2023

The OECD is considering clarifying a rule intended to prevent multinational groups from trying to use intracompany loans to game the new global minimum tax, an IRS official said on May 5.

The IRS released rules affecting intangible property repatriations or transactions in which companies bring intellectual property like patents and trademarks back to the United States. The proposed rules would turn off the application of 367(d) in certain instances to help avoid “excessive” U.S. taxation on income related to the repatriated intangible property.

The Kenyan government has presented draft legislation to Parliament calling for a three percent tax on digital asset transfers and a fifteen percent withholding tax on digital content creation to help finance its 2023-2024 budget.

A “double tax” conundrum involving Taiwanese businesses operating on American soil is straining business ties between the U.S. and Taiwan, a technology manufacturing powerhouse and a central player in Washington’s plan to counter the rise of China and strengthen U.S. supply chains.

Negotiators have been “seeing progress” over the last few months on Pillar One of the OECD-led global tax deal, a Treasury official said on April 28.

Companies are looking to the IRS to clarify how and to what extent the global minimum tax they pay in other countries will be eligible for a foreign tax credit back home.

Swiss Finance Minister Karin Keller-Sutter urged voters to back a plan to raise corporate taxes, warning that the government would lose revenue to other countries if it does not pass a ballot due in less than two months.

American car brands will benefit most from rules that determine which electric vehicles qualify for tax credits starting on April 18. Foreign carmakers will be at a significant disadvantage because of restrictions aimed at cutting China out of the supply chain.

The Irish government predicted surging corporate-tax income will help widen its budget surplus to €10 billion ($11 billion) this year and to €16.2 billion in 2024 and reiterated a plan to channel some of the windfall into a reserve fund.

Under the U.S. government’s interim guidance released in late December, the buyback tax could apply if a U.S. subsidiary of a foreign company makes ordinary business payments to its parent, such as for paying royalties or purchasing inventory, and then the foreign parent buys back shares within a two-year period of that payment. Tax advisors warn that the tax could hurt the competitiveness of the United States as it might diminish foreign direct investment and may provoke major trading partners to reciprocate.

Green tax credits from the Inflation Reduction Act of 2022 are likely to be far more popular than anticipated, potentially reducing carbon emissions but also increasing costs to U.S. taxpayers.

G-20 countries are calling for “swift implementation” of the two-part international tax agreement, India’s Minister of Finance Nirmala Sitharaman said on April 13. Sitharaman was speaking at a briefing during the International Monetary Fund and World Bank meetings in Washington.

The U.K. Treasury is amending parts of its minimum tax proposal in the Spring Finance Bill to avoid redundancies and ensure multinationals comply with minimum anti-avoidance standards. The changes published on April 14 are being made ahead of an April 18 review of the bill by the Committee of the House of Commons.

Nigeria agreed to continue talks at the OECD on the global tax deal and revise its local tax framework to avoid losses under global minimum tax deals.

A Latin America-wide global tax summit will help nations join forces in the global negotiations over a tax deal, Colombian Minister of Finance and Public Credit Jose Antonio Ocampo said on April 14.

Australia’s recent proposal to curb tax avoidance by multinationals is poised to overlap with the OECD-led global minimum tax, sparking concerns of double taxation. The measure would deny deductions on payments related to intangibles, like patents, made to entities in jurisdictions with a corporate rate that is lower than 15%.

The Group of 24 developing countries are calling for international tax negotiations to address “remaining issues” beyond the scope of the OECD-led global agreement.

The U.S. District Court granted FedEx a crucial victory in an $89 million foreign tax credit dispute, invalidating a Treasury regulation limiting credits on offset earnings from loss-making subsidiaries by ruling in favor of FedEx under Chevron step 1 analysis. The court ruled against the government's interpretation of section 965(b)(4)(A), stating that the approach contradicts the ordinary and common meaning of "for purposes of" as limiting language and creates unintended consequences in the application of sections 959 and 960. The court's decision in FedEx Corp. v. United States may have broader ramifications, potentially affecting taxpayers with similar disputed amounts and the government's use of interlocking rules in other contexts.

