Two weeks to 10 December 2021
Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
UK
Tax Day 2 - 30 November 2021
The second Tax Administration and Maintenance Day of 2021 took place on 30 November (aka Tax Day 2) and saw the publication of these documents. They include a number of summaries of responses to recently closed consultations, technical information notices, and the launch of consultations for announcements made in the Autumn Budget. Of particular relevance from an international tax and treasury perspective are:
- R&D Tax Reliefs: consultation - response to consultation & R&D Tax Reliefs report - see further below
- Customer experience in claiming Research and Development tax reliefs
- Mandatory Disclosure Rules consultation - see further below
- Transfer pricing documentation - consultation outcome - see this note (which includes links to a video and flyer that can be shared with clients)
Join our specialists to explore the impact of these announcements for your business.
- Live webcast - Exploring the tax announcements impacting businesses
In this live webcast held on 9 December, as part of our Delivering Tax: Creating Value in a Changing World series, we discussed the implications of the latest announcements, including significant developments announced on Tax Day 2 or as part of the OECD’s planned announcements of the more detailed rules on Pillar 2. Register here to watch the recording. - Transfer Pricing in 5 Minutes, Episode 6: UK Transfer Pricing Documentation Changes
Following the release by HMRC on 30 November 2021 of the outcome to its consultation, there are a number of significant changes on the way for UK transfer pricing documentation. Dan Pybus, PwC UK Transfer Pricing Partner, discusses the key developments and next steps with PwC's Diane Hay.
R&D tax reliefs - HMRC releases further details on proposed changes to regime
As noted above, Tax Day 2 saw the release of further details on the proposed changes to the R&D regimes following the recent consultation on how to improve the UK’s R&D regimes to ensure the incentives are globally competitive. Our specialists discuss that detail here, including the restrictions on relief for overseas costs from April 2023. It’s fundamental that all claimants understand how these changes will impact their claims going forward, particularly given the proposal for advance notification of R&D claims and other requirements to help tackle abuse.
Mandatory Disclosure Rules consultation - UK consults on regulations to replace DAC6
As noted above, the UK Government has launched a consultation on the implementation of regulations to replace DAC6, which the government envisages will come into force in Summer 2022. The draft regulations broadly follow the OECD model rules. Notably, it’s proposed that arrangements entered into since 29 October 2014 will be required to be reported - the date the OECD’s Common Reporting Standard (CRS) was published (para 3.5).
Requesting more time to file corporation tax returns
Similar to last year, companies with valid Covid related reasons for being unable to file on time, can ask HMRC for a short extension (usually 1 month) to their normal corporate tax return due date of 31 December 2021. If the extension is agreed, HMRC will not charge late filing penalties. Read more.
First tier tribunal case - R&D expenditure was not subsidised
The recently published First Tier Tribunal (FTT) Quinn London Ltd V HMRC case provides some much needed clarity on the application of the subsidised expenditure rules for Small & Medium Sized Enterprise (SME) R&D claims. Rachel Moore, partner in our R&D team, discusses the case here.
.Tax treaty updates
- Double Taxation Treaty Passport Scheme register
HMRC has updated the Double Taxation Treaty Passport Scheme register with 130 additions, two removals and four amendments.
PE blog "Private equity tax perspectives"
It’s been a very busy year for Private Equity. Read our latest blog by International Tax Partner Rachel Palmer on how an active market brings the importance of understanding the tax implications of transactions into focus.
HMRC publishes guidance on exempt distributions on purchase of own shares
HMRC has published guidance about clearance applications and how to apply to HMRC for advance confirmation of an exempt distribution when a company purchases its own shares.
Approved offshore reporting funds
HMRC has updated its list of approved offshore reporting funds to include the funds that have entered the Reporting Fund Regime up to 6 December 2021.
Why is Tax an important element of TCFD?
The TCFD (Task Force on Climate-Related Financial Disclosures) is adoptable to all organisations and premium listed companies must report on a ‘comply-or-explain’ basis in the UK from 1 January 2021 - but what relevance does TCFD have in relation to Tax? Read more.
EU
UK consults on regulations to replace DAC6
As reported above, the UK Government has launched a consultation on the implementation of regulations to replace DAC6.
