December 18, 2022
U.S. International Tax This Week for December 16
Ernst & Young's U.S. International Tax This Week newsletter for the week ending December 16 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 on 15 December followed House action the prior day and passed a temporary stopgap spending bill that extends government solvency beyond the 16 December midnight deadline to 23 December. The bill now goes to President Biden for signature. This gives negotiators an additional week to reach agreement on an omnibus spending bill that, at least theoretically, could include a Tax Title. The omnibus negotiators on 13 December announced that they had reached agreement on a deal framework that is supported by Senate Minority Leader Mitch McConnell, suggesting that a final agreement may be possible. If an omnibus agreement is reached before the next deadline, it remains unclear if it will contain tax provisions, and if so, which measures will be included. House Republicans, who will take the majority when Congress convenes on 3 January, are opposed to passage of an omnibus agreement at this time, arguing that they will be in a better position to influence a final spending package in the new year.
The IRS released Revenue Ruling 2022-43 on 13 December, setting forth the final qualified intermediary (QI) withholding agreement entered into under Reg. Section 1.1441-1(e)(5) that applies beginning 1 January 2023 (the 2023 QI agreement). While the QI agreement generally allows certain persons to enter into agreement with the IRS to simplify their withholding-agent obligations (among other things), the 2023 QI Agreement also allows foreign persons to enter into the agreement for purposes of the withholding and reporting required under IRC Sections 1446(a) and (f) for their account holders with interests in publicly traded partnerships.
The Internal Revenue Service (IRS) on 9 December issued proposed regulations on the single-entity treatment of consolidated groups for specific purposes. The proposed regulations (REG-113839-22) would treat members of a consolidated group as a single US shareholder in certain situations for purposes of IRC Section 951(a)(2)(B). The proposed rules would affect consolidated groups that own stock in foreign corporations. A Treasury official was quoted as saying the goal is to finalize the proposed regulations before 15 April 2023.
The Financial Crimes Enforcement Network (FinCEN) on 9 December released Notice 2022-1, further extending the filing deadline for certain individuals who previously qualified for an extension of time to file the Report of Foreign Bank and Financial Accounts (FBAR) regarding signature authority under FinCEN Notice 2021-1 and previous guidance. The Notice pertains only to individuals who were initially granted extensions of time to report signature authority under FinCEN Notices 2011-1 and 2011-2 (most recently extended by FinCEN Notice 2021-1). Under the Notice, individuals have until 15 April 2024, to file deferred FBARs, subject to any potential further extension. Any persons not covered by the Notice for 2022 will have until 17 April 2023 — automatically extended six months to 16 October 2023 — to file their FBARs for the 2022 calendar year. In no case is an extension (beyond the automatic six-month extension) available for financial interest filing obligations.
FinCEN on 15 December also released proposed regulations on beneficial ownership. The proposed rules would "implement the strict protocols on security and confidentiality required by the CTA [Corporate Transparency Act] to protect sensitive personally identifiable information reported to FinCEN."
The OECD on 8 December released a consultation document on Amount B of BEPS 2.0 Pillar One. Amount B is aimed at simplifying and streamlining the transfer pricing of in-country baseline marketing and distribution activities, while ensuring outputs consistent with the arm's-length principle. The consultation document outlines the main design elements of Amount B, focusing on the scope, the pricing methodology, and the current status of discussions concerning an appropriate implementation framework. See this EY Tax Alert for details.
In an important BEPS 2.0 development, European Union (EU) Member States on 15 December unanimously adopted a Directive ensuring a global minimum level of taxation for multinational enterprise (MNE) groups and large-scale domestic groups in the EU. The text of the adopted Directive is the version that was published by the Czech EU Presidency on 25 November. EU Member States have until 31 December 2023 to transpose the Directive into national legislation with the rules to be applicable for fiscal years starting on or after 31 December 2023, with the exception of the Under-Taxed Payment Rule (UTPR) which is to be applicable for fiscal years starting on or after 31 December 2024. See this EY Tax Alert for details.
