Two weeks to 19 March 2021
Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
UK
Finance Bill
The latest Finance Bill (strictly Finance (No2) Bill 2020/21) was published on 11 March. It contains legislation which will enact a number of the tax changes set out by the Chancellor in his Budget earlier this month, together with a number of previously announced measures.
- Changes to the anti-hybrid rules
The Finance Bill includes several legislative updates to the anti-hybrid rules following HMRCs recent consultation. This article provides a high level summary of these updates. - Extended loss carry back not as generous as it might appear
Companies with on-going trades have always been able to carry back surplus trading losses incurred in an accounting period to the previous 12 months, to reduce taxable profits of the earlier period and generate a cash tax refund. The 12 month carry back of trading losses has been temporarily extended to a 3 year carry back and for many companies this extended trade loss carry back will generate a welcome and valuable tax refund from HMRC. However, the Finance Bill clauses published on 11 March 2021 to enact this temporary extension are complex and contain limitations which reduce its apparent generosity. Read more. - Computer software may qualify for super-deduction
A recent Parliamentary question to the Treasury asked whether investment in software can qualify for the new 130 per cent super-deduction. See the response here. - Non-UK resident Stamp Duty Land Tax surcharge
Finance (No. 2) Bill 2020/21 incorporates the legislation introducing a 2% SDLT surcharge on non-UK residents purchasing residential property in England and Northern Ireland from 1 April 2021. The Finance Bill makes certain changes from the draft legislation previously published. The additional 2% SDLT will apply to both non-resident individuals and non-natural persons (e.g. companies, trusts, partnerships), and will apply in addition to the existing SDLT rates of up to 15%. Read more. - Tax Day - The government will publish a range of tax-related consultations and calls for evidence on 23 March.
- Budget 2021 - the roadmap for recovery
For a reminder of all the Chancellor’s announcements in his Budget, check out our Budget2021 web page.
Responding to the business impacts of COVID-19
Visit our global crisis centre webpage and our COVID-19 hub on TheSuite to continue to keep up to date with developments on this topic. Of particular relevance to multinational companies operating in the UK, navigate the global tax, legal and economic measures in response to COVID-19 by territory here. In relation to the UK:
Seeking certainty: the latest insight on Advance Pricing Agreements (APA)
In an environment where the common perception is of increased risk of enquiry by both HMRC and overseas tax administrations, demand for early certainty in relation to transfer pricing arrangements continues unabated. Recent discussions with HMRC have confirmed HMRC’s commitment to maintaining an effective APA programme, supporting the UK’s competitiveness and promoting investment. Read more in this PwC article.
PwC response to Making Tax Digital for Corporation Tax consultation
The recent HMRC Consultation into Making Tax Digital for Corporation Tax has now closed to responses. The Consultation focused on HMRC’s desire to implement the making tax digital rules in place for VAT to corporation tax and considers the potential design of those rules. Broadly we are supportive of the moves towards the digitisation of HMRC processes and services however there are a number of practical points we have set out in our response which will hopefully be helpful to HMRC in developing the policies. Read more here.
Tax Accounting Insights series
We’re delighted to invite you to sign up to our Tax Accounting Insights series which will be run approximately quarterly with our tax accounting specialists sharing practical and technical insights on business issues. Please click on the link here to register and watch a recording of our first instalment, a 10min video highlighting the main tax accounting considerations relating to acquisitions and disposals. We recorded the video just before social distancing measures were introduced, but it is a topic which has increased relevance in light of the volume of deals activity as we recover from COVID-19. By viewing the video you will automatically be invited to future Tax Accounting Insights calls which will last for c. 30mins (live and also recorded for convenience).
EU
Taxing the digital economy
- Better cooperation between national authorities on taxation of digital trading recommended
On 10 March, MEPs recommended changes to draft legislation aiming to trace and tax the sales that people make through online platforms more effectively. Highlights include: 1) tax authorities should share information more quickly; 2) sanctions should be introduced for platforms and need to be harmonised; 3) non-EU platforms must register in an EU member state where they have substantial economic activity. Read more in this European Parliament press release. - EU committed to boosting tax take from digital economy
The EU is willing to move ahead with its own proposals on taxing the digital economy if an agreement is not reached at an international level, according to the current EU Council presidency. Joao Leao, the Portuguese Minister of State for Finance, said that EU finance ministers had discussed the taxation of the digital economy at their informal meeting on 16 March 2021. Read more in this Croner-i item and see this European Commission item.
