Int'l Tax News

Under the updated agreement negotiated by the Treasury Department, U.S.-based companies will have an extra year (until 2026) before foreign countries can start imposing new taxes on any U.S. companies deemed to pay too little tax in the United States. In addition, the clean-energy tax credits at the core of last year’s Inflation Reduction Act will be counted in a more favorable way than some companies had feared, offering certainty as a tax-credit trading market gets under way.

Nana Ama Sarfo examines the OECD’s latest report on tax transparency in Latin America and questions whether the organization’s tax transparency standards could be a useful tool in improving the region’s slow economic growth.

Martin A. Sullivan argues that even if pillar 2 is adopted, multinationals’ income stemming from intellectual property transfers to low-tax jurisdictions is likely to remain as tax advantaged as it is now.

Mindy Herzfeld examines what the United States stands to lose if it enacts or rejects pillar 2, and what can be done to lessen the impact.

EU finance ministers did not sound impressed by the European Commission’s idea to allocate to the EU budget a new statistics-based levy on large companies’ profits.

Luxembourg will be referred to the Court of Justice of the European Union for its continued failure to correctly incorporate the anti-tax-avoidance directive into domestic law, according to the European Commission.

EU finance ministers rejected the European Commission's proposal to levy a charge based on a calculation of surplus corporate profits. The ministers said the levy would be regressive and difficult to implement.

If the United States isn’t among the critical mass of jurisdictions needed to sign and ratify the OECD’s pillar 1 multilateral convention, then the reforms won’t be able to proceed globally, EU researchers said.

Germany’s Ministry of Finance has circulated plans for the largest corporate tax reform since 2008, calling for an extended research allowance, a revised interest barrier rule, and notification for national tax arrangements, among other issues.

The global tax deal on Pillar One requires ratification by 30 signatory jurisdictions representing 60% of multinational groups covered by the deal. The US represents 46% of these groups, so the deal cannot go ahead without US ratification.

Businesses want to see more progress on Pillar One, and African countries are concerned about the extended moratorium on new digital services taxes.

Canadian Finance Minister Chrystia Freeland has doubled down on the government’s plans to introduce a digital services tax after refusing to agree on a one-year extension of an OECD moratorium on new digital taxes.

The top congressional taxwriters released a discussion draft of legislation for a tax agreement with Taiwan, hoping to clarify committee jurisdictions on the issue of ending the burden of double taxation for those in the region.

House GOP appropriators voted to zero out U.S. funding of the OECD in a spending bill that advanced July 12, complaining that the organization promotes higher tax rates and “digital tax schemes that target the American tax base.”

The OECD extended the global freeze on new digital taxes for one year. However, Canada refused to endorse the deal, raising the possibility of trade tensions between the US and its close ally.

The OECD announced progress on the global tax deal, but acknowledged that differences remain between countries. The organization said governments are nearing an agreement on Amount A, and it will release a consultation document next week on Amount B.

Tax officials from 143 jurisdictions had hoped to seal an agreement on a new way to divide the taxes levied on the profits of about 100 of the world’s biggest companies. Such a deal would reallocate the taxation of some $200 billion in corporate profits across the world. Failure could lead some nations to impose their own levies.

Nearly 140 countries have backed a statement on the OECD’s two-pillar tax reform plan that confirms agreement on the text of a pillar 1 tax convention and on extending a digital services tax moratorium.

The OECD has struck back at accusations that it had a hand in weakening Australian country-by-country reporting legislation, but critics have said that Secretary-General Mathias Cormann’s explanation sounds more like an admission.

A Treasury official met with EU officials and business leaders to continue negotiations on a deal to allow more European firms to at least partially qualify for the clean vehicle tax credit enacted as part of the Inflation Reduction Act.

Brazil released draft guidance on its new transfer pricing law, which adopts the arm's length standard. The rules become mandatory in 2024, but companies may choose to apply them in 2023.

The EU is considering whether to move forward with a directive on Pillar One separately from the OECD-led tax deal. While not legally necessary, it could inject political momentum into the negotiations.

Canada agreed to provide $11 billion in public support for an electric-vehicle battery plant to remain competitive with the generous US green incentives in the Inflation Reduction Act.

Lee A. Sheppard discusses how the OECD’s GLOBE taxes will work and how multinationals will be required to report the tax on their financial statements.

Mindy Herzfeld examines how the U.S. Supreme Court’s decision in Moore v. United States could affect the U.S. international tax system and explores ways to limit the decision’s scope.

Nana Ama Sarfo reviews how various Caribbean countries are considering pillar 2’s global minimum tax.

An Australian regulator is consulting on draft amendments to its disclosure requirements for Tier 2 nonprofit and for-profit entities that have used the temporary accounting exception for deferred taxes under the OECD’s global minimum tax rules.

The pending Securing the Activity Framework of Enablers proposal will clearly define aggressive tax planning so that companies and advisers will know “where the red line is,” according to an EU tax official.

Developing countries are not likely to benefit from the two-pillar global tax reform plan negotiated through the OECD framework, so they should adopt alternative measures instead, the BEPS Monitoring Group said.

HM Revenue & Customs’ approach to research and development tax relief inquiries is deterring genuine claims and risks undermining the U.K. government’s policy aim of encouraging R&D, the Chartered Institute of Taxation said.

An over-€1 billion tax package will be among the measures in Ireland’s 2024 budget, according to the Finance Department, which also announced plans to increase capital spending with windfall corporate tax receipts.

Martin A. Sullivan examines the causes and possible effects of the post-COVID surge in Ireland’s corporate tax receipts, cautioning that although the increased revenue might be good for the country in the short term, the revenue stream is too volatile to rely on long-term.

With pillar 2 of the global tax plan materializing, it may be time to take another look at some of the base erosion and profit-shifting measures implemented over the years, an OECD official said.

Competent authorities and multinational enterprises should work together to reduce mutual agreement procedure case inventories by focusing on dispute prevention rather than resolution, an OECD official said.

The US Supreme Court will hear a case on whether the government can tax foreign earnings that have not been distributed to US shareholders. The case could have implications for the limits of Congress' taxing powers.

A report from South Centre says African countries need to improve data collection around digital transactions to benefit from the OECD's global tax reallocation plan.

European Parliament members suggest delaying creation of a common tax base for large companies until businesses have adjusted to the global minimum tax rules.

Lawmakers are looking to a new US-China competition bill as a potential vehicle for enacting tax policy, including reviving the research and development tax break and establishing a carbon border adjustment mechanism.

The US Supreme Court will hear a case that could upend wide sections of US tax law, but experts say the justices may ultimately coalesce around a narrower ruling. If the court strikes down the foreign earnings tax, it could jeopardize other taxes tied to multinational arrangements.

The UK Treasury agreed to review and provide progress reports on the global tax agreement and its digital services tax and provide a contingency plan in case the UK DST needs to be extended past 2025.

An OECD official said countries should review and slim down national rules that may no longer be needed now that there is a global minimum tax approach.

The global head of tax at Siemens said that businesses have not had a proper chance to provide their opinions on the global tax deal, which he described as an anti-democratic process..

After consulting on transporting an EU directive implementing global minimum tax rules under pillar 2 of the OECD’s two-pillar global tax reform plan, Germany is ready to take the next step, a German official said.

A European Commission proposal to penalize intermediaries that facilitate tax avoidance and aggressive tax planning aims to target “bad apples,” not law-abiding tax advisers, Dutch member of the European Parliament Paul Tang said.

The pillar 2 proposed global minimum tax could raise taxes on multinationals’ operations in the United States even if the country fails to act on the proposal, and it could reduce the benefit of credits or other domestic tax incentives, the Congressional Research Service said in a June 29 report.

Australia’s amended draft rule denying deductions for intangibles payments linked to low-tax jurisdictions reflects some stakeholder concerns, but its interaction with OECD global minimum tax rules remains to be seen, practitioners said.

A global minimum effective tax rate will likely encourage governments to stop offering tax incentives that reduce a multinational enterprise’s profit and design incentives to cost-effectively stimulate investment, according to an OECD official.

In Moore v. United States, the Supreme Court has decided to take up a constitutional challenge to the validity of the transition tax in the face of 16th Amendment concerns, and the fallout from a taxpayer-favorable decision could be monumental.

The Spanish presidency of the EU Council, which begins in July, will try to get member states to agree on proposals to strengthen the EU list of noncooperative jurisdictions for tax purposes.

Mindy Herzfeld considers how commitments countries have made under bilateral investment treaties might hinder adoption of the pillar 2 global minimum tax.