Two weeks to 27 May 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
- The new global 15% minimum tax: essential briefing for Treasurers
The implementation of a global 15% minimum tax rate represents a radically different approach to the international tax framework. Read more in this PwC article on the financial and operational tax implications for finance and treasury professionals.
For further insights and resources, visit our new Pillar 2 webpage.
HMRC consultations
- Consultation on hybrid instruments draft regulations
This technical consultation seeks views on draft regulations that will remove a sunset clause from the Hybrid and Other Mismatches rules so that an exemption for certain hybrid instruments issued by banks continues to apply from 1 January 2023. It closes on 30 June. - Consultation on investment transactions list expansion
HMRC is seeking views on the inclusion of cryptoassets in the Investment Transactions List of asset types used for the purposes of the Investment Manager Exemption (IME) and certain fund tax regimes. The consultation closes on 18 July.
HMRC International Manual updates
- Changes relating to DPT
Various minor changes have recently been made to the HMRC International Manual in relation to Diverted Profits Tax (DPT) (INTM489530, INTM489922 and INTM489988). They relate to administrative aspects and the interaction with corporate tax, rather than interpretation of the rules. - Changes relating to CIR
HMRC updated its guidance on how to 'Submit a Corporate Interest Restriction return' on 23 May with a link to the online form for submitting a return.
PwC International Perspectives webcast series
Are you interested in gaining a more international perspective on your tax presence and recent changes to the UK-German tax landscape? From 3 May to 22 June 2022, PwC UK and PwC Germany are partnering to host a series of webcasts, covering areas from UK incentives to German anti-hybrid legislation. You can find out more and register here.
Double taxation treaty passport scheme register updated
HMRC updated the double taxation treaty passport scheme register on 24 May 2022, with 107 additions and 3 amendments. See here.
HMRC update UK–Ukraine double tax treaty information
HMRC have added The 1993 UK-Ukraine Double Taxation Convention as amended by the 2017 protocol - consolidated text to their online guidance covering tax treaties and related documents between the UK and Ukraine. See this HMRC page.
Driving value through integrated tax and finance transformation
Tax and finance functions continuously face challenges, such as; tax and regulatory changes, digital disruption and audits. These challenges are forcing companies to re-evaluate their operations and processes to ensure they are ready for the future. Read more in this PwC tax blog.
Talking Tax: Creating and protecting value through tax across the deal lifecycle
This edition of Talking Tax explores how tax can play a key role in supporting and realising value throughout the investment lifecycle from strategic planning, preparing for a transaction, deal execution through to post deal integration and execution of your value creation plan.
New Bill to enable implementation of Australia and New Zealand trade deals
The UK government has introduced a bill which will help to bring into force its first independently negotiated Free Trade Agreements in more than 50 years. See this press release.
EU
Pillar Two Model Rules
- Parliament backs global minimum corporate tax rate
On 18 May, Parliament adopted a report by the economic and monetary affairs committee on ensuring a minimum corporate tax rate for large multinational corporations. The directive will apply to companies with a turnover of at least €750 million a year. Read more in this press release.
EU Commission publishes proposal to implement debt-equity bias reduction allowance (‘DEBRA’)
As reported in our previous edition, the European Commission has proposed a debt-equity bias reduction allowance (DEBRA) - otherwise known as a notional interest deduction or NID - which will operate EU-wide. The proposal has two aspects: an allowance for new equity and an additional potential disallowance for interest deductions including on existing borrowings. The proposals will apply to companies other than financial institutions or AIFMs and the target date is 1 January 2024. Read more in our Tax Policy Alert.
EU Fit for 55 Package: pre approval for next months EP vote
With the Fit for 55 Package, the EU aims to reduce its net greenhouse gas emissions by at least 55 per cent by 2030 compared to 1990 levels, and reach climate neutrality by 2050. The full European parliament will vote on the key components of the Fit for 55 package in June 2022. The EP’s Environment committee (ENVI) has already agreed with these proposals together with a number of changes. Read more in this PwC news item.
