July 16, 2023
U.S. International Tax This Week for July 14
Ernst & Young's U.S. International Tax This Week newsletter for the week ending July 14 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 OECD on 12 July published an "Outcome Statement" and a press release announcing that the Inclusive Framework (IF) had made significant progress on BEPS 2.0 Pillar One, but had not reached a final agreement.
In regard to Amount A in Pillar One (new nexus/taxing right), the Statement notes that the IF has developed a text of the Multilateral Convention (MLC) for Pillar One Amount A (with a few unidentified open items), which will allow the parties to the MLC to exercise a domestic taxing right. The MLC will be opened for signature in the second half of 2023 and a signing ceremony will be organized by year-end, with the objective of enabling the MLC to enter into force in 2025. Members of the IF also agreed to refrain from imposing newly enacted Digital Services Taxes or relevant similar measures, as defined in the MLC, on any company between 1 January 2024 and the earlier of 31 December 2024 or the entry into force of the MLC. That moratorium is conditional, however, on having at least 30 countries — with at least 60% of the parents from in-scope companies — sign the MLC by the end of 2023. And that condition represents a major hurdle for the extension to take place.
In regard to Amount B in Pillar One (framework for the simplified and streamlined application of the arm's-length principle to in-country baseline marketing and distribution activities), the Statement says the IF achieved consensus on many aspects of that framework, although additional work remains. The OECD will open Amount B for further public consultation beginning the week of 17 July 2023, with comments to be submitted by 1 September 2023. The July Statement further indicates the intention that the IF will approve and publish a final Amount B report by year-end, and aspects of Amount B will be incorporated into the OECD Transfer Pricing Guidelines by January 2024. In this regard, consideration will be given to both the needs of low-capacity jurisdictions and the interdependence with the signing and entry into force of the MLC.
The Statement indicates that the Subject to Tax Rule (STTR) is an integral part of the consensus on Pillar Two for developing countries. It states that work has been completed on a MLI together with an Explanatory Statement to facilitate implementation of the STTR, which will be open for signature from 2 October 2023. IF members can elect to implement the STTR by signing the MLI or bilaterally amending their tax treaties to include the STTR when asked to do so by developing countries that are members of the Inclusive Framework. These agreed documents relating to the STTR will be published during the week of 17 July. The STTR will apply to intra-group interest, royalties and a defined set of other intra-group payments that includes all payments for intra-group services. The STTR is subject to certain exclusions and materiality and mark-up thresholds and will be administered through an ex-post annualized charge.
EY Tax Alert 2023-1223 provides further details on the Opening Statement.
Senate Finance Committee Chairman Ron Wyden (D-OR), Ranking Member Mike Crapo (R-ID), House Ways & Means Committee Chairman Jason Smith (R-MO) and Ranking Member Richard E. Neal (D-MA) on 12 July released a discussion draft of legislation for a US-Taiwan tax agreement. According to the press release, the bill would significantly reduce withholding taxes on dividends, interest, and royalties paid on these cross-border investments, among other measures. More information is available here.
Separately on 13 July, the Senate Foreign Relations Committee voted to advance a different bill, titled the Taiwan Tax Agreement Act of 2023 (S. 1457). This competing bill, introduced by Foreign Relations Committee Chair Robert Menendez (D-NJ), would authorize the Biden administration to negotiate a tax agreement between the American Institute in Taiwan and the Taipei Economic and Cultural Representative Office, providing double-taxation relief and measures to limit tax evasion and avoidance. According to the tax press, the competing bills face an uncertain future. It has been reported, however, that talks are underway to see if there is a solution for reconciling the two bills. "I'm looking forward to working together to see if we can have an amalgam of it," Chairman Menendez said this week.
Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) on 12 July reintroduced the Lummis-Gillibrand Responsible Financial Innovation Act to create a comprehensive regulatory framework for crypto assets. The legislation, which includes a Tax Title, significantly expands on the original bill introduced last year, including new consumer protections and safeguards against fraud and bad actors. A section-by-section overview is available here.
The day before, Senate Finance Committee Chairman Ron Wyden (D-OR) and Ranking Member Mike Crapo (R-ID) asked for comments on "uncertainties surrounding the tax treatment of digital assets with an open letter seeking input from experts, stakeholders and interested parties" across a number of areas. The Committee release said answers to questions will be collected on a rolling basis until 8 September. A Congressional Joint Committee on Taxation Report, dated June 2023 but released on 11 July, reviews a number of issues related to digital assets.
Tax in a time of transition: Legislative, economic, regulatory and IRS developments (July 28)
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.
