Two weeks to 10 March 2023
Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
UK
Spring Budget 2023
On 15 March Chancellor of the Exchequer Jeremy Hunt will deliver his Spring Budget, accompanied by a full fiscal statement from the OBR. The Budget is expected to focus on measures which will support the Government’s economic plan to halve inflation, grow the economy and reduce public debt. Visit our dedicated Budget webpage which will be updated for our insights and commentary.
- Spring Budget 2023 - what could we expect?
In this article we preview what we could potentially expect in the Budget and what businesses would like to see, as they look to strengthen competitiveness and drive growth. - Spring Budget 2023: Reactions Webcast
Our panel of tax, economic and political specialists will host a webcast the following morning (16 March at 9am) to discuss what the announcements could mean for individuals and businesses. Please use this link to register. - Spring Finance Bill 2023 will be published on 23 March
Victoria Atkins, The Financial Secretary to the Treasury announced in a 3 March written ministerial statement that the Spring Finance Bill 2023 will be published on 23 March. We’re expecting it to include draft legislation relating to the UK implementation of Pillar Two.
Responses to draft guidance on R&D tax reliefs
As reported previously, HMRC published draft guidance in December 2022 on R&D tax relief changes due to be implemented on 1 April 2023. This was open for consultation until 28 February. The Chartered Institute of Taxation response has now been published.
Approved offshore reporting funds
HMRC has updated the list of approved offshore reporting funds to include the latest funds that have entered the Reporting Fund Regime. The list has been updated to include the funds that have entered as at 3 March 2023. View the updated list.
EU
DAC7 - EC consultation and webcast replay
As reported in the latest digital tax byte, the European Commission opened the opportunity for feedback until 17 February 2023, on a draft implementing regulation of certain DAC7 provisions. The regulation aims to establish the criteria for determining whether the information automatically exchanged under an agreement between the tax authorities of EU Member States and third countries is equivalent to the information specified under DAC7. With the introduction of the DAC7 legislation, digital platform operators will be required to report on sellers for the year 2023 for the first time in 2024. Watch this PwC webcast replay from 14 February, to get guidance and background information.
State aid: Commission adopts Temporary Crisis and Transition Framework to further support transition towards net-zero economy
The European Commission has adopted a new Temporary Crisis and Transition Framework to foster support measures in sectors which are key for the transition to a net-zero economy, in line with the Green Deal Industrial Plan. Read more in this EC press release.
CFE Tax Advisers Europe
- EU Tax Policy News Top 5
The latest round-up of EU Tax Policy news from the Confédération Fiscale Européenne (CFE). The latest edition from 27 February includes: 1) EU Parliament Publishes Study on Tax Compliance Costs; 2) FATF Updates List of Jurisdictions Under Increased AML Monitoring; 3) Register Now: CFE Forum – 20 April 2023 – “Towards a More Cohesive European Fiscal Union? Minimum Tax & VAT in the Digital Age”; 4) UN Invites Public Input on International Tax Plan; and 5) ICAEW & IFAC Discussion Panel – “Is Trust Enough to Fight Money Laundering? – 7 March 2023. Visit their latest news page here.
OECD
Pillar Two
- Public consultation meeting on compliance and tax certainty aspects of global minimum tax
The OECD is holding a public consultation meeting on 16 March 2023 to discuss the input provided from the recent Pillar Two consultations: 1) GloBE Information Return; and 2) Tax Certainty for the GloBE Rules. Online registration closed on Friday 10 March 2023, however you can register after this deadline by sending an email to taxpublicconsultation@oecd.org. The event will be recorded and the replay will be made available here. - Cross-border Tax Talks: Searching for Pillar Two clarity - the OECD’s Administrative Guidance
In this episode from 8 March, Doug McHoney (PwC's US International Tax Services Global Leader) records from PwC’s 2023 International Tax Conference, where he is joined by Phil Ramstetter, PwC International Tax Partner based in Chicago. Phil was formerly a tax policy consultant for Business at OECD (BIAC). Doug and Phil overcome conference background noise to discuss the recent administrative guidance, but start with a history lesson on Pillar Two, when it was merely the Digital Project. - Cross-border Tax Talks: Pascal Saint-Amans - the Pillar Two Origin Story
In this episode from 1 March, Doug McHoney records from PwC’s 2023 International Tax Conference, where he is joined by Pascal Saint-Amans, former Director of the OECD's Centre for Tax Policy and Administration to discuss Pillar Two in depth.
