Two weeks to 18 March 2022
Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
The Chancellor's Spring Statement 2022
On Wednesday 23 March, 2022 the Chancellor of the Exchequer, Rishi Sunak, will be making his Spring Statement. The Chancellor has commissioned the Office for Budget Responsibility (OBR) to produce an economic and fiscal forecast on 23 March to set the context of the speech he is due to make as part of the Spring Statement. Our experts will be following the speech live on the day and providing commentary and insights on what is announced here.
OECD Pillar 2
- Tax Accounting Insights: the impact of Pillar 2
This Tax Accounting Insights event, which takes place on Wednesday 23 March 2022 at 10:00am, will cover reflections from year end and ahead of Pillar 2 changes. We will cover the key topics with a focus on the process and systems impact of Pillar 2 on tax accounting as we know it.
HMRC publishes guidance on making QAHC notifications
HMRC has published guidance on how to make a qualifying asset holding company (QAHC) notification.
HMRC publish policy paper on derivative contracts
HMRC has issued a policy paper about derivative contracts used to hedge foreign exchange risks relating to acquisitions or disposals of shareholdings. This measure will have effect for companies entering into derivative contracts from 1 April 2022. It was identified as part of the consultation on the UK funds regime to consider reforms which hold the potential to enhance the UK’s competitiveness as a location for asset management and for investment funds.
Double Taxation Treaty Passport scheme register
HMRC has updated the double taxation treaty passport scheme register with 174 additions, 35 removals and 12 amendments.
Tax function optimisation – a journey to the future!
The digitisation of tax authorities around the world continues to gather pace and with it comes a corresponding impact on tax functions. Increasingly, the role of the tax function needs to be embedded into all aspects of the business lifecycle so that there are ‘no surprises’ when it comes to tax. Combined with greater calls for transparency and regulation, tax functions are struggling to keep pace, as few have unlimited resources and infrastructure to effectively respond to the complex and challenging external environment. Optimising the tax function could be the answer. Read more in this PwC tax blog.
HMRC updates list of approved offshore reporting funds
HMRC has updated the list of approved offshore reporting funds to include the funds that have entered the Reporting Fund Regime up to 4 March 2022.
- New measures to tackle corrupt elites and dirty money become law
The new Economic Crime (Transparency and Enforcement) Act received Royal Assent in the early hours of 15 March, following an expedited passage through Parliament. Introduced following Russia's invasion of Ukraine, the new legislation will mean the government can move more quickly to impose sanctions. The Act will also establish a new Register of Overseas Entities, requiring those behind foreign companies which own UK property to reveal their identities. Entities who refuse to reveal their ‘beneficial owner’ will face tough restrictions on selling the property and those who break the rules could face a fine of up to £2,500 per day or up to 5 years in prison. Read more in this Government press release.
UK suspends tax co-operation with Russia
The UK announced on 17 March that it is suspending the exchange and sharing of tax information with Russia and Belarus as part of continued efforts to inflict economic pain on President Putin’s regime. Read this HM Treasury press release.
EU Finance Ministers do not reach unanimous support for proposed Pillar Two Directive – will try again 5 April
EU Finance Ministers met on 15 March to debate and ultimately vote on a compromise text covering the introduction of a minimum taxation by the EU Member States. While there was broad support for the compromise text, it was not supported unanimously, despite the date by which Member States would be required to have transposed the Directive and made it effective having been pushed back from 1 January 2023 to 31 December 2023. Read more in this PwC tax policy alert.
Webcast recording: Are you ready for the digital platform reporting rules under DAC 7?
PwC recently organised a webinar focusing on the new reporting obligation introduced by the EU’s DAC 7 for digital platforms located both inside and outside the EU (and the automatic exchange of information with respect to this information). Rewatch the recording of the live session which took place on 15 March 2022 and download the full presentation.
Council agrees on the Carbon Border Adjustment Mechanism (CBAM)
The European Council has reached agreement (general approach) on the Carbon Border Adjustment Mechanism (CBAM) regulation, which is one of the key elements of the European Union’s ‘Fit for 55’ package. The main objective of this environmental measure is to avoid carbon leakage. It will also encourage partner countries to establish carbon pricing policies to fight climate change. Read more in this press release.
CFE Tax Advisers Europe
EU Tax Policy News Top 5
Visit their latest news page here.
