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October 28, 2022
Report on recent US international tax developments – 28 October 2022
A Treasury official this week said the United States (US) Government is working on establishing “prophylactic” measures to address new tax regimes in the context of future tax treaties. He indicated that Treasury wants to include rules in US treaties that would consider tax regimes that do not yet exist in order to prevent issues arising later.
The official was also quoted as saying that the US and Croatia are expected to sign a first-ever income tax treaty before the end of the year. He confirmed earlier reports that US reservations to the proposed US-Chile tax treaty are pending approval in the Chilean Parliament. The US Senate Foreign Relations Committee last spring approved the Chilean treaty subject to two reservations. The official further said there are current plans to update the existing US-Switzerland and US-Israel tax accords.
On a separate topic, a Treasury official this week was quoted as saying the Government hopes to release proposed crypto regulations before the end of the year. The Infrastructure Investment and Jobs Act, enacted in November 2021, imposed information-reporting requirements on sales of cryptocurrency and other “digital assets.” Cryptocurrency and other digital assets sold by customers of “brokers" will be subject to Form 1099-B reporting and cost-basis reporting.
The legislation specifically amended the Code to make certain changes, including expanding the definition of a broker, defining digital assets, and applying the cost-basis-reporting regime for securities to digital assets. It also required brokers to report to the Internal Revenue Service the basis of digital assets transferred to their customers or other non-brokers and requires digital assets to be treated as "cash" when received in the course of a trade or business. The amendments will be effective for information returns filed in 2024 for the 2023 calendar year.
The official was quoted as saying the proposed rules would provide clarity as to effective dates regarding reporting, which she noted is necessary for market participants.
An Organisation for Economic Co-operation and Development (OECD) official this week also said that the organization wants as many jurisdictions as possible to adopt the OECD’s Crypto Asset Reporting Framework (CARF) to ensure harmonization for reporting and other related areas. The OECD on 10 October 2022 published the final CARF, which would bring cryptocurrency and other crypto-assets into scope for reporting. The OECD earlier indicated that it is working to a “ensure a broad implementation of the CARF as the single global reporting framework for Relevant Crypto-Assets.” The official said this week that the OECD would begin work on the implementation package in the coming months and that it would include an automatic exchange of information framework, a section on compliance measures to ensure CARF is applied appropriately, along with an implementation timeline.
For additional information with respect to this Alert, please contact the following:
Ernst & Young LLP (United States), International Tax and Transaction Services, Washington, DC