Two weeks to 19 August 2022
Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
UK
UK-Guernsey double tax treaty - supporting documents published
HMRC has added the 'UK-Guernsey memorandum of understanding on arbitration under Article 25 of the Agreement' (MOU) and '2021 UK-Guernsey exchange of letters' to their website (and also listed '1952 Guernsey-UK Double Taxation Agreement as amended by the 2016 Protocol' and '2016 Guernsey-UK Protocol' and the '2015 Guernsey-UK Protocol' as terminated). The MOU was signed by representatives of both the UK and Guernsey on 16 June 2022, but has not yet entered into force. The exchange of letters entered into force on 1 January 2022. See this HMRC page.
Blog: Why today’s threats and opportunities call for a broader take on restructuring
Businesses are grappling with a perfect storm of soaring inflation, supply chain disruption and fragile consumer confidence, while striving to keep pace with digital transformation and the shift to Net Zero. From a restructuring perspective, the businesses we speak to are increasingly seeking out turnaround teams with the breadth of skills and perspectives to match today’s evolving threats and opportunities. The results can not only help to stabilise but also re-energise the enterprise and future-proof its capabilities. Read more.
Business in focus: Trust, technology and transformation: The TMT trends affecting us all
Following the pandemic we’re more online, more aware of emerging technology and more likely to place as much emphasis on a brand’s reputation and purpose as their products or services. So what does this mean for businesses looking to connect with their customers? This podcast takes a closer look at how the trends seen in this sector are creating opportunities and challenges for businesses of all sorts.
EU
EU Tax News - May/June 2022
EU tax news is a bimonthly newsletter with summaries of all the relevant ECJ and national court cases and decisions, and EU policy initiatives related to EU direct tax law and state aid. The newsletter is prepared by members of PwC's EU direct tax group (EUDTG) from across Europe. Read the latest edition here.
OECD
Pillar One Model Rules
- Public consultation meeting on Amount A of Pillar One
As reported previously, the OECD is seeking public comments on the draft model rules to implement a new taxing right that will allow market jurisdictions to tax profits from some of the largest multinational enterprises ("Amount A of Pillar One"). A public consultation meeting is being held on 12 September which will focus on the key questions identified in the consultation document and issues raised in the written submissions received as part of the consultation process. Read more. - CIOT response to OECD consultation on the Progress Report on Amount A of Pillar One
Read their response here.
MLI
- BEPS MLI to become effective for China, Hong Kong and Senegal
The BEPS multilateral instrument is to become effective for treaties concluded by China, Hong Kong and Senegal from 1 September 2022. See https://oe.cd/mli.
Global Forum releases eight new peer review reports on transparency and exchange of information on request
The Global Forum recently published eight new peer review reports on transparency and exchange of information on request (EOIR) for the Cook Islands, Ecuador, Finland, Pakistan, Poland, Portugal, Sint Maarten and Sweden.
Other territories
International
International Tax News - July 2022
International Tax News is designed to help multinational organisations keep up with the constant flow of tax developments. Read the latest edition here. Among the topics featured in this month's edition are: (1) the Australian Election Commitments Report reveals potential changes to royalty and interest deductibility; (2) Korea releases draft Pillar Two rules; (3) Chilean Government presents Tax Reform Bill; and (4) Hungarian Government Decree on extra-profit tax.
Digital tax byte
The latest addition to our series of brief insights into the workings of the UK and supranational bodies reviewing the taxation of digitalisation of business.
- The latest edition from 18 August includes: (1) comments on a G24 response to the Plilar 1 Amount A Progress Report; (2) Korean draft legislation; (3) Malaysian consultation document for implementing Pillar 2; (4) guidance from the Irish Revenue on the deductibility of digital services taxes (DSTs); and (5) our summation of the European Commission's report on its public consultation on 'VAT in the Digital Age'.
Environmental, Social and Governance (ESG)
- US reconciliation bill includes numerous energy incentive tax proposals
As reported previously, the US Senate recently passed the Inflation Reduction Act of 2022 (the bill), which includes incentives for clean, renewable, and traditional energy sources. The bill would reinstate and significantly expand current incentives by providing an estimated $370 billion of new energy-related tax credits over the next 10 years. The legislation also would have a significant impact for companies relying on financing arrangements for energy-related projects, permitting more flexibility with direct-pay and transferable credit options. Read more in this PwC Tax Insights.
