Two weeks to 17 September 2021
Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
Autumn Budget 2021 date confirmed - Wednesday 27 October 2021
See this HM Treasury press release on the Government’s spending plans to be set out at the Spending Review on 27 October alongside an Autumn Budget.
Notification of Uncertain Tax Treatment by Large Businesses - CIOT responds to consultation
The CIOT has commented on the draft legislation and draft guidance that has been published in relation to this new requirement for large businesses to disclose ‘uncertain tax treatments’ (UTT) to HMRC in Corporation Tax, VAT and PAYE returns due to be filed on or after 1 April 2022, see here. For a summary of these latest measures, see our flyer here.
Aozora - HMRC appeal now lodged
Back in May we reported on this case, Aozora GMAC Investments Limited v HMRC  UKFTT 99 (TC), in which the FTT concluded that the Limitation of Benefits article in the UK/US treaty is not an ‘express provision’ denying credit relief under s11(3) TIOPA 2010, see here. We are now aware that, as anticipated, HMRC has appealed this decision.
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 COVID related tax developments. 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.
- Talking Tax: using technology to add value
As the world emerges from the COVID-19 era, businesses continue to adapt to the changing circumstances. At the same time, Tax authorities continue to increasingly leverage technology for collection and compliance. So, it is more crucial than ever that Tax departments use data and technology to add value to their organisations. And transformation is a key, interlinked, element in this. This edition looks at some of the key legislative changes, what good looks like when using technology for Tax as well as how you can get started.
- Our UK Annual Report 2021 is out now
Read our reflections on the last year, in the 2021 PwC UK Annual Report to see how we supported our clients as they responded to the pandemic. When circumstances accelerated the need for tax and legal departments to modernise, changed working patterns and pushed ESG priorities into focus, we were able to help our clients navigate these changes.
UK and Taiwan to add BEPS and dividends tax changes to DTA
The UK has released the text of a protocol signed with Taiwan in August that would add provisions to combat tax base erosion and profit shifting (BEPS) and limit rates of withholding tax that can be charged on dividends income at source. It was signed in London on 11 August 2021 and in Taipei on 19 August 2021. The protocol will enter into force upon completion of the procedures required by the law of both territories.
State of the Union: Commission proposes a Path to the Digital Decade to deliver the EU's digital transformation by 2030
The European Commission has proposed a Path to the Digital Decade, a concrete plan to achieve the digital transformation of our society and economy by 2030. The proposed Path to the Digital Decade will translate the EUʼs digital ambitions for 2030 into a concrete delivery mechanism. Read more in this European Commission press release.
CJEU decision on Belgian excess profits regime
The European Court of Justice has decided the Belgian excess profits regime constitutes an aid scheme and has referred the case back to the General Court. The current dispute between the Belgian government, the impacted Belgian companies and the Commission has been ongoing for many years. The case relates to a provision under Belgian tax law that exempted certain income, which is considered as excess profits, i.e. profits that are - on an arm’s length basis - not considered to relate to the Belgian activities. Read more in this PwC EUDTG newsalert.
EU Member States refuse to reveal details of DAC enforcement
The group set up by the European Parliament’s Committee on Economic and Monetary Affairs to assess the enforcement and implementation of the Directive on Administrative Cooperation (DAC), versions 1 to 4, has not been granted access to the necessary documents and data. See this European Parliament report and read more in this STEP article.
EU Parliament paves the way for special fund to mitigate the impact of Brexit
MEPs have approved a €5 billion Brexit Adjustment Reserve to help member states deal with the economic, social and territorial impact of the UK’s departure from the EU. Read more in this EU Parliament press release.
Remarks by Executive Vice-President Dombrovskis at the ECOFIN press conference
See this European Commission press release for the comments made at the ECOFIN press conference held on 11 September 2021 in Brdo.
Tax administrations continue to accelerate their digital transformation
Tax administrations are investing significant resources in the development of e-services and digital solutions and are embracing opportunities for fast tracking digital transformation to improve their services, reduce burdens, and improve tax compliance, according to a new OECD report. The latest edition of Tax Administration 2021 sets out key performance indicators for 59 tax administrations from the OECD and other advanced and emerging economies which together collect EUR 12.3 trillion of revenue annually.
OECD Tax administration responses to COVID-19: Administrative measures to facilitate withholding tax relief claims
The OECD has recently issued guidance on the administrative measures that source and residence jurisdictions may consider adopting to manage withholding tax relief procedures in a coordinated manner due to the coronavirus pandemic. Topics covered include: 1) an overview of cross-border withholding tax relief procedures; 2) features of cross-border withholding tax relief procedures that raise challenges in the pandemic health crisis; 3) the impact on investors and tax administrations; 4) the determination of grace periods for tax residence certificates; and 5) requirements for paper form tax relief forms by source countries.
