U.S. International Tax This Week for September 1

01 September 2022

Ernst & Young's U.S. Tax This Week newsletter for the week ending September 1 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.

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Spotlight

The Internal Revenue Service (IRS) recently issued Notice 2022-36, granting relief from certain failure-to-file penalties and certain information return penalties for most individual and business taxpayers who did not file tax returns for tax years 2019 and 2020, provided the returns are filed before 30 September. In addition, the IRS will automatically (1) abate assessed, but unpaid, penalties or (2) refund or credit any penalties that were already paid by taxpayers who would have been granted this failure-to-file relief.

The penalty relief applies to certain international information returns. In particular, penalty relief applies to Form 5471 (Information Return of U.S. Persons With Respect To Certain Foreign Corporations) and Form 5472 (Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business) when they are attached to a late-filed Form 1120 or Form 1065.

The penalty relief does not apply to international information returns not listed in the Notice, such as Form 926 (Return by a U.S. Transferor of Property to a Foreign Corporation) and Form 8865 (Return of U.S. Persons With Respect to Certain Foreign Partnerships).

The OECD on 25 August released the public comments it received on theProgress Report on Amount A of BEPS Pillar One. EY submitted extensive comments on the Amount A Pillar One progress report. According to the comment letter submitted by EY, applying the complex mechanics for Pillar One that have been specified to date, it becomes clear that the overall result would be that a relatively small number of mature market jurisdictions would gain additional taxing rights, with the bulk of jurisdictions around the world likely receiving little benefit or seeing a reduction in their taxing rights. This outcome is largely due to the formulaic approach used to determine Amount A.

The OECD announced that the public consultation meeting on Amount A of Pillar One will take place on 12 September in hybrid format.

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EY Guides, Surveys, and Reports

EY's 2022 Worldwide Corporate Tax Guide
Governments worldwide continue to reform their tax codes at a historically rapid rate. Taxpayers need a current guide, such as EY's Worldwide Corporate Tax Guide, in such a shifting tax landscape, especially if they are contemplating new markets.

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Upcoming Webcasts

How economic, geopolitical and technological ripples impact the tax agenda (September 8)
During this EY Webcast, Ernst & Young professionals focus on the global economic outlook and the forces disrupting it in the short, medium and long term. Hosted by Kate Barton, EY Global Vice Chair - Tax, the webcast will also feature recognized economist Dr. Tassu Shervani of the Cox School of Business at SMU.

International tax talk quarterly series with the EY Global Tax Desk Network (September 13)
During this EY Webcast, Ernst & Young professionals will address significant tax developments in the APAC region.

BEPS 2.0 developments: What to watch out for in country implementation (September 15)
During this EY Webcast, Ernst & Young professionals will discuss the recent activities in the global negotiations and the emerging implementation activities in countries. The panelists will also share updates on latest developments and outlook for country implementation and discuss the current status and outlook for Pillar One and Two.

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Recent Tax Alerts

Africa

— Aug 26: Kenya exempts foreign investors from obtaining KRA PIN under certain circumstances (Tax Alert 2022-1296)

Asia

— Sep 01: Thailand launches new 10-year Long-Term Resident Visa for working professionals and investors (Tax Alert 2022-1326)

— Aug 31: India announces new salary requirement for Employment Visa applicants (Tax Alert 2022-1320)

— Aug 30: Singapore relaxes entry requirements for Long-Term Pass, Work Permit and S Pass holders and short-term visitors (Tax Alert 2022-1311)

Canada & Latin America

— Aug 31: Peru enacts temporary VAT reduction for specific hotels and restaurants (Tax Alert 2022-1321)

— Aug 31: Dominican Republic issues notice on the country-by-country report submission threshold (Tax Alert 2022-1319)

— Aug 30: El Salvador enacts tax amnesty program (Tax Alert 2022-1312)

Europe

— Sep 01: Poland proposes changes to transfer pricing regulations (Tax Alert 2022-1327)

— Aug 26: Poland | A review of changes in the “Polish holding company regime" (Tax Alert 2022-1302)

— Aug 26: Denmark publishes draft bill introducing a cultural levy of 6% on turnover generated by Danish and EU-based digital streaming platforms and services in Denmark (Tax Alert 2022-1301)

— Aug 26: Poland plans to amend provisions implementing tax on shifted profits (Tax Alert 2022-1297)

Oceana

— Aug 31: New Zealand proposes various changes to Goods and Services Tax Law (Tax Alert 2022-1316)

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Recent Newsletters

ITS/Washington Dispatch
Highlights of this edition include:

Legislation

President Biden signs Inflation Reduction Act with 15% corporate minimum tax
Congress passes $280 billion Chips and Science Act

IRS news

Applicability date for foreign currency regulations under Section 987 extended again
IRS announces delay in effective date of Section 871(m) regulations

Transfer pricing news

Tax Court increases Medtronic royalty rate under unspecified TP method
Increased IRS funding from Inflation Reduction Act may increase scrutiny of transfer pricing cases

OECD developments

OECD releases 2022 update on peer review of preferential tax regimes and no or only nominal tax jurisdictions

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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.

Document ID: 2022-1325