Australia
Consultation on Government’s multinational tax proposals
As reported previously, the Australian government has announced a multinational tax integrity package to address the tax avoidance practices of multinational enterprises (MNEs) and improve transparency through better public reporting of MNEs’ tax information. The consultation closes on 2 September. The discussion paper includes: 1) a change in the thin cap safe harbour from a balance sheet based test to an earnings test (in line with OECD 30% EBITDA); 2) introduction of an integrity rule for royalty payments (including 'embedded royalties'); and 3) tax transparency measures. Read more in this PwC tax alert.
Reporting Regime for Online Marketplaces remains on Government agenda
The new Government has reintroduced legislation that will require operators of online marketplaces to report seller identification and payment details to the Australian Taxation Office (ATO). Although the amendments which are now before Parliament are identical to what was introduced into the previous Parliament before they lapsed with the calling of the 2022 Federal election, in a welcome move, the applicable start dates have been extended by a further year. Read more in this PwC tax alert.
Belgium
See here for latest updates.
Canada
Canada seeks input on plans to overhaul general anti-avoidance rule
The Canadian Revenue Authority has released a consultation to provide views and feedback until 30 September on approaches to modernise Canada's General Anti-Avoidance Rule (GAAR).
Canada legislates for 2022 Budget Tax Changes
On 9 August, the Canadian Government released for consultation draft legislation for the implementation of various income tax and other tax measures announced in the 2022 Budget. Views and feedback on the proposed measures are invited until 30 September.
Finance releases draft legislative proposals to implement a luxury tax
Bill C-19, which enacts the Select Luxury Items Tax Act (the Act), recently received royal assent. The Act implements, in large part, the draft legislative proposals that were released on 11 March 2022. Read this PwC Tax Insights for the key differences between the Act and the draft legislative proposals. Purchasers who intend to acquire selected luxury goods after August 2022 should factor the luxury tax into their purchase price and be aware of the potential requirement to self-assess additional luxury tax. Suppliers of luxury vehicles, aircraft and vessels (and owners purchasing improvements to such items) should prepare to start calculating and remitting the luxury tax, starting in September 2022.
China
BEPS MLI to become effective for China
The BEPS multilateral instrument is to become effective for treaties concluded by China and Hong Kong from 1 September 2022. See https://oe.cd/mli.
Colombia
Colombian government presents tax reform bill
The leader of the left-wing coalition ‘Pacto Histórico,’ Gustavo Petro, took office as the 61st Colombian president on 7 August. Within a day of inauguration, the executive branch presented a new tax reform bill (the tax reform bill), which has the intended goals of making the Colombian tax system more egalitarian, progressive, and efficient. The government hopes to meet these goals through provisions focused on taxing high-net-worth taxpayers, preventing tax evasion and avoidance, and promoting the improvement of the public health system and the environment. Read more in this PwC Tax Insights.
Germany
Observations on Germany’s draft bill on application of the exit tax rules
The German Federal Ministry of Finance recently published on its website the draft bill of a new Ordinance on the application of the arm's-length principle pursuant to Sec. 1 (1) of the German Foreign Tax Act in cases of cross-border transfer of functions (FVerlV 2022 - E). The new rules would be applicable for the first time for assessment periods beginning after 31 December 2021, and would replace the current FVerlV. Public comments were invited until 22 July and an updated draft bill is expected to be published in the autumn of 2022. Read more in this PwC Tax Insights.
Guernsey
UK-Guernsey double tax treaty - supporting documents published
HMRC has added the 'UK-Guernsey memorandum of understanding on arbitration under Article 25 of the Agreement' (MOU) and '2021 UK-Guernsey exchange of letters' to their website (and also listed '1952 Guernsey-UK Double Taxation Agreement as amended by the 2016 Protocol' and '2016 Guernsey-UK Protocol' and the '2015 Guernsey-UK Protocol' as terminated). The MOU was signed by representatives of both the UK and Guernsey on 16 June 2022, but has not yet entered into force. The exchange of letters entered into force on 1 January 2022. See this HMRC page.
Hong Kong
BEPS MLI to become effective for China and Hong Kong
The BEPS multilateral instrument is to become effective for treaties concluded by China and Hong Kong from 1 September 2022. See https://oe.cd/mli.
Ireland
Budget 2023 Tax Strategy Group papers
Ahead of the 2023 budget, the Tax Strategy Group recently published several papers examining different parts of Ireland’s tax system, including income tax and corporation tax.