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 23 May includes: 1) EU Commission Publishes Equity Allowance Proposal; 2) CFE Awards “The Albert J Raedler Medal” for Academic Excellence; 3) CFE Opinion Statement in Case C-788/19 (Commission v Spain); 4) The Conference on the Future of Europe Concludes Its Work; and 5) OECD Public Consultation on Crypto-Assets Reporting. Visit their latest news page here.
OECD
Pillar Two
- German- Belgian Colloquium on global tax reform: a status update on the OECD Two Pillar Approach
On 23 May 2022 the Belgian and German tax authorities organised a colloquium on the two-pillar approach. The colloquium was held in Brussels and was hosted by Mr Hans D’Hondt, Chairman of the Management Committee of the Belgian Federal Public Service Finance. Read more in this PwC news item.
Pillar One Model Rules
- OECD invites public input on tax certainty aspects of Amount A under Pillar One
As part of the ongoing work of the OECD/G20 Inclusive Framework on BEPS to implement the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy, the OECD is seeking public comments until 10 June on 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. - Public comments received on the regulated financial services exclusion under Amount A of Pillar One
The OECD has published the public comments received to its consultation launched on 6 May on the Regulated Financial Services Exclusion under Amount A of Pillar One to assist members in further refining and finalising the relevant rules.
China ratifies MLI
China deposited its instrument of approval for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (aka MLI) on 25 May 2022. The Convention will enter into force on 1 September 2022 for China (including Hong Kong). See https://oe.cd/mli.
Crypto-Asset Reporting Framework and Amendments to the Common Reporting Standard - Public consultation meeting
A public consultation meeting took place on 23 May which focused on the key questions identified in the consultation document and issues raised in the written submissions received as part of the consultation process. The event was recorded and the replay is available on this web page.
Uzbekistan joins Global Forum on Transparency and Exchange of Information for Tax Purposes
Uzbekistan has joined the international fight against tax evasion by becoming the 164th member of the Global Forum on Transparency and Exchange of Information for Tax Purposes. Read more in this OECD item.
Other territories
International
- International Tax News - April 2022
International Tax News is designed to help multinational organisations keep up with the constant flow of tax developments. Among the topics featured in this month's edition are: 1) Canadian Government releases 2022 federal budget; 2) China releases new preferential tax policies for SMEs; 3) New Mexican rules to identify and document the controlling beneficiary; and 4) Portugal Budget proposal targets patent box regime, tax incentives and start-ups. - Digital tax byte
The latest edition from 25 May includes an OECD announcement on a delay to Pillar One, our latest Africa tax report that includes digital economy insights and a proposed 6% streaming levy in Denmark..There is also insight into the UK's proposal to introduce platform reporting rules with effect from 1 January 2024. - Digital tax megabyte for April 2022
This edition includes an OECD release on the IT format for sharing digital platform reporting information and an update on the EU attempts to adopt a Directive to implement Pillar Two. It also considers the relevance of 'nudge' letters being sent by the Indian tax authorities and the CJEU decision on Belgian tax reporting on tourist accommodation not being contrary to EU law.
Environmental, Social and Governance (ESG)
- Tax Readiness webcast: How ESG is reshaping the Deals landscape
Register here to join our specialists on Tuesday 31 May at 8pm as they discuss the importance of ESG positioning in corporate strategy, buy-side due diligence, sell-side divestiture planning, and credits & incentives. - Net Zero, one bite at a time
We all know we need to get to net zero - and fast - but the challenge has always been putting it into practice. The scale of change required - and the amount of time to make it in - makes for a daunting prospect. Where do you start? In this podcast, James Wright, MD of Jude’s Ice Cream is here to unpick their journey producing carbon negative ice cream alongside their B Corp status. He's joined by Zubin Randeria, leader of PwC’s ESG business to explore what others can learn from this journey in order to drive change through their own organisations to make business a force for good. - Why is whistleblowing an important part of ESG?
Whistleblowing, or acting in good faith to report wrongdoing, is a concept that is appearing increasingly frequently in the public sphere. But is this topic relevant from the perspective of ESG? The answer is yes, and the reason is twofold. Read more in this PwC article.
