Two weeks to 25 June 2021
Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
UK
Virtual employment
While there have been a number of big items which have dominated the news over the past year such as CJRS, NMW changes, Holiday Pay and employment Disputes, there have also been a number of other key developments across employment taxes that employers need to be aware of. Register here for this session, taking place on Wednesday 7 July 2021 at 10:00am, where we will run through the key recent developments that you should be starting to plan for now, including the tax implications of hybrid working.
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 COVID related tax developments. 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.
Patent box grandfathering ends on 30 June 2021
Patent box grandfathering ends on 30 June 2021. From 1 July 2021, all companies will be required to make patent box claims under the new Nexus regime, including companies that were grandfathered under the old patent box regime. Read more.
New associated company rules for corporation tax payments and marginal relief
Within the new marginal relief rules coming in 1 April 2023, HMRC have repealed the 51% related companies rules and replaced them with new associated companies rules. Read more.
Transfer Pricing in 5 Minutes, Episode 4: Transitioning from LIBOR
The fourth of a regular series of short videos highlighting key issues and developments in the transfer pricing field. This episode discusses the challenges ahead from the disappearance of LIBOR as a published financing reference rate at the end of 2021.
PwC Webcast - Exploring the intersections between ESG and the Tax function
Please register here to join us for this live webcast which will take place on 30 June from 4pm - 4.30pm (BST). Host Stuart Higgins, PwC Tax Markets and Services Leader, will be joined by PwC Partners Amal Larhlid, Barry Murphy and Georgie Messent who are each members of PwC’s ESG leadership group, where they will explore the specific impacts of ESG on the Tax function and the practical steps that organisations can take.
Updated HMRC checklist for statutory clearance applications
HMRC has updated its checklist for statutory clearance applications, see this link.
Brexit & other international trade developments
The UK has left the EU and negotiations on the future trading relationship of the UK and the EU have concluded with a deal agreed. So what next for businesses as we enter this new trading world?
- PwC EMEA Brexit and Beyond Webinar - 16 June - Business Travel in 2021
Over the last 6 months, PwC’s Asset and Wealth Management EMEA Brexit team have been hosting a series of client webinar events focused on the "Beyond Brexit" phase. These webinars have been looking at some of the post Brexit open-issues which could affect AWM’s in 2021 and beyond. In this article, we have summarised some of the key issues that we explored in our most recent webinar on the topic of business travel, immigration and cross border working in 2021. - UK agrees historic trade deal with Australia
The UK has secured a trade deal with Australia eliminating tariffs on all UK goods and boosting jobs and businesses across the country, in the first major trade deal negotiated from scratch by the Government since the UK left the EU. Read more in this Government press release.
Visit our Beyond Brexit webpage and Beyond Brexit internal site for the latest updates.
EU
EU Parliament and Member States agree on public country-by-country reporting
We reported previously that the European Council had published the text of a compromise agreement, reached by negotiators for the European Parliament and the Portuguese EU Council Presidency, on behalf of the Council of the EU on the EU’s draft Directive on public country-by-country reporting for big multinational groups. This Directive aims to make corporate tax in the European Union more transparent by introducing the same reporting obligations for European businesses and non-European multinational companies doing business in the European Union through their branches and subsidiaries. Our Bulletin on EU public country-by-country reporting
EU challenges Germany on ATAD implementation
The European Commission has taken action against Germany regarding its implementation of anti-avoidance and anti-hybrid mismatch rules and may decide to refer the case to the Court of Justice. See the Commission's letter of formal notice.
EU roadmap - debt-equity bias reduction allowance (DEBRA)
The European Commission has published a roadmap initiative aimed at encouraging companies to finance their investment through equity contributions rather than through debt financing. The initiative will introduce an allowance for equity-financed new investment, to mitigate debt bias. The whole scheme will incorporate a number of robust anti-tax avoidance rules to ensure tax fairness. The feedback period for comments closes on 12 July 2021.
CFE Tax Advisers Europe
CFE Tax Top 5 – Round-up of EU Tax Policy News
The latest edition looks at the following: 1) CFE Discussion Paper: “If it is legal, is it acceptable?” – An Ethics Quality Bar for All Advisers; 2) EU: Addressing the Debt - Equity Tax Bias (DEBRA); 3) EU Parliament: Exchange of Views with US Treasury & EU Commission; 4) Ireland, Poland, Hungary: Recognise the Role of Legitimate Tax Competition; and 5) Summary: CFE Tax Academy Webinar on Cryptocurrency Developments & Digital Regulation. View previous editions here.
