Two weeks to 10 May 2024
Welcome to the latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
UK
Pillar Two
- Pillar Two Decoded: What do Legal Counsels need to know?
Our livestream entitled "Pillar Two Decoded: What do Legal Counsels need to know?" is taking place virtually on 14 May at 16:30, the latest in our PwC International Business Reorganisations Academy series of quarterly livestreams designed to help in-house counsels, company secretaries, tax professionals and other key stakeholders navigate the challenges with legal entity reorganisations and restructurings. Our experts will unravel the complexities of Pillar Two and its potential implications for legal practitioners, delivering helpful and practical insights into how these regulations affect their functions and the strategic approaches necessary for Pillar Two readiness, compliance and risk management. You can register your attendance via this link. You will then be sent an email with calendar details, and you will also receive a recording of the session afterwards.
Case law update
- Kwik-Fit case - unallowable purpose case finds loan had tax advantage main purpose
The Court of Appeal has found for HMRC in Kwik-Fit v HMRC, the latest of a recent series of cases considering the unallowable purpose rules, affirming that there was a main purpose of securing a tax advantage in this case. Lady Justice Falk has reiterated her important messages from BlackRock on how the question of unallowable purpose should be approached.
The tax implications of engaging cross-border executives
Talent searches for top executives are increasingly crossing borders, thanks to the rise of hybrid working. But engaging overseas workers in these roles outside their home territory has a number of tax implications. Read more.
Finance (No2) Bill 2024
The Finance Bill had its second reading on 17 April with debates in the Whole House on 8 May and Public Bill Committee taking place between 21-23 May.
HMRC Manual & guidance updates
- Digital Services Tax Manual - updated 8 May
- DST27000: Attributing to UK Users – Online Marketplaces - Updating to provide clarification on HMRC’s interpretation of Case 3 and Case 5 revenues, including a clarification in the example. Minor updates also made.
- DST43200 - Cross Border Relief Claim - Update to clarify online marketplace revenues that qualify for cross-border relief.
- DST43300 - Similar DSTs - Added a point to the factors HMRC consider when deciding whether a DST is similar.
- International Manual
- 1 May
INTM252200: Controlled Foreign Companies: How the corporate tax regime works for CFCs: Clearances: Where to send applications - Updated CFCs Mailbox link to correct address; updated postal address - updated 1 May - 7 May
INTM860800: European Union (EU): General Exemption - page archived
INTM860810: European Union: exemption from Taxation - Updated paragraph to detail terms of exemption. - Stamp Duty Land Tax Manual - updated 10 May
- SDLTM20260 - Freeports and Investment Zones relief – leases and rent. Changes made to the SDLT Manual to update the freeport and Investment Zones sunset dates.
- Stamp Taxes on Shares Manual - updated 10 May
- STSM123030 - Financial markets: trading venues: recognised investment exchange. Page updated to reflect removal of IPSX UK Limited from FCA list of RIEs.
- STSM123040 - Financial markets: trading venues: regulated market. Details of UK regulated markets updated to reflect removal of IPSX from the FCA list.
Treaty updates
Double Taxation Treaty Passport Scheme register
HMRC has updated the register of overseas corporate lenders who are passport holders for Double Taxation Relief on UK loan interest. The register has been updated as of 6 May with 207 additions, 17 amendments and 67 removals.
EU
Consultation on EU Directive on Administrative Cooperation (DAC) information exchange Directive
Directive 2011/16/EU (directive on administrative cooperation - DAC) establishes a system for secure administrative cooperation between the national tax authorities of EU countries and lays down rules and procedures for exchanging information. The European Commission has launched an evaluation that will assess the effectiveness, efficiency and continued relevance of the DAC and its amendments (DAC2 to DAC6), as well as its coherence with other policy initiatives and priorities and the EU added value. The consultation runs until 30 July.
ATAD I and II overview
PwC Netherlands has published an updated version of the ATAD I & II implementation overview. This version (as of April 2024) serves as an update to the overview published in November 2022, and includes information on implementation of the ATAD I & II rules in EU Member States’ national laws up until 15 January 2024. Read more.
Final FASTER compromise proposal changes exemption threshold
The Belgian EU Council presidency's final Faster and Safer Relief of Excess Withholding Taxes (FASTER) compromise proposal increases the market capitalisation ratio that a country with an extensive relief-at-source system needs to be exempt from some provisions.