Tax crime chiefs summit commits to international action
A ground-breaking alliance dedicated to tackling global financial crime must continue its efforts to defeat tax cheats and frauds Financial Secretary to the Treasury, Lucy Frazer QC told an enforcement summit this week.The heads of tax enforcement from the UK, Australia, Canada, Netherlands and the US came together in London for the latest Joint Chiefs of Global Tax Enforcement (J5) summit to share intelligence and coordinate efforts on a global level against international tax crime and money laundering. See this press release.
Australia
What does the new Government mean for corporate taxpayers?
Following the confirmation that the Australian Labor Party will form Government, PwC's Tax team unpacks what this result means for corporate taxpayers. Read more in this Tax Alert.
Austria
Austrian Tax Court declares horizontal group to be permissible
In a decision of 31 March 2022 (RV/7104573/2020), the Austrian Federal Tax Court has stated – contrary to the wording of Sec 9 Austrian Corporate Income Tax Act – that a company group between Austrian affiliates is permissible even if the joint parent company is resident abroad and does not have a branch in Austria. Read more in this PwC news item.
Belgium
See here for latest updates.
German- Belgian Colloquium on global tax reform: a status update on the OECD Two Pillar Approach
On 23 May 2022 the Belgian and German tax authorities organised a colloquium on the two-pillar approach. The colloquium was held in Brussels and was hosted by Mr Hans D’Hondt, Chairman of the Management Committee of the Belgian Federal Public Service Finance. Read more in this PwC news item.
Ontario non-resident speculation tax – recent changes
The Ontario government has announced changes to the province’s non-resident speculation tax (NRST), which is imposed on foreign entities and taxable trustees that purchase or acquire certain residential property. Effective 30 March 2022, the changes: 1) increase the rate to 20% (from 15%); 2) expand the tax to apply provincewide; and 3) restrict eligibility for exemptions from the tax. This Tax Insights discusses these changes and provides a refresher on the Ontario NRST.
China (see also Hong Kong below)
China ratifies MLI
China deposited its instrument of approval for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (aka MLI) on 25 May 2022. The Convention will enter into force on 1 September 2022 for China (including Hong Kong). See https://oe.cd/mli.
Finland
Tax and Legal News
- May 2022 edition
The latest tax and legal news from Finland. Read the May edition. - April 2022 edition
The latest tax and legal news from Finland. Read the April edition.
Germany
German- Belgian Colloquium on global tax reform: a status update on the OECD Two Pillar Approach
As reported above, on 23 May 2022 the Belgian and German tax authorities organised a colloquium on the two-pillar approach. The colloquium was held in Brussels and was hosted by Mr Hans D’Hondt, Chairman of the Management Committee of the Belgian Federal Public Service Finance. Read more in this PwC news item.
ECJ: Refusal to allow the utilisation of foreign branch final losses in breach of freedom of establishment?
Following the request for a preliminary ruling from the German Supreme Tax Court, the European Court of Justice (ECJ) is called to decide whether a German parent company has the right to deduct income losses incurred by its UK branch, which had ceased activity and thus could no longer utilise its accumulated tax losses in the UK, from its taxable income. In his Opinion, the Advocate General has suggested that the German rules denying the import of losses of foreign branches are not contrary to the EU principles of freedom of establishment. Read more in this PwC tax blog.
Federal Ministry of Finance publishes circular on the taxation of cryptocurrencies
The German Federal Ministry of Finance recently published a circular on the income taxation of virtual currencies and other tokens in coordination with the Supreme Tax Authorities of the German Federal States.The circular is intended to provide practitioners both in the administration and in business as well as individual taxpayers with legally sound and easily applicable guidelines on the income tax treatment of crypto currencies and other tokens. Read more in this PwC tax blog.
Fourth Corona Tax Assistance Act: amendments to the government draft
After the Bundestag adopted the Fourth Corona Tax Assistance Act in its session on 19 May 2022 following the resolution recommendation of its Finance Committee, the Act is now on the agenda of the Bundesrat for 10 June 2022. Read more in this PwC tax blog.
ECJ and VAT: No fixed establishment through subsidiary providing marketing and representation services
In a recent judgment, the European Court of Justice (ECJ) held that a German company does not maintain a fixed establishment through its Romanian subsidiary where the latter actively promoted the products of the German company in Romania based on marketing, advertising and regulatory strategies established and developed by the German parent. Read more in this PwC tax blog.
Hong Kong
China ratifies MLI
China deposited its instrument of approval for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (aka MLI) on 25 May 2022. The Convention will enter into force on 1 September 2022 for China (including Hong Kong). See https://oe.cd/mli.
India
Supreme Court holds secondment of employees by an overseas group entity to an Indian entity as service by applying principle of ‘substance over form'
In a recent appeal, the Supreme Court has held that the secondment of employees by an overseas group company (OGC) to an Indian company is liable to service tax based on a detailed analysis of the agreements and applying the principle of ‘substance over form’. Read more in this PwC Tax Insights.
Ireland
Tax facts 2022
Welcome to Tax Facts 2022, our practical and easy-to-follow guide to the Irish tax system. It provides a summary of Irish tax rates and an outline of the main areas of Irish taxation, together with an overview of recent tax policy developments.
Public Consultation on Pillar Two Minimum Tax Rate Implementation
Minister Donohoe has launched a public consultation until 22 July, seeking stakeholder views on the implementation of the Pillar Two Minimum Tax Rate proposal in Ireland.
Italy
Italian Revenue Agency publishes Circular providing clarifications for a proper interpretation of “the arm’s length range” concept
On 24 May 2022, the Italian Revenue Agency published Circular Letter no. 16/E containing some key clarifications on the proper interpretation of the “arm’s length range” concept, as provided for by Art. 6 of the Decree issued by the Italian Minister of Economy and Finance on 14 May 2018, when applying the provisions set forth in Art. 110(7), of the Italian Tax Code (“ITC”) i.e., the provisions contained in the Double Tax Treaties entered into by Italy that comply with Art. 9 of the OECD Model Tax Convention. Read more in this PwC tax blog.
Korea
Korean Tax Update - May 2022
This edition includes: 1) Korea’s Presidential Transition Committee Considers Measures to Secure Overseas Natural Resources; 2) Presidential Transition Committee Considers Extraordinary Tax Measures for Investment in New Opportunity and Development Zones; 3) NTS Seeks to Strengthen Transaction Verification to Curb Speculative Housing Transactions by Some Foreigners; 4) NTS to Amend its Taxpayer Advocate Administration Guide; and 5) Rulings Update.
Middle East
The UAE-India Comprehensive Economic Partnership Agreement (CEPA) enters into force
The UAE Ministry of Economy has recently published the full text of the CEPA signed between the Government of the United Arab Emirates (UAE) and the Government of the Republic of India (India). The CEPA is expected to increase trade between the UAE and India, lower tariffs and enhance market access. Read more in this PwC news item.
New Zealand
Consultation opens on New Zealand's potential implementation of the OECD's global minimum tax rate
New Zealand’s Inland Revenue has opened the floor for public consultation on if, when and how New Zealand should adopt a new international tax framework to impose a global minimum effective tax rate of 15% on large multinational enterprises (MNEs). Read more in this Tax Tips Alert.
Disputes process consultation
The New Zealand Inland Revenue Department has launched a consultation on changes to its disputes process. The draft standard practice statement sets out the rights and responsibilities of both a taxpayer and the Commissioner when either party commences a dispute. The consultation closes on 24 June.
Nigeria
FIRS reverses the practice of granting 7.5% WHT rate to treaty partners on passive income
In May 2022, the Federal Inland Revenue Service (FIRS) issued a public notice reversing the long established practice of granting a reduced WHT rate of 7.5% on dividends, interest, rent and royalties (passive income) payable to companies resident in treaty countries. Companies that plan to distribute dividends to shareholders in treaty countries and that have obtained relevant administrative clearance, should consider paying the dividends before 1 July 2022, to benefit from the existing practice. Read more in this PwC alert.
