U.S. International Tax This Week for February 24

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February 26, 2023
2023-0364

Ernst & Young's U.S. International Tax This Week newsletter for the week ending February 24 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

Taxpayers should expect initial guidance on how far back to apply basis adjustments to arrive at their "opening" books for the new corporate alternative minimum tax (CAMT), and on additional transaction types, according to an Internal Revenue Service (IRS) official this week. The IRS official was quoted as saying that the CAMT "is incredibly broad, and we took a lot of feedback from the bar when we were determining what we needed to address, so you can expect additional rounds of guidance" in regard to unaddressed areas. Among the areas that will be addressed, the official said, are IRC Section 351 transactions.

The IRS released final regulations (TD 9972) this week that amend the electronic filing rules for certain returns to reflect changes made by the Taxpayer First Act of 2019, which reduced the threshold for requiring taxpayers to file electronically, in most cases, from 250 annual returns to 10. The 10-return threshold applies to returns required to be filed in calendar years 2024 and later; the 250-return threshold applies to returns filed in calendar years 2022 and 2023. The regulations affect returns for partnership income, corporate income, unrelated business income and withholding tax, as well as certain information returns, registration statements, disclosure statements, notifications, actuarial reports and excise tax returns. Taxpayers will need to aggregate almost all information return types when determining whether they meet the 10-return threshold.

The preamble to the final regulations state that the IRS did not "adopt the suggestion to provide a blanket electronic-filing exemption for non-U.S. filers." The IRS indicated that its "preferred approach is to develop alternative authentication requirements for identity proofing in accordance with standards," and it is actively engaged to develop those procedures.

The IRS this week finalized regulations (TD 9973) that treat consolidated group members as a single US shareholder in certain cases for purposes of IRC Section 951(a)(2)(B). No changes were made to the underlying proposed regs issued in December 2022. The regulations are apparently intended to preclude consolidated taxpayers from asserting that a controlled foreign corporation's (CFC's) IRC Section 959(b) distribution, coupled with a shift in the IRC Section 958(a) ownership of the CFC's stock among consolidated group members, causes the lesser of the CFC's subpart F income and global intangible low-taxed income (GILTI) tested items to be included in the group's consolidated gross income.

The final regulations affect consolidated groups that own stock in foreign corporations and apply to the 2022 tax year for consolidated groups with a calendar tax year. The final regs could require certain consolidated groups that have a calendar tax year and carried out transactions during 2022 to include more in consolidated gross income than they anticipated. For a detailed look at the proposed regs, see EY Tax Alert 2022-1933.

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Upcoming Webcasts

BEPS 2.0: New Administrative Guidance and implementation activity on Pillar Two (February 28)
Following significant activity at the end of 2022, the OECD has released much-anticipated technical guidance on the Pillar Two rule. The global activity around implementation of Pillar Two has also ramped up as countries look to have global minimum tax rules take effect in 2024. Please join us for “BEPS 2.0: New Administrative Guidance and implementation activity on Pillar Two,” the next in the series of EY global webcasts focusing on the dynamics of the BEPS 2.0 project.

Corporate alternative minimum tax: what the latest interim guidance could mean for companies (February 28)
During this EY Webcast, Ernst & Young professionals will discuss the technical aspects, implications and uncertainties of Notice 2023-7.

Are you Pillar Two-ready? | Banking and Capital Markets: Current industry insights (March 8)
During this EY Webcast, Ernst & Young professionals will examine the latest guidance from the Organisation for Economic Co-operation and Development (OECD) on the BEPS 2.0 project as it relates to the banking and capital markets industry.

Pillar Two administrative guidance and safe harbors: implications for US multinationals (March 9)
Recent administrative guidance from the Organisation for Economic Co-operation and Development (OECD) on the Global Anti-Base Erosion (GloBE) rules under Pillar Two addresses many critical issues for US multinationals but also raises many (unanswered) technical questions. The OECD’s transitional safe harbor rules, released at the end of 2022, could help relieve compliance burdens for US companies. During this EY Webcast, Ernst & Young professionals will provide a detailed discussion of these developments and practical approaches to help manage the reporting and tax-rate implications.

