Two weeks to 13 May 2022
Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
UK
PwC International Perspectives webcast series
Are you interested in gaining a more international perspective on your tax presence and recent changes to the UK-German tax landscape? From 3 May to 22 June 2022, PwC UK and PwC Germany are partnering to host a series of webcasts, covering areas from UK incentives to German anti-hybrid legislation. You can find out more and register here.
HMRC’s latest Transfer Pricing and Diverted Profits Tax
HMRC’s latest Transfer Pricing (TP) and Diverted Profits Tax (DPT) statistics between April 2020 to March 2021 demonstrate that TP and tackling profit diversion remain a key priority area for HMRC investigators. The statistics report across a variety of transfer pricing areas, including enquiries, Advance Pricing Agreements (APAs), Mutual Agreement Procedures (MAPs), Advance Thin Capitalisation Agreements (ATCAs), DPT investigations and Profit Diversion Compliance Facility cases (PDCFs) highlighting the additional yield, number of cases and length of time to resolve cases, across each area. A summary of the statistics and our view of these are set out in this article.
Factsheet on penalties applying to interest restriction returns
HMRC have published a factsheet that tells you about the penalties HMRC may charge if taxpayers have sent an inaccurate return or other document.
Treasury starts conversation to reform UK capital allowance regime
The Chancellor has called on businesses of all sizes to have their say, after his Spring Statement pledged to look at how to sustainably cut and reform business taxes ahead of the Autumn Budget. The publication sets out how firms can work with the government on capital allowances to help foster a new culture of enterprise and growth in the UK, with responses requested by 1 July 2022. Read more in this press release.
Recognised Stock Exchange (MICEX Stock Exchange) (Russia) Designation Revocation Order 2022
HMRC has published the Recognised Stock Exchange (MICEX Stock Exchange) (Russia) Designation Revocation Order 2022, alongside a response to the consultation on the draft order. Following consultation, HMRC has revoked the Moscow stock exchange’s designation as a recognised stock exchange with effect from 5 May 2022. In view of the responses received, the draft revocation order has been amended so that Stamp Duty Reserve Tax is correctly chargeable on depository interest transactions from the date of revocation.
Double taxation treaty passport scheme register updated
HMRC updated the double taxation treaty passport scheme register on 12 May 2022, with 75 additions and eight amendments. See here.
HMRC updates list of approved offshore reporting funds
HMRC has updated its list of approved offshore reporting funds to include the latest funds that have entered the Reporting Fund Regime.
EU
Pillar Two Model Rules
- Parliament set to back global minimum corporate tax rate
MEPs are expected to back new rules for a global minimum corporate tax rate from 2023 during the plenary session on 18-19 May. Read more in this news item.
Commission proposes tax incentive for equity - draft EU NID directive
The European Commission has proposed a debt-equity bias reduction allowance, or DEBRA - otherwise known as a notional interest deduction or NID - which will operate EU-wide. The proposal has two aspects: an allowance for new equity and an additional potential disallowance for interest deductions including on existing borrowings. The proposals will apply to companies other than financial institutions or AIFMs and the target date is 1 January 2024. Read more in this EC press release.
CFE Tax Advisers Europe
- Opinion Statement TTC 1/2022 on the OECD Public Consultation on a Crypto-Asset Reporting Framework and Amendments to the Common Reporting Standard
CFE Tax Advisers have published an opinion statement on the OECD public consultation on a Crypto-Asset Reporting Framework and Amendments to the Common Reporting Standard. - 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 2 May includes: 1) CFE Opinion Statement on OECD Public Consultation on a Crypto-Asset Reporting Framework; 2) ECJ Decision on Disclosure of Information in Airbnb Case C-974/20; 3) EU VAT Committee Publishes Meeting Papers & Updated Guidelines; 4) EU Commission to Consult on Regulation of Tax Profession; and 5) Registration Reminder: CFE Forum 2022 on 12 May 2022 in Brussels. Visit their latest news page here.
OECD
Pillar Two
- Parliament set to back global minimum corporate tax rate
As reported above, MEPs are expected to back new rules for a global minimum corporate tax rate from 2023 during the plenary session on 18-19 May.
Pillar One Model Rules
- OECD invites public input on the regulated financial services exclusion under Amount A
The OECD released the public consultation document on the Pillar One - Amount A: Regulated Financial Services Exclusion on 6 May 2022. Comments on the consultation document are due by 20 May 2022. This PwC tax policy alert provides a short overview of the proposed approach to the Regulated Financial Services Exclusion and some initial observations. This is the fifth in a series of public consultations on the Pillar One Amount A Model Rules that the OECD is expected to release over the coming months, with very short comment periods, as part of a 'rolling consultation’. - Public comments received on the extractives exclusion under Amount A
On 14 April 2022, the OECD invited public comments on the Extractives Exclusion under Amount A of Pillar One to assist members in further refining and finalising the relevant rules and has now published the public comments received.
MLI
- Senegal deposits MLI ratification instrument
Senegal has deposited its instrument of ratification for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). The MLI will enter into force on 1 September 2022 for Senegal. See https://oe.cd/mli.
Crypto-Asset Reporting Framework and Amendments to the Common Reporting Standard
- Consultation comments published
On 22 March 2022, interested parties were invited to provide comments on the Crypto-Asset Reporting Framework and Amendments to the Common Reporting Standard. The OECD has now published the public comments received. As noted above, CFE Tax Advisers submitted this opinion statement. - Public consultation meeting
A public consultation meeting taking place on 23 May will focus on the key questions identified in the consultation document and issues raised in the written submissions received as part of the consultation process. The event will be recorded and the replay will be made available on this web page shortly after.
OECD takes stock of tax transparency advances in Latin America
The OECD has released a new report, Tax Transparency in Latin America 2022, which looks at the Latin American region's recent progress in tackling tax evasion and other financial crimes through transparency and exchange of information (EOI) for tax purposes. Read more in this OECD item.
Other territories
International
Why headline tax rates are just the tip of the iceberg for private businesses
So, what are entrepreneurial and private businesses looking for in the tax and regulatory regime of the country in which they are based? The answer is broad and nuanced. But if a jurisdiction fails to provide a conducive tax and regulatory environment with a focus on supporting private businesses and their owners, it can severely undermine the jurisdiction's attractiveness as a place to set-up and grow a private business. This is evident in the findings contained in PwC's inaugural EMEA Private Business Heatmap. A drill down into the tax and regulatory environment category reveals significant insights for both private businesses and governments. Find out more in this article from PwC Ireland.
United Nations - public launch of the 2021 Model Tax Convention
The United Nations recently held a launch event for the 2021 version of its Model Tax Convention. The UN Model is intended to be used for treaties between developed and developing countries and includes, for example, the concept of a ‘service’ permanent establishment, which does not appear in the OECD Model Tax Convention. Read more in this UN news item.
Digital tax byte
The latest edition from 28 April includes an OECD release on the IT format for sharing digital platform reporting information and an update on the EU attempts to adopt a Directive to implement Pillar Two. It also considers the relevance of 'nudge' letters being sent by the Indian tax authorities and the CJEU decision on Belgian tax reporting on tourist accommodation not being contrary to EU law.
Environmental, Social and Governance (ESG)
- It's time for a UK environmental tax strategy, ICAS says
The UK’s plan to achieve net zero by 2050 is missing a tax strategy, according to a briefing paper by the Institute of Chartered Accountants of Scotland (ICAS), which called on the government to produce a tax roadmap notwithstanding existing uncertainty.
J5 issues non-fungible token marketplace “red flag” indicators
The Joint Chiefs of Global Tax Enforcement (J5) recently released the ‘J5 NFT Marketplace Red Flag Indicators' to provide insight to banks, law enforcement partners, and private industry regarding potential red flags in non-fungible token (NFT) marketplaces. The J5 consists of five tax agencies (the US, the UK, Canada, the Netherlands, and Australia) collaborating to combat transactional tax crimes. Read more in this PwC Tax Insights
Australia
2022-23 Northern Territory Budget
The 2022-23 Northern Territory (NT) Budget was delivered on 10 May 2022 by Treasurer Michael Gunner and focuses on the NT as the “Comeback Capital of Australia” - locking in new investment, new industries and new jobs. Read more in this PwC Tax Alert.