OECD
Webcast: How will the G7 commitment to Pillars 1 and 2 impact your business?
In this recent webcast, our PwC panel discussed how the G7 Finance Ministers’ agreement might affect our clients’ businesses. Countries participating in the agreement committed to new taxing rights that allow countries to reallocate some portion of profits of large multinational companies to markets, as well as to enact a global minimum tax rate of at least 15%. The meeting marked an early test of whether the US position on the OECD Inclusive Framework’s ‘Taxation of the Digitalising Economy’ project would provide momentum to finding a common base for agreement. Register here to view the recording.
Global Forum publishes five new peer review reports
The Global Forum has published new peer review reports assessing the legal and regulatory framework against the international standard on transparency and exchange of information on request (EOIR) for Antigua and Barbuda, Argentina, the Russian Federation, South Africa and Ukraine. See this OECD item.
Heads of tax crime investigation welcome new OECD report on fighting tax crimes
At a recent meeting, heads of tax crime investigation from 44 countries welcomed the launch of the latest edition of Fighting Tax Crime – The Ten Global Principles which sets out ten essential legal, institutional, administrative and operational mechanisms necessary for putting in place an efficient system for fighting tax crimes and other financial crimes. Read more in this OECD press release.
Botswana ratifies multilateral tax administrative assistance pact
Botswana recently deposited its instrument of ratification to join the Convention on Mutual Administrative Assistance in Tax Matters. The text will enter into force for Botswana from 1 October 2021. With Botswana's notification, a total of 114 states have now ratified the Convention.
Model Reporting Rules for Digital Platforms: Optional module for sale of goods
The Model Reporting Rules for Digital Platforms, which operate under the Multilateral Competent Authority Agreement, require digital platforms to collect information on the income realised by those offering accommodation, transport and personal services through platforms and to report it to tax authorities. These Model Rules are designed to help taxpayers comply with their tax obligations, while ensuring a level-playing field with traditional businesses. Reflecting the interest of a number of jurisdictions to permit the extension of the scope of these Rules to the sale of goods and the rental of means of transportation, the OECD has developed an optional module allowing such jurisdictions to implement the Model Rules with an extended scope. Read more in this OECD report.
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:
- How will the G7 commitment to Pillars 1 and 2 impact your business?
As noted above, you can view a recording of our PwC panel’s recent discussion of how the G7 Finance Ministers’ agreement might affect your business. Register here to view it.
- Digital tax byte
The latest edition from 16 June includes: announcements by the OECD's outgoing and incoming Secretary-Generals on Pillar One/ Two and from the G7 Finance Ministers and subsequently leaders. The US Trade Representative office has imposed but postponed tariffs in relation to various DSTs as Maryland's digital advertising tax and adjusted sales tax provisions become law. The draft Czech DST legislation has finally progressed in Parliament, Spain has adopted Regulations clarifying location rules, record keeping and other procedures and provided draft guidance on scope etc and on returns and payment, while Canada has published guidance on its incoming e-commerce GST/HST rules.
Argentina
Argentina amends corporate income tax and withholding on dividend rates as from FY 2021
Argentine Law 27,630, which introduced amendments to the corporate income tax (CIT) law, entered into force on June 16, 2021. Taxpayers conducting business in Argentina should model how the amended CIT and withholding rates could impact current tax costs and operations and any planned transactions. Read more in this PwC Tax Insights.
Australia
R&D Tax Incentive Bulletin - June 2021
This PwC bulletin presents some highlights from the recent changes introduced by the Australian government relevant to the research and development tax incentives to support business innovation.
ATO considers certain payments for software distribution rights are royalties
The Australian Taxation Office (ATO) has issued a draft taxation ruling which sets out the Commissioner of Taxations’ preliminary views on the income tax treatment of receipts from the distribution and licensing of software, as distinct from ‘simple use’ by end-users of the software. It has a particular focus on the circumstances in which receipts will be treated as royalties under arrangements involving the distribution of packaged software, digital software distribution and cloud computing arrangements including software-as-as-service This has the potential to be quite broad, such that any business where software is fundamental to the delivery of services should also consider the draft ruling. Read more here.