PwC’s overview of defensive tax measures in EU Member States
The EU Member States committed, as of 1 January 2021, to use the EU list of non-cooperative jurisdictions (the EU list) in the application of at least one of four specific legislative measures. PwC has updated this publication of the defensive measures applicable or proposed in each EU Member State, following the publication of the updated version of the EU list on 22 February 2021 . The results of this publication are based on the input that was provided by the members of PwC’s EU Direct Tax Group (“EUDTG”).
CJEU rules that the Hungarian advertisement tax and the Polish tax on the retail sector do not infringe EU State aid rules
The Court of Justice of the European Union has issued its judgments in two cases relating to the Hungarian Advertisement tax (C-596/19 P) and to the Polish retail tax (C-562/19 P) ruling that they do not infringe EU State aid rules. Read more in this PwC EUDTG news alert.
DAC6 information exchange between EU Member States may begin on April 30
Most of the EU Member States that deferred the DAC6 reporting deadlines due to the pandemic postponed them to 28 February 2021. Thus, the extended deadline for reporting cross-border arrangements satisfying at least one of the DAC6 hallmarks and whose first step was implemented on or after 25 June 2018 has passed. Read more.
EU Directive proposals would widen public country-by-country reporting
The EU Member States’ negotiating mandate on public country-by-country reporting (public CbCR) was established under the Portuguese Presidency of the Council on the basis of its compromise draft following the informal Council video conference on 25 February 2021. The mandate also was approved by Member State permanent representatives in the ‘Coreper’ meeting on 3 March 2021. Read more in this PwC Tax Policy bulletin.
CFE Tax Advisers Europe
CFE Tax Top 5 – Round-up of EU Tax Policy News
The latest edition looks at the following: 1) Public consultation on DAC8 EU Exchange of Information on Crypto-Assets & e-Money; 2) EU Parliament recommends DAC7 Digital Platform Reporting Legislation be strengthened; 3) EU Commission launches Taxpayers’ Rights consultation; 4) OECD Secretary-General designate announced; and 5) EESC opinion on EU’s package for Fair & Simple Taxation. View previous editions here.
OECD
Platform for Collaboration on Tax Launches Tax Treaty Negotiations Toolkit
The Platform for Collaboration on Tax (PCT) – a joint initiative of the IMF, OECD, UN and World Bank Group – released the final version of the Toolkit on Tax Treaty Negotiations along with its web-based, interactive edition. The PCT's Toolkit is an effort to provide capacity-building support to developing countries on tax treaty negotiations, building on existing guidance, particularly from the UN Manual for the Negotiation of Bilateral Tax Treaties between Developed and Developing Countries.
Mongolian Tax Administration partners with international organisations and issues first transfer pricing tax assessment for USD 228 million
The recent tax assessment builds upon focussed efforts by the Mongolian Tax Administration and the Ministry of Finance to align the country’s tax rules and practices with international best practices. Having joined the OECD’s BEPS Project and the Global Forum on Transparency and Exchange of Information for Tax Purposes, Mongolia is successfully implementing the BEPS measures by introducing a number of international taxation provisions. Read more in this OECD item.
Other territories
International
Taxation of the digital economy
- Global Digital Tax Online
In a time when information is key and compliance is vital, GlobalDigitalTaxOnline (GDTO) is an essential tool to help navigate the complex world of tax and the reporting of various digital/electronic services. Read more about our new online subscription service. - Digital tax byte
The latest edition from 16 March, includes progress on the US State of Maryland's digital advertising tax, a further postponement of the dates of payment and filing for Italy's DST and announcements by South Africa and Japan that they would consider a DST. - EU
See our EU section above for EU developments relating to the taxation of the digital economy.- Better cooperation between national authorities on taxation of digital trading recommended
- EU committed to boosting tax take from digital economy
Business in focus - 2021 priorities with Amanda Blanc, CEO of Aviva
In a year like no other, understanding what CEO’s see as their biggest challenges and opportunities can provide us all with essential insight. To help us do just that, we’ve launched our 24th annual CEO Survey, which explores the issues that matter to CEOs and how they’re planning for the future. In this episode, host Rowena Missis is joined by Amanda Blanc, the CEO of Aviva, and Kevin Ellis, PwC’s UK Chairman to discuss the most important challenges facing business today.
Belgium
See here for latest updates.
COVID-19 & cross-border employment: agreements with the Netherlands and Luxembourg extended
Given the still uncertain current public health situation, a further extension was recently announced with respect to the agreements concluded between Belgium and the Netherlands / Luxembourg. These are the first two of the COVID-19 mutual agreements between Belgium and its neighbouring countries which are made applicable until 30 June 2021. We anticipate that a similar extension will become applicable with regard to the agreements concluded between Belgium and France / Germany. Read more in this PwC Belgium news item.