MLI
- Romania deposits MLI instrument of ratification, making BEPS changes to up to 55 double tax treaties
Romania has notified the OECD that it has completed the domestic procedures necessary for the BEPS multilateral instrument to enter into effect for 55 of its double tax agreements. The announcement was made in a notification deposited with the OECD as the depository of the BEPS MLI on 6 March 2023. - Portugal deposits MLI notification
Portugal deposited a notification relating to the MLI on 6 March 2023, simply confirming the 12 October 2022 entry into effect of the BEPS MLI changes for Portugal's treaty with Timor-Leste.
See the latest status of signatories and parties.
Angola joins Global Forum as 166th member
Angola has joined the international fight against tax evasion by becoming the 166th member – and 35th African member – of the Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum). Read more in this OECD item.
Other territories
International
Digital tax byte
The latest edition in our series of brief insights into the workings of the UK and supranational bodies reviewing the taxation of digitalisation of business. This edition, from 28 February, includes: 1) draft update ESS regulations for Kenya; 2) guidance on VAT reporting for e-commerce in the UAE and pre-registration procedures for those without a presence in Egypt; 3) reminders of the deadline for feedback on DAC7 implementing regulations and registering for our webcast on DAC7 more widely; 4) New Zealand's political parties argue about making platform responsible for GST of sellers.; 5) UAE plans ahead for pre-registering digital businesses for the incoming corporate tax; 6) Singapore and Hong Kong plan to implement the Pillar Two GloBE rules and a domestic top-up tax for businesses’ financial years starting from 1 January 2025; 7) Bermuda flags the second half of 2023 for decisions on Pillar Two; 8) new Washington State sourcing rules and a Massachusetts State nexus decision; and 9) we also consider the sales and use tax implications of metaverse transactions.
UN invites public input on international tax plan
The United Nations has launched a consultation until 17 March on its future role in supporting international efforts to tackle tax avoidance and evasion and support developing nations achieve the sustainable development goals.
IMF Executive Board discusses elements of effective policies for crypto assets
The International Monetary Fund has released a report that looks at the tax consequences of crypto assets and in particular of countries accepting them as legal tender. The paper addresses questions raised by IMF member countries on benefits and risks of crypto assets and on how to structure appropriate policy responses. Read more in this IMF press release.
Environmental, Social and Governance (ESG)
- How CEOs can meet investors’ climate change expectations
CEOs are less concerned about climate change than investors would like. Learn how executives can bridge the expectation gap on climate action. Read more. - Carrots, sticks and green accelerants: What every sustainability leader should be thinking about
ESG can be a critical driver of growth, but the challenge lies in aligning positive change for the environment and society with growth for business. Chief Sustainability Officers (CSOs) are central to this transformation, and must be equipped with the data, insights and expertise to enable them to be effective agents of change. Read more.
For more ESG insights, visit our dedicated ESG webpage.
Angola
Angola joins Global Forum as 166th member
As reported above, Angola has joined the international fight against tax evasion by becoming the 166th member – and 35th African member – of the Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum). Read more in this OECD item.
Australia
Monthly Tax Update - March 2023
Welcome to the March 2023 edition of Australia's Monthly Tax Update, keeping you up to date on the latest Australian and international tax developments.
Belgium
See here for latest updates.
The Belgian Minister of Finance proposes long awaited tax reform
Finance Minister Vincent Van Peteghem launched his proposal for a first phase in the Belgian tax reform. This proposal was announced several months ago and is now being put formally on the table and will go into the legislative process. The aim is to land on a reform by the beginning of April, with a formal vote in the summer. Read more in this PwC news item.