Global Forum Secretariat, African Development Bank and World Bank Group deliver new model manual on exchange of information for tax purposes
Exchange of information (EOI) is an essential tool for tax authorities worldwide to ensure that all taxpayers pay the correct amount of tax. The Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum), the World Bank Group and the African Development Bank have jointly published a new version of the Manual on Exchange of Information. Read more in this OECD item.
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:
- Digital tax byte
The latest edition from 20 September includes the latest from both sides of the US Congress on international tax reform, proposals from the Czech Ministry of Finance on reporting by platforms in accordance with DAC7, Vietnam's incoming regime that goes beyond reporting to require withholding at source and Pakistan's application of withholding tax to online marketplaces. Some recent developments in relation to VAT on e-services in South Africa warrant attention. Singapore has clarified aspects of its e-commerce GST regime.
Environmental, Social and Governance issues (ESG)
- Tax Readiness: ESG - Bringing your reporting & investment strategy to life
This US webcast held on Wednesday 25 August explored two key focus areas of Environmental, Social, and Governance (ESG) - Reporting and Investment - and how they relate to tax and the increased demands for transparency. Watch the replay.
Expanding Australia's tax treaty network
The Australian Government has launched a consultation on expanding Australia's tax treaty network, covering plans to build on the 45 existing treaties with 10 new and updated treaties by 2023. Comments are invited by 31 October 2021.
See here for latest updates.
GST/HST and QST alert: Investment plans are required to obtain investor percentages – action required by 15 October 2021
Distributed investment plans (DIPs), which include investment limited partnerships, that are a selected listed financial institution (SLFI) are required to obtain information from investors to determine the plan’s provincial attribution percentage, so that the plan's GST/HST and QST liabilities can be calculated. Exchange‑traded funds (ETFs) and exchange traded series are excluded from this requirement. This requires investment plans to make written requests to investors and securities dealers. Read more in this PwC Tax Insights.
Cyprus receives approval of its Recovery and Resilience Plan, extends DAC6 deadline, and ratifies Dutch treaty
The EU Economic and Financial Affairs Council (ECOFIN) recently approved the European Commission’s positive assessment of the Cyprus Recovery and Resilience Plan. In June, the Cyprus Tax Authority announced an additional extension of the submission deadline for DAC6 reports (without penalties) to 30 September 2021 and also the first tax treaty between Cyprus and the Netherlands, signed on 1 June 2021, was ratified by Cyprus. Read more in this PwC Tax Insights.
Issuance of Ministerial Decree 428 of 2021
Following the consecutive amendments to the income tax law, the stamp tax law and the issuance of Ministerial Decree 610 of 2020, the Ministry of Finance has issued Ministerial Decree 428 of 2021 in connection with the sales and disposal of financial securities and treasury bills/bonds. The decree helps clarify the compliance procedures, as well as the applicable laws and regulations. Read more in this PwC News Alert.
Distributions from Luxembourg investment company (SICAV) exempt from German income tax
Corporations with at least a 25% share in a Société d’investissement à capital variable (SICAV), a Luxembourg investment company, do not have to pay income tax in Germany on the dividends received from the SICAV in 2010. This also applies if the Luxembourg tax authorities – for whatever reason – did not exercise their right of taxation at source and the distributions hence remained untaxed. Read more in this PwC Germany tax blog.
GST Council - various changes and clarifications announced
The forty-fifth meeting of the Goods and Service Tax Council (GST Council) was held on 17 September 2021. The Council discussed various aspects of GST pertaining to legal and procedural changes to remove ambiguity/disputes, exemptions on COVID-19-related medical goods, changes in GST rates of goods and services, and compliance-related relief measures. Read more in this PwC Tax Insights.
New interest withholding tax rate on bonds held by domestic taxpayers and permanent establishments
The Indonesian Government has announced that in order to create a level playing field between foreign and domestic investors in the local bond market, it has reduced the rate of withholding tax on bond-related interest earned by domestic taxpayers and permanent establishments from 15% to 10%. See this PwC TaxFlash.
Budget 2022, to be announced in October, will be set against an ongoing backdrop of significant economic, political and societal uncertainty. In addition to the continuing fallout from COVID-19, the unprecedented challenges faced include climate change, housing, healthcare and international tax reform as well as the scale of Ireland’s fiscal indebtedness, one of the highest in the developed world. Visit our PwC Ireland Budget page for the latest news.
