August 27, 2023
U.S. International Tax This Week for August 25
Ernst & Young's U.S. International Tax This Week newsletter for the week ending August 25 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.
Congress ends its August recess after Labor Day with the Senate scheduled to return to Washington on 5 September and the House returning on 12 September. Much of September is still expected to be taken up by passage and subsequent reconciliation of appropriation bills that must be enacted before the government's fiscal year-end on 30 September.
The House Ways & Means Committee-passed American Families and Jobs Act from June — which addresses the TCJA "pre-cliffs" on IRC Section 174 R&D expensing, IRC Section 163(j) interest deduction limitations, and 100% expensing — is considered to be House Republicans' negotiating position for talks later this year if a year-end tax package materializes.
In the Senate, Finance Committee Chairman Ron Wyden (D-OR) and Ranking Member Mike Crapo (R-ID) announced before the August recess that the committee will meet in September to mark up tax legislation to strengthen the US economic relationship with Taiwan. There are at least two proposals circulating that are not mutually exclusive.
Senators Wyden and Crapo, along with House Ways & Means Committee Chairman Jason Smith (R-MO) and Ranking Member Richard Neal (D-MA) on 12 July released a discussion draft of legislation for a US-Taiwan tax agreement. The Senate Foreign Relations Committee on 13 July also approved the Taiwan Tax Agreement Act (S. 1457), which would authorize the President to negotiate and enter into a tax agreement.
On 25 August, the IRS released proposed regulations (REG-122793-19) on information reporting, the determination of amount realized and basis, and backup withholding for certain digital asset sales and exchanges. The 282-page proposed rules would "require brokers, including digital asset trading platforms, digital asset payment processors, and certain digital asset hosted wallets, to file information returns, and furnish payee statements, on dispositions of digital assets effected for customers in certain sale or exchange transactions."
The IRS notes that digital assets have grown in popularity both as a payment method and as an investment or trading asset. According to a GAO report cited in the preamble, limits on third-party information reporting to the IRS generally are an important factor contributing to the tax gap (the difference between taxes legally owed and taxes actually paid.)
On 25 August, the IRS updated the Frequently Asked Questions on the FATCA webpage, extending penalty relief for the 2022, 2023, and 2024 calendar years in limited situations where a withholding agent is reporting dividend equivalent amounts on transactions involving covered partnerships. See updated FAQ 23 (Q23) on the FATCA - FAQs General webpage.
Treasury and the IRS this week released the fourth-quarter update to the 2022–2023 Priority Guidance Plan. The update shows the projects that have been published or released through 30 June 2023. A new international project is identified in the update: regulations under IRC Section 6011 related to Malta personal retirement scheme transactions (published in the Federal Register on 7 June 2023). No additional projects have been added with respect to the international provisions during the fourth-quarter update.
BorderCrossings ... With EY transfer pricing and tax professionals (August 31)
During this EY webcast, Ernst & Young professionals examine the difficulties in applying transfer pricing rules to attribute profits to permanent establishments considering both US and international tax treaties. Under US tax treaties, Article 7 governs profit attribution to permanent establishments and references the arm’s-length principle under Article 9. In response to a lack of clear and consistent interpretation of profit attribution under international tax treaties, the Organisation for Economic Co-operation and Development (OECD) developed the Authorized OECD Approach (AOA).
International tax talk quarterly series with the EY Global Tax Desk Network (September 12)
Recent proposed tax changes across the globe may have significant implications for companies in the next quarter and beyond. Some of these changes are complex, so it is important that businesses understand them and try to prepare now – particularly for those that take effect in 2024. Please join our EY webcast for insights on recent developments in Australia, Brazil, Hong Kong, Mexico, Switzerland, and the United States and an analysis of how they might affect your businesses.
Recent Tax Alerts
— Aug 24: Nigeria | Federal High Court upholds the Tax Appeal Tribunal's judgment on the taxation of non-freight income of foreign shipping companies in Nigeria (Tax Alert 2023-1445)
— Aug 24: Hong Kong tax authority updates proposed asset disposal gain regimes (Tax Alert 2023-1441)
— Aug 23: Vietnam extends e-visa eligibility to nationals of all countries (Tax Alert 2023-1438)
Canada & Latin America
— Aug 24: Canada | Legislative update for the CCUS investment tax credit (Tax Alert 2023-1442)
— Aug 22: El Salvador's Congress approves bills to reform International Services Law and Free Trade Zones Law (Tax Alert 2023-1434)
— Aug 21: Canada | Legislative details released for the new clean technology investment tax credit (Tax Alert 2023-1431)
— Aug 21: Costa Rica's Tax Authority issues resolution on declaring income from movable and immovable capital under the corporate income tax regime (Tax Alert 2023-1430)
— Aug 18: Canada releases further revisions to EIFEL proposals (Tax Alert 2023-1421)
— Aug 18: Dominican Republic establishes special transitional treatment for audit, management and recovery of tax debt (Tax Alert 2023-1420)
— Aug 21: Spanish Supreme Court issues taxpayer-favorable decisions on domestic dividend withholding exemption with respect to EU holding structures (Tax Alert 2023-1432)
— Aug 18: Luxembourg enacts new reporting regime to combat VAT fraud (Tax Alert 2023-1423)
— Aug 18: European Commission adopts final Implementing Regulation for transitional phase of CBAM (Tax Alert 2023-1422)
— Aug 24: Saudi Arabia announces eighth wave of Phase 2 e-invoicing integration (Tax Alert 2023-1443)
— Aug 21: Australia considers CBAM to address carbon leakage (Tax Alert 2023-1428)
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.