China (see also Hong Kong below)
An observation on the fiscal and tax policies in China’s Government Work Report in 2021
The Report on the Work of the Government was recently delivered at the fourth session of the 13th National People’s Congress. The Report reviews China’s economic and social development work in 2020 and the 13th Five Year Plan Period and sets forth the main development targets for the 14th Five Year Plan Period and the major tasks for 2021. This News Flash introduces the key fiscal and tax policies in the Report and shares our observations.
Cyprus
Anti-tax abuse proposals include new withholding taxes and corporate tax residence test
The Cypriot Ministry of Finance has submitted two tax bills to Parliament proposing anti-tax abuse measures in line with recent EU Country-Specific Recommendations for Cyprus and the EU guidelines for defensive tax measures to be adopted by EU Member States towards EU blacklisted jurisdictions. They propose:
- the introduction (or expansion) of withholding tax on payments of passive interest, royalties and dividends to companies in EU blacklist jurisdictions; and
- the introduction of an incorporation test for tax residence for companies that are not tax resident elsewhere in the world.
These measures are proposed to take effect on 1 July 2021, but both bills need follow the legislative process and may therefore change before they enter into force. Read more in this PwC Tax Insights.
Minister of Finance issues a decree extending the deadline for submission of certain direct tax returns
The Minister of Finance recently issued a decree extending the deadline for submission of certain direct tax returns. The deadline for electronic submission of the 2019 corporate tax return has been extended to 30 September 2021 (from 31 March 2021). Read more in this PwC Tax Insights.
Cyprus-Egypt new Double Tax Treaty: effective as from 1 January 2021
As reported above, the new Double Tax Treaty (DTT) between Cyprus and Egypt, which was signed on 8 October 2019 and entered into force on 31 July 2020, is effective as from 1 January 2021 based on a recent Interpretative Directive issued by the Cyprus Tax Authority. The new DTT replaced the existing DTT between Cyprus and Egypt (signed in 1993). Read more in this PwC Tax Insights.
Egypt
Cyprus-Egypt new Double Tax Treaty: effective as from 1 January 2021
As reported above, the new Double Tax Treaty (DTT) between Cyprus and Egypt, which was signed on 8 October 2019 and entered into force on 31 July 2020, is effective as from 1 January 2021 based on a recent interpretative Directive issued by the Cyprus Tax Authority. The new DTT replaced the existing DTT between Cyprus and Egypt (signed in 1993). Read more in this PwC Tax Insights.
Finland
Tax and Legal news - March 2021
The latest tax and legal news from Finland. Read the latest edition.
Germany
When does tax loss arise on shares following the opening of insolvency proceedings
If the shareholder’s right of membership in a domestic stock corporation (AG) lapses because the AG is dissolved, wound up and deleted from the register as a result of insolvency, the shareholder incurs a taxable loss if he does not receive his contribution back in full or in part. If such shares are deleted from the shareholder’s securities account by the custodian bank before the AG is removed from the register, the loss will be considered to arise at the time of the deletion by the custodian bank. However, a loss cannot already be assumed to have arisen at the point when a distribution of assets can no longer be objectively expected as part of the final distribution of the assets of the AG or when the listing of the shares on the stock exchange is discontinued or their listing is revoked. This judgment (VIII R 20/18) was made by the Supreme Tax Court on November 17 2020 and published on 11 March 2021. Read more in this PwC Germany tax blog.
Hong Kong
The proposed relaxation of deduction of foreign taxes for profits tax purposes
The Inland Revenue (Amendment) (Miscellaneous Provisions) Bill 2021 was recently gazetted. The Bill, among other things, seeks to amend the Inland Revenue Ordinance to enhance the deduction of foreign taxes for profits tax purposes as a means for relieving double taxation in Hong Kong. Upon enactment of the Bill, the revised rules on foreign tax deduction will take effect from the year of assessment 2021/22. Read more in this PwC News Flash.
Indonesia
Omnibus implementing Regulation on Taxation
Government Regulation No.9 Year 2021 (GR-9) has been issued as one of the implementing regulations of the Omnibus Law. GR-9 deals with taxation issues under the Omnibus Law and is effective from 2 February This Omnibus Flash focuses on the key changes which provide additional rules.
Ireland
Implementation of Interest Limitation Rules in Ireland
Interest limitation rules, as required by the EU Anti Tax Avoidance Directive, are set to be transposed into Irish law later this year and take effect from 1 January 2022. PwC has submitted a response to the recent Feedback Statement consultation process on the introduction of Interest Limitation Rules. Read more in this PwC Tax Insights.
Navigating the transfer pricing risk and controversy landscape
In recent years, Ireland's Revenue Commissioners have expanded their Transfer Pricing (“TP”) audit and Competent Authority resources in response to the increased profile of TP across its case base. In addition, the volume of data available to tax authorities, coupled with new mechanisms for information sharing between them, has led to an increase in TP disputes globally. In this article, we explore the factors shaping the transfer pricing landscape and each of the phases of the TP risk and controversy lifecycle.
Tax Risk & Controversy webcast series: The transfer pricing landscape
The latest webcast in our Tax Risk and Controversy series focuses on the transfer pricing landscape. What are the key points that companies should consider at each phase of the transfer pricing risk and controversy lifecycle? How can they effectively manage pre-audit dispute prevention, audit management, through to post-audit dispute resolution?
Public consultation on the application of the Authorised OECD Approach to the attribution of profits to branches of non-resident companies
As was indicated in the January 2021 update to Ireland’s Corporation Tax Roadmap, following the substantial modernisation and extension of Ireland’s transfer pricing rules in Finance Act 2019, the next step in this modernisation process is to extend transfer pricing rules to the taxation of branches in Ireland in line with the ‘Authorised OECD Approach’ (AOA). It is intended to bring forward legislation in Finance Bill 2021. The consultation closes on 16 April 2021.
Korea
Korean Tax Update - March 2021
This edition includes: 1) The National Assembly approved Bill to amend the Special Tax Treatment Control Law; 2) Amended Enforcement Rules of Tax Laws have been proclaimed; 3) NTS expands the ‘Advance Verification for R&D Tax Credit’; and 4) Rulings update.
Middle East
Bahrain CbCR requirements
The Kingdom of Bahrain recently published Resolution No. 28 for the year 2021, introducing Country by Country Reporting (CbCR) requirements applicable for reporting years beginning on or after 1 January 2021. Multinational Groups with Bahrain resident ultimate parent entities, which previously filed a CbCR through a surrogate parent entity in a different jurisdiction, will need to undertake CbCR filing in Bahrain from years beginning 1 January 2021. Read more in this PwC Middle East tax news item.
Oman: Incentives announced by the Government as part of Oman Vision 2040
As part of Oman’s Vision 2040 and a plan to diversify the economy away from oil, tax incentives have been approved for companies as part of an economic stimulus plan to enhance growth rates. The measures were approved on 9 March 2021 and are expected to be in force from 10 March 2021. They include a reduction in tax rates and fees for specified sectors, offering long term residency permits for foreign investors, overall Omanisation drive and flexibility to negotiate wage cuts etc. Read more in this PwC Middle East tax news item.
Kingdom of Saudi Arabia: Special Tax Rules for the Special Integrated Logistics Zone
The Special Integrated Logistics Zone (“ILBZ”) is a special economic zone located adjacent to the King Khalid International Airport in Riyadh. The General Authority of Civil Aviation has now issued Special Tax Rules setting out the tax and customs incentives (and the associated conditions) that apply to entities established in the ILBZ to carry out specific activities. They specify that, provided certain conditions can be met, ILBZ entities would be subject to corporate income tax at 0% on the income earned from carrying on their specific activities for up to 50 years. Further, provided certain conditions can be met, ILBZ entities would also be exempt from deducting withholding tax on certain payments relating to the specific activities to non-residents. Read more in this PwC Middle East tax news item.
Netherlands
Consultation on proposed introduction tax liability for 'reverse hybrids' for ATAD2
On 4 March 2021 the Dutch Government presented a consultation document on proposed legislation regarding the tax liability of reverse hybrids for ATAD2. Companies, advisers and other interested parties can respond to the proposal until 2 April 2021. Read more in this PwC Tax news item.
New Zealand
New Zealand Tax Tips: March 2021
This edition of Tax Tips provides a recap of the New Zealand Government's COVID-19 support measures and also discusses the NZ Inland Revenue's new exposure draft on the administration of the imported hybrid mismatch rule, which sets out the steps Inland Revenue expects taxpayers to have undertaken before claiming deductions for cross-border related party payments.
Philippines
Allowing the use of e-signatures on certain BIR Forms/Certificates
Due to the continuing effect of COVID-19 pandemic, the Commissioner of Internal Revenue has issued a Circular to provide policies and guidelines for the use of electronic signatures (e-signatures) on certain Bureau of Internal Revenue (BIR) Forms/Certificates. Read more in this PwC Tax Alert.
