Two weeks to 19 July 2024
Welcome to the latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
UK
Pillar Two
- Preparing for Pillar Two - HMRC issues new information for taxpayers
HMRC is sending out letters to taxpayers who they consider to be in scope of the new Multinational Top-up (MTT) and Domestic Top-up (DTT) taxes, taxpayers who have asked to be on HMRC’s mailing list, and interested agents. This is the latest of their educational communications on the UK adoption of Pillar Two and sets out how HMRC is preparing to administer these new taxes and what groups can expect in the coming months. This CIOT item shares the letters from HMRC.
HMRC also published a new Pillar Two webpage on 11 July, which has links to a variety of Pillar Two resources and gives new guidance on how to prepare for compliance. It includes information on HMRC’s proposed reporting process (including registration and self assessment return) and proposed online services to enable businesses to meet their MTT and DTT obligations.
- OECD’s latest Pillar Two Administrative Guidance
- Glimpses of clarity
In this podcast episode from 17 July, Doug McHoney (PwC’s International Tax Services Global Leader) is joined by Phil Ramstetter, International Tax Partner and former Tax Policy Consultant at Business at OECD (BIAC). Doug and Phil discuss the OECD’s Administrative Guidance released in June 2024, including the deferred tax liability (DTL) recapture rule or five-year rule, the allocation of cross-border taxes, deferred tax accounting, transactions within the GloBE rules, entity classification and treatment, and the expectation of more OECD administrative guidance in the second half of 2024. - How Pillar Two and the EU FSR impact multinational entities
The 16 July episode of our Tax Readiness series (a 90-minute webcast) covered the latest Pillar Two Administrative Guidance, which includes the application of the recapture rule to deferred tax liabilities, cross-border allocation of current and deferred taxes, allocation of profits and taxes in certain structures involving flow-through entities, and the treatment of securitization vehicles. The webcast also covered the EU Foreign Subsidies Regulation (FSR). Watch the replay here.
King’s Speech
The King delivered the Labour government's first King's Speech in the House of Lords on 17 July. The text of the speech is available here, along with the briefing notes on the announcements made.
UK Economic Outlook - July 2024
The new Labour Government has placed economic growth at the heart of their plans for the next five years. In the latest edition of PwC’s UK Economic Outlook, we explore how viable the ambition to achieve the ‘highest sustained growth in the G7’ is.
Webcast: Employment measures under the new Labour Government
PwC hosted a live webcast on 19 July to cover the new employment measures included in the King’s Speech on 17 July. We discussed the announcements in the King's Speech as well as a summary of the key proposals. Register here to view the recording.
Case law
- Centrica - Supreme Court confirms transaction related costs are generally not tax deductible
The Supreme Court released its decision in Centrica Overseas Holdings Ltd v R&C Commrs on 16 July. The appellant in the case (COHL) is an investment holding company in the Centrica Plc group with the principal activity of holding capital investments for the purpose of long-term investment from which it derives value; significantly, its business is to manage its capital assets, not to trade with them. The appeal concerned whether professional advisory fees incurred by COHL, which are accepted to have been expenses of management, were revenue expenditure and therefore deductible, or capital in nature and therefore not deductible. The SC unanimously dismissed COHL’s appeal, holding that the disputed expenditure was capital in nature, and therefore not deductible under section 1219(3)(a) of the 2009 Act. - Capital or revenue: tax treatment of distributions - UT decision in Alexander Beard v HMRC [2024]
PwC Legal’s Peter Johnson has analysed the Upper Tribunal’s decision in Alexander Beard v HMRC [2024], in an article for TaxAdviser magazine published on 21 June. As previously reported, in this case the UT considered whether payments made by an overseas company out of its share premium account constituted ‘dividends not of a capital nature’ for UK tax purposes and were therefore chargeable to income tax in the UK. The UT dismissed the taxpayer’s appeal, broadly affirming the earlier decision of the FTT and the principles established by the UT in the First Nationwide case.
