Four weeks to 13 January 2023
Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
UK
Pillar Two
The OECD published four guidance documents relating to Pillars One and Two on 20 December, the first anniversary of the issue of the Pillar Two Model Rules:
- Pillar Two Guidance on Safe Harbors and Penalty Relief (Tax Policy Alert);
- Pillar Two consultation document on Tax Certainty for the GloBE Rules (Tax Policy Alert);
- Pillar Two consultation document on the GloBE Information Return (Tax Policy Alert);
- Pillar One consultation document on the Draft Multilateral Convention provisions on Digital Services Taxes and other relevant similar measures (Tax Policy Alert).
All these are OECD Secretariat consultation documents (and, thus, unagreed), except for the guidance on Pillar Two Safe Harbours and Penalty Relief, which was approved on 15 December.
Finance Act
Finance Act 2023 received Royal Assent on 10 January. A link is available here.
OTS report on hybrid and distance working
The Office of Tax Simplification (OTS) has published a report on the tax complexities driven by hybrid working, including for periods where employees choose to work overseas.
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 with 64 additions, 8 amendments and 50 removals.
HMRC publish legislation defining ‘designated crypto assets’
HMRC has made secondary legislation via a Non-Statutory Instrument to define ‘designated crypto assets’ and include them in the list of investment transactions which qualify for the Investment Manager Exemption. View the policy paper here.
Draft regulations: The Transfer Pricing Records Regulations 2023
HMRC has opened a consultation into a draft statutory instrument concerning the alignment of UK transfer pricing reporting requirements with OECD guidelines. The draft statutory instrument requires Multinational Enterprises (MNEs) with turnover of €750m or more, operating in the UK, to keep and preserve a master file and local file in accordance with the OECD Transfer Pricing Guidelines.
Digital services tax a success, say officials, but it should be gone by 2025
Senior Treasury and HMRC officials have told the Public Accounts Committee that the digital services tax has been a success, which raised more than forecast, and that this was partly down to having a very small group of taxpayers who could be dealt with on a ‘one to one’ basis. However, they assured the MPs that it is still on track to be replaced by OECD-led reforms by 2025. Read more in this CIOT blog.
HMRC release updated corporation tax rates and allowances
HMRC have updated their guidance on rates and allowances for corporation tax for the financial year 2023. From 1 April 2023 there is no longer a single Corporation Tax rate for non-ring fence profits. Marginal relief is also available for companies with profits between £50,000 and £250,000. The rates tables have also been updated for the financial year 1 April 2023 to 31 March 2024.
UK Economic Outlook: Predictions for the year ahead 2023
Uncertainty was an overarching theme of 2022 overshadowing many of our predictions. So what lies ahead? Here, our economists outline what may be in store for people, businesses and society. Read more.
MPs probe witnesses on use and abuse of tax reliefs
The Treasury Committee held the first oral evidence session of its inquiry into tax reliefs on Monday 19 December 2022. During the session, the committee heard about the role of tax reliefs in driving economic growth and the challenges posed by a complicated and convoluted system that can make it harder to present an overall picture of the effectiveness of the system. MPs also heard about fraud and abuse in the system, and wider concerns around the decision to abolish the Office for Tax Simplification and efforts to regulate the tax profession. Read more in this CIOT blog.
SI 2022/1389 – The Register of Overseas Entities (Verification and Provision of Information) (Amendment) Regulations 2022
Overseas entities that own UK land are required to disclose information about their beneficial owner(s) (if any) and/or managing officers to Companies House (the Register of Overseas Entities). SI 2022/1389 amends the Register of Overseas Entities (Verification and Provision of Information) Regulations 2022 (SI 2022/725), which make provision in respect of the verification by a relevant person of information before it can be submitted to the registrar. The amendments relax the requirement to verify certain information. The Regulations come into force on 12 January 2023. See HMRC’s guidance in relation to this obligation.
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 6 January 2023. View the updated list.
