Two weeks to 24 June 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 - latest insights
- Getting ready for Pillar 2
This month’s edition of Talking Tax focuses on the introduction of the OECD Pillar 2 framework. We provide an update on the latest developments relating to the new rules, including the recent announcement by the UK government of its decision to defer the implementation of Pillar 2 to accounting periods beginning on or after 31 December 2023. We consider the impact Pillar 2 might have on deals and tax accounting, and suggest some ways in which being proactive and incorporating technology can help to reduce its impact on your business. - Pillar 2 – the tools and technology that can help you achieve compliance
On 24 June, our panel of speakers provided an update on timings and technical developments, outlined some of the operational impacts that the Pillar 2 rules could have on your organisation, and the steps you can take to manage the initial adoption and embed into business-as-usual. They also discussed the role that technology has to play, and why its importance cannot be underestimated when considering your strategy to achieve compliance with the framework. Register here to view a recording. - What is the impact of Pillar 2 on deals?
Pillar 2 legislation has broad implications across all aspects of tax, including deals tax. How will Pillar 2 affect cross-border deals? How can acquirers identify the most tax-efficient structures for their transactions to ensure they reap the benefits of those deals and minimise any downsides? Read more. - The global minimum tax: what it means for treasurers
In this joint webcast with the Association of Corporate Treasurers held on 22 June, PwC specialists gave an update on the global minimum tax and what it means for treasurers. Register here to watch the recording.
For further insights and resources, visit our new Pillar 2 webpage.
General Court of the EU decision on UK CFC State aid
As reported previously, the General Court of the EU has dismissed the applications of both the UK and ITV made in respect of the European Commission’s UK Controlled Foreign Company State aid decision. The General Court judgment was handed down on 8 June, with both applications being dismissed in their entirety. Read more in this PwC EUDTG alert.
Treaty updates
- UK-Portugal Joint Declaration on Bilateral Cooperation
In a joint declaration on bilateral cooperation signed recently in London, Portuguese Prime Minister António Costa and Boris Johnson agreed to work toward finalising a new income tax treaty. - Double taxation treaty passport scheme register updated
HMRC updated the double taxation treaty passport scheme register on 22 June with 59 additions and seven amendments. See here.
Approved offshore reporting funds
HMRC have updated the list of approved offshore reporting funds to include the latest funds that have entered the Reporting Fund Regime. The list has been updated to include the funds that have entered as at 10 June 2022. View the updated list.
UK launches ambitious trade deal with Gulf nations
The Trade Secretary has launched free trade negotiations between the UK and the Gulf Cooperation Council, made up of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE. See this press release.
Joint Statement on UK-Thailand Joint Economic and Trade Committee
The UK and Thailand have held the first Joint Economic and Trade Committee (JETCO). The JETCO offers a significant new opportunity to improve bilateral trade, including by addressing trade barriers affecting business activity in both countries. See this press release.
EU
EU Finance Ministers fail again to reach political agreement on proposed Pillar Two Directive
EU Finance Ministers met on Friday 17 June to agree a new compromise text covering the introduction of a minimum taxation proposal by the EU Member States. No political agreement to the text has been reached, on the basis that unanimous approval for the proposal was not forthcoming. According to the French Finance Minister (Bruno le Maire) and agreed by Poland (who until Friday remained the only country to oppose the proposal), all conditions were met to reach unanimous support. However, as was widely anticipated in the days before the meeting took place, Hungary declined to approve the compromise text, thereby revoking its previous support for the proposal. Read more in our Tax Policy alert.
CJEU judgment on German withholding tax refund rules
On 16 June 2022, the Court of Justice of the European Union (CJEU) rendered its judgment in the case C-572/20 (ACC Silicones) finding that German requirements for withholding tax refund claimed by non-resident corporate taxpayers with a portfolio shareholding are in breach of EU law. This judgment is of great importance to non-resident corporate taxpayers with a portfolio shareholding in German companies if their withholding tax is higher than the corporate income tax of a comparable German shareholder. Those entities can claim a withholding tax refund in Germany unless the tax treaty ensures that it is fully credited in their state of residence. Read more in this PwC EUDTG alert.
Update 2022: PwC overview of defensive tax measures in EU
PwC has prepared an updated overview of defensive tax measures applicable or proposed by EU Member States. This overview follows the updated version of the EU list of non-cooperative jurisdictions of 24 February 2022, to which these measures are linked. The results of this publication are based on the input that was provided by the members of PwC’s EU Direct Tax Group (EUDTG).