Directors/Persons of Significant Control (PSC) of UK companies
Companies House has recently published a draft document on increased verification requirements (eg for setting up UK companies). This requires proof of identity, with a limited list of documents. This relates to a draft statutory instrument which (per the explanatory notes) is intended to deter fraudulent activity, improve the reliability of the register (ie Companies House), and provide the registrar with a much greater source of intelligence that can also be shared with relevant authorities. For UK Directors this should be straightforward (eg a biometric passport). On the face of it (noting this is a draft and details may follow) this suggests non-UK directors of UK companies may need to get their documents verified at a post office/similar (unless Corporate Service Providers are authorised to do so).
The ICAEW has flagged that HMRC are writing to people listed as PSCs on Companies House. (A PSC in this context generally means someone who owns or controls a company, or otherwise exercises significant influence/control, eg here per HMRC). One letter is sent where the PSC has not filed a UK self-assessment tax return. The other is where the PSC has made a self-assessment tax return, and invites the individual to consider whether the return is complete and correct (while making clear it is not a formal compliance check).
HMRC Manual & guidance updates
- International Manual - updated 10 July
- INTM330750: Double Taxation applications and claims: time limit: Notice of intention to claim. Last paragraph updated to reflect MAP request to mailbox.
Treaty updates
- Double Taxation Treaty Passport Scheme register
HMRC has updated the register of overseas corporate lenders who are passport holders for Double Taxation Relief on UK loan interest. The register has been updated as of 16 July with 181 additions, 24 amendments and 177 removals.
EU
Tax Readiness: How Pillar Two and the EU FSR impact multinational entities
Entities operating cross border and in the European Union will be very interested in our discussion of both Pillar Two and the EU Foreign Subsidies Regulation (FSR). In this 90-minute webcast which took place on 16 July, we covered FSR and the latest Pillar Two Administrative Guidance, which includes the application of the recapture rule to deferred tax liabilities, cross-border allocation of current and deferred taxes, allocation of profits and taxes in certain structures involving flow-through entities, and the treatment of securitization vehicles. Watch the replay here.
AG says Polish tax exemptions are not discriminatory
In a recent opinion in F S.A. v. Poland, C-18/23, Advocate General Juliane Kokott told the Court of Justice of the European Union that Poland not allowing foreign internally managed investments funds to claim certain corporate tax exemptions is not a discriminatory practice because it does not hinge on whether the fund is established or registered in Poland.
European Parliament
- Parliament re-elects Ursula von der Leyen as Commission President
With 401 votes in favour, the European Parliament elected Ursula von der Leyen as President of the European Commission in a secret ballot on 18 July. This will be Ursula von der Leyen’s second term as Commission President. The Commission President-elect will now send official letters to member state heads of state or government inviting them to put forward their candidates for European Commissioner posts. Read more in this EP press release. - Roberta Metsola re-elected as President of the European Parliament
MEPs have re-elected Roberta Metsola (EPP, MT) as President of the European Parliament until 2027, winning the election in the first round of voting, where she received an absolute majority of 562 votes cast out of 699 by secret paper ballot, among two candidates. She will continue to lead Parliament for the first two and a half years of the 10th legislative term. Read more in this EP press release. - Members of Parliament’s committees and subcommittees
The members who will sit on each of Parliament’s committees and subcommittees in the tenth legislature were announced in plenary on 19 July. Following a decision by plenary on 17 July, the structure and size of Parliament’s standing committees and subcommittees, the political groups and the non-attached members appointed the MEPs assigned to each of them. Read more in this EP press release.
CFE Tax Advisers Europe
- EU Tax Policy News Top 5
The latest round-up of EU Tax Policy news from the Confédération Fiscale Européenne (CFE). The latest edition from 8 July includes: 1) Hungarian Presidency of the Council of the EU: Taxation Priorities; 2) EU Commission 2024 Annual Report on Taxation; 3) GTAP Statement on the Recent Developments in International Tax Policy; 4) Corporate Tax Statistics 2024; and 5) EU Parliament’s Subcommittee on Tax Matters: Constitutive Meeting on 23 July. Visit their latest news page here. - Opinion Statement PAC 1|2024 on Evaluation of the Directive on Administrative Cooperation in the Field of Taxation
CFE Tax Advisers Europe has published an Opinion Statement concerning the EU Commission evaluation of the Directive on Administrative Cooperation in the field of taxation in The European Union Union (“DAC” – Directive 2011/16/EU). CFE’s comments focus on DAC6, the iteration of the Directive that introduces mandatory disclosure rules in the European Union. Read more in this news item.
