Two weeks to 24 May 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
- Pillar Two registrations
HMRC has published this notice explaining how to register for Pillar Two top-up taxes in the UK, what needs to be provided, and how to notify HMRC of any reporting related changes. It has also opened the new registration system, which can be accessed here. Groups must register no later than six months after the end of their first accounting period that started on or after 31 December 2023.
Finance (No2) Bill 2024
MPs debated the remaining clauses of the Finance (No. 2) Bill in a Public Bill Committee on 21 May 2024, with the Lords stages on 24 May 2024. The Finance (No. 2) Bill received Royal Assent on 24 May 2024 and became Finance (No. 2) Act 2024.
General Election - Thursday 4 July
A statement from Downing Street has confirmed: “Parliament will be prorogued on Friday 24 May. Dissolution will take place on Thursday 30 May. The General Election will take place on Thursday 4 July. The new Parliament will be summoned to meet on Tuesday 9 July, when the first business will be the election of the Speaker and the swearing-in of members, and the State Opening will be on Wednesday 17 July.”
HMRC Manual & guidance updates
- Capital Gains Manual - updated 13 May
- CG51976: Reorganisations of share capital: apportioning costs at the date of reorganisation - Replacing reference to Interactive Data.
- Double Taxation Relief Manual
- 16 May
DT1821 - Non-residents: UK income: Interest, royalties, pensions. This page has been deleted because later guidance has been published at INTM400010 - Interest and Royalty payments - 23 May
DT1938: Non-residents: UK income: Teachers: Foreign Language Assistants - Removed Austria as requested - DT2754: Double Taxation Relief Manual: Guidance by country: Austria: Notes - Article removed no longer in the treaty
- International Manual
- 17 May
INTM342030 - DT applications and claims - Types of income: Interest - Changing outdated legislation. - 23 May
INTM342030 - DT applications and claims - Types of income: Interest - Removal of obsolete wording. - Investment Funds Manual - updated 14 May
IFM37310 - Foreign Chargeable Gains: Introduction - Whole page updated.
Treaty updates
- UK-Belarus double tax treaty - Belarus unilaterally suspends certain provisions
Belarus suspended certain provisions of many of its double tax treaties by Resolution of the Council of Ministers dated 7 March 2024, including its double tax treaty with the UK. HMRC has stated that the UK-Belarus Convention does not permit this unilateral action and the UK has therefore asked Belarus to reverse its action. In the interim, the UK considers the treaty to remain in force and is continuing to comply with its terms. The government is considering next steps and will provide more information in due course. See HMRC’s full statement here, which includes details of which provisions Belarus considers to be suspended and the dates on which it considers the suspension to tax effect. - Ireland clarifies new residence tie-breaker rule in UK-Ireland double tax treaty
The Irish Revenue has updated its guidance on the application of the new residence tie-breaker introduced into the UK-Ireland double tax treaty by the MLI as it relates to the residence of trusts (other than Unit Trusts) and estates under administration. - UK - Liechtenstein double tax treaty - synthesised text published
HMRC has published a synthesised text of the UK-Liechtenstein double tax treaty, prepared in consultation with the competent authority of Liechtenstein, which represents a shared understanding of the modifications made to the treaty by the MLI. See here. - UK-Peru Joint Declaration - treaty negotiations concluded
HMRC has published a 2024 joint declaration which welcomes the conclusion of negotiations in relation to a new double taxation treaty.
Case law update
FTT considers transactions in securities rules in Hugh Edward Mark Osmond & Anor v HMRC
This case concerned two shareholders who sold their shares back to a company and claimed an exemption from tax under the Enterprise Investment Scheme (EIS). HMRC argued that the transactions were designed to avoid income tax and applied the transactions in securities (TiS) regime to tax the shareholders on the full amount of the consideration. The First Tier Tribunal agreed with HMRC and dismissed the appeals, finding that the main purpose of the transactions was to avoid income tax and that the return of share capital was not a safe harbour from the TiS regime. The tribunal also rejected the arguments that the counteraction notices and assessments were defective or out of time. Read the decision here.
EU
Pillar Two infringement procedures
The European Commission is sending reasoned opinions to Spain, Cyprus, Latvia, Lithuania, Poland and Portugal for failing to notify measures for the transposition into national law of Council Directive (EU) 2022/2523 of 14 December 2022 on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the Union (Pillar Two Directive). See Section 5 of this May infringements package.