2022-23 Victorian State Budget
The 2022-23 Victorian State Budget was delivered on 3 May 2022 by Treasurer Tim Pallas, with an emphasis on boosting the Victorian economy through investment of $22.2 billion in new output initiatives and $6.7 billion in new asset initiatives. Read more in this PwC Tax Alert.
Belgium
See here for latest updates.
Due date for both corporate income tax return and local form for assessment year 2022
Whilst the general due date for filing is the end of the seventh month after year-end closing, an additional term until 17 October 2022 has now been confirmed for Belgian companies, Belgian legal entities and foreign entities with a financial year-end from 31 December 2021 up to 28 February 2022. Read more in this PwC news item.
Brazil
Brazil reinforces commitment to align its TP rules with OECD Guidelines
Brazil’s Ministry of the Economy recently reaffirmed its commitment to ‘fully converge’ its transfer pricing (TP) rules to the arm’s-length standard (ALS), bringing the rules in line with the OECD TP Guidelines. Specific draft legislation has not yet been released. This announcement is of increased significance to taxpayers in light of the recently adopted final regulations (TD 9959) by the US Department of Treasury and Internal Revenue Service addressing various aspects of the US foreign tax credit regime, as well as BEPS 2.0 developments. Read more.
Canada
Canada introduces first package of hybrid mismatch rules
The Department of Finance recently released draft legislative proposals to address hybrid mismatch arrangements, which are cross‑border arrangements that are characterised differently under the tax laws of different countries. These proposals are the first of two separate legislative packages to implement recommendations of the OECD BEPS Action Plan into the Income Tax Act to eliminate the tax benefits arising from hybrid mismatch arrangements. Read more in this PwC Tax Insights.
Germany
Ministry of Finance circular - repayments of capital by third country corporations
In a recent circular, the German Federal Ministry of Finance (MoF) addresses the tax issues arising from the repayment of contributions, both of nominal capital as well as those made into free capital reserves, by third-country corporations. Read more in this PwC tax blog.
Taxis radio control centre may be a PE under Swiss/German double tax treaty
The Tax Court of Baden-Württemberg has ruled that premises in a Swiss taxi radio control centre may constitute a permanent establishment and, as a result, the resultant commercial income may be tax-exempt in Germany. Read more in this PwC tax blog.
India
Supreme Court overturns High Court decisions and upholds validity of reassessment notices issued after 1 April 2021 under erstwhile reassessment provisions
The Supreme Court of India, by overturning various High Court decisions, has upheld the validity of the reassessment notices issued after 1 April 2021 under the unamended section 148 of the Income-tax Act, 1961 (the Act). According to the Supreme Court, such notices are to be treated as show-cause notices under section 148A of the Act. All the defences available to the taxpayer and department under the new law are to continue to be available. The decision will be applicable pan-India. Read more in this PwC Tax Insights.
Government notifies operationalisation of the CEPA between India and the UAE for trade in goods
India and the UAE signed a comprehensive economic partnership agreement (CEPA) in February 2022, covering approximately 90% of bilateral trade between the two countries. The CEPA is expected to increase the bilateral trade volume from the current US$60bn to US$100bn over the next five years. After completion of the legal process of implementation and operationalisation of the CEPA between the two countries, the Central Board of Indirect Taxes and Customs has rolled out suitable notifications which give effect to the concessional customs duty benefit on trade of goods and outline the eligibility requirements in terms of rules of origin to claim the benefit under the CEPA. The notifications are effective from 1 May 2022. Read more in this PwC Tax Insights.
Ireland
Ireland updates offshore funds tax guidance
The Tax and Duty Manual Part 27-05-01, which provides guidance on taxation of offshore funds that are managed in Ireland, has been updated to include guidance in relation to the taxation of non-residents, including offshore funds, who avail of the services of an independent Irish investment or asset manager.
