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May 19, 2023
Report on recent US international tax developments - 19 May 2023
The BEPS 2.0 Pillar One project is expected to follow a revised, three-step implementation program, according to Manal Corwin, the new director of the OECD Centre for Tax Policy and Administration, who addressed a 12 May tax conference in Washington, D.C. According to the OECD official, if there is agreement on the Multilateral Convention (MLC) text by the Inclusive Framework, the target will be to release it by the end of July. The second step will be an internal country process to determine whether domestic legislation along with the MLC is necessary and to determine politically whether the country can sign on to the convention. Step three, the OECD director said, is actual ratification by countries. Corwin also indicated there will be consideration of whether Model Rules should accompany the MLC text once it is shared.
Corwin, a former US Treasury official, suggested that 40 countries have indicated their intent to adopt Pillar Two through their own domestic legislation and praised the collaborative process with stakeholders that has influenced the drafting of the rules. No specific technical issues or other implementation issues were discussed, but it is understood that the OECD continues to work through priorities for additional implementation guidance and some additional rules could be released by late summer, with another set of new guidance to follow by year-end.
This next set of guidance will likely cover the rules for the qualified domestic minimum top-up tax safe harbor and how transferable tax credits, like those enacted as part of the Inflation Reduction Act, will be treated for purposes of the Model Rules.
Corwin added that other tax projects before the OECD include addressing rules to minimize compliance costs and recommendations on the increasing mobility of workers, crypto assets, and carbon mitigation.
The proposed US-Chile tax treaty may move forward after the Memorial Day recess, according to US Senate Foreign Relations Committee Chairman Robert Menendez (D-NJ), with a resolution consenting to treaty ratification being added to the committee's calendar for markup. Senate Finance Committee and Foreign Relations Committee members and Treasury officials reportedly reached agreement last week to address concerns over changes made by the 2017 TCJA that could result in US companies' facing double taxation. The solution, according to the press, is a separate declaration that will be added to the ratification resolution, stating that the Senate and Treasury will continue to discuss and ensure that future tax treaties reflect current US law. Senate Foreign Relations Committee Ranking Member Jim Risch (R-ID) indicated the deal is complete, saying "We're going to get this done very quickly."
Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor