Two weeks to 11 November 2022
Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
UK
Autumn Statement - predictions, analysis and resources
The Autumn Statement is due to be delivered on 17 November, following the decision by the new Prime Minister Rishi Sunak and his Chancellor of the Exchequer Jeremy Hunt to defer the date of the Medium Term Fiscal Plan (originally scheduled for 31 October). It follows the Chancellor’s reversal of the majority of the measures announced in the ‘mini-Budget’ held on 23 September by his predecessor, Kwasi Kwarteng.
- Our predictions
What could the Autumn Statement on 17 November mean for individuals and businesses? We share our predictions here. - Our reactions and analysis on the day
Visit our dedicated webpage for our reactions and analysis. - Our webcast
Register here to join our panel on Friday 18 November at 9am as they discuss the announcements and what they could mean for businesses and the economy as a whole.
Public Accounts Committee opens an inquiry on DST
The UK government introduced digital services tax (DST) in April 2020 as a temporary measure to address the challenges posed by the digital economy to international corporate taxation. On 1 November 2022, the Public Accounts Committee (PAC) opened an inquiry into the DST, which follows on from an investigation undertaken by the National Audit Office. The PAC will question officials at HMRC/HMT on the design, implementation and administration of the DST and readiness to replace it with the OECD reforms. The inquiry will be open for users to submit evidence until 27 November 2022.
Call for Evidence: Review of hybrid and distance working
As reported previously, the Office of Tax Simplification (OTS) launched a consultation on the emerging trends and tax implications of hybrid and distance working which closed on 28 October . This was a high-level evidential review of the current extent of hybrid and distance/home working, whether it is likely to increase, whether this trend involves more working across borders, and whether changes in working practices give rise to any tax complexity or challenges for employers and employees, as well as small businesses. The CIOT has submitted their comments which you can view here.
The appeal of the UK REIT regime continues to grow
As we consider the landscape for investors in UK real estate, the list of factors influencing yields, sector performance and investor strategy is certainly not a short one. We imagine business analysts across the country updating PESTLE analysis v200, and it seems the Bank of England gave investors reason for a further update last week. Effective rates of tax on property income and gains have increased and will increase further from April 2023 for non-REITs. There are fewer barriers to REIT conversion than before and, if listing can be avoided, REIT running costs should not be dissimilar to those of a “normal” corporate structure. As a result, we believe the number of UK REITs will continue to increase and many of them will not be listed. Read more.
How a new generation of technology is opening up a world of new possibilities for tax teams
Tax teams are seeing the benefit of the latest wave of technological advancements which have the potential to catapult tax to the front of the finance function investment agenda. Read more.
Hybrid & other mismatches: HMRC update TIIN on hybrid and other mismatches legislation change
SI 2022/1144 was laid before the house on 8 November and comes into effect on 31 December 2022. It amends SI 2019/1345, to continue the exemption for certain hybrid capital instruments issued by banks to overseas associates beyond 31 December 2022. Following its publication, HMRC have updated their Tax Information and Impact Note (TIIN) on this.
Company Tax Return Guide - other updates
A number of updates have been made to the guide recently, including more information on how to claim non-trading losses on intangible fixed assets and excess amounts of management expenses and the insertion of a new link to information about 'Make a qualifying asset holding company notification to HMRC guidance' in the 'Qualifying Asset Holding Company' section. See here.
The Taxation (International and Other Provisions) Act 2010 Transfer Pricing Guidelines Designation Order 2022
SI 2022/1147 designates the 2022 version of the OECD Transfer Pricing Guidelines for the purposes of UK transfer pricing rules.
Offshore Corporates Owning UK Property – HMRC campaign
HMRC have told the CIOT that they will be launching a new campaign in November 2022 to tackle non-compliance linked to offshore corporates owning UK property. Read more in this CIOT article.
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 November 2022. View the updated list.
EU
CJEU’s final State aid decision in the European Commission’s Fiat case
On 8 November 2022, the Court of Justice of the European Union (CJEU) published its final decision on two appeals (C885/19 P, and C-898/19P) regarding the formal State aid investigation by the European Commission dating back to October 2015 in relation to an Advance Pricing Agreement (“APA” or “tax ruling”) of Fiat Finance & Trade Ltd (“FFT”). The European Court of Justice annulled the European Commission’s decision setting aside the finding that FFT had received State aid. Read more in this PwC EUDTG newsalert.