Advance tax payments: first deadline of the financial year 2023
Unless a company pays its Belgian corporate income taxes due by means of timely advance tax payments during the financial year concerned, a surcharge is due on the final amount of Belgian corporate income tax due upon assessment. For financial year 2023, the global surcharge is 6.75% and the first due date to make an advance tax payment for a financial year ending on 31 December 2023 is 11 April 2023 (since 10 April is a banking holiday). Future dates for your calendar are: 10 July, 10 October and 20 December 2023. Read more in this PwC news item.
Bermuda
Bermuda flags the second half of 2023 for decisions on Pillar Two
We noted in our last edition that Bermuda is now actively looking at how to implement Pillar Two and has flagged the second half of 2023 for decisions on the matter. Further information is now available in our latest digital tax byte and the Bermudan 2023-24 Budget Statement can be viewed here.
Brazil
Brazil issues guidance for early adoption of the arm’s-length principle - taxpayers should evaluate its potential impact
In late December 2022, Provisional Measure (MP) 1152/22 was published by the Brazilian Government, seeking alignment with the arm’s-length principle (ALP) in accordance with the OECD Transfer Pricing Guidelines. The MP must be ratified by the Congress and converted into ordinary law within 60 days from the date of its publication (discounting Congressional recess, the initial deadline is in April 2023). The deadline for formalisation of the early adoption for 2023, if elected, must be made during the period 1 - 30 September 2023. As such, taxpayers considering early adoption should begin evaluating its potential impact so they are prepared to make a final decision in September 2023. Read more in this PwC Tax Insights.
Germany
Cryptocurrencies to be taxed as capital gain if not held for more than one year
Gains realised by taxpayers within one year from the sale or exchange of cryptocurrencies such as Bitcoin, Ethereum and Monero are subject to taxation as a private capital gain. At least as far as the year 2017 was concerned, the Supreme Tax Court held that there was no normative enforcement deficit in the recognition and taxation of transactions with currency tokens which could be viewed as unconstitutional. Read more in this PwC tax blog.
Taxation of stock options in the event of change of residence
Concerning the taxation of stock options, the Supreme Tax Court decided that the question of residency is not to be answered by looking at the year in which the benefit was received (which was the year in dispute), but rather at the time of the plaintiff's residency abroad in the period between the grant of the options and the date on which the option could be exercised for the first time. Read more in this PwC tax blog.
Hong Kong
Hong Kong Budget announces Pillar 2 plans for 2025
In the Hong Kong Budget 2023/24 on 22 February, Financial Secretary Paul Chan Mo-po announced that it was proposed to implement the 15% global minimum tax on large multinational enterprise (MNE) groups under BEPS 2.0 Pillar Two and a domestic minimum top-up tax starting from 2025 onwards. He said the Budget was themed ‘Leaping forward steadily, together we bolster prosperity under our new vision’. Further analysis of this announcement is now available from PwC Hong Kong and in our latest digital tax byte.
India
Revision under section 263 is not tenable where issue was examined during assessment proceedings - Provisions of section 79 cannot be invoked, where ultimate beneficial shareholder remains the same
In a recent ruling, the Mumbai bench of the Income-tax Appellate Tribunal quashed the Principal Commissioner of Income-tax’s (PCIT) revisionary order under section 263 of the Income-tax Act 1961, on the grounds that the tax officer had taken a plausible view after enquiry and verification. The Tribunal further held that where the beneficial shareholding remains the same and/or no set-off of losses has been claimed or allowed, section 79 of the Act cannot be invoked. Read more in this PwC Tax Insights.
Ireland
Ireland updates FATCA guidance
The Irish tax agency has announced an update to Tax and Duty Manual Part 38-03-22, titled Guidance Notes on the Implementation of Foreign Account Tax Compliance Act (FATCA) in Ireland, as well as Tax and Duty Manual Part 38-03-25, titled Filing Guidelines for Foreign Account Tax Compliance Act (FATCA).
Italy
2023 Budget Law – the main measures in national and international taxation
Budget Law No. 197/2022 (Budget Law 2023), titled “State budget for the financial year 2023 and multi-year budget for the three-year period 2023-2025“, was published in the Official Gazette on 29 December 2022. This PwC blog article, dated 27 February, summarises some of the main measures in national and international taxation.