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 20 June includes: 1) Professional Regulation of Tax Advisers in the EU: Commission consultation to be launched in July; 2) EU fails to reach agreement on minimum tax directive; 3) OECD publishes public comments on tax certainty under Pillar One; 4) EU Parliament’s FISC: Study on regulation of intermediaries; and 5) Tax Transparency in Africa 2022: Africa Initiative Progress Report. Visit their latest news page here.
OECD
Pillar Two Model Rules - further insights
- EU Finance Ministers fail again to reach political agreement on proposed Pillar Two Directive
As noted above, EU Finance Ministers met on Friday 17 June to agree a new compromise text covering the introduction of a minimum taxation proposal by the EU Member States. However, Hungary declined to approve the compromise text, thereby revoking its previous support for the proposal. As a result, the required unanimous approval for the proposal was not forthcoming. Read more in our Tax Policy alert.
Pillar One Model Rules
- Public comments received on tax certainty aspects of Amount A under Pillar One
The OECD has published the public comments received following two consultation documents relating to tax certainty: a Tax Certainty Framework for Amount A and Tax Certainty for Issues Related to Amount A under Pillar One.
MLI
- Ireland shows impact of MLI on its double tax treaties with Portugal and Spain
The Irish Government recently released an English-language synthesized text of the country's double tax treaties with Portugal and Spain, as modified by the BEPS multilateral instrument (BEPS MLI). - Impact of the MLI on Thailand's tax treaties
The majority of Thailand's 61 tax treaties will be revised with effect from 1 January 2023 for withholding tax purposes and from the financial year starting on or after 1 January 2023 onward for all other taxes. The changes are a result of Thailand signing the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) on 9 February 2022. The instrument of ratification was deposited on 31 March 2022. Read more in this PwC tax alert.
Republic of the Congo joins international fight against tax evasion
The Republic of the Congo has joined the international fight against tax evasion by becoming the 165th member – and 34th African member – of the Global Forum on Transparency and Exchange of Information for Tax Purposes. The country’s decision to join the Global Forum was made public on the last day of the 11th meeting of the Africa Initiative, which was held in Nairobi, Kenya, from 14 to 16 June 2022. Read more in this OECD item.
COVID-19 accelerated the digital transformation of tax administrations
Tax administrations continued to deliver quality services for taxpayers during the COVID-19 pandemic, including in many cases delivering wider government support measures, while collecting EUR 12.1 trillion in 2020, according to new data from 58 OECD and other advanced and emerging economies. Read more in this OECD item.
Ministers adopt new recommendation on fighting tax crimes
Ministers at this year's Ministerial Council Meeting also approved a Recommendation on the Ten Global Principles for Fighting Tax Crime which sets out the core requirements for jurisdictions to effectively tackle tax crime and other financial crimes.
African countries making good strides on tax transparency
Launched during the 11th meeting of the Africa Initiative, Tax Transparency in Africa 2022 documents the region’s latest progress in tackling tax evasion and other illicit financial flows (IFFs) through transparency and exchange of information (EOI) for tax purposes. See this OECD item.
Other territories
International
International Tax News - May 2022
The latest edition of our global newsletter, published 20 June 2022. Topics covered include: 1) Canada proposes first package of hybrid mismatch rules; 2) Singapore launches tax governance and tax risk management initiatives; 3) Business reason rules for Mexican transactions; 4) EU Commission publishes proposal to implement debt-equity bias reduction allowance (‘DEBRA’).
Digital tax byte
The latest edition from 21 June. Topics include: 1) Pillar 1 overarching consultation imminent?; 2) India issues guidelines on WHT on crypto assets; 3) Nepal to introduce DST; 4) Tanzania to introduce DST and amend VAT on digital services; 5) UK confirms 31 December 2023 start date for Pillar 2; 6) New ESS registration requirements coming to Kenya; 7) A Vibrant State of Change The AsiaPac digital indirect taxation story.
Environmental, Social and Governance (ESG)
- Seven questions energy-company boards need to ask their CEOs
Uncover the seven urgent ESG questions we believe every leader should be considering.
Belgium
See here for latest updates.
China (see also Hong Kong below)
China launches first collaborative TP administration pilot program between Customs and Tax Authorities in Shenzhen
On 18 May, the Shenzhen Customs and the Shenzhen Tax Service, State Taxation Administration (Shenzhen STA) jointly issued a notice introducing a pilot program on cross-department collaboration between the two authorities in transfer pricing administration and services. This offers an important innovation designed to help Shenzhen taxpayers to achieve comprehensive tax certainty. However, some issues remain to be clarified and need to be further explored in the future. Read more in this PwC Tax Insights.
