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Two weeks to 16 April 2021

Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.

UK

Responding to the business impacts of COVID-19
Visit our global crisis centre webpage and our COVID-19 hub on TheSuite to continue to keep up to date with developments on this topic.  Of particular relevance to multinational companies operating in the UK, navigate the global tax, legal and economic measures in response to COVID-19 by territory here. In relation to the UK:

  • Business in Focus podcast series - What will new ways of working mean for your people?
    Many organisations, COVID-19 has brought to the fore the discrepancy between the skills people have and those that are needed for the future. Our recent Upskilling Hopes and Fears research - a survey of 32,500 workers across 19 countries - revealed fascinating insights into how people feel about the future of work. In this episode, host Rowena Morris speaks to PwC People and Organisation leaders Fiona Camenzuli and Pete Brown about the practical ways organisations can upskill their people in response to these trends.

Webcast - Using tax incentives to generate value from investments
The next PwC webcast in our ‘Delivering Tax: Creating value in a changing world’ series, taking place on 21 April at 10.00 to 10.30 (BST), will look ahead to a post pandemic world and focus on ‘Using tax incentives to generate value from investments’.  This is an area that has seen significant changes recently, including the newly announced super-deduction and the R&D Tax Credits consultation.  Hosted by Stuart Higgins (PwC’s Tax Markets and Services Leader), who will be joined by Rohit Patiar (Innovation and Capital Incentives Leader), Portia Pierrel (Innovation and Capital Incentives Director) and Sanjay Shah (Deals Tax Leader), the discussion will cover the important considerations for businesses on the value and impact of the different tax incentives, how they interact and the role they play in an organisation’s investment options.  The event will run via our secure video conferencing platform and you can register here.  We’re keen to discuss your most pressing questions on this topic, so please do submit these in advance via this form as well as letting us know what else you would like to hear about in future sessions.

HMRC update negligible value claims and agreements guidance
HMRC have updated their guidance on negligible value claims and agreements for capital gains tax purposes.

EU

Taxing the digital economy - PwC's submission to the EU Digital Levy consultation
PwC has welcomed the opportunity to share its views on the consultation document on the Digital levy which aims to provide COVID-19 recovery resources for the European Union. Read our submission here.

Remarks by Executive Vice-President Dombrovskis at the informal ECOFIN press conference
See this press release for the text of a speech by the European Commission’s Executive Vice-President Valdis Dombrovskis at a recent ECOFIN press conference. The Economic and Financial Affairs Council (ECOFIN) is responsible for EU policy in three main areas: economic policy, taxation  issues and the regulation of financial services.

OECD

OECD presents international tax update to G20 Finance Ministers
The OECD Secretary General has published a report on the latest developments in the international tax agenda. The report includes measures introduced in response to COVID-19 and tax policy and climate change and provides an update on G20 tax deliverables including tax transparency, BEPS implementation, supporting developing countries, tax certainty and addressing tax evasion. The report also provides an overview of the ongoing work to address tax challenges arising from digitalisation.

Making tax dispute resolution more effective: New peer review assessment released
Under BEPS Action 14, jurisdictions have committed to implement a minimum standard to improve the resolution of tax-related disputes between jurisdictions. Despite the significant disruption caused by the COVID-19 pandemic and the necessity to hold all meetings virtually, work has continued with the release of the stage 2 peer review monitoring reports for Australia, Ireland, Israel, Japan, Malta, Mexico, New Zealand and Portugal. Read more in this OECD item.

Country tax measures during the COVID-19 pandemic
The OECD has updated here the latest data on tax measures taken by governments so far in response to the COVID-19 pandemic.

Other territories

International

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: 

  • Global Digital Tax Online
    In a time when information is key and compliance is vital, GlobalDigitalTaxOnline (GDTO) is an essential tool to help navigate the complex world of tax and the reporting of various digital/electronic services. Read more about our new online subscription service.
  • Tax Readiness: Are digital taxes here to stay?
    Join us on Wednesday 28 April 2021 at 7pm for this webcast, in which we will discuss the rapidly evolving environment, and how Digital Services Taxes (DSTs) are expanding beyond Europe, not just in geography, but also in scope. We will talk about the impact on company operating and tax models, how a DST in one country affects entities in other jurisdictions and how companies are responding to DSTs. Register here
  • Digital tax byte
    The latest edition, from 16 April, includes announcements on the Biden administration tax plan and its commitment to a global minimum tax and multilateralism, as well as US thoughts on some nuances in the search for a Pillar One and Pillar Two solution. It also includes the UN's final proposal for an Article 12B. The effective date of Maryland's proposed digital advertising tax has been delayed while Connecticut has advanced its proposals. The European Commission has provided resources on its e-commerce VAT Package. Cambodia is the latest country to seek to clarify its VAT charge on non-residents supplying e-commerce services.
  • Digital tax megabyte for March 2021
    A round-up of the brief insights throughout March 2021 of the type provided on an ad hoc basis in our Latest digital tax byte update.
  • EU
    See our EU section above for EU developments relating to the taxation of the digital economy.

Belgium
See here for latest updates.

Canada
2021 Manitoba budget: Tax highlights
On 7 April 2021, Manitoba’s Minister of Finance (Scott Fielding) presented the province’s budget. The budget does not change corporate or personal income tax rates, but does: 1) introduce, enhance and extend certain corporate and personal tax credits; 2) increase the thresholds at which the Health and Post-Secondary Education Tax Levy applies, effective 1 January 2022; 3) require streaming service providers, online marketplaces and online accommodation platforms to collect and remit provincial sales tax on sales of certain goods and services to Manitoban consumers, effective 1 December 2021; and 4) begin phasing out education property taxes in 2021. Read more in this PwC Tax Insights.

China (also see Hong Kong below)
China STA issues consultation draft on simplified procedure for unilateral APAs
China’s State Taxation Administration (STA) recently issued a consultation draft which closes for comments on 18 April 2021. The proposed establishment of the simplified procedure is intended to improve the unilateral APA application process and encourage taxpayers’ use of unilateral APAs to achieve tax certainty on their transfer pricing. This procedure is expected to boost the popularity of unilateral APAs as taxpayers may find that APAs offer more benefits than just tax certainty. Read more in this PwC Tax Insights

Cyprus
Cyprus-Kazakhstan first-time double tax treaty: effective as from 1 January 2021
The first-time double tax treaty agreed between Cyprus and Kazakhstan, which was signed on 15 May 2019 and entered into force on 17 January 2020, is effective from 1 January 2021 and will contribute to the further development of trade and economic relations between the two States. See this brief PwC Tax Insights.

Finland
Extended deadline for the tax returns
The Finnish Tax Administration has granted an extension of time to submit the income tax return for corporate entities that ended their accounting year in December 2020.

Tax and Legal news - April 2021
The latest tax and legal news from Finland. Read the latest edition.

Germany
Federal Cabinet approval of Bill to modernise corporation tax
On 24 March 2021, the Federal Cabinet approved the German Federal Ministry of Finance’s draft legislation to modernize corporation tax. The first reading before the Bundestag is expected on 22 April 2021. With this bill the government is taking a first step towards introducing a so-called “option model”, which provides commercial partnerships with the option of being treated as corporations for tax purposes. In addition, the bill contains proposals to modernise and make more international the tax regulations in relation to corporate reorganisations, to replace the concept of so-called “tax balancing items” in relation to deviations in profit transfers within a tax group (Organschaft) and to revoke the rule prohibiting the deduction of losses arising from currency fluctuations on shareholder loans. Read more in this PwC Germany tax blog.

German real estate transfer tax (RETT) reform back on track
In October 2019, the German coalition government issued a joint press release announcing that the proposed reforms to the German Real Estate Transfer Tax Act (RETTA) would be delayed until the first half of 2020. At that time, the parties failed to reach a solution in the first half of 2020 and progress had since halted. Efforts have now started to adopt the original draft with few amendments despite the requests for changes. Read more.

Successful constitutional complaint against income correction affecting freedom of establishment
The German Constitutional Court overturned a 2019 judgment of the Supreme Tax Court regarding the erstwhile change in its case law on the issue of the income correction with respect to an unsecured group loan because the tax court failed to submit the facts of the case to the European Court of Justice (ECJ) for final clarification and thus violated the complainant’s right to the lawful judge under Article 101(1) of the Constitutional Statute. Read more in this PwC Germany tax blog.

Hong Kong
Revising the statutory framework for tax filing to pave way for e-filing of tax returns
The Inland Revenue (Amendment) (Miscellaneous Provisions) Bill 2021 was gazetted on 19 March 2021. The Bill seeks to amend the Inland Revenue Ordinance to, among other things, revise the statutory framework for furnishing of tax returns. The proposed revised framework is necessary for implementing wide-reaching electronic filing of tax returns in Hong Kong. Read more in this PwC Hong Kong tax news flash.

Kazakhstan
Cyprus-Kazakhstan first-time double tax treaty: effective as from 1 January 2021
The first-time double tax treaty agreed between Cyprus and Kazakhstan, which was signed on 15 May 2019 and entered into force on 17 January 2020, is effective from 1 January 2021 and will contribute to the further development of trade and economic relations between the two States. See this brief PwC Tax Insights.

Korea
Korean Tax News - April 2021
This latest edition includes: 1) MOEF announces tax expenditure plan for 2021; 2) MOEF announces measures to combat real estate speculation; 3) NTS launches Task force to establish income data management system; 4) Notes to corporate local income tax return filing by April 30; and 5) Rulings update.

Middle East
Qatar: Requirement to submit Arabic financial statements
In line with the provisions of the Circular No 14 of 2019, the General Tax Authority (“GTA”) requires all taxpayers to submit their Financial Statements (FS) in Arabic for the taxable year starting on 1 January 2020 and onwards. Based on recent enquiries, the GTA has reiterated that the taxpayers are expected to comply with this requirement. We therefore remind all the taxpayers to follow the GTA’s instructions while submitting their annual income tax returns for the year ended 31 December 2020 and onwards. Read more in this PwC Middle East news item.

Netherlands
Real Estate news: Dutch government starts internet consultation on the tax policy of foreign entity qualification
As reported previously, the Dutch Ministry of Finance has published a consultation document which includes proposed amendments to the Dutch qualification rules for Dutch and foreign entities. This newsalert highlights the changes that are expected to be most important for the real estate industry.

New Zealand
Parliament passes omnibus tax bill
The Taxation (Annual Rates for 2020-21, Feasibility Expenditure and Remedial Matters) Act has been enacted and is now in force. In this PwC news alert, we consider the amendments arising from the Finance and Expenditure Select Committee’s recommendations following the submissions process, and we also discuss new measures that were introduced by way of a supplementary order paper (SOP).

Pakistan
Pakistan overhauls system of corporate tax breaks
This PwC Pakistan news item gives a brief overview of significant amendments made by the Tax Laws (Second Amendment) Ordinance, 2021 in the fiscal laws of Pakistan. The Ordinance was promulgated by the President of Pakistan on 22 March 2021, primarily for withdrawal of various income tax exemptions and concessions with immediate effect.

MLI enters into force on 1 April 2021
Double Tax Treaties entered into by Pakistan with 66 countries, are expected to change (subject to certain reciprocal actions by the respective treaty partners) following the entry into force of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“MLI”) on 1 April 2021. Read more in this PwC Pakistan news alert.