EU
State aid extended to aid received from outside the EU27
At the end of November, the Council of the EU gave final approval to the Foreign Subsidies Regulation (FSR). On 12 January FSR entered into force. Remember State aid? The overarching goal of the FSR is to apply the State aid rules to aid received from outside the EU27, in order to “level the playing field”. This means the EU Commission will look, in particular, at whether distortive aid has been received from non-EU public authorities which could give businesses an advantage in large M&A transactions and large public procurement bids. The Commission will however also have the power to investigate foreign subsidies more generally, similar to a traditional State aid investigation. With its entry into force, the FSR will move into its crucial implementation phase and start to apply in six months, as of 12 July 2023. From that date, the Commission will be able to launch ex-officio investigations. The notification obligation for companies will be effective as of 12 October 2023. Read more in this PwC blog
New EU transparency rules for crypto assets
As reported previously, the Commission has published a new Administrative Cooperation Directive (DAC8) which includes new rules for reporting crypto asset transactions and extends certain exchange of information requirements in relation to HNWIs. Read more in this ATT/CIOT newsletter article.
OECD
Pillar Two
- OECD invites comments on compliance and tax certainty aspects of global minimum tax
As noted above, the OECD published two consultation documents relating to Pillar Two on 20 December, the first anniversary of the issue of the Pillar Two Model Rules. These documents are open for comments until 3 February 2023.
- OECD invites comments on compliance and tax certainty aspects of global minimum tax
As noted above, the OECD is seeking public comments until 3 February 2023 on compliance and coordination aspects of the Pillar Two global minimum tax:
1) The public consultation document on the GloBE Information Return seeks input on the amount and type of information that MNE Groups should be expected to collect, retain and/or report for the application of the GloBE Rules and possible simplifications that could be incorporated in the GloBE Information Return as well as the ability of the MNE Group to provide alternative data points. See our Tax Policy Alert.
2) The public consultation document on Tax Certainty for the GloBE Rules outlines various mechanisms, including dispute prevention and dispute resolution, for achieving tax certainty under the GloBE Rules. The document outlines the expected next steps in connection with the development of these mechanisms and identifies a number of areas where stakeholder input would be valuable. Read more in this OECD item and our Tax Policy Alert.
- OECD approves guidance on safe harbours and penalty relief
Pillar Two Guidance on Safe Harbors and Penalty Relief. Read more in our Tax Policy Alert. - Pillar Two - South Korea becoming first to pass global minimum tax rules
South Korea's budget bill for 2023, approved by parliament on December 23, includes the Korean rules on a global minimum tax (the GloBE Rules), making South Korea the first country to have codified the global minimum tax rules in its domestic legislation. The rules include an Income Inclusion Rule (IIR) and ‘Supplementary rules for income inclusion’ (referred to as the UTPR in the OECD Model Rules). Both rules will be effective for fiscal years beginning on or after 1 January 2024. Given the short timeline before the new rules become effective, non-Korean MNEs that have a Korean presence are highly encouraged to assess the impact of the new rules and understand the additional compliance and reporting obligations. See this PwC Tax Insights document.
Pillar One
- OECD invites public input on the draft Multilateral Convention provisions on digital services taxes and other relevant similar measures under Amount A of Pillar One
The OECD is seeking public comments until 20 January 2023 on the Draft Multilateral Convention (MLC) Provisions on Digital Services Taxes (DSTs) and other Relevant Similar Measures of Amount A of Pillar One. The draft MLC provisions reflect the commitments with respect to the removal of all existing DSTs and other relevant similar measures and the standstill of such future measures. These commitments are an integral part of achieving Pillar One’s goal of stabilising the international tax architecture. Read more in this OECD item and see this related PwC Tax Policy Alert. - Amount B discussion draft - Tax Bites Podcast
As discussed in our last edition, the OECD released a public consultation document on Amount B of Pillar One on 8 December 2022. During this episode of the Tax Bites podcast, from PwC Belgium, the speakers discuss the main items of the discussion draft (scope, methods, documentation and certainty) to provide you with some important takeaways.
Webinar: Economic impact assessment of the Two-Pillar Solution
In this live webinar taking place on Wednesday 18 January at 2pm (UK time), the OECD will provide an update on its ongoing work to assess the economic impact of the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy, including new estimates of the revenue impacts of implementing Pillar One and Pillar Two. These estimates are based on updated data and incorporate many recently agreed design features of Pillar One and Pillar Two, many of which have not been accounted for in other studies. You can register here to join. A replay will be available.
PwC Policy on Demand webcast - complex Pillars One and Two full of uncertainties
The OECD recently released three Pillars 1 and 2 consultation documents as well as guidance on Pillar 2 safe harbours and penalty relief. In this episode from 21 December, Will Morris, PwC’s Deputy Global Tax Policy Leader, discusses the complexities and uncertainties presented in these documents and encourages companies to study the documents and submit comments.
