October 8, 2023
U.S. International Tax This Week for October 6
Ernst & Young's U.S. International Tax This Week newsletter for the week ending October 6 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 on 30 September passed a continuing resolution (CR) to prevent a government shutdown and fund the government, along with health and other programs, through 17 November. President Biden signed the bill into law several hours before the midnight deadline, setting spending at FY 2023 levels for the duration of the CR.
That success was followed by the ouster of House Speaker Kevin McCarthy (R-CA) from the leadership post on 3 October. The House voted 216-210, with a handful of conservative House Republicans joined by all House Democrats present. The House soon adjourned until 10 October. It is widely recognized that the House is now in a holding pattern — including in regard to appropriations bills and other legislative priorities — at least until another Speaker is elected. Rep. Patrick McHenry (R-NC), the current Financial Services Committee Chairman, was named as acting speaker.
The IRS and Treasury on 5 October released long-anticipated proposed regulations (REG-117614-14) that would modify the rules under IRC Section 367(b) applicable to cross-border triangular reorganizations. Specifically, the proposed regulations provide rules described in Notice 2014-32 and Notice 2016-73, with modifications. In a triangular reorganization that is the focus of the proposed regulations, a subsidiary purchases stock or securities of its parent corporation in exchange for property and exchanges the purchased stock or securities for that of a target.
The proposed rules expand the definition of "property" for purposes of certain regulations under IRC Section 367(b), address how to treat the property used to acquire the parent stock or securities, explain the consequences of receiving the stock and provide for the treatment of certain subsequent inbound nonrecognition transactions following the reorganization. A Tax Alert is pending.
The US and Israel signed a competent authority agreement (CA) on 16 August 2023 on the exchange of country-by-country (CbC) reports, operative on the same date. The exchange of CbC information is based on the information exchange provision in the 1975 US-Israel tax treaty. Under the terms of the CA, CbC reports are first to be exchanged for fiscal years (FYs) of multinational groups beginning on or after 1 January 2021, "as soon as possible and no later than 18 months after the last day of the Fiscal Year of the MNE Group to which the CbC Report relates." CbC reports for FYs beginning on or after 1 January 2022 are to be exchanged as soon as possible but not later than 15 months after the close of the FY of the multinational group to which the report relates.
The OECD/G20 Inclusive Framework on 3 October adopted a new Multilateral Convention to Facilitate the Implementation of the Pillar Two Subject to Tax Rule that is meant to implement the BEPS 2.0 Pillar Two Subject to Tax Rule (STTR). The OECD describes the STTR as enabling "developing countries to tax certain intra-group payments, in instances where these payments are subject to a nominal corporate income tax rate below 9%." The STTR provides source income jurisdictions the ability to impose tax that otherwise would not be available under the existing provisions of tax treaties.
The OECD in July 2023 released adocument under Pillar Two containing the model treaty provision of the STTR, together with an accompanying commentary explaining the purpose and operation of the rule. The STTR is a core element of Pillar Two (see details here).
The OECD will act as the depositary of the multilateral instrument "and will support governments in the process of its signature and ratification." A comprehensive action plan is also planned to support rapid implementation of Pillar Two, with additional support and technical assistance for developing countries.
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).
How to energize a workforce in the great rebalance (October 17)
During this EY Webcast, Ernst & Young professionals discuss the EY 2023 Work Reimagined Survey with insights from 17,050 employees and 1,575 employers in 22 countries, revealing the contours of new workforce realities..
Recent Tax Alerts
— Sep 29: USCIS work authorization and travel program updates end fiscal year 2023 on a positive note (Tax Alert 2023-1622)
— Oct 02: Kenya Revenue Authority enforces VAT and DST compliance for electronic, internet and digital marketplace supplies (Tax Alert 2023-1633)
— Sep 29: Kenya's new anti-money laundering law adds compliance obligations for companies, branches, limited liability partnerships and foreign LLPs (Tax Alert 2023-1625)
Canada & Latin America
— Oct 05: Argentine Tax Authority establishes new income tax prepayment for financial entities, insurance companies, payment service providers (Tax Alert 2023-1657)
— Oct 05: EY Canada's Tax Matters @ EY for October 2023 (Tax Alert 2023-1652)
— Oct 04: El Salvador's Tax Authority publishes list of tax havens for 2024 (Tax Alert 2023-1646)
— Oct 02: Costa Rica enacts law making reforms to achieve exclusion from EU's list of non-cooperative jurisdictions in tax matters (Tax Alert 2023-1636)
— Oct 05: UK's Migration Advisory Committee publishes its review of the Shortage Occupation List (Tax Alert 2023-1651)
— Oct 03: Portugal enacts legislation introducing public country-by-country reporting for multinational enterprises (Tax Alert 2023-1642)
— Oct 03: Norway's pilot program to expedite work permit processing times (Tax Alert 2023-1640)
— Oct 03: Denmark announces extension of Special Act on displaced persons from Ukraine until March 2025 (Tax Alert 2023-1639)
— Sep 29: French Government releases draft Finance Bill for 2024, including OECD Pillar Two rules (Tax Alert 2023-1624)
— Oct 05: Pakistan | Sindh issues rules for collecting sales tax on IT and advertisement services remitted abroad (Tax Alert 2023-1654)
— Oct 03: Egypt issues transfer pricing Explanatory Instructions (Tax Alert 2023-1641)
— Oct 03: Pakistan | Punjab modifies Sales Tax on Services Act 2012, changing descriptions, rates and more (Tax Alert 2023-1638)
— Sep 29: Saudi Arabia proposes amendments to the Income Tax Law (Tax Alert 2023-1623)
Highlights of this edition include:
- Senate Finance Committee approves US-Taiwan tax bill
- House Republicans want countries to delay BEPS Pillar Two, adopt GILTI-like regime
- IRS publishes additional interim guidance clarifying CAMT
- IRS announces intent to issue proposed regulations for Section 174, would affect cost sharing arrangements
- US Government considering extension of temporary FTC relief, guidance on taxes paid under BEPS Pillar Two
- IRS official offers international regulatory update
- 2024 CAP program accepting new applications
- IRS announces major new compliance initiative targeting large partnerships
IRS Weekly Wrap-Up
Internal Revenue Bulletin
| ||2023-39||Internal Revenue Bulletin of September 25, 2023|
| ||2023-40||Internal Revenue Bulletin of October 2, 2023|
| ||2023-41||Internal Revenue Bulletin of October 10, 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.