Commissioner Gentiloni quizzed on EU tax policy for 2022
Members of the European Parliament’s subcommittee on tax matters recently quizzed Commissioner Gentiloni on the Commission’s plans on tax policy for the year ahead and possible obstacles. MEPs also asked about the financial transaction tax, tax competition, a possible minimum tax rate for royalties, dividends and interests, and on how to balance the need for ambitious tax policy with that of not shutting down growth. Read more in this European Parliament press release.
Economic and Financial Affairs Council (ECOFIN) meeting
See this press release of the speech made by Executive Vice-President Dombrovskis at the ECOFIN press conference and the main results of the ECOFIN meeting held on 7 December 2021.
State aid: Commission adopts revised Guidelines on State aid to promote risk finance investments
The European Commission has adopted revised Guidelines on State aid to promote risk finance investments. The revised Guidelines will apply from 1 January 2022. They clarify and simplify the rules under which Member States can support and facilitate access to finance by European start-ups, small and medium-sized enterprises and companies with a medium capitalization, while ensuring a level playing field in the Single Market. Read more in this press release.
Pandora Papers revelations: experts outline needed changes to MEPs
The main lessons to be learnt from the Pandora Papers revelations and the best actions to take as a reaction were recently the topic of a hearing in Parliament. Read more in this press release.
CFE Tax Advisers Europe – EU Tax Policy News Top 5
The latest edition looks at the following: 1) Commission Gentiloni outlines European Commission tax plans for 2022; 2) Public Country-by-Country Reporting Directive published in the Official Journal of the EU; 3) EU VAT Committee publishes updated guidelines; 4) Commission takes action against Members States for failing to implement requirements for regulated professions; and 5) EU Commission 2021 VAT Gap Report published. View previous editions here.
OECD
Global tax agreement - Pillars 1 & 2
We're still awaiting the release of the Pillar 2 model rules. Assuming the Inclusive Framework on BEPS (the IF) approves the rules by their 14 December comment-period deadline, there’s still a chance we will see them later this week – although Itai’s comment at IFA USA on 9 December about them being released “before Christmas” extends the possibilities well into next week. In addition, there are now rumours that there is nervousness about releasing rules without the commentary - which is currently not expected to be published until late January or early February 2022 (with detailed implementation guidance expected subsequently). Whilst there is some sense in that, the French (apparently keen to press forward) are fighting against any delay because of the EU deadline of 22 December for the publication of their parallel proposal (which is intended to be “fully consistent” with the OECD Pillar 2). Work on Pillar 1 is less advanced than on Pillar 1.
Government support cushions tax revenues in OECD countries from the worst impacts of the COVID-19 crisis
The impact of the COVID-19 pandemic on tax revenues was less pronounced than during previous crises, in part due to government support measures introduced to support households and businesses, according to new OECD research published.
Global Forum organises workshop on automatic exchange of information’s effectiveness review process
The Global Forum Secretariat recently organised a virtual workshop on the effectiveness review process with a focus on ensuring compliance by financial institutions in relation to the Automatic Exchange of Financial Account Information (AEOI). It was attended by over 420 participants from 84 jurisdictions. Read more in this OECD item.
OECD releases new transfer pricing profiles for 21 countries
The OECD has released the second batch of updated transfer pricing country profiles for Austria, Belgium, Bulgaria, France, Georgia, Germany, Indonesia, Ireland, Italy, Latvia, Malaysia, Mexico, Peru, Poland, Seychelles, Singapore, South Africa and Sweden. Today’s release also includes for the first time country profiles for Albania, Kenya and the Maldives, bringing the total number of countries covered to 63. Read more in this OECD item.
Tunisia, OECD and EU strengthen tax co-operation to improve domestic resource mobilisation in Tunisia
The Tunisian Ministry of Finance, the OECD and the European Union have decided to extend their programme to assist Tunisia in the implementation of international tax standards, to improve its analytical capacity in tax policy, and to strengthen tax morale. Read more in this OECD item.
Other territories
International
International Tax News - October 2021
Among the topics featured in this edition are: 1) Mexico sees important changes in the Mequiladora regime; 2) Ireland introduces multiple amendments and credits as part of the Finance Act 2021; 3) Australia proposes amendments to deal with cessation of LIBOR; and 4) 136 countries reach political agreement on a new international corporate tax framework.
The Total Tax Contribution Framework
The Total Tax Contribution Framework (the Framework) has a relevance today that could not have been foreseen when it was developed over ten years ago. In the intervening years, the Framework has been developed as a voluntary framework. As the debate around company taxes continues to gather momentum, it’s more important than ever that disclosures are made on a consistent basis. Read more.
Tax Foundation examines global corporate tax rates
Corporate tax rates have seen an overall decline in recent years, with only three out of 225 countries increasing their top corporate tax rates and many countries, including the United States, moving their corporate tax rates below 30 percent, the Tax Foundation said in a November report.
Taxation of the digital economy
Keep track of the number of international initiatives that are underway to address the tax problems caused by digitalisation of our economy:
- OECD’s Pillars 1 & 2
See our OECD section above. - Digital tax byte
The latest edition from 8 December includes a brief update on the expected publication of Model Rules for Pillar Two of the G20/OECD Inclusive Framework digitalisation project and a warning from the Australian tax authorities for businesses to be prepared. - Digital tax megabyte - November 2021
This edition includes further G20 endorsement of the Inclusive Framework Statement on 8 October. US progress on its own domestic tax plans has moved on with House approval of the reconciliation bill and it has reached similar DST compromise agreements with Turkey and India as with other DST countries previously. This edition also includes on digital services an update from Nigeria on easing the application of new VAT rules, further India guidance on collection at source mechanisms, Budget proposals from Malaysia on low value goods imports and tourism tax and a brief analysis of Georgia's new VAT rules. - India Digital Tax update – US and India agree on transitional approach
The Indian Finance Ministry recently issued a press release announcing that it had agreed with the United States on a transitional approach to the 2% Indian Equalisation levy (the ‘Indian EL’ or digital tax) on e-commerce supply or services. The US Treasury also announced this agreement through a press release. Read more below.
Environmental, Social and Governance ESG
- ESG Legal event - Environmental and sustainability
This virtual event taking place on Tuesday 14 December at 11:00 will focus on rapid developments in environmental and sustainability regulation which will accelerate the UK Government’s drive towards net-zero carbon emissions.This is the biggest shift in a generation for General Counsels, Company Secretaries and others in the C-suite, who can play a key role in helping Directors understand these challenges and look for value creation. Register here. - Tax Transparency and Building Public Trust: Total Tax Contribution as a starting point for businesses on their ESG journey
The fundamental role and purpose of business in society is under an intense level of scrutiny in the current climate. Historically, the main priority of business has been to generate profit and return on investment for shareholders. In today’s world, however, stakeholders are increasingly expecting business to help address the big issues facing society such as COVID-19, climate change, sustainability and societal inequalities. The development of ESG standards are one of the main products of these stakeholder-driven expectations placed on businesses. Read more. - A Global Standard for Sustainability Reporting - GRI 207: Tax
The Global Reporting Initiative (GRI) is an independent organisation responsible for setting sustainability standards globally. They are widely accepted as good practice for reporting on a range of economic, environmental, and social topics. Our review into the 2020 year-ends of the FTSE100 showed that around 35% of the index follow the GRI standards on environmental, social and governance topics. Read more.
CFE Tax Advisers Europe - Global Tax Top 10
This edition covers: 1) US House approves minimum corporate tax legislation; 2) EU Commission 2022 Work Programme & Q4 Tax Policy Priorities; 3) Carbon trading mechanism agreed at COP26: World’s Climate Policy Summit; 4) CFE’s 14th European Conference on professional affairs: Professional Judgment in Tax Planning; 5) Tax Inspectors Without Borders Annual Report; 6) European Parliament hearings on taxation of cryptocurrencies & Pandora Papers; 7) European Parliament adopts public country-by-country reporting legislation; 8) Global Forum 2021 Annual Report & Plenary; 9) EU Tax Observatory: New report on tax competition; and 10) Committee on conduit companies: shell companies detrimental to the Netherlands.
Australia
Monthly Tax Update - December 2021
Welcome to the November edition of Australia's Monthly Tax Update, keeping you up to date on the latest Australian and international tax developments. Read more.
Belgium
See here for latest updates.
Consider direct tax requirements and opportunities at year-end
As the year-end is now rapidly approaching, this newsflash lists some corporate tax compliance formalities and attention points still to be considered in the remaining weeks of 2021.
