U.S. International Tax This Week for February 10

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February 12, 2023
2023-0259

Ernst & Young's U.S. International Tax This Week newsletter for the week ending February 10 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.

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Spotlight

President Biden gave his second State of the Union address to Congress on 7 February, striking a mostly optimistic tone, pointing to the country's recovery from the COVID-19 pandemic and the creation of 12 million new jobs, among other developments. The President proposed reducing the budget deficit by $2 trillion with help from revenue raisers, including the 15% corporate minimum tax enacted in the 2022 Inflation Reduction Act, quadrupling the current one percent tax on corporate stock buybacks and enacting a "billionaire surtax." The President also proposed closing unspecified tax loopholes and "cracking down on wealthy tax cheats." According to some commentators, increasing the stock buyback excise tax and passage of a billionaire surtax may have little chance of passing Congress this year. The President is expected to release his proposed FY 2024 budget on 9 March.

The Senate Finance Committee this week announced it will hold a hearing to consider the nomination of Daniel Werfel to be the next Internal Revenue Service (IRS) Commissioner, for the term expiring in November 2027. The hearing will take place on 15 February. Confirmation will require a simple majority vote in the Senate.

Addressing the Organisation for Economic Co-operation and Development (OECD)-led Base Erosion and Profit Shifting (BEPS) 2.0 global tax agreement, House Ways and Means Committee Chairman Jason Smith sent a letter to OECD Secretary-General Mathias Cormann on 10 February, in which he defended the US global intangible low-taxed income (GILTI) regime and said other countries are considering a minimum tax only if they can impose the "fundamentally flawed" Undertaxed Profits Rule (UTPR) on US companies. The chairman warned that the UTPR would target US tax incentives like the research and development credit "as well as the operations of American companies in third-party jurisdictions." Chairman Smith said House Republicans "will aggressively pursue tax and trade countermeasures to protect American jobs, sovereignty, and tax revenues."

And for the fourth consecutive Congress, Ways and Means Committee Member Lloyd Doggett and Senate Finance Committee Member Sheldon Whitehouse introduced the No Tax Breaks for Outsourcing Act. Among other things, the bill would eliminate GILTI and foreign-derived intangible income (FDII) deductions and apply GILTI on a per-country basis, repeal the 10% exemption for tangible investments, and treat corporations managed and controlled in the US as domestic corporations.

An IRS official recently was quoted as saying that the IRS is in the process of drafting updated guidance on Advance Pricing Agreements (APAs) and requests for competent authority assistance. The official said the IRS is revising the guidance to reflect its recent case experience and is still deciding whether to seek public comments on the revised guidance.

Consistent with other IRS officials' previous statements, the official confirmed that the IRS is also reviewing the selection process for cases included in the APA program.

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Upcoming Webcasts

Tax in a time of transition: legislative, economic, regulatory and IRS developments (February 17)
During this EY Webcast, Ernst & Young professionals will provide an overview of recent tax and economic developments designed to help you stay on top of changes in today’s shifting economic, legislative and regulatory environment. In this regularly occurring webcast series, panelists will provide updates on: (i) the US economy and tax policy; (ii) what’s happening at the IRS; (iii) breaking developments.

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Recent Tax Alerts

United States

— Feb 02: USCIS to resume bundling adjudication of I-539 and I-765 applications filed by H-4 and L-2 spouses (Tax Alert 2023-0196)

— Feb 02: USCIS announces FY 2024 H-1B Cap Registration Period (Tax Alert 2023-0195)

Asia

— Feb 07: Malaysia to imposes sales tax on imports of low value goods from 1 April 2023 (Tax Alert 2023-0232)

— Feb 07: Japan and Switzerland’s updated Double Taxation Agreement has entered into force (Tax Alert 2023-0221)

— Feb 06: Mainland China resumes visa issuance and 72/144-hour visa-free transit policy for Japanese nationals (Tax Alert 2023-0219)

— Feb 03: India releases Union Budget 2023 (Tax Alert 2023-0211)

