Two weeks to 13 October 2023
Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
UK
Autumn Statement 2023 reactions - webcast
The Chancellor will make his Autumn Statement on the afternoon of Wednesday 22 November. You can register here to join our Autumn Statement 2023 Reactions webcast, which will take place on Thursday, 23 November at 9:00am.
Case law update
- BCM Cayman LP & Anor v HMRC - profit allocation & interest deductibility in connection with a UK partnership
The court of appeal has dismissed the taxpayer’s appeal in this case, finding additional tax to be payable on profits allocated to corporate partner, with no interest deduction. Read the decision here.
HMRC Manual & guidance updates
The following changes have recently been made by HMRC following review:
- International Exchange of Information Manual
The manual had 88 updates on 9 October as legislation is being replaced. See here.
Treaty updates
Double Taxation Treaty Passport Scheme register
HMRC has updated the register of overseas corporate lenders who are passport holders for Double Taxation Relief on UK loan interest. The register has been updated as of 6 October with 183 additions, 14 amendments and 59 removals.
Talking Tax
Welcome to the October edition of Talking Tax, bringing you a range of views and insights from specialists across our business.
EU
EU Foreign Subsidies Regulation in effect
The EU Foreign Subsidies Regulation notification requirements came into effect on 12 October 2023. Consequently, companies will now have to notify either mergers and acquisitions (‘concentrations’) or participation in public procurement bids, where they involve foreign financial contributions, meet the relevant notification thresholds and do not fall within the new exceptions. Read more in our Tax Policy Alert from July 2023, when this EU Regulation was adopted, and watch the replay of our webcast from 12 July, where our panel explored, among other topics, the range of subsidies and incentives within scope, data collection issues/requirements, and how the FSR might impact deals.
CFE Tax Advisers Europe
- EU Tax Policy News Top 5
The latest round-up of EU Tax Policy news from the Confédération Fiscale Européenne (CFE). The latest edition from 2 October includes: 1) State Aid & Transfer Pricing: General Court Declares Belgian Excess Profit Scheme Unlawful; 2) CFE Professional Affairs Conference: “Tax Adviser 2030: Evolution or Revolution for Tax Practice, Policy and Administration?” 3) WU Global Tax Policy Centre Surveys on Multilateral Cooperative Compliance & Tax Control Frameworks; 4) OECD Publishes Input Received Concerning Consultation on Amount B, Pillar 1 on Transfer Pricing; and 5) UCLouvain Conference on Abuse of Law in European Taxation – 21 to 22 November 2023. Visit their latest news page here. - Global Tax Top 10 - September 2023
The September 2023 issue looks at the following: 1) European Commission Public Consultation on BEFIT (Business in Europe: Framework for Income Taxation); 2) United Nations Assert Greater Role in International Tax Affairs; 3) OECD Secretary-General Tax Report to G20 Leaders; 4) State Aid & Transfer Pricing: General Court Declares Belgian Excess Profit Scheme Unlawful; 5) BEPS Action 13 Country-by-Country Reporting Update; 6) CFE Opinion Statement on the EU Commission FASTER Withholding Tax Proposal; 7) OECD Publishes Input Received Concerning Consultation on Amount B, Pillar 1 on Transfer Pricing; 8) African Leaders Propose Global Carbon Tax; 9) Tax Administration 2023 Report Published; and 10) WU Global Tax Policy Centre Surveys on Multilateral Cooperative Compliance & Tax Control Frameworks. - Opinion Statement on right to be paid interest on overpayment of taxes in breach of EU Law
The CFE has published Opinion Statement ECJ-TF 3/2023 on the CJEU decision of 8 June 2023 in Case C-322/22, E. v Dyrektor Izby Administracji Skarbowej we Wrocławiu, which concerns the right to be paid interest on overpayment of taxes in breach of EU Law.