Finance ministers agree to strengthen the code of conduct used to identify and curb harmful tax measures of member states
EU finance ministers have agreed on a revised code of conduct for business taxation: a political, intergovernmental commitment by member states to apply reinforced screening rules when looking for and remedying tax measures that could be harmful to the tax bases of other member states. The ultimate goal is to tackle harmful tax competition, tax evasion and tax avoidance in the EU. It is the first revision of the code since 1997. Read more in this press release.
Commission launches public consultation on BEFIT, a new framework for EU corporate taxation
The European Commission has launched a public consultation until 26 January 2023 on BEFIT (Business in Europe: Framework for Income Taxation), a new framework for EU corporate taxation. This initiative aims to introduce a single corporate tax rulebook for the EU, providing for fairer allocation of taxing rights between Member States. It also plans to reduce compliance costs and create a coherent approach to business taxation throughout the EU.
Tax MEPs conclude fact finding visit to Switzerland
A delegation of MEPs of the subcommittee on tax matters has recently concluded a two day fact finding visit to Switzerland. The delegation (led by the Chair, Mr Paul Tang) met with representatives of key institutions, such as the Federal Department of Finance, the Federal Tax Administration, Members of the Economic Affairs and Taxation Committees of the National Council, as well as stakeholders from the private sector, experts and civil society. Read more in this European Parliament 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 7 November includes: 1) EU Parliament’s Draft Report on Tax-Related Revelations; 2) CFE Opinion Statement in PRA Group Europe on Interest Barrier & Group Contributions (EEA relevance); 3) ICAEW Wyman Symposium Debates Regulation of Tax Professionals; 4) EU Commission 2023 Work Programme Announced; 5) CFE Conference “Targeting the “Bad Apples”: Enablers of Tax Avoidance”; Zagreb, 2 December 2022. Visit their latest news page here. - Global Tax Top 10 - October 2022
The latest edition includes:1) EU Commission Publishes BEFIT Call for Evidence; 2) OECD Presents New Crypto-Assets Transparency Framework; 3) CFE Publishes Statement on the EU Enablers Initiative; 4) UN Committee of Experts on International Cooperation in Tax Matters: 25th Session; 5) Register Now: Conference “Targeting the “Bad Apples”: Enablers of Tax Avoidance”; Zagreb, 2 December 2022; 6) Council of the EU Blacklists Anguilla, The Bahamas & Turks and Caicos Islands; 7) Inclusive Framework on BEPS Release Progress Report for Public Consultation; 8) CFE ECJ TaskForce Opinion Statement on the EFTA Court decision in Case E-3/21, PRA Group Europe; 9) EU Parliament’s FISC: Reform of Corporate Taxation & Lessons Learned from the Pandora Papers; 10) OECD Secretary-General Report to G20 Ministers.
OECD
Pillar One Model Rules - Progress Report on the Administration and Tax Certainty Aspects of Amount A of Pillar One
The Chartered Institute of Taxation (CIOT) has responded to the OECD’s public consultation on the Progress Report on the Administration and Tax Certainty Aspects of Pillar One. A copy of the response can be found here.
15th meeting of the Global Forum on Transparency and Exchange of Information for Tax Purposes
The 2022 Global Forum plenary meeting was held at FIBES Conference and Exhibition Centre in Seville, Spain, from Wednesday 9 to Friday 11 November 2022. The three-day meeting brought together ministers, other high-level authorities and delegates from more than 100 member jurisdictions. The event was jointly organised by the Global Forum and the Spanish Ministry of Finance and Civil Service (Ministerio de Hacienda y Función Pública). The meeting was broadcast live and you can view the recording here.
