March 20, 2022
U.S. International Tax This Week for March 18
Ernst & Young's U.S. International Tax This Week newsletter for the week ending March 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 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) on 14 March released a commentary document on the BEPS 2.0 Pillar Two global minimum tax rules (GloBE Rules), providing detailed guidance on the operation of these rules. The commentary is 228 pages long and is accompanied by 50 pages of examples that address a host of issues. Among them, the commentary reconfirmed that there could be a top-up tax allocable under the Undertaxed Payments Rule (UTPR) when domestic income earned by a company in its headquarter jurisdiction has an effective tax rate as computed under the Pillar Two model rules that is below 15%. This is an outcome that has raised concerns among many US companies that avail themselves of incentives and credits that are not qualified refundable credits as defined in the model rules under Pillar Two. In effect, this could mean that a top-up tax may be payable in other jurisdictions because certain credits and incentives were utilized in the US.
The Organisation for Economic Co-operation and Development (OECD) indicated that the next step in regard to the GloBE Rules will be development of the Implementation Framework, "as agreed under the Detailed Implementation Plan set out in the October Statement." Inclusive Framework members are seeking public input on the issues by 11 April. The public consultation is meant to focus on "mechanisms that will ensure tax administrations and MNEs can implement and apply the GloBE Rules in a consistent and co-ordinated manner" while minimizing compliance costs.
Senate Finance Committee Chairman Ron Wyden recently issued a press release indicating he supports putting Russia and Belarus on the list of countries subject to IRC Section 901(j) sanctions. IRC Section 901(j) eliminates the preferential 10.5% GILTI (global intangible low-taxed income) tax rate and disallows foreign tax credits for income earned in countries that support terrorism or without US diplomatic relations. Chairman Wyden's proposal would put countries that are participating in or materially support the invasion of Ukraine on the list of countries subject to the sanction. This latest proposal follows President Biden's revocation of most favored nation status for Russia and some talk on Capitol Hill of terminating the US-Russia tax treaty.
An Internal Revenue Service (IRS) official this week recommended that taxpayers should always request being under the new fast-track private letter ruling (PLR) process that was announced in January 2022 in Revenue Procedure 2022-10, saying there is no down-side. The IRS instituted the 18-month pilot program to address corporate PLR requests, with a target completion of 12 weeks from assignment to an agency review team.
EY Guides and Publications
How BEPS 2.0 could impact the alternative investment fund (AIF) industry
The Organisation for Economic Co-operation and Development/G20 Inclusive Framework on BEPS 2.0 project continues to move forward. An article outlines the potential implications of these rules for asset managers and their portfolio companies.
BEPS 2.0: Implications of Pillar Two for businesses (March 22)
During this EY Webcast, Ernst & Young professionals will walk through practical examples illustrating the potential effects of core elements of the Model Rules. They also will provide an update on ongoing technical developments in the Inclusive Framework and share perspectives on the plans of some key jurisdictions for moving forward with the global minimum tax.
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.
17th Annual International Tax Quantitative and Reporting Conference (March 28 & 29)
The 17th Annual International Tax Quantitative and Reporting Conference will continue to explore in detail the considerations associated with international tax reporting and quantitative analysis related to today’s ever-changing environment, including US legislative developments, international initiatives and regulatory changes. Key topics will include the recently released foreign tax credit regulations, BEPS, the Build Back Better Act (and potential subsequent legislation) and significant changes to US international reporting requirements for 2021 tax years. Register here.
Recent Tax Alerts
— Mar 17: US takes more trade actions against Russia (Tax Alert 2022-0436)
— Mar 15: Singapore introduces new points-based COMPASS immigration framework (Tax Alert 2022-0424)
Canada & Latin America
— Mar 17: Brazil reduces financial transaction tax on foreign exchange settlements (Tax Alert 2022-0434)
— Mar 15: Argentina announces three-year residence permits to Ukrainian citizens (Tax Alert 2022-0425)
— Mar 15: Peruvian Tax Court concludes loan proceeds qualify as a payment of services (Tax Alert 2022-0423)
— Mar 14: Peruvian Tax Court addresses how to determine if payments to foreign entities qualify as payments for digital services (Tax Alert 2022-0422)
— Mar 14: Canada announces update to sanctions related to Russia (Tax Alert 2022-0420)
— Mar 14: Costa Rica enacts law simplifying tax obligations for inactive entities and extending due date for simplified income tax return (Tax Alert 2022-0419)
— Mar 11: Ecuadorian President proposes bill to attract new investments (Tax Alert 2022-0412)
— Mar 17: EU Finance Ministers reach agreement on EU Carbon Border Adjustment Mechanism (Tax Alert 2022-0433)
— Mar 16: EU Finance Ministers express broad support for compromise text for Pillar Two Directive which includes one-year delay of implementation timeline, but no unanimous agreement yet (Tax Alert 2022-0430)
— Mar 16: European Commission unveils latest plan regarding fast tracking of renewables, hydrogen and biomethane to replace gas imports from Russia to the EU (Tax Alert 2022-0429)
— Mar 16: The Latest on BEPS and Beyond | March 2022 edition (Tax Alert 2022-0427)
— Mar 17: Australia's flexible work visa options support economic recovery (Tax Alert 2022-0439)
IRS Weekly Wrap-Up
Internal Revenue Bulletin
|Internal Revenue Bulletin of March 21, 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.