Two weeks to 21 January 2022
Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
UK
OECD Pillar 2 – UK consultation on implementation
Following the publication of detailed Pillar 2 rules by the OECD on 20 December 2021, to ensure that multinational enterprises are subject to a minimum tax rate of 15% from 2023, the UK government published a consultation on 11 January on how those Pillar Two rules will be implemented in the UK. The consultation closes on 4 April 2022.
Roundtable discussion with HMT/HMRC and clients on R&D proposals
On Tax Administration and Maintenance Day (30 November 2021) a detailed paper on proposals to reform the R&D schemes was released. A roundtable discussion recently took place with HMT/HMRC and several high profile UK and global clients. The discussions provided businesses an opportunity to voice their views on the proposed changes as well as hear from HMT on their latest thinking and policy intentions behind the proposals. See this Suite item to read more on how we can support and provide added value to the R&D credits process.
HMRC consultation on Uncertain Tax Treatment guidance
An initial draft of the technical guidance was published in August 2021, explaining how HMRC will interpret and apply the Uncertain Tax Treatment (UTT) legislation and to help businesses comply with the new legislative requirements. Following responses received to the initial draft, HMRC have published a further consultation until 1 February. As the notification requirement is due to come into effect from 1 April 2022, HMRC intend to publish the final version of the UTT technical guidance by 28 February 2022.
CIOT responds to consultation on corporate re-domiciliation
The Chartered Institute of Taxation (CIOT) has responded to the BEIS, HMT and HMRC consultation on the introduction of a corporate re-domiciliation regime to support companies seeking to relocate to the UK. Read their response here.
Talking Tax: Using technology to create value
This edition explores businesses' desire to add value to their organisations through technology as they continue to adapt to changing circumstances and Tax authorities increasingly leverage technology. It also looks at some of the key legislative changes and how businesses can use technology to prepare their people for the future.
EU
EU finance ministers concerned about Pillar 2 adoption timeline
As reported previously, on 22 December the European Commission published its proposal for a Council Directive “on ensuring a global minimum level of taxation for multinational groups in the Union”, aimed at implementing the OECD Pillar Two Model Rules on a 15% minimum effective tax rate in EU Member States. EU finance ministers generally support the quick implementation of a global minimum tax rate proposal, but a minority raised concerns about the tight timetable and separation of the two pillars in the OECD tax deal. The ministers’ comments came during a recent meeting of the Economic and Financial Affairs Council in Brussels.
CFE Tax Advisers Europe – EU Tax Policy News Top 5
The latest edition looks at: 1) EU Tax Policy Report – Semester II – July to December 2021; 2) ECOFIN to Discuss EU Directive on Minimum Tax; 3) CFE Tax Advisers Europe Annual Report; 4) EU Shell Entities Directive; and 5) EU Targets Portion of Carbon Tax Revenues & OECD Pillar 1 To Finance Post-Pandemic Recovery. View previous editions here.
OECD
OECD releases Pillar Two Model Rules - our specialists share their insights
Following the OECD’s publication of detailed Pillar Two rules on 20 December, our specialists have shared their insights into the measures in a number of webcasts:
- Tax Readiness: The OECD's Pillar Two Model Rules on a global minimum tax
Watch the replay from this US webcast on 10 January in which our panel discussed the OECD model rules (including definitions, scope, timeline, tax accounting issues, administration of the rules) as well as touching briefly on the 22 December EU draft Directive on minimum taxes, and the interactions with current US legislative proposals. - Exploring the impacts of the recent Pillar 2 and US Policy announcements
Matt Ryan and Tom Patten joined Jon Richardson and Giorgia Maffini in the latest in our Delivering Tax: Creating value in a changing world client webcast series, where they explored the mechanics of the new Pillar 2 system, its effects on business and the interconnectivities with tax proposals from the Biden administration in the US. Please see this Suite item with a link to the recording.
OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations 2022
The OECD has released the 2022 edition of the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations. The January 2022 edition includes the revised guidance on the application of the transactional profit method and the guidance for tax administrations on the application of the approach to hard-to-value intangibles agreed in 2018, as well as the new transfer pricing guidance on financial transactions approved in 2020. Finally, consistency changes have been made to the rest of the OECD Transfer Pricing Guidelines.
OECD releases updated conclusions on the review of preferential tax regimes
Discover the latest results of the review of preferential tax regimes conducted by the OECD Forum on Harmful Tax Practices. Read more in this OECD press release.
New OECD hub to boost transparency on the tax treatment of foreign aid
The OECD has launched a digital hub designed to improve transparency around the taxation of development aid by presenting approaches taken by participating donor countries to claiming tax exemptions on goods and services funded by official development assistance (ODA). Read more in this OECD news item.
Switzerland and the Global Forum Secretariat assist Tunisia for the implementation of automatic exchange of financial account information
On 21 January 2022, Switzerland, Tunisia and the Global Forum Secretariat launched a pilot project to assist Tunisia in the implementation of the Standard for Automatic Exchange of Financial Account Information in Tax Matters (AEOI) during a high-level virtual meeting. Read more in this OECD news item.
Other territories
International
Taxation of the digital economy
Keep track of the number of international initiatives that are underway to address the tax problems caused by digitalisation of our economy:
- OECD’s Pillars 1 & 2
See our OECD section above. - Digital tax byte
The latest edition from 17 January includes the publication of Nigeria's Finance Act 2021 with its effective 6% Digital Service Tax (DST).and of a Ukrainian Information Notice for VAT on e-services.
Environmental, Social and Governance (ESG)
- ESG Legal event - Environmental and sustainability
Our latest event took place on Tuesday 18 January 2022 and focused on the ‘S’ or ‘Social’ of the ESG agenda. Employees are key stakeholders in an organisation whose stakeholder influence is increasing in the context of significant and fast paced social change. Register here to watch the recording. - A recording of our previous event, which focused on the ‘E’ component of ESG, can be viewed here.
Belgium
See here for latest updates.
Payments to tax havens : new circular letter published
A recently published circular letter provides administrative guidelines for the obligation to report payments to tax havens. The circular letter focuses on three main aspects: 1) the importance of applying the reporting formalities diligently; 2) the consequences if the reporting formalities are not carried out in a complete manner; and 3) the burden of proof, which lies with the taxpayer. Read more in this PwC tax news item.
Belgian Tax authorities publish FAQs on reporting obligations for digital platform operators
The Belgian Tax Authorities recently published Frequently Asked Questions (“FAQs”) clarifying the reporting obligations for digital platform operators. A key takeaway is the upcoming due date for the first filings and their format. See this PwC tax news item.
Germany
Tax privilege for income from business profits over income from surpluses unconstitutional
In a recent decision, the Federal Constitutional Court held that the favorable tax treatment of income from trade or business, self-employment, agriculture, and forestry (so called ‘profit income’) versus taxable income computed on a cash-basis (“surplus income”) to be unconstitutional. This privileged tax treatment of income from profits, which only applied for 2007, is considered by the court as unequal and thus not justified. See this PwC tax blog.
Second protocol to Germany-Ireland double tax treaty takes effect
The second protocol to the 2011 Germany-Ireland double tax treaty, signed on 19 January 2021, took effect for income, corporate, and capital gains tax purposes on 1 January 2022. See this Irish Revenue page.
Guernsey
Guernsey publishes Protocol to Guernsey-Ireland double tax treaty
The text of the protocol to Guernsey’s 2009 double tax treaty with Ireland, signed on 8 December 2021, has been posted online by the Guernsey government here.
India
Central Government notifies e-Advance Rulings Scheme 2022
The Central Government has announced the e-Advance Ruling Scheme, 2022 (Scheme). The Scheme eliminates the requirement that the applicant or their authorised representative be physically present before the Board for Advance Ruling (BAR), although a hearing through video conference is permitted on request by the applicant. Read more in this PwC news alert.