OECD
Pillar One and Pillar Two
- OECD’s latest Pillar Two Administrative Guidance
- Pillar Two Admin Guidance: Glimpses of clarity
As noted above, in this podcast episode from 17 July, Doug McHoney (PwC’s International Tax Services Global Leader) is joined by Phil Ramstetter, International Tax Partner and former Tax Policy Consultant at Business at OECD (BIAC) to discuss the OECD’s Administrative Guidance released in June 2024. - Tax Readiness: How Pillar Two and the EU FSR impact multinational entities
As noted above, the 16 July episode in our Tax Readiness series, was a 90-minute webcast covering the latest Pillar Two Administrative Guidance and EU Foreign Subsidies Regulation (FSR). Watch the replay here.
- OECD consultation on GloBE Information Return XML Schema
On 10 July, the OECD secretariat published a consultation document containing a draft User Guide and GloBE Information Return (GIR) XML Schema (145 pages). The GIR User Guide is divided into sections based on the underlying GIR XML schema, and provides information on specific data elements and any “attributes” that describe each data element. The GIR XML Schema is designed to facilitate electronic domestic information return filings, and to be the technical format for exchanging information return data between relevant tax authorities. The consultation document notes that exchange of GIR information will occur under a yet-to-be-agreed Multilateral (or other “Qualifying”) Competent Authority Agreement. Comments are due by 19 August.
Blueprint for global minimum wealth tax on ultra-high net worth individuals
The EU Tax Observatory published a report on 25 June that was authored by the French economist Gabriel Zucman, as commissioned by the Brazilian presidency of the G20. The report provides a blueprint for a coordinated minimum tax on ultra-high net worth individuals (UHNWI) equal to 2% of their wealth. The report estimates that the tax could raise up to USD 250 billion annually if levied on billionaires, or up to USD 380 billion annually if levied on centimillionaires. Read more in this Tax Policy Alert.
New OECD data highlight stabilisation in statutory corporate tax rates worldwide
Statutory corporate tax rates are stabilising worldwide after a lengthy period of falling rates, according to new OECD data released recently. The 2024 edition of OECD Corporate Tax Statistics shows that average statutory corporate income tax (CIT) rates have remained steady at 21.1% over the past three years. This follows a two-decade period that saw average statutory CIT rates decline from 28% in 2000 to 21.1% in 2021. Read more in this OECD press release.
OECD International Compliance Assurance Programme (ICAP) documentation requirements
The ICAP documentation package includes two parts: the Selection Documentation Package, which is provided at the time of applying to ICAP, and the Main Documentation Package, which is provided before the risk assessment commences. The OECD recently published the templates for the Selection Documentation Package, containing forms for group information and relevant advance pricing agreements and tax rulings, a spreadsheet for listing covered transactions, and a submission checklist.
OECD invites Thailand to start the accession discussion
On 17 June 2024, the Council of the OECD invited Thailand to start accession discussions, making Thailand an OECD candidate country. See this press release.
MLI
Latest updates, the text of the BEPS Convention, the explanatory statement, background information, database, and positions of each signatory and parties are available at https://oe.cd/mli
United Nations
EU position paper on the UN Tax Convention
EU finance ministers approved a position paper during an ECOFIN meeting on 16 July, concerning the upcoming second substantive session (July 29-August 16) of the ad hoc committee to draft terms of reference (ToR) for a UN Framework Convention on international tax cooperation (UN Tax Convention). The position paper expresses several concerns regarding the “zero draft” ToR, including the need for greater clarity on procedural aspects for the negotiations, consensus-based decision making, and avoiding duplication of work on existing international tax initiatives.
