International Tax Services Washington Dispatch, October 2019

This edition of the ITS Washington Dispatch for October begins with a look at the OECD public consultation document regarding Pillar One of the BEPS 2.0 project and how it will facilities negotiations between international organizations, as well as the G20’s reaction to the two-pillar approach.

There’s coverage of the latest guidelines from the Treasury and IRS too, including details on Section 385, the repeal of Section 958(b)(4) and cryptocurrency, as well as guidance on the impending repeal of LIBOR and any relevant tax implications.

This EY monthly update starts with the release of the highly-anticipated OECD public consultation document that outlines a unified approach under Pillar One as part of the BEPS 2.0 project, to reach an agreement on rules that will facilitate negotiations between the countries involved in the first half of 2020, including a new nexus that doesn’t require a physical presence. The G20 group has also confirmed support for the two-pillar approach in a press release issued in October.

In Treasury news, it has issued final regulations that remove some of the document requirements under Section 385 while giving notice of proposed rulemaking that would see some interests treated as debt. Meanwhile the IRS confirmed that taxpayers can rely on expired temporary rules on recharacterization under Section 385, until further notice is given.

The IRS has issued proposed regulations and Revenue Procedure 2019-40 on the repeal of Section 958(b)(4) which should “limit the enquiries required by US persons to determine whether certain foreign corporations are controlled foreign corporations”.

Also, the IRS recently issued proposed rules that addressed the tax consequences of the elimination of the London Inter-Bank Offered Rate (LIBOR). It’s in light of the pending phase out of LIBOR and other rates.

Additionally, new guidance has been issued for taxpayers surrounding cryptocurrency, which answers some open questions. However other questions do remain and are expected to be clarified at a later date. Further updates also cover the judgement that the 952(c) election is obsolete.

Learning outcomes

• Understanding the two-pillar approach of the OECD BEPS 2.0 Project and the latest developments under Pillar One
• Finding out about the final regulations regarding Section 385 documentation requirements as issued by the Treasury
• Learning about the latest issued guidelines from the IRS on expired Section 385 rules, the repeal of Section 958(b) and on the tax consequences of the abolition of the LIBOR rate
• Exploring further details on cryptocurrency and guidance that leaves some questions yet to be answered.