Two weeks to 18 February 2022
Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
Exploring the benefits of thinking about compliance differently
Historically many businesses have focused on ‘getting compliance done’. But now, with the growing compliance burden, which will include the impact of Pillar 2 and the need for compliance to deliver greater value and insights, many businesses are rethinking this approach. Register here to join us on Thursday 24 February at 2PM, as we explore what ‘doing compliance well’ looks like. We’ll uncover the changes that can be made in key focus areas to make a big difference and demonstrate how viewing compliance holistically can drive much greater benefits beyond just ‘complying’.
Case law update - UTT denies Royal Bank of Canada treaty relief
In Royal Bank of Canada v. HMRC, the Upper Tier Tribunal has affirmed the First Tier Tribunal’s decision that the Canada-UK double tax treaty gives the UK taxing rights over royalties paid in Canada on drilling operations on the UK continental shelf. See the decision here.
Another day another tax - new tax on power and gas industry in response to fuel price crisis
A new anti-avoidance measure, in recently published draft legislation aimed at the power and gas sector, aims to curb in-the-money hedges being transferred out of struggling supply businesses. We’ve recently seen a quarter of the UK power and gas supply market bankrupting, so it’s more common than one might think, but the key reason this is interesting is because it is the first time the UK government has recognised commodity hedges and gone on record with what they think about them.
HMRC’s mandatory disclosure rules consultation
The Chartered Institute of Taxation (CIOT) has published its response to this consultation, as has the Institute of Chartered Accountants in England and Wales (ICAEW) here.
Business in Focus podcast
The results of our 25th CEO Survey indicate a tipping point for purpose. With their actions and decisions under the microscope, how do CEOs see this as a chance to showcase the role business plays across society? In this podcast, host Teresa Owusu-Adjei is joined by Alex Baldock, CEO of Currys and Kevin Ellis, PwC Senior Partner and Chairman to discuss the importance of trust and transparency in navigating the way forward.
MEPs adopt proposals for addressing harmful tax schemes and reducing the EU VAT gap
MEPs adopted two reports on taxation, the first on the impact of national tax schemes on the EU economy and the second on reducing the EU VAT gap. The report on the effect of national taxation on the EU economy argues that the single market requires harmonisation and coordination in tax policy-making in order to increase the integration of the single market and prevent base erosion. Read more in this European Parliament press release.
CFE Tax Advisers Europe – EU Tax Policy News Top 5
For the latest round-up of EU Tax Policy news from the Confédération Fiscale Européenne (CFE), visit their latest news page here.
Pillar Two Model Rules
- OECD Tax Talks webinar - Monday 21 February 2.30pm UK time
With a number of recent and upcoming developments in the OECD’s international tax agenda, this live webinar with experts from the OECD Centre for Tax Policy and Administration will provide the latest update on the current work, in particular on the implementation of the agreement reached last October to reform international tax rules and on upcoming public consultations. The webinar will be recorded and the replay will be made available within 24 hours.
- Flexibility is key in adopting minimum tax, advocacy group says
Companies need flexibility in adopting the new global minimum tax that the OECD tax agreement calls for, and shouldn’t just be forced to follow the organisation’s model rules, according to a report from the BEPS Monitoring Group. The group is a network of international tax specialists set up by advocacy organisations like Oxfam and the Tax Justice Network.
Pillar One draft Model Rules
- OECD launches public consultation on draft rules for revenue sourcing and nexus under Amount A of Pillar One
As reported previously, the OECD released the draft model rules on Amount A revenue sourcing and nexus for public consultation on 4 February (see here). Our PwC alert provides a short overview of the draft Model Rules and some initial observations. It should be noted that this is the first in a series of several sets of rules that the OECD is expected to release over the coming months, with very short comment periods, as part of a 'rolling consultation'.
- OECD launches public consultation on the draft rules for tax base determinations under Amount A of Pillar One
The OECD launched a public consultation on the draft rules for tax base determinations under Amount A of Pillar One on 18 February. The purpose of the rules is to establish the profit (or loss) of an in-scope MNE that will be used for the Amount A calculations to reallocate a portion of its profits to market jurisdictions. The consultation closes on 4 March 2022. Read more in this OECD announcement.
Lesotho, Thailand and Vietnam sign up to MLI
With Lesotho, Thailand, and Vietnam recently signing the BEPS Multilateral Instrument (MLI), the total number of jurisdictions under the convention comes to 99, 68 of which have now ratified, accepted or approved the convention. See this OECD announcement.