Philippines
New RMO on Tax Treaty Relief Intent vs Impact
While everybody was busy anticipating developments on CREATE and a possible extension of the tax filing deadline given the re-imposition of the Enhanced Community Quarantine, the Bureau of Internal Revenue (BIR) pulled a rabbit out of the hat and issued Revenue Memorandum Order (RMO) No. 14-2021, providing updated procedures for availing of tax treaty benefits for nonresident foreign income earners. Read more in this PwC tax news item.

South Africa
Tax Synopsis - March 2021
This edition includes: 1) Insights into the ‘new GAAR’; 2) Unravelling the VAT treatment of a local branch and foreign main business; 3) Recent case law on the withholding of value-added tax refunds by SARS; 4) Taxpayers’ right to interest on delayed VAT refunds: Does SARS’ current practice constitute non-compliance with its legal obligation? and 5) 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.

Taiwan
Tax Update - March 2021
This edition includes: 1) Due to mobility restrictions imposed by COVID-19, taxpayers can file income tax following prior year’s residency status when in doubt, pending verification by tax authorities based on case evidence; and 2) Companies who use “current period after-tax earnings” to set aside legal reserve shall, no later than 2020 earnings distribution, take into consideration “amount directly booked as retained earnings without flowing through income statement”.

US

US Senate Finance Democrats, Treasury Secretary Yellen call for international tax policy changes
Building off President Biden’s recent proposals for infrastructure spending to be paid for with corporate tax increases, Senate Finance Committee Chairman Ron Wyden (D-OR) joined with Finance members Sherrod Brown (D-OH) and Mark Warner (D-VA) in releasing a nine-page paper outlining a framework for overhauling US international tax policy.  It aligns with several of the international tax proposals offered recently by President Biden to pay for a variety of spending priorities, but differs from the administration’s approach on some specific provisions. Companies should be evaluating and modeling the potential effect of President Biden’s infrastructure and tax increase proposals as well as options for tax law changes being offered by key members of Congress. Companies should be communicating with policy makers about how specific proposals may affect their employees, job creation, and investments in the United States.  Read more here.

Despite the pandemic, 2020 US APA report shows increase in executed APAs and decreased processing times
The IRS Advance Pricing and Mutual Agreement Program (APMA) has issued its 22nd Annual Statutory Report concerning Advance Pricing Agreements (APAs). The Report observes that during calendar year 2020, APMA completed more APAs than in 2019 and completed them somewhat more quickly.  A total of 127 APAs were executed in 2020 as compared to 120 APAs executed in 2019.  For APAs completed in 2020, the average processing time was 38.5 months, a slight decrease from the prior year’s average of 40 months. Further, the data reflects a trend of decreased processing times over the last several years. Read more in this PwC Tax Insights.

IRS defines ‘restaurant’ for food and beverage deduction
Under Section 274(n), a taxpayer generally may deduct only 50% of the taxpayer’s otherwise allowable business expenses for food and beverages.  The Consolidated Appropriations Act, 2021, removed this limitation for business expenses paid or incurred after 2020 and before 2023 for food or beverages provided by a restaurant.  The IRS has released Notice 2021-25, which provides guidance on what is a ‘restaurant’ for this purpose. Read more in this PwC Tax Insights.

Maryland legislature approves digital ad tax delay, digital products amendments
Legislation passed by the Maryland General Assembly on the last day of the regular session (12 April) delays the state’s digital advertising gross revenue tax by one year and retroactively amends the state’s digital products sales tax provisions. Because of questions raised by litigation challenges to the Maryland digital advertising tax under the federal Internet Tax Freedom Act and the US Constitution and the lack of guidance from the Comptroller on how to source digital ad revenue, a delay has been expected. The measure now goes to Governor Larry Hogan (R) for his consideration. Taxpayers subject to sales or use tax under the digital products provisions that became effective 14 March, as well as taxpayers required to pay a digital advertising gross revenue tax estimated payment on 15 April, should monitor the Governor’s action on this legislation. The Governor must act on the bill within 30 days of transmittal or it will become law without his signature. Read more in this PwC Tax Insights.