OECD
Pillars One and Two
- Multilateral instrument implementing the Pillar Two Subject to Tax Rule opens for signature
On 3 October 2023, the OECD Inclusive Framework (IF) announced the conclusion of negotiations on a multilateral instrument (MLI) to implement the Pillar Two Subject to Tax Rule (STTR). The text of the STTR MLI, along with an explanatory statement, high-level summary (‘at a glance’), and frequently asked questions (FAQs) can be found on the OECD website. As of 2 October 2023, the MLI is open for signature by all states without reservations. The STTR allows countries to increase taxes on certain cross-border payments (not including dividends) among associated entities under a bilateral tax treaty where the nominal rate in the recipient country is below 9% (adjusted for tax base reductions such as tax exemptions and tax credits). Read more in our Tax Policy Alert. - OECD releases Multilateral Convention to implement Amount A of Pillar One
On 11 October 2023 the OECD released a package of guidance in relation to Amount A of Pillar One:- the text of a consensus-based Multilateral Convention (MLC) and accompanying explanatory statement;
- an Understanding on the Application of Certainty for Amount A of Pillar One (UAC); and
- an update to the economic impact assessment of Pillar One.
Notably absent from the package is any further guidance on Amount B (ie transfer pricing for routine distribution and marketing transactions), which the Inclusive Framework (IF) continues to work on, post-consultation, to provide final guidance by the early part of 2024. Read more in our PwC Tax Policy alert.
- Updated Pillar Two Country Tracker
PwC's Pillar Two Country Tracker, our online tool, provides the status of Pillar Two implementation in different countries and regions. You can also find updates on recent Pillar Two developments in the territory updates below.
OECD Tax Talks Webcast
With several recent developments in the OECD’s international tax agenda, experts from the OECD Centre for Tax Policy and Administration present an update on their work on 16 October. The presentation and replay is available on the OECD website here.
Heads of tax administrations agree on new collaborative initiatives to shape the future of tax administration and on deepening their co-operation for the implementation of the global minimum tax
The OECD's Forum on Tax Administration (FTA) held its annual Plenary meeting in Singapore from 11-13 October 2023, bringing together tax commissioners and delegates from across the globe, including representatives from international organisations, regional tax administration bodies, business and academia. At the meeting, Commissioners agreed on new areas of collaboration to pave the way for transforming the future of tax administration. Read more in this OECD item.
Other territories
International
Digital tax byte
The latest edition in our series of brief insights into the workings of the UK and supranational bodies reviewing the taxation of digitalisation of business. In this edition, from 11 October, we cover the release by the OECD of a package of materials for Amount A of Pillar One. We also note proposed new US digital asset reporting regulations and a Kenya notice about starting enforcement proceedings in relation to those offering registerable digital services.
Environmental, Social and Governance (ESG)
- TPT launches final Framework
The UK Transition Plan Taskforce (TPT) has published its final Disclosure Framework, technical mapping, and a consultation on its Sector Summary. Read PwC UK's analysis of the TPT publications and their implications for businesses. - GTAG publishes final advice and closing statement
The Green Technical Advisory Group (GTAG) has published its final advice to the Government on the UK Green Taxonomy. Read PwC UK's analysis of the advice and implications for businesses. - Leadership in the sustainability era
The position of a sustainability leader in any organisation is invariably challenging. Explore our expert insights to move you from ambition to action. Read more.
Austria
Austrian Ministry of Finance (BMF) publishes a consultation draft for a Minimum Tax Act (MinBestG)
On 3 October 2023 the BMF published a consultation draft for an act to ensure a Global Minimum Tax (Pillar II). The consultation period ends on 20 October 2023. The new regulations will enter into force as of 1 January 2024. The Minimum Tax Act transposes into domestic law the complex framework of the European Unions’ Directive on a global minimum level of taxation as well as of the OECD’s model rules. This PwC alert summaries the key points.
Belgium
See here for latest updates.
Belgian government agrees on federal budget: what is the impact?
On 9 October, the Belgian Federal government reached an agreement on the federal budget. The current budget round was an important one, as the economic climate is deteriorating and this has an impact on the budget of the government. This budget needed to find additional funds. The total effort is 1.7 bln EUR, of which one third was found in new sources of income (the other parts from savings and one offs). When looking at the new receipts, the following are among the combined measures announced: 1) Change to the Belgian Controlled Foreign Companies (“CFC”) rules; 2) Banking tax; 3) Tightening of the anti-abuse measures against international tax evasion. Read more in this PwC news item.
Bermuda
Proposed Bermuda corporate income tax is closely modelled after the GloBE rules, with key differences
The Government of Bermuda issued its second public consultation paper (PCP) on 5 October, proposing a 15% corporate income tax (CIT) applicable to Bermuda businesses that are part of multinational enterprise (MNE) groups with annual revenue of €750M. The tax would be effective beginning in 2025. The second PCP provides details with respect to the scope of the proposed CIT, as well as the computation of taxable income and the tax itself. The third and last PCP is expected to be released on or about November 10, 2023, with the consultation period to run until 24 November 2023. The Bermuda Government intends to table the CIT bill for debate, with a view to enactment prior to 31 December 2023. Read more in our PwC Tax Insights.
China
China and Germany commit to help administer Pillar Two GloBE rules
Germany and China released a joint statement on 1 October, following a high-level financial dialogue in Frankfurt. The 25-point statement addresses a wide range of issues, but on tax (Paragraph 8) focused on cross-border tax evasion, BEPS, and tax certainty.
Cyprus
Cyprus consults on implementation of EU Pillar Two Directive
The Cyprus Ministry of Finance (MoF) has launched a public consultation on Cyprus’ transposition into national law of the EU Directive on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups (the Directive) of 14 December 2022. The public consultation invites comments from interested parties until 31 October 2023. Read more in this PwC alert.
Cyprus consents to Pillar Two Transitional CbCR Safe Harbour Rules, enhances tax deduction for R&D costs
Cyprus has consented to the Pillar Two Transitional CbCR Safe Harbour. In addition, the Cyprus Parliament recently voted to amend Article 9(1)(d) of the Cyprus Income Tax Law, which grants a tax deduction for expenditures incurred for scientific research and R&D. Finally, the Ministry of Finance announced that the Cyprus-Netherlands tax treaty will be effective from 1 January 2024. Read more in this PwC Tax Insights.
Interest Limitation Rule of Section 11(16) of the Cyprus Income Tax Law: Cyprus Tax Authorities issue Circular clarifying its application
The Cyprus tax authorities recently issued Circular 5/2023 clarifying certain aspects regarding the application of the Interest Limitation Rule (“ILR”) of Section 11(16) of the Cyprus Income Tax Law (“CITL”). The aspects being clarified include the scope of the ILR, the application of the ILR on Cyprus Groups, the application of certain exemptions to the ILR, etc. The Circular also includes practical examples aiming to illustrate the clarifications. Read more in this PwC alert.
Germany
China and Germany commit to help administer Pillar Two GloBE rules
Germany and China released a joint statement on 1 October, following a high-level financial dialogue in Frankfurt. The 25-point statement addresses a wide range of issues, but on tax (Paragraph 8) focused on cross-border tax evasion, BEPS, and tax certainty.
India
Treaty access cannot be denied in complete disregard to TRC and other corroborative evidence reaffirmed
The Delhi bench of the Income-tax Appellate Tribunal has, in a welcome ruling pertaining to the taxation of gains arising out of the sale of shares, provided relief to the taxpayer by upholding the following principles in the context of access to a Double Tax Treaty (treaty): 1) Treaty access cannot be denied to the taxpayer by invoking the doctrine of substance over form by completely disregarding the availability of the Tax Residency Certificate (TRC) and other corroborative evidence and satisfaction of the limitation of benefit (LoB) clause; and 2) If the subject transaction is specifically exempt from the purview of General Anti-Avoidance Regulations (GAAR), the Tax Officer (TO) cannot involve the doctrine of substance over form to deny treaty access. Read more in this PwC insight.
