November 5, 2023
U.S. International Tax This Week for November 3
Ernst & Young's U.S. International Tax This Week newsletter for the week ending November 3 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.
A senior IRS official recently said follow-up guidance to the temporary relief granted in regard to the final foreign tax credit (FTC) regulations is not an active project. In July 2023, the IRS had 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. Last week, the official said, "We're not actively working on what to do substantively in respect to the notice, but the basic policy concerns that we have reflected in the FTC 2022 regs are still valid." An official earlier indicated the government anticipated extending the temporary moratorium on the FTC rules past the end of this year.
The IRS also reportedly still plans to issue a notice on the US foreign tax credit implications of BEPS Pillar Two before the end of the year, but it will only address the income inclusion rule (IIR) and the qualified domestic minimum top-up tax (QDMTT). That notice will not cover the UTPR, however, which will be included in later guidance. The official also indicated that this notice would address certain issues under the dual consolidated loss (DCL) rules that arise because of Pillar Two implementation around the world. It has been suggested that QDMTTs and, potentially, IIRs could give rise to "foreign use" that requires the recapture of previously deducted DCLs. The official indicated that the IRS did not believe that recapture was intended and that the notice would address this issue.
A senior Treasury official last week reiterated the Biden Administration's commitment to the Two Pillar BEPS project, arguing it is the best way to address instability in the global international tax system, despite strong opposition to the project by certain members of Congress. With regard to Pillar Two, the official said the treatment of nonrefundable research credits in the context of the global anti-base erosion (GloBE) rules is a major priority for the US government and is being raised in multilateral discussions. "We're continuing to work with our Inclusive Framework partners to collaborate on consensus multilateral guidance that clarifies the application of Pillar Two in the context and interaction with the U.S. system."
With regard to Pillar One, another senior official said extending the current BEPS moratorium on unilateral digital services taxes (DST) that is set to expire at the end of 2023 is a "key issue" for the US. In particular, the official was quoted as saying the US is engaged "at all levels" with the Canadian government regarding its announced plans to implement a DST in 2024.
A government official also commented on the recently released draft Multilateral Convention to Implement Amount A of Pillar One, characterizing it as "significant progress." The Multilateral Convention would update the global international tax framework to "coordinate a reallocation of taxing rights to market jurisdictions, improve tax certainty, and remove digital service taxes." But according to a Treasury official, open issues remain that need to be resolved. "We want and need the mechanics of this to work," she said. Treasury opened a comment period on the MLI that extends until 11 December.
The Senate Finance Committee last week voted 16 to 11 to confirm Marjorie Rollinson to be the next IRS Chief Counsel, with two Republicans joining all Committee Democrats. The Committee held a hearing on her nomination on 28 September. Rollinson spent most of her career at EY, retiring as EY Deputy Director of National Tax, and has held several senior positions at the IRS including Associate Chief Counsel (International).
International tax talk quarterly series with the EY Global Tax Desk Network (November 14)
During this EY Webcast, Ernst & Young 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)
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; and (iii) breaking developments.
Recent Tax Alerts
— Nov 01: Kenya Revenue Authority issues guidelines on tax amnesty application process (Tax Alert 2023-1816)
— Oct 31: South Africa's application to terminate Zimbabwe Exemption Permits dismissed (Tax Alert 2023-1806)
— Nov 01: Hong Kong introduces bills on asset disposal gain regimes (Tax Alert 2023-1820)
— Oct 31: Singapore's Economic Expansion Incentives (Relief from Income Tax) (Amendment) Bill 2023 proposes changes to the approved royalty incentive (Tax Alert 2023-1812)
— Oct 27: Hong Kong Chief Executive announces several upcoming immigration changes (Tax Alert 2023-1794)
Canada & Latin America
— Nov 02: Costa Rica provides visa exemption for Honduran nationals (Tax Alert 2023-1826)
— Nov 02: EY Canada's Tax Matters @ EY for November 2023 (Tax Alert 2023-1824)
— Nov 02: Certain Canadian nationals now subject to entry fee when traveling to Colombia (Tax Alert 2023-1823)
— Oct 27: Chilean Congress asked to approve double tax treaty with United States (Tax Alert 2023-1791)
— Nov 01: Italian Revenue Agency issue draft guidelines on asset management transfer pricing to support implementation of new Investment Management Exemption Regime (Tax Alert 2023-1819)
— Nov 01: Malta will not be introducing any component of Pillar Two in 2024 (Tax Alert 2023-1818)
— Nov 01: EU Council adopts new renewable energy rules and rules for promotion of sustainable aviation fuels under Fit for 55 (Tax Alert 2023-1817)
— Oct 31: Bulgaria | New energy contribution for transfers of natural gas of Russian origin (Tax Alert 2023-1810)
— Oct 31: Monaco Legislature considers draft legislation to allow single-shareholder limited liability companies and innovation companies limited by shares; two new Double Tax Treaties signed (Tax Alert 2023-1809)
— Oct 30: European Union's implementation of EES and ETIAS delayed until 2024 and 2025, respectively (Tax Alert 2023-1799)
— Oct 27: Germany to lower reporting thresholds for energy and electricity tax subsidies (Tax Alert 2023-1792)
— Oct 30: Australia's migration reform update provided (Tax Alert 2023-1798)
— Oct 30: OECD releases Multilateral Convention to implement Pillar One Amount A (Tax Alert 2023-1802)
IRS Weekly Wrap-Up
State and Local Tax Weekly
Highlights of this edition include:
— IRS releases guidance on transferring clean vehicle credits. The IRS and Treasury Department proposed regulations (REG-113064-23) and Revenue Procedure 2023-33 on how buyers can transfer clean vehicle credits under IRC §§ 30D (clean vehicles) and 25E (previously-owned vehicles) to eligible dealers at the time of purchase.
— Colorado revenue department proposes rules on buyer’s claims for refund of sales tax paid. On Nov. 2, 2023, the Colorado Department of Revenue (CO DOR) will hold a public rulemaking hearing on sales tax rules to implement law enacted in 2022 (HB 22-1118), that impose significant new penalties on refund claims for sales and use taxes paid by a purchaser to a vendor.
— Income/Franchise, Sales & Use, Business Incentives, Property Tax, Compliance & Reporting, Payroll & Employment Tax, Miscellaneous Tax, Value Added Tax
Internal Revenue Bulletin
| ||2023-44||Internal Revenue Bulletin of October 30, 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.