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June 4, 2023
2023-0984

U.S. International Tax This Week for June 2

Ernst & Young's U.S. International Tax This Week newsletter for the week ending June 2 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 House (314-117) and Senate (63-36) this week passed the Fiscal Responsibility Act of 2023 (H.R. 3746), a debt ceiling bill agreed to by President Biden and House Speaker Kevin McCarthy (R-CA). The deal came just days before the 5 June deadline that Treasury Secretary Janet Yellen cited as the potential date the US could default on its debt. The bill suspends the statutory debt ceiling through 1 January 2025, along with applying curbs on government spending and claw-backs of IRS and COVID-19-related funding. According to the Congressional Budget Office, the bill would reduce deficits by $1.5 trillion over the 2023–2033 period relative to May 2023 baseline projections under caps to discretionary funding provisions in the bill.

The bill would rescind $1.4 billion of the Inflation Reduction Act's $80 billion in increased IRS funding. The bill now goes to the President for signature.

As expected, House Ways and Means Committee Chairman Jason Smith (R-MO), joined by every Republican on the Committee, introduced legislation on 25 May aimed at discouraging countries from adopting the BEPS 2.0 Pillar Two Undertaxed Profits Rule (UTPR). The Defending American Jobs and Investment Act would increase taxes on the US businesses of companies headquartered in countries that enact the UTPR.

The legislation is unlikely to be enacted in this Congress, as it would require bipartisan support and the support of the Biden Administration. Rather, Committee Republicans hope the introduction of the bill will encourage the OECD and the Inclusive Framework participants in Pillar Two to reconsider introduction of UTPRs in their own domestic legislation.

The Senate Foreign Relations Committee on 1 June voted out of committee (20-1) the proposed US-Chile tax treaty. The approved agreement includes two reservations and a declaration. Text of the resolution of advice and consent to ratification can be found here. Senate Majority Leader Chuck Schumer (D-NY) earlier this week said ratification of the treaty is crucial for access to critical minerals such as lithium.

And a bipartisan group of House members introduced a resolution on 25 May calling for legislation to prevent double taxation between the US and Taiwan, with the goal of providing treaty-like benefits through the tax code. The resolution follows the Senate's introduction of the Taiwan Tax Agreement Act of 2023, which would authorize the Biden Administration to negotiate a tax agreement with Taiwan.

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Upcoming Webcasts

BEPS 2.0: Pillar Two implementation and practical considerations (June 7)
During this EY Webcast, Ernst & Young professionals will examine the latest BEPS 2.0 Pillar Two implementation activity in countries around the world and highlight practical considerations with respect to the Pillar Two rules and guidance issued to date by the Inclusive Framework.

Private equity and private capital quarterly tax webcast (June 8)
During this EY Webcast, Ernst & Young professionals will discuss recent global private equity (PE) industry trends and the outlook for changes relevant to PE and alternative funds, transactions, fund professionals, and portfolio companies.

Tax in a time of transition: Legislative, economic, regulatory and IRS developments (June 16)
Please join us for a fast-paced overview of recent tax and economic developments designed to help you stay on top of changes in today’s shifting economic, legislative and regulatory environment. In this regularly occurring EY Webcast series, panelists will provide updates on: (i) the US economy and tax policy; (ii) what’s happening at the IRS; and (iii) breaking developments.

Finance and treasury: How to navigate the changing global tax landscape (June 28)
During this EY Webcast, Ernst & Young professionals will discuss key tax trends and topics that will affect global finance and treasury activities.

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Recent Tax Alerts

United States

— May 25: United States | IRS GLAM concludes that the regularly-traded-stock-exception test under IRC Section 897(c)(3) applies at partnership level (Tax Alert 2023-0947)

— May 25: Puerto Rico's Treasury Secretary announces sales and use tax holiday for hurricane-season purchases will take place from May 26-May 28, 2023 (Tax Alert 2023-0946)

Africa

— May 25: Nigeria | Highlights of the Business Facilitation (Miscellaneous Provisions) Act (Tax Alert 2023-0950)

Canada & Latin America

— Jun 01: Brazil adopts new rule on individual taxation of financial investments, controlled entities and trusts held abroad (Tax Alert 2023-0982)

— Jun 01: Dominican Republic Executive Branch enacts law implementing mandatory electronic invoicing (Tax Alert 2023-0976)

— Jun 01: EY Canada's Tax Matters @ EY for June 2023 (Tax Alert 2023-0975)

— May 31: Canada | Prince Edward Island budget 2023-24 (Tax Alert 2023-0969)

— May 30: Costa Rican Executive Branch files comprehensive tax reform bills (Tax Alert 2023-0957)

— May 30: Chile | New mining royalty is approved and ready to become law (Tax Alert 2023-0956)

Europe

— Jun 01: Denmark expands tax liability scope to include activities carried out in the Exclusive Economic Zone (Tax Alert 2023-0980)

— Jun 01: UK announces changes to the Youth Mobility Scheme (Tax Alert 2023-0974)

— May 31: The Netherlands issues proposed Pillar Two legislation (Tax Alert 2023-0972)

— May 25: Switzerland opens public consultation on procedural aspects of the OECD's Pillar Two minimum corporate tax (Tax Alert 2023-0949)

Middle East

— May 31: UAE issues update to the mandatory unemployment insurance program (Tax Alert 2023-0971)

— May 31: Saudi Arabia clarifies interpretation of service-PE provisions in its tax treaties (Tax Alert 2023-0967)

— May 31: Turkey extends the deadline for tax amnesty application (Tax Alert 2023-0966)

— May 30: Saudi Arabia announces fifth wave of Phase 2 e-invoicing integration (Tax Alert 2023-0959)

Oceana

— May 25: Australian Taxation Office issues second draft of compliance guidelines on intangibles arrangements (Tax Alert 2023-0942)

— May 25: New Zealand to adopt the OECD GloBE (Pillar Two) rules (Tax Alert 2023-0941)

Multinational

— May 31: UK/Australia and New Zealand Free Trade Agreements enter into force (Tax Alert 2023-0970)

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IRS Weekly Wrap-Up

Internal Revenue Bulletin

 2023-22Internal Revenue Bulletin of May 30, 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.

 

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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