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09 April 2023

U.S. International Tax This Week for April 7

Ernst & Young's U.S. International Tax This Week newsletter for the week ending April 7 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 Internal Revenue Service (IRS) on 3 April announced in Notice 2023-31 that it will provide a 180-day transition period for meeting the documentation requirements in Reg. Section 1.903-1(c)(2)(iv)(D) for the foreign tax credit "single-country exception" under Prop. Reg. Section 1.903-1(c)(2)(iii)(B)) after the regulations are finalized.

Previously, in November 2022, the IRS published proposed regulations (REG-112096-22) that addressed the definition of a foreign income tax and provided a limited exception to the source-based "attribution requirement" for certain withholding taxes imposed on certain royalty payments. The proposed regulations would provide certain relief from the cost recovery requirement and the source-based attribution requirement on royalty income for purposes of determining the creditability of foreign taxes under IRC Sections 901 and 903. The proposed regulations would modify the final foreign tax credit regulations published in January 2022 (TD 9959), as amended by technical corrections (87 FR 45018 & 87 FR 45021) published in July 2022.

The Tax Court this week held in Farhy v. Commissioner that the IRS does not have authority to assess penalties under IRC Section 6038(b) on a taxpayer who willfully failed to report foreign income on IRS Form 5471, Information Return of U.S Persons With Respect to Certain Foreign Corporations. As a result, the IRS cannot collect the penalties it assessed through a levy notice, though it may collect the penalties through a civil action. The Tax Court concluded that "Congress has explicitly authorized assessment with respect to myriad penalty provisions in the Code, but not for section 6038(b) penalties."

The US and Germany on 24 March signed a competent authority arrangement on the automatic exchange of country-by-country (CbC) reports. The IRS CbC Reporting Jurisdiction Status Table states that the arrangement's operative date is "To be determined."

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EY Guides, Surveys, and Reports

Worldwide VAT, GST and Sales Tax Guide 2023
Outlining value-added tax (VAT) systems in 149 jurisdictions, the 2023 edition of our annual reference book, Worldwide VAT, GST and Sales Tax Guide, is now available in an interactive map format (as well as to download as a pdf) on ey.com. New chapters for 2023 include: Antigua and Barbuda, Bosnia and Herzegovina, Fiji, Guyana, Republic of Montenegro, Mozambique, Nepal and Senegal. The São Tomé and Príncipe and Suriname chapters have also been updated to reflect the new VAT law.

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Upcoming Webcasts

Tax in a time of transition: Legislative, economic, regulatory and IRS developments (April 21)
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; and (iii) breaking developments.

BorderCrossings... With EY transfer pricing and tax professionals (April 27)
During this EY Webcast, Ernst & Young professionals will talk about the results APMA reported in its 2022 APA Annual Statutory Report and discuss the challenges facing APMA and what the future holds.

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Recent Tax Alerts

United States

Africa

Asia

Canada & Latin America

Europe

Middle East

Oceana

Multinational

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Recent Newsletters

ITS/Washington Dispatch
   Highlights of this edition include:

Legislation

  • President Biden releases FY’24 Budget with major international policy proposals

Treasury and IRS news

  • US officials offer insights on major pending international regulatory projects
  • Turkish Lira’s hyperinflationary status has federal tax implications for US multinationals
  • IRS announces plans to issue guidance on certain NFTs as collectibles

Transfer pricing

  • IRS planning new APA process
  • IRS considering Section 482 regulation for parent’s implicit support in pricing intercompany loans

OECD developments

  • OECD holds public consultation meeting on compliance and tax certainty aspects of BEPS Pillar Two global minimum tax

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IRS Weekly Wrap-Up

Internal Revenue Bulletin

 2023-14Internal Revenue Bulletin of April 3, 2023
 2023-15Internal Revenue Bulletin of April 10, 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: 2023-0681

 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

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