- Global Forum reports significant progress on global transparency and exchange of tax information, while noting further work is needed
The peer review report was presented during the first day of the annual plenary meeting of the Global Forum. This report presents the latest conclusions of the peer reviews of the legal frameworks put in place by each jurisdiction to implement the AEOI standard. The results relate to the more than 100 jurisdictions that committed to commence AEOI by 2020. It also contains, for the first time, the results of the Global Forum’s initial peer reviews in relation to the effectiveness in practice of the implementation of the standard. Read more in this OECD press release. - Global Forum publishes the latest series of second round peer review reports
The Global Forum has published 10 new peer review reports on the Exchange of Information on Request (EOIR) for Barbados, the British Virgin Islands, Iceland, Israel, Kuwait, the Maldives, Morocco, Slovenia, South Africa and Türkiye.
28 jurisdictions sign international tax agreements to exchange information with respect to income earned on digital platforms and offshore financial assets
At a signing ceremony held in Seville in the side-lines of the 15th Plenary Meeting of the Global Forum on Transparency and Exchange of Information for Tax Purposes, 22 jurisdictions signed the multilateral competent authority agreement (MCAA) for the automatic exchange of information under the OECD Model Rules for Reporting by Digital Platforms. In addition, 15 jurisdictions signed a separate MCAA supporting the Model Mandatory Disclosure Rules on Common Reporting Standard Avoidance Arrangements and Opaque Offshore Structures (CRS Mandatory Disclosure Rules). See this OECD press release.
Other territories
International
New research reveals close to $1 trillion in profits shifted to tax havens
A new research paper published by the United Nations University World Institute for Development Economics Research (UNU-WIDER) shows the first global estimates of profits shifted to tax havens between 1975-2019. The study documents a remarkable increase in profit shifting, with close to $1 trillion or 40% of multinational profits shifted to tax havens in 2019. Globally, 10% of corporate tax revenues are lost as a result. Read more in this press release.
Digital tax byte
The latest edition, from 10 November, in our series of brief insights into the workings of the UK and supranational bodies reviewing the taxation of digitalisation of business. It includes comments on: 1) Finland begins implementation of DAC7; 2) Indian Tribunal rules on payment for distribution of AdWords Program; 3) Denmark publishes guidance on DAC7 reporting requirement; 4) UK Parliamentary committee opens inquiry into DST; 5) Hungary passes law on digital platform operators; 6) Signature of MCAA on digital platform reporting.
Digital tax megabyte
This edition, to the end of October, includes: 1) Netherlands consults on Pillar 2 legislation; 2) UK publishes draft Regulations on digital platform reporting; 3) Denmark discusses bill to implement media cultural contribution agreement; 4) Turkey investigating cloud and software licensing services; 5) Circuit court judge rules against US State of Maryland’s digital advertising tax; 6) OECD issues new Crypto Asset Reporting Framework; 7) VAT and online marketplaces operating in the GCC.
Environmental, Social and Governance (ESG)
- What to expect from COP27
COP27 - dubbed the Implementation COP - began in Sharm-el-Sheikh, on Sunday 6 November with the world looking on to see if its elected leaders can set a course to turn ambition into action. This blog offers an in-depth look at what to expect. - A step-change for sustainability - Business in Focus podcast
As COP27 kicks off, how can conversations and pledges turn into meaningful action at the pace needed? The challenges are of a scale and complexity that can’t be solved in isolation. In this podcast, join host Rowena Daines to explore how organisations and investors can work alongside innovative ClimateTech to direct focus and funding towards collaborative momentum on progress. PwC’s ESG leader for Deals, James Pincus will be providing insight into the trends in the market while Grey Parrot’s CEO Mikela Druckman will share the perspective of the innovative new scaleups offering new ways to tackle sustainability.
Visit our dedicated ESG webpage.
Australia
ATO guide on market valuation for tax purposes
The Australian Taxation Office (ATO) has released an updated guide on market valuations for tax purposes. The updated guide is intended to help taxpayers reduce the tax risks associated with valuations, as failing to engage an appropriately qualified valuer can lead to incorrect reporting of tax outcomes, and the potential for administrative penalties and interest. This PwC Tax Alert summarises the ATO’s latest guidance on market valuations for tax purposes.
