Three weeks to 16 December 2022
Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
UK
Spring Budget
The Chancellor has confirmed, via a Written Ministerial Statement, that the next OBR forecast and Spring Budget will be presented on Wednesday 15 March.
Financial Services: The Edinburgh Reforms
On 9 December, the Chancellor of the Exchequer announced a set of reforms to drive growth and competitiveness in the financial services sector. Read more in this HM Treasury item.
Pillar Two
With agreement finally reached on the implementation of Pillar Two across the EU (see our EU section below), it’s now clear that Pillar Two has reached critical mass.
- Pillar Two is Coming - Matt Ryan in discussion with Doug McHoney at PwC’s Global Tax Symposium in Barcelona
In this episode from 15 December, Doug McHoney, PwC’s International Tax Services Global Leader, is in Barcelona, Spain at PwC’s Global Tax Symposium and joined by Matt Ryan, a UK-based International Tax Partner with PwC. Doug and Matt discuss the UK’s parliamentary process, Liz Truss’s resignation, the corporate tax proposed changes, and Pillar Two, including a qualified domestic minimum tax, the income inclusion rule, and the under taxed payments rule. They also cover the finer points of the UK's treatment of asset transfers, deferred taxes, year-end adjustments, and the system and data requirements that companies must address. - IASB to soon release changes to IFRS income tax rules in response to Pillar Two
In response to the OECD's two-pillar tax plan, the International Accounting Standards Board (IASB), meeting in November, decided to add to its work plan an accelerated project proposing narrow-scope amendments to IAS 12 Income Taxes. The IASB said it expects to publish an exposure draft in January 2023. This Staff Paper was prepared for discussion at that meeting. - Technology enhances Pillar 2 modelling
It is essential for multinationals to model the potential impact of Pillar 2. In this episode from 8 December, Sherry Grabow, PwC’s US International Tax Services Leader discusses how technology helps provide clarity around modelling.
Case law update
- Kwik Fit - a win for HMRC as UT upholds FTT decision on debt reorg
The Upper Tribunal agreed with the FTT in this case, endorsing the UT approach in Blackrock. The Court’s approach in this area is getting narrower and simpler - and is entirely led by what can be identified with the available evidence. See the full decision here. - Jays - FTT considers when a declared dividend has been paid
This case concerned, inter alia, whether dividends declared subject to strict stipulations should be considered to be paid (or to be distributions), and therefore taxable, at the time of declaration. The FTT ruled that they could not. See the full decision here. - Peter Gould - FTT considers when a declared dividend has been paid
In another case involving this same issue, the FTT considered whether it’s possible to have dividends on the same class of shares paid (for tax purposes) on different dates to different shareholders. An interim dividend was declared on 31 March 2016 with no payment date specified. It suited the shareholders concerned, brothers A and B, to receive (and be taxed) on their interim dividend in different tax years. Therefore the interim dividend was actually paid to brother A on 5 April 2016 and brother B on 16 December 2016. HMRC argued that the interim dividend paid to brother B should be treated as paid for tax purposes (ie treated as becoming due and payable) on the earlier date that brother A’s dividend was paid. The FTT ruled no, the dividend paid to brother B was not due and payable until actually paid. See the full decision here.
Treaty updates
- UK-Brazil double tax treaty information
The 2022 UK-Brazil Double Taxation Convention has been added to the HMRC page here. - UK-Republic of Chile MoU published
HM Treasury has published a Memorandum of Understanding (MoU) between the UK and the Republic of Chile for Financial Services Collaboration. - 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 273 additions, 15 amendments and 100 removals.
GAAR Advisory Panel opinion: Unauthorised payment from pension scheme involving debt arrangement
HMRC have published the GAAR Advisory Panel opinion of 15 September 2022 explaining that an unauthorised payment from a registered pension scheme was actually tax avoidance.
HMRC publish uncertain tax treatment policy evaluation plan
The government announced that it would evaluate UTT to assess whether it is achieving its stated aims and is proportionate. This plan outlines the framework for the evaluation, which will be taken forward by HMRC, with input where needed from HM Treasury. This builds upon the government’s commitment to increase transparency and accountability.