— Feb 06: Indonesia mandates local counterpart training certificates for work permit renewal (Tax Alert 2023-0209)

Canada & Latin America

— Feb 07: Panama’s Tax Authority issues a calendar with implementation phases of the electronic invoicing system for operations and services carried out by banks and financial institutions (Tax Alert 2023-0223)

— Feb 02: Costa Rican Tax Authority publishes Institutional Criterion regarding tax treatment of foreign exchange in financial investment instruments (Tax Alert 2023-0200)

— Feb 02: EY Canada's Tax Matters @ EY for February 2023 (Tax Alert 2023-0197)

Europe

— Feb 09: Italy approves Budget Law for 2023 (Tax Alert 2023-0248)

— Feb 09: Sweden allows applications from eligible Ukrainian citizens to extend their status under the Temporary Protection Directive (Tax Alert 2023-0245)

— Feb 08: Denmark mandates DISCO codes for all residence and work permit applications (Tax Alert 2023-0244)

— Feb 08: Poland implements changes to immigration policies impacting citizens of Ukraine and other countries (Tax Alert 2023-0241)

— Feb 07: Luxembourg revises salary requirements for certain third-country nationals (Tax Alert 2023-0235)

— Feb 07: European Commission publishes proposal for a "Green Deal Industrial Plan for the Net-Zero Age" (Tax Alert 2023-0229)

— Feb 07: European Union delays the launch of Entry and Exit System (EES) until late 2023 (Tax Alert 2023-0226)

— Feb 06: Italy releases work quotas and now requires labor office confirmation to hire foreign employees (Tax Alert 2023-0210)

— Feb 06: Switzerland relaxes rules for hiring highly skilled non-EEA nationals (Tax Alert 2023-0208)

Middle East

— Feb 09: Qatar announces new insurance requirement for visitors and extension of Hayya Cards (Tax Alert 2023-0246)

— Feb 07: Turkey announces customs exemption regarding aid materials sent from abroad in response to recent earthquakes (Tax Alert 2023-0230)

— Feb 07: Israel's Tax Authority releases new Form 1585 and updates Form 1385 following adoption of BEPS Action 13 principles (Tax Alert 2023-0228)

— Feb 07: Israeli Supreme Court rules in favor of taxpayer for recovering input VAT on certain meal-related expenses (Tax Alert 2023-0222)

Multinational

— Feb 09: OECD's Pillar Two Administrative Guidance raises implications for US multinationals (Tax Alert 2023-0254)

— Feb 09: PE Watch | Latest developments and trends, February 2023 (Tax Alert 2023-0247)

— Feb 08: PE Watch | 2022 in review (Tax Alert 2023-0234)

— Feb 03: OECD/G20 Inclusive Framework releases Administrative Guidance under Pillar Two GloBE rules (Tax Alert 2023-0206)

— Feb 02: Accounting for the global minimum tax under the OECD's Pillar Two Global Anti-Base Erosion model rules (Tax Alert 2023-0201)

— Feb 02: OECD releases Pillar Two guidance (Tax Alert 2023-0199)

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Recent Newsletters

ITS/Washington Dispatch
Highlights of this edition include:

US Congress

Kevin McCarthy new House Speaker, Rep. Smith chairs Ways and Means Committee
JCT will release 'Blue Book' by end of June

Treasury and IRS news

Final regulations issued for qualified foreign pension funds contain some favorable clarifications
IRS proposed regulations would make major changes to domestically controlled QIE rules under Section 897, and certain controlled commercial entity rules under Section 892
IRS addresses deductions involving cryptocurrency in two CCA memos
Acting IRS Commissioner affirms continued participation in ICAP

Transfer pricing

IRS examiners must consult IRS Counsel before applying economic substance doctrine in transfer pricing audits

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IRS Weekly Wrap-Up

Internal Revenue Bulletin

	2023-06	Internal Revenue Bulletin of February 6, 2023
	2023-07	Internal Revenue Bulletin of February 13, 2023

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Additional Resources

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.