April 9, 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.
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."
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.
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.
Recent Tax Alerts
— Apr 03: USCIS announces H-1B lottery results and considerations for working in Canada (Tax Alert 2023-0642)
— Apr 04: South Africa announces automatic extensions for eligible visa holders until December 31 (Tax Alert 2023-0663)
— Apr 04: Kenya High Court upholds that interchange fees are financial services exempt from VAT (Tax Alert 2023-0662)
— Apr 05: Malaysia implements instant approval of employer submitted expatriate projection applications (Tax Alert 2023-0669)
— Apr 05: Singapore Enhanced medical insurance requirements for Work Permit and S Pass holders from July 1 (Tax Alert 2023-0668)
— Apr 04: Singapore updates scoring criteria under the new Complementary Assessment framework (Tax Alert 2023-0655)
— Apr 04: Hong Kong requires applicants under four Talent Admission Schemes to submit visa and entry permit applications online (Tax Alert 2023-0652)
Canada & Latin America
— Apr 06: EY Canada's Tax Matters @ EY for April 2023 (Tax Alert 2023-0674)
— Apr 04: Canada Federal budget 2023/24: A made-in-Canada plan (Tax Alert 2023-0658)
— Apr 03: Canada announces amendments to ease the Prohibition on the Purchase of Residential Property by Non-Canadians Act (Tax Alert 2023-0637)
— Mar 31: Costa Rican inactive entities must file their informative return on new form D-195 by 31 May 2023 (Tax Alert 2023-0621)
— Apr 06: UK concludes negotiations to join Comprehensive and Progressive Agreement for Trans-Pacific Partnership (Tax Alert 2023-0677)
— Apr 05: Ireland launches consultation on EU Minimum Tax Directive and proposed legislative approach (Tax Alert 2023-0666)
— Apr 04: Albania introduces Single Permits and new Residence Permits for specific categories of foreign nationals (Tax Alert 2023-0665)
— Apr 04: Bulgaria introduces new temporary obligation for solidarity contribution (Tax Alert 2023-0661)
— Apr 04: EU VAT Committee publishes working paper on non-fungible tokens (Tax Alert 2023-0659)
— Mar 31: Portugal's Immigration and Border staff announce strike from April 5 (Tax Alert 2023-0627)
— Apr 03: Saudi Arabia amends Implementing Regulations on excise tax (Tax Alert 2023-0641)
— Apr 04: Australian Treasury releases Exposure Draft Bill to deny deductions for payments by significant global entities to low-tax jurisdictions relating to intangible assets (Tax Alert 2023-0664)
— Mar 31: Australia proposes to impose additional registration requirements under the Foreign Investment Review Board Regulations (Tax Alert 2023-0622)
— Apr 05: OECD releases fifth annual peer review report on BEPS Action 6 relating to the prevention of treaty abuse (Tax Alert 2023-0671)
Highlights of this edition include:
- 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
- IRS planning new APA process
- IRS considering Section 482 regulation for parent’s implicit support in pricing intercompany loans
- OECD holds public consultation meeting on compliance and tax certainty aspects of BEPS Pillar Two global minimum tax
IRS Weekly Wrap-Up
Internal Revenue Bulletin
| ||2023-14||Internal Revenue Bulletin of April 3, 2023|
| ||2023-15||Internal Revenue Bulletin of April 10, 2023|
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.