EU Finance Ministers agree on FASTER but EU Parliament needs to be reconsulted following changes
On 14 May 2024 the EU Finance Ministers reached agreement on the Faster and Safer Relief of Excess Withholding Taxes (FASTER) Directive. The FASTER compromise proposal seeks to address the problems of double taxation and administrative burden, as well as tax fraud and abuse that can be linked to securities investments, hampering development of the Capital Markets Union (CMU). Although the EU Parliament had already reached consensus approving the proposal, the number of changes made to the proposal in recent months means that the Parliament will need to be consulted again on the updated proposal. Read more in this PwC Tax Policy alert.
Corporate sustainability due diligence: Council gives its final approval
The European Council has formally adopted the corporate sustainability due diligence directive. This is the last step in the decision-making procedure. The directive introduces obligations for large companies regarding adverse impacts of their activities on human rights and environmental protection. It also lays down the liabilities linked to these obligations. The rules concern not only the companies’ operations, but also the activities of their subsidiaries, and those of their business partners along the companies’ chain of activities. Read more in this 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 13 May includes: 1) European Commission Launches DAC Evaluation; 2) CFE – Accountancy Europe Members’ Only Webinar: New EU AML Rules – What Changes For Practitioners? 3) #UseYourVote – European Elections – 6 to 9 June 2024; 4) EU Finance Ministers Seek Compromise on FASTER & ViDA; and 5) CFE Forum 2024 Report. Visit their latest news page here. - Opinion Statement FC 2/2024 Responding to the EU Commission Consultation on Dispute Resolution Mechanisms in the European Union
CFE Tax Advisers Europe has published an Opinion Statement responding to a consultation of the European Commission concerning the operation of the Directive on Tax Dispute Resolution Mechanisms in the European Union.
OECD
Guidance on the Implementation of CbC Reporting
As jurisdictions have moved into the implementation stage, some questions of interpretation have arisen. In the interests of consistent implementation and certainty for both tax administrations and taxpayers, the Inclusive Framework on BEPS has issued guidance to address certain key questions. This guidance is periodically updated. Also available is a compilation of the approaches adopted by jurisdictions, in cases where guidance provides flexibility.
Fiji joins the Inclusive Framework on BEPS and participates in the agreement to address the tax challenges arising from the digitalisation of the economy
Fiji has joined international efforts against tax avoidance by joining the OECD/G20 Inclusive Framework on BEPS, an international collaboration with over 145 member countries and jurisdictions. Through its membership, Fiji has also committed to addressing the tax challenges arising from the digitalisation of the economy by participating in the Two-Pillar Solution to reform the international taxation rules and ensure that multinational enterprises (MNEs) pay a fair share of tax wherever they operate. Read more in this OECD item.
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.
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 20 May, we cover:
- Malta's simplified pricing method for low-value-adding intra-group services;
- Ireland's updated guidance on certain withholding tax (WHT) defensive measures;
- the US State of California's latest attempts to tax digital activities through a "data extraction" tax;
- progress on the EU's VAT in the Digital Age (ViDA) proposals;
- Kenyan proposal to replace DST with taxes on SEP basis and income via digital platforms; and
- guidance from Colombia on its SEP rule.
Environmental, Social and Governance (ESG)
- Three ways sustainability reporting can be a catalyst for critical change
Sustainability reporting is far more than a tick box compliance exercise. Reframing reporting through a strategic lens can help you build trust and unlock new ways to achieve your commercial and climate ambitions. Read more on how sustainability reporting can be a catalyst for transformation in this latest blog.
Australia
Federal Budget 2024-25
Treasurer Jim Chalmers handed down his third Federal Budget in Canberra on Tuesday 14 May 2024, highlighting the Australian Government’s plans for revenue and expenditure in 2024-25 and beyond. Compared to recent years, tax measures do not form a large part of this year’s Budget.
- Strengthening the foreign resident capital gains tax regime
On 14 May 2024, as part of the 2024–25 Budget, the Government announced it will strengthen the integrity of the foreign resident capital gains tax (CGT) regime to ensure foreign residents pay their fair share of tax in Australia and to provide greater certainty about the operation of the rules. This measure is not yet law. - New Royalty Penalty and withdrawal of intangibles measure
On 14 May 2024, as part of the 2024–25 Budget, the Government announced from 1 July 2026 it will introduce a new penalty for taxpayers with more than $1 billion in global turnover annually, who have mischaracterised or undervalued royalty payments to which withholding tax would normally apply. This measure is not yet law.
