The US Tax Act GILTI regulations are under review, and should be released before the end of Q3, that will require review and incorporation into the annual ETR. The regulations are expected to address a consolidated, vs. separate shareholder, approach for the calculation as well as some guidance re: US expense allocation. EY’s Global Tax Alert summarizes the status of this guidance.
Additionally, guidance was recently released on Sec. 162(m) compensation, also necessitating review for Q3 reporting.
The proposed regulations that were released for Sec. 965, deemed repatriation tax, are expected to be followed up by final regulations by June 2019. The third quarter 2018 marks the end of the SAB 118 period to finalize such amounts, notwithstanding additional guidance in the future. Note, these regulations should provide definitive guidance on some pending items (inclusion of PTI for a E&P deficit foreign corporation; calculation of Sec. 986 gain for Sec. 965b E&P) that may require amending 2017 corporate income tax returns.
The European Commission has recently amended the definition of “exporter” for EU purposes. The new definition allows greater flexibility, although still postulates that non-EU established companies may not act as an EU exporter.
Article 1(19) of the UCC DA now requires a company that wants to act as an “exporter,” to be a person established in the EU customs territory and:
Has the power to determine that the goods are to be brought outside the customs territory of the Union
Is a party to the contract under which goods are to be taken out of that customs territory
In summary, the EU supply chains should be reviewed re: whom is acting as an exporter, as well as how the new rule may simplify such actions.
EY’s Global Tax Alert provides additional details for this important change:
Significant tax developments have recently transpired for US / international tax.
Section 965 Proposed Regulations have been issued, including discussion of potential stock basis elections that are critical to review (reference link).
Proposed Regulations issued for capital expensing provisions of US Tax Act (reference link)
IRS has published its statutory interpretation of their previously issued FAQ Q&A that 2017 overpayments of federal income tax are allocated solely to transitional tax liability in its entirety prior to allocating such amount to its 2018 federal income tax liability without transition tax. In summary, the reasoning is that the transition tax is a 2017 liability, notwithstanding the ability to make an election to pay in installments. Considerable debate is currently ongoing re: this latest development, as it seemingly obviates the election methodology solely for one instance of overpayments, yet preserving the ability of deferred payments if a prior year overpayment is not present.
The Ninth Circuit Court of Appeals has reversed the Tax Court’s holding in Altera v. Commissioner, and upheld a 2003 regulation that requires participants in a cost sharing arrangement (CSA) to treat stock-based compensation costs (SBC costs) as compensable. The Appellate Court concluded that the regulations were valid under general administrative law principles and that under current law, SBC costs should be treated as shared by participants in a CSA. It is important to note that the Tax Court’s taxpayer-favorable opinion is still precedent and authority for taxpayers located in geographical areas outside of the Ninth Circuit’s jurisdiction.
The IRS Foreign Account Tax Compliance Act (FATCA) certification portal is now live. The FATCA Registration System has been updated to allow for the completion and submission of the certification of pre-existing accounts and periodic certifications. The IRS is recommending that all FATCA registered entities should monitor their message board for notifications. The registration system allows for the establishment of an online account for financial institutions to register with the IRS, renew their agreement, and complete and submit FATCA certifications.
EY’s Global Tax Alert discusses some of the latest developments.
Technical and lengthy documentation re: the above highlights will need critical reading and review in the very near future for US / international tax professionals.