OECD appoints Manal Corwin as new Director of its Centre for Tax Policy and Administration
Manal Corwin has been appointed to serve as the next Director of the OECD Centre for Tax Policy and Administration beginning 3 April 2023, following Pascal Saint-Amans’ retirement. Currently, Manal serves as Partner-in-charge of the National Tax Office and Lead Director of the Board of Directors for KPMG, LLP in the United States. Manal is very well known in the international tax community and extremely well regarded internationally for her leadership, integrity, expertise, and contributions in the field of tax law and policy. Having held senior tax policy positions in two separate US Administrations and having previously served as a delegate and then Vice Chair of the OECD Committee on Fiscal Affairs and as delegate to the Global Forum on Tax and Transparency, Manal is uniquely suited for this position and will make an outstanding contribution. Read more in this OECD item.
MLI
- BEPS MLI now effective for Bulgaria and South Africa
The BEPS multilateral instrument became effective for treaties concluded by Bulgaria and South Africa on 1 January 2023. - MLI to enter into effect for Swiss-Iceland double tax treaty
The OECD recently announced that Switzerland has confirmed the completion of its internal procedures for the entry into effect under Article 35(7)(b) of the provisions of the Multilateral BEPS Convention (MLI) to its double tax treaty with Iceland. With the notification deposited, the provisions of the MLI apply for the 2014 Swiss-Iceland tax treaty:- with respect to taxes withheld at source on amounts paid or credited to non-residents, where the event giving rise to such taxes occurs on or after 1 January 2024;
- with respect to all other taxes levied by Switzerland, for taxes levied with respect to taxable periods beginning on or after 15 July 2023; and
- with respect to all other taxes levied by Iceland, for taxes levied with respect to taxable periods beginning on or after 1 January 2024.
See https://oecd/mli.
OECD releases results that show further progress in countering harmful tax practices
The OECD's Forum on Harmful Tax Practices has released its review of preferential tax regimes, outlining the progress made to curb harmful tax practices. Read more in this OECD item.
Other territories
International
International Tax News - Edition 114
Among the topics featured in this month's edition are: 1) New Zealand circulated draft legislation affecting dual tax resident companies; 2) Mexico considers ATAD 3; 3) Hong Kong refines foreign-sourced income exemption regime; and 4) Nigeria's Startup Act positions the country for the fourth revolution.
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, from 11 January. This edition includes: 1) measures taken just prior to the end of December 2022 by France, Germany, Spain, Belgium, Finland, Croatia and Slovenia on DAC7 in relation to reporting by digital platform operators; 2) Tanzania has also published a notice on registration by non-resident electronic service providers.
Digital tax megabyte for December 2022
This edition, to the end of December, includes: 1) information on the OECD's release of a consultation document on a multilateral tax convention provision on removing DSTs and other unilateral measures and an OECD webinar on Amount B of Pillar 1; 2) comments on the latest developments in the cases challenging Maryland's digital advertising tax and the USTR concerns about Canada's proposed DST; 3) Pillar 2: EU Member States finally agreeing on an implementation Directive; 4) OECD consultations on the GloBE information return and on tax certainty plus implementation guidance on safe harbours and relief from penalties in the early years; 5) ATAF has published its suggested approach to countries introducing their own minimum taxes; 6) comment on the publication by the European Commission of proposals for its VAT in the Digital Age initiative; and 7) the Bulgarian and Czech Republic's implementation of DAC7 rules on digital platform operators.
Environmental, Social and Governance (ESG)
- ESG: Combining expertise, data and technology to accelerate ambitions
The right balance of human ingenuity and technology is critical if organisations are to set, measure and meet meaningful ESG goals. In this video, Martin Musk, ESG UK Technology Alliances Leader, and Olivia Grey, Net Zero Transformation Manager, discuss how they’re helping clients create change and deliver sustained outcomes.
Visit our dedicated ESG webpage.
Austria
Austrian Supreme Administrative Court (VwGH) on seamless transition in cases of mergers within company groups
In principle, section 9 para 5 Austrian Corporate Income Tax Act (KStG) provides that a merger within the company group does not result in the merging company exiting the company group or in other changes to the company group. The Austrian Supreme Administrative Court addressed a special situation in its decision of 19 October 2022, Ro 2022/15/0032 (available in German only): the absorbing company was a wholly owned subsidiary of the group parent but became a member of the company group only as of the day following the effective date of the merger. Read more in this PwC news item.