Ireland initiates another consultation on adopting EU-approved GLOBE rules and implementing a qualified domestic top-up tax, while Japan publishes its tax reform legislation containing an income inclusion rule.

The Chartered Institute of Taxation warns that the UK's digital services tax, intended as a temporary measure, could become a permanent "blunt instrument" due to its controversial nature and lack of progress in international tax negotiations. The UK government has committed to withdrawing its digital services tax (DST) once an international solution is implemented while emphasizing its effectiveness and achievements in taxing online businesses and combating multinational tax avoidance.

The U.K. Financial Reporting Council (FRC) is consulting on draft amendments to financial reporting standards, proposing a temporary accounting exception for deferred taxes under the OECD's global minimum tax rules, with the consultation closing on May 24th.

The Australian Taxation Office is consulting on antiavoidance rules targeting large multinational enterprises to prevent tax deductions on payments for intangibles held in low- or no-tax jurisdictions, ensuring these corporations pay their fair share of tax in Australia. William Hoke discusses concerns law firms and consultancies raised about the exposure draft's broad scope and lack of purpose-based requirements, potentially impacting many jurisdictions in the proposed antiavoidance rules for multinational companies.

The International Accounting Standards Board is considering amendments to disclosure requirements for entities subject to potential global minimum tax legislation, aiming to standardize accounting practices and improve information for investors as countries adopt pillar 2 rules from the OECD's international corporate tax overhaul plan. The IASB considers amending IAS 12 to provide guidance on pillar 2 legislation disclosures, receiving mixed feedback from stakeholders and aiming for finalized amendments in the second quarter of 2023.

The tax relief from the foreign-derived intangible income deduction has tripled in four years for 48 large corporations, due to a combination of increased profits, revised regulations, the tax break working as intended, and changes in research expenditure write-offs.

Malaysia's deputy finance minister emphasizes the importance of adopting OECD-brokered global minimum tax rules, expecting it to initially raise $227 million in tax revenues for the country.

The U.S. Tax Court said that the IRS cannot assess penalties on a taxpayer with unreported business interests under tax code Section 6038 because no provision in the code authorizes it.

Irish corporation tax receipts soared more than 70% in the first quarter compared to the same period last year as the country’s business tax boom continues. Ireland collected EUR 3.2 billion in corporation tax from firms in the three months to the end of March, an increase of EUR 1.3 billion on the equivalent 2022 figure.

The United Kingdom is changing how it structures certain corporate tax credits to help cushion the blow of the global 15% minimum tax on companies taking advantage of those tax breaks. The proposal illustrates how some countries could implement the 15% rate while still offering companies certain tax perks to lower their effective tax rate.

A coalition of investors and activists is seeking shareholder support for increased tax transparency at the annual meetings of several of the largest US companies in the coming weeks, making it the latest frontier in the battles over environmental, social, and governance reporting.

The European Commission is exploring options for an EU-wide solution to address tax issues faced by remote workers and their employers, including possible legislative initiatives such as a directive or recommendation.

The EU unshell directive aims to address the misuse of shell companies, but its potential future effects remain uncertain as it may create surprises when implemented, and is expected to be applicable in 2025 only for manifest cases of tax avoidance practices.

U.S. officials and delegates from various countries stress the importance of not duplicating tax reform efforts and ensuring inclusive international tax cooperation at a U.N. Economic and Social Council meeting.

The European Commission is developing new rules and proposing a Securing the Activity Framework of Enablers (SAFE) to prevent aggressive tax planning arrangements for EU taxpayers and penalize non-compliant intermediaries.

The OECD's pillar 2 global minimum tax proposal is advancing. It raises concerns for U.S. taxpayers and lawmakers about its potential impact on U.S. corporate tax revenues and the country's position in the global tax landscape. Mindy Herzfeld discusses the complexities and potential issues surrounding investment tax credits and their interaction with the pillar 2 global minimum tax rules, highlighting the potential elimination of benefits from specific tax incentives designed by Congress.

