Cross-border Tax Talks

Double taxation ahead? Parsing the final FTC regs

Doug McHoney (PwC's US International Tax Services Co-Leader) is joined by Wade Sutton, PwC ITS Partner in the Washington National Tax Practice office and former deputy international tax council at Treasury. They discuss the highly technical topics of the final foreign tax credit regulations, credibility of tax under Section 901, the definition of an income tax, DSTs, nonresident taxation, effective dates, digital services taxes, withholding taxes, nonresident capital gains taxes, Puerto Rican excise tax, BEPS 2.0 and much more.

Timestamps:

• 2:30 - What is the context and background around the December-released final Foreign Tax Credit regulations?
• Material changes seen in the new regulations
  • 3:50 - Creditability
  • 5:30 - Definition of an income tax
  • 9:13 - Digital service taxes
  • 12:30 - Withholding tax on services
  • 13:25 - Non-resident capital gains tax (direct capital gains tax or indirect stock transfer tax)
  • 15:36 - Puerto Rican excise tax
  • 17:09 - Digital permanent establishment rules
  • 18:16 - Tax on residents, the requirement of arm’s length principles
• 19:25 - How do these changes fit in the new context of Pillar Two, particularly the new concept of the undertax payment rule, which would seem to be squarely outside the credibility attribution requirement?
• 24:00 - The rules moved from jurisdictional nexus to attribution - how material of the change is that from what was proposed to what is now finalized?
• 26:00 - In lieu of taxes in Section 903 - what is an ‘in lieu of’ tax? How have those rules been changed?
• 28:35 - What were some of the changes regarding allocation and apportionment of taxes?
• 30:45 - The denial of foreign tax credits under Section 245A - What is Section 245A, and how do these rules change any distributions associated with Section 245A?
• 33:25 - Taking into account all these changes, what should taxpayers know about the timing of claiming a foreign tax credit, including contested taxes?
• 35:36 - What do these regulations say about FDII?
• 36:50 - What are some key takeaways in your view for taxpayers, and how should they be thinking about these rules?

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