ATO to retire Business Portal in late July
The Australian Taxation Office confirmed that it will decommission its existing Business Portal after July 2021. Online services for business is the new way to manage superannuation and taxation obligations.
Belgium
See here for latest updates.
Tax Control Framework: be in control of your taxes – and prove it!
With reputational and financial damage at stake, the need to be in control of your taxes and have sound tax risk management is rising rapidly. In this episode, our panelists talk about how companies can deal with this complexity by implementing a robust tax control framework. They also give insights on how to bring such a tax control framework to life within your organisation.
Double taxation of foreign dividends – Published FAQ is still holding out on applying foreign tax credit to individuals
Double taxation treaties concluded by Belgium with some countries, in particular France, make it possible to mitigate double taxation of foreign-sourced dividends through foreign tax credits (‘FTC’ ‘QFIE’ or ‘FBB’). The Belgian tax authorities have long refused to take this into account on the grounds that the foreign tax credit had been abolished in Belgian domestic law. See this PwC news item for the latest update.
COVID-19 and cross-border employment: Agreements with France, Germany and Luxembourg extended
Mutual agreements between Belgium with France, Germany and Luxembourg which include a “force majeure tolerance” for cross-border workers in relation to government imposed COVID-19 (travel) restrictions have been extended further until 30 September 2021 (previously announced extension operates until 30 June 2021). See here.
Botswana
Botswana ratifies multilateral tax administrative assistance pact
As reported above, on 15 June, Botswana deposited its instrument of ratification to join the Convention on Mutual Administrative Assistance in Tax Matters. The text will enter into force for Botswana from 1 October 2021. With Botswana's notification, a total of 114 states have now ratified the Convention.
Cyprus
Cyprus Tax Authority extends DAC6 reporting deadline
The Cyprus Tax Authority recently issued an announcement stating that no penalties will be imposed for all filings submitted by the end of 30 September 2021 in respect of arrangements with a triggering event between 25 June 2018 and 31 August 2021. Read more in this brief PwC Tax Insights
Finland
Tax and Legal News - June 2021
The latest tax and legal news from Finland. Read the latest edition.
Georgia
Hong Kong / Georgia double tax treaty to enter into force
The Hong Kong Government has announced that the comprehensive double tax treaty it signed with Georgia last year will enter into force and have effect in respect of Hong Kong tax from 1 April 2022.
Germany
Bundestag approves Tax Haven Defence Act
On 10 June 2021, following the recommendation of the Finance Committee, the Bundestag approved the “Act to avert tax avoidance and unfair tax competition and to amend other laws”. The measures (e.g. denial of tax benefits and deductions) contained in the bill are intended to make it more difficult for individuals and companies to avoid paying taxes in Germany through business relations with states and territories that are on the EU list of non-cooperative tax jurisdictions. Read more in this PwC Germany tax news item.
Decree by Federal Ministry of Finance extends motive test for escape from CFC taxation to third country situations
On 17 March 2021 the German Federal Ministry of Finance published a decree on the application of Section 8(2) of the Foreign Tax Act (AStG) which stipulates the “motive test” taxpayers have to meet to escape controlled foreign company (CFC) taxation. Read more in this PwC Germany tax blog.
Bill for the implementation of the land tax reform
On 10 June 2021 the Bundestag passed the Federal Government’s bill on the implementation of the land tax reform. Read more in this PwC Germany tax news item.
Hong Kong
Hong Kong / Georgia double tax treaty to enter into force
As reported above, the Hong Kong Government has announced that the comprehensive double tax treaty it signed with Georgia last year will enter into force and have effect in respect of Hong Kong tax from 1 April 2022.
Recent tax legislation focuses on certain profits tax and stamp duty amendments
The Inland Revenue (Amendment) (Miscellaneous Provisions) Ordinance 2021 and the Revenue (Stamp Duty) Ordinance 2021 were gazetted on 11 June 2021. The former: 1) specifies the profits tax treatments of corporate amalgamations in Hong Kong, 2) sets out the revised deduction rules for foreign taxes paid for profits tax purposes; and 3) enhances the statutory framework for furnishing of tax returns to pave the way for e-filing of profits tax returns. The changes related to 1) above apply to corporate amalgamations taking effect on or after 11 June 2021 whereas the revised deduction rules in 2) above apply from 2021/2022 year of assessment. The latter raises the rate of stamp duty on transfers of Hong Kong stock from 0.1% to 0.13% for each of the buyer and seller, effective from 1 August 2021. See this PwC Tax News Flash.
