Two weeks to 12 November 2021
Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
UK
Finance Bill 2021-22
Finance (No. 2) Bill 2021-22 was published on 4 November. This will now progress through Parliament and is estimated to receive Royal Assent around mid-February (although it could be any time from late January to early March). In the interim, there may be a 'Tax Day 2' in late November or early December, on which HMRC will issue new Consultations and provide responses to earlier Consultations.
First Tier Tribunal decision - UK WHT
The First Tier Tribunal has recently published its decision in this case concerning the obligation to withhold tax from interest payments. The FTT considered whether the interest concerned was UK source interest, or short term interest, the availability of treaty relief, and the exemption for interest to which a UK resident company is beneficially entitled.
UK qualifying asset holding company regime - full draft legislation published with FB22
The full draft legislation for the UK qualifying asset holding company (QAHC) regime was released as part of Finance Bill 2021-22. Our flyer summarises the features and criteria of the regime, plus the key changes since the original draft which was published in July.
Register of beneficial owners of overseas entities update
The Government has committed, via Section 50 of the Sanctions and Anti-Money Laundering Act 2018, to report to Parliament annually on the progress that has been made towards putting in place a register of beneficial owners of overseas entities owning land in the UK (“the overseas entities register”). Read more in this written ministerial statement.
House of Lords: Pandora papers, money laundering and corruption
The House of Lords has issued a press release asking for a short debate “To ask Her Majesty’s Government what assessment they have made of (1) the ‘Pandora Papers’, and (2) the role of the United Kingdom in facilitating international money laundering and corruption.”
Brexit
- Commissioner McGuinness announces proposed way forward for central clearing
The Commission remains of the view that over-reliance on UK-based central counterparties (CCPs) for some clearing activities is a source of financial stability risk in the medium term and will pursue its work to develop the capacity of EU-based CCPs as a means to reduce such over-reliance. Read more in this European Commission press release. - 2021 Exchange of Notes to Netherlands-UK SSA
The Dutch Official Gazette has published the exchange of notes confirming the 2005 Social Security Agreement with the UK. Whilst not applicable for persons in cross-border situations between the Netherlands and the UK if they are governed by the personal scope of the EU-UK withdrawal agreement or the EU-UK trade and cooperation agreement, the SSA will continue to apply concerning the Netherlands and the UK crown dependencies of Guernsey, the Isle of Man, and Jersey.
EU
Cyprus decree on providing guidance on key provisions of the DAC6 implementing law
The Minister of Finance has issued a Decree providing guidance on key provisions of the Law on Administrative Cooperation in the Field of Taxation, implementing Council Directives (EU) 2018/822 of 25 May 2018 and 2020/876 of 24 June 2020 on the mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (“DAC6”). The Decree was issued after the Cyprus Tax Authority had already issued an announcement extending the deadline for submission of DAC6 reports without any penalties to the end of 30 November 2021. Read more in this PwC Tax Insights.
European Parliament votes to pass public country-by-country reporting
Following a final debate between MEPs in the European Parliament plenary session, a majority of MEPs voted on 11 November to pass changes to amend Directive 2013/34/EU, which deals with financial reporting of certain types of undertakings (the EU Accounting Directive). This vote follows the political agreement reached with the Council in June and a further updated text that was agreed in September 2021. The amendments have become known as public country-by-country reporting (pCbCR) requirements. Read more in our Tax Policy Alert and also see this European Parliament press release.
European Commission consults on Corporate reporting – improving its quality and enforcement
The consultation is divided into five parts seeking views about the overall impact of the existing EU framework for the three pillars of high-quality and reliable corporate reporting: corporate governance, statutory audit and supervision. It also seeks views about the interaction between the three pillars. Finally, the consultation contains specific questions on each of the three pillars, including on whether/what issues have been identified and whether action is considered necessary, on potential actions and their expected impact. The consultation closes on 4 February 2022.