Barbados
Barbados issues filing extension for country-by-country reporting
The Barbados Revenue Authority (BRA) has issued an extension of the filing deadline for country-by-country (CbC) reporting to 31 January 2023 for any multinational enterprise (MNE) group whose first reporting fiscal year ends on 31 December 2021 (Barbados Revenue Authority (2022), Guidance Note P&F No. 12/2022). Read more in this PwC Tax Insights.
Belgium
See here for latest updates.
Colombia
Colombia passes major tax reform effective 1 January 2023
The Colombian Executive Branch enacted the ‘Tax Reform Law’ (Law 2277) on 13 December. The Colombian Congress had passed the legislation in early December. The new law becomes effective 1 January 2023. Read more in this PwC Tax Insights.
Croatia
Newly signed treaty with Croatia reflects a major shift in US income tax treaty terms
The US and Croatia recently announced that the two parties have signed a new income tax treaty. Once the treaty process has been completed, this will be the first bilateral income tax treaty between the United States and Croatia, the only EU member country that currently does not have such a treaty with the United States. While trade and investment between the United States and Croatia may be relevant for only a relatively small subset of taxpayers, the implications of this new treaty’s reach may be broader than initially apparent. Read more in this PwC Tax Insights.
Germany
Tax treatment of incongruent advance distributions
A civil law resolution for a selective incongruent advance distribution to only one of two shareholders, contravening the articles of association but passed unanimously by the shareholders' meeting, is also tax effective. Thus, the “left-out” shareholder does not realise taxable income by way of a hidden distribution. Read more in this PwC blog.
No charitable status for Austrian foundation
The recognition of a foreign foundation as a charitable foundation is based solely on German law. In its ruling, the Supreme Tax Court further states that the German legislator is not obliged under EU law to recognize a non-profit status established under foreign law. Read more in this PwC blog.
Hong Kong
2023/24 Hong Kong Budget - pre Budget submission
Leading up to the 2023/24 Hong Kong Budget announcement on 22 February by Financial Secretary Paul Chan Mo-po, we submit our forecasts and recommendations to the Hong Kong government, aiming to make positive and sustained impacts for the economy, business community and individuals through our commitments to act. Read more.
Bill on refined FSIE regime passed
Further to the gazettal of the Inland Revenue (Amendment) (Taxation on Specified Foreign-sourced Income) Bill 2022 (Bill), which introduces refinements to Hong Kong’s foreign-sourced income exemption (FSIE) regime, the Bill was passed by the Legislative Council (LegCo) on 14 December 2022 together with certain amendments subsequently made to the Bill through the Committee Stage Amendments (CSA). It is expected that the Bill will be gazetted as the amendment ordinance (Ordinance) on 23 December 2022. The Ordinance will come into operation on 1 January 2023. Read more in this PwC news item.
Hungary
Decree prescribing the special requirements for transfer pricing documentation has been amended
The amendment of Decree No. 32/2017 (X. 18.) of the Ministry of National Economy on the Documentation Requirements Pertaining to Determining the Arm’s-Length Price (“Decree”) was published on 28 December 2022, which imposes considerable changes regarding the obligations of taxpayers concerned. Read more in this PwC news item.
Iceland
MLI to enter into effect for Swiss-Iceland double tax treaty
The OECD recently announced that Switzerland has confirmed the completion of its internal procedures for the entry into effect under Article 35(7)(b) of the provisions of the Multilateral BEPS Convention (MLI) to its double tax treaty with Iceland. With the notification deposited, the provisions of the MLI apply for the 2014 Swiss-Iceland tax treaty:
- with respect to taxes withheld at source on amounts paid or credited to non-residents, where the event giving rise to such taxes occurs on or after 1 January 2024;
- with respect to all other taxes levied by Switzerland, for taxes levied with respect to taxable periods beginning on or after 15 July 2023; and
- with respect to all other taxes levied by Iceland, for taxes levied with respect to taxable periods beginning on or after 1 January 2024.
See https://oecd/mli.
India
Extended time limit for reassessment to tax foreign asset not applicable to assessments that are concluded and time-barred prior to effective date of amendment providing time limit
The Mumbai bench of the Income-tax Appellate Tribunal recently held that the extended time limit of 16 years for reassessment to tax foreign asset would not be applicable to assessments which stood concluded and time barred prior to the effective date of the amendment providing the time limit. Read more in this PwC Tax Insights.