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 1 December 2022. View the updated list.
Consultation outcome on investment transactions list expansion
The government has published a summary of responses to a consultation that ran from 23 May to 18 July 2022 on the expansion of the Investment Management Exemption (IME) to include transactions in crypto assets and intends for this change to be made through HMRC regulations this year.
Designated recognised stock exchange update
HMRC’s guidance on designated recognised stock exchanges for the purposes of section 1005 Income Tax Act 2007 has recently been updated to include:
- the entry for SIX Swiss Exchange was updated to include 'Bonds Standard' in 'listed' and 'not listed'.
- HMRC have updated the entries for The Dutch Caribbean Securities Exchange and The Sao Paulo Stock Exchange for market names and confirmed listed status.
View the full HMRC list here.
Top 100 companies’ total tax contribution rebounds
The taxes borne and collected by the UK’s largest companies increased by 5.2% to reach an estimated £81.5 billion in 2021-22. What are the latest trends in Total Tax Contribution and what’s driving them? Now in its 18th year, PwC’s annual Total Tax Contribution (TTC) Survey gauges the tax and wider economic contribution of the UK’s largest listed companies (The 100 Group). Read more.
PwC releases its 2022 Global Crypto Tax Report
PwC has released its 2022 Global Crypto Tax Report offering insight into key trends, developments, and challenges presented by developments in the global crypto tax space. The report highlights the trend of increasing tax regulation targeting the digital assets sector, as governments and bodies such as the OECD and EU seek to create tax policy that keeps up with the pace of technological innovation. However, there is still a disparity in the coverage, definition, and tax treatment of digital assets between jurisdictions.
Global employment taxes newsletter
In this edition, we have insights from PwC teams in over 30 countries covering wider employment tax updates, as well as a focus on how a number of jurisdictions are currently approaching the issues and challenges presented by employment status. We’ve highlighted the latest developments in this area, particularly in the context of the ever growing gig economy.
EU
Pillar Two
- EU reaches deal on Pillar Two Minimum Tax Directive
On December 15 the EU Council formally adopted the EU Minimum Tax Directive by written procedure. The written procedure ended with an agreement sealing the deal even though Hungary abstained from voting on Pillar Two. EU member states must transpose the Directive into national law by the end of 2023 (unless a derogation applies). The Income Inclusion Rule (IIR) will apply to years beginning from 31 December 2023. The Undertaxed Payment Rule (UTPR) will apply a year later, for years beginning from 31 December 2024. Read more in this PwC Tax Policy Alert. - EU Member States reach provisional agreement on proposed Pillar Two Directive
On 12 December 2022 the Committee of the Permanent Representatives of the Governments of the Member States to the European Union (COREPER) agreed in principle on the introduction of a global minimum taxation proposal by the EU Member States. The COREPER decided to advise the Council to adopt the draft Pillar Two Directive and approved the related Council statement. A written procedure for formal adoption of the Directive is expected to conclude on 14 December. The Directive is being adopted as part of a package, together with decisions to financially support Ukraine and approve Hungary’s national recovery and resilience plan. Read more in this PwC Tax Policy Alert and related EC press release. - Where Pillar 2 stands after ECOFIN meeting
On 8 December, Will Morris shared his insights into the EU’s progress towards agreement on a Pillar Two Directive following the ECOFIN meeting on 6 December in this Policy on Demand episode.
EC report on progress of tax matters - DEBRA on hold & Unshell proposal requires more work
This EC report provides an overview of the progress achieved in the Council during the term of the Czech Presidency, as well as an overview of the state of play of the most important dossiers under negotiation in the area of tax. Of particular interest, it comments on the status of the Unshell proposal (page 5) and the Debt-Equity Bias Reduction Allowance (DEBRA, page 6). It concludes that work on the latter is suspended and will, if appropriate, be reassessed within a broader context only after other proposals in the area of corporate income taxation announced by the Commission have been put forward.