Other territories
International
Digital tax byte
The latest edition in our series of brief insights into the workings of the UK and supranational bodies reviewing the taxation of digitalisation of business. In this edition, from 18 July, we cover:
- Kenya High Court affirms WHT not due on management and professional fees under Kenya-France double tax treaty;
- East African Community members seek more revenues from digital services;
- Canada's enactment of its digital services tax (DST) and subsequent Order to bring it into effect;
- India and US extend Unilateral Measures Compromise.
Environmental, Social and Governance (ESG)
- Tech-powered sustainability - Three ways data can drive climate action
Join @PwC UK’s virtual LinkedIn broadcast on 18 September where host Karl Saunt, ESG Partner at PwC UK, will be joined by guest speakers from Experian, Sage Earth and the Institute of Directors to explore how organisations can use sustainability data to drive better commercial and climate outcomes.
Transfer Pricing Briefing
PwC’s quarterly transfer pricing briefing helps multinational organisations keep up with the continuous flow of relevant tax and transfer pricing developments, providing a summary of Tax Insights and News Alerts published by individual members of the PwC network. Read the latest edition covering 1 April to 30 June 2024.
Africa
East African Community members seek more revenues from digital services
The East African Community (“EAC”) - Burundi, DR Congo, Kenya, Rwanda, Somalia, S Sudan, Uganda and Tanzania - agreed a broad mixture of duty changes published in Gazette Notice No. 18 of 2024 (“the Gazette”), some of which may affect digital services. We're also reminded of the interest in the area of withholding taxes as a means of tackling digital services, with some changes arising in 2024/25 National Budget Statements. Read more in our latest digital tax byte from 18 July.
Australia
Australia sends global minimum tax legislation to parliament
The Australian Treasury has introduced to Parliament three pieces of draft primary legislation for implementing global anti-base-erosion (GLOBE) rules and a domestic minimum top-up tax in line with a multilaterally agreed global tax reform plan. The three bills were presented 4 July to the House of Representatives for first and second readings and were referred to the Senate Economics Legislation Committee the same day. The committee is expected to issue a report on the legislation by 14 August. For more details, visit the Australian Treasury dedicated webpage on Australia’s Pillar Two adoption.
Hybrid mismatch rules - application of certain aspects of the 'liable entity' and 'hybrid payer' definitions
The Australian Taxation Office has issued a new Taxation Determination (TD 2024/4), which sets out the ATO’s view on two separate but related issues. These are, whether: 1) hypothetical income or profits within the tax base of a country can be used to identify a 'liable entity' or entities in the country for the purpose of section 832-325, and 2) a 'non-including country' for the purpose of subsection 832-320(3) of the 'hybrid payer' definition can be a jurisdiction other than the country where the payee of the relevant payment is located or resides.
Payment Times Reporting Amendments
Amendments to the Payment Times Reporting Act 2020 were passed by Parliament in June 2024 which overhaul the Payment Times Reporting Scheme (PTRS). The changes amend the objects of the Act to clarify the purpose of the PTRS, as well as make extensive reforms to the operation of the Act to simplify reporting, reduce regulatory burdens, increase pressure on slow-paying big businesses and reward fast-paying big businesses. Read more in this news release.
Belgium
See here for latest updates.
Upcoming changes to the Belgian transfer pricing documentation forms
Transfer pricing documentation has become an integral part of the compliance obligations of Belgian entities since the financial year 2016. The Belgian administration recently published adjusted transfer pricing documentation forms and guidance, which will come into effect from financial years starting per 1 January 2025. There is no change for upcoming filings. Read more in this PwC alert.
Bermuda
Bermuda tables Corporate Income Tax Agency Act 2024
Bermuda’s Premier and Minister David Burt tabled the Corporate Income Tax Agency Act 2024 in the House of Assembly on 12 July. It aims to establish a CIT agency as a corporate body that administers the country’s new 15% CIT regime, which will start applying 1 January 2025. While Bermuda’s CIT legislation is modelled on the GloBE rules, Bermuda is not enacting the GloBE rules. The announcement notes that the government of Bermuda “remains committed to working with all stakeholders to ensure that Bermuda remains an effective and cooperative partner while appropriately addressing global tax matters”. Read more in this press release.