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 6 May includes: 1) Ad Hoc Committee to Draft Terms of Reference for a United Nations Framework Convention on International Tax Cooperation; 2) CFE Forum | Sharing the Tax Pie | 18 April 2024 | Brussels; 3) EU Elections – 6 to 9 June – #UseYourVote; 4) OECD Labour Tax Report; and 5) Tax Inspectors Without Borders Report Published. Visit their latest news page here. - CFE’s Global Tax Top 10
The April edition includes: 1) Ad Hoc Committee to Draft Terms of Reference for a United Nations Framework Convention on International Tax Cooperation; 2) OECD Publishes Updated GloBE Commentary; 3) EU Elections – 6 to 9 June – #UseYourVote; 4) EU Commission April Infringement Package; 5) CFE Forum | Sharing the Tax Pie | 18 April 2024 | Brussels; 6) EU-US AI Research Alliance & Report on “AI for Public Good”; 7) Activity Report of EU Parliament’s Subcommittee on Tax Matters; 8) EU Opens Investigations Into Tech Companies Under DMA; 9) OECD Labour Tax Report; and 10) EU Commission to Examine Austria’s Complaint Against Hungary’s Retail Tax.
OECD
Pillar Two
- OECD releases Pillar Two GloBE Consolidated Commentary & Examples
As we reported in our previous edition, the OECD on 25 April 2024 published Consolidated Commentary (Commentary) to the Pillar Two Global Anti-Base Erosion (GloBE) Model Rules that incorporates all agreed Administrative Guidance that has been released by the Inclusive Framework (IF) from March 2022 through December 2023. The Commentary aims to provide tax administrations and taxpayers with guidance on the interpretation and application of the GloBE Model Rules, which are designed to ensure that large businesses pay a minimum level of tax on the income arising in each jurisdiction where they operate. The OECD also released updated Illustrative Examples (Examples), originally published in March 2022, including the examples that were developed as part of the various pieces of Administrative Guidance approved by the IF before the end of December 2023. You can now read more in our PwC Tax Policy alert. - Pillar Two Data Strategy: Play ball!!!
In this Cross-border Tax Talks episode from 29 April, Doug McHoney (PwC's US International Tax Services Global Leader) is with Anthony Sciarra, a Principal in PwC’s Tax Reporting and Strategy Practice and the Global Pillar Two Data Strategy leader, to discuss the importance of a Pillar Two Data Strategy. Doug and Anthony detail what taxpayers should be doing today to stay ahead of Pillar Two’s complexity, specifically highlighting: data sourcing, data forecasting, qualifying for the CbC Transitional Safe Harbor, considerations for both an insourcing & outsourcing model, existing technology solutions, and the importance of a centralised rules calculation. - Pillar Two: Hindsight is 20/24
In this Cross-border Tax Talks episode from 10 May, Doug McHoney (PwC's Global International Tax Services Leader) and podcast regular Calum Dewar (Principal, International tax services) are at PwC’s EMEA’s International Tax, Legal, and Workforce Academy in Prague, Czech Republic, to discuss the latest happenings around Pillar Two. Doug and Calum examine the many practical issues taxpayers, governments and tax advisors are facing to implement the new rules, including disparity in financial accounting, the QDMTT safe harbour, arbitrage arrangements, GloBE reorganisation rules, and allocation of deferred taxes.
Joint OECD - UNDP initiative continues successfully working with developing countries to boost tax revenues and mobilise domestic resources
A groundbreaking international tax initiative managed by the OECD and the United Nations Development Programme (UNDP) continues making strong progress assisting developing countries boost tax revenues and better mobilise domestic resources, according to a recent report. Read more in this OECD item.
MLI
Latest updates, the text of the BEPS Convention, the explanatory statement, background information, database, and positions of each signatory and parties are available at https://oe.cd/mli.
United Nations
UN Framework Convention on International Tax Cooperation
The first substantive session of the UN Ad Hoc Committee (Committee) to develop a terms of reference (ToR) for negotiating a UN Framework Convention was held from 26 April to 8 May. The UN website contains links to a provisional agenda, the organisation of work for the first substantive session, a skeleton ToR, and replays of the proceedings. In short, it does not appear that much progress has been made. Countries reiterated their already-voiced positions during the meetings, and debated a number of items with little to no agreement reached. These debates covered: consensus in decision-making; whether procedural or substantive issues should be included in the ToR; topics to be included in the Framework Convention, and topics/timelines for initial priority protocols. Throughout the debates, there was an apparent divide between developed and developing countries.
Other territories
International
International Tax News - April 2024
Among the topics featured in this month's edition are: 1) Hong Kong introduces patent box tax incentive; 2) Canada releases 2024 Federal Budget; 3) China releases preferential CIT policies; and 4) Belgium draft law amending the law introducing minimum tax for multinational companies.
