December 1, 2023
Report on recent US international tax developments — 1 December 2023
The US House Ways and Means Committee on 30 November unanimously approved the bipartisan United States-Taiwan Expedited Double-Tax Relief Act (H.R. 5988), under which income from US sources earned or received by qualified residents of Taiwan would be entitled to certain benefits. H.R. 5988, which would add Section 894A to the Internal Revenue Code, was amended to add a new provision that would authorize the President to negotiate and enter into one or more non-self-executing tax agreements to provide for bilateral tax relief with Taiwan after a determination is made that Taiwan has provided benefits to US persons that are reciprocal to the benefits provided under Section 894A. The new provision is similar to the Senate Foreign Relations Committee proposal released earlier in the year authorizing the negotiation of a tax agreement with Taiwan.
Subject to reciprocity requirements, the Ways and Means bill would reduce the general statutory 30% withholding tax on certain US-source income received by qualified residents of Taiwan.
Both Chairman Jason Smith (R-MO) and Ranking Member Richard Neal (D-MA) highlighted the bill's reciprocity requirements, under which the bill's provisions apply only if reciprocal provisions apply to US persons with respect to income sourced in Taiwan.
Chairman Smith and Ranking Member Neal made comments suggesting the bill is ready to be brought to the House floor and could receive a vote soon. The Taiwan tax issue has bipartisan support and is rooted — at least in part — by interest in boosting semiconductor chip production. The Taiwan bill is considered a candidate to be attached to a broader tax measure.
A US Treasury official this week said BEPS 2.0 Pillar Two guidance is expected to be released before the end of the year. The official was quoted as saying the guidance would cover the peer review process that would verify if a jurisdiction has adopted provisions that follow the Pillar Two global anti-base erosion (GloBE) rules. The peer review process will affect the application of Pillar Two rule order and, ultimately, which jurisdictions can apply the minimum top-up tax. According to press reports, the process would verify whether a jurisdiction has adopted measures that are in line with model GLOBE rules at the center of Pillar Two.
The official said the coming OECD BEPS guidance is also expected to include anti-abuse rules that would address arbitrage under the transitional country-by-country reporting safe harbor.
For additional information with respect to this Alert, please contact the following:
Ernst & Young LLP (United States), International Tax and Transaction Services, Washington, DC
Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor