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September 17, 2023

U.S. International Tax This Week for September 15

Ernst & Young's U.S. International Tax This Week newsletter for the week ending September 15 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.


An Executive Session of the Senate Finance Committee was held on 14 September to consider the US-Taiwan Expedited Double Taxation Relief Act, which the committee then approved by a unanimous 27-0 vote. Under the bill, income from US sources earned or received by qualified residents of Taiwan would be entitled to certain benefits. Benefits include: reduced tax rates for income otherwise subject to 30% gross basis withholding tax; taxation of income effectively connected with a US permanent establishment; and certain preferential treatment of wages earned by qualified residents.

Finance Committee Chairman Ron Wyden (D-OR) and Ranking Member Mike Crapo (R-ID) released a discussion draft in July with leaders of the House Ways & Means Committee, which may consider a bill on the issue but has not announced plans. With no announced plans for consideration by the Ways and Means Committee, it is unclear when a bill on the issue could be considered by the full House. Both the House and Senate would need to pass the same bill for it to become law with the President's signature. Moreover, the proposed rules become applicable only if reciprocal provisions apply to US persons with respect to income sourced in Taiwan.

Separately, the Senate Foreign Relations Committee on 13 July approved the Taiwan Tax Agreement Act (S. 1457), a bill to authorize the President to negotiate and enter into a tax agreement with Taiwan to relieve double taxation. At the Executive Session on 14 September, Senator Crapo said he is confident there will be an appropriate path forward for each committee, a point that was echoed by Chairman Wyden. Foreign Relations Chairman Bob Menendez (D-NJ), while voting to advance the bill, said that bill alone is insufficient. However, Senator Menendez did not push for a vote on his amendment to sunset the bill after two years unless there is a US-Taiwan tax agreement.

Michael Plowgian, Deputy Assistant Treasury Secretary for International Tax Affairs, confirmed that a tax information exchange agreement with Taiwan is currently being negotiated.

Treasury and the IRS issued Notice 2023-64 on 12 September, providing additional interim guidance to clarify the application of the new corporate alternative minimum tax (CAMT) that was enacted under the Inflation Reduction Act of 2022. Notice 2023-64 describes rules the IRS intends to include in proposed regulations, which generally pertain to:

  • The determination of a taxpayer's applicable financial statement
  • The determination of adjusted financial statement income (AFSI) for members of a consolidated financial statement group
  • AFSI adjustments to prevent certain duplications and omissions
  • Tax consolidated groups
  • The application of IRC Section 56A(c) to certain foreign corporations
  • AFSI adjustments for certain income taxes, Qualified Wireless Spectrum Property and property to which IRC Section 168 applies

The Notice also includes rules on determining whether a corporation is an applicable corporation subject to the CAMT, as well as rules on aggregation under IRC Section 52, foreign-parented multinational groups, the treatment of investments in partnerships and the CAMT foreign tax credit.

The forthcoming proposed regulations would apply for tax years beginning on or after 1 January 2024. Taxpayers, however, may rely on the interim guidance for tax years ending on or before the forthcoming proposed regulations are published, as well as any tax year that begins before 1 January 2024 (regardless of when proposed regulations are published). A Tax Alert on Notice 2023-64 is pending.

An IRS official this week indicated that it is considering extending the temporary foreign tax credit relief provided in Notice 2023-55 to assist fiscal-year taxpayers. Notice 2023-55, released in July 2023, announced temporary relief for taxpayers seeking a foreign tax credit by deferring key components of Reg. Sections 1.901-2 and 1.903-1, which were issued in December 2021 (TD 9959, 87 FR 276).

A Treasury official was quoted as saying the government also plans to issue foreign tax credit guidance this year to address taxes paid under the BEPS 2.0 Pillar Two. Specifically, Treasury hopes to issue rules on the Pillar Two income inclusion rule, undertaxed profits rule and qualified domestic minimum top-up taxes before year-end.

An IRS official this week provided an update on the status of various international tax guidance. The official said proposed previously taxed earnings and profits (PTEP) regulations were "highly unlikely" to be released in 2023. The long-awaited proposed PTEP rules have had several delays over the years.

IRS guidance modifying the rules under IRC Section 367 applicable to cross-border triangular reorganizations "should be out anytime," the official said. The IRS has been actively working on regulations consistent with the guidance in Notice 2016-73 and Notice 2014-32. A major project on foreign currency gain or loss under IRC Section 987 is still expected to be released in 2023.

Other projects that the IRS reportedly is moving forward include finalizing IRC Section 897(h)(4) regulations on disposition of investments in US real property interests by qualified investment entities. Further, work is continuing on software and cloud computing regulations, the official said. IRS guidance on IRC Section 892 is not expected until sometime in 2024.