Belarus
UK-Belarus double tax treaty - Belarus unilaterally suspends provisions
Belarus suspended certain provisions of many of its double tax treaties by Resolution of the Council of Ministers dated 7 March 2024, including its double tax treaty with the UK. HMRC has stated that the UK-Belarus Convention does not permit this unilateral action and the UK has therefore asked Belarus to reverse its action. In the interim, the UK considers the treaty to remain in force and is continuing to comply with its terms. The government is considering next steps and will provide more information in due course. See HMRC’s full statement here, which includes details of which provisions Belarus considers to be suspended and the dates on which it considers the suspension to tax effect.
Belgium
See here for latest updates.
The first Belgian Pillar 2 compliance milestone is out: notification at the Crossroads Bank of Enterprises (KBO/BCE)
Last year, Belgium officially enforced the Pillar Two rules introducing a minimum tax for multinational companies and large domestic groups further to the publication of the law in the Belgian Official Gazette (Belgisch Staatsblad / Moniteur Belge) in December 2023. To comply with the requirements, groups in scope of the rules have to register at the Crossroads Bank for Enterprises (Kruispuntbank van Ondernemingen / Banque Carrefour des Entreprises). The modalities included in a Royal Decree, dated 15 May 2024, will be published in the Belgian Official Gazette in the coming days and have already been published on the Pillar Two section on the website of the Belgian tax authorities. The 45 day count will start from the publication of the royal decree in the official gazette (which has not yet been published - the agreement was on 15 May 2024). The publication in the official gazette is expected very soon, so it is still important to move quickly, but groups should have slightly more time. Read more in this PwC news item.
Recent changes to the Belgian CFC legislation can give rise to an increased tax burden of your investment
If a Belgian company has a foreign participation which it controls and of which the effective tax rate is lower than 12.5%, based on the taxable profit of that foreign entity recalculated according to Belgian tax rules, an additional tax could arise on the undistributed passive income of the foreign participation. In other words, each year one will have to check whether any of their controlled foreign participations would qualify as a CFC (if the 12.5% test is met) and each year one will have to conclude whether any CFC reporting needs to be done via the Belgian corporate income tax return and whether any CFC taxation will occur. Read more in this PwC news item.
It’s official : the new copyright regime does not apply to the IT sector
The Constitutional Court has rejected the actions introduced by several software designers and IT companies for the cancellation of the legislative provision which excludes income relating to computer programs from the specific copyright tax regime. Read more in this PwC news item.
Channel Islands
Pillar Two update
Jersey, Guernsey, and the Isle of Man released a joint statement on 19 May, confirming their intended implementation of the Pillar Two rules from 2025. While the Crown Dependencies are working collaboratively on the implementation of Pillar Two, their individual statements do highlight a different approach to the introduction of a domestic minimum tax:
- Jersey has announced its proposal to introduce an income inclusion rule and a domestic minimum tax in the form of a new standalone multinational corporate income tax;
- Guernsey has opted to introduce an income inclusion rule and a qualified domestic minimum top-up tax; and
- the Isle of Man plans to introduce a qualified domestic minimum top-up tax.
All are taking a “wait and see” approach concerning their plans (if any) to adopt a UTPR.
Colombia
Colombia issues guidance on its Significant Economic Presence rule
The Colombian tax authority (DIAN) has issued Ruling 305 (in Spanish), addressing the application of new rules for non-residents with a significant economic presence (SEP) in the country. DIAN reiterated what triggers a SEP in Colombia, and confirmed that payments made to non-residents with SEP (who have opted to file an annual tax return in Colombia and have requested that no withholding tax is applied), can be fully deducted by the payer. The ruling also clarifies exchange rate considerations, withholding obligations for financial entities, and specifics for digital accommodation services, among other questions. Read more in the latest edition of our Digital Tax Byte.
Fiji
Fiji joins the Inclusive Framework on BEPS and participates in the agreement to address the tax challenges arising from the digitalisation of the economy
Fiji has joined international efforts against tax avoidance by joining the OECD/G20 Inclusive Framework on BEPS, an international collaboration with over 145 member countries and jurisdictions. Through its membership, Fiji has also committed to addressing the tax challenges arising from the digitalisation of the economy by participating in the Two-Pillar Solution to reform the international taxation rules and ensure that multinational enterprises (MNEs) pay a fair share of tax wherever they operate. Read more in this OECD item.