Korea
MOEF announces the Korean Tax Reform Proposals for 2022
The Ministry of Economy and Finance (MOEF) recently announced the government’s bill to amend a series of tax laws including the corporation tax law (‘the Reform Bill’). The Reform Bill includes measures aimed at enhancing corporate competitiveness, expanding tax support to facilitate corporate investment and job creation, revitalising capital markets, expanding tax revenue sources to enhance public finance sustainability and easing the tax burden of low and middle-income families. Read more in this PwC news alert.
Malaysia
Doing Business in Malaysia 2022
This Guide has been prepared to assist those interested in doing business in Malaysia. The coverage of the subjects is not exhaustive, but is intended to deal with some of the more important and/or broad questions that may arise. The material contained in this Guide is based on legislation as at 30 June 2022, unless otherwise indicated.
Middle East
Egypt: reintroduction of Amnesty Law
Following the positive impact of introducing several tax incentives and facilities to taxpayers in Egypt over the past few years, the Egyptian government has decided to reintroduce the Amnesty Law to encourage taxpayers to settle their outstanding tax liabilities. Read more in this PwC tax alert.
Qatar: Tenders Law Amendments
The amendments, issued via Cabinet Decision no. 11 of 2022, focus primarily on three key areas: (i) supporting local small- and medium-sized entities (SMEs); (ii) enhancing governance and procurement processes; and (iii) incentivizing companies to generate in-country value ("ICV") and support the local economy. Read more in this PwC tax alert.
Saudi Arabia: Zakat rules for investment funds
As part of the Kingdom’s 2030 vision in providing a safe and stable investment environment, the Zakat, Tax and Customs Authority (ZATCA) introduced Zakat rules for investments funds, on 4 August, in the form of a public consultation paper. The purpose of the introduced rules is to clarify the zakat calculation mechanism and provisions for the Capital Market Authority (CMA) approved investment funds and their investors. Read more in this PwC tax alert.
Netherlands
Winds of change: New Dutch transfer pricing and PE rules that can impact your business
This TP Talks episode discusses two decrees recently published by the Dutch tax authorities related to transfer pricing and the attribution of profits to permanent establishments, exploring what’s in the decrees, the potential impact for companies, and what actions taxpayers should take.
Poland
Significant increase of real estate tax rates for 2023
On 1 August, an announcement of the Minister of Finance was published specifying the amount of maximum rates of local taxes and fees, including real estate tax, for 2023. The increase in rates for land related to business activity is 12.62%, and for buildings related to business activities the maximum rate increased by 11.81%. The maximum rate for the taxation of buildings remains unchanged at 2%. This means that the tax liability of real estate tax may increase by approx 12% compared to 2022. Read more in this PwC news item.
Senegal
BEPS MLI to become effective for Senegal
The BEPS multilateral instrument is to become effective for treaties concluded by Senegal from 1 September 2022. See https://oe.cd/mli.
South Africa
Limitation of set-off of assessed losses for companies
A significant change to the set-off of assessed losses against the taxable income of a company is imminent. Corporate taxpayers who have not yet considered the potential implications of this on upcoming provisional tax payments have less than two months left to do so. Read more in this PwC tax alert.
PwC Synopsis - July 2022
This edition includes: 1) The ordering of section 23M and section 31; 2) Taxpayer M v CSARS: Application for default judgment - “slight” noncompliance with judicial timelines and closing the doors to justice; and 3) SARS watch.
Switzerland
For the latest updates on current topics, see this PwC Switzerland Insights page.
Switzerland seeks input on temporary Pillar 2 regulation
On 17 August, Switzerland announced the publication of draft GloBE rules (currently not in English) for public consultation. The measure proposed is a temporary regulation that would implement pillar 2 (a global minimum tax) of the OECD-brokered international tax deal until the Swiss Parliament publishes a referendum next year.
US
Budget reconciliation bill - Inflation Reduction Act
- Congress clears “Inflation Reduction Act” reconciliation bill for White House action
Congress has given final approval to the “Inflation Reduction Act” reconciliation bill, clearing the legislation to be signed by President Joe Biden. The House on 12 August voted 220 to 207 to approve without change a broad package of tax, energy, and healthcare provisions. White House officials have indicated that the President will sign the legislation in the coming days. Read more in this PwC Tax Insights. - Corporate book minimum tax to be effective for 2023
The recently enacted Inflation Reduction Act imposes a corporate alternative minimum tax (AMT) based on financial statement income (book minimum tax, or BMT). The BMT is effective for tax years beginning after 31 December 2022. Read more in this PwC Tax Insights. - Reconciliation bill includes numerous energy incentive tax proposals
As reported previously, the US Senate passed the Inflation Reduction Act of 2022 (the bill), which included incentives for clean, renewable, and traditional energy sources. The bill would reinstate and significantly expand current incentives by providing an estimated $370 billion of new energy-related tax credits over the next 10 years. The legislation also would have a significant impact for companies relying on financing arrangements for energy-related projects, permitting more flexibility with direct-pay and transferable credit options. Read more in this PwC Tax Insights. - Considerations for private equity firms
Key tax and energy provisions of the IRA may affect the private equity sector. Read more in tis PwC Tax Insights. - Tax Readiness: Overview of the Inflation Reduction Act
How will the tax provisions in the Inflation Reduction Act impact organisations? Join our panel of specialists on Thursday 25 August at 8pm as they discuss the bill's tax incentives, 15% book minimum tax (BMT), and 1% stock buyback excise tax. Register here.