New York budget increases tax rates and makes other changes
The New York Legislature recently approved comprehensive tax legislation (S2509-C/A3009-C) as part of the state’s FY22 budget. The legislation includes increased taxes on businesses and high-income individuals and a pass-through entity tax option. Other provisions include amendments to the real estate transfer tax and the impact of a remote workforce on state tax benefits. Read more in this PwC Tax Insights.

Virginia pro forma combined reports due 1 July 2021
Virginia’s FY 2020-2022 budget, enacted on 7 April, includes a requirement for “corporations that are members of a unitary business” to file a report declaring certain unitary combined reporting items for the 2019 tax year. Under an amendment requested by Governor Ralph Northam (D) and approved by the General Assembly, these pro forma reports are due by 1 July 2021. Virginia corporate taxpayers should consider gathering data and analyzing their potential liability as a unitary combined group to meet the 1 July reporting deadline. Read more in this PwC Tax Insights.

Webcasts & podcasts: 

  • Tax Function of the Future: Keeping pace with the new operating tempo
    Join our panelists on Tuesday 20 April at 7pm to explore how high priority policy changes and other disruption are shaping the C-suite agenda and impacting Tax functions. Together, we will walk through tangible examples of how companies can operationalize to meet new Tax function challenges now and beyond. Register here
  • Tax Readiness: Are digital taxes here to stay?
    Join us on Wednesday 28 April 2021 at 7pm for this webcast, in which we will discuss the rapidly evolving environment, and how Digital Services Taxes (DSTs) are expanding beyond Europe, not just in geography, but also in scope. We will talk about the impact on company operating and tax models, how a DST in one country affects entities in other jurisdictions and how companies are responding to DSTs. Register here
  • Tax Readiness: The intersection of ESG and Tax
    Register here to join our webcast on Wednesday, 5 May 2021 at 7pm to learn more about environmental, social and governance (ESG) and how tax leaders can engage with the C-suite to align tax with ESG transformation.
  • Tap into Tax podcast
    This PwC podcast series combines perspectives from our tax technical specialists and our professionals focusing on the evolving tax function for a holistic look at tax. Since our last edition, two episodes have been released:

Previous episodes in this series are available here, as well as on Spotify and other streaming services.

  • Cross-border tax talks: SPACs - the confluence of A-list celebs and Sec. 7874
    In this episode from 14 April, Doug McHoney (PwC's US International Tax Services (ITS) Leader) and Thomas Groenen (PwC's US ITS-Financial Services Leader) discuss the renewed interest in special purpose acquisition companies (SPACs).
    Previous episodes in this fabulous series of podcasts can be found here, as well as on Spotify, YouTube and other streaming services.
  • Talking tax with Industrial Products: Insights from PwC's Manufacturing COO Survey
    Anil Khurana, PwC’s Global Industrial Manufacturing & Automotive Leader, and Alex Voloshko, PwC’s Value Chain Transformation Leader, join John Livingstone, PwC’s Global Industrial Products Tax Leader, to discuss insights from PwC’s recent Global Manufacturing Survey of almost 600 Chief Operating Officers and the related implications for tax executives.

Replays: 
A number of previous webcasts are available for replay in our US tax reform hub here, including:

  • Tax Readiness: How to comply with the new final stewardship regulations
    Register here to watch the replay from this webcast on Wednesday 7 April 2021.
  • Q1 Financial Reporting Considerations
    You can watch the replay here of this webcast held on Wednesday 24 March 2021. 
  • Tax Readiness: International tax planning post-election
    Register here to watch the replay from this webcast on Wednesday 17 March 2021.
  • Tax Readiness: State and Local Tax implications of a remote workforce
    Watch the replay from this webcast held on 3 March 2021. 
  • 2021 Tax Policy Outlook: The Changing Horizon
    Watch the replay from this webcast on 28 January 2021.

Other updates
For regular updates on this topic, check out our US tax reform hub on The Suite here.