European Commission publishes crypto and other revised reporting proposals for tax (DAC8)
The European Parliament’s recommendations to the EU Commission on a fair and simple taxation strategy included further categories of income and assets, such as crypto assets, to include in the scope of automatic exchange of information. The seventh potential update published by the European Commision to the EU’s Directive on Administrative Cooperation on Tax (DAC), which would make this DAC8, is to address certain deficiencies that have been identified in the scope of the automatic exchange of information, including to set minimum levels of financial penalties with respect to serious non-compliance. Read more in this PwC Tax Policy Alert.
European Council formally adopts the Foreign Subsidy Regulation
After the European Parliament’s approval on 10 November, on 28 November the Council formally adopted the regulation on foreign subsidies (‘FSR’) that, in certain cases, are distorting the internal market (see also our previous Tax Policy Alert on the initial proposal). The FSR is likely to enter into force in December 2022 and will apply as of mid-2023. The FSR is the latest instrument by which the European Commission aims to ensure a level playing field in the internal market and to execute its broader EU 2020 industrial policy. Read more in this PwC Tax Policy Alert.
VAT in the Digital Age proposals published by the European Commission
On 8 December 2022, the European Commission (EC) published significant, and much anticipated, proposals to amend the VAT directive and Implementing Regulation with respect to the VAT in the Digital Age (ViDA) initiative. According to the EC, the 30 year-old VAT rules for cross-border trade are not fully adapted to deal with the digital age and need to be amended using technology to reduce administrative burdens and related costs for business and at the same time combat tax fraud. Read more in this PwC Tax Policy Alert.
OECD 21st meeting of the Global Forum on Competition
This press release details EVP Vestager remarks at the OECD 21st meeting of the Global Forum on Competition "Competition in the wider policy context".
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 12 December includes: 1) ECJ: Certain Elements of DAC6 Incompatible with Primary EU Law; 2) EU Proposes DAC8 Directive: Crypto-Assets Reporting; 3) VAT in the Digital Age Proposals Published; 4) OECD Invites Input on Amount B (Pillar 1); and 5) CFE Opinion Statement on Case C-538/20 (W AG): Foreign Final Losses. Visit their latest news page here. - Global Tax Top 10 - December 2022
This issue looks at the following: 1) EU adopts minimum tax directive; 2) EU seeks to define aggressive tax planning; 3) ECJ rules certain elements of DAC6 incompatible with primary EU law; 4) EU progresses landmark agreement on carbon leakage prevention; 5) EU proposes DAC8 Directive: crypto-assets reporting; 6) OECD invites input on amount B (PiIlar 1); 7) VAT in the digital age proposals published; 8) CFE opinion statement on case C-538/20 (W AG): foreign final losses; 9) EU considers state aid rules change in response to ‘Buy American’ US subsidies; and 10) OECD publishes 2021 peer review reports on the exchange of information on tax rulings. - Global Tax Top 10 - November 2022
This issue looks at the following: 1) G20 summit leaders’ declaration on OECD’s Two-Pillar solution; 2) EU adopts revised code of conduct on business taxation; 3) ECJ rules public access to beneficial ownership registry information invalid – joined cases C-37/20 & C-601/20; 4) 28 jurisdictions sign agreement on reporting income from digital platforms; 5) OECD publishes updated mutual agreement procedure statistics; 6) ECJ delivers judgment in fiscal state aid case Fiat Finance; 7) OECD’s Global Forum progress report on tax transparency; 8) EU Parliament draft report on tax-related revelations published; 9) OECD publishes updated corporate tax statistics report; and 10) EU Commission 2023 Work Programme announced. - Opinion Statement
The CFE ECJ Task Force has issued an Opinion Statement 4/2022 on the ECJ decision of 22 September 2022 in Case C-538/20, W AG, on the deductibility of foreign final losses.
OECD
Pillar Two
The OECD’s project has reached critical mass with the EU finally reaching agreement on the implementation of Pillar Two across the entire EU. See the materials on this topic signposted in the UK section above and on our Pillar Two webpage.