Karnataka High Court interprets new reassessment law
The Karnataka High Court quashed reassessment proceedings, holding that they were initiated merely by change of opinion and were time-barred by the prescribed period of limitation. The Court held that once the taxpayer has submitted all the relevant information during the scrutiny proceedings in relation to the transaction which is the subject matter of the reassessment proceedings, the extended period of ten years cannot be invoked for the assessment years which are barred by the period of limitation under the erstwhile provisions of section 149 of the Income-tax Act. This is an important decision interpreting the new reassessment law. It seems to suggest that the books of account or other documents or evidence in the possession of the Tax Officer that can be used to undertake reassessment proceedings must be new evidence which was not available at the time of passing the order which is a subject matter of reassessment proceedings. Read more in this PwC Tax Insights.
Ireland
Payment and receipt of interest and royalties without deduction of income tax
The Irish Revenue Commissioners recently issued Revenue eBrief No. 221/22, and updated guidance on the payment and receipt of interest and royalties without deduction of income tax. The updates include: 1) clarification of the agency’s interpretation of a “bona fide banking business in the State” that may pay interest without deduction of tax; and 2) certain changes to the self-certification process related to the application of withholding tax on specified payments of interest and royalties at a treaty rate.
Ireland releases new transfer pricing guidance
Ireland has updated its guidance on the country's transfer pricing rules, to reflect recent tax law amendments and the release of new transfer pricing guidelines from the OECD.
Japan
Japan’s 2023 tax reform proposals include an outline for Pillar Two legislation
Japan’s Liberal Democratic Party and Komeito Party released the 2023 tax reform proposals on 16 December 2022. The proposals include a legislative outline to implement a global minimum corporate tax based on the Global Anti-Base Erosion Model Rules (‘Pillar Two’) published by the OECD (the ‘GloBE Model Rules’). The outline introduces an Income Inclusion Rule (IIR) that broadly aligns with the GloBE Model Rules, which would apply to fiscal years beginning on or after 1 April 2024. Read more in this PwC Tax Insights.
Middle East
The UAE publishes its new corporate tax law
As noted in our last edition, the United Arab Emirates (UAE) recently issued long-awaited legislation providing for the introduction of a corporate income tax regime featuring a nine percent rate, which will apply to financial years starting on or after 1 June 2023. We previously shared our initial PwC analysis and can now share more detail in this PwC Tax Insights.
Moldova
Moldova introduces its first transfer pricing legislation
The Republic of Moldova recently formally introduced its first transfer pricing regulations, which follow the OECD’s Transfer Pricing Guidelines. Law no. 356 of 29 December 2022 introduced the transfer pricing concept in the Moldovan Tax Code, along with the general rules related to transfer pricing reporting and documentation requirements. The legislation will enter into force on 1 January 2024. In the months following the approval of the legislation, the government intends to provide further guidance on the contents of the transfer pricing documentation and details regarding the application of the law. Read more in this PwC Tax Insights.
Netherlands
In 2023 you can depreciate ‘at random’, read the conditions
In 2023, a maximum of 50 per cent of the acquisition or production costs of newly designated business assets may be depreciated at random. This previously announced scheme for at-random depreciation of assets in 2023 has been published with the Year-end regulation 2022 of 27 December 2022. Read more in this PwC news item.
Amendment taxable moment stock options per 1 January 2023
The share option regime has been changed as of 1 January 2023. In cases where shares are not tradable after the exercise of a stock option, the taxable moment will be deferred as a general rule, unless an employee decides to keep exercise as the taxable moment and puts it into writing. This law was not part of the Dutch Tax Plan 2023, but has also entered into force as of 1 January 2023. Read more in this PwC news item.
Seychelles
Seychelles Tax Agency posts texts of double tax treaties with Isle of Man and Jersey
The Seychellois Revenue Commission recently posted online the texts of its double tax treaties with: 1) the Isle of Man, signed 28 March 2013; and 2) Jersey, signed 28 July 2015.