Ireland
Updated guidance on taxation of share regimes
Revenue eBrief No. 241/21 has made a number of updates to the Share Schemes Tax and Duty Manuals.The updates include: 1) the reporting of restricted stock units, which includes temporary filling concessions due to the coronavirus pandemic; 2) the filing guidelines for unapproved share options; 3) payroll obligations for restricted shares; 4) the definition of a qualifying share option; and 5) the share regime reporting.
Updated guidance on film tax relief expenditure
Tax and Duty Manual Part 15-02-04 has been updated to reflect the legislative amendment, introduced in Finance Act 2021, confirming that payments made directly by a qualifying company, in respect of labour only services by an individual for the purposes of a qualifying film, qualify as eligible expenditure.
Second protocol to Germany-Ireland double tax treaty takes effect
The second protocol to the 2011 Germany-Ireland double tax treaty, signed on 19 January 2021, took effect for income, corporate, and capital gains tax purposes on 1 January 2022. See this Irish Revenue page.
Guernsey publishes Protocol to Guernsey-Ireland double tax treaty
As reported above, the text of the protocol to Guernsey’s 2009 double tax treaty with Ireland, signed on 8 December 2021, has been posted online by the Guernsey government here.
Korea
Korean tax update - January 2022
This issue provides a brief summary of selected significant changes contained in the government’s bill to amend the Presidential Decrees of the tax laws (the ‘bill’) as announced recently by the Ministry of Economy and Finance. The government’s bill will be finalized in the cabinet meeting and proclaimed in February 2022. If approved, most of the proposed amendments will take effect from the date the amended rules are proclaimed or from the fiscal year in which the effective date falls, unless otherwise specified.
Malta
US-Malta competent authority agreement targets certain pension planning by US taxpayers
The IRS recently announced that the competent authorities of the United States and Malta entered into a competent authority agreement related to the definition of the term ‘pension fund’ in the US-Malta Treaty.1 The agreement is intended to address certain planning used by some US citizens and residents involving the establishment of pensions under Maltese law. Read more in this PwC Tax Insights.
Switzerland
Implementation of OECD minimum tax rate by constitutional amendment
During its meeting on 12 January 2022, the Federal Council decided to implement the minimum tax rate for certain companies agreed by the OECD and G20 member states by means of a constitutional amendment. Based on that decision, a temporary ordinance should ensure that the minimum tax rate comes into force on 1 January 2024. The law will be enacted subsequently in the ordinary manner. Read more in this press release.
COVID-19 webinar series
See here for upcoming and recorded webinars. For the latest updates on current topics, see this PwC Switzerland Insights page.
Thailand
Extension of due date for filing Country-by-Country report
The Country-by-Country (CbC) report was originally to be submitted, together with the annual corporate income tax return, within 150 days of the financial year-end. A Notification of the Ministry of Finance, dated 23 December 2021, has been issued to grant an extension of the CbC report filing with effect from the accounting period starting on or after 1 January 2021. Read more in this PwC tax update.
Mandatory online filing of Country-by-Country Report
The Revenue Department issued Notification of the Director-General on Income Tax No. 419 (DGN 419) dated 12 January 2022 to mandate that the Country-by-Country Report (CbCR) be submitted to the Revenue Department by way of online filing.This may accomplished using either the taxpayers' account registered with the Revenue Department or the taxpayer's Tax Single Sign On account registered with the Ministry of Finance. Read more in this PwC tax update.
US
Key insights from the 2021 final foreign tax credit regulations
As reported previously, the Treasury and IRS released final regulations at the end of December addressing various aspects of the foreign tax credit (FTC) regime. The 2021 Final Regulations were published in the Federal Register on 4 January 2022, and represent the third set of final regulations that have been issued with respect to the core provisions of the US foreign tax credit regime following the 2017 Tax Cut and Jobs Act. While the 2021 Final Regulations are effective on 7 March 2022, certain provisions are applicable to periods beginning before that date. Key highlights and the various applicability dates are discussed further in this PwC Tax Insights. We also have the following resources on this topic:
- Tax Readiness podcast: Key insights from the 2021 final foreign tax credit regulations
This podcast provides the information highlighted in a recent Tax Insights of the recently released final foreign tax credit (FTC) regulations. - 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.