COVID-19 and cross-border employment: agreements with France and Luxembourg extended until 31 March 2022
The Belgian tax authorities and their French counterparts recently decided to further extend the application of the Belgian-French COVID-19 agreement until 31 March 2022, which is then expected to be automatically extended to 30 June 2022. They have also agreed the further extension of their equivalent agreement with Luxembourg (again until 31 March 2022 and expected thereafter to be automatically extended to 30 June 2022), and those with the Netherlands and Germany are also expected to be extended. Read more in this PwC news item.
Canada
Loblaw Financial Holdings ─ Supreme Court of Canada interprets the foreign accrual property income regime
The Supreme Court of Canada (SCC) recently rendered its judgment in The Queen v. Loblaw Financial Holdings Inc., 2021 SCC 51. The SCC dismissed the government’s appeal from the decision of the Federal Court of Appeal, finding that Glenhuron Bank Limited (a controlled foreign affiliate of the taxpayer) conducted business principally with arm’s length persons for purposes of the foreign bank exclusion in the definition “investment business” in subsection 95(1) of the Income Tax Act (Canada) (ITA). Read more in this PwC Tax Insights.
Cyprus
Extension of the application of the debt restructuring provisions to 31 December 2022
On 3 and 6 December 2021, amendments to the provisions of seven Cyprus tax laws were published in the Government Gazette for extending the application of the debt restructuring provisions to 31 December 2022. Read more in this brief PwC Tax Insights.
France
COVID-19 and cross-border employment: agreement with Belgium extended until 31 March 2022
As reported above, the Belgian tax authorities have agreed with their French counterparts to further extend the COVID-19 agreements until 31 March 2022, which is then expected to be automatically extended to 30 June 2022. Read more in this PwC news item.
Germany
Taxi operation found to have a Swiss permanent establishment
A German resident individual who operated a cab business was held to have a permanent establishment in Switzerland and the income from the business operations was therefore held to be exempt from income tax in Germany. Read more in this PwC tax blog.
Dividend exemption under double tax treaty or abuse of legal forms?
The distribution of profits by a Luxembourg subsidiary (in the legal form of a SARL) to its German parent company (a partnership limited by shares – KGaA) may be an abuse of legal forms where the KGaA provided SARL with a loan and shortly thereafter waived repayment, thereby putting the SARL in a position to actually make the profit distribution. Even more so when the losses arising from the impairment of the value of SARL because of the distribution are to be used by the shareholders in a tax-effective manner. Read more in this PwC tax blog.
Inadmissible review of norm regarding the solidarity surcharge on corporate income tax credits
In a decision published on 26 November 2021, the Federal Constitutional Court (Bundesverfassungsgericht) declared as inadmissible a referral by the Supreme Tax Court (Bundesfinanzhof) regarding Section 3 of the Solidarity Surcharge Act 1995 as amended on 15 October 2002 (SSA, 1995). The Supreme Tax Court ruled s3 (as amended) unconstitutional to the extent that it neither provides for a claim to a solidarity surcharge credit (similar to the corporation tax credit under s37(5) of the German Corporation Tax Act (CTA), as amended on 7 December 2006) nor does it provide for the corporation tax credit – refunded in installments – to reduce the tax base for the solidarity surcharge. Read more in this PwC tax blog.
India
India Digital Tax update – US and India agree on transitional approach
The Indian Finance Ministry recently issued a press release announcing that it had agreed with the United States on a transitional approach to the 2% Indian Equalisation levy (the ‘Indian EL’ or digital tax) on e-commerce supply or services. The US Treasury also announced this agreement through a press release. Read more in this PwC Tax Insights.
Ireland
Local Property Tax: implications of sales and transfers of residential properties
Two new Local Property Tax (LPT) Tax and Duty Manuals (TDM's) have been created to update and replace guidelines published on the Revenue website - "Guidelines for the sale or transfer of ownership of a relevant residential property". See this Revenue item. Tax and Duty Manual Part 07-02, which sets out the surcharge that can be imposed for non-compliance with the filing of Local Property Tax (LPT) returns and the payment of LPT liabilities, has also been updated.