Ireland redrafts capital acquisitions tax compliance guidance
The Irish Revenue has redrafted its Tax and Duty Manual on Capital Acquisitions Tax Compliance Interventions and restructured it throughout to simplify the text. See here for the specific changes.
Fund to support large companies in financial difficulties
On 3 September 2021, the General Director for Business Incentives before the Ministry of Economic Development ("MED") published the decree setting out terms and conditions for submitting applications for access to the fund to support large companies in temporary financial difficulties. Read more in this PwC tax blog.
Korean Tax News - September 2021
The latest edition of our Korean tax update includes: 1) MOEF announces the National Tax Revenue Budget Bill and the National Tax Expenditure Plan for 2022; 2) National Tax Administration Policy for the second half of 2021; 3) MOIS pre-announces legislation to amend local tax-related laws; 4) MSS announces supplementary measures for the promotion of venture businesses; 5) Financial Services Commission to create a new division to supervise virtual asset transactions; and 6) Rulings update.
Mexico budget proposes numerous tax law changes
On 8 September, the Mexican Ministry of Finance submitted to Congress the proposed budget for the year 2022. Given the broad nature of the proposed bill, multinationals with operations in Mexico should analyse the impact of these proposals and the relevant business requirements and tax formalities that would become relevant in determining the Mexican tax treatment. Read more in this PwC Tax Insights.
Mexican tax authorities publish effective tax rates to measure tax risks for large taxpayer
Mexican tax authorities recently released ETRs intended to serve as parameters for measuring tax risks that correspond to over 200 economic activities. The stated objective is to facilitate and encourage voluntary tax compliance by inviting taxpayers to analyse the applicability of the ETRs, compare them with their own and, as expressed by the authorities, self-correct their tax positions, if appropriate. According to the authorities, this should reduce the need for in-depth tax reviews focused on verifying that taxpayers have complied with their tax obligations. Read more in this PwC Tax Insights.
KSA: The Zakat, Tax and Custom Authority issues Guidance Notes for the Common Reporting Standard
The Zakat, Tax and Custom Authority (“ZATCA”) has issued Guidance Notes in relation to the Common Reporting Standard (“CRS”) on 15 April 2021 which clarify the obligations of Reporting KSA Financial Institutions (“FIs”). Read more in this PwC News Alert.
Foreign real estate funds eligible for Dutch FBI exemption
Against the opinion of the tax authorities, a Dutch court has ruled that a German real estate investment fund is in principle entitled to the Dutch FBI regime. The importance of this case lies in the Court’s confirmation that, contrary to the position taken by the Dutch tax authorities, the German fund complies with the current legal form requirement even though no (withholding) tax is effectively levied on the Dutch source real estate income at shareholder level. Read more in this PwC news item.
The Polish Deal - Significant impact on business activity taxation
A new bill amending the Law on Personal Income Tax, the Law on Corporate Income Tax and certain other laws - the so-called Polish Deal - was recently published on the Polish Parliament’s website. The key changes to be introduced by the new law will focus on 4 main areas: 1) new minimum tax for CIT taxpayers; 2) additional transfer pricing restrictions; 3) tax and social security burdens on the remuneration of the employees and board members; and 4) new tax reliefs. See this PwC news item.
Singapore issues revised Transfer Pricing Guidelines with new guidance on CCAs
As reported previously, the Inland Revenue Authority of Singapore (IRAS) issued revised Transfer Pricing Guidelines (Sixth Edition) (6th Edn TPG) in August. While there are no fundamental changes to the last edition, the 6th Edn TPG provides new guidance on cost contribution arrangements (CCAs) and enhanced guidance on financial transactions, intercompany services and transfer pricing (TP) audits and adjustments. The 6th Edn TPG is more closely aligned with the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administration, and reference has been made to the mandatory binding arbitration procedures that are available under many of Singapore’s post BEPS double-taxation treaties, with a potential application to future bilateral tax disputes. Read more in this PwC Tax Insights.
Tax Synopsis - August 2021
This edition includes: 1) Diesel rebates: “own primary production in mining”; 2) Punishment to fit the crime – even if a taxpayer’s tax position is adopted based on the advice of its tax advisor; and 3) SARS watch.
Taiwan Tax Update August 2021
This edition includes: 1) Amendment to “Regulations Governing Application of Agreements for the Avoidance of Double Taxation with Respect to Taxes on Income”; and 2) Exemption from 2021 provisional income tax filing for profit-seeking enterprises impacted by COVID-19.