New Zealand
Tax Policy Bulletin - February 2023
Tax Policy Bulletin is our monthly round-up of key recent tax headline news items from New Zealand. This edition includes: 1) tax relief for flood and cyclone impacted people - interest remission; 2) other tax considerations - flood and cyclone impacted people; 3) extension for deadline for R&D loss tax credit statements; and 4) other recent news, including a round-up of open consultations, recent tax cases, and Inland Revenue guidance.
Portugal
Portugal deposits MLI notification
Portugal deposited a notification relating to the MLI on 6 March 2023, simply confirming the 12 October 2022 entry into effect of the BEPS MLI changes for Portugal's treaty with Timor-Leste. See the latest status of signatories and parties.
Singapore
Singapore Budget announces Pillar 2 plans
Singapore plans to implement the GloBE rules and a domestic top-up tax (DTT) from businesses’ financial year starting on or after 1 January 2025. Singapore’s 14 February 2023 Budget Annex G-1 states “We will continue to monitor the international developments and adjust our implementation timeline as needed if there are delays internationally. We will also continue to engage businesses and provide them with sufficient notice ahead of any rules becoming effective.” Read more from PwC Singapore and in our latest digital tax byte.
South Africa
Donations receipts to claim income tax deductions - additional information requirements
The South African Revenue Service’s notice (published in the Government Gazette on 24 February 2023) provides that additional information will have to be included on receipts, issued on or after 1 March 2023, to donors in terms of section 18A(2)(a)(vii) of the Income Tax Act 58 of 1962. Taxpayers making donations on or after this date should note these changes and ensure that donations receipts include the required additional information. Read more in this PwC tax alert.
Switzerland
For the latest updates on current topics, see this PwC Switzerland Insights page.
Taiwan
Taiwan Tax Update February 2023
The latest edition includes: 1) donations made by individuals or profit-seeking enterprises for Turkey earthquake are allowed as itemised deduction for individual tax purpose, or deductible expense for corporate tax purpose; 2) CFC set up in low-tax country or jurisdiction to obtain transportation operating license, which holds vessels and hires foreign crew to carry out international transportation business, is not considered to have “substantive operation”.
Turkey
New supplementary tax for corporate taxpayers
Law No. 7440, published in the official gazette on 12 March 2023, introduced a supplementary tax of 10% (5% in certain situations) for corporate taxpayers. The new tax will apply to the following base:
- deductions and exemptions which are excluded from the taxpayer’s corporateincome tax base on the annual corporate tax return of the year 2022 (subject to some exceptions); and
- corporate income tax base which is taxed at reduced rates in the year 2022 due to the investment incentives available under Article 32/A of the Corporate Tax Law.
The base for additional tax should be assessed regardless of whether the taxpayer has a corporate income tax liability in 2022. Read more in this PwC alert.
Turkey reduces withholding tax rate to zero on share buybacks
With the Presidential Decree no.6791 published in the official gazette on 14 February 2023, the withholding tax rate on deemed dividends in connection with share buybacks by Turkish resident companies has been reduced to 0% from 15%. Read more in this PwC tax alert.
United Arab Emirates
UAE plans ahead for pre-registering digital businesses for the incoming corporate tax
The UAE Federal Tax Authority (FTA) has launched early registration for corporate tax through the EmaraTax platform for digital tax services, in line with Federal Decree-Law No.47 of 2022 on the Taxation of Corporations and Businesses (the “Corporate Tax Law”), which stipulates that Taxable Persons will become subject to Corporate Tax from the beginning of their first financial year that starts on or after 1 June 2023. Read more in our latest digital tax byte and from the Federal Tax Authority here.
US
Budget 2024
President Biden’s FY 2024 budget was released on 9 March.
- President Biden’s FY 2024 budget renews call for 28% corporate rate & other tax increases
Key business tax provisions in the FY 2024 budget include a proposal to increase the US corporate income tax rate from 21% to 28%, and proposed reforms to US international tax rules that include raising the tax rate on the foreign earnings of US multinational corporations from 10.5% to 21% and adopting an undertaxed profits rule. Read more in this PwC Tax Insights. - President's budget: Tax proposals we might see
In this Policy On Demand episode from 6 March, Janice Mays discusses tax proposals we might see in the president’s budget, how the budget may help guide debt limit discussions, and how it might contribute to the debate over the direction of US tax policy. - Week in Review with Andrew Prior
This Policy on Demand episode from 10 March, includes a discussion of how President Biden’s FY24 budget will likely reignite a debate over deficit reduction and the US debt limit.
Pillar Two
- Cross-border Tax Talks: Searching for Pillar Two clarity - the OECD’s Administrative Guidance
In this episode from 8 March, Doug McHoney (PwC's US International Tax Services Global Leader) records from PwC’s 2023 International Tax Conference, where he is joined by Phil Ramstetter, PwC International Tax Partner based in Chicago. Phil was formerly a tax policy consultant for Business at OECD (BIAC). Doug and Phil overcome conference background noise to discuss the recent administrative guidance, but start with a history lesson on Pillar Two, when it was merely the Digital Project. - Cross-border Tax Talks: Pascal Saint-Amans - the Pillar Two Origin Story
In this episode from 1 March, Doug McHoney records from PwC’s 2023 International Tax Conference, where he is joined by Pascal Saint-Amans, former Director of the OECD's Centre for Tax Policy and Administration to discuss Pillar Two in depth.
Tax Court upholds validity of ‘blocked income regulation’ in long-awaited 3M decision
In 3M, a sharply divided US Tax Court recently issued a long-awaited decision that upheld the 1994 blocked income regulation under Section 482. In upholding the validity of the 1994 blocked income regulation, the Tax Court majority opinion directly impacts the evaluation of related-party transactions that are subject to legal restrictions preventing the payment or receipt of arm’s-length amounts. The 1994 regulation allows taxpayers to avoid the imputation of arm’s-length income that is subject to such legal restrictions only if certain strict requirements are met. Read more in this PwC Tax Insights.
Policy on Demand series - Week in Review
- In this episode from 10 March, Andrew Prior discusses how President Biden’s FY24 budget will likely reignite a debate over deficit reduction and the US debt limit. Companies continue to be concerned about worldwide implementation of Pillar 2. Andrew encourages companies to watch Congressional hearings on the president’s budget for potential areas of bipartisan consensus.
- In this episode from 3 March, Todd Metcalf discusses how bipartisanship seems to be breaking out around a few select issues, including working families, retirement plans, and US relations with China, reflecting areas where legislative agreement may occur. He encourages companies to continue to build relationships and raise their issues with legislators.
Tax Readiness webcast series
- Tax Readiness: Q1 Financial reporting considerations
Register here to join our panel of PwC specialists on Tuesday 28 March at 8pm as they take a deep dive into key tax accounting and reporting reminders and discuss recent tax developments. - Tax Readiness: Deals Outlook - The tax perspective
In this webcast from 2 March, our panel reviews the recently launched US Deals 2023 outlook and discusses key tax issues and opportunities including the new stock buyback excise tax, divestitures, expiring provisions, and state and local taxes. Watch the replay here.
State and local tax
- US Supreme Court rules unclaimed agent, teller’s checks escheat to state of purchase
The US Supreme Court recently ruled that the Disposition of Abandoned Money Orders and Traveler’s Checks Act (Federal Disposition Act or FDA) governs teller’s checks and agent checks, and that unclaimed proceeds of such should escheat to the state of purchase. [Arkansas, et al. v. Delaware, No. 22O146 ORG, Delaware v. Pennsylvania, U.S., No. 22O145, 2/28/23]. For companies that issue teller’s checks and agent checks, this decision may significantly alter the filing of unclaimed property for Delaware and other states. Read more in this PwC Tax Insights.
Further information
You can sign up for Tax Alerts issued by the US to be emailed to you. Subscribe using the link on this page. A back catalogue of previous webcasts and other resources are available on our US tax reform hub here.