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05 March 2023

U.S. International Tax This Week for March 3

Ernst & Young's U.S. International Tax This Week newsletter for the week ending March 3 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

The US Supreme Court on 28 February held in Bittner v United States that the Bank Secrecy Act's (BSA) $10,000 penalty for nonwillful failure to file FBAR reports applies per annual report/filing, not per account. In a 5-4 decision, the Court rejected the US argument that the nonwillful penalty applies on a per account basis and resolved a split among the circuits. Justice Gorsuch wrote: "Best read, the BSA treats the failure to file a legally compliant report as one violation carrying a maximum penalty of $10,000, not a cascade of such penalties calculated on a per-account basis."

Although the Supreme Court decision is pro-filer for accidental or negligent failures to file, taxpayers nonetheless should bear in mind that the more severe willful penalty explicitly applies to each account by statute and that the US can assess the willful violation where it deems appropriate.

In a recently released Chief Counsel memorandum (AM 2023-001), the Internal Revenue Service advised that payments from a US depository institution to a foreign corporation, either (1) for expenses the corporation incurs to institute a sponsored American Depositary Receipts program with holders in the US and abroad or (2) under a revenue-sharing arrangement, both represent consideration for the US depository institution's exclusive right to establish, control and exploit the trading of the foreign corporation's American Depositary Receipts in the US. Therefore, the payments to the foreign corporation are treated as solely US source income and, if no treaty applies, are subject to 30% US withholding under IRC Section 1442.

During a 27 February OECD Tax Talk, Grace Perez-Navarro, outgoing Director of the Organisation for Economic Co-operation and Development's (OECD) Centre for Tax Policy and Administration, said regarding Pillar One, "the intense negotiations of the multilateral convention are well under way and we are still aiming for finalizing the convention by the middle of the year for signature." Pillar Two and the minimum tax have been made a reality, she said, and pointed to the European Union, Australia, Canada, Colombia, Indonesia, Japan, South Korea, Malaysia, Mauritius, South Africa, Switzerland, Thailand, the United Kingdom, and the United Arab Emirates as all having taken steps to implement the minimum tax.

Deputy Director of the Centre, Achim Pross, said a peer review process starting this year will look at how countries are applying the 15% minimum tax rules "as they're in the process of being drafted." Also, OECD Secretary-General Mathias Cormann presented a report to the G20 Finance Ministers and Central Bank Governors at their 24-25 February meeting, in which he laid out the current status of the BEPS 2.0 project.

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Upcoming Webcasts

The outlook for global tax policy and controversy in 2023 (March 7)
During this EY Webcast, Ernst & Young professionals discuss significant tax law trends, highlighting leading practices for organizations as they navigate tax developments around the world.

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.

Latest clean-energy and manufacturing incentives and grants from the US and Europe (March 14)
During this EY Webcast, Ernst & Young professionals will take a deeper dive into next steps of realizing unprecedented government subsidies under the IRA (including Section 48C), IIJA and the EU.

Tax in a time of transition: legislative, economic, regulatory and IRS developments (March 17)
During this EY Webcast, Ernst & Young professionals 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

Africa

Asia

Canada & Latin America

Europe

Middle East

Multinational

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IRS Weekly Wrap-Up

Internal Revenue Bulletin

 2023-09Internal Revenue Bulletin of February 27, 2023
 2023-10Internal Revenue Bulletin of March 6, 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.

Document ID: 2023-0402

 

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