Multinational tax integrity: Public Beneficial Ownership Register
The Australian Government is seeking comments on the design features for the first phase of a publicly available beneficial ownership register. Stakeholders are invited to submit their views until 16 December, on the proposed design of a first phase of the reform, in which specified unlisted entities regulated under the Corporations Act 2001 would be required to maintain accurate, up‑to‑date and publicly accessible beneficial ownership registers. The Government is also seeking views on proposed amendments to the substantial holding notice and tracing notice regimes in the Corporations Act, which concern beneficial ownership disclosures with respect to listed entities.
Belgium
See here for latest updates.
Limitation of excess DRD after merger is in line with Parent-Subsidiary Directive
The European Court of Justice (ECJ) recently rendered its judgement in the “Allianz Benelux” case relating to the limitation of excess dividends-received deduction (DRD) of Belgian companies that are involved in a tax-neutral merger. Read more in this PwC news item.
Canada
2022 Federal Fall Economic Statement – Tax highlights
On 3 November 2022, the Deputy Prime Minister and federal Minister of Finance, Chrystia Freeland, presented the 2022 Federal Fall Economic Statement. The economic statement does not change corporate or personal income tax rates, but does: 1) introduce investment tax credits for clean technologies and for clean hydrogen production, to be effective upon release of the 2023 federal budget; 2) propose a new tax on share buybacks by public corporations in Canada, effective 1 January 2024; 3) provide an update on the status of previously announced international tax reform measures. The Department of Finance also: 1) released revised draft legislation for the proposed excessive interest and financing expenses limitation (EIFEL) regime; and 2) announced a new effective date for certain of the proposed enhancements to Canada’s mandatory disclosure rules. This PwC Tax Insights discusses these and other tax initiatives proposed in the economic statement.
Finance releases draft legislative proposals ─ Mandatory disclosure rules
On 3 November 2022, the Department of Finance announced a new effective date for the proposed enhancements to Canada’s mandatory disclosure rules; this is to allow the federal government to “fully assess the feedback received” from the public consultation (which was launched on 9 August 2022) on these rules. Read more in this brief PwC Tax Insights.
Germany
Bundestag adopts regulations on reporting obligations for digital platforms and reform of tax audits
On 10 November 2022, the Bundestag approved the bill submitted by the Federal Government to implement Council Directive (EU) 2021/514 of 22 March 2021 amending Directive 2011/16/EU on administrative cooperation in the field of taxation and modernising tax procedural law (20/3436, 20/4228). The operators of digital platforms are to be obliged to report to the Federal Central Tax Office information which will allow both an identification of the providers active on the platforms as well as an assessment of their transactions for tax purposes. Furthermore, the law provides for changes in the conduct of tax audits. Such tax audits are to be carried out more promptly and at an accelerated pace. Read more in this PwC tax blog.
Extension of the deadline for submitting the declaration for the determination of the real estate tax value
Certain Federal States have granted a filing extension for the filing of declarations for the determination of the value of real estate for real estate tax purposes. Read more in this PwC tax blog.
Hong Kong
Hong Kong gazettes bill on significantly changed FSIE regime
Hong Kong’s SAR’s Government recently gazetted the Inland Revenue (Amendment) (Taxation on Specified Foreign-sourced Income ) Bill 2022. The Bill introduced significant refinements to Hong Kong’s foreign source income exemption (FSIE) regime for four types of offshore income: interest, dividends, disposal gains from the sale of equity interests, and income from intellectual property (IP) (collectively, ‘specified foreign-sourced income’). The Bill is expected to become effective 1 January 2023. Read more in this PwC Tax Insights.
India
Payment for distribution of AdWords Program cannot be characterised as royalty
The Bangalore bench of the Income-tax Appellate Tribunal observed that the AdWords Program (a computerised advertising program) is essentially a computer program or software, and the issue regarding the use of computer software being tantamount to royalty now stands resolved by the Supreme Court. The Tribunal concluded that the payment for distribution of AdWords Program is not ‘royalty’, and in the absence of a permanent establishment (PE) of the non-resident in India, the same cannot be brought to tax in India. Accordingly, no withholding tax obligations can be attached on the payer for the same. Read more in this PwC Tax Insights.