The U.K. government is consulting on a potential carbon border adjustment mechanism (CBAM) to mitigate carbon leakage, with aims to introduce embodied emissions reporting in 2025, initial CBAM implementation in 2026, and new product standards in the late 2020s.

Japan's National Diet has passed tax reform legislation incorporating an income inclusion rule in accordance with the OECD's global anti-base-erosion framework, with more than 40 countries, including Canada and Liechtenstein, making moves to implement similar rules.

The Kenyan government plans to review and potentially align its 1.5% digital services tax with the OECD's two-pillar global tax reform plan, following initial resistance to joining the agreement.

The approved U.N. model subject-to-tax rule (STTR) offers a framework for jurisdictions to establish base taxation levels and country-specific exemptions based on individual needs and policy objectives, while leaving the minimum tax rate to be negotiated between parties, unlike the OECD's proposed 9% rate.

Canada's latest budget proposes new clean technology tax incentives, digital services tax legislation, and spending cuts while aiming to increase the alternative minimum tax rate and implement a corporate-level share buyback tax.

China's government introduces new economic measures, including a 100% superdeduction for R&D expenses, and reduced tax rates for small businesses and self-employed individuals, aiming to reduce corporate tax burdens by over CNY 480 billion annually.

On March 31, the Biden administration released new rules that will significantly shorten the list of electric vehicles that qualify for federal tax credits. Officials hope the change will push carmakers to move their supply chains out of China and to the United States or its allies. For purchases of their electric cars to qualify for up to $7,500 in tax credits, automakers must meet strict requirements for where they assemble the cars and batteries and where they get the materials that go into batteries.

The United States and Japan reached a trade agreement for minerals used in clean-energy technologies, a deal aimed at allowing Japan to meet sourcing requirements for new electric-vehicle subsidies in the United States and shifting energy supply chains away from China. The two countries agreed not to levy export duties on critical minerals they trade and coordinate labor standards in producing minerals.

On March 31, Anna Manitara, policy officer at the European Commission, said that the Commission wants states to transpose rules to implement a 15% minimum corporate tax rate by the summer to give businesses tax certainty as soon as possible.

On March 31, Sandra Knaepen, acting head of Tax Treaty, Transfer Pricing and Financial Transactions Division at the OECD, said that the OECD will start holding meetings next month to address questions countries have about the transition to a 2021 agreement to overhaul global tax rules.

Officials at a United Nations meeting on March 31 were divided on whether the United Nations should become a center of international tax discussions, potentially shifting focus away from the OECD. Proponents of boosting the UN’s tax remit pointed to what they see as problems with the OECD-led global tax deal.

On March 31, Benjamin Angel, director of direct taxation at the European Commission, said that the Commission aims to update its consolidated tax base proposal alongside some key tax avoidance measures this year. The proposals would create a common tax base with limited national adjustments and include formulary apportionment.

President Joe Biden wants to bring the world’s most sophisticated chipmakers to the United States. Taiwanese officials are pushing hard for an agreement to eliminate the burden of double taxation like the United States has with dozens of countries.

Finance Minister Bruno Le Maire said that implementing a 15% global minimum tax on corporate profits would boost the country’s revenues by at least €1 billion ($1.1 billion) a year. France aims to ratify the new mechanism negotiated at the OECD in the first half of 2023 after the European Union agreed on a directive on the matter.

On March 28, the Canadian federal budget was released. According to the federal budget, Canada expects to raise new revenue of C$5.1 billion (US $3.8 billion) in the first two years after it imposes a global minimum tax on multinationals.

Peter R. Merril, Karl Russo, Aaron Junge, Damien Boudreau, and Florian Holle discuss the implications of the OECD's pillar 2 model rules on tax credits, specifically focusing on how different types of credits are treated, their impact on multinational entities, and the potential revenue cost of converting various tax incentives to qualified refundable tax credits.