OECD presents international tax update to G20 Finance Ministers and Central Bank Governors
This OECD report outlines key developments in international tax reform in recent months, in particular the developments regarding the two-pillar agreement, as well as progress made in tax transparency, the implementation of the BEPS minimum standards and the taxation of MNEs. The report also provides the latest on OECD work to establish an Inclusive Framework-like initiative to facilitate dialogue on implicit and explicit carbon pricing.
OECD Tax and Development Days 2022
The OECD hosted the second Tax and Development Days on 16-17 February 2022. This event provides an update on OECD's practical initiatives to strengthen tax capacity and improve tax policy and compliance in developing countries. You can watch the replays here.
First meeting of the Asia Initiative on tax transparency
A first meeting of the Asia Initiative was held recently by the Global Forum as a side event of Indonesia’s G20 Presidency. This capacity-building initiative aims at promoting the implementation of the internationally-agreed standards on transparency and exchange of information and their use to tackle tax evasion and other illicit financial flows in Asia. Read more in this OECD item.
International Tax News - December 2021 & January 2022
International Tax News is designed to help multinational organisations keep up with the constant flow of tax developments. Among the topics featured in this month's edition are: 1)The Netherlands implements ATAD II’s reverse hybrid rule; 2) Mexico imposes new requirements on domestic and international reorganisations; 3) China extends tax exemption for overseas investors in bond market; and 4) The Nigerian Tax Authority now has the powers to assess income tax on the turnover of foreign digital companies.
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:
- OECD’s Pillars 1 & 2
See our OECD section above.
- Digital tax byte
The latest edition from 18 February includes details of a Pillar One consultation on Nexus and Revenue Sourcing and the expectation of an imminent OECD Pillar Two consultation and the push by the EU Council's French Presidency to see Pillar Two impacts in the EU. The Danish government's proposed introduction of a streaming levy is also under the spotlight and we comment on the Dominican Republic's consultation on VAT on digital services provided by foreign suppliers. Malaysia is providing an amnesty covering late registration/payment of its tax on digital services.
Environmental, Social and Governance (ESG)
- Tax is a crucial part of the ESG conversation
Tax is becoming a core component of ESG reporting metrics – and that’s a good thing. By viewing tax through an ESG lens, companies can move the conversation beyond corporate income tax. See this thought leadership article by Will Morris and Edwin Visser.
- ESG Legal event
Our latest event in this ESG series was held on 8 February 2022, where we focused on the ‘G’ element - Governance, of the ESG agenda. You can register to watch the replay here. A recording of our previous events in this series can be viewed here.
Taxing Crypto and Digital Assets - Emerging Global Tax Policy and Latest Trends
Please join our webcast on Tuesday 22 February at 4pm where PwC subject matter experts will discuss the findings with an OECD panellist and share insights into the latest global tax policy initiatives for the newly emerging trends, and what they mean for multinational enterprises, tax authorities and other stakeholders. Register here.
Observations on key changes to Austria’s revised Transfer Pricing Guidelines
Following the publication of Austria’s draft Transfer Pricing Guidelines (draft ATPG) in 2020, the Austrian Federal Ministry of Finance issued the final Austrian Transfer Pricing Guidelines (ATPG 2021 or Guidelines) in October 2021. The ATPG 2021 extensively revises the 2010 Transfer Pricing Guidelines (ATPG 2010) and aims to reflect the OECD BEPS project-related developments, latest jurisprudence, and administration practice in Austria. This PwC Insight provides a comprehensive overview of the key changes in the final ATPG 2021 compared to the draft ATPG, as well as the ATPG 2010.
See here for latest updates.
Draft legislative proposals released
The Department of Finance has released draft legislative proposals to implement numerous 2021 federal budget and other measures.
- Corporate income tax measures
The proposals include: 1) allowing immediate expensing of up to $1.5 million per taxation year of capital property acquisitions for certain businesses; 2) reduce corporate tax rates on eligible zero-emission technology manufacturing income; 3) expand eligibility for accelerated capital cost allowance (CCA) on clean energy equipment; 4) temporarily extend certain timelines relating to federal film or video production tax credits; and 5) confirm the extent of the Canada Revenue Agency’s (CRA’s) audit authorities. This Tax Insights discusses these measures, for which the federal government has launched public consultations, with comments to be submitted by 7 March 2022 (5 April 2022 for those relating to CRA’s audit authorities).