Ireland
Budget 2024
Budget 2024 announced on 10 October, was arguably the Government’s most challenging budget yet. Despite being buoyed by strong corporate tax revenues, the Government was constrained by inflationary risks and capacity constraints. With one eye on a general election, did the Minister for Finance strike the right balance between easing the cost-of-living burden and investing in the country’s future? Visit our dedicated Budget webpage for our insights, including our analysis on what Budget 2024 means for you and your business.
Jersey
Jersey re-confirms 2025 Pillar Two implementation plans
The Jersey government recently published its Government Plan 2024 to 2027, which sets out the funding position for the Government, including income, capital and revenue expenditure. The plan confirms Jersey’s implementation of the Pillar Two global minimum tax, including the intent to implement an IIR and domestic minimum tax from 2025, while continuing to monitor global implementation. The implementation is part of a joint approach together with Guernsey and the Isle of Man.
Korea
Korean Tax Update
This edition includes: 1) Government considers the creation of opportunities zones with tax incentives for companies investing in or relocating to these zones; 2) Korea’s national tax revenue estimated to be less than the Budget by KRW59 trillion in 2023; 3) The Protocol amending the Customs Mutual Assistance Agreement concluded between Korea and Vietnam takes effect; 4) Foreign financial account reportings mark a record high of KRW186 trillion this year; and 5) Rulings update.
Netherlands
Repurchases of own shares fully subject to dividend tax
Companies can, under certain conditions, repurchase their own shares without being subject to dividend tax. Parties within the Dutch Parliament propose to limit or abolish this possibility and use the proceeds to support low and middle-income earners. Read more in this PwC news item.
Norway
Norwegian National Budget for 2024
The 2024 budget was presented on 6 October. The main impression is that there are few changes in the tax and VAT area in this year's budget. The global minimum tax of 15 percent for groups with a total turnover of more than 750 million EURO will be presented as a separate matter later this autumn and the rules will take effect from the income year 2024. See this PwC blog for an overview of the most important proposals for changes in the tax and VAT area.
The new proposal for resource rent taxation of onshore wind power
The resource rent taxation for onshore wind power announced on 28th September last year is now likely to be introduced. In the proposal for the State budget for 2024 issued on 6th October the resource rent tax was included, and although the State budget is not final but subject to political debate before being finally resolved, it is at this point likely that we will see the resource rent tax on onshore wind coming. The proposal includes some significant changes to the consultation paper that was issued earlier this year. Read more in this PwC blog.
Singapore
Singapore’s response to Pillar Two
Singapore’s Ministry of Finance published a 29 September opening address given by Indranee Rajah, Second Minister for Finance and National Development. The remarks include Singapore’s response to international tax developments and the new competitive landscape resulting from Pillar Two.
Switzerland
For the latest updates on current topics, see this PwC Switzerland Insights page.
Denial of Swiss withholding tax refund in the case of cross-currency swaps
The Swiss Administrative Court recently issued a new decision concerning the right to a Swiss withholding tax refund of a Danish credit institute that was engaged in cross-currency swaps in USD/CHF. The Danish claimant of Swiss withholding tax had acquired Swiss government bonds and swapped a fixed payment in CHF (matching the gross coupon on the Swiss government bonds) against a floating rate in USD. Read more in this PwC insights.
US
Treasury issues proposed regulations on triangular reorganisations and inbound nonrecognition transactions
Treasury and the IRS have issued proposed regulations (REG-117614-14 ) providing guidance on the treatment of property used to acquire parent stock or securities in connection with certain triangular reorganisations involving one or more foreign corporations, the consequences to persons that receive parent stock or securities pursuant to those reorganisations, and the treatment of certain subsequent inbound nonrecognition transactions following those reorganisations and certain other transactions. The Proposed Regulations affect corporations engaged in certain triangular reorganisations involving one or more foreign corporations, certain shareholders of foreign corporations acquired in such reorganisations, and foreign corporations that participate in certain inbound nonrecognition transactions. Read more in this PwC Tax Insights.