Congo
Republic of the Congo joins international fight against tax evasion as 165th Global Forum member
The Republic of the Congo has joined the international fight against tax evasion by becoming the 165th member – and 34th African member – of the Global Forum on Transparency and Exchange of Information for Tax Purposes. The country’s decision to join the Global Forum was made public on the last day of the 11th meeting of the Africa Initiative, which was held in Nairobi, Kenya, from 14 to 16 June 2022. Read more in this OECD item.
Germany
CJEU judgment on German withholding tax refund rules
On 16 June 2022, the Court of Justice of the European Union (CJEU) rendered its judgment in the case C-572/20 (ACC Silicones), finding that German requirements for withholding tax refund claimed by non-resident corporate taxpayers with a portfolio shareholding are in breach of EU law. This judgment is of great importance to non-resident corporate taxpayers with a portfolio shareholding in German companies if their withholding tax is higher than the corporate income tax of a comparable German shareholder. Those entities can claim a withholding tax refund in Germany, unless the tax treaty ensures that it is fully credited in their state of residence. Read more in this PwC EUDTG news alert and PwC Germany tax blog.
Update: Traffic Light Coalition Agreement
According to reports from usually well-informed sources, the introduction of the "super depreciation" for investments in climate protection and digitization agreed in the coalition agreement and intended to provide targeted investment incentives in 2022 and 2023 is not planned until the currently limited declining-balance depreciation expires. Read more in this PwC blog.
Court rules on application of UK-Germany double tax treaty
In a recent ruling, the Münster Tax Court had to decide on the income tax and treaty law treatment of a severance payment received by the plaintiff as a soldier in the British armed forces. In a decision which considered the meaning of the subject to tax test in Article 23 of the treaty (Elimination of Double Taxation) and of Article 18 (Government Service), the Court ruled that the severance payment was taxable only in the UK. See this PwC tax blog.
Decrees issued on the application of the extended deduction from trading income in TTA
The German Federal Ministry of Finance recently published identical decrees issued by the supreme tax authorities of the Federal States on certain application issues in relation to the extended reduction of trading income pursuant to Section 9 No. 1 Sentences 3 and 4 of the Trade Tax Act (TTA) as amended by the Fund Location Act of 17 June 2021. Read more in this PwC tax blog.
Hong Kong
The IRD's views on various tax issues expressed in the 2021 annual meeting with the HKICPA
The minutes of the 2021 annual meeting between the Inland Revenue Department (IRD) and the Hong Kong Institute of Certified Public Accountants (HKICPA), held on 14 May 2021, were recently released. They summarise the IRD's views on various issues related to profit tax, salaries tax, transfer pricing, double tax treaties and administrative matters expressed during the meeting. This newsflash discusses the IRD’s views or clarifications on selected important Hong Kong profits tax and international tax issues and shares our observations.
The proposed tax concessions for maritime services in Hong Kong
The Inland Revenue (Amendment) (Tax Concessions for Certain Shipping-related Activities) Bill 2022 was gazetted on 2 June 2022, introducing a profit tax exemption or a concessionary profits tax rate of 0% or 8.25% for a qualifying shipping commercial principal carrying out qualifying ship agency, ship management or ship broking activities. The proposed tax regime will foster maritime service businesses in Hong Kong. This news flash highlights the concessionary tax treatments, the qualifying conditions and the anti-abuse rules that need to be observed, together with our observations on the proposed tax regime.
India
CBDT releases updated MAP guidance
India’s Central Board of Direct Taxes (CBDT) issued detailed guidance in August 2020 on the mutual agreement procedure (MAP) and related matters for the benefit of taxpayers, tax practitioners, tax authorities, and competent authorities (CAs) of both India and its double tax treaty partners. Subsequently, stakeholders raised queries on certain related aspects of the MAP, which were not covered by existing guidance, and requested clarity on those issues. The CBDT has therefore recently released updated guidance in relation to MAP (updated MAP guidance). Read more in this PwC Tax Insights.
CBDT issues guidelines for withholding tax under section 194R of the Act on benefit or perquisite
India’s CBDT has recently issued guidelines on the application of s194R Income-tax Act 1961, inserted by Finance Act 2022, which is effective from 1 July 2022. This new provision imposes an obligation on any person providing any benefit or perquisite to a resident arising from their business or exercising of profession, to ensure that tax is withheld at the rate of 10%. The new guidelines set out the applicability of this new obligation to various types of transactions, but some areas of uncertainty remain unaddressed. Read more in this PwC Tax Insights.
Ireland
Investing in Ireland
In this edition of our newsletter on foreign direct investment (FDI) in Ireland, we review the Ireland/US trade and economic relationship and we also detail the Government’s new trade strategy.