Canada
Canada’s Digital Services Tax Act enters into force
As reported previously Canada’s legislation (included in Bill C-50) implementing the Digital Services Tax Act (DSTA), received royal assent on 20 June 2024. Later, on 3 July 2024, an order of the Governor in Council dated 28 June 2024, was made available on the Orders in Council website. The order fixes 28 June 2024 as the date that the DSTA comes into force. Accordingly, the Digital Services Tax will be effective for the 2024 calendar year and will apply retroactively to in-scope revenues earned since 1 January 2022. This further PwC alert has now been published.
Finance releases draft legislation to increase the capital gains inclusion rate
On 10 June 2024, the Department of Finance released a backgrounder that contains additional design details for the federal government’s 2024 budget measure that proposed to increase the capital gains inclusion rate from ½ to ⅔ for capital gains realised after 24 June 2024. Read more in this PwC alert.
Costa Rica
Switzerland and Costa Rica seek to restart double tax treaty negotiations
Swiss Federal Councillor Ignazio Cassis met with Costa Rican Foreign Minister Arnoldo André in San José on 15 July. The visit provided an opportunity to relaunch negotiations on the conclusion of a double tax treaty to complement the 2014 free trade agreement between the European Free Trade Association (EFTA) and the states of Central America (Costa Rica and Panama). The countries have sought a treaty since 2013, but previous negotiations did not lead to a signed agreement. This would be the first agreement of its kind between Costa Rica and Switzerland. This press release contains further details.
Germany
Germany announces 2025 Budget
Federal Chancellor Scholz, Federal Minister for Economic Affairs Habeck and Federal Finance Minister Lindner have agreed on a general outline for the 2025 budget, a supplementary budget for 2024 and a growth initiative. The growth initiative is to be adopted by the Federal Cabinet on 17 July, along with the 2025 budget. The draft budget provides for a total of 481 billion euros of expenditure, and EUR 44 billion of net borrowing. Read more in this press release.
Accrual and taxation of unpaid bonus for shareholding managing director
A management bonus for the majority shareholder and managing director of a limited liability company (GmbH) which is not recorded as a liability in the certified annual financial statements is not immediately subject to income tax, even if it is mandatory under generally accepted accounting principles to record a liability to this effect in the (certified) financial accounts. Read more in this PwC blog.
Hong Kong
Hong Kong introduces patent box regime
As reported in our previous edition (see this PwC alert), Hong Kong has implemented tax law amendments to introduce a new patent box tax incentive, which provides concessions for qualifying profits sourced in Hong Kong that are derived from eligible intellectual property created from research and development activities. The changes were included in the Inland Revenue (Amendment) (Tax Concessions for Intellectual Property Income) Ordinance 2024, which became effective from its publication in the Official Gazette on 5 July 2024.
India
US extends unilateral measures compromise with India
As reported previously, on 28 June the US and India released a joint statement announcing the extension of their political compromise set forth in their 24 November 2021 joint statement through 30 June 2024, on the transition from India’s existing Equalization Levy to the “new multilateral solution” (ie Amount A) and to “continuing discussions on this matter through constructive dialogue.” Under the agreement, liability accrued by US companies in scope of Pillar One during the extended ‘interim period’ (1 April 2022 through 30 June 2024) will be creditable against future taxes accrued under Amount A. In exchange, the US will terminate the currently-suspended additional duties on goods of India adopted in the DST Section 301 investigation. Read further comments in our latest digital tax byte from 18 July.
Ireland
Ireland publishes Summer Economic Statement 2024
The Minister for Finance, Jack Chambers T.D., and the Minister for Public Expenditure, NDP Delivery and Reform, Paschal Donohoe T.D., published the Government’s Summer Economic Statement 2024 on 9 July, following agreement at Cabinet. This document sets out the Government’s budgetary strategy and outlines the fiscal parameters within which discussions will take place ahead of Budget 2025. Read more in this press release.
