The US tax treaty protocols will enter into force between US and the countries of Japan and Spain.
The Japanese protocol will have effect for withholding taxes (e.g., related to dividends and interest) for amounts paid or credited on or after the first day of the third month following the date on which the protocol enters into force — that is, 1 November 2019. For all other taxes, the Japanese Protocol will apply to tax years beginning on or after 1 January 2020.
For withholding taxes, the Spanish protocol generally will apply to amounts paid or credited on or after 27 November 2019, the date on which the protocol enters into force. For taxes determined by reference to a tax period, the protocol will apply for tax years beginning on or after 27 November 2019 (e.g., 1 January 2020, for calendar-year taxpayers). In all other cases, the protocol will apply on or after 27 November 2019.
The key features of the protocols are detailed in the EY Global Tax Alert, as reference. For the Spanish protocol, the new limitation on benefits requirements must be met timely for treaty-based withholding rates to apply.
Monumental progress was recently made, in the form of 4 treaty protocols being approved; Luxembourg, Switzerland, Japan and Spain. This will hopefully start a natural progression towards prompt treaty approvals/ratifications.
Additional Section 965, transition tax, FAQ’s were issued. As you may recall, there was an infamous FAQ issued 13 April, 2018, whereby all overpayments from 2017 were deemed to be credited in their entirety to the 8 years, if elected, of transition tax liability. This important issue is still being contested, and am hopeful that HR 2985 calling for its proper reversal (i.e. IRS was wrong) will attract additional cosponsors and be an integral component of a tax technical corrections package that will be passed this year.
The 2019 United Nations (UN) tax treaty negotiation manual, attached for reference, was updated to reflect changes in the 2017 UN Model Treaty to include changes that resulted from the OECD’s base erosion and profit-shifting project.
Transfer pricing: IRS officials noted that completing the advance pricing and mutual agreement program’s (APMA’s) functional cost diagnostic model (FCDM) is a detailed process and taxpayers may want to submit the model form only in complex cases.
EY’s Global Tax Alert contains additional details, provided as reference.