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Recent Tax Alerts

United States

— Feb 16: US stock buyback excise tax has potential implications for Canadian public companies (Tax Alert 2023-0304)

— Feb 16: US Department of State to launch pilot program for domestic visa renewal (Tax Alert 2023-0297)

Africa

— Feb 20: Kenya's Court of Appeal declares National Social Security Fund Act of 2013 proposing increase to monthly contributions constitutional (Tax Alert 2023-0328)

— Feb 17: Kenya publishes draft National Green Fiscal Incentives Policy Framework (Tax Alert 2023-0313)

— Feb 16: South Africa's President announces significant immigration changes expected in the future (Tax Alert 2023-0295)

Asia

— Feb 21: Hong Kong expands scheme on exempting eligible visitors from the Employment Visa requirement (Tax Alert 2023-0339)

— Feb 20: Hong Kong to further revise its foreign source income exemption regime to expand scope of disposal gain (Tax Alert 2023-0329)

— Feb 16: Chinese authorities resume visa issuance and 72/144-hour visa-free transit policy for South Korean nationals (Tax Alert 2023-0296)

— Feb 16: Malaysia introduces new Multiple Entry Visa for business visitors and other travelers (Tax Alert 2023-0294)

Canada & Latin America

— Feb 22: Dominican Republic issues extension stamps to eligible individuals in lieu of new passports (Tax Alert 2023-0345)

— Feb 20: Costa Rica's President signs law that eliminates 10% tax on imported beer (Tax Alert 2023-0330)

— Feb 17: Brazil's Federal Supreme Court restarts analysis on imposition of ICMS on transfers between branches of same legal entity (Tax Alert 2023-0320)

— Feb 17: Panama's Tax Authority publishes resolution that modifies Service Rendering and Sales Report for VAT purposes (Tax Alert 2023-0318)

— Feb 16: Northwest Territories budget 2023-24 discussed (Tax Alert 2023-0305)

— Feb 16: Canada releases semi-annual list of trade compliance verification priorities (Tax Alert 2023-0303)

— Feb 16: Brazilian Supreme Court overrules use of res judicata in cases where such use is against the Supreme Court's holding (Tax Alert 2023-0302)

Europe

— Feb 22: UK resumes priority processing of Family Visa applications in the Settlement category (Tax Alert 2023-0350)

— Feb 20: Cyprus | Update of EU list of non-cooperative jurisdictions may trigger withholding tax and other implications (Tax Alert 2023-0332)

— Feb 20: Netherlands extends residence permit exemption for certain highly skilled foreign nationals (Tax Alert 2023-0331)

— Feb 20: Spain's Large Business Unit to soon accept only digital signatures for work and residence permit applications (Tax Alert 2023-0327)

— Feb 20: Ireland extends Temporary Protection status for Ukrainian citizens and residents (Tax Alert 2023-0326)

— Feb 17: OECD releases revised methodology for BEPS Action 14 peer reviews and updates on reporting of MAP and APA statistics (Tax Alert 2023-0322)

— Feb 16: Switzerland significantly increases safe harbor interest rates for 2023 (Tax Alert 2023-0309)

— Feb 16: Bulgaria introduces major changes relating to EU Blue cards (Tax Alert 2023-0292)

— Feb 16: Germany's updated EU list of non-cooperative jurisdictions may trigger significant German tax consequences for business relationships with Russia (Tax Alert 2023-0291)

— Feb 16: Spain releases final List of Non-Cooperative Jurisdictions for Tax Purposes (Tax Alert 2023-0290)

Middle East

— Feb 22: Azerbaijan relaxes documentation requirements, new work permit exemptions (Tax Alert 2023-0346)

— Feb 16: UAE announces launch of new re-entry permit service for residence visa holders who stay outside the UAE for six months or more (Tax Alert 2023-0293)

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IRS Weekly Wrap-Up

Internal Revenue Bulletin

2023-09

Internal Revenue Bulletin of February 27, 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.