March 27, 2022
U.S. International Tax This Week for March 25
Ernst & Young's U.S. Tax This Week newsletter for the week ending March 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 White House announced that the Biden Administration will release the FY 2023 budget on 28 March. There has been no indication what will be included in the budget or if President Biden will refocus on tax proposals included in the stalled Build Back Better Act or the FY 2022 budget. Both the House and Senate will be in session next week.
In the meantime, Senator Joe Manchin reportedly has restarted discussions with colleagues with regard to developing a limited reconciliation bill that would focus on climate change, prescription drugs, reducing the debt and tax changes. According to multiple reports, Senator Manchin wants to negotiate a compromise and believes that a vote should take place before the August congressional recess. Senator Manchin reportedly would support approximately $500 billion for climate change and $1 trillion in new revenue. There is no mention that the Senator would support new or enhanced social spending programs in the pared down bill.
Addressing how the US can bring the global intangible low-taxed income (GILTI) provision into conformity with the Organisation for Economic Co-operation and Development's (OECD's) proposed Base Erosion and Profit Shifting (BEPS) 2.0 Pillar Two rules given the failure to enact the Build Back Better Act, a Treasury official this week said GILTI reform will happen. "Even though the proposed [US] framework didn't pass in 2021, we can do GILTI reform before that agreed-upon [OECD] implementation date, so we don't see anything that needs to be changed in the global tax framework."
A Treasury official this week was quoted as saying the government will consider whether US foreign tax credits would be available for qualified domestic minimum top-up taxes related to the OECD BEPS 2.0 Pillar Two rules once more guidance becomes available. The official noted that the recently released final foreign tax credit regulations do not explicitly address Pillar One or Pillar Two. But "as the pillars are getting implemented, we will have to reopen those regs," he said.
While the Pillar Two commentary released in March 2022 is explicit that countries should not provide foreign tax credits for taxes paid under the Income Inclusion Rule and the Undertaxed Payment Rule, the issue is less clear for qualified domestic minimum top-up taxes. The Treasury official elaborated that "it's something that we're going to have to study and look at, whether there should be a credit for qualified domestic minimum top-up tax, and it will depend on how they're implemented."
There was some movement with regard to the long-delayed US-Chile income tax treaty this week. The Senate Foreign Relations Committee put the proposed treaty on the agenda of a business meeting scheduled for 29 March. The Senate Foreign Relations Committee was considering holding a vote on the treaty in 2019, under Republican leadership, but it never materialized.
US and Croatian officials met in Washington on 17 March for a "strategic dialog." In a joint statement, the two governments expressed satisfaction with reaching a final stage of tax treaty negotiations and affirmed their commitment for a "swift conclusion of a treaty."
The OECD on 22 March initiated a public consultation titled "Crypto-Asset Reporting Framework and Amendments to the Common Reporting Standard" (CRS). The public consultation will run through 29 April. The OECD is developing a global tax transparency framework that would provide for standardization of automatic exchange of information regarding crypto-asset transactions. The OECD is also proposing amendments to the Common Reporting Standard to bring crypto-assets into scope. Finally, the OECD announced plans to launch a comprehensive review of the CRS to improve its operation.
BorderCrossings . . . With EY transfer pricing and tax professionals (March 31)
During this EY Webcast, Ernst & Young professionals will examine some of the transfer pricing considerations presented by group captive finance companies.
Recent Tax Alerts
— Mar 24: Kenya considers legal right for remote workers to ‘disconnect’ and establish specific working hours (Tax Alert 2022-0466)
— Mar 23: Hong Kong proposes family office tax concession regime (Tax Alert 2022-0463)
Canada & Latin America
— Mar 24: Québec budget 2022-23 discussed (Tax Alert 2022-0475)
— Mar 24: Saskatchewan budget 2022-23 discussed (Tax Alert 2022-0473)
— Mar 23: Uncertainty remains on whether tax authority will recognize tax basis of Peruvian shares acquired indirectly from January 2012 through March 2022 (Tax Alert 2022-0470)
— Mar 23: Canada implements changes to the British Columbia Provincial Nominee Program (Tax Alert 2022-0469)
— Mar 23: Canada's special immigration measures for Ukrainians now accepting applications (Tax Alert 2022-0468)
— Mar 23: Canada to remove pre-entry test requirements for fully vaccinated travelers (Tax Alert 2022-0467)
— Mar 23: Highlights of Québec budget 2022-23 provided (Tax Alert 2022-0465)
— Mar 23: New Brunswick budget 2022-23 discussed (Tax Alert 2022-0464)
— Mar 24: Turkey’s TP documentation requirement deadlines are approaching (Tax Alert 2022-0472)
— Mar 22: Turkey’s General Directorate of Customs issues letter clarifying the Special Consumption Tax base (Tax Alert 2022-0457)
— Mar 21: OECD releases Commentary and illustrative examples on Pillar Two Model Rules (Tax Alert 2022-0458)
IRS Weekly Wrap-Up
Internal Revenue Bulletin
| ||2022-13||The Internal Revenue Bulletin 2022-13 will be posted on IRS.gov by COB Friday 03/25/2022.|
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.