Jersey
Amendment to the income tax law on taxation of cannabis companies
The Jersey Official Gazette has published Law No. 144/2021, amending provisions of the income tax law on the taxation of the cannabis companies, which enters into force and generally takes effect from 1 January 2022. It 1) applies a 20 percent corporate income tax rate for companies licensed in cultivating and processing cannabis plants; 2) defines activities within the scope of the cannabis industry; and 3) outlines exclusions from the cannabis tax.
Luxembourg
Amending protocol to double tax treaty between Kuwait and Luxembourg
The Luxembourg Chamber of Deputies recently approved the amending protocol to the 2007 income and capital tax treaty between Kuwait and Luxembourg signed on 25 March 2021. The new protocol amends the treaty to bring it in line with the base erosion and profit-shifting (BEPS) minimum standards. The protocol will enter into force once ratification instruments are exchanged and will apply from 1 January of the year following its entry into force. Read more in this PwC news item.
COVID-19 and cross-border employment: Agreement with Belgium extended until 31 March 2022
As reported above, the Belgian and Luxembourg tax authorities have agreed to further extend the COVID-19 agreements until 31 March 2022. Read more in this PwC news item.
Middle East
Amending protocol to double tax treaty between Kuwait and Luxembourg
As reported above, the Luxembourg Chamber of Deputies recently approved the amending protocol to the 2007 income and capital tax treaty between Kuwait and Luxembourg signed on 25 March 2021. The new protocol amends the treaty to bring it in line with the base erosion and profit-shifting (BEPS) minimum standards. The protocol will enter into force once ratification instruments are exchanged and will apply from 1 January of the year following its entry into force. Read more in this PwC news item.
Netherlands
Decree regarding international lucrative investments
A new Decree has been published by the State Secretary of Finance regarding lucrative investments in international situations. From a Dutch perspective, the benefits obtained with a lucrative investment are (partially) deemed to be a remuneration for performed activities. The new Decree mitigates double taxation risk for certain situations. Read more in this PwC tax news item.
Poland
Important tax changes in Poland from 2022 - The Polish Deal
On 23 November, an amendment to tax laws that implement solutions of the so-called “Polish Deal” was published in the Journal of Laws. New legislation will have a significant impact on business activity taxation. Watch this webinar recording (in English) where our experts presented topics that are most relevant from investors’ perspective.
Russia
How exemption from tax on movable property could deteriorate investors’ position
From 2013, movable property has been exempt from taxation in Russia. Could investors and regional lawmakers ever have expected that these amendments would be made to the Russian Tax Code (RTC)? How should previous regional exemptions be treated that refer to the cost of fixed assets created in the course of a project (without distinguishing the property into movables and immovables)? Many questions remain on these matters - and decoding the Supreme Court’s position is a challenge. This dispute, once again, demonstrates that the application of regional exemptions may trigger certain risks. Read more in this PwC Tax Flash.
South Africa
Tax Synopsis - November 2021
This edition includes: 1) Taxpayer confidentiality – no guarantee? 2) Tax return preparation – a slippery path! 3) SARS watch.
Switzerland
COVID-19 webinar series
See here for upcoming and recorded webinars. For the latest updates on current topics, see this PwC Switzerland Insights page.
Switzerland releases quotas for employees coming from abroad
The Swiss Federal Council recently decided that the 2022 quotas for foreign workers will remain the same as in 2021. From 1 January 2021, UK nationals are no longer considered EU nationals and non-EU admission rules apply. However, since the UK is an important commercial partner for Switzerland, the Swiss authorities have decided to grant a separate class of quotas for UK nationals. This is a temporary solution until further developments on a potential preferred agreement between the two countries arise. Read more in this PwC item.
Taiwan
Taiwan Tax Update November 2021
This edition includes: 1) Ministry of Finance issues operational guidelines governing review of advance pricing agreement cases by National Taxation Bureaus (“APA Assessment Guidelines”); and 2) MOF releases amendments to Regulations governing reduction and exemption of income tax of foreign special professionals.
Turkey
Competent Authority Agreement allowing the CbCR exchange between the USA and Turkey has been signed
The United States and Turkey are to begin exchanging country-by-country reports from early next year, under a new competent authority agreement concluded between the two states which was signed on 24 November 2021. Read more in this PwC news alert.