Pillar Two Model Rules - further insights
- OECD releases Pillar Two Commentary and launches public consultation on the Implementation Framework
The OECD/G20 Inclusive Framework on BEPS has released further technical guidance on the 15% global minimum tax agreed in October 2021 as part of the two-pillar solution to address the tax challenges arising from digitalisation of the economy. The Inclusive Framework is now undertaking a public consultation until 11 April to collect input from stakeholders on the matters they consider need to be addressed as part of the Implementation Framework that is being developed. Our Tax Policy Alert includes several highlights of what is, and is not, in the Commentary, plus some initial observations. The Commentary attempts to explain the Pillar Two Model Rules in a more accessible way. It helps address some of the outstanding issues but, from a technical point of view, it does not go as far as we would have hoped to clarify a number of outstanding issues.
Pillar One draft Model Rules
- OECD publishes public comments received on the draft rules for tax base determinations under Pillar One Amount A
The OECD has published the comments it received on proposals for Draft Rules to support the calculation of Amount A under pillar one of its international tax reform plans.
Botswana joins Yaoundé Declaration – 33 African countries now signatories
Botswana’s Minister of Finance and Economic Development has endorsed the Yaoundé Declaration. Originally signed by four countries in November 2017, the Yaoundé Declaration encouraged the African Union to begin a high-level discussion on tax co-operation, the fight against illicit financial flows (IFFs) and their link to domestic resource mobilisation. Less than five years later, with Botswana’s support, 33 African ministers of Finance and the African Union Commission now back the Declaration. 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:
- OECD’s Pillars 1 & 2
See our OECD section above.
- Webcast 15 March: Are you ready for the digital platform reporting rules under DAC 7?
PwC is organising a webinar focusing on the part of DAC 7 that introduces a reporting obligation for digital platforms located both inside and outside the EU (and the automatic exchange of information with respect to this information). Find out more and register here.
International Tax News - February 2022
Among the topics featured in this month's edition are: 1) Canada proposes excessive interest and financing expenses limitation legislation; 2) The UAE introduces a federal corporate tax; 3) Court decision acknowledges tax credit for taxes paid abroad on dividends; and 4) India Budget 2022 - impact on foreign investors and multinationals.
Environmental, Social and Governance (ESG)
- ESG & Tax - Sustainability & Transformation
The second of our ESG & Tax virtual webinars is taking place on Tuesday 5 April at 10:00am. The focus will be on the key role tax plays as part of the Business Sustainability and Transformation agenda. Please register using this link.
Quota system: Extended deadline for tax returns 2020
Tax returns (e.g. individual and corporate income tax returns or annual VAT returns) generally have to be submitted by 30 June of the following year (if submitted electronically). If a taxpayer has a tax representative, the taxpayer can make use of the quota system. In this case, tax returns have to be submitted by 31 March of the second subsequent year at the latest. Due to the ongoing restrictions due to the COVID-19 pandemic, the usual grace period of one month (April) will be extended to a total of three months (end of June). Read more in this PwC news item.
See here for latest updates.
Client webcast: Are you ready for the digital platform reporting rules under DAC 7?
As noted above, PwC recently organised a webinar focusing on DAC 7 that introduces a reporting obligation for digital platforms located both inside and outside the EU (and the automatic exchange of information with respect to this information). Rewatch the recording of the live session which took place on 15 March 2022 and download the full presentation.
Are you ready for the next compliance deadlines?
Keeping track of all Belgian compliance obligations can be a challenge. This PwC news alert shares a compliance timeline to help you keep track of the most important deadlines upcoming in 2022. This timeline includes the main due dates for legal and tax compliance obligations of a standard Belgian company, with a financial year between 1 January 2022 and 31 December 2022.
2022 British Columbia budget – Tax highlights
On 22 February 2022, British Columbia’s Minister of Finance presented the province’s budget. The budget does not change corporate or personal income tax rates, but does: 1) introduce the clean buildings tax credit, for eligible building retrofit expenditures that improve energy efficiency; 2) temporarily expand the budget for the small business venture capital tax credit, for clean technology investments; 3) extend several business and personal tax credits, including the scientific research and experimental development (SR&ED) and training tax credits; 4) require marketplace facilitators, effective 1 July 2022, to collect and remit provincial sales tax (PST) on certain sales and leases made in British Columbia. This PwC Tax Insights discusses these and other tax initiatives outlined in the budget.
