Menu
Tax Notes logo

Pending U.S. Tax Treaties Face Bumpy Road

Posted on Nov. 5, 2019

Disagreements between Treasury and lawmakers over base erosion and antiabuse tax provisions are holding up passage of tax treaties with Chile, Hungary, and Poland, but observers say U.S. companies can help push the treaties through.

Although it's been nearly a decade since the treaties were signed, they still may not be passed into law before 2020, Deloitte partner Victoria Glover said during a November 4 webcast sponsored by the firm.

Glover said the main hurdle is Treasury’s demand for reservation language that would disallow interference with the United States’ ability to apply BEAT, which could conflict with the treaty provisions.

“It’s hard to see that these three [treaties] can move by the end of the year," Glover said. "That being said, Senate Majority Leader Mitch McConnell, along with Senate Foreign Relations Committee Chairman Senator [James] Risch, have both said they're committed to moving these three treaties, and I know that there have been very significant negotiations between Treasury, the Senate Foreign Relations Committee, and [the Senate] Finance Committee. . . . All three of those have been trying to find a path forward.”

Belinda Rowsell, principal for international tax services at PwC, also expressed uncertainty as to whether the treaties will be passed by the end of the year. “On the one hand, [we're] very excited to see Spain and Japan [treaties] move through," Rowsell said during a PwC webcast October 31. "Poland and Hungary, on the other hand . . . haven’t yet passed through the Senate and [I'm] unsure at this stage whether they will. Again, this goes back to limited time to get anything done.”

Nils Cousin, director of international tax at PwC, noted that recent pressure from several high-profile companies resulted in the approval of treaty protocols for Japan, Luxembourg, Spain, and Switzerland. In April 84 U.S. multinationals requested that “expeditious action” be taken to ratify the tax treaties and protocols pending before the Senate

“The impetus for passing the protocols that went through was in part the Spanish treaty, and some companies in Senator McConnell’s state were very interested in that, and that provides some impetus," Cousin said. "So the question now, I think, is you have these three other treaties — Vietnam as well, but we haven’t seen Vietnam go to the Senate — but you have these three other treaties that have yet to be ratified. Is there any impetus? Is anyone going to push for them in industry?” 

Copy RID