Updated guidance on Research and Development (R&D) Corporation Tax Credit
The Irish Revenue has updated Tax and Duty Manual Part 29-02-03 – Research and Development (R&D) Corporation Tax Credit – to incorporate the changes to the R&D credit introduced by Finance (No.2) Act 2023. Key changes introduced to Part 29 by Finance (No. 2) Act 2023 include: 1) increase in the rate of the R&D credit to 30%; 2) increase in the first instalment threshold from EUR 25,000 to EUR 30,000; and 3) the introduction of a pre-filing notification requirement. See this Revenue eBrief No. 190/24.
Irish Commission: Liechtenstein Foundation not similar in effect to a discretionary trust
The Irish Tax Appeals Commission recently published a determination, striking down a notice of assessment by the Irish Revenue Commissioners for capital acquisitions tax against a Liechtenstein foundation because it determined that the foundation was not ‘similar in effect’ to a discretionary trust.
Italy
Pillar Two update
On 9 July 2024, the decree of the Deputy Minister of Economy and Finance dated 1 July 2024 was published in the Official Gazette. This decree contains procedures for implementing a national minimum tax, implementing the OECD Pillar Two agreement and the EU’s Pillar Two Directive. The accompanying explanatory report (in Italian) spells out specific conditions for the QDMTT to be considered “qualified” as provided in the February 2023 and July 2023 Administrative Guidance so companies can access the safe harbour provision. Key aspects covered include relevant currency conversions and allocation methods, among other items. Read more in this PwC blog.
MIMIT issues guidelines for obtaining technical certification of the tax credit for R&D, Innovation and Design
The Ministry of Enterprises and Made in Italy (MIMIT) recently approved the “Guidelines” for Certification relating to the criteria to be followed for the qualification and validation of investments made (or to be made) for the purposes of their classification within the scope of Research and Development, Technological Innovation, Design and Aesthetic Ideation activities eligible for the tax credit pursuant to art. 1, paragraphs 198-208 of Law no. 160/2019 (for the tax periods 2020 onwards) and within the scope of Research and Development activities pursuant to art. 3 of Legislative Decree no. 145/2013 (for the tax periods 2015-2019). Read more in this PwC blog.
Kenya
Kenya High Court affirms WHT not due on management and professional fees under Kenya-France double tax treaty
The Kenya High Court recently issued a judgement in the case of Commissioner of Domestic Taxes vs Total Kenya Limited, E044 of 2021, which addressed whether management/professional fees paid by Total Kenya to its French resident holding company should be subject to withholding tax in Kenya. The Tax Appeals Tribunal (TAT) had previously ruled that no withholding was applicable on these payments, a decision that was upheld by the High Court on appeal. Read more in this PwC alert and our latest digital tax byte from 18 July.
Korean Tax Update - July 2024
Among the items included in this edition are: 1) Government announces economic strategy for the second half of 2024 and dynamic economy roadmap; 2) additional tax incentives proposed with the designation of special opportunity development zones in 20 areas across eight cities and provinces; and 3) tax treatment of profits distributed by individual shareholders to their related parties through unfair capital transactions.
Liechtenstein
Irish Commission: Liechtenstein Foundation not similar in effect to a discretionary trust
The Irish Tax Appeals Commission recently published a determination, striking down a notice of assessment by the Irish Revenue Commissioners for capital acquisitions tax against a Liechtenstein foundation because it determined that the foundation was not ‘similar in effect’ to a discretionary trust.
Middle East
Saudi Arabia: Tax amnesty extension until 31 December 2024
The Zakat, Tax and Customs Authority (ZATCA) has extended the fines and financial penalties waiver initiative and made this available for taxpayers who wish to submit a voluntary disclosure through their returns and pay the taxes due. The types of taxes included in this initiative are Excise Tax, Value Added Tax, Real Estate Transaction Tax, Withholding Tax and Corporate Income tax. The initiative has been extended for an additional 6 months period, starting from 1 July 2024 until 31 December 2024. Read more in this PwC alert.
