October 29, 2023
U.S. International Tax This Week for October 27
Ernst & Young's U.S. International Tax This Week newsletter for the week ending October 27 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.
The House of Representatives on 25 October elected Rep. Mike Johnson (R-LA) to be the next Speaker, with members voting 220 to 209 along strictly party-lines. The vote came over three weeks after the ouster of House Speaker Kevin McCarthy (R-CA) from the leadership post on 3 October. The new Speaker has already set an ambitious schedule for regular-order consideration of appropriations bills and said a continuing resolution (CR) after the expiration of the existing CR on 17 November should end on 15 January or 15 April so the Senate can’t “jam” the House with a year-end omnibus spending bill. Speaker Johnson also said he would create a bipartisan debt commission.
A Treasury official last week said that US reservations to the new US-Chile tax treaty, which were also integrated into the language of the US-Croatia Treaty signed in 2022, reflect current policy and are included in the working model of the US Model Treaty. The reservations in the Chilean accord address the IRC Section 59A base erosion and anti-abuse tax and the application of foreign tax credits. The official was quoted as saying there are no plans to release the next iteration of the US Model Treaty, but that the proposed 2022 US-Croatia tax treaty can serve as a good indication of positions in the new US Model Treaty.
With regard to the US-Chile treaty, the Chilean government on 25 October submitted the proposed convention with US reservations to the Chilean Congress for approval.
The US and Uruguay signed a tax information exchange agreement (TIEA) on 24 October. TIEAs allow the US competent authority and their bilateral counterpart to exchange information on tax matters in regard to the administration and enforcement of domestic tax laws.
The IRS announced (IR-2023-194) on 20 October that it plans to send compliance alerts to approximately 150 US-based subsidiaries of foreign-owned corporations that distribute goods in the United States. The alerts stem from the companies’ alleged use of certain transfer pricing strategies, which the IRS deems improper. The IRS also said in the news release that it plans to expand the Large Corporate Compliance program in 2024 to audit 60 additional large corporate taxpayers, which will be selected with the help of artificial intelligence.
An IRS official last week was quoted as saying that proposed previously taxed earnings and profits (PTEP) regulations now are expected to be released in early 2024, acknowledging the long delays in releasing the regulatory package. IRS officials in the past have said PTEP regulations would be released in tranches, with the official last week confirming that the regulations would address the timing of basis adjustments related to mid-year share transfers or distributions.
The Cypriot Tax Department has publicly announced that the bilateral Cyprus-US Competent Authority Agreement (CAA) for the exchange of Country-by-Country (CbC) reports, which is still under negotiation, is expected to be effective for Reporting Fiscal Years (RFYs) starting on or after 1 January 2023. An EY Tax Alert provides details of the implications for reporting fiscal years starting on or after 1 January 2022.
An OECD official this week was quoted as saying that the Inclusive Framework on BEPS is considering issuing Pillar Two guidance on the treatment of deferred tax assets in jurisdictions with federal and subnational taxes. The official said the GloBE rules on which Pillar Two is based create a deferred tax asset in the jurisdiction in which the entity records a loss, instead of using a loss carryforward mechanism. Upon the suggestion that it may be possible to recast the deferred tax asset at 15% accounting for both the federal and subnational level, because GLOBE rules do not distinguish between the two, he said, “We are working on this issue…. The result has to be equivalent to a 15 percent [rate].” He also reportedly said the Inclusive Framework is working on additional guidance on the treatment of deferred losses in countries that have multiple levels of taxation.
Further, the director of the OECD Centre for Tax Policy and Administration recently defended the recently released BEPS Pillar One Multilateral Convention saying it is much preferable to the alternative, which would be the enactment of hundreds of digital services taxes around the globe. Manal Corwin conceded that “simplification is not always simple,” adding that without the OECD two-Pillar project, taxpayers would see the “the proliferation of multiple different measures, each with different standards and entry points and enforcement mechanisms that lead to double tax.”
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.
Realizing the full potential of your tax and finance function: Insights and leading practices for financial services institutions (November 7)
During this EY Webcast, Ernst & Young professionals will discuss how financial services institutions are elevating their tax operating models to: (i) empower their people to shape change; (ii) utilize technology to improve efficiency and data integrity; and (iii) future-proof their tax and finance responsibilities.
International tax talk quarterly series with the EY Global Tax Desk Network (November 14)
During this EY Webcast, part of an ongoing series, a panel of experienced EY professionals will provide you with information on major tax law changes in the countries and jurisdictions covered by our US-based Global Tax Desk Network.
Tax in a time of transition: Legislative, economic, regulatory and IRS developments (November 17)
Companies need to keep pace with a tax and economic environment in transition. This requires understanding tax policy trends and anticipating future developments that could impact their operations. Please join this EY webcast for a fast-paced overview of recent tax and economic developments designed to help you stay on top of changes in today’s shifting economic, legislative and regulatory environment. In this regularly occurring webcast series, panelists will provide updates on: (i) the US economy and tax policy; (ii) what’s happening at the IRS; and (iii) breaking developments.
Recent Tax Alerts
— Oct 20: U.S. Department of Homeland Security announces commencement of visa-free travel for Israelis (Tax Alert 2023-1758)
— Oct 24: Ethiopia issues a Directive to regulate the opening and operations of offshore foreign-exchange accounts (Tax Alert 2023-1766)
— Oct 20: Mauritian Finance Minister issues new regulations on e-invoicing (Tax Alert 2023-1752)
— Oct 27: Hong Kong Chief Executive announces several upcoming immigration changes (Tax Alert 2023-1794)
— Oct 26: India resumes processing Business and Conference Visa applications from Canadian nationals (Tax Alert 2023-1785)
— Oct 25: India's Supreme Court rules 'notification' mandatory to invoke Most Favored Nations clause in India's tax treaties (Tax Alert 2023-1776)
Canada & Latin America
— Oct 27: Chilean Congress asked to approve double tax treaty with United States (Tax Alert 2023-1791)
— Oct 26: Canada launches pilot program to streamline work permit processing for Canadian employers recruiting in the Philippines (Tax Alert 2023-1783)
— Oct 26: Canadian High Commission provides update on visa processing delays in India (Tax Alert 2023-1784)
— Oct 20: Colombia introduces new citizenship regulations (Tax Alert 2023-1754)
— Oct 27: Germany to lower reporting thresholds for energy and electricity tax subsidies (Tax Alert 2023-1792)
— Oct 25: France submits new e-invoicing timetable to Parliament (Tax Alert 2023-1777)
— Oct 24: UK announces increase in Immigration Health Surcharge expected to go into effect on 16 January 2024 (Tax Alert 2023-1769)
— Oct 24: Italy publishes work permit quotas for 2023 until 2025 (Tax Alert 2023-1768)
— Oct 24: EU adopts Directive introducing tax transparency rules for crypto assets (DAC8) (Tax Alert 2023-1765)
— Oct 20: OECD Forum on Tax Administration agrees on action to support continued digital transformation, delivering Pillar Two and capacity building (Tax Alert 2023-1751)
— Oct 26: Turkiye increases additional customs duty rates on textile industry (Tax Alert 2023-1779)
— Oct 20: Qatar removed from EU ‘grey list’ (Tax Alert 2023-1755)
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.