- Mandatory disclosure rules
This PwC Tax Insights discusses the proposed enhanced mandatory disclosure rules. Interested parties are asked to provide comments to the Department of Finance on these rules and the list of sample notifiable transactions by 5 April 2022.
- Excessive interest and financing expenses limitation (EIFEL) regime
The proposals include the 2021 federal budget proposal to limit the amount of net interest and financing expenses that certain taxpayers may deduct in computing their taxable income, based on a fixed percentage of earnings before interest, taxes, depreciation and amortisation (EBITDA). Read more in this PwC Tax Insights.
Guernsey Policy & Resources Committee to carry out further investigations into corporate tax options as part of ongoing Tax Review
The Policy & Resources Committee is commissioning further work on the issue of corporate taxation as part of its work on the Tax Review. The Committee is expecting additional revenues to come from taxes on business as part of the overall tax reforms that will be needed to meet the forecast shortfall of around £85m per year. Its current assumption is that an additional £10m will come from corporate taxes.See this press release.
Jersey consults on corporate tax filing deadline
A consultation to move the current corporate income tax return filing deadline of 31 December has been opened by Revenue Jersey, seeking views on the proposal that the deadline is brought forward to 30 November in the year following the year of assessment.
Jersey Assembly considers amendments to Income Tax Act for LLCs
In September 2018, the States adopted the Limited Liability Companies (Jersey) Law 2018 (the “LLC Law”) which provides for the establishment of limited liability companies (“LLCs”) in Jersey. In order to bring that Law into effect, it is necessary to make consequential amendments to existing pieces of legislation to acknowledge the existence of that new vehicle. Draft regulations have therefore been published, Bill No. P.25/2022, which seek to ensure that when the LLC Law is introduced, the appropriate regulatory and legislative framework exists to ensure the relevant treatment of the Jersey LLC.
The Cyprus Tax Department publishes FAQs on tax treatment of intra group back to back financing transactions
The Cyprus Tax Authorities published a Frequently Asked Questions (FAQs) section on their website with respect to Interpretative Circular 3, dated 30 June 2017 and effective from 1 July 2017, with title “Tax treatment of intra-group back to back financing transactions”. Read more in this PwC Tax Insights.
Tax and Legal News, January 2022
The latest tax and legal news from Finland. Read the latest edition.
Fourth Corona Tax Relief Act – Draft Bill – Update
The German Federal Ministry of Finance has presented the draft bill for a fourth act implementing tax relief measures to address the Corona crisis (Fourth Corona Tax Relief Act). Read more about the tax measures in this PwC tax blog.
Hong Kong tax review 2021
The Hong Kong Tax Review 2021 summarises the significant tax updates in 2021 and previews the upcoming tax developments in 2022.
Protocol is an integral part of double tax treaty
A recent Tribunal has reaffirmed the view that a protocol to a double tax treaty is an integral part of that DTT, and is not required to be notified separately. The Central Board of Direct Taxes (CBDT) had issued a Circular stipulating that a separate notification was required. The Tribunal held that the CBDT Circular exceeded the boundaries of s90(1) of the Income Tax 1961 and was not binding on the taxpayer or the Tribunal or other appellate authorities. It also concluded that the Circular could not be invoked for a period prior to the date it was issued. Read more in this PwC Tax Insights.
Assessing the impact of Revenue's new Compliance Intervention Framework
The Irish Revenue has unveiled its new Compliance Intervention Framework which will have significant implications for all taxpayers. It adds a further layer of complexity to the ever-changing tax risk and controversy environment, which has been influenced by many factors including real-time reporting, increased tax transparency and the use of dedicated digital resources by Revenue. Read more in this PwC Tax Insights.
Firms urge Ireland to pause outbound payment tax changes
Accounting firms and tax observers have cautioned Ireland to wait for the implementation of EU and international tax developments before implementing what they call potentially unnecessary reforms to the taxation of outbound payments. The responses are available to view here.
Italian Tax Court of First Instance: withholding tax on dividends to Luxembourg investment fund incompatible with EU law
The Pescara Tax Court of First Instance recently ruled that a Luxembourg SICAV is comparable to an Italian investment fund and, therefore, is entitled to the refund of the full withholding tax suffered on the dividends received from Italian companies. Read more in our EU Direct Tax Group Newsalert.
Italy issues final circular on hybrid mismatch arrangements
The Italian Tax Authorities recently published the final version of the interpretative Circular Letter on hybrid mismatch arrangements rules, as governed by Legislative Decree 142/2018 that implements the EU’s anti-tax avoidance directives through domestic Italian legislation and that also considers the OECD BEPS reports on Action 2. Read more in this PwC Tax Insights.