New Zealand
Tax Policy Bulletin - July 2024
Tax Policy Bulletin is a regular round-up of recent tax headline news. In this edition we cover: 1) Budget 2024: tax changes; 2) Summary of recent IR tax publications; 3) Open consultations; and 4) The High Court's recent decision on customs valuation in Country Road.
Nigeria
Highlights of the Deduction at Source (Withholding) Regulations 2024
The Federal Ministry of Finance has recently issued the Deduction at Source (Withholding) Regulations 2024 (“WHT Regulations”), effective 1 July 2024, except for the rules applicable to the gaming sector which are billed to commence on 1 October 2024. In the pre-existing WHT Regulations, there were a number of concerns around different issues such as when to deduct WHT, what type of transactions were exempt from WHT, excessive WHT rates for certain transactions, and other administrative issues. The new WHT Regulations seek to address some of these issues, and this PwC alert highlights the major changes.
Poland
AG says Polish tax exemptions are not discriminatory
In a recent opinion in F S.A. v. Poland, C-18/23, Advocate General Juliane Kokott told the Court of Justice of the European Union that Poland not allowing foreign internally managed investments funds to claim certain corporate tax exemptions is not a discriminatory practice because it does not hinge on whether the fund is established or registered in Poland.
Portugal
Pillar Two update
On 4 July the Portuguese government issued a press release, confirming the country will transpose the EU minimum tax Directive (Directive) into national law. Finance Minister Joaquim Miranda Sarmento noted that the government has approved measures to gradually reduce the corporate tax rate to 15% from 21% by 2 percentage points per year from 2025 to 2027. The EU Commission had previously started infringement proceedings on 25 January against nine countries, including Portugal, for late implementation of the Directive. On 10 July the Portuguese Government launched a public consultation on the draft legislation proposed to achieve this.
Singapore
Singapore issues Transfer Pricing Guidelines 7th Edition
The Inland Revenue of Authority of Singapore (“IRAS”) recently issued revised Transfer Pricing (“TP”) Guidelines (Seventh Edition) (“7th Edition”). Notable changes in the 7th Edition include a step up in TP audit, along with stricter conditions for surcharge remission. There is also added emphasis on commercial rationality and substance of related party (“RP”) transactions, as well as adequacy of TP documentation and contemporaneous supplementary analyses in a TP audit. The MAP process has been tightened to include a more detailed evaluation step before IRAS accepts a MAP application. Read more in this PwC alert.
South Africa
Tax Synopsis - June 2024
The latest edition includes: 1) ‘Notional business’ – A fallacy: The Constitutional Court’s ruling on the Coronation case; 2) Tax transparency – Tip of the iceberg series; and 3) SARS watch.
Draft guide – Income tax benefits in Special Economic Zones
The South African Revenue Service has published a draft guide that provides a general overview of the income tax benefits available to a qualifying company that carries on a trade in a special economic zone, and a discussion on the qualifying criteria under section 12R and section 12S. The closing date for comments is 30 August.
Switzerland
For the latest updates on current topics, see this PwC Switzerland Insights page.
Switzerland and Costa Rica seek to restart double tax treaty negotiations
Swiss Federal Councillor Ignazio Cassis met with Costa Rican Foreign Minister Arnoldo André in San José on 15 July. The visit provided an opportunity to relaunch negotiations on the conclusion of a double tax treaty to complement the 2014 free trade agreement between the European Free Trade Association (EFTA) and the states of Central America (Costa Rica and Panama). The countries have sought a treaty since 2013, but previous negotiations did not lead to a signed agreement. This would be the first agreement of its kind between Costa Rica and Switzerland. This press release contains further details.
Thailand
OECD invites Thailand to start the accession discussion
On 17 June 2024, the Council of the OECD invited Thailand to start accession discussions, making Thailand an OECD candidate country. See this press release.
