U.S. International Tax This Week for November 22

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November 22, 2023
2023-1940

Ernst & Young's U.S. International Tax This Week newsletter for the week ending November 22 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.

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Spotlight

Both Houses of Congress return from the Thanksgiving holiday recess next week, with prospects for a tax bill still uncertain.

The recent approval of a two-step continuing resolution to extend federal government funding into early 2024 – separate deadlines in January and February – means there will not be a must-pass year-end appropriations bill to which such tax packages are typically appended. It remains to be seen whether tax provisions can be added to spending bills either in January or February, or possibly to other legislation sometime between now and then.

A business tax package would likely center around Tax Cuts and Jobs Act (TCJA) pre-cliffs that relate to the five- or 15-year amortization for R&D expenses, rather than expensing under IRC Section 174 and the IRC Section 163(j) interest deduction limitation based on earnings before interest and taxes (EBIT) rather than earnings before interest, taxes, depreciation and amortization (EBITDA), both of which took effect in 2022, and 100% expensing, which is phased down after 2022. Any deal would likely require achieving some parity between the cost of addressing those provisions and an expansion of the child tax credit, which is backed by Democrats.

The Canadian government presented its 2023 Fall Economic Statement on 21 November, confirming its intention to proceed with plans to enact a 3% Digital Services Tax (DST) in 2024, setting the stage for a possible showdown with the US. The proposed Canadian DST would be effective 1 January 2024 and apply retroactively to 1 January 2022. Bipartisan members of Congress have warned that the United States “would examine all options, including under our trade agreements and domestic statutes,” if Canada introduces the DST.

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Upcoming Webcasts

Spotlight on BEPS 2.0: developments and practical implications for US MNEs (December 13)
Jurisdictions are enacting and proposing legislation implementing the Pillar Two rules developed under the Organisation for Economic Co-operation and Development/G20’s project on addressing the tax challenges of the digitization of the economy (BEPS 2.0). 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. Join this EY webcast 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).

Tax in a time of transition: Legislative, economic, regulatory and IRS developments (December 15)
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 us 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 EY 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.

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Recent Tax Alerts

United States

— Nov 16: US IRS launches new initiative to strengthen transfer pricing enforcement (Tax Alert 2023-1907)

— Nov 16: US IRS announces hiring for Advance Pricing and Mutual Agreement Program (Tax Alert 2023-1906)

Africa

— Nov 21: Kenya Revenue Authority unveils guidelines for customs clearance at port of entry for passengers (Tax Alert 2023-1938)

— Nov 20: Kenya | Data Protection Commissioner decision clarifies employer's vicarious liability for employee's data breach (Tax Alert 2023-1921)

— Nov 16: Kenya Tax Appeals Tribunal determines key role of management and control in determining residency (Tax Alert 2023-1908)

Asia

— Nov 17: Thailand implements changes to document requirements for Long-term Visa applications (Tax Alert 2023-1916)

Canada & Latin America

— Nov 20: Canada's new trust reporting requirements apply for first time to 2023 tax year (Tax Alert 2023-1920)

Europe

— Nov 21: OECD holds Tax Certainty Day addressing MAP developments and updates on tax certainty efforts (Tax Alert 2023-1933)

— Nov 21: Denmark's new domestic reverse-charge VAT rules apply beginning 1 January 2024 (Tax Alert 2023-1935)

— Nov 21: Finland closes four border crossing points with Russia (Tax Alert 2023-1928)

— Nov 20: Luxembourg updates draft legislation on implementation of the EU Minimum Tax Directive (Tax Alert 2023-1924)

— Nov 20: European Commission and Council release statements on BEPS 2.0 progress (Tax Alert 2023-1922)

Middle East

— Nov 21: Oman revamps visa policies to restrict work visa conversion and ban new visa issuance to Bangladeshi nationals (Tax Alert 2023-1937)

— Nov 21: Saudi Arabia announces ninth wave of Phase 2 e-invoicing integration (Tax Alert 2023-1934)

— Nov 20: Saudi Arabia approves new operating procedures of the General Secretariat of Zakat, Tax and Customs Committees (Tax Alert 2023-1925)

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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.