Recent Tax Alerts
— Jul 13: USCIS policy guidance on rescheduling biometrics services appointments provided (Tax Alert 2023-1232)
— Jul 13: Tanzanian Finance Act, 2023 analysis (Tax Alert 2023-1225)
— Jun 30: South Africa further extends deadline for Zimbabwe Exemption Permit holders to change immigration status (Tax Alert 2023-1175)
— Jun 30: Kenya rolls out new tax return template to capture data on intercompany transactions for MNEs (Tax Alert 2023-1170)
— Jun 30: Rwanda presents the national budget for financial year 2023/24 (Tax Alert 2023-1169)
— Jul 11: Malaysia updates Labor Market Testing requirements for Employment Pass applicants (Tax Alert 2023-1207)
— Jul 10: Japan announces Specified Skilled Worker (ii) route to expand to foreign workers in nine new industries (Tax Alert 2023-1190)
— Jul 10: Hong Kong extends exemption allowing applicants to file renewal applications from outside Hong Kong (Tax Alert 2023-1188)
Canada & Latin America
— Jul 13: Peru replaces LIBOR with SOFR for WHT purposes on interest paid to nonresidents (Tax Alert 2023-1231)
— Jul 12: Costa Rica Tax Authority announces 31 July deadline for receipt of CRS and FATCA financial account reports (Tax Alert 2023-1222)
— Jul 12: Uruguay makes temporary corporate income tax benefit for promoters and construction companies permanent (Tax Alert 2023-1215)
— Jul 11: Draft decree provides guidance for nonresidents subject to Colombia's version of digital services tax (Significant Economic Presence) (Tax Alert 2023-1206)
— Jul 11: Panama adopts new classification system for income tax returns (Tax Alert 2023-1202)
— Jul 11: Panama publishes 2023 list of reportable jurisdictions for Common Reporting Standard purposes (Tax Alert 2023-1201)
— Jul 11: Peruvian Tax Authority rules merger between nonresident entities triggers indirect transfer of Peruvian shares (Tax Alert 2023-1200)
— Jul 11: Costa Rica Tax Authority announces 13% VAT on tourism services from 1 July 2023 (Tax Alert 2023-1199)
— Jul 10: EY Canada's Tax Matters @ EY for July 2023 (Tax Alert 2023-1193)
— Jul 10: Costa Rica publishes resolution on conditions for using Tax Authority Platform (Tax Alert 2023-1189)
— Jul 10: Panama Tax Authority provides process for deregistering certain 'fiscal equipment' (Tax Alert 2023-1187)
— Jul 13: Romania issues further guidance clarifying implementation of EU Public CbCR Directive through Romanian Ministry of Finances Order 1730/2023 (Tax Alert 2023-1230)
— Jul 13: Spain | Obligation to submit the plastic packaging tax ledgers by the end of July 2023; Spanish Tax Authority clarifies interpretative issues (Tax Alert 2023-1228)
— Jul 13: Czech Republic's Long-Term Visas now available to digital nomads (Tax Alert 2023-1227)
— Jul 12: Gibraltar issues Budget 2023/24 (Tax Alert 2023-1224)
— Jul 12: German Federal Ministry of Finance publishes draft BEPS 2.0 Pillar Two implementation bill and accompanying measures (Tax Alert 2023-1221)
— Jul 12: Luxembourg Tax Authority issues updated version of MDR guidance (Tax Alert 2023-1217)
— Jul 12: Cyprus tax authorities issue transfer pricing simplification measures (Tax Alert 2023-1216)
— Jul 11: European Commission adopts rules for implementing the Foreign Subsidies Regulation (Tax Alert 2023-1209)
— Jul 11: Germany's amendments to Skilled Worker immigration regulations to go into effect starting November 2023 (Tax Alert 2023-1204)
— Jul 05: Spain: Planning now to comply with pending mandatory e-invoicing for B2B transactions (Tax Alert 2023-1183)
— Jun 30: Spanish Supreme Court affirms judgment holding domestic withholding tax exemption applies to EU shareholder dividends (Tax Alert 2023-1181)
— Jun 30: Netherlands issues new explanatory Decree on international tax matters (Tax Alert 2023-1180)
— Jun 30: Spanish immigration authorities clarify foreign students’ ability to work in Spain (Tax Alert 2023-1176)
— Jul 10: Turkiye limits 0% withholding tax rate on share-buy-back transactions for corporations with shares traded in Borsa Istanbul (Tax Alert 2023-1196)
— Jul 10: Turkiye proposes amendments in Turkish tax laws, including an increase in corporate income tax rates (Tax Alert 2023-1195)
— Jul 10: Turkiye increases VAT rates on goods and services (Tax Alert 2023-1194)
— Jul 13: PE Watch | Latest developments and trends, July 2023 (Tax Alert 2023-1229)
— Jul 12: OECD releases outcome statement on progress on Pillars One and Two of BEPS 2.0 project (Tax Alert 2023-1223)
— Jun 30: OECD releases 2023 report on tax transparency in Latin America (Tax Alert 2023-1174)
IRS Weekly Wrap-Up
Internal Revenue Bulletin
| ||2023-27||Internal Revenue Bulletin of July 3, 2023|
| ||2023-28||Internal Revenue Bulletin of July 10, 2023|
| ||2023-29||Internal Revenue Bulletin of July 17, 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:
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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.