Hungary
Real Estate news: Changes in the Hungarian real estate transfer tax rules
On 9 June the spring tax package adopted by the Hungarian Parliament was published, containing amendments to the definition of Hungarian real estate rich companies, effective from 10 July 2021. Read more in this PwC alert.
Korea
Korean Tax Update - June 2021
Topics covered in this issue: 1) 2021 edition of the Medium and Long-term Direction of the Government’s Tax Policy; 2) Tax incentives to stimulate R&D and facility investment in strategic core technologies including semiconductors; 3) Korea signs a Free Trade Agreement with Israel; 4) Reporting requirement for foreign bank and financial accounts with an aggregate balance of more than KRW 500 million; and 5) Rulings update.
Middle East
UAE - Important regulatory updates and compliance requirements
A recent amendment of Commercial Companies Law clarified the much anticipated change in ownership rights - it removed the mandatory requirement for 51% ownership by a UAE national for onshore UAE companies.Read more in this PwC Tax news item.
Jordan introduces formal transfer pricing requirements
Regulation introducing formal transfer pricing requirements has been published in Jordan’s Official Gazette on 7 June 2021. The Regulation requires transactions between related parties to be dealt with on an ‘arm’s length basis’. Read more in this PwC Tax news item.
Egyptian Government issues Executive Regulation for the Unified Tax Procedures Law
Following issuance of the Unified Tax Procedures Law on 19 October 2020, Ministerial Decree No. 286 was published on 3 June 2021 in the Official Gazette to issue the Executive Regulation of the law. The Executive Regulation, effective from 4 June, provides explanatory guidelines to the application of the Unified Tax Procedures Law articles. This PwC alert summarises the key provisions of the Regulation, as stipulated in Egypt’s Official Gazette on 3 June 2021.
New Zealand
Loss carry-forward - Continuity of business activities
New Zealand's Inland Revenue Department has released a draft interpretation statement to explain the new loss carry-forward rules, including the new business continuity test, which may enable a company to carry forward tax losses. A consultation on the statement is running until 28 June 2021.
Russia
IPPAs: Taxes may be reduced to 0%
The State Duma will consider a draft law that would introduce deductions on a number of taxes for parties to investment protection and promotion agreements (IPPAs), enabling the parties to recoup some of the costs incurred while implementing the project. Read more in this PwC Russia tax flash.
Land tax: 2 + 2 = 4
The Russian Supreme Court has upheld the taxpayer’s position in a case involving the assessment of land tax following a change in the cadastral value of a land plot. Read more in this PwC Russia tax flash.
Singapore
Public consultation on proposed Income Tax (Amendment) Bill 2021
Singapore's Ministry of Finance is consulting on 36 proposed legislative amendments to the Income Tax Act. The consultation closes on 2 July 2021.
South Africa
Exchange Control: Recent developments
During 2020, the National Treasury announced that South Africa’s Exchange Control regime would be replaced by a new Capital Flow Management system. This transition is intended to reduce ‘red tape’ in the case of legitimate financial flows and to introduce more robust measures to detect, deter and disrupt illegitimate cross-border financial flows. Since the announcement, the South African Reserve Bank has issued a number of Circulars that effect changes to the existing Exchange Control Regulations applicable to emigration and loop structures. In this PwC Alert, we explore some of the changes brought about by these Circulars.
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.
Thailand
Reduction of withholding tax rate
Ministerial Regulation No. 373, published in the Royal Gazette on 11 June 2021, grants a reduction and an extension of the reduction of the withholding tax rate provided that the remittance of the tax is made via the e-withholding tax system. Read more in this PwC Tax Insight.
Justifiable grounds for transaction at lower than market value
Section 65 bis (4) of the Revenue Code requires all sales of goods, provisions of service and loans to be transacted at market value unless there are justifiable grounds to do otherwise. On 21 May 2021, the Revenue Department issued the Instruction No. Paw 158/2564 specifying an event that will be considered as having justifiable grounds in the case of a lease of assets at lower than market value. See this PwC Tax Insight.
Turkey
Limitation on financial expenses deduction
Turkish tax authorities released guidance on the application of the financial expense deduction limitation rule which became effective from 1 January 2021. Read more in this PwC Turkey tax bulletin.