South Korea
South Korea becoming first to pass global minimum tax rules
South Korea's budget bill for 2023, approved by parliament on December 23, includes the Korean rules on a global minimum tax (the GloBE Rules), making South Korea the first country to have codified the global minimum tax rules in its domestic legislation. The rules include an Income Inclusion Rule (IIR) and ‘Supplementary rules for income inclusion’ (referred to as the UTPR in the OECD Model Rules). Both rules will be effective for fiscal years beginning on or after 1 January 2024. Given the short timeline before the new rules become effective, non-Korean MNEs that have a Korean presence are highly encouraged to assess the impact of the new rules and understand the additional compliance and reporting obligations. See this PwC Tax Insights document.
Switzerland
MLI to enter into effect for Swiss-Iceland double tax treaty
The OECD recently announced that Switzerland has confirmed the completion of its internal procedures for the entry into effect under Article 35(7)(b) of the provisions of the Multilateral BEPS Convention (MLI) to its double tax treaty with Iceland. With the notification deposited, the provisions of the MLI apply for the 2014 Swiss-Iceland tax treaty:
- with respect to taxes withheld at source on amounts paid or credited to non-residents, where the event giving rise to such taxes occurs on or after 1 January 2024;
- with respect to all other taxes levied by Switzerland, for taxes levied with respect to taxable periods beginning on or after 15 July 2023; and
- with respect to all other taxes levied by Iceland, for taxes levied with respect to taxable periods beginning on or after 1 January 2024.
See https://oecd/mli.
For the latest updates on current topics, see this PwC Switzerland Insights page.
Taiwan
Taiwan Tax Update December 2022
This edition includes: 1) Ministry of Finance announces updated Reference List of CFC Low-Tax Countries or Jurisdictions; 2) Executive Yuan passed draft amendments to Article 10-2 of Statute for Industrial Innovation; and 3) Ministry of Defense and Ministry of Finance enacted Regulation Granting Additional Tax Deduction for Paid Leave Given to Employees Recalled as Reservists (“Regulation”).
US
Alternative Minimum Tax
- Interim guidance clarifies certain key issues under new corporate AMT
Notice 2023-7 (Notice) provides interim guidance pending publication of proposed regulations on how the Corporate Alternative Minimum Tax (CAMT) applies to corporations, certain partnerships, troubled corporations, and affiliated groups of corporations that file consolidated tax returns. The interim rules also address determining CAMT adjustments for depreciation and the treatment of federal income tax credits and provide a safe-harbor method for determining whether a corporation is an applicable corporation subject to the CAMT. Read more in this PwC Tax Insights from January 2023. - IRS issues initial guidance on corporate alternative minimum tax
The IRS and Treasury released Notice 2023-7, announcing their intention to issue proposed regulations addressing the application of the new CAMT. Notice 2023-7 provides interim guidance regarding certain time-sensitive issues that are intended to be addressed in the proposed regulations. The notice states that taxpayers may rely on the interim guidance until publication of regulations, which would be proposed to apply for tax years beginning after 31 December 2022. Read more in this PwC Tax Insights from December 2022. - Webcast replay
PwC professionals discussed the Notice and issues related to the CAMT on a Tax Readiness webcast on 11 January 2023. Watch the replay. It is also discussed in this episode of our Policy on Demand series.
Initial guidance from Treasury on stock repurchase provisions
Treasury and the IRS released Notice 2023-2 (the Notice) on 27 December, providing interim guidance addressing application of the new excise tax on repurchases of corporate stock under Section 4501 (the Excise Tax), which was enacted as part of the Inflation Reduction Act of 2022 (the IRA). The interim guidance applies until proposed regulations addressing the provision are issued. The Notice states that taxpayers may rely on the rules described in the Notice until such time. The Excise Tax applies to certain repurchases of stock made after 31 December 2022. Read more in this PwC Tax Insights. There is also this Policy on Demand episode which discusses the topic: Stock buyback guidance prompts analysis and comments.
Research and experimental expenditures
- IRS revises automatic method change for RE capitalization
The IRS previously issued Rev. Proc. 2023-8, which allows taxpayers to change their method of accounting for Section 174 costs for tax years beginning after 31 December 31 2021, using the automatic method change procedures. The IRS now has issued Rev. Proc. 2023-11, modifying the audit protection terms and conditions and transition rule under Rev. Proc. 2023-8. This PwC Tax Insight discusses these modifications. - IRS provides automatic method change for RE expenditures
The 2017 tax reform act amended Section 174, effective for amounts paid or incurred in tax years beginning after 31 December 2021, to require taxpayers to charge research and experimental (R&E) expenditures, including software development costs (collectively, Section 174 costs), to a capital account. Section 174 costs are required to be amortized over five years (15 years for expenditures attributable to foreign research). The IRS has now issued Rev. Proc. 2023-8, providing for taxpayers to change their method of accounting for Section 174 costs for tax years beginning after 31 December 2021, using the automatic procedures. Read more in this PwC Tax Insights.