Ireland
Pillar Two update
The Irish Revenue has published guidance titled “Implementation of Council Directive (EU) 2022/2523 of 15 December 2022 on Ensuring a Global Minimum Level of Taxation for Multinational Enterprise Groups and Large-Scale Domestic Groups in the Union”. Tax and Duty Manual – Part 4a-01-02 contains an overview of the main Pillar Two charging rules along with a detailed correlation table which cross references the legislation contained in Part 4A of the TCA 1997 with:
- The relevant article of the EU Minimum Tax Directive,
- The relevant article of the OECD model rules,
- OECD commentary, where relevant, and
- OECD administrative guidance, where relevant.
Ireland clarifies new residence tie-breaker rule in UK-Ireland double tax treaty
The Irish Revenue has updated its guidance on the application of the new residence tie-breaker introduced into the UK-Ireland double tax treaty by the MLI as it relates to the residence of trusts (other than Unit Trusts) and estates under administration.
Kenya
Kenya releases 2024 FInance Bill
Kenya's Finance Bill 2024 has had its first reading before the National Assembly. The bill proposes key amendments to the Income Tax Act, with the overall aim to broaden the tax base and enhance revenue collection. Included in the proposed amendments is a minimum top-up tax applicable to multinational groups with consolidated annual turnover of EUR 750 million or more (mimicking the global minimum tax under the GloBE rules), effective 1 July 2024. Read more in the latest edition of our Digital Tax Byte.
Liechtenstein
Synthesised text published of UK - Liechtenstein double tax treaty
HMRC has published a synthesised text of the UK-Liechtenstein double tax treaty, prepared in consultation with the competent authority of Liechtenstein, which represents a shared understanding of the modifications made to the treaty by the MLI. See here.
Luxembourg
Updated Grand Ducal Decree is published: List of CRS reportable and participating jurisdictions for the year 2023
On 19 April 2024, a Grand Ducal Decree was published in the Official Gazette to update the list of jurisdictions considered as reportable jurisdictions and participating jurisdictions for the year 2023 for the purpose of the Common Reporting Standard (CRS) in Luxembourg. Liberia, Uganda, Moldova, Montenegro and Morocco were removed from the list of participating jurisdictions, whilst Georgia and Ukraine have been added to the list. Read more in this PwC alert.
Middle East
Saudi Arabia: Approved amendments to the RETT Implementing Regulations
The Minister of Finance and Chairman of the Board of Directors of the Zakat, Tax and Customs Authority (‘ZATCA’), has approved amendments/additions to certain provisions of the RETT Implementing Regulations. The approved amendments/additions have been published in the official Gazette on 3 May 2024 and can be accessed on uqn.gov.sa. The effective date of the aforesaid amendments/additions is from the date of publication in the official Gazette (ie 3 May 2024). Read more in this PwC alert.
UAE: “Qualifying Group Relief” Guide and “Business Restructuring Relief” Guide
The Federal Tax Authority (FTA) has released a comprehensive Corporate Tax (CT) Guide on Qualifying Group (QG) Relief. This guide serves as a significant resource, providing clarifications and insights on many important topics in relation to entities transactions covered within the scope of the relief, conditions to be eligible for the relief, circumstances when the relief will be clawed back and consequences, compliance requirements and interaction with other parts of CT law. Read more in this PwC alert.
Netherlands
Outline agreement: the tax measures
Dutch conservative parties PVV, VVD, NSC and BBB reached an outline agreement on 16 May 2024 which serves as a basis for further formation and should ultimately lead to a coalition agreement. It includes concrete tax measures as well as expressing intentions for tax measures. Several recent tax increases for entrepreneurs have been partly reversed, namely the abolition of the dividend tax repurchase facility and the increase in energy tax. This PwC news item provides an overview of the currently known tax measures.
New Zealand
Tax Tips - previewing Budget 2024
With the Government set to deliver its first Budget on 30 May, there has been much commentary around the state of the nation's finances. How much are we spending? Are we raising enough revenue? Is the current system sustainable? In this edition of Tax Tips, we consider the current shape of the New Zealand tax system and explore the key factors that will determine if it will remain fit for purpose in the future.
Peru
UK-Peru Joint Declaration - treaty negotiations concluded
HMRC has published a 2024 joint declaration which welcomes the conclusion of negotiations in relation to a new double taxation treaty.
South Africa
PwC Synopsis - April 2024
This edition includes: 1) Tax transparency – tip of the iceberg series; 2) Amendments to Amendments, a VAT perspective; and 3) SARS watch.