Pillar One
- OECD releases Pillar One Amount B consultation draft
On 8 December 2022, the OECD released a public consultation document on Amount B of Pillar One. The Consultation Document sets out the main design elements of Amount B, which aims to standardise the remuneration of related party distributors that perform baseline marketing and distribution activities. It outlines the progress made in defining what in-country baseline marketing and distribution arrangements are, how they may be identified in practice, and subsequently how in-scope arrangements may be priced in accordance with the arm’s length principle (ALP). It also identifies areas where further work is being undertaken and seeks input from stakeholders on a number of specific questions. Read more in this PwC Tax Policy Alert.OECD technical webinar on Amount B under Pillar One - OECD technical webinar on Amount B under Pillar One
In addition to the consultation document, a technical webinar on Amount B took place on 8 December, in which OECD experts discussed some of the main features of the draft rules. If you missed the event, you can watch the replay.
Significant progress on countering harmful tax practices with almost 50 000 exchanges of information on tax rulings undertaken to date under the BEPS Action 5 standard
The OECD/G20 Inclusive Framework on BEPS has released the latest peer review assessments for 131 jurisdictions in relation to the compulsory spontaneous exchange of information on tax rulings. This is the sixth annual peer review of the implementation of the BEPS Action 5 minimum standard on tax rulings, which aims to provide tax administrations with the necessary information concerning their taxpayers to efficiently tackle tax avoidance and other BEPS risks. Read more in this OECD press release.
OECD 21st meeting of the Global Forum on Competition
This press release details EVP Vestager remarks at the OECD 21st meeting of the Global Forum on Competition "Competition in the wider policy context".
Azerbaijan joins the Inclusive Framework on BEPS and participates in the agreement to address the tax challenges arising from the digitalisation of the economy
Azerbaijan joins international efforts against tax evasion and avoidance by joining the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS). Read more in this OECD press release.
Other territories
International Tax News
Among the topics featured in this month's edition are: 1) Australia’s Federal Budget includes significant changes for multinationals; 2) Hong Kong gazettes bill on significantly changed FSIE regime; 3) PPT and Mexican GAA considerations in light of the MLI Mexico approval; and 4) Spain introduces new measures regarding reverse hybrid mismatches implementing ATAD.
PwC releases its 2022 Global Crypto Tax Report
PwC has released its 2022 Global Crypto Tax Report offering insight into key trends, developments, and challenges presented by developments in the global crypto tax space. The report highlights the trend of increasing tax regulation targeting the digital assets sector, as governments and bodies such as the OECD and EU seek to create tax policy that keeps up with the pace of technological innovation. However, there is still a disparity in the coverage, definition, and tax treatment of digital assets between jurisdictions.
Digital tax byte
The latest edition, from 19 December, in our series of brief insights into the workings of the UK and supranational bodies reviewing the taxation of digitalisation of business. This edition includes: 1) information on 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) EU Member States finally agreeing on a Directive to implement Pillar 2; 4) publication by the European Commission of proposals for its VAT in the Digital Age initiative; 5) comments on the Czech Republic's implementation of DAC7 rules on digital platform operators; and 6) ATAF has published its suggested approach to countries introducing their own minimum taxes.
Environmental, Social and Governance (ESG)
- Tax reporting under the ESG spotlight: Standing up to intensifying scrutiny
New sustainability reporting standards and public disclosure of Country-by-Country Reports (CbCRs) mean that the tax elements of environmental, social and governance (ESG) are under the spotlight as never before. How can you make sure your business stands up to the associated scrutiny, and stands out for the right reasons? Read more. - Green taxes and incentives can help businesses achieve ESG goals
Understanding the impact of new policies and programs empowers companies to accelerate decarbonization and boost the bottom line. Read more.
Visit our dedicated ESG webpage.
Australia
Treasury consults on proposed public beneficial ownership register in Australia
As reported previously, Treasury released a consultation paper early November seeking comments until 16 December on the design of a public register of beneficial ownership in Australia. Whilst the Government announced its intention to establish this register as part of its pre-election commitment to introduce a package of measures to enhance multinational tax integrity and increase tax transparency in Australia, this proposal is not solely focused on tax transparency. Its aim is to also support stronger regulatory and law enforcement responses to tax and financial crime, assist foreign investment applications, and facilitate the enforcement of sanctions. Read more in this PwC tax alert.
Monthly Tax Update
Welcome to the December 2022 edition of Australia's Monthly Tax Update, keeping you up to date on the latest Australian and international tax developments.
Australia seeks input on Budget 2023-24 tax measures
The Australian Government has invited stakeholders to propose measures for inclusion in the territory's upcoming Budget. The Government is undertaking a consultation until 27 January 2023, to seek input from individuals, businesses, and community groups on potential tax measures for inclusion in the 2023-24 Budget.
Australia seeks input on Budget 2023-24 tax measures
The Australian Government has invited stakeholders to propose measures for inclusion in the territory's upcoming Budget. The Government is undertaking a consultation until 27 January 2023, to seek input from individuals, businesses, and community groups on potential tax measures for inclusion in the 2023-24 Budget.
Trade deal with India delivers from 29 December
Australia has recently enacted legislation to provide for a future Australian tax exemption for payments or credits made to Indian tax resident entities for remotely supplied technical services. Read more in this press release.
Australia launches consultation on new Iceland DTA
The Australian Government has launched a consultation until 23 December, on legislation to bring into effect a new double tax treaty with Iceland, signed on 12 October 2022.
Azerbaijan
Azerbaijan joins the Inclusive Framework on BEPS and participates in the agreement to address the tax challenges arising from the digitalisation of the economy
Azerbaijan joins international efforts against tax evasion and avoidance by joining the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS). Read more in this OECD press release.
Belgium
See here for latest updates.
Draft program law on corporate income tax budget measures tabled in the Chamber
In October, the Belgian Government reached an agreement on the federal budget. The draft program law including these measures has just been tabled in the Chamber of Representatives. This PwC tax news item looks at the relevant provisions of the draft law from a corporate income tax perspective.
Tax Bites Podcast: Tax certainty in an uncertain world
The recent developments in the tax arena may raise some areas of concern. In this podcast the speakers address some of the recent trends.
Canada
Pre-Budget consultations 2023
The Canadian Government has launched a consultation until 10 February 2023 on measures for inclusion in the country's 2023 Budget.
Cyprus
Extension of the application of the debt restructuring provisions to 31 December 2023
On 2 December 2022 the Cyprus parliament voted in favour of certain amendments to the provisions of seven Cyprus tax laws so as to extend the application of the debt restructuring provisions to 31 December 2023. Read more in this PwC Tax Insights.
Germany
Federal Parliament resolves legislative changes to the taxation of payments for German-registered rights
The German Federal Parliament passed the Annual Tax Act 2022 on 2 December. Among other provisions, the Act introduces (transitional) legislative changes to the taxation of payments for IP rights that are registered in a German register between foreign taxpayers. In a change from the government’s draft bill, all non-treaty cases between related parties, for the time being, will remain subject to German nonresident taxation beyond 2022. The German Federal Council will deal with the law in its session on 16 December. Read more in this PwC Tax Insights.
RETT exemption in case of upstream merger of second-tier company
The tax exemption from real estate transfer tax (RETT) in the event of restructuring within a group under Section 6a of the RETT Act also applies to cases where a dependent second-tier company is merged with a subsidiary of a group parent company, even if in the five years after the transaction 25 percent of the shares in the parent company are transferred to a new shareholder. In a recent decision, the Supreme Tax Court held that the subsidiary must be regarded as a “controlling company” within the meaning of the RETT Act. Read more in this PwC tax blog.
Hong Kong
Court of Appeal upheld upfront lump sum spectrum utilisation fees as capital in nature and not deductible
The taxpayer appealed against the decision of the Court of First Instance (CFI) which previously ruled that the upfront lump sum spectrum utilisation fees (Upfront SUFs) paid by the taxpayer to the Telecommunications Authority (TA) were capital in nature and non-deductible. The Court of Appeal generally agreed with the CFI’s analyses and upheld the CFI’s decision, dismissing the taxpayer's appeal accordingly. Read more in this PwC news flash.
Bill on profits tax concession for family-owned investment holding vehicles
The Inland Revenue (Amendment) (Tax Concessions for Family-owned Investment Holding Vehicles) Bill 20222 (Bill) was gazetted on 9 December 2022. It seeks to provide a profits tax concession for an eligible family-owned investment holding vehicle (FIHV) managed by an eligible single family office (ESF Office) in Hong Kong, such that the FIHV’s assessable profits earned from qualifying transactions and incidental transactions (the latter being subject to a 5% threshold) would be subject to a 0% profits tax rate. The tax concession will take retrospective effect from the year of assessment commencing on 1 April 2022. Read more in this PwC news flash.
India
Australian trade deal with India delivers from 29 December
Australia has recently enacted legislation to provide for a future Australian tax exemption for payments or credits made to Indian tax resident entities for remotely supplied technical services. Read more in this press release.
Tribunal holds that brought forward business loss and unabsorbed depreciation would be set-off against foreign dividend income
The Income-tax Appellate Tribunal recently held that the taxpayer would be entitled for set-off of current year loss, brought forward business losses and unabsorbed depreciation of earlier years with foreign dividend income. Moreover, the taxpayer would be eligible for deduction under section 80G of the Income-tax Act 1961 from the total income. Read more in this PwC Tax Insights.
Successor steps in predecessor’s shoes for long-term capital loss and MAT credit
The Pune bench of the Income-tax Appellate Tribunal recently held that, by virtue of the provisions of section 74 of the Income-tax Act 1961, a long-term capital loss of predecessor-amalgamating company is available for set off in the hands of the successor-amalgamated company. The Tribunal also held that the minimum alternate tax (MAT) credit of the amalgamating company has to be allowed in the hands of the amalgamated company. Read more in this PwC Tax Insights.
Amount credited to partner’s capital account on revaluation of assets can be said to be ‘transfer’, falling under the category of ‘otherwise’, liable to tax under erstwhile section 45(4) of the Act
The Supreme Court has ruled that the surplus on account of revaluation of assets credited to a partner’s capital can be said to be ‘transfer’ falling under the ambit of ‘or otherwise’. Therefore, the provision of section 45(4) of the Income-tax Act 1961 will be applicable. Read more in this PwC Tax Insights.
Ireland
Responses to the Public Consultation on Pillar Two Minimum Tax Rate Implementation
The Irish Government has released the feedback it received to its public consultation, launched in May 2022, on the implementation of the OECD's proposal for a minimum 15 percent rate of corporate income tax for large multinationals.
Italy
Italy introduces permanent establishment investment management exemption
The 2023 Budget Bill, expected to be enacted before year-end, introduces into the Italian Income Tax Act (IITA) an investment management exemption (IME). In brief, the IME is a safe harbour aimed at providing certainty that foreign investment funds (and controlled entities) will not trigger a permanent establishment (PE) due to activities in Italy of a fund’s (senior) asset managers. Read more in this PwC Tax Insights.
Luxembourg
Luxembourg Budget Law 2023 voted
On 15 December 2022, the Luxembourg Parliament voted to approve the 2023 Budget (subject to confirmation by the Luxembourg State Council that no second hearing is required). The draft text of the legislation, bill n°8080 (the “Budget Law”), had been submitted to Parliament on 12 October 2022. Clarifications have been given during the legislative process to the scope of the proposed amendments to the reverse hybrid rules. Read more in this PwC news item.
Middle East
UAE releases law for new corporate income tax
The United Arab Emirates has released long-awaited legislation providing for the introduction of a corporate income tax regime featuring a nine percent rate. This PwC analysis sets out our initial reactions and the key takeaways.
Impact of the new tax residency rules on the CRS requirements in the UAE
The UAE Cabinet of Ministers issued Decision No. 85 of for 2022 (“Resolution”) in September 2022, which provides a new domestic definition and criteria for when an individual or a legal entity shall be considered a ‘tax resident’ of the UAE for the purposes of any domestic law or international regimes. The effective date of the new rules is 1 March 2023. Given that there was no statutory definition of UAE tax residency previously, the introduction of statutory rules around the subject gives additional clarity to individuals and legal entities in respect of their UAE tax residency position, making it easier for Financial Institutions to identify UAE residents and comply with their obligations to determine the jurisdiction of tax residence of Reportable Persons under the Common Reporting Standard (CRS). Read more in this PwC Tax Insights.
Poland
Tax transparency and a new obligation to publish an income tax report
A draft act amending the Accounting Act and the Act on Statutory Auditors, Audit Firms and Public Oversight was recently published, imposing a new obligation on multinational companies to publicly report information on corporate income tax. The provisions will apply if the consolidated revenues of the ultimate parent company of the capital group or the revenues of an independent entity exceed PLN 3.5 billion in two following years. Read more in this PwC news item.
South Africa
PwC Synopsis November/December 2022
A monthly journal, published by PwC South Africa, that gives informed commentary on current developments in the tax arena, both locally and internationally. This edition includes: 1) What constitutes a ‘tax debt’ in the context of recovering debt from third parties; 2) The Transfer Pricing and Customs Valuation Series, Article 4; and 3) SARS watch.
Sweden
Foreign equivalences to Swedish mutual funds and special funds
The Tax Agency partly updates their standpoint regarding foreign equivalences to Swedish mutual funds and special funds. The Tax Agency deems that in some cases it is irrelevant which legal form a foreign fund has when assessing whether the fund could be an equivalent to a Swedish special fund. Read more in this PwC tax blog.
Switzerland
For the latest updates on current topics, see this PwC Switzerland Insights page.
Taiwan
Controlled Foreign Company rules - supplemental information for FAQs
The Ministry of Finance has added supplemental information to Frequently Asked Questions (“FAQs”) on the CFC rules. Salient points of supplemental information to the FAQs are summarised in this PwC tax update.
US
IRS issues penalty relief guidance for eligible taxpayers
The IRS recently issued Rev. Proc. 2022-39, setting forth special procedures for eligible large corporate and partnership taxpayers who are regularly selected for audit and have been selected for examination. The guidance allows eligible taxpayers to file a qualified amended tax return to reflect additional tax due or make adequate disclosure with respect to an item or a position on a previously filed return to avoid imposition of accuracy-related penalties. Read more in this PwC Tax Insights.
Taxpayers may need to engage in accounting method planning by year-end
Taxpayers should engage in accounting method planning by tax year-end to file nonautomatic accounting method changes or change facts that affect their accounting methods. Read more in this PwC Tax Insights.
Proposed regulations address CFC pro-rata share rules in consolidated groups
Treasury and the IRS have released proposed regulations (REG-113839-22) that would amend the regulations under Section 1502 to treat members of a consolidated group as a single US shareholder when ownership of CFC stock changes among group members during a tax year and a CFC makes a distribution described in Section 959(b). The regulations affect the determination of a US shareholder’s pro rata share of subpart F income or tested income with regard to the entire group’s stock ownership for purposes of Section 951(a)(2)(B). Read more in this PwC Tax Insights.
IRS provides guidance and relief for certain missed Required Minimum Distributions
The IRS has released Notice 2022-53, which provides guidance on significant changes to Section 401(a)(9) through the SECURE Act and the timing of final regulations. Read more in this PwC Tax Insights.
Florida court rules that service revenue sourced under state COP rule
The Florida second circuit court ruled that the taxpayer, a Target corporation subsidiary (TEI), properly sourced its service revenue under the state’s cost-of-performance (COP) rule. The court rejected the Department of Revenue’s attempt to source such revenue based on a formula that considered the square footage of Target stores located in the state. Read more in this PwC Tax Insights.
Michigan issues guidance for UBG members computing pro-forma federal taxable income
The Michigan Department of Treasury recently issued a Revenue Administrative Bulletin (RAB) addressing the computation of pro-forma taxable income for Unitary Business Group (UBG) members that file a federal consolidated return. Read more in this PwC Tax Insights.
New York ALJ rules that a combined group was not a “qualified emerging technology company”
A New York administrative law judge (ALJ), recently ruled that a combined group did not qualify as a “qualified emerging technology company” (QETC) and, therefore, could not take advantage of the applicable reduced tax rate, because the statute did not allow for the aggregation of the group member’s attributes when determining the applicability of the lower QETC rate. Read more in this PwC Tax Insights.
Ohio Supreme Court holds revenue from intangible property rights not sitused to Ohio
The Ohio Supreme Court has found that revenue relating to intangible property was not sitused to Ohio and, therefore, not subject to the Commercial Activity Tax. Read more in this PwC Tax Insights.
