September 10, 2023
U.S. International Tax This Week for September 8
Ernst & Young's U.S. International Tax This Week newsletter for the week ending September 8 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.
House Ways and Means Committee Chairman Jason Smith (R-MO) recently told OECD Secretary-General Mathias Cormann in Paris that there are serious concerns with respect to the BEPS 2.0 project in Congress. The Ways and Means Chairman led a delegation of committee members to Europe to explain those concerns directly to OECD officials.
Chairman Smith pointed out that the US already has a global minimum tax — the Global Intangible Low-taxed income (GILTI) regime — and does "not object to others implementing their own GILTI-type taxes." However, the Chairman warned that the US "will not suddenly repeal our proven system in favor of an untested regime with substantial complexity and uncertainty." The Ways and Means delegation also told OECD officials of their strong objection to "discriminatory digital services taxes that countries have targeted at U.S. companies."
The chairman singled out the Pillar Two Undertaxed Profits Rule (UTPR) as particularly problematic, saying: "If countries move forward with the UTPR surtax, we will continue to aggressively pursue tax and trade countermeasures." Last May, Chairman Smith, along with all committee Republicans, introduced the Defending American Jobs and Investment Act, which, if enacted, would impose reciprocal tax measures on multinational companies from countries that "try to use the UTPR to tax U.S. workers and productivity for their own gain."
According to a Ways and Means committee press release, there is also a concern that the global tax system is "headed for more, not fewer, disputes among countries."
The House returns to Washington on 12 September; the Senate returned from the August recess on 5 September.
The IRS's Large Business and International division (LB&I) last week announced (IR-2023-164) that it will accept, between 6 September and 31 October, new applications for its Compliance Assurance Process (CAP) program for tax year 2024. CAP, a cooperative pre-filing program available to certain large taxpayers, is intended to allow the IRS and taxpayers to reach agreement on the treatment of various tax issues before a return is filed. To be eligible, new applicants must: (1) have $10m or more in assets; (2) be a US publicly traded corporation legally required to submit SEC Forms 10-K, 10-Q and 8-K; and (3) not be under investigation by, or involved in litigation with, any government agency that would limit the IRS's access to current tax records. (See the IRS's CAP webpage for more information.)
Modifications for the 2024 tax year include providing a new draft form for international issues. An EY Tax Alert provides details.
The IRS on 8 September announced a major new compliance initiative that will focus increased scrutiny on large partnerships, corporations, high-income taxpayers and "promoters abusing tax rules on the books." The IRS will expand its existing Large Partnership Compliance (LPC) program to additional large partnerships with the help of artificial intelligence. By the end of the month, the IRS indicated it will open exams on 75 of the largest partnerships in the US across industries with assets of more than $10 billion, on average.
According to the IRS, there will also be expanded focus on partnership issues through compliance letters. The IRS is citing "ongoing discrepancies on balance sheets involving partnerships with over $10 million in assets, which is an indicator of potential non-compliance" — specifically, discrepancies between year-end balances and beginning balances the following year. Consequently, the IRS plans to focus on "high-risk partnerships" and, beginning in early October, will begin mailing letters to approximately 500 partnerships to address the issue.
The IRS also indicated it will expand its focus on digital assets.
EY Guides, Surveys, and Reports
Asean Mobility Spotlight (August 2023)
In this edition of EY’s Asean Mobility Spotlight, we focus on the compliance considerations and areas of risk for remote workers in selected Asean jurisdictions. As organizations define their stance on international remote working arrangements, understanding what is required and who is responsible is key. Organizations need to adopt a forward-looking approach and develop a robust framework to manage the growing complexities and risks associated with international remote working arrangements.
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.
BEPS 2.0 recent developments and practical considerations (September 14)
During this EY Webcast, Ernst & Young professionals will discuss the additional Administrative Guidance on the Global Anti-Base Erosion (GloBE) rules, including the new safe harbors.
Tax in a time of transition: Legislative, economic, regulatory and IRS developments (September 15)
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; (iii) Breaking developments.
Recent Tax Alerts
— Sep 05: Japan implements new system to expedite the employment of foreign IT professionals (Tax Alert 2023-1470)
Canada & Latin America
— Sep 07: Peruvian Supreme Court holds Peruvian branches may not offset past losses when distributing dividends to nonresident parent (Tax Alert 2023-1486)
— Sep 07: EY Canada's Tax Matters @ EY for September 2023 (Tax Alert 2023-1483)
— Sep 06: Brazilian Government proposes the elimination of interest on net equity deduction (Tax Alert 2023-1477)
— Sep 05: Guatemala's Superintendency of Tax Administration introduces a new tax inspection risk model (Tax Alert 2023-1475)
— Sep 05: Canada moves ahead with its own digital services tax, releasing draft legislation (Tax Alert 2023-1472)
— Sep 05: Brazil modifies how investment funds will be taxed (Tax Alert 2023-1471)
— Sep 07: Iceland introduces new benefits for residence permit holders (Tax Alert 2023-1484)
— Sep 06: German government issues revised draft Growth Opportunities Act bill on corporate tax reform (Tax Alert 2023-1481)
— Sep 05: Israeli tax authority issues updated guidance on Mutual Agreement Procedures, in line with BEPS principles (Tax Alert 2023-1473)
— Sep 07: New Zealand introduces draft Digital Services Tax legislation (Tax Alert 2023-1482)
Highlights of this edition include:
- US Congress to take up appropriations bills, consider US-Taiwan tax relationship
- IRS proposes updating regulations on consolidated returns, discarding unnecessary guidance
- IRS issues proposed regs on broker reporting requirements for digital asset sales and exchanges
- Cryptocurrency stakers must include rewards in gross income upon gaining control
- Russia suspends US-Russia, other tax treaties
- Progress reported on BEPS Amount A, Pillar One, further work on Pillar Two safe harbors
- Global minimum tax filing simplification possible, OECD official says
- UN releases final report on international tax cooperation
IRS Weekly Wrap-Up
Internal Revenue Bulletin
|Internal Revenue Bulletin of August 28, 2023
|Internal Revenue Bulletin of September 5, 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.