Public Hearing on the impact of new technologies on taxation: crypto and blockchain
On 9 November 2021, the FISC Subcommittee held a public hearing on “The impact of new technologies on taxation: crypto and blockchain” to discuss with experts and institutional representatives on fiscal challenges regarding crypto-assets, the impact of technologies - such as blockchain - on taxation and the use of technologies as an instrument to support tax fraud and evasion.
CFE Tax Advisers Europe
CFE Tax Top 5 – Round-up of EU Tax Policy News
The latest edition looks at the following: 1) World leaders endorse global tax deal; 2) Tax implications of COP26: World’s Climate Policy Summit; 3) Register now: CFE Conference on Professional Judgment in Tax Planning on 25 November 2021; 4) EU Commission 2022 work programme & Q4 tax policy priorities; and 5) European Parliament: Public hearing on The impact of new technologies on taxation: crypto and blockchain. View previous editions here.
OECD
OECD Secretary-General Mathias Cormann welcomes the outcome of the G20 Leaders Summit
OECD Secretary-General Mathias Cormann has welcomed the G20 Leaders’ Declaration, recognising the historic tax agreement reached by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS). “This reform will make our international tax system fairer and work better in a digitalised and globalised world economy,” he said. Read more in this OECD item.
TP Talks podcast series: The new world tax system – what it means for your company
In this episode, we take an excerpt from our recent Global Transfer Pricing Conference, discussing the OECD global tax agreement focusing on where we are now and the sticking points in moving forward.
Mauritania joins the Inclusive Framework on BEPS
Mauritania has joined international efforts against tax evasion and avoidance by joining the OECD/G20 Inclusive Framework on BEPS as its 141st member and has also committed to addressing the tax challenges arising from the digitalisation of the economy. Read more in this OECD item.
OECD and Vietnam sign MoU to deepen cooperation and support reforms
The OECD and the Government of Vietnam have signed a Memorandum of Understanding (MoU) to strengthen cooperation over the next five years. The MoU, the Organisation’s first with Vietnam, aims to support Vietnam’s reform efforts in areas where it is already working with the OECD, such as competition, investment, and tax policy. See this OECD item.
2021 plenary meeting of the Global Forum on Transparency and Exchange of Information for Tax
The meeting will be held virtually from 17-19 November 2021. It will give participants the opportunity to take stock of recent developments in tax transparency and celebrate the 10th anniversary of the Global Forum's capacity-building programme. See this OECD item for more information.
Tax Inspectors Without Borders Annual Report 2021
Tax Inspectors Without Borders continues to significantly boost domestic revenue mobilisation in spite of the COVID-19 crisis. The effective capacity building initiative run by the OECD and UNDP continues to strengthen developing countries' ability to fight tax avoidance by MNEs, with operations running in 47 countries and more than USD 850 million generated in new tax revenues since July 2020. Read more in this OECD item.
Other territories
International
International Tax News - September 2021 Edition
Among the topics featured in this month's edition are: 1) Changes to the Mexican international taxation framework from the 2022 Budget proposal; 2) Netherlands 2022 budget includes tax proposals of limited scope; 3) Unexpected DAC6 reporting obligations may arise in Portugal; and 4) Protocol to China - Qatar tax treaty enters into force.
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:
- Digital tax byte
The latest edition from 5 November includes further G20 endorsement of the Inclusive Framework Statement on 8 October. It also includes on digital services an update from Nigeria on easing the application of new VAT rules, Budget proposals from Malaysia on low value goods imports and tourism tax and a brief analysis of Georgia's new VAT rules.
Environmental, Social and Governance ESG
- COP26 - Making the transition to net zero
COP26 shone a light on climate issues and the extent of change needed. To get to net zero, organisations need to identify and prioritise their climate risks and opportunities. This means understanding where you are today, where you want to go and what strategies will get you there. Join us as we explore some of the big questions facing the world and share our insights and perspectives here. See in particular:
- Bob Moritz’s blog regarding the announcement of the creation of the International Sustainability Standards Board (ISSB) at COP26.
Australia
R&D tax offset - understanding affiliates and connected entities is key to getting your aggregated turnover calculation correct
The concepts of aggregated turnover, connected entity and affiliate are important in determining the type of research and development (R&D) offset available to an R&D entity. The determination of aggregated turnover can be a complex and time consuming exercise. Recently, the Australian Taxation Office (ATO) has issued four tax determinations to provide guidance to taxpayers when calculating their aggregated turnover. Read more in this PwC tax alert.
Austria
Draft Update of the Corporate Income Tax Guidelines
In September 2021, the Austrian Ministry of Finance published a draft update of the Corporate Income Tax Guidelines, which included a focus on the new Austrian interest limitation rule (implementation of Article 4 of the EU Anti-Tax Avoidance Directive, ATAD). See this PwC item for an outline of the key aspects of the Austrian Ministry of Finance’s view on the interest limitation rule.
New Austrian Transfer Pricing Guidelines 2021 – lowering the threshold for PEs
The Austrian Ministry of Finance published the final version of the Austrian Transfer Pricing Guidelines 2021 (ATPG 2021), which reflects the opinion of the Austrian authorities on the interpretation of the statutory provisions. Read more in this update, which also includes some further clarifications regarding the creation of a permanent establishment for CIT purposes (PE) in Austria.
Belgium
See here for latest updates.
Budget 2022
On the 29th October, the council of ministers agreed on the draft program law outlining the 2022 Belgian budget measures. It includes measures which aim to: (1) transition the Belgian economy post Covid; (2) focus on a more sustainable and green economy; and (3) increase tax revenue with a view to reducing the budget deficit. The program law is draft, as it still needs to be approved by the parliament. Read more in this PwC news item. You can also register here to watch a webinar on the main changes that were announced, including the Belgian expat regime, the new measures to combat fraud, and many more.
Tax Bites Podcast: How can taxpayer’s fundamental rights bring balance to the ever increasing powers of the tax authorities in the EU?
Tax transparency is the new normal. An ever increasing amount of EU legislation is passed under the banner of the fight against tax fraud and the scope of the legal instruments that allow for mutual assistance between tax authorities are constantly extended. This PwC podcast illustrates how instruments providing for taxpayer’s fundamental rights can restore the balance.
Canada
2021 Ontario Economic Outlook and Fiscal Review ─ Tax highlights
Ontario’s Minister of Finance has presented the province’s Economic Outlook and Fiscal Review. It doesn’t change corporate or personal income tax rates, but does: 1) introduce beneficial ownership information requirements for certain privately-held corporations, effective 1 January 2023; 2) provide a 2022 refundable “staycation” tax credit for Ontario residents vacationing in the province; and 3) extend the Ontario Jobs Training Tax Credit and Seniors’ Home Safety Tax Credit to 2022. This Tax Insights discusses these and other tax initiatives outlined in the Review.
Cyprus
Decree on providing guidance on key provisions of the DAC6 implementing Law
The Minister of Finance has issued a Decree providing guidance on key provisions of the Law on Administrative Cooperation in the Field of Taxation, implementing Council Directives (EU) 2018/822 of 25 May 2018 and 2020/876 of 24 June 2020 on the mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (“DAC6”). The Decree was issued after the Cyprus Tax Authority had already issued an announcement extending the deadline for submission of DAC6 reports without any penalties to the end of 30 November 2021. Read more in this PwC Tax Insights.
Finland
Changes to the Finnish interest deduction limitation
The Finnish government has issued a draft government proposal to change the Finnish interest deduction limitation rules. Most significantly, it proposes: (1) changes to the balance sheet exemption (equity/assets test); (2) expansion of the public infrastructure exemption to entities established by public law bodies; and (3) certain technical corrections to the way non-deductible interests from previous years can be deducted. Read more in this PwC article.
Tax and Legal News, October 2021
The latest tax and legal news from Finland. Read the latest edition.
Germany
Retention period infringement under Section 6 (5) Sentence 6 Income Tax Act due to change of legal form of a parent company at book value
According to a decision of the Supreme Tax Court, where, within the framework of a multi-level partnership, an upper partnership, which indirectly participated in an asset transferred at book value under Section 6 (5) Sentence 3 Income Tax Act (“ITA”), changes its legal form into a corporation at book value, this will be considered an infringement of the retention period under Section 6 (5) Sentence 6 ITA. Read more in this PwC tax blog.
Foreign tax credit possible even if several options to reduce foreign withholding tax exist
The regional tax court of Rhineland-Palatinate had to decide whether, in the case of a right to choose between two methods of reducing foreign withholding tax, the taxpayer must ensure that foreign taxes are credited in as small an amount as possible. The regional tax court is of the opinion that it is at the discretion of the taxpayer if and how to use the option to which he is entitled and that this does not have an adverse impact on the general possibility of a foreign tax credit against his German income tax liability. As yet and according to reports the judgment is final since no appeal was brought before the Federal Tax Court. Read more in this PwC tax blog.
BMF further explains tax treatment of guarantee commitments, but no exceptions or substantial relief
The Federal Ministry of Finance (BMF) has responded to business associations’ questions regarding its circular of 11 May 2021 on the revised tax treatment of guarantee commitments offered in return for payment in connection with sales contracts or contracts for work and services. Our specialists analyse the BMF’s response, consider the practical consequences it has for the Insurance Premium Tax (IPT) and VAT liability arising in connection with such guarantees, and set out what action affected companies should take in order to be able to offer guarantee commitments in a tax-optimized manner and be tax-compliant from 1 January 2023. Read more in this PwC Newsflash.
Indonesia
New “HPP” Tax Bill signed into Law
The signing of the Harmonisation of Tax Regulations Bill by the President on 29 October 2021 marked the enactment of this Bill into Law No. 7/2021 (“HPP Law”). The HPP Law contains some significant policy changes as well as some provisions to emphasise and strengthen the legal basis for some existing rules. Read more in this PwC TaxFlash which highlights some of the most important changes under each section of the tax law.
Ireland
Investing in Ireland
This edition highlights the ever-expanding foreign direct investment (FDI) sector in Ireland as we emerge from the pandemic. Confidence in Ireland’s economy is reflected in the encouraging number of Irish jobs and investments announced over the last few months. We look at what the announcements made in Budget 2022 mean for Ireland’s competitive corporation tax rate. We also explain Ireland’s position emerging from the pandemic and Ireland as a prime location for Artificial Intelligence.
Ireland seeks input on new tax rules for outbound payments
Ireland’s Department of Finance has launched a public consultation seeking stakeholder views on the introduction of New Taxation Measures to apply to Outbound Payments. Measures may include withholding taxes on, or non-deductibility of, outbound payments. In the case of dividends, measures may include withholding taxes as dividends are non-deductible, the Irish Government said. The consultation closes on 20 December.
Italy
Extension of the guarantee coverage until 30 June 2022, up to 80% of the loan
On 28 October 2021, the Italian Council of Ministers approved the draft of the law regarding the provisional budget for financial year 2022 and the budget for years 2022-2024. In the financial framework, an extension until 30 June 2022 has been provided of the measures provided by Decree-Law no. 23/2020 pertaining to the loans guaranteed by “Fondo di Garanzia” for small and medium-sized enterprises. Read more in this PwC tax blog.
Mexico
Mexico’s 2022 budget includes numerous tax changes
The Mexican Congress recently approved several changes to different tax laws as part of the proposed 2022 budget. These changes include amendments to the Mexican Income Tax Law (MITL), the Value-Added Tax Law (VATL), and the Mexican Federal Tax Code (MFTC). These amendments are still pending publication in the Federal Official Gazette; most of them are expected to enter into force on 1 January 2022. Read more in this PwC Tax Insights.
Middle East
Oman: Executive Regulations to the Commercial Companies Law
The Executive Regulations set out controls, rules, and procedures for establishing and regulating the commercial companies. These regulations are applicable to all types of commercial companies, established in Oman or carrying out their principal activities in Oman, except public joint stock companies which are subject to separate regulations issued by the Capital Market Authority. Read more in this PwC tax news item.
Netherlands
2021 Exchange of Notes to Netherlands-UK SSA
The Dutch Official Gazette has published the exchange of notes confirming the 2005 Social Security Agreement with the UK. Whilst not applicable for persons in cross-border situations between the Netherlands and the UK if they are governed by the personal scope of the EU-UK withdrawal agreement or the EU-UK trade and cooperation agreement, the SSA will continue to apply concerning the Netherlands and the UK crown dependencies of Guernsey, the Isle of Man, and Jersey.
New Zealand
Show Me The Money: Inland Revenue’s new information-gathering powers
The New Zealand Inland Revenue is flexing the Commissioner's new information-gathering powers by requiring detailed financial information from high-wealth individuals and domestic trusts. Whilst the new reporting requirements for domestic trusts is currently undergoing consultation, both new powers were passed under urgency and without any consultation, scrutiny or Select Committee review that is usually expected for tax legislation under the Generic Tax Policy Process (GTPP). This Tax Tips Alert summarises these recent developments and reflects on the Government's increased willingness to pass tax legislation without due consultation.
Poland
Important tax changes in Poland from 2022 - The Polish Deal
On 29 October 2021, the Polish Deal Project was adopted by the parliament and sent for signature by the president. New legislation will have a significant impact on business activity taxation. Due to the large scope of the changes and, in most cases, the entry into force of the regulations as early as 1 January 2022, it is important to start preparations now. Register here for a PwC webcast taking place on 7 December at 3pm (UK time) discussing the planned changes and topics that are most relevant from investors’ perspective.
Russia
Has your business split up? Then you may be taxed twice
The Russian Supreme Court has sent an interesting case that concerns a business split-up for re-trial. The tax authorities charged an alleged tax scheme organiser an additional 20% income tax under the general taxation regime, combining the profits of his company with those of the counterparty that had been split off (the “Sole Proprietor”). Read more in this PwC Russia Tax Flash.
South Africa
Tax Synopsis - October 2021
Topics covered in this edition are: 1) SCA finds against the taxpayer on a share incentive contribution; 2) When tax amendments conflict with the policy rationale; and 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.
Swiss Federal Council brings new legal framework on implementation of international tax agreements into force
According to a press release from the Swiss Federal Council, at its meeting on 10 November 2021, the Federal Council brought the Federal Act on the Implementation of International Tax Agreements (ITAIA) and the associated Ordinance into force with effect from 1 January 2022. In this way, the Federal Council is aligning the existing legal framework with developments in international tax law.
Thailand
Exchange of Information
In January 2020, the Thai Cabinet approved Thailand to be a member of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (MAC). One aspect of the administrative assistance to be provided is the sharing of tax information with the competent authorities of the countries with which Thailand has signed double tax treaties or other international agreements. Revenue Code Amendment Act No. 54 was recently published in the Royal Gazette and entered into force on 9 November 2021. Read more in this PwC Tax Insight.
US
Revised Build Back Better Bill
House Democratic leaders announced on 5 November that they would delay voting on a $1.75 trillion “Build Back Better” reconciliation bill that includes more than $1.5 trillion in business, international, and individual tax increase provisions. A group of moderate House Democrats insisted that a vote on the bill should be held only after the Congressional Budget Office reports on the total cost of the legislation. The House did vote later that day by 228 to 206 to pass without change a $1.2 trillion Senate-approved bipartisan infrastructure bill, which includes revenue-raising provisions dealing with cryptocurrency and a Superfund excise tax on chemicals. Read more in this PwC Tax Insight.