California legislature passes unclaimed property voluntary compliance programme
The California legislature passed a bill on 17 August authorising the Controller to establish a voluntary compliance programme (VCP) for eligible unclaimed property holders. The proposal directs the Comptroller to waive the 12% interest imposition if a holder participates in the programme and completes all the VCP requirements. The bill will be sent to Governor Gavin Newsom (D) for his consideration. Read more in this PwC Tax Insights.
Policy on Demand series
- Tax provisions in - and out - of reconciliation bill
In this episode from 8 August, Todd Metcalf shares his insights on the reconciliation bill passed by the Senate and considered by the House on 12 August. He discusses the tax provisions included in the bill and focus areas for companies. - Week in Review
- In this episode from 19 August, Chairman Dave Camp shares his insights on the Inflation Reduction Act signed into law this week. He advised companies to focus on the upcoming regulatory process that will interpret key provisions of the legislation.
- In this episode from 12 August, Pam Olson shares her insights on passage of the Inflation Reduction Act and the unintended consequences of the book minimum tax provision. She also addresses the question that she received most this week: What is the book minimum tax, how does it work, and who does it apply to?
Cross-border tax talks
- The Inflation Reduction Act and Book Minimum Tax: Not a Pillar Two Podcast
In this episode from 17 August, Doug McHoney (PwC's Global International Tax Services Leader) is joined by Aaron Junge (International Tax Partner in PwC’s Washington’s National Tax Services and previously Tax Counsel in the House Ways and Means Committee during the Tax Cuts and Jobs Act implementation). Doug and Aaron discuss the corporate alternative minimum tax (also called the ‘Book Minimum Tax’) and other Inflation Reduction Act tax provisions, which President Biden signed into law on August 16. - Risk modelling: Quantitative insights for business intelligence
In this episode from 10 August, Doug McHoney (PwC Global International Tax Services Leader) is joined by Richard de Haan (PwC Global and US Risk Modelling Services Leader). Doug and Rich discuss climate risk modelling, the climate for risk in the C-Suite, how ESG is impacting business decisions, data sources (including geospatial data) for modelling, dealing with risk in the supply chain,the impact of AI and machine learning, and how visualisations help tell the story.
Tax Readiness webcast series:
- How does current law interact with Pillar Two?
In this webcast held on Thursday 18 August, our specialists discussed the significant interplay between current US tax law and Pillar Two. Watch the replay where our panel talk about the latest developments, and how, for example, Pillar Two will interact with GILTI and the foreign tax credit. - Overview of the Inflation Reduction Act
How will the tax provisions in the Inflation Reduction Act impact organisations? Join our panel of specialists on Thursday 25 August at 8pm as they discuss the bill's tax incentives, 15% book minimum tax (BMT), and 1% stock buyback excise tax. Register here. - Sourcing and Supply Chain Disruption
In this webcast taking place on Wednesday 31 August at 8pm, our specialists will discuss global sourcing of products and services being influenced by external market factors and how companies can take a solution oriented approach through cost proofing, simplification, and digital transformation. Register here. - Unlock value through global indirect and US state tax reporting
Watch the replay from this webcast held on 27 July where our specialists discuss how companies are dealing with more sources of data in real-time at a granular level and the operational and compliance challenges for both direct and indirect tax departments. It focussed on state and local income tax, sales and use tax, and global VAT compliance strategies and benefits. - Emerging trends in the Metaverse
The Metaverse is profoundly changing how businesses and consumers interact with products, services and each other. Watch the replay from Thursday 21 July as we discussed how companies can begin to operate in this new three-dimensional digital world they need to understand and manage the tax consequences.
You can sign up for Tax Alerts issued by the US to be emailed to you. Subscribe using the link on this page and a back catalogue of previous webcasts and other resources are available on our US tax reform hub here.