Tax and Legal News - March 2022
The latest tax and legal news from Finland. Read the latest edition.
Court decision explains tax refund on share transactions
The German Ministry of Finance released Tax Court Decision No. IR 22/20 on 15 March, concerning tax refund rules for cum-ex share transactions. The court rejected a “business concept” that sought to “exploit” uncertainties in the clear economic allocation of shares in such a way that withholding tax once withheld might be credited or refunded by the tax authorities twice or even more times. Read more in this PwC tax blog
Disposal of shares from a convertible bond issue
According to a ruling of the Supreme Tax Court published on 10 March 2022, where a financial company acquires a convertible bond with the intention of achieving a short-term proprietary trading profit and sells the shares received as a result of the conversion, this meets the conditions of Section 8b (7) sentence 2 Corporation Tax Act. Read more in this PwC tax blog.
Federal Ministry of Finance publishes Tax Relief Bill 2022
Following the release on 23 February 2022 by the Committee of the Coalition Government of a paper entitled “10 Steps to Relieve our Country”, the Federal Ministry of Finance published the draft Tax Relief 2022 bill on 2 March 2022. Read more in this PwC tax blog.
Investing in Ireland
The latest edition of our newsletter on foreign direct investment (FDI) in Ireland (1) reviews the digital economy in Ireland as regards hybrid working, its impact on the economy, the extent to which organisations rely on digital initiatives and recent legislation for the successful execution of hybrid working and (2) examines the success of the MedTech sector in Ireland.
Korean Tax Update - March 2022
This edition includes: 1) Government’s Bill to Amend Enforcement Rules of Tax Laws for 2021; 2) The NTS Investigation Targets Some Overseas Subsidiaries of Domestic Companies and Domestic PEs of Multinationals; 3) The KCS Enforces and Briefs on Measures to Improve the Amended Import VAT Invoice Issuance Regime to Strengthen Taxpayers’ Rights; 4) Korea’s National Tax Revenue Increases in 2021; and 5) Rulings update.
Are you complying with the new Mexican controlling beneficiary tax obligation?
The tax reform published in the Official Gazette on 12 November 2021 added a new obligation for Mexican parties. As of 1 January 2022, Mexican legal entities, trusts incorporated under the Mexican legislation, and contracting parties in any other Mexican legal agreement (e.g., Asociación en Participación), must obtain and keep as part of their books and records the applicable, trustworthy, complete, and updated relevant information to each of their ultimate controlling beneficiaries. Read more in this PwC Tax Insights.
DAC7 - an introduction & the impact on Middle East businesses
The EU Directive introducing the automatic exchange of information for both EU and non-EU digital platform operators (known as DAC7), enters into force on 1 January 2023. Middle East businesses that bring users and sellers together through a digital platform therefore now have less than 18 months to assess whether they are impacted by DAC7 and if so, to ensure they comply. Read more in this PwC news alert.
Initiation of Tax Audits by the GTA in Qatar
Under the Income Tax Law No. 24 of 2018 and its Executive Regulations, the General Tax Authority (“GTA”) has the right to conduct tax audits and field inspections at taxpayers’ places of business and review their tax returns, activities, information systems and databases, accounting records, and financial information. The GTA has recently started to issue notifications to taxpayers through their Dhareeba accounts informing them of their selection for field inspections. Read more in this PwC news alert.
Important notice: Restrictions on certain Russian legal entities
Russian Presidential Decree No. 79 of 28 February 2022 contains several provisions that lay out restrictions on certain activities of resident entities and individuals. The restrictions include the following: 1) currency transactions related to the provision of foreign currency by residents to non-residents under loan agreements are prohibited; 2) residents are prohibited from crediting foreign currency to their accounts (deposits) with banks and other financial market institutions outside the Russian Federation; 3) residents are required to sell 80% of their foreign currency generated from foreign trade with non-residents. In this Legal Flash, we provide further details regarding the restrictions and highlight the key features that are important for resident entities and individuals. Read more in this Newsflash.
Tax Synopsis - February 2022
Topics covered in this edition include: 1) Unpacking the interest limitation amendments for multinationals; 2) Bona fide inadvertent error – Tax Court suggests a narrow interpretation; and 3) SARS watch.
For the latest updates on current topics, see this PwC Switzerland Insights page.