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. In this edition, from 9 May, we cover:
- Malta's simplified pricing method for low-value-adding intra-group services;
- Ireland's updated guidance on certain withholding tax (WHT) defensive measures;
- the US State of California's latest attempts to tax digital activities through a "data extraction" tax.
Digital tax megabyte for April 2024
A collection of the brief insights throughout April 2024 of the type provided on an ad hoc basis in our Latest digital tax byte update (see above).
Environmental, Social and Governance (ESG)
- Invitation to Webinar: Nordic Battle of Treasury - Commodity Risk Management focused on CO2 emissions
Join our colleagues in PwC Denmark for a webinar on Wednesday 12 June at 2pm (UK) where you will gain valuable insights into measurement of CO2 emissions as well as how to handle CO2 as a commodity and how the CO2 market is developing. You can register here. - Circular manufacturing: Three steps to future-proof your business
While some companies are ahead of the curve in embracing circularity and its economic dividends, there is an opportunity for many more across manufacturing sectors to release the potential it offers. So how can you get started? Read more in our article.
Australia
Updates to the ATO’s approach to reviewing the Top 1,000 taxpayers
The Australian Tax Office (ATO) is making changes to the Top 1,000 program which include tangible incentives where taxpayers have strong tax governance and have previously received a medium or high overall assurance rating from the ATO.
Spotlight on Next 5,000 private groups
The Australian Taxation Office has released guidance on the "Next 5,000" tax enforcement programme. These are entities linked to Australian residents who together with their associates control wealth of more than $50 million.
Belgium
See here for latest updates.
Investment deduction rates for tax year 2025 published
The percentages of the investment deduction for investments made during the taxable period linked to tax year 2025 until 31 December 2024 have been published. This PwC news item provides an overview of the percentages that apply for companies.
Belgium - New withholding tax exemption for variable shifts adopted in Parliament
On 3 May 2024, the Belgian Parliament adopted the law concerning the new exemption of withholding tax for shift work with variable shifts. The law introduces the “variant bis”, aiming to ensure clarity and legal security, mitigating recent judicial decisions that restricted the definition of qualifying shift. Read more in this PwC news item.
Canada
Canada launches second phase of consultations on the SR&ED programme
Budget 2024 announced an additional $600 million over four years starting in 2025-26, with $150 million per year ongoing, for future enhancements to the Scientific Research and Experimental Development (SR&ED) tax incentive program. The Canadian Government has launched a second consultation until 27 May, as it works to enhance the SR&ED program and target this additional funding to boost research and innovation.
Germany
Two-step trade tax allocation if permanent establishment is based in more than one municipality
The trade tax allocation of permanent establishments (PEs) extending over more than one municipality ("multi-municipality permanent establishments") must by way of typification consider the specific character and nature of the PE and the interests of the municipalities involved. The Supreme Tax Court held that, in the case of PEs constituted through a natural gas pipeline, the volume of natural gas supplied in the respective communities can be a suitable approach for allocation of the trade tax. Read more in this PwC blog.
Hong Kong
Minutes released of the 2023 annual meeting between the IRD and the HKICPA
The minutes of the 2023 annual meeting between the Inland Revenue Department (IRD) and the Hong Kong Institute of Certified Public Accountants (HKICPA or Institute) held on 12 May 2023 were recently released. They summarise the IRD’s views on various tax issues expressed during the meeting, including issues related to profits tax, salaries tax, transfer pricing, the foreign-sourced income exemption (FSIE) regime and administrative matters.
- IRD provides guidance on applying the FSIE regime at the 2023 annual meeting with the HKICPA
This PwC alert provides a summary of the guidance provided by the IRD on the application of the FSIE regime, along with our observations. - IRD’s views on certain profits tax issues expressed in its 2023 annual meeting with HKICPA
This PwC alert highlights the IRD’s views on key profits tax issues.
Hong Kong updates list of AEOI partner territories
Hong Kong recently gazetted the Inland Revenue Ordinance (Amendment of Schedule 17E) Notice 2024, which will update the list of partner jurisdictions for purposes of the automatic exchange of information in tax matters (AEOI). Read more in this press release.
India
Court rejects higher TDS rate than prior years’ as finding on profit attribution was left unquestioned
The Delhi High Court has held that the Revenue cannot direct a higher rate of tax deducted at source (TDS) than the rate of profit attribution to the permanent establishment (PE) in India it accepted earlier, unless the Revenue challenges the same before the appropriate authority. Read more in this PwC alert.
Ireland
Bilateral Advance Pricing Agreement Guidelines
The Irish Revenue Agency has updated Tax and Duty Manual Part 35-02-07 Bilateral Advance Pricing Agreement Guidelines, to take into account international best practice in relation to bilateral Advance Pricing Agreements (APA) as identified by the OECD.
Podcast - The role of Ireland as a treasury hub
In this podcast, co hosted by Bank of America and PwC, the panel discusses the factors driving Ireland's success in the global treasury landscape and the opportunities it presents for businesses looking to optimise their treasury function.
Malta
A closer look at the recently launched Malta Enterprise incentive schemes
Malta Enterprise is the country's economic development agency, tasked with attracting new foreign direct investment as well as facilitating the growth of existing operations. Recently Malta Enterprise Corporation launched several incentive schemes to support start-ups, SMEs and large enterprises with funding for initial investment projects and other eligible expenditures. Read more in this PwC news item.
Malta's simplified pricing method for low-value-adding intra-group services
As reported in our previous edition, Malta issued Transfer Pricing Guidelines in January of this year, on its application of the arm’s length charge for low value-adding intra-group services, determined following the OECD Transfer Pricing Guidelines and EU Joint Transfer Pricing Forum guidelines. Read more in the latest edition of our Digital Tax Byte.
Singapore
Pillar Two update
The Inland Revenue Authority of Singapore recently updated its Pillar 2 website with an informational slide deck covering general background on BEPS 2.0, the adoption and scope of the GloBE rules, IIR/UTPR/domestic top-up tax (DMTT) mechanics, exclusions, and safe harbors. Singapore intends to implement parts of the global minimum tax, including the IIR and a DMTT effective 2025. The UTPR will be considered at a later stage.
Switzerland
For the latest updates on current topics, see this PwC Switzerland Insights page.
Taiwan
Taiwan Tax Update - April 2024
This update includes: Ministry of Finance announced that profit-seeking enterprises, institutions, and organisations may access income query service for tax year 2023 from 26 April 2024 to 31 May 2024 using digital certificates.
US
Regulations on transfers of energy tax credits are finalised
Section 6418 allows an eligible taxpayer to transfer certain energy credits to an unrelated party in lieu of claiming the credit. Regulations under Section 6418 were published on 30 April that finalise proposed regulations and remove temporary regulations that were published on 21 June 2023. The final regulations apply to tax years ending on or after 30 April 2024. However, taxpayers may apply the final regulations, other than rules relating to pre-filing registration, in earlier tax years if they apply the rules consistently and in their entirety. Read more in this PwC Tax Insights.
Policy on Demand series
- Deficit, revenue concerns to play larger role in TCJA discussions
In this episode from 6 May, Karl Russo shares his insights on the projected US revenue loss from the OECD’s global tax agreement and the potential costly extension of TCJA provisions. - Week in Review
- 10 May - With the likelihood of passage of the bipartisan tax bill dimming, companies should focus their attention on the Congressional tax-writing committees and engage with Members as they begin to prepare for the 2025 tax debate. Watch here.
- 3 May - While Congress struggles to advance tax policy and the likelihood of the tax bill passing is diminishing, Todd Metcalf sees the wheels of tax policy turning with the quickening pace of regulatory guidance. Watch here.
Tax Readiness webcast series
- Tax Readiness: Private Capital tax trends
Join our panel of tax specialists on Tuesday 4 June at 7pm, who will discuss the latest tax trends and regulatory changes impacting the private capital industry - from portfolio companies to investors. Register now to gain actionable insights on how the ever-evolving tax landscape is shaping business strategies and operational considerations for private capital firms. Register here. - Tax Readiness: What taxpayers need to know about the recent stock buyback proposed regulations
Watch the replay from this webcast held on 8 May, where our panel discuss the recently issued stock buyback proposed regulations including reporting considerations and equity compensation determinations. - Tax Readiness: Operationalising your AI strategy
Watch the replay from this webcast held on 25 April where our panel of specialists share how to build an effective AI strategy for your tax operations. Explore real-world examples of successful AI implementation and discover practical steps to unlock the full potential of AI, drive value, and develop a strategic approach.
State and local tax
- California digital data extraction tax proposal moves to the Senate Appropriations Committee
The digital data extraction bill (S.B. 1327), put forward by committee Chair Sen. Steve Glazer (D), passed by a vote of 4-1 and now moves to the Senate Appropriations Committee for consideration.as a basis of funding local news media. Read more in the latest edition of our Digital Tax Byte. - US state income tax digest - May 2024
The US state income tax digest highlights significant income and business tax legislative enactments, regulatory adoptions, judicial decisions, and administrative guidance. Read the latest edition here.
Further information
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