Russia
Intra-group services versus shareholder activity
As a follow-up on the topic of intra-group services, the Federal Tax Service has issued a Letter clarifying the definition of shareholder activity as well as cases when expenses incurred by a shareholder may not be included in the cost of services. It describes key approaches to defining shareholder activity and makes several conclusions, provides examples of such activity and gives instructions to territorial tax authorities regarding the key principles to be followed in the course of audits so as to differentiate between two activities – the provision of intragroup services and the performance of shareholder’s functions. Read more in this PwC Russia Tax Flash.
South Africa
Budget 2021
The Minister of Finance, Tito Mboweni, delivered his 2021 Budget speech on 24 February 2021. See our South African Budget page for what it will mean for you and your business.
Switzerland
COVID-19 webinar series
See here for upcoming and recorded webinars. For the latest updates on current topics, see this PwC Switzerland Insights page.
US
Inbounds should engage now on US tax and trade policy
The Biden Administration and Congress are focused on responding to the COVID-19 pandemic and its economic impact, while also preparing to consider significant tax law changes impacting business and individuals. Important changes in trade policy also are likely. Foreign companies and investors will need to engage early with policymakers to educate them about the vital role they play in the US economy and about their unique concerns. Read more in this PwC Tax Insights.
The US FDI landscape in 2021
Following the challenging economic climate of 2020 and the change of presidential administrations in January, 2021 is shaping up as a crucial year for foreign direct investment (FDI) in the United States. There are several key trends and points worth noting.
$1.9 trillion COVID relief legislation cleared for President Biden’s signature
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House clears $1.9 trillion relief legislation for President Biden’s signature
On 10 March, the House voted 220 to 211 to approve the Senate-passed version of H.R. 1319, the American Rescue Plan Act of 2021. House passage of the $1.9 trillion legislative package clears the measure to go to the White House and be signed into law by President Biden. Read more in this PwC Tax Insights. -
US Senate passes COVID relief legislation with changes to House-approved bill
On 6 March, the Senate passed by a vote of 50 to 49 a Senate substitute amendment to the COVID relief legislation that made certain changes to the House-passed budget reconciliation bill (H.R. 1319, the American Rescue Plan Act of 2021). The final vote came after an all-night session in which a number of additional amendments were considered. Read more in this PwC Tax Insights.
Maryland interprets new tax on digital products; provides filing, payment extension
The Maryland Comptroller has issued guidance on the expansion of the state’s sales and use tax to a digital product or code, specifying which items are considered taxable digital products if delivered electronically, explaining exclusions and exemptions from tax, and applying economic nexus and marketplace facilitator rules to digital products. The tax must be collected beginning 14 March 2021. The Comptroller has provided an extension to 15 July 2021 to file and pay tax, and relief from interest and penalties if the tax is paid by that date. The requirement to collect the tax from customers has not been delayed. Read more in this PwC Tax Insights.
Webcasts & podcasts:
- Q1 Financial Reporting Considerations
Join us for this webcast on Wednesday 24 March at 6pm. Register here. - Tap into Tax podcast
This PwC podcast series combines perspectives from our tax technical specialists and our professionals focusing on the evolving tax function for a holistic look at tax. Previous episodes in this series are available here, as well as on Spotify and other streaming services.
- Cross-border tax talks
- Social justice: how the CEO Action for Racial Equity is effectuating change
In this episode, Doug McHoney (PwC's US International Tax Services (ITS) Leader) and Roy Weathers (PwC’s Vice Chair for Societal Engagement and Policy Solutions) discuss Roy’s new role as CEO of CEO ACtion for Racial Equity.
Previous episodes in this fabulous series of podcasts can be found here, as well as on Spotify, YouTube and other streaming services.
Replays:
A number of previous webcasts are available for replay in our US tax reform hub here, including:
- Tax Readiness: International tax planning post-election
Register here to watch the replay from this webcast on Wednesday 17 March 2021. - Tax Readiness: State and Local Tax implications of a remote workforce
Watch the replay from this webcast held on 3 March 2021. - Tax Readiness: Settlements and judgements - Review of Section 162(f)/6050X final regulations
You can watch the replay here of this webcast from 16 February 2021. - 2021 Tax Policy Outlook: The Changing Horizon
Watch the replay from this webcast on 28 January 2021.
Other updates
For regular updates on this topic, check out our US tax reform hub on The Suite here.
Vietnam
Guidance on the validity of certain existing tax circulars, pending the issuance of a new circular guiding the new Tax admin law
While the draft Circular guiding the Law on Tax administration 38/2019/QH14 remains under progress, the Ministry of Finance has released a letter to all local tax departments providing guidance on the validity of certain existing circulars. Read more in this PwC Vietnam NewsBrief.