Taiwan Tax Update February 2022
This edition includes: 1) Executive Yuan announced on 14 January 2022 that the Controlled Foreign Company (CFC) Rules for profit-seeking enterprises and individuals will come into force from 1 January 2023; and 2) Ministry of Finance announced definition of “Qualifying Shares” under Joint Property Tax System 2.0 on 25 January 2022.
Tax benefits on debt restructuring extended
Royal Decree No. 742, effective from 25 February 2022, was issued to extend the time limit for the tax benefits granted for the debt restructuring of financial institutions and other creditors so as to assist debtors and SME operators (previously granted under Royal Decree No. 709) from 31 December 2021 to 31 December 2026. In addition, a further group of creditors is now included whose benefits were available with effect from 1 January 2021. Read more in this PwC Tax Update.
State corporate tax implications of Section 174 changes for 2022
The Federal 2017 Tax Reform Act enacted changes to Section 174 applicable for tax years beginning after 2021. Companies computing their first-quarter state income tax estimated payments should be aware of the state income tax implications associated with the federal changes. Read more in this PwC Tax Insights.
Maryland breaks new ground in taxing the digital realm
In February 2021, Maryland’s General Assembly enacted two bills that make major changes in the state’s tax code. The first bill, H.B. 932, expands the existing sales and use tax base to include “digital products,” effective 14 March 2021. The second bill, H.B. 732, establishes a new digital advertising gross revenue tax — the first in any state. The effective date subsequently was delayed from 2021 until 2022. Read more in this PwC Tax Insights.
Accounting Methods Spotlight Q1 2022
This quarter's Accounting Methods Spotlight discusses important IRS guidance and other developments.
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Webcasts, blogs & podcasts:
- Tax Readiness webcast: Q1 financial reporting considerations
Join our Tax Accounting Services (TAS) specialists on Thursday 24 March at 6pm as they take a deep dive into relevant tax accounting matters and recent tax developments. Register here.
- Tax Readiness: Exploring the details of the OECD Pillar Two Rules Commentary
Register here to join our panel of specialists on Wednesday 30 March at 4pm, as they discuss observations and insights into the recently released OECD Commentary to the Pillar Two Model Rules.
- Cross-border tax talks: Whirlpool Appellate Decision: A new standard for subpart F?
In this episode from 9 March, Doug McHoney (PwC's US International Tax Services Co-Leader) is joined by PwC Value Chain Transformation Specialist Tom Quinn. They discuss the Sixth Circuit Court of Appeals ruling to uphold the US Tax Court’s 5 May 2020 decision, and concluded that a CFC’s income ‘attributable to’ a branch, in this case a manufacturing branch, per se is foreign based company sales income (FBCSI) under the statute if a ‘substantial tax deferral effect’ is found.
- Policy on Demand series
- How will sanctions, other economic numbers weigh on the economy?
In this episode, Karl Russo shares his insights on the near term economic impacts of the conflict in Ukraine and February job growth in the US.
- Podcast: Week in Review
- In this episode Will Morris shares his insights on the OECD Pillar Two Commentary and EU Minimum Tax Directive — both released this week.
- In this episode, Andrew Prior shares his insights on recent bipartisan cooperation in the face of geopolitical tensions and explains why companies should focus their attention on global tax policy in the near term. He also answers the question that he received most this week: What is the fate of reconciliation legislation and proposed tax increases?
- Banking & Capital Markets Tax Updates Webcast
Join us at 7pm on Wednesday 30 March for an in depth discussion on up-to-the-minute taxation issues and other hot topics impacting financial accounting and reporting of income taxes. Register here.
A number of previous webcasts are available for replay in our US tax reform hub here, including:
- Tax Readiness: The future of tax - What’s your workforce and tax technology strategy in 2022?
Register for the replay here to hear our panel of specialists as they discuss how businesses are facing a growing list of challenges in 2022 and are increasingly relying on their people and technology systems to do more. Companies have to execute a variety of tasks in order to adhere to burdensome compliance requirements, workforce issues, and evolving tax policy, including OECD’s Pillar Two.
- 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. Watch the replay from 23 February where our panel of specialists discussed 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.
- 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.
Vietnam added to the EU’s grey list
As reported in our last edition, in its latest regular biannual review of its list of non-cooperative countries for tax purposes, the European Council added several territories to Annex II (known as its grey list). One of those additions was Vietnam. In this PwC Newsbrief we will examine why Vietnam was added and what the consequences may be for taxpayers in Vietnam.