Treaty updates
- Ireland shows impact of MLI on its double tax treaty with Portugal
The Irish Government recently released an English-language synthesized text of the country's double tax agreement with Portugal, as modified by the BEPS multilateral instrument (BEPS MLI). - Ireland shows impact of MLI on its double tax treaty with Spain
The Irish Government recently released an English-language synthesized text of the country's double tax treaty with Spain, as modified by the BEPS multilateral instrument (BEPS MLI).
Guidelines updated for Article 9 Correlative Adjustment claims
The Irish Revenue has updated its guidance on Article 9 Correlative Adjustment claims setting out: 1) the basis on which a company can claim a correlative adjustment; 2) that the claim will be reviewed by Revenue; and 3) the options available to the company when the review is completed.
Italy
Review of the main clarifications on tax incentives for businesses recently provided by the Revenue Agency and the Ragioneria Generale dello Stato
The Revenue Agency and Ragioneria Generale dello Stato recently provided several clarifications to facilitate the understanding of the complex regulatory framework and related procedures concerning tax incentives for businesses. This tax blog provides a brief review of the main clarifications.
Korea
Korean Tax Update - June 2022
Topics covered in this issue include: 1) Bills to amend tax laws to implement proposed measures for emergency stabilisation of livelihood; 2) OECD projects Korea’s economic growth at 2.7% in 2022; 3) Custom audits to be suspended temporarily for companies creating jobs, etc; 4) Government announces a draft amendment to the Presidential Decree and the Enforcement Rules of the Customs Act for implementation of FTA; 5) Rulings Update.
Luxembourg
CRS Reporting - regulatory updates
The Luxembourg tax authorities, as part of their consistency checks, are inquiring into Financial Institutions having submitted CRS reports with a certain number of accounts having no TIN or place of birth information. The tax authorities also recently clarified that Alternative Investment Funds indirectly regulated through their AIFM are not eligible for Collective Investment Vehicle of Non-Reporting status. Read more in this PwC alert.
Middle East
UK launches ambitious trade deal with Gulf nations
The Trade Secretary has launched free trade negotiations between the UK and the Gulf Cooperation Council, made up of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE. See this press release.
New Zealand
Remote Working - tax and legal considerations
One of the most significant impacts of Covid-19 on employers globally has been the accelerated need to consider working arrangements. Employees now wish to work more flexibly, and organisations that can offer this are more likely to win the war for talent in a tight labour market. It has been estimated that by 2030, up to half the labour market will be Millenials who favour flexibility over remuneration. As remote working becomes the new normal, in this Tax Tips we consider the issues that can arise for employers if they do not consider the full impact of their employees working remotely, whether domestically, or overseas on a working holiday or for a longer period of time on a more permanent basis.
Norway
EFTA Court rules on the Norwegian interest limitation rules
The EFTA Court has ruled that the combination of the Norwegian interest limitation rules and group contribution rules are in breach of the freedom of establishment. Read more in this PwC EUDTG newsalert.
Portugal
UK-Portugal Joint Declaration on Bilateral Cooperation
In a joint declaration on bilateral cooperation signed recently in London, Portuguese Prime Minister António Costa and Boris Johnson agreed to work toward finalising a new income tax treaty.
Ireland shows impact of MLI on its double tax treaty with Portugal
The Irish Government recently released an English-language synthesized text of the country's double tax agreement with Portugal, as modified by the BEPS multilateral instrument (BEPS MLI).
Singapore
Public Consultation on Proposed Income Tax (Amendment) Bill 2022
Singapore's Ministry of Finance has launched a consultation on proposed legislative amendments to the Income Tax Act. The consultation closes on 6 July 2022.
Spain
Ireland shows impact of MLI on its double tax treaty with Spain
The Irish Government recently released an English-language synthesized text of the country's double tax treaty with Spain, as modified by the BEPS multilateral instrument (BEPS MLI).
Thailand
Joint Statement on UK-Thailand Joint Economic and Trade Committee
As reported above, the UK and Thailand have held the first Joint Economic and Trade Committee (JETCO). The JETCO offers a significant new opportunity to improve bilateral trade, including by addressing trade barriers affecting business activity in both countries. See this press release.
Impact of the MLI on Thailand's tax treaties
The majority of Thailand's 61 tax treaties will be revised with effect from 1 January 2023 for withholding tax purposes and from the financial year starting on or after 1 January 2023 onward for all other taxes. The changes are a result of Thailand signing the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) on 9 February 2022. The instrument of ratification was deposited on 31 March 2022. Read more in this PwC tax alert.