Trick or treat(y): An update on US treaties
In this Cross-border Tax Talks episode from 4 October, Doug McHoney (PwC’s International Tax Services Global Leader) is with Nils Cousin, a Washington, D.C. based International Tax Services Principal specialising in US inbound taxation. Together they discuss tax treaties, mutual agreement procedures, the concept of competent authority, the treaty process in the US, recent US tax treaty activities, treaty shopping, the USMCA Trade Agreement, and the future of tax treaties in the United States. Among the treaties and agreements discussed are US treaties and agreements with Chile, Croatia, Hungary, Taiwan, and Russia.
Policy on Demand series
- Taxpayers "need to turn up temperature" even as shutdown cools
There was a plot twist over the weekend: while all signs were pointing to a government shutdown, a last minute deal came together to keep the government open. Rohit Kumar discusses what changed, the outlook for a year-end tax bill, and the importance of voicing the need to address TCJA provisions. Watch here. - Amid disruption, shutdown more likely, tax bill less certain
The removal of Kevin McCarthy as House Speaker has caused a flurry of activity – with some chaos – in Washington. Chairman Dave Camp discusses the challenges facing the new Speaker and how House disarray could affect key legislative priorities. Janice Mays gives us the latest state of play in the House and what she’s hearing. Watch here.
- Week in Review
- 13 October - The US Treasury has opened a public consultation on the recently released OECD Pillar One Amount A multilateral convention. Continued disarray in the House makes a year-end tax bill less certain, but not impossible. Get up to speed on new Pillar One guidance, prepare for Pillar Two compliance, and press Congress on key tax legislation. Watch here.
- 6 October - It is too soon to tell what impact the short-term CR and Speaker removal might have on efforts to enact year-end tax legislation addressing TCJA business tax provisions. The OECD MLI is now open for signature - be on the look-out for additional Pillar Two administrative guidance later this month. Watch here.
Tax Readiness webcast series
- Tax Readiness: What taxpayers need to know about the recent Section 174 and CAMT guidance
In recent weeks, Treasury and the IRS have released critical guidance in two notices that propose rules potentially affecting a vast array of taxpayers - Section 174 guidance and new corporate alternative minimum tax (CAMT) guidance. In this webcast taking place on Monday 9 October at 7pm, from these notices and how businesses should consider responding. Register here. - Tax Readiness: Insights from the new digital asset reporting regulations
Treasury and the IRS released much anticipated proposed regulations regarding information reporting for Digital Assets. Register here to join our specialists on Thursday 5 October at 4pm where they will discuss the scope of these regulations, required obligations, and what steps impacted taxpayers should be taking now in order to prepare. The panel will share policy insights, industry perspective, as well as practical solutions for companies currently involved or looking to be involved in this fast emerging industry. - Tax Readiness: Recent controversy trends and their impact on your business
Tax Controversy is top of mind for companies and is a hot topic for many executives, given the recent high-profile cases in the news. On this webcast, which took place on Tuesday 26 September, we explore proactive steps companies should be taking to better prepare their tax department for the risk of controversy. We also dive into what companies can expect from the IRS and how they will use the funding from the Inflation Reduction Act. Watch the recording here.
State and local tax
- Massachusetts enacts single sales factor apportionment and changes for individuals, estates and trusts
Governor Maura Healey (D) recently signed a tax relief bill (H.4104), which makes significant changes to how corporations, financial institutions, individuals, trusts, and estates calculate their Massachusetts income. H. 4101 enacts a single sales factor apportionment formula for all corporations and financial institutions and prescribes a method for receipts factor sourcing of a financial institution’s income from investment activities and trading activities. Read more in this PwC Tax Insights.
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.