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July 14, 2023

Report on recent US international tax developments - 14 July 2023

The OECD on 12 July published an "Outcome Statement" and a press release announcing that the Inclusive Framework (IF) had made significant progress on BEPS 2.0 Pillar One, but had not reached a final agreement.

In regard to Amount A in Pillar One (new nexus/taxing right), the Statement notes that the IF has developed a text of the Multilateral Convention (MLC) for Pillar One Amount A (with a few unidentified open items), which will allow the parties to the MLC to exercise a domestic taxing right. The MLC will be opened for signature in the second half of 2023 and a signing ceremony will be organized by year-end, with the objective of enabling the MLC to enter into force in 2025. Members of the IF also agreed to refrain from imposing newly enacted Digital Services Taxes or relevant similar measures, as defined in the MLC, on any company between 1 January 2024 and the earlier of 31 December 2024 or the entry into force of the MLC. That moratorium is conditional, however, on having at least 30 countries — with at least 60% of the parents from in-scope companies — sign the MLC by the end of 2023. And that condition represents a major hurdle for the extension to take place.

In regard to Amount B in Pillar One (framework for the simplified and streamlined application of the arm's-length principle to in-country baseline marketing and distribution activities), the Statement says the IF achieved consensus on many aspects of that framework, although additional work remains. The OECD will open Amount B for further public consultation beginning the week of 17 July 2023, with comments to be submitted by 1 September 2023. The July Statement further indicates the intention that the IF will approve and publish a final Amount B report by year-end, and aspects of Amount B will be incorporated into the OECD Transfer Pricing Guidelines by January 2024. In this regard, consideration will be given to both the needs of low-capacity jurisdictions and the interdependence with the signing and entry into force of the MLC.

The Statement indicates that the Subject to Tax Rule (STTR) is an integral part of the consensus on Pillar Two for developing countries. It states that work has been completed on a MLI together with an Explanatory Statement to facilitate implementation of the STTR, which will be open for signature from 2 October 2023. IF members can elect to implement the STTR by signing the MLI or bilaterally amending their tax treaties to include the STTR when asked to do so by developing countries that are members of the Inclusive Framework. These agreed documents relating to the STTR will be published during the week of 17 July 2023. The STTR will apply to intra-group interest, royalties and a defined set of other intra-group payments that includes all payments for intra-group services. The STTR is subject to certain exclusions and materiality and mark-up thresholds and will be administered through an ex-post annualized charge.

A Global Tax Alert provides further details on the Opening Statement.

Senate Finance Committee Chairman Ron Wyden (D-OR), Ranking Member Mike Crapo (R-ID), House Ways & Means Committee Chairman Jason Smith (R-MO) and Ranking Member Richard E. Neal (D-MA) on 12 July released a discussion draft of legislation for a US-Taiwan tax agreement. According to the press release, the bill would significantly reduce withholding taxes on dividends, interest, and royalties paid on these cross-border investments, among other measures. More information is available here.

Separately on 13 July, the Senate Foreign Relations Committee voted to advance a different bill, titled the Taiwan Tax Agreement Act of 2023 (S. 1457). This competing bill, introduced by Foreign Relations Committee Chair Robert Menendez (D-NJ), would authorize the Biden administration to negotiate a tax agreement between the American Institute in Taiwan and the Taipei Economic and Cultural Representative Office, providing double-taxation relief and measures to limit tax evasion and avoidance. According to the tax press, the competing bills face an uncertain future. It has been reported, however, that talks are underway to see if there is a solution for reconciling the two bills. "I'm looking forward to working together to see if we can have an amalgam of it," Chairman Menendez said this week.

Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) on 12 July reintroduced the Lummis-Gillibrand Responsible Financial Innovation Act to create a comprehensive regulatory framework for crypto assets. The legislation, which includes a Tax Title, significantly expands on the original bill introduced last year, including new consumer protections and safeguards against fraud and bad actors. A section-by-section overview is available here.

The day before, Senate Finance Committee Chairman Ron Wyden (D-OR) and Ranking Member Mike Crapo (R-ID) asked for comments on "uncertainties surrounding the tax treatment of digital assets with an open letter seeking input from experts, stakeholders and interested parties" across a number of areas. The Committee release said answers to questions will be collected on a rolling basis until 8 September. A Congressional Joint Committee on Taxation Report, dated June 2023 but released on 11 July, reviews a number of issues related to digital assets.


Contact Information
For additional information concerning this Alert, please contact:
Ernst & Young LLP (United States), International Tax and Transaction Services, Washington, DC
   • Arlene Fitzpatrick (
   • Joshua Ruland (

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor


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