US
Senate Democrats release initial Build Back Better reconciliation tax proposals
Senate Finance Committee Chairman Ron Wyden released 1,180 pages of draft Finance amendment bill text for Senate consideration of the “Build Back Better” reconciliation bill (H.R. 5736). The Finance amendment bill text would amend H.R. 5736 as passed on 19 November by the House. Chairman Wyden noted that the bill text is subject to further revisions. Senate Majority Leader Chuck Schumer has stated that he wants the Senate to begin voting on amendments to H.R. 5376 during the week of 13 December, but it seems increasingly likely that Senate action on the legislation could be delayed until later in the month or early next year. Read more in this PwC Tax Insights.
IRS finalizes international reporting Schedules K-2 and K-3 for pass-throughs, but provides transition relief
The IRS has released final versions of two new forms that should be added to the tax returns of pass-through entities to report certain international income, deductions, credits, and other miscellaneous items. For tax years beginning in 2021, a partnership must file Schedule K-2 (partners’ total international distributive share items) and Schedule K-3 (partner’s share of international income, deductions, credits, etc.), if the partnership has relevant international tax items. Additionally, S corporations with international tax relevance, as well as certain Form 8865 filers, will have similar Schedules K-2 and K-3 filing obligations for tax years beginning in 2021. Read more in this PwC Tax Insights.
India Digital Tax update – US and India agree on transitional approach
As reported above, the Indian Finance Ministry recently issued a press release announcing that it had agreed with the United States on a transitional approach to the 2% Indian Equalisation levy (the ‘Indian EL’ or digital tax) on e-commerce supply or services. The US Treasury also announced this agreement through a press release. Read more in this PwC Tax Insights.
Delaware Supreme Court invalidates Division’s NOL limitation policy
The Delaware Supreme Court has found that the Division of Revenue’s policy limiting a corporate income taxpayer’s net operating loss (NOL) deduction to the amount of its federal consolidated group’s NOL violated Delaware statutory law requiring corporate taxpayers to report as stand-alone entities. Read more in this PwC Tax Insights.
Competent Authority Agreement allowing the CbCR exchange between the USA and Turkey has been signed
As reported above, the United States and Turkey are to begin exchanging country-by-country reports from early next year, under a new competent authority agreement concluded between the two states which was signed on 24 November 2021. Read more in this PwC news alert.
Subscribe for US tax alerts
You can sign up for Tax Alerts issued by the US to be emailed to you. Subscribe using the link on this page.
Webcasts, blogs & podcasts:
- Prepare now for international tax changes
Congress is back in session and the Senate is expected to consider the House-passed reconciliation bill. Pat Brown discusses the latest on the US international tax proposals and what companies should be doing now to prepare. Subscribe here to watch this and other episodes in our US Policy on Demand series. - Elevating Tax: A strategic approach to enhancing overall deal value
The deals market is hot and fast-moving — collaborating with Tax early on can be a strategic differentiator that helps enhance overall deal value in a complex, ever-changing environment. Read more in this PwC blog. - Cross-border tax talks - Why International Tax? One professional's career journey
In this episode from 30 November, Doug McHoney (PwC's US International Tax Services Co-Leader) is joined by Ugo Alisiobi, ITS Partner, based in our New York Metro ITS practice. They discuss their paths to careers in international taxation; the struggles, joys, and rewards of being an international tax practitioner; being proactive and authentic in your career; imposter syndrome; finding - and being - a mentor; and working at PwC.
Replays
A number of previous webcasts are available for replay in our US tax reform hub here, including:
- Tax Readiness: Q4 financial reporting considerations
In this webcast from 9 December, we discussed financial reporting impacts of enacted and proposed tax law changes in the US and around the world. We also covered key tax accounting reminders related to the year-end reporting cycle. Register here to watch the replay. - Tax Readiness: Cloud Transformation - Leveraging Tax to Drive Change and Increase ROI
Register here to watch the replay from this webcast held on 17 November, where our panel of PwC specialists discussed how aligning with tax can help reduce the costs of cloud transformations by utilizing technology, identifying refund opportunities, and maximizing incentives such as R&D credits and applicable state and local tax benefits.
Other updates
For regular updates on this topic, check out our US tax reform hub on The Suite here.
Vietnam
Decree 85 amending e-commerce regulations
Following on from the new rules to tighten up the taxation of e-commerce, the Government has issued Decree 85/2021 setting out new rules on e-commerce. Read more on the key points in this PwC NewsBrief.