minimum tax (QDMT), newly released in the December 2020 Model Rules, was highlighted as a provision that would be applied first in determining the appropriate jurisdiction to which any top-up tax would be owed. Thus, if a jurisdiction adopts a QDMT, it will have the first right to collect tax, while a jurisdiction that adopts the income inclusion rule will have the right to collect tax (on a top-down basis) only when there is not a QDMT in a local jurisdiction. The undertaxed payments rule (UTPR) was identified as the third and last step in determining the jurisdiction to which tax could be owed but was not discussed.

An official also presented a Pillar Two timeline, saying the OECD is adding the finishing touches to the commentary and that it is expected to be released shortly. It appears that once the commentary is released, the OECD will turn to meet its goal of a February/March public consultation on implementation, with rules that are intended to deliver intended outcomes with a sensible compliance burden, including safe harbors and simplified tax administration processes.

On the subject to tax rule (STTR), an OECD official presented the work streams as: (i) an STTR model treaty provision; (ii) a commentary; (iii) the process to assist in implementing; and (iv) a multilateral instrument. He said the OECD is developing a new multilateral instrument to facilitate implementation of the STTR in affected tax treaties, which is envisioned to be similar to the BEPS Multilateral Instrument and will modify the application of existing treaties to give effect to the rule. As identified in the October 2021 Inclusive Framework agreement, the STTR will apply to royalties, interest and other payments that remain under discussion.

In other OECD news, an official was quoted as saying the organization is finalizing a tax reporting framework for cryptoassets. The official said, "The goal of the OECD work is to design a tax reporting exchange framework that will allow tax administrations to obtain and then automatically exchange the relevant information, which is needed to address tax compliance risks … ." The OECD will publish the framework plan, reportedly including proposed revisions to the common reporting standard, in March 2022.

EY Guides, Surveys, and Reports

Global Tax | Recent developments and trends in asset management
This latest EY publication is a summary of key issues and trends arising from domestic tax reforms and international developments related to base erosion and profit shifting (BEPS) initiatives relevant to alternative fund managers in managing their fund and investment platforms. The publication summarizes jurisdiction-specific key issues, trends, and general developments.

Upcoming Webcasts

The outlook for global tax policy and controversy in 2022 (March 1)
During this EY Webcast, Ernst & Young professionals 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.

Transparency in the sharing economy: What to know about DAC7 and beyond (March 24)
During this EY Webcast, Ernst & Young professionals will discuss the global adoption of tax reporting rules for digital platforms, including OECD’s Model Rules, EU’s tax automatic exchange of information directive known as DAC7 and the UK’s hybrid implementation.

Recent Tax Alerts


— Feb 22: Highlights of Nigeria's Finance Act 2021 discusssed (Tax Alert 2022-0309)


— Feb 21: Singapore announces new border control measures to go into effect on February 22 (Tax Alert 2022-0305)

Canada & Latin America

— Feb 24: Uruguay's tax authority updates list of low- or no-taxation countries, jurisdictions and special regimes (Tax Alert 2022-0322)

— Feb 23: Northwest Territories budget 2022-23 discussed (Tax Alert 2022-0316)

— Feb 23: British Columbia budget 2022-23 discussed (Tax Alert 2022-0312)

— Feb 22: Canada's proposed rate reduction for zero-emission technology manufacturers discussed (Tax Alert 2022-0310)

— Feb 18: Canadian immigration in 2022 discussed (Tax Alert 2022-0301)


— Feb 24: Netherlands publishes changed view on international allocation of severance payments (Tax Alert 2022-0320)

— Feb 23: Italy issues final guidance on hybrid mismatches (Tax Alert 2022-0313)

— Feb 18: United Kingdom closes Tier 1 Investor Route to new applicants with immediate effect (Tax Alert 2022-0300)


— Feb 21: OECD releases Pillar One public consultation document on draft rules for tax base determinations (Tax Alert 2022-0307)

— Feb 21: OECD Tax Talk provides insight on BEPS 2.0 (Tax Alert 2022-0306)

IRS Weekly Wrap-Up

Internal Revenue Bulletin

 2022-09Internal Revenue Bulletin of February 28, 2022

Additional Resources

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.