Malta
Tax incentives for ESG centred investments
In this article, we look at the Environmental part of ESG and focus on some of the support measures that have been introduced locally by different authorities to incentivise decarbonisation and the energy transition and provide assistance to environmentally-friendly projects. Read more in this PwC article.
Middle East
United Arab Emirates (UAE) - corporate tax consultation closes on 19 May 2022
On 31 January 2022, the UAE’s Ministry of Finance announced that the territory will introduce a federal corporate tax on business profits effective for financial years starting on or after 1 June 2023. Since the announcement, work has continued on the design and implementation. The Ministry has invited comments on their consultation document by 19 May 2022 using the online submission form. See here.
Publication of the UAE Control List for Dual-Use Items
Recently, the Ministry of Economy of the UAE issued Circular No 1 of 2022, requiring Designated Non-Financial Businesses and Professionals (DNFBP), e.g. real estate brokers and agents, legal firms,accounting firms and corporate services providers, to comply with the sanctions imposed by UN Security Council's resolutions. Most importantly, the Circular includes a publicised version of the UAE Control List for the import and export of dual-use items. Read more in this PwC news item.
New Zealand
OECD Pillar 2 consultation launched
New Zealand's Inland Revenue Department has launched a public consultation until 1 July, on whether and how New Zealand should participate in the OECD/G20 tax measure aimed at curtailing base erosion and profit shifting by large multinational enterprises.
Norway
Norwegian Revised National Budget 2022
The Norwegian Revised National Budget was presented on 12 May. This PwC blog provides an overview of the most important changes concerning tax and VAT, and confirmation that the introduction of Pillar Two in Norwegian law is postponed until 2024.
Proposal to introduce VAT on all types of intangible services not explicitly exempt for VAT
Norwegian tax authorities have published a hearing proposal (akin to a white paper in the UK) introducing Norwegian VAT on all type of intangible services.The introduction of VAT on all type of intangible services implies that all types of intangible services supplied by foreign suppliers will be subject to Norwegian VAT, independent of the status of the customer. Read more in this PwC blog.
Portugal
Portugal Budget proposal targets patent box regime, tax incentives and start-ups
After the appointment of the government following the January elections, the 2022 State Budget Law proposal was presented to Parliament on 13 April. The proposal includes new tax measures and amendments to the tax legislation and proposes to increase the deduction for Corporation Tax (CIT) purposes under the existing Patent Box regime to 85% (currently 50%). The budget law would be effective on the day after its publication. Read more in this PwC Tax Insights.
Russia
Russia/Ukraine crisis
- Recognised Stock Exchange (MICEX Stock Exchange) (Russia) Designation Revocation Order 2022
As reported above, HMRC has published the Recognised Stock Exchange (MICEX Stock Exchange) (Russia) Designation Revocation Order 2022 alongside a response to the consultation on the draft order.
Senegal
Senegal deposits MLI ratification instrument
Senegal has deposited its instrument of ratification for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). The MLI will enter into force on 1 September 2022 for Senegal. See https://oe.cd/mli.
South Africa
PwC Synopsis - April 2022
This edition includes articles on: 1) Tax residence of a company; 2) Taking SARS’ decisions on review under PAJA; and 3) SARS watch.
Switzerland
For the latest updates on current topics, see this PwC Switzerland Insights page.
Thailand
Justifiable grounds for certain transactions at lower than market value
Section 65 bis (4) of the Revenue Code requires all sales of goods, provisions of service and loans to be transacted at market value unless there are justifiable grounds to do otherwise. Recently the Revenue Department issued its Instruction No. Paw 160/2565 specifying that the event described below in the case of a lease of assets at lower than market value will be considered as having justifiable grounds. Read more in this PwC Tax Insight.
US
Recent US trade developments affecting supply chains, business operations
The past few months have seen several important developments affecting US global trade. Taxpayers that could be affected should analyse the potential impact. Read more in this PwC Tax Insights.
