Two weeks to 27 October 2023
Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
UK
What does Pillar Two mean for tax accounting?
The impending Pillar Two framework will have implications for tax accounting, but what are they? How can your organisation ensure you have the appropriate structures in place? Preparation of the jurisdictional consolidations/aggregations is just the start of the Pillar Two calculation process. To determine the impact of the various adjustments made on consolidation to the calculations will require significant financial reporting experience. Our expertise in accounting, tax and technology means we can help with the complex calculations that will be required to comply with Pillar Two and to assist with financial statements disclosures. We’re ready to partner with you on this new challenge as your project takes shape. Read more here.
Autumn Statement 2023 reactions - webcast
The Chancellor will make his Autumn Statement on the afternoon of Wednesday 22 November. You can register here to join our Autumn Statement 2023 Reactions webcast, which will take place on Thursday, 23 November at 9:00am.
HMRC Manual & guidance updates
The following changes have recently been made by HMRC following review:
- Double taxation treaty passport scheme - terms, conditions & guidance
HMRC updated this page on 24 October. The email address for the Double Taxation Treaty team was updated and is now dttteam.lbnottingham@hmrc.gov.uk.
Treaty updates
- Double Taxation Treaty Passport Scheme guidance updated
HMRC updated this page on 20 October, adding guidance to explain HMRC no longer issue reminders when a treaty passport is due to expire. Also borrowers should tell them of any passported loan as soon as possible once the loan arrangement is entered into, to allow time to review the application.
EU
Council of the EU approves changes to the EU list of non-cooperative jurisdictions
The European Finance Ministers, sitting as the Council of the EU, approved the recommendations of the EU Code of Conduct Group in relation to the updated list of non-cooperative jurisdictions. Three jurisdictions, Antigua and Barbuda, Belize, and Seychelles were all added to Annex I (the so-called EU blacklist). British Virgin Islands, Costa Rica, and Marshall Islands were removed from the previous Annex I list (published in February 2023). Read more in our PwC Tax Policy alert.
EU Directive (DAC8) adopts wider reporting requirements for crypto and other transactions
The Council of the EU recently adopted a Directive amending the EU rules on administrative cooperation in the area of taxation (DAC8). The amendments primarily pertain to the reporting and automatic exchange of information on certain revenues from crypto asset transactions and the provision of advance tax rulings for the wealthiest (high net worth) individuals. The Directive aims to strengthen the existing legislative framework by broadening the scope for registration and reporting obligations and improving overall administrative cooperation between tax administrations. Read more in our PwC Tax Policy alert.
Commission reports on EU policy initiatives to promote investments in clean technologies
In a recent communication, the European Commission has set out what the EU has done to promote and support the development and deployment of clean technologies, by reinforcing the Single Market, ensuring a level-playing field, supporting research and innovation, expanding its network of trade agreements, and mitigating the impact of external developments. It also looks at first results materialising from the US Inflation Reduction Act (IRA), as requested by the European Council, and stresses the need to continue monitoring the situation and constructively engaging with the US.
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 24 October includes: 1) ECOFIN – Council of the EU Approves Tax Blacklist Updates & DAC8 Directive on Administrative Cooperation; 2) European Commission Adopts 2024 Work Programme; 3) OECD Webinar on MLI to Implement Amount A of Pillar One; 4) EU Tax Observatory Calls for Global Minimum Wealth Tax; and 5) C-524/23 EU Commission v Belgium – Improper Implementation of CFC Rules. Visit their latest news page here.
OECD
Pillars One and Two
- OECD Webinar on the Multilateral Convention of Amount A
If you missed the OECD’s technical webinar on 26 October exploring the key features of the Multilateral Convention (MLC) to implement Amount A of Pillar One, watch the recording and find out more on the application of Amount A rules, the tax certainty framework and related issues, the removal and standstill of digital services taxes and relevant similar measures. - Pillar One guidance: Some clarity, some issues remain unresolved
As reported in our previous edition, the OECD has released almost 900 pages of guidance under Amount A of Pillar One of the OECD’s two-pillar framework. In this Policy in Demand episode from 16 October, PwC’s Will Morris discusses what’s in this guidance and what he’s anticipating. - Countdown to Pillar Two: Have you completed these key actions?
Readiness for the increased Pillar Two tax compliance complexity is top of mind for many companies and proper preparation can ease the burden. This PwC blog sets out the key steps we recommend companies take between now and the end of November. - Updated Pillar Two Country Tracker
PwC's Pillar Two Country Tracker, our online tool, provides the status of Pillar Two implementation in different countries and regions. You can also find updates on recent Pillar Two developments in the territory updates below.
MLI soon in force for Tunisia
The BEPS multilateral instrument (MLI) will become effective for treaties signed by Tunisia from 1 November 2023.
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 25 October, we cover:
- the release by the OECD of a package of materials for Amount A of Pillar One and proposals from the UN tax committee on other aspects of the digitalisation and globalisation of the economy;
- the adoption of the EU rules (DAC8) on reporting of crypto asset and e-money transactions and proposed new US digital asset reporting regulations;
- Kenya notice about starting enforcement proceedings in relation to those offering registerable digital services;
- Japan has clarified the definition of Importer of Record under new customs laws; and
- an update on the US state of New Mexico's digital advertising tax.
Environmental, Social and Governance (ESG)
- The hidden cost of carbon
Carbon pricing mechanisms impose costs that are deeply, and subtly, embedded in supply chains, affecting companies’ profitability and competitiveness. In this PwC article, discover how these costs can add up, and what leaders can do to manage them. - How tax can shape the UK’s journey to a Net Zero economy
The road to net zero will require widespread behaviour change in the UK and our choices now will be definitive for future generations. Read more.
How taxes shape choices and the UK’s economy
Consumers and businesses make an enormous number of choices every day. Almost all of them are influenced by the taxes involved, nudging towards one option over another. Some measures are “carrots” and provide a reward, while others are “sticks” and create an additional cost. Read more.
Belgium
See here for latest updates.
Navigating DAC 7 in Belgium - Comprehensive FAQ document published by Belgian tax authorities for digital platforms
The Belgian tax authorities have released a comprehensive Frequently Asked Questions (FAQ) document aimed at clarifying the requirements and procedures for compliance with the DAC 7 reporting obligation. Read more in this PwC news item.
Germany
Taxation of foreign passive income in case of potential doubts under constitutional and EU law
Pursuant to the claim for interim relief in the form of a suspension from payment, the Supreme Tax Court decided that the taxation of foreign passive income pursuant to Secs. 7 et seq. Foreign Tax Act of a corporation domiciled in Hong Kong is not in serious doubt with respect to the free movement of capital and under constitutional law. Read more in this PwC blog.
Bundesrat comments on the proposed Growth Opportunity Act
At a recent sitting, the Bundesrat (Federal Council/upper house) expressed its opinion on the Growth Opportunities Act initiated by the German government, and which envisages extensive changes in tax law. In their detailed comments, the states expressed fundamental support for the plan to establish better environmental conditions for more growth, investment, and innovation, including for climate protection. At the same time, however, they are concerned with the financial burden on state and local government budgets, which will have to bear almost two-thirds of the proposed tax measures. Read more in this PwC blog.
No specific determination of capital contributions account for foundation
Since the wording of Section 27(7) of the German Corporation Tax Act does not cover estates, private foundations under civil law with legal capacity are not eligible for the specific determination of the special tax contributions account which is necessary to establish the amounts of tax neutral repayments of capital contributions. This was decided by the Supreme Tax Court in two similar cases. Contrary to the view held by other local tax courts the Supreme Tax Court gives precedence to the strict wording of the law. Read more in this PwC blog.
New Federal Office for Combating Financial Crime - Revamp of AML authorities
On 11 October 2023, the Federal Cabinet adopted the draft of the Financial Crime Control Act (FCCA). The draft law is intended to fundamentally revamp the fight against financial crime, especially money laundering, in Germany. Read more in this PwC blog.
Hong Kong
Bill for tax certainty enhancement scheme for onshore equity disposal gains introduced
The highly anticipated tax certainty Enhancement Scheme has taken a further step towards implementation, with the Inland Revenue (Amendment) (Disposal Gain by Holder of Qualifying Equity Interests) Bill 2023 gazetted on 20 October 2023. The Bill proposes to amend the Inland Revenue Ordinance (IRO) by adding a new section 40AX and Schedule 17K to the IRO to provide for the tax treatment in relation to gains covered by the Enhancement Scheme. Under the Enhancement Scheme, onshore equity disposal gains that satisfy all the prescribed conditions, including, inter alia, that the investor entity has held at least 15% of the equity interests in the investee entity for a continuous period of at least 24 months immediately prior to the date of disposal of such interests, will be regarded as capital in nature and not chargeable to profits tax. This PwC news flash outlines the key requirements under the Enhancement Scheme and its major differences from prior consultations and clarifications made in the IRD Guidance, followed by our take on the Enhancement Scheme.
Hungary
Pillar Two - draft Hungarian legislation published for public consultation
On 18 October 2023, the Hungarian Ministry of Finance published draft legislation for public consultation to implement Council Directive (EU) 2022/2523 and the OECD Model Rules on the global minimum tax (“GloBE”). The draft legislation mainly follows the OECD Model Rules and its Commentary, including the Administrative Guidelines published by the OECD. Read more in this PwC alert.
India
Supreme Court of India holds that double tax treaty or protocol not enforceable until appropriate notifications issued
The Supreme Court of India has held that a notification under section 90 of the Income tax Act,1961 is a necessary and mandatory condition to give effect to a double tax treaty (treaty) or any protocol that has the effect of altering the existing provisions of law. Moreover, a claim under the Most Favoured Nation (MFN) clause of a treaty with a country which is a member of the OECD, which relies on a third OECD member’s treaty with India, is valid only if the third country was a member of OECD at the time of entering into its treaty with India. The Supreme Court, while adjudicating the aforesaid principles, had considered the MFN clause provided in the treaty between India and France, