October 22, 2023
U.S. International Tax This Week for October 20
Ernst & Young's U.S. International Tax This Week newsletter for the week ending October 20 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.
Treasury Secretary Janet Yellen this week said that the recently released BEPS 2.0 Multilateral Convention to Implement Amount A of Pillar One (MLC) will require further negotiation before signing and that it will not take place this year. The Treasury Secretary was quoted as saying that while the MLC reached considerable consensus and there was substantial progress in its negotiation, outstanding issues remain that will require countries to continue to work into 2024. The MLC, which provides taxing rights to market jurisdictions, was released on 11 October and Treasury immediately announced a public comment period on the convention.
"There are some matters that are important to the United States and other countries that remain unresolved, open issues that still must be resolved before the treaty can be signed. So [these] processes will take into next year," the Treasury Secretary said. She added that it is very important for businesses and other stakeholders, as well as Congress, to be apprised about the MLC and ensure there is support for the convention.
Treasury and IRS officials recently offered insights regarding expected international tax guidance at a virtual American Bar Association meeting.
Addressing the temporary suspension of final foreign tax credit (FTC) regulations issued in December 2021, an IRS official warned taxpayers that the temporary suspension is just that, and they should not assume Treasury ultimately will make any change to the regulations. The official also said it anticipates extending the temporary moratorium on the FTC rules past the end of this year. The IRS in July 2023 released Notice 2023-55, announcing temporary relief for taxpayers seeking a foreign tax credit by deferring key components of Reg. Sections 1.901-2 and 1.903-1.
The IRS official reiterated prior statements by officials that the Service plans to issue foreign tax regulations before the end of the year that will address how FTCs will apply in the context of coming global minimum taxes.
Also, in regard to the coming global minimum tax, Treasury reportedly is looking at developing anti-abuse rules that will address the BEPS Pillar Two transitional safe harbor for country-by-country reporting. In particular, the US has concerns that there may be inappropriate use of the safe harbor by taxpayers, specifically in the context of hybrid instruments. Another issue under review by Treasury is the difference between how US rules and Pillar Two rules would treat asset transfers between two entities under common control. The Treasury official said there is no timeframe on when this guidance would be released.
A Treasury official was quoted as saying that it will also issue proposed corporate alternative minimum tax (CAMT) guidance before the end of 2023 and that taxpayers will not see another notice until that time. CAMT topics that the proposed rules reportedly may address include controlled foreign corporation income double counting, definitions and determinations related to foreign parents of multinational groups and mark-to-market considerations.
According to press reports, the Office of the IRS Associate Chief Counsel (Corporate) will "significantly broaden" the scope of the type of private letter rulings that it is willing to consider. The new head of the IRS's corporate division was quoted as saying the majority of subchapter C transactions — including IRC Section 351 transactions, acquisitive reorganizations and IRC Section 332 liquidations — will become eligible for PLR requests. The official added that he also envisions the IRS issuing PLRs on CAMT issues in the context of corporate reorganizations.
The U.S.-Taiwan Expedited Double Tax Relief Act that was passed unanimously by the Senate Finance Committee in September was formally introduced in the Senate (S. 3084) on 19 October by Chairman Ron Wyden (D-OR) and Ranking Member Mike Crapo (R-ID) and in the House (H.R. 5988) by Ways and Means Committee Chairman Jason Smith (R-MO) and Ranking Member Richard Neal (D-MA). The updated text reflects the Finance Committee's amendment to prevent double taxation on payments to entertainers and athletes in certain circumstances, as well as some other changes.
EY Guides, Surveys, and Reports
TradeFlash | October 2023
In this issue, we provide links to EY content covering key trade topics such as the reform of the Union Customs Code, implementation of Carbon Border Adjustment Mechanisms (CBAMs) in the EU and UK, proposals for a CBAM in Australia, tariff changes and legislative changes to Free Zones and Customs laws.
Crypto and digital asset information reporting: Navigating the operational challenges of the recently proposed regulations (November 1)
The proposed regulations issued by the IRS and Treasury Department introduce new standards unlike any seen previously in the digital asset space. From traditional financial institutions to decentralized exchanges, firms across the industry will need to determine how the new regulatory requirements impact any existing processes and technology, from customer onboarding to reporting. During this EY Webcast, Ernst & Young professionals will discuss operational challenges, implementation considerations, and maintaining a seamless client experience in the dynamic digital asset sector.
Recent Tax Alerts
— Oct 17: Bermuda's proposed corporate income tax takes shape with release of second public consultation (Tax Alert 2023-1728)
— Oct 18: South Africa opens applications for the Trusted Employers Scheme pilot program (Tax Alert 2023-1734)
— Oct 13: Rwanda gazettes amendments to the Income Tax Law, changing certain reporting requirements and the corporate rate (Tax Alert 2023-1710)
— Oct 13: Rwanda gazettes new law on Value Added Tax (Tax Alert 2023-1709)
— Oct 13: South Africa updates the Critical Skills List and Critical Skills Work Visa framework (Tax Alert 2023-1705)
— Oct 13: Indonesia's new regulations impacting business visitors to go into effect by 23 October 2023 (Tax Alert 2023-1712)
Canada & Latin America
— Oct 19: Brazil publishes Normative Instruction to regulate the new Brazilian transfer pricing system (Tax Alert 2023-1744)
— Oct 18: Costa Rica implements new visa requirement for nationals of Honduras (Tax Alert 2023-1736)
— Oct 17: Panamanian Tax Authority further extends deadline for resident agents to file affidavit on accounting records of offshore entities (Tax Alert 2023-1732)
— Oct 17: Costa Rica removed from EU's 'blacklist' of non-cooperative jurisdictions for tax purposes (Tax Alert 2023-1730)
— Oct 16: Panama enacts law creating transitory tax-recovery measures and abbreviated audit procedures (Tax Alert 2023-1724)
— Oct 13: Mexico offers tax incentives to taxpayers in key sectors of the export industry (Tax Alert 2023-1711)
— Oct 13: Mexico implements new visa requirement for transit purposes (Tax Alert 2023-1707)
— Oct 19: Polish Ministry of Finance issues draft explanations illuminating Beneficial Owner concept (Tax Alert 2023-1746)
— Oct 19: Italian draft ministerial decree provides implementation rules for Investment Management Exemption regime (Tax Alert 2023-1745)
— Oct 18: ECOFIN adopts revised list of non-cooperative jurisdictions for tax purposes (Tax Alert 2023-1739)
— Oct 17: Netherlands Proposal to align legal entity and partnership classification rules with international tax standards, including earlier look-through rule (Tax Alert 2023-1733)
— Oct 16: Cyprus tax authorities issue clarification note regarding Bilateral Agreement with the United States (Tax Alert 2023-1726)
— Oct 16: Norway publishes fiscal budget for 2024 (Tax Alert 2023-1725)
— Oct 16: EU | Compliance obligations for EU CBAM (Tax Alert 2023-1719)
— Oct 16: UK visa application center temporarily closed in Tel Aviv, Israel (Tax Alert 2023-1718)
— Oct 13: Ireland announces Budget 2024 (Tax Alert 2023-1713)
— Oct 19: Israel travel and mobility update provided (Tax Alert 2023-1743)
— Oct 18: The Latest on BEPS and Beyond | October 2023 edition (Tax Alert 2023-1738)
IRS Weekly Wrap-Up
Internal Revenue Bulletin
| ||2023-43||Internal Revenue Bulletin of October 23, 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.