Third-party reporting by section 18A approved organisations
From May 2024, Section 18A-approved entities must provide SARS with their Section 18A third-party data submissions. This means that all Section 18A-approved entities that have issued Section 18A tax deductible receipts to their donors from 1 March 2023 to 29 February 2024 must submit this data to SARS. If an approved entity has not issued any Section 18A receipts for the period, they must submit a nil declaration. Read more in this PwC alert.
Switzerland
For the latest updates on current topics, see this PwC Switzerland Insights page.
US
Updated accounting for Pillar Two: Frequently Asked Questions
This updated In depth includes our responses to frequently asked questions on US GAAP accounting considerations related to the implementation of Pillar Two. New questions on valuation allowance considerations have been added as of 15 May 2024. New questions are marked with the date added.
IRS overhauls process and requirements for spinoff ruling request
The IRS and Treasury released Rev. Proc. 2024-24 (the revenue procedure) and Notice 2024-38 (the notice) on 1 May 2024. The revenue procedure contains significant changes to the procedures required for filing a private letter ruling (PLR) request under Section 355 and related provisions (spin-off transactions). The revenue procedure is applicable to all PLR requests submitted after 31 May 2024. The notice requests public feedback on the revenue procedure and highlights numerous specific areas for comment. Comments are due by 30 July 2024. Read more in this PwC Tax Insights.
PLR addresses the “held for” requirement in a like-kind exchange transaction for a property held by a trust that was distributed to its beneficiaries
A recent private letter ruling (PLR) issued by the IRS to an individual taxpayer that intended to effectuate a like-kind exchange, held that an involuntary distribution of real property interest did not preclude it from being “held for the productive use in a trade or business or for investment." This ruling may provide some indication of the IRS’s position to other entities, such as partnerships or limited liability companies (LLCs), that may be considering similar like-kind exchange transactions. Read more in this PwC Tax Insights.
Policy on Demand series
- Applications open for $6 billion in energy credits
The second round of Section 48C energy tax credit allocations for companies kicks off this week with $6 billion available for qualified advanced energy projects. In this episode from 22 May, Randa Barsoum walks through the application process and how companies can prepare. - Timing perspective for legislative action before election
With 168 days until the 2024 Presidential Election and 50 days in which Congress is scheduled to be in session, how much legislative work can Congress get done? In this episode from 20 May, Todd Metcalf discusses possible legislative actions this week and after Congress returns from the Memorial Day recess. - Election Watch 16 May
In this episode from 16 May, Karl Russo joins Rohit Kumar on this month’s Election Watch to focus on how the economy impacts elections and discuss unemployment, economic growth, and consumer sentiment in the battleground states. - Week in Review
- 24 May - The path forward for the House-passed tax bill looks challenging, but tax policy developments are still happening in Washington. Companies are asking whether Pillar One will move forward, while additional Pillar Two guidance is expected soon. Companies also should be on the look-out for Supreme Court decisions in the Moore case and a case involving the Chevron doctrine. Watch here.
- 17 May - The Senate continues to look for a path forward for the House-passed tax bill while preparing for the daunting challenge of extending the TCJA business provisions set to expire in 2025. Watch here.
Tax Readiness webcast series
- Tax Readiness: Q2 Financial reporting considerations
Join our panel of PwC specialists on Wednesday 19 June at 7pm, as they discuss tax accounting considerations and recent tax developments. On this webcast, we will discuss financial reporting considerations relating to intraperiod tax allocations, intercompany transactions and valuation allowances, including the potential Pillar two impacts, as well as other hot topics and commonly asked questions. Register here. - Tax Readiness: Private Capital tax trends
Join our panel of tax specialists on Tuesday 4 June at 7pm, who will discuss the latest tax trends and regulatory changes impacting the private capital industry - from portfolio companies to investors. Register now to gain actionable insights into how the ever-evolving tax landscape is shaping business strategies and operational considerations for private capital firms. Register here. - Tax Readiness: What taxpayers need to know about the recent stock buyback proposed regulations
Watch the replay from this webcast held on 8 May, where our panel discussed the recently issued stock buyback proposed regulations including reporting considerations and equity compensation determinations.
State and local tax
- Colorado amends unitary combined reporting law effective in 2026
Legislation recently signed by Governor Jared Polis (D) amends the law for corporate unitary combined reporting effective for tax years beginning on or after January 1, 2026. Among other changes, the legislation replaces the historic “3 of 6” unitary test with a statement of constitutional principles for determining if a unitary business exists. [H.B. 1134, signed by Governor, 14/05/2024]. Read more in this PwC Tax Insights.
Further information
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