Capitalization of R&E expenditures and increased interest disallowance are effective for 2022
Unless pending legislation is enacted, a change to Section 174 requiring the capitalization of R&E expenditures is in effect for amounts paid or incurred in tax years beginning after 2021. A potential increase in the Section 163(j) interest deduction disallowance has also gone into effect in 2022. Taxpayers should consider the impact of these changes on their first quarter 2022 financial reporting and estimated tax payments and on cash taxes, R&E credits, Section 861 allocation and apportionment of R&E expenditures, state income taxes, and other tax matters. Read more in this PwC Tax Insights.
Final regulations address final IBOR transition issues
The IRS and Treasury have published final regulations under Sections 860A, 860G, 1001, 1271, 1275, and 7701(1). These regulations provide tax guidance with respect to alterations to debt instruments, derivative contracts, and other contracts that replace interbank offered rates (IBORs) - e.g., London Interbank Offered Rate (LIBOR) - with qualified replacement rates or provide fallback replacement rate provisions. The final regulations generally adopt proposed regulations (REG-118784-18) issued in October 2019, with some modifications in response to public comments received by the Treasury and IRS. The final regulations provide several technical rules that may result in complexities and novel questions in certain cases. Consequently, market participants should evaluate the potential tax impact of the transition from IBOR-based rates on their portfolios and operations under these final regulations. Read more in this PwC Tax Insights.
US-Malta competent authority agreement targets certain pension planning by US taxpayers
As reported above, the IRS recently announced that the competent authorities of the United States and Malta entered into a competent authority agreement related to the definition of the term ‘pension fund’ in the US-Malta Treaty. The agreement is intended to address certain planning used by some US citizens and residents involving the establishment of pensions under Maltese law. Read more in this PwC Tax Insights.
Top tax accounting considerations for 2021
2021 had considerable activity across the global legislative and regulatory landscapes, which has resulted in companies being tasked with understanding the changes from a technical perspective and related financial reporting impacts. Read more in this PwC publication which provides a general overview of the significant financial reporting developments from 2021, as well as helpful reminders and useful links to quickly access additional information.
Massachusetts Appellate Tax Board finds taxpayer qualifies as a manufacturing corporation
The Massachusetts Appellate Tax Board recently determined that Akamai Technologies, Inc., a Software-as-a-Service (SaaS) provider that did not license its software-based solutions, developed standardized, remotely accessed computer software products that it sold to its customers. As a consequence, due to stipulations agreed to by the parties, Akamai should be classified as a manufacturing corporation for local property tax purposes and treated as being substantially engaged in manufacturing for corporate excise purposes. See this PwC Tax Insights.
Pennsylvania Supreme Court rules NOL cap unconstitutional, Due Process remedy results in refund
In a 5-2 decision, the Pennsylvania Supreme Court affirmed the Commonwealth Court’s decision to apply Nextel retroactively, such that the state’s net loss carryover (NLC) $2 million limitation violated the state’s Uniformity Clause regarding the taxpayer’s 2001 tax year. To remedy the violation, the Court struck down the NLC deduction in its entirety for the 2001 tax year. Read more in this PwC Tax Insights.
Subscribe for US tax alerts
You can sign up for Tax Alerts issued by the US to be emailed to you. Subscribe using the link on this page.
Webcasts, blogs & podcasts:
- Tax Readiness podcast: Key insights from the 2021 final foreign tax credit regulations
This podcast provides the information highlighted in a recent Tax Insights of the recently released final foreign tax credit (FTC) regulations.
Replays:
A number of previous webcasts are available for replay in our US tax reform hub here, including:
- Tax Readiness: Impacts of the 2021 final foreign tax credit regulations
Treasury and the 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. - Tax Readiness: Q4 financial reporting considerations
In this webcast from 9 December, we discussed financial reporting impacts of enacted and proposed tax law changes in the US and around the world. We also covered key tax accounting reminders related to the year-end reporting cycle. Register here to watch the replay.
Other updates
For regular updates on this topic, check out our US tax reform hub on The Suite here.