EY Guides, Surveys, and Reports
Who pays the tax: Carbon pricing by sector and country under alternative climate scenarios
Given the global focus on climate change and the range of possible policy paths that can be taken by governments worldwide, it is important that businesses formulate long-term strategies to adjust to the policies employed to make progress in the global transition toward a green economy. As part of this, businesses need to consider a variety of possible future scenarios.
TTC/EY Business Tax Policy Barometer (November 2022)
The Tax Council (TTC) and Ernst & Young LLP periodically produce the Business Tax Policy Barometer, providing insights on the business community's perceptions on a variety of business tax and other key policy issues. This 21st Barometer tracks the views reported from October 25 through November 8, 2022.
BEPS 2.0: New OECD releases and ongoing implementation activity (January 12)
During this EY Webcast, Ernst & Young professionals will examine the latest OECD releases on both Pillars and explore the growing legislative activity as jurisdictions begin to incorporate global minimum tax rules into their domestic law. Please join EY professionals for this webcast.
Recent Tax Alerts
— Dec 15: United States and Croatia sign income tax treaty (Tax Alert 2022-1886)
— Dec 14: FinCEN continues to extend certain signature authority reporting (FBAR, Form 114) (Tax Alert 2022-1877)
— Dec 15: China releases 2021 annual report on Advance Pricing Arrangements (Tax Alert 2022-1888)
— Dec 13: Hong Kong issues trade consultation paper proposing enhancements to aircraft leasing tax concession regime (Tax Alert 2022-1871)
— Dec 13: Hong Kong and Mauritius sign comprehensive double taxation arrangement (Tax Alert 2022-1870)
Canada & Latin America
— Dec 13: Managing your personal taxes 2022-23 | A Canadian perspective (Tax Alert 2022-1869)
— Dec 09: Colombia's Tax Reform includes key provisions on individual taxation (Tax Alert 2022-1854)
— Dec 15: Croatia to join the Schengen Area on January 1, 2023 (Tax Alert 2022-1884)
— Dec 14: European Parliament and European Council reach provisional agreement on EU Carbon Border Adjustment Mechanism (Tax Alert 2022-1872)
— Dec 13: Ireland's immigration authorities announce travel, work and residence exemptions for non-EEA nationals holding expired Irish Residence Permits (Tax Alert 2022-1868)
— Dec 12: EU says member states reach agreement on Pillar Two minimum tax directive (Tax Alert 2022-1865)
— Dec 12: Belgium implements new corporate income tax rules starting 1 January 2023 (Tax Alert 2022-1860)
— Dec 09: EU publishes Directive proposal on tax transparency rules for crypto-assets (Tax Alert 2022-1852)
— Dec 09: European Commission publishes proposals for VAT in the Digital Age (Tax Alert 2022-1848)
— Dec 13: UAE Ministry of Finance releases Corporate Tax Law (Tax Alert 2022-1861)
— Dec 14: Global Tax Policy and Controversy Watch | December 2022 edition (Tax Alert 2022-1880)
— Dec 14: EY TradeWatch | Issue 3, 2022 (Tax Alert 2022-1878)
— Dec 09: PE Watch | Latest developments and trends, December 2022 (Tax Alert 2022-1843)
Highlights of this edition include:
Treasury and IRS news
- IRS proposed foreign tax credit regulations offer relief from cost recovery and source-based attribution rules, include other key changes
- IRS moving forward on cryptoasset issues
- Section 367(d) regs coming early next year, official says
- No delay or transition period for final Section 1446(f) regs implementation date
Tax treaty news
- Congressional Republicans urge Administration to not terminate US-Hungary treaty
- IRS will consider applying economic substance doctrine and related penalties more frequently in transfer pricing audits
- IRS 2022–2023 Priority Guidance Plan includes transfer pricing projects similar to last year
- OECD holds Tax Certainty Day addressing MAP developments, tax certainty under BEPS Pillars One and Two
- OECD updates guidance on implementation of CbC Reporting
IRS Weekly Wrap-Up
Internal Revenue Bulletin
| ||2022-50||Internal Revenue Bulletin of December 12, 2022|
| ||2022-51||Internal Revenue Bulletin of December 19, 2022|
EY’s Tax News Update, 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’s Tax and Law Guides. — Tax and Law Guides | EY - Global 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.