Newly signed treaty with Croatia reflects a major shift in US income tax treaty terms
The US and Croatia recently announced that the two parties had signed a new income tax treaty. Once the treaty process has been completed this will be the first bilateral income tax treaty between the United States and Croatia, the only EU member country that currently does not have an income tax treaty with the United States. While trade and investment between the United States and Croatia may be relevant for only a relatively small subset of taxpayers, the implications of this new treaty’s reach may be broader than initially apparent. Read more in this PwC Tax Insights.
2023 Tax Policy Outlook Ahead
With the midterm elections behind us and a divided government ahead, a highly unsettled international tax environment is making it difficult for business leaders to plan for the world today. PwC's Rohit Kumar highlights the upcoming tax policy outlook report and how it can prepare business leaders for the year ahead. Read more.
IRS provides FATCA relief to foreign financial institutions
The IRS recently released Notice 2023-11, which provides temporary relief for certain foreign financial institutions required to report under FATCA US tax identification numbers for pre-existing accounts. Read more in this PwC Tax Insights.
IRS issues final qualified intermediary agreement
The IRS recently issued Rev. Proc. 2022-43 setting forth the final qualified intermediary (QI) agreement that applies beginning 1 January 2023 (the 2023 QI agreement) when the final Section 1446(f) regulations issued in 2020 became effective and the current version of the QI agreement (2017 QI agreement) expired. The 2023 QI agreement generally adopts changes proposed by the IRS in Notice 2022-23, which expanded the scope of the QI agreement to apply to QIs (1) effecting transfers of interests in publicly traded partnerships (PTPs) or (2) receiving distributions made by PTPs on behalf of QI account holders. QIs are permitted to assume withholding and reporting responsibilities for purposes of Sections 1446(a) and (f). Read more in this PwC Tax Insights.
FY 2023 federal funding bill does not address R&D deduction, other key business tax provisions
Congress currently is on track to enact a $1.7 trillion FY 2023 ‘omnibus’ federal spending bill and then adjourn for the year without taking action on proposals to reinstate the current deductibility of Section 174 research expenditures that became subject to amortisation in 2022 under a provision of the 2017 Tax Cuts and Jobs Act (TCJA). Additional TCJA business issues that will not be addressed this year include proposals to reverse tighter Section 163(j) interest deduction limitations that went into effect at the beginning of 2022 and to delay a phase-out of Section 168(k) ‘bonus’ depreciation deductions that is scheduled to begin in 2023. Read more in this PwC Tax Insights.
Accounting Methods Spotlight Q4 2022
This quarter's Accounting Methods Spotlight discusses important IRS guidance and other developments.
IRS finalises 2022 Schedule UTP and instructions
The IRS recently issued final versions of the Schedule UTP and instructions for the 2022 tax year (processing year 2023). The IRS revised the final instructions in response to comments received on the draft form and instructions released on 11 October, Read more in this PwC Tax Insights.
Final Section 897(l) regulations address qualified foreign pension funds
Treasury and the IRS published final regulations (TD 9971 ) on December 29, 2022, addressing qualified foreign pension funds (QFPFs) under Section 897(l) and exemptions from withholding tax for QFPFs. Read more in this PwC Tax Insights.
Massachusetts DOR characterises ASC 842 leases as intangible assets
The Massachusetts DOR provides that leases subject to ASC 842 should be characterised as intangible assets for purposes of the non-income measure of the corporate excise. Read more in this PwC Tax Insights.
Pennsylvania court rules that Due Process requires retroactive application of net loss carryover relief
A Pennsylvania court ruled that a taxpayer was entitled to an income tax refund because Due Process required that it utilise its full net loss carryover without limitation. Read more in this PwC Tax Insights.