Italy Tax Agency clarifies income tax treatment of securities issued by UK financial entities
The Italian Revenue Agency has posted online Letter No. 67/2022 (in Italian), clarifying the income tax treatment of interest on securities issued by financial entities in the UK.
Korean Tax Update - February 2022
Updates in this issue include: 1) National Tax Administration Policy for 2022; 2) Regional Comprehensive Economic Partnership Agreement enters into force in Korea on 1 February 2022; 3) NTS announces list of virtual asset service providers for virtual asset valuation; 4) NTS simplifies documents required for R&D tax credit re-screening; and 5) Rulings update.
Real Estate Levy - guidance on compliance obligations for Luxembourg investment vehicles
The Luxembourg tax authorities recently issued an administrative circular providing guidance on application of the new Real Estate Levy introduced by the 2021 Budget Law (Bill n°7666 which became the Law of 19 December 2020), inter alia clarifying related new filing obligations imposed on the Luxembourg investment vehicles in scope. While the Real Estate Levy applies only on the revenues derived from a Luxembourg based real estate, the circular reminds that all “non-transparent” Luxembourg investment vehicles, even though not owning Luxembourg real estate, are subject to specific notification obligations to be filed prior to 31 May 2022. Read more in this PwC news item.
Mexico extends tax benefits for IPOs & bonds
The Mexican Government recently published a Decree that extends, and in some cases expands to fiscal year 2025, the tax benefits initially granted through a previous Decree. That previous Decree, published in January 2019 (originally ending in FY 2021), related to the withholding tax on interest paid by Mexican residents for publicly traded corporate debt bonds and a reduced tax rate for certain taxpayers on the capital gain obtained from the sale of public shares through an initial public offering. Read more in this PwC Tax Insights.
UAE Federal Corporate Tax announcement - webinar
Watch our recorded webinar where our tax experts take a deeper look at the UAE federal corporate tax announcement, give insights and observations and answer questions that are top of mind for businesses locally, regionally and globally.
Polish Deal - new obligations for issuers of securities
From 1 January 2022 there is new law in place that changes the rules of collecting withholding tax (WHT). New rules implement a pay-and-refund mechanism for passive income (interest, dividends) earned by related parties which exceed PLN 2m in a tax year. Some changes particularly affect the rules of collecting WHT in case the payments of proceeds are done through entities which maintain securities accounts. Read more in this PwC news alert.
Singapore Budget 2022
Singapore’s FY2022 Budget Statement was announced by the Minister for Finance on 18 February 2022. The OECD’s proposal for a global minimum tax is expected to reduce the effectiveness of tax incentives as a tool to encourage larger multinational enterprises (MNEs) to invest in Singapore. Therefore, it is crucial for Singapore to strengthen its competitiveness on the non-tax front to remain attractive to foreign direct investors. Visit PwC Singapore’s Budget 2022 page to keep up to date on how businesses can navigate this year’s Budget measures.
A step towards certainty in the uncertain world of transfer pricing
In December 2021, the South African Revenue Service issued a paper titled the ‘Proposed Model for Establishing an Advance Pricing Agreement Programme’ (“APA”) in South Africa and Release of Draft Legislation’ (“the Model Paper”). Public comments on the proposals contained in the Model Paper were invited by 31 January 2022. This PwC alert discusses the APA paper.
Draft guidance on transfer pricing of cross-border intra-group loans
On 11 February 2022, the South African Revenue Service issued a draft Interpretation Note (IN) on the application of the arm’s length principle in the context of the pricing of intra-group loans for public comment. Feedback on the content of the IN is due by 29 April 2022. Read more in this PwC Tax Alert.
For the latest updates on current topics, see this PwC Switzerland Insights page.
Uganda releases 2021-22 Taxation 'Handbook'
The Uganda Revenue Authority has released its Taxation Handbook for 2021/2022, which provides an overview of all elements of the country's tax regime.
IRS updates exempt organisation Forms 990T, 4720, and 1024
The IRS has revised 2021 tax forms applicable to tax-exempt organisations: 1) Form 990-T, Exempt Organisation Business Income Tax Return; and 2) Form 4720, Return of Certain Excise Taxes Under Chapters 41 and 42 of the Internal Revenue Code. The IRS has also revised Form 1024, Application for Recognition of Exemption Under Section 501(a) or Section 521 of the Internal Revenue Code. Read more in this PwC Tax Insights.