Japan
Japanese Consumption Tax: Preparing for new Qualified Invoicing Issuer Rules, effective from 1 October 2023
The Japanese government introduced a new Qualified Invoice System (‘QIS’) to Japan’s Consumption Tax (‘JCT’) regime in its 2016 Tax Reform. Under the QIS, a JCT taxpayer (a ‘taxpayer’, who files JCT tax returns and pays or gets a refund of JCT), can in principle only take an input JCT credit if such taxpayer receives a ‘qualified invoice’ from a seller that is registered as both (i) a JCT taxpayer and (ii) a qualified invoice issuer (‘QII’). Read more in this PwC tax update.
Jersey
Jersey tables draft legislation for broad tax system changes
The Jersey Government has lodged the draft Finance (2023 Budget) (Jersey) Law 202 in parliament, which would make sweeping changes to the territory's tax regime and includes a number of technical amendments to Jersey tax law that may affect tax planning arrangements.
Middle East
United Arab Emirates: Introduction of a new Tax Procedures Decree-Law
The President of the UAE recently issued Federal Decree-Law No. 28 of 2022 on Tax Procedures (the new TPL) which revokes Federal Decree-Law No. 7 of 2017 on Tax Procedures as amended by Federal Decree-Law No. 28 of 2021 (the current TPL). The new TPL will be effective as of 1 March 2023. Read more in this PwC news item.
Netherlands
The Netherlands publishes draft Pillar 2 legislation
The Dutch Government recently submitted the draft legislative proposal ‘Minimum Tax Act 2024 (Pillar 2)’ to public consultation. By doing so, the Netherlands takes the next step in implementing Pillar 2 as of 1 January 2024. The proposal is almost entirely in line with the last compromise text of the Pillar 2 Directive. EU Member States have not yet reached political agreement on the currently presented compromise text of the Pillar 2 Directive. Read more in this PwC tax news item, which is based on the information as of 24 October.
Singapore
GEY v Comptroller of Income Tax
In GEY v Comptroller of Income Tax [2022] SGITBR, the Income Tax Board of Review (the Board) held that the cement silo deployed in the taxpayer’s business does not qualify as a “plant” for capital allowance claim under Section 19A of the Income Tax Act 1947. The Board’s decision sheds light on how the legal principles established by the Court of Appeal in ZF v Comptroller of Income Tax [2010] SGCA 48 are to be applied. Read more in this PwC tax bulletin.
South Africa
Tax Synopsis - October 2022
Topics covered in this edition include: 1) The VAT treatment of prepaid airtime vouchers remains unanswered; 2) Long-time-coming changes to sections 8F and 8FA – how do they affect REITs, controlled companies and property companies?; 3) The Transfer Pricing and Customs Valuation Series: Article 3; 4) Overview of the Samsung Electronics SA (Pty) Ltd v The Commissioner for the South African Revenue Service; and 5) SARS watch.
Switzerland
For the latest updates on current topics, see this PwC Switzerland Insights page.
US
Midterm elections - the implications
- Limited tax legislation expected with possible return to divided government
The 2022 midterm election results point to a return to divided control of the federal government with the new 118th Congress that will begin in January 2023. Read more in this PwC Tax Insights. - Midterms could result in split government
What a divided government could mean for business, and what executives think about the midterms’ impact. Read more. - Tax Readiness webcast: Implications of the US midterm elections
Join our panel of specialists on Tuesday 22 November at 7pm as they examine the potential effect of the 2022 midterm elections for a year-end tax bill, the legislative path ahead for the 118th Congress, and the expected administrative guidance from Treasury. Register here. - Policy on Demand series: Advancing tax agenda in a divided government
In this episode, Pat Brown (Co-Leader of PwC’s Washington National Tax Services Practice) and Wade Sutton (a Principal in PwC’s International Tax Services Practice) discuss how the Biden administration may attempt to advance its tax policy agenda in a divided government and what checks may be applied to those efforts. - Policy on Demand series: Economic issues affecting the election outlook
In this episode, Karl Russo, Leader of PwC’s National Economics & Statistics Practice, discusses how positive and negative economic factors might affect the outcome of the midterm elections and what companies may consider as they wade through uncertainty. - Policy on Demand series: Week in Review
- In this episode from 11 November, Ken Kuykendall shares his insights on how both parties likely will continue to craft legislative proposals even in light of divided government. The question he has received most is whether a year-end tax package will address Section 174. He encourages companies to continue to focus on challenging operational issues.