- Tax Readiness: Revised Build Back Better Bill - key business and individual tax provisions (in summary)
This podcast provides a summary of PwC's Tax Insight with an analysis of key business and individual provisions proposed as part of the revised Build Back Better bill. - Key provisions impacting asset and wealth management
This PwC Tax Insights provides an analysis of some of the key provisions of the bill affecting hedge funds, private equity funds, real estate funds, and other stakeholders in the asset management industry.
New Section 1061 reporting guidance: Observations and impacts on passthrough entities
The IRS has released reporting guidance in the form of FAQs for partnership interests held in connection with the performance of services (Section 1061). The FAQs contain sample worksheets for passthrough entities to attach to each investor’s Schedule K-1 and for individual taxpayers to use for purposes of preparing Form 1040s. See this PwC Tax Insights for some initial observations regarding the FAQs.
Louisiana adopts transfer pricing managed audit program
The Louisiana Department of Revenue has announced a voluntary initiative for corporate income taxpayers to resolve intercompany transfer pricing issues through a new Louisiana Transfer Pricing Managed Audit Program beginning in November. Benefits of the program can include waiver of penalties that otherwise would be due based on the results of the managed audit and abatement of interest during the course of the audit. The program covers the current tax period (2021 tax year for calendar-and fiscal-year filers), any open tax periods, and up to four future tax periods. Read more in this PwC Tax Insights.
Texas adopts significant changes to research and development tax credit rule
Texas recently promulgated significant amendments to Texas Admin Code Sec. 3.599 concerning the research and development activities franchise tax credit. The amendments offer a significant departure from IRC statute and regulations when addressing the definitions of qualified research and qualified research expenditures. The changes also provide significant administrative challenges to taxpayers by requiring the research credit to be computed for each legal entity and records to be maintained beyond the normal statute of limitations. Read more in this PwC Tax Insights.
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 & podcasts:
- Tax Readiness: Revised Build Back Better Bill - key business and individual tax provisions (in summary)
This podcast provides a summary of PwC's Tax Insight with an analysis of key business and individual provisions proposed as part of the revised Build Back Better bill. - Tax Readiness: Cloud Transformation - Leveraging Tax to Drive Change and Increase ROI
Register here to join our panel of PwC specialists on Wednesday 17 November at 8pm for a discussion on 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. - Cross-border tax talks - Cryptocurrency Trends: Blockchain goes mainstream
In this episode from 10 November, Doug McHoney (PwC's US International Tax Services Co-Leader) is joined by Rebecca Lee (PwC ITS Washington National Tax Partner), who specialises in cross-border financial transactions, where they discuss trends in cryptocurrency.
Replays
A number of previous webcasts are available for replay in our US tax reform hub here, including:
- Tax Readiness: Simplifying the complexity of tax reporting
In this webcast held on 20 October, we explored effective solutions to meet extensive tax reporting requirements in a prioritised, cost efficient manner, as well as planning for what's around the corner in this ever-changing regulatory environment. Watch the replay here. - Tax Readiness: Elevating Tax in a Hot Deal Market
In this replay from 29 September, PwC professionals from our Tax, Deals and Value Chain Transformation practices had a timely discussion on the important role tax plays in the current deals environment including a discussion of opportunities for the tax department to add value as an integral part of the deal process. - Tax Readiness: Q3 financial reporting considerations
In this webcast which took place on 22 September, our panel of Tax Accounting Services (TAS) specialists took a deep dive into relevant tax accounting matters and recent tax developments. Watch the replay here.
Other updates
For regular updates on this topic, check out our US tax reform hub on The Suite here.
Vietnam
Decree guiding the implementation of Resolution 406 on tax support measures
Following Resolution 406 dated 19 October setting out some measures to help business and individuals affected by COVID-19, the Government has now released Decree 92/2021 guiding the implementation of Resolution 406. Read more in this PwC NewsBrief.