US
Final regulations address triangular reorganisations and inbound nonrecognition transactions
The Treasury and IRS released final regulations under Section 367(b) providing guidance on the taxation of cross-border triangular reorganisations and related transactions on 17 July. The regulations finalise, without substantive change, proposed regulations published on 6 October 2023. The final regulations are effective 17 July 2024. Read more in this PwC alert.
Policy on Demand
- Chevron’s impact on tax policy uncertain
In this episode from 8 July, Pat Brown and Pam Olson discuss the significance of the repeal of the Chevron doctrine and its uncertain impact on tax policy. - Hill Republicans reviewing energy credits
How will energy tax credits from the Inflation Reduction Act impact the 2025 tax policy debate? In this episode from 15 July, Mark Prater discusses budget and economic factors analysed by tax writers from both parties, and highlights considerations for companies to respond to the uncertainty. - Week in Review
- 12 July - As the Ways and Means Committee continues to advance legislation along party lines, House and Senate tax writers in both parties have shifted their focus to the 2025 tax policy debate. President Biden's decision as to whether to remain the Democratic nominee could affect the presidential race as well as the balance of power on Capitol Hill when Congress considers 2025 tax policy issues. Watch here.
- 19 July - The Republican National Convention was marked by enthusiasm and unanimity, with the party adopting a platform focused on the permanent extension of TCJA tax cuts and certain tax exemptions. Rumours about possible action in the Senate on the House-passed extenders bill have stirred more questions. Companies can consider engaging with Congress members on low corporate tax rates and fair international tax rules, ahead of the August recess. Watch here.
Tax readiness webcast series
- Tax Readiness: How Pillar Two and the EU FSR impact multinational entities
Entities operating cross border and in the European Union will be very interested in our discussion of both Pillar Two and the EU Foreign Subsidies Regulation (FSR). In this 90-minute webcast which took place on 16 July, we covered the latest Pillar Two Administrative Guidance, which includes the application of the recapture rule to deferred tax liabilities, cross-border allocation of current and deferred taxes, allocation of profits and taxes in certain structures involving flow-through entities, and the treatment of securitization vehicles. Watch the replay here. - Tax Readiness: Bringing state income tax opportunities to business transformation
Register here to join this webcast on Thursday 25 July at 7pm, where we will provide valuable insights into the state income tax issues arising from global and domestic business changes. Our PwC specialists will discuss potential action items to consider, including state filing methodology, apportionment, and state tax treatment of foreign income, along with the indirect tax consequences to be taken into account. - Tax Readiness: Q2 financial reporting considerations
On 19 June, our panel of specialists discussed tax accounting considerations and recent tax developments. The webcast included financial reporting considerations relating to intra-period tax allocations, intercompany transactions and valuation allowances, including the potential Pillar Two impacts, as well as other hot topics and commonly asked questions. Watch the replay here.
State and local tax
- Pennsylvania provides NOL limitation relief, amends related party “addback”
Budget-related tax legislation enacted in Pennsylvania on 11 July increases the net operating loss (NOL) deduction limitation (from 40% to 80% of taxable income by 2029), provides an election concerning the related party expense addback “subject to tax” exception, and amends provisions regarding the deduction of goodwill for bank shares tax purposes, among other changes. Read more in this PwC alert. - Tax Readiness: Bringing state income tax opportunities to business transformation
As noted above, our webcast on Thursday 25 July at 7pm will provide valuable insights into the state income tax issues arising from global and domestic business changes. For further information see item above. Register here to join. - US state income tax digest - July 2024
Welcome to the latest edition of US State Income Tax Digest. We highlight significant income and business tax legislation, regulatory adoptions, judicial decisions, and administrative guidance.
Further information
You can sign up for Tax Alerts issued by the US to be emailed to you. Subscribe using the link on this page.
Vietnam
Draft decree released which will amend and supplement existing transfer pricing rules
The Ministry of Finance recently released a draft decree which, when enacted, will amend and supplement parts of the transfer pricing rules contained in Decree 132. At the moment, the draft decree has been released to various government departments and the wider business community for them to provide their comments. We will keep you up to date with any developments. In the meantime, this PwC alert provides a summary of the main points included in the draft decree.