House Ways and Means Committee “Build Back Better” reconciliation legislation
House Ways and Means Committee Chairman Richard Neal (D-MA) released his ‘chairman’s mark’ of tax increase and tax relief proposals on 13 September which was approved by the House Ways and Means Committee on 15 September as part of “Build Back Better” reconciliation legislation that the committee is currently developing. Congressional Democratic leaders are seeking to complete action on the legislation so it can be signed into law by President Biden before the end of this year.
- Ways and Means Chairman Neal announces reconciliation tax increase proposals
Chairman Neal’s tax increase proposals are projected to raise federal revenues by more than $2 trillion over 10 years, according to estimates by Joint Committee on Taxation (JCT) staff. See this PwC Tax Insights.
- Key business provisions
This PwC Tax Insights provides a high-level overview of some of the key business provisions contained in the Ways and Means Committee-approved legislation.
- Key individual provisions
Significant individual provisions in the Ways and Means Committee-approved bill include increases to individual income and capital gains tax rates, along with many other provisions affecting high-income individuals, pass-through businesses (including partnerships and S corporations), and estates and trusts. Read more in this PwC Tax Insights.
- Select passthrough entity tax changes
Significant passthrough provisions in the Ways and Means Committee-approved bill includes expansion of the net investment income tax, limitations on Section 199A deduction, modifications to the treatment of carried interest income, and limitations on deductibility of business interest expense and more. Read more in this PwC Tax Insights.
Wyden proposes significant partnership tax changes
Senate Finance Committee Chair Ron Wyden (D-Ore) has released a Discussion Draft of legislation that would significantly revise the treatment of partnerships and partners under Subchapter K of the Internal Revenue Code. Wyden’s office also released a one-page summary and a 10 page, section-by-section description of the proposals. Read more in this PwC Tax Insights.
Nontaxable IRC Sec. 965 income ruled included in calculation of Arkansas NOL
An Administrative Law Judge (ALJ) ruled that the calculation of a taxpayer’s Arkansas net operating loss (NOL) carryforward must be adjusted to include the taxpayer’s IRC Sec. 965 income excluded from Arkansas taxable income. Although IRC Sec. 965 income is not subject to tax in Arkansas, state law requires nontaxable income to be added to a taxpayer’s gross income when measuring an Arkansas NOL carryforward. Read more in this PwC Tax Insights.
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Webcasts & podcasts
- Tax Readiness: Q3 financial reporting considerations
In this webcast taking place on Wednesday 22 September at 7pm, our panel of Tax Accounting Services (TAS) specialists will take a deep dive into relevant tax accounting matters and recent tax developments. Register here.
- Tax Readiness: Elevating Tax in a Hot Deal Market
Join PwC professionals from our Tax, Deals and Value Chain Transformation practices on Wednesday 29 September at 7pm, for a timely discussion on the important role tax plays in the current deals environment including a discussion of opportunities for the tax department to add value as an integral part of the deal process. Register here.
- Cross-border tax talks
- Tax Reform 2.0: the House "Ways" in
In this episode from 20 September, Doug McHoney (PwC's US International Tax Services (ITS) Leader) is live at the Westminster Studios with Sherry Grabow (PwC's US International Tax Services Co-Leader) to discuss the international tax provisions in the recently released ‘Chairman’s Mark’ from the House Ways and Means Committee.
Previous episodes in this fabulous series of podcasts can be found here, as well as on Spotify, YouTube and other streaming services.
- 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. This episode was released on 13 September:
Previous episodes in this series are available here, as well as on Spotify and other streaming services.
A number of previous webcasts are available for replay in our US tax reform hub here, including:
- Tax Readiness: US tax legislation advances under budget reconciliation
Watch the replay from this webcast held on Tuesday 21 September 2021, where our policy specialists explored the tax proposals being considered by the House of Representatives as part of “Build Back Better” reconciliation legislation, potential issues and challenges facing tax executives, and what companies should be doing in anticipation of potentially large scale changes.
- Tax Readiness: ESG - Bringing your reporting & investment strategy to life
This webcast held on Wednesday 25 August explored two key focus areas of Environmental, Social, and Governance (ESG) - Reporting and Investment - and how they relate to tax and the increased demands for transparency. Watch the replay.
- Tax Readiness: Crypto Market Insights 2021 - Latest trends
Register here to watch the replay of this webcast held on Thursday 12 August 2021, where our Trust and Consulting panel will examine corporate strategies, operational effects, regulatory restrictions, risk factors, accounting implications, and future policy changes.