Portugal
Portugal: Deadlines near for TP documentation, filing APA requests
Portugal introduced changes to its Advance Pricing Agreement (APA) regime and transfer pricing (TP) documentation requirements on 26 November 2021. Following those changes, taxpayers should now review and update their TP documentation in accordance with the new rules to meet the 15 July deadline and, if intending to file an APA request, must keep in mind the changes to the APA regime and their timing requirements. Our specialists share a reminder of the new requirements and deadlines, aspects of which are much more demanding than before, here.
Switzerland
For the latest updates on current topics, see this PwC Switzerland Insights page.
Thailand
Tax exemption for certain subsidies obtained by corporate entities
Royal Decree No. 747, which is effective from 25 May 2022, was issued to grant an income tax exemption to corporate entities that have obtained specified subsidies from the government sector. Read more in this PwC Tax Insight.
US
IRS releases guidance on treatment of deferred compensation expense for Section 250 FDII deduction
The IRS Office of Chief Counsel recently released Generic Legal Advice Memorandum (GLAM) 2022-001 dealing with the allocation and apportionment of deferred compensation expense for purposes of calculating the Section 250 deduction for foreign-derived intangible income (FDII). GLAM 2022-001 concludes that deferred compensation expense that relates to services provided in years prior to enactment of Section 250, but that is deductible post-enactment, may be allocated to deduction eligible income (DEI) and foreign-derived deduction eligible income (FDDEI) if the class of gross income to which the deduction relates includes DEI or FDDEI. Read more in this PwC Tax Insights.
US launches Indo-Pacific Economic Framework for Prosperity
US President Joe Biden launched the Indo-Pacific Economic Framework for Prosperity (IPEF) on 23 May with 12 initial partners: Australia, Brunei, India, Indonesia, Japan, the Republic of Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and Vietnam. According to a White House fact sheet, these countries represent 40% of the world’s Gross Domestic Product (GDP). Companies that engage in trade or are considering engaging in trade with any of the IPEF countries should determine how the framework could enhance opportunities in those countries. Read more in this PwC Tax Insights.
Massachusetts supreme court blocks taxing capital gain of a nondomiciliary corporation without unity
The Massachusetts Supreme Judicial Court (SJC) recently concluded that the state could constitutionally impose both its corporate excise tax on the out-of-state S corporation’s capital gain and its nonresident composite tax on the S corporation nonresident shareholders’ share of such gain. However, the SJC abated the tax because Massachusetts lacked the requisite statutory authority to tax the capital gain. Read more in this PwC Tax Insights.
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Webcasts, blogs & podcasts:
- 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: Q2 financial reporting considerations
Join our Tax Accounting Services (TAS) specialists on Wednesday 22 June at 7pm as they take a deep dive into relevant tax accounting matters and recent tax developments. Register here. - Tax Readiness webcast: How ESG is reshaping the Deals landscape
Register here to join our specialists on Tuesday 31 May at 8pm as they discuss the importance of ESG positioning in corporate strategy, buy-side due diligence, sell-side divestiture planning, and credits & incentives. - Global disruption and the impact on doing business in the US
We continue to live in challenging times, and recent events underscore how quickly the state of the world can change. From geopolitical tensions to tax policy, significant developments are impacting the business strategy of international companies operating in the US. Watch the replay of this webcast held on 17 May to gain practical insights from PwC’s economic, deals, and tax policy specialists to stay ahead of the curve. - Cross-border tax talks: Back to School - Mindy Herzfeld’s Pillar 2 insights
In this episode from 25 May, Doug McHoney (PwC's US International Tax Services Co-Leader) is joined by Mindy Herzfeld, professor of tax practice at the University of Florida Levin College of Law, where she teaches International Tax, to discuss Pillar Two rules. - Policy on Demand series
- In this episode from 27 May, Rohit Kumar shares his insights on the optimism surrounding the ongoing reconciliation negotiations and why Senator Sinema is the one to watch in the coming weeks. He also answers the question that he received most this week: What can we expect in the slimmed down reconciliation legislation?
- In this episode from 20 May, Scott McCandless shares why companies should still be focused on Build Back Better as we approach the end of May.
- Week in Review
You can sign up for Tax Alerts issued by the US to be emailed to you. Subscribe using the link on this page. A back catalogue of previous webcasts and other resources are available on our US tax reform hub here.