Upcoming Webcasts

Crypto and digital asset information reporting (September 27)
Recently issued proposed regulations for digital asset information reporting (Form 1099) would require reporting by centralized and de-centralized exchanges, among others, and may have a sweeping impact on an organization’s operational process. For example, onboarding will now require an entity to collect tax forms, transaction systems will need to capture cost basis and sale/transfer information and Forms 1099 will need to be issued annually to the customer and the IRS. The proposed regulations would require reporting in 2026 for sales in 2025. Importantly, that reporting would require cost basis information going back to January 1, 2023. Join this EY Webcast for a discussion of these proposed changes.

BorderCrossings with EY transfer pricing and tax professionals ... OECD BEPS 2.0 transfer pricing update (September 28)
During this EY Webcast, Ernst & Young professionals will provide a transfer pricing update on the Base Erosion and Profit Shifting (BEPS) 2.0 initiative of the Organisation for Economic Co-operation and Development (OECD), with particular emphasis on Pillar One and the country-by-country (CbC) report safe harbor that is part of Pillar Two.

Metaverse event: Charitable giving with appreciated assets and cryptocurrency (September 29)
During this EY Webcast, Ernst & Young professionals and Fidelity Charitable® on Friday, September 29 as we explore the metaverse and discuss the tax impacts of charitable giving and the world of cryptocurrencies.

Refocusing on the global trade functional organization ... A global trade perspective (October 5)
Global trade professionals have navigated higher customs duty costs, increased complexity from the ever-changing regulatory environment, and a need for increased operational efficiencies to help reduce supply chain delays. During this EY Webcast, Ernst & Young professionals will share the benchmarking results of peer global trade professionals on how they are organizing their global trade functions to be more efficient, reduce customs duty costs and effectively manage risks, also taking into consideration technology advancements.

Spotlight on BEPS 2.0: developments and practical implications for US MNEs (October 11)
Global minimum tax rules are set to take effect as soon as 2024, and many multinational entities (MNEs) still have a lot to do to prepare. To help with these efforts, EY is launching a one-hour webcast series focused on steps MNEs can take to prepare for, and comply with, these new rules. During this EY Webcast, Ernst & Young Pillar Two subject-matter professionals for an action-oriented panel discussion, moderated by EY’s Jose Murillo, National Tax Department Leader and former US Department of the Treasury Deputy Assistant Secretary (International Tax Affairs).

Recent Tax Alerts

United States

— Sep 12: US proposed digital asset rules would redefine key terms and introduce new standards (Tax Alert 2023-1513)


— Sep 12: Nigeria Tax Appeal Tribunal judgment partially voids Income Tax Country-by-Country Reporting Regulations 2018 (Tax Alert 2023-1511)

— Sep 12: Kenya revamps Transfer Pricing rules (Tax Alert 2023-1509)


— Sep 12: Hong Kong introduces new patent-box tax incentive; accepting comments until 30 September (Tax Alert 2023-1507)

Canada & Latin America

— Sep 13: Dominican Republic signs Multilateral Competent Authority Agreement for automatic exchange of transfer pricing information (Tax Alert 2023-1524)

— Sep 12: Costa Rican Congress approves bill to counter exclusion from the European Union's list of non-cooperative jurisdictions in tax matters (Tax Alert 2023-1508)

— Sep 11: Brazil introduces individual income tax bill affecting taxation of foreign investment income (Tax Alert 2023-1504)

— Sep 11: Canada joins Apostille Convention (Tax Alert 2023-1503)

— Sep 11: Uruguay enacts new initiative to attract IT professionals using tax incentives (Tax Alert 2023-1502)

— Sep 08: Peruvian Supreme Court establishes guidelines to determine Peruvian-source income for nonresident entities (Tax Alert 2023-1494)

— Sep 08: Costa Rican Tax Authority issues a private letter ruling related to the tax treatment of crypto assets (Tax Alert 2023-1492)


— Sep 13: Italy launches BEPS 2.0 Pillar Two draft law for public consultation (Tax Alert 2023-1517)

— Sep 11: Italian Supreme Court decision extends capital gains participation exemption to nonresident entities (Tax Alert 2023-1505)

— Sep 11: UK publishes Statement of Changes to Immigration Rules (Tax Alert 2023-1499)

— Sep 11: Ireland announces new visa requirement for Bolivian nationals (Tax Alert 2023-1498)

Middle East

— Sep 13: Bahrain's Interior Ministry announces online service for renewal of residency and work permits from outside Bahrain (Tax Alert 2023-1532)

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.