May 7, 2023
U.S. International Tax This Week for May 5
Ernst & Young's U.S. International Tax This Week newsletter for the week ending May 5 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.
Treasury and the IRS this week released long-expected proposed regulations under IRC Section 367(d) (REG-124064-19) addressing "repatriations" of intangible property (IP). The regulations apply when: (1) a US person had previously transferred IP to a related foreign corporation in a transaction that caused the US transferor to annually include in income deemed payments under IRC Section 367(d); and (2) the foreign corporation (or a successor) then "repatriates" the IP to a "qualified domestic person." The proposed regulations would terminate the application of IRC Section 367(d) to the US transferor.
By way of background, if a US person transfers IP to a foreign corporation in a nonrecognition transaction, the US transferor generally must annually include in income amounts that are (1) contingent upon productivity, use and disposition of the IP and (2) commensurate with the income that the transferee foreign corporation earns from the IP (Outbounded IP) during its useful life.
The proposed regulations would terminate these annual inclusions if the Outbounded IP is transferred to a "qualified domestic person." Depending on the nature of the transfer, the US transferor may or may not recognize gain. For example, if the foreign corporation (or a successor) transfers the Outbounded IP to a qualified domestic person in a transferred-basis transaction and the foreign corporation (or its successor) does not recognize any gain, the US transferor does not recognize gain. Conversely, if the foreign corporation (or its successor) transfers the Outbounded IP in a fully taxable, non-transferred-basis transaction, the US transferor recognizes gain in an amount equal to the fair market value of the IP on the date of the transaction less the US transferor's former adjusted basis in the property. The proposed regulations would apply only to subsequent transfers of Outbounded IP on or after the date on which the regulations are finalized.
A bipartisan group of Senators on 5 May introduced the Taiwan Tax Agreement Act of 2023, authorizing the Biden Administration to begin negotiations with Taiwan to conclude a tax agreement. The bill was introduced by Senate Foreign Relations Committee Chairman Robert Menendez (D-NJ), ranking member James Risch (R-ID) and members Sens. Chris Van Hollen (D-MD) and Mitt Romney (R-UT). In March 2023, a bipartisan Senate resolution was introduced similarly urging the Administration to initiate negotiations with Taiwan over an income tax agreement.
The Norwegian government is reporting that it is in negotiations with the United States regarding a new income tax treaty. A new treaty would replace the existing 1971 convention, amended by a 1980 protocol.
International tax talk quarterly series with the EY Global Tax Desk Network (May 9)
During this EY Webcast, our Global Tax Desk professionals will provide insights on recent significant tax developments in Australia, Brazil, India, Netherlands and Russia and explain how they might affect your businesses.
Recent Tax Alerts
— May 02: Uganda issues Tax Amendment Bills for 2023 (Tax Alert 2023-0795)
— May 03: Japan lifts COVID-19 vaccination and testing requirements ahead of schedule (Tax Alert 2023-0802)
— May 01: Hong Kong proposes safe harbor rules for onshore equity disposal gain (Tax Alert 2023-0788)
Canada & Latin America
— May 02: Panama's Tax Authority sets the penalty for failing to timely file withholding tax return Form 03 (Tax Alert 2023-0798)
— May 02: Costa Rican Tax Authority modifies resolution on requests for and issuance of tax residence certificates (Tax Alert 2023-0796)
— May 02: Argentine Central Bank issues new regulations on foreign exchange controls (Tax Alert 2023-0792)
— Apr 27: Chilean appeals court considers whether Chile can tax Spanish resident's indirect transfer of Chilean company (Tax Alert 2023-0769)
— May 03: Sweden proposes to suspend applicants’ “right to request to conclude cases” for Swedish work permits and citizenship (Tax Alert 2023-0808)
— May 02: Saudi Arabia announces fourth wave of Phase 2 e-invoicing integration (Tax Alert 2023-0793)
— May 01: Dubai Customs amends the grace period for Customs declaration submission (Tax Alert 2023-0787)
— May 03: Australia outlines a new skilled migration strategy (Tax Alert 2023-0804)
— Apr 30: Significant reform to Australia’s migration program underway (Tax Alert 2023-0803)
IRS Weekly Wrap-Up
Internal Revenue Bulletin
| ||2023-18||Internal Revenue Bulletin of May 1, 2023|
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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.