- In this episode from 4 November, Rohit Kumar discusses how a Republican-controlled House and Senate could set up an interesting tax legislative dynamic for 2023. He addresses the question he has received most which is whether Section 174 will be addressed before the end of the year. He encourages companies to focus on how the outcome of the midterm elections could affect the likelihood of a year-end tax bill.
Update - Accounting for the Inflation Reduction Act and the CHIPS Act
This updated PwC Alert provides for the latest interpretations of the accounting implications related to the Inflation Reduction Act and the CHIPs Act. Since the most recent issuance, the section on transferable credits was expanded to reflect updated guidance as of 7 November.
Policy on Demand series
As noted above, the latest episodes all focus on the implications of the recent midterm elections.
- Advancing tax agenda in a divided government
In this episode, Pat Brown (Co-Leader of PwC’s Washington National Tax Services Practice) and Wade Sutton (a Principal in PwC’s International Tax Services Practice) discuss how the Biden administration may attempt to advance its tax policy agenda in a divided government and what checks may be applied to those efforts. - Economic issues affecting the election outlook
In this episode, Karl Russo, Leader of PwC’s National Economics & Statistics Practice, discusses how positive and negative economic factors might affect the outcome of the midterm elections and what companies may consider as they wade through uncertainty. - Week in Review
- In this episode from 11 November, Ken Kuykendall shares his insights on how both parties likely will continue to craft legislative proposals even in light of divided government. The question he has received most is whether a year-end tax package will address Section 174. He encourages companies to continue to focus on challenging operational issues.
- In this episode from 4 November, Rohit Kumar discusses how a Republican-controlled House and Senate could set up an interesting tax legislative dynamic for 2023. He addresses the question he has received most which is whether Section 174 will be addressed before the end of the year. He encourages companies to focus on how the outcome of the midterm elections could affect the likelihood of a year-end tax bill.
Cross-border tax talks
- Transfer Pricing: A macroeconomic view
In this episode from 8 November, Doug McHoney (PwC Global International Tax Services Leader) welcomes Horacio Pena (Tax Principal, Senior Economist and PwC’s Global Transfer Pricing Network Leader) to the podcast. Doug and Horacio provide the macroview of the transfer pricing environment, covering global inflation, China’s COVID restrictions, environmental volatility, the dollar’s strengthening against other currencies, regionalization, a brief touch on Pillar Two, country-by-country reporting, and more.
Tax Readiness webcast series
- Tax Readiness: Implications of the US midterm elections
Join our panel of specialists on Tuesday 22 November at 7pm as they examine the potential effect of the 2022 midterm elections for a year-end tax bill, the legislative path ahead for the 118th Congress, and the expected administrative guidance from Treasury. Tax is a central piece to implementing your business' strategy in 2023 and can be a catalyst for delivering trust and driving strategic outcomes. Register here. - Tax Readiness webcast: Creating value - is tax aligned to support and enhance your business' strategic priorities?
Watch the replay from this webcast held on 3 November as our specialists discuss innovative ways to create operational efficiencies and strategically reduce costs. We review the types of business transformations companies are undertaking and how tax serves as a strategic business partner within your organisation to enhance the value of those efforts. - Tax Readiness: Building a productive and resilient tax reporting strategy
Watch the recording of this webcast held on 27 October, where our panel discussed how practical, sustainable data and reporting solutions can help ease workforce pressures (e.g., widening labour gap, economic uncertainty, inflation, etc.) and compliance challenges moving forward. Watch here.
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.
Vietnam
Decree 91/2022 which amends Decree 126/2020 guiding the implementation of the Law on tax administration 2019
The Government has just released Decree 91/2022, guiding the implementation of the Law on tax administration 2019. Decree 91/2022 took effect on the signing date, ie 30 October 2022. One of the notable points is the change of the rule for provisional corporate income tax (“CIT”) payments. This PwC NewsBrief summarises some of the key points of this new decree.