International Tax Services Washington Dispatch, February 2020

This edition of the ITS Washington Dispatch for February 2020 examines the deal made between the US and France to de-escalate tensions around the latter’s Digital Services Tax (DST). It also looks at the further explanation of the government’s guidance around the Tax Cuts and Jobs Act (TCJA), and the pending tax treaties with Chile, Hungary and Poland.

There’s an update on Section 965 transition relief from the IRS, and information on the Altera Corporation’s petition to the Supreme Court in their ongoing case. Finally, there are various updates on the OECD around BEPs and other guidance and reviews.

This EY monthly update details the confirmation that the US and France have agreed to de-escalate tensions over France’s DST. The deal means that France will suspend collection of the 3% DST and in return the US won’t impose retaliation tariffs of up to 100% on approximately US$2.4 billion of French goods.

The government is confident that all major Tax Cuts and Jobs Act (TCJA) guidance by October 2020, with final section 901M regulations would be released “in the next few weeks.”

The three pending US tax treaties with Chile, Hungary and Poland were addressed, which have stalled due to the Base Erosion and Anti-Abuse Tax (BEAT). The suggestion is that the most direct solution may be to reopen negotiations with these nations.

A senior IRS official elaborated on limited Section 965 transition relief to prevent double taxation. The new detail states that taxpayers shouldn’t expect the IRS to issue more guidance in this area, and are instead planning to revisit positions already taken by the government in the released guidance.

Altera Corporation have filed a petition for a writ for certiorari, asking the Supreme Court to appeal the decision in the cost sharing case, insisting that the government used a bait and switch in their original decision.

In OECD news, the organization is on track to deliver pillars one and two in the BEPS 2.0 project by October 2020. The OECD also released a number of documents and reports including details on the gig economy, and peer reviews.

Learning outcomes

• Understanding the DTS deal that’s been struck between the US and France
• Finding out the latest on guidance around TCJA and Section 965 transition relief
• Being aware of the next steps in the tax treaty agreements between the US and Chile, Hungary and Poland
• Understanding the latest updates from the OECD including on the gig economy, BEPS and peer reviews