Tax amnesty launched
A new tax amnesty program was launched in Turkey on 9 June. Under the program, taxpayers can: 1) restructure their unpaid tax debts and other payables to the State; 2) settle their pending tax disputes; 3) protect their past accounts against potential tax audits by making voluntary tax base increases; and 4) correct their business records to reflect the reality of their situations. Read more in this PwC tax bulletin.
New optional tax regime: revaluation of depreciable assets
The revaluation option is a one-time mechanism available for Turkish resident individuals and companies to revalue for tax purposes their depreciable assets, including immovable properties. The mechanism requires payment of a one-time, 2% tax on the revaluation surplus. The deadline for applying the revaluation option is 31 December 2021. Read more in this PwC tax bulletin.
US
Connecticut enacts budget with surcharge and capital base tax extension, amnesty
Connecticut budget-implementing legislation enacted on June 23 extends the 10% corporation business tax surcharge through 2022, delays the phase-out of the capital base tax by four years, increases the research and development tax credit allowance to over two years but limits the carryforward of nonincremental research and development tax credits to 15 years, and provides a tax amnesty, among other provisions. Read more in this PwC Tax Insights.
Texas excludes payment processing services from sales and use tax
Texas recently enacted legislation excluding certain payment processing services from the taxable ‘data processing service’ definition. Effective 1 October 2021, Texas statute provides that these services are not subject to sales and use tax. Read more in this PwC Tax Insights.
Subscribe for US tax alerts
You and your clients can sign up for Tax Alerts issued by the US to be emailed to you. Subscribe using the link on this page.
Webcasts & podcasts:
- 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. This episode was released on 23 June:
Previous episodes in this series are available here, as well as on Spotify and other streaming services.
Replays:
A number of previous webcasts are available for replay in our US tax reform hub here, including:
- Tax Function of the Future: R&D Innovation and Cloud
Register here for the replay of this webcast held on Wednesday 16 June 2021, where we explored why quantifying the bottom line tax impact of cloud computing while serving as a strategic partner for cloud efforts, such as R&D and ERP, are both critical tasks for Tax. - Q2 financial reporting considerations
Watch this replay from Wednesday 23 June 2021, where our panel of Tax Accounting Services (TAS) specialists took a deep dive into relevant tax accounting matters and recent tax developments. - Tax Readiness: Key state tax legislation and trends - What you need to know to navigate change
This webcast, held on Tuesday 8 June 2021, focused on key state legislation impacting corporate, passthrough entity, individual, and indirect taxes. Register here to watch the replay. - Tax Readiness: Treasury's Green Book is back, adding detail to President Biden's tax proposals
Register here to watch the relay of our webcast, held on 3 June 2021, in which our PwC panel walked through the Treasury's 'Green Book,' which adds details to President Biden's FY22 Budget proposals, and informs Congress. - Tax Readiness: Preparing for Deals in a Changing Environment
In this webcast, held on Wednesday 26 May 2021, PwC professionals from our Tax and Deals practices had a timely discussion of the many factors impacting the current deals environment including the prevalence of ESG, the use of SPACs, and anticipated tax changes. - Mexico's outsourcing services reform significantly impacts multinationals
You can watch the replay here from this webcast, from Thursday 27 May 2021, where we discussed the legislation recently published in Mexico that will significantly impact multinational entities with operations or investments in Mexico. - Zeroing in on your trade and supply chain strategy: How ready is your business?
If you missed this webcast, you can watch the replay from Wednesday 12 May 2021 where we examined potential steps that businesses can take in the near-term to proactively prepare for any changes in trade policy. - Tax Readiness: The intersection of ESG and Tax
Register here to watch the replay from our webcast on Wednesday 5 May 2021 to learn more about environmental, social and governance (ESG) and how tax leaders can engage with the C-suite to align tax with ESG transformation.
Other updates
For regular updates on this topic, check out our US tax reform hub on The Suite here.
Vietnam
Favourable development on tax incentives for supportive industries
The Vietnamese government has released a new Decree (effective on 4 June 2021) which ensures equal treatment of projects manufacturing prioritised supporting industry products. Such projects set up before 2015 were not eligible for the very favourable CIT incentives available to subsequent projects, but that has now changed provided certain conditions are satisfied. Read more in this PwC Vietnam tax brief.