Georgia allows elective consolidated filing for post-2022 tax years
Existing law requires taxpayers to request consolidated filing. Applicable to tax years beginning on or after 1 January 2023, new law H.B. 1058 - enacted on 5 May - allows taxpayers meeting specified requirements an election to file consolidated Georgia corporate income tax returns. Additionally, the new law removes the ability of the Department to compel consolidated filing. Read more in this PwC Tax Insights.
New York proposed draft regulations to address Internet activities and P.L. 86-272
New York’s Department of Taxation and Finance amended its draft corporate tax regulations that would provide for revised Public Law 86-272 guidance, modelled after the Multistate Tax Commission (MTC) model statute, which addresses activities conducted via the Internet. This development is one part of an overall process to draft new corporate income tax regulations, which taxpayers should consider before the formal adoption commences.Read more in this PwC Tax Insights.
New York extends 2022 tax year pass-through entity tax election due date; requires estimated payments
Governor Kathy Hochul recently signed into law S8948, which amends the recently enacted changes to the state pass-through entity tax (PTET) by extending the election due date for the current year and by requiring estimated payments. The new amendments allow eligible partnerships and S corporations that missed the 15 March 2022 deadline for electing into the PTET to now have until 15 September 2022 to make the election. Read more in this PwC Tax Insights.
Subscribe for US tax alerts
Youcan sign up for Tax Alerts issued by the US to be emailed to you. Subscribe using the link on this page.
Webcasts, blogs & podcasts:
- Tax Readiness webcast: How ESG is reshaping the Deals landscape
Register here to join our specialists on Tuesday 31 May at 8pm as they discuss the importance of ESG positioning in corporate strategy, buy-side due diligence, sell-side divestiture planning, and credits & incentives. - Global disruption and the impact on doing business in the US
We continue to live in challenging times, and recent events underscore how quickly the state of the world can change. From geopolitical tensions to tax policy, significant developments are impacting the business strategy of international companies operating in the US. In this webcast taking place on Tuesday 17 May at 4pm, gain practical insights from PwC’s economic, deals, and tax policy specialists to stay ahead of the curve. Register here. - Tax Readiness webcast: The Future of Tax Controversy - How companies should prepare
In this webcast held on 4 May, our panel of specialists discussed the controversy challenges companies are facing and ways they can minimise risk to their business operations. Watch the replay here. - Tax Readiness: Supply Chain, Business Disruption, and Unlocking Cash through Tax
Register here to watch the replay of our webcast from 13 April, where our panel of specialists discuss the current global and economic environment and illustrate the challenges through various case studies to demonstrate how tax might offer some pathways to clarity and improved cash flow. - Cross-border tax talks: Green Book Proposals: Codifying Pillar 2 in the US?
In this episode from 9 May, Doug McHoney (PwC's US International Tax Services Co-Leader) is joined by Pat Brown, PwC’s International Tax Policy Leader, making his sixth appearance on the podcast. Doug and Pat discuss the Biden Administration's fiscal year 2023 budget proposals as explained in the Green Book, how some of the proposals interact with the OECD’s Pillar Two Model Rules, and what taxpayers might expect. - Policy on Demand series
- US Election Watch: Primaries, trends, and money
In this episode, Rohit Kumar and Todd Metcalf share their insights on upcoming primary races, fundraising, and other trends as we approach the 2022 midterm elections. - Week in Review
- In this episode from 13 May, Todd Metcalf shares why the focus is on everything but tax policy at this time. He also answers the question that he received most this week: Will Congress ever get to a deal on reconciliation?
- In this episode from 6 May, Mark Prater shares his insights from this week, including the status of the reconciliation bill and bipartisan legislative efforts.
- US Election Watch: Primaries, trends, and money
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
Tax system reform strategy up to 2030 approved
On 23 April, the Prime Minister signed Decision 508/QD-TTg approving the tax system reform strategy through to 2030, with a focus on building a modern and effective taxation regime. Read more in this PwC NewsBrief.