California makes significant changes to PTE tax & repeals 2022 NOL/credit limits
Governor Gavin Newsom recently signed Senate Bill (SB) 113, which includes taxpayer-friendly changes to the California pass-through entity tax (PTE tax) and removes California net operating loss (NOL) and tax credit limitations for the 2022 tax year, one year earlier than originally enacted. Read more in this PwC Tax Insights.
California taxpayers now must report their unclaimed property compliance
The California Franchise Tax Board (FTB) is requiring certain business taxpayers to attest to their unclaimed property reporting compliance when filing their 2021 business tax returns. These returns include the corporation franchise/income tax return, partnership return, and LLC return. Read more in this PwC Tax Insights.
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Webcasts, blogs & podcasts:
- Tax Readiness: Capitalizing research expenditures and software development costs — issues and implications
The 2017 tax reform act amended Section 174, effective for tax years beginning after 2021, to require capitalization and amortization of research expenditures and software development costs. Join our panel of specialists on Wednesday 23 February at 7pm, as they discuss the implications of this new capitalization requirement, including potential impacts on the research credit, foreign tax credits, tested income, Section 861 allocation, Section 482 cost sharing arrangements, and state and local taxes. Register here.
- Podcast: Week in Review
- Tax is on the back burner for now but appropriations are moving on track. In this edition Todd Metcalf discusses what to watch for in the coming months and answers questions he received this week: Is anything going to happen on the tax front this year and, if so, when?
- Government funding took priority this week and tax legislation is on hold. In this edition, Mark Prater shares his thoughts on these developments and why it is important to keep an eye on the key actors in the coming weeks.
- Cross-border tax talks: Double taxation ahead? Parsing the final FTC regs
In this episode from 8 February, Doug McHoney (PwC's US International Tax Services Co-Leader) is joined by Wade Sutton, PwC ITS Partner in the Washington National Tax Practice office and former deputy international tax council at Treasury. They discuss the highly technical topics of the final foreign tax credit regulations, credibility of tax under Section 901, the definition of an income tax, DSTs, nonresident taxation, effective dates, digital services taxes, withholding taxes, nonresident capital gains taxes, Puerto Rican excise tax, BEPS 2.0 and much more.
- Policy on Demand series
- US Election Watch with Rohit Kumar and Todd Metcalf
Roughly nine months out from the 2022 midterm elections in November, in this episode Rohit Kumar and Todd Metcalf examine the factors that may affect those elections and the Washington power balance, and where they are focusing attention in the coming weeks.
- US Taxpayer focus shifts to international tax landscape
In this episode, Pat Brown discusses his top three areas of focus: Pillar One documents and public consultations, Pillar Two model rules, and the final foreign tax credit regulations. He also shares his advice for companies as uncertainty looms about the details of the OECD project and the future of US legislation.
A number of previous webcasts are available for replay in our US tax reform hub here, including:
- Tax Readiness webcast: 2022 Tax Policy Outlook - Managing Constant Change
In this webcast, our panel of specialists dived into this year’s Tax Policy Outlook, discussing the key role that tax can play around potential changes to US and global tax policy, a world of technological disruption, fractured geopolitics, the enduring impacts of the COVID-19 pandemic, and increased focus on ESG concerns. Register here.
- Tax Readiness: Impacts of the 2021 final foreign tax credit regulations
The Treasury and IRS recently released final regulations addressing various aspects of the foreign tax credit (FTC) regime. Listen to our panel of PwC specialists in this webcast held on Wednesday 19 January as they discuss these final regulations and the impact they may have on taxpayers. Register here for the replay.
- Tax Readiness: The OECD's Pillar Two Model Rules on a global minimum tax
Watch the replay from this webcast held on Monday 10 January 2022, where our panel discussed the Model Rules, including definitions, scope, timeline, tax accounting issues, administration of the rules, and touch briefly on the 22 December EU draft Directive on minimum taxes, as well as the interactions with current US legislative proposals.
For regular updates on this topic, check out our US tax reform hub on The Suite here.
Resolution 11 provides various measures to support businesses
The Vietnamese Government has issued Resolution 11/NQ-CP on socio- economic recovery measures and implementation of Resolution 43/2022/QH15 on fiscal and monetary policies, including an extension of the deadline for payment of CIT, PIT, VAT, SST and land rental in 2022. Read more in this PwC NewsBrief.