Policy on Demand series
- Comments encouraged on CAMT guidance
Treasury recently released interim guidance on the application of the corporate alternative minimum tax (CAMT). In this episode from 4 January, Olivia Orobona, a Principal in PwC’s Mergers & Acquisitions Practice, and Ross Margelefsky, a Partner in PwC’s Specialized Tax Services Practice, discuss helpful and surprising aspects of the guidance and encourage taxpayers to submit comments as we await future guidance. - Tax policy uncertainties going into 2023
The 118th Congress convenes today with a new House Speaker and Ways and Means Chair yet to be selected. In this episode from 3 January, Rohit Kumar, Co-Leader of PwC’s Washington National Tax Services Practice, walks through what this change in Congressional leadership means for tax policy in 2023. - Stock buyback guidance prompts analysis and comments
Treasury recently released interim guidance on the application of the 1% stock buyback excise tax. In this episode from 3 January, Matt Lamorena and Chris Van Blarcum, members of PwC’s Mergers & Acquisitions Practice, discuss helpful aspects and surprises of the guidance and encourage taxpayers to analyze their transactions and provide comments to Treasury. - Complex Pillar 1 and 2 documents full of uncertainties
The OECD recently released three Pillars 1 and 2 consultation documents as well as guidance on Pillar 2 safe harbours and penalty relief. In this episode from 21 December, Will Morris, PwC’s Deputy Global Tax Policy Leader, discusses the complexities and uncertainties presented in these documents and encourages companies to study the documents and submit comments. - Week in Review
- In this episode from 13 January, Janice Mays discusses how House Republicans may need to buck members of their own caucus to pass “must-pass” legislation dealing with government funding and the federal debt limit. She encourages companies to work to educate new members of Congress on their priorities for tax legislative action.
- In this episode from 6 January, Rohit Kumar discusses how the difficulty the House is having in selecting a Speaker may be an indicator of challenges Congress may face in passing tax legislation in 2023. He encourages companies to focus on concessions the new Speaker makes and the role Democrats may play in future negotiations on tax policy as well as “must-pass” bills dealing with government funding and the federal debt limit.
Cross Border Tax Talks
- New FTC Regs: Raise your creditability score
In this episode from 9 January, Doug McHoney, PwC’s International Tax Services Global Leader is joined by Ninee Dewar, PwC International Tax Services Principal, to discuss the recently released 2022 proposed foreign tax credit (FTC) regulations. - Propósito Principal: Mexican tax reforms
In this episode from 19 December, Doug McHoney, PwC’s International Tax Services Global Leader, is joined by Mario Alberto Gutierez, International Tax Partner based in Mexico City, and Leader of PwC’s International Tax Practice in Mexico to discuss Mexico’s recent tax reforms.
Tax Readiness webcast series
- Tax Readiness: Tax Policy Outlook
The stakes have rarely been higher for tax executives seeking to manage and plan for business operations in the face of policy divisions among elected officials over the direction of US and global tax policy, and respond to worldwide technological disruption, the lasting impacts of the COVID-19 pandemic on how people work, and an increased focus on environmental, social, and governance (ESG) concerns. Join our panel of specialists on Tuesday 31 January at 4pm, as they discuss the details of our annual Tax Policy Outlook. Register here. - Tax Readiness: New Year's Resolution - Prepare for Pillar Two!
As 2022 came to an end, the European Union finally adopted the EU Minimum Tax Directive and the OECD released several significant guidance documents related to Pillar One and Pillar Two. EU Member States must now transpose the Directive into their local law by 31 December 2023. Join our panel on Thursday 26 January at 8pm, where they will review these recent developments and cover some of the practical steps that multinationals should be taking now to prepare for the coming changes. Register here. - Tax Readiness: Initial guidance on the new corporate alternative minimum tax
The Inflation Reduction Act imposed a corporate alternative minimum tax based on financial statement income. The corporate alternative minimum tax is effective for tax years beginning after 31 December 2022. Watch this webcast replay from 11 January, where we took a deeper dive into the recently released guidance. - Tax Readiness: Impact of the 2022 Proposed Foreign Tax Credit Regulations
Treasury and the IRS released proposed foreign tax credit regulations on 18 November, which potentially may be the last major change to the creditability regulations for some time. In this webcast from 19 December, our panel of specialists discussed how taxpayers may rely on the proposed provisions and how these regulations insert some much-needed flexibility into the FTC regime. Watch the replay here. - Tax Readiness: Q4 financial reporting considerations
Watch the replay from this webcast held on 14 December, where our panel discussed key tax accounting reminders related to the year-end reporting cycle and recent tax developments. - Tax Readiness: Implications of the US midterm elections
On 22 November our panel of specialists examined 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 the 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. Watch the replay 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.