Washington Supreme Court allows capital gains tax administration to proceed
The Washington Supreme Court recently issued an order staying a lower court’s invalidation of 2021 legislation (ESSB 5096) to institute a tax on capital gains. Under the Supreme Court order, the lower court’s order is stayed pending a final decision in the matter. While the Supreme Court order is unanimous, it does not set forth an analysis as to how the justices came to their conclusion and may not indicate a view one way or the other on the merits of the case. Pending a final decision or other guidance from the court, the order allows the Department of Revenue to administer and collect the tax. Read more in this PwC Tax Insights.
Policy on Demand series
- Technology enhances Pillar 2 modelling
It is essential for multinationals to model the potential impact of Pillar 2. In this episode from 8 December, Sherry Grabow, PwC’s US International Tax Services Leader discusses how technology helps provide clarity around modelling. - Where Pillar 2 stands after ECOFIN meeting
The EU held its most recent ECOFIN meeting on 6 December and the Pillar 2 talks remain in focus. In this episode from 8 December, Will Morris, PwC’s Deputy Global Tax Policy Leader, shares his insights on the latest and future developments. - New Leadership and the future of tax policy
House leadership changes are affecting negotiations in the lame-duck session of Congress around government funding and a potential year-end tax bill and likely will affect future tax policy. In this episode from 5 December, Janice Mays, a Managing Director in PwC’s Tax Policy Services, discusses how critical it is to build relationships around tax policy. - Prospects for year-end tax bill
Congress returns this week from recess to face a big item on its checklist: funding the federal government -- a key step if there are chances for a year-end tax bill. In this episode from 28 November, Chairman Dave Camp and Janice Mays discuss the status of the continuing resolution and thoughts on a tax agenda with a divided government, including transition to a Republican House majority. - Week in Review
- In this episode from 16 December, Mark Prater addresses the question he is receiving most which is whether Congress will pass a year-end tax package. With the clock ticking on potential legislation, he encourages companies to stay focused on signs of an agreement.
- In this episode from 9 December, Ken Kuykendall shares his insights on the breadth of responsibilities faced by corporate tax executives. He addresses the likelihood of passage of tax legislation during the lame duck, particularly the extension of Section 174 before year end.
- In this episode from 2 December, Todd Metcalf discusses how bipartisan agreement on government funding will be key to passage of a year-end tax package. He encourages companies to keep their priorities front and center on lawmakers’ radar during the lame-duck session.
Cross Border Tax Talks
- UK Updates: Pillar Two is Coming
In this episode from 15 December, Doug McHoney, PwC’s International Tax Services Global Leader, is in Barcelona, Spain at PwC’s Global Tax Symposium and joined by Matt Ryan, a UK-based International Tax Partner with PwC. Doug and Matt discuss the UK’s parliamentary process, Liz Truss’s resignation, the corporate tax proposed changes, and Pillar Two, including a qualified domestic minimum tax, the income inclusion rule, and the under taxed payments rule. They also cover the finer points of UK’s treatment of asset transfers, deferred taxes, year-end adjustments, and the system and data requirements that companies must address. - Inbound Challenges: A Head of Tax Discussion
In this episode from 28 November, Doug McHoney, PwC’s International Tax Services Global Leader, is at PwC’s Global Transfer Pricing Conference in Berlin and is joined by Omri Yaniv, Global Head of Tax at Amdocs Ltd, based in Tel Aviv. Omri is a former PwC partner, and the first Tax VP from a non-US-parented company to appear on the podcast. Doug and Omri discuss the three pillars of Omri’s job, Amdocs’ tax department, the accounting talent war, recent global tax changes, and the potential changes on the horizon.
Crypto webcast: Current digital asset accounting and tax topics
In this webcast held on 15 December, our panel of specialists covered accounting and tax topics impacting the industry, including digital asset valuation and classification, SAB 121, revenue recognition and tax reporting considerations.Watch the replay here.
Tax Readiness webcast series
- 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. Join our panel of specialists on Monday 19 December at 8pm, as they discuss 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.