Turkey
Tax Regulations within the scope of Istanbul Finance Centre (IFC) law proposal
Pursuant to the bill submitted to the Presidency of the Turkish Grand National Assembly on 1 June, the purpose of this Law is to increase the financial competitiveness of the Republic of Turkey in the international arena, contribute to the development and deepening of financial markets and products and services, to strengthen integration with international finance and capital markets, and thus to make Istanbul Financial Centre one of the leading global financial centres. Read more in this PwC bulletin.
US
Cross-border tax talks
- 100th Episode Special: The evolution of global structuring
In this episode from 22 June, Doug McHoney (PwC's US International Tax Services Co-Leader) is joined by Mike Urse, current International Tax Partner and former US International Tax Services Leader for the 100th episode of the Cross Border Tax Talks podcast. Doug and Mike discuss the changing world of international taxation, focusing on the current status of holding companies, finance companies, and Intangible property companies. Mike provides insights and analysis from almost 40 years of international tax experience and sheds some light on the future state of play. - In the Clouds: Pillar 2 Operational Readiness
In this episode from 13 June, Doug McHoney (PwC's US International Tax Services Co-Leader) is joined by Dom Megna, Tax Partner and leader of PwC’s US Tax Reporting and Strategy practice. They discuss the latest on Pillar Two developments, GAAP considerations, Enterprise Resource Planning Systems, the Cloud, the future of data collection, and more.
Policy on Demand series
- The economy, interest rates, and the election
In this episode from 17 June, Rohit Kumar and Todd Metcalf shared their insights on recent primary elections and current trends of this election season. They also looked ahead to the significant primary races in August as well as the impact of the economy on Democrats. - Reconciliation update: latest on negotiations, tax items, and timing
In this episode from 13 June, Todd Metcalf discusses the latest on reconciliation negotiations and which tax items could potentially be included in the package. He shares why an agreement needs to be finalised before the August recess and stresses the importance of continued engagement from the business community. - Week in Review
- In this episode from 24 June, Andrew Prior shares his takeaways from this week and discusses why companies should keep an eye on global developments related to Pillars 1 & 2.
- In this episode from 17 June, Chairman Dave Camp shares his takeaways from this week and discusses why companies should continue to monitor reconciliation legislation and OECD negotiations. He also answers the questions that he received most this week: What is the viability and timing of reconciliation legislation?
Tax Readiness: Q2 financial reporting considerations
On Wednesday 22 June, our Tax Accounting Services (TAS) specialists took a deep dive into relevant tax accounting matters and recent tax developments. Register here to view a recording.
IRS issues proposed regulation to limit ‘anti-clawback’ rules
In response to a perceived potential abuse of the ‘anti-clawback’ regulations released in 2019, the IRS recently published Proposed Regulation sec. 20.2010-1(c)(3) which would impose some limits on those anti-clawback regulations. When finalised, the limitation is proposed to apply to estates of descendants dying on or after 27 April 2022. Comments on the proposed regulations are due by 26 July 2022. Read more in this PwC Tax Insights.
Tax Readiness: Unlock value through global indirect and US state tax reporting
Join our specialists on Wednesday 27 July at 7pm as they 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. We will focus on state and local income tax, sales and use tax, and global VAT compliance strategies and benefits. Register here.
Maryland enacts digital products sales tax exclusions
Maryland legislation recently enacted, excludes from taxable “digital products” certain computer software or software as a service (SaaS) purchased or licensed solely for commercial purposes in an enterprise computer system. The legislation also excludes certain digital products in which the purchaser has an intellectual property interest. The legislation, enacted without the signature of Gov. Larry Hogan (D), is effective 1 July 2022. Read more in this PwC Tax Insights.
New Jersey announces transfer pricing initiative with September 15 deadline
The New Jersey Division of Taxation recently announced its Transfer Pricing Initiative. Taxpayers must agree to participate in the initiative by 15 September 2022. Generally, in return for filing New Jersey Corporate Business Tax (CBT) returns that include intercompany transactions, the Division agrees to propose a settlement amount consistent with IRC Section 482 principles and agrees to waive penalties. Read more in this PwC Tax Insights.
Tax Readiness: Breaking through reporting disruption with a more sustainable strategy
The rapidly changing tax and business landscape requires companies to build a more sustainable data and reporting strategy that addresses both global transparency and digitization trends. Join our panel of specialists on Wednesday 29 June at 7pm as they discuss practical steps for adapting to change and preparing for the future. Register here.
Tax Readiness webcast: How ESG is reshaping the Deals landscape
Register here to watch this webcast from 31 May where our specialists discuss the importance of ESG positioning in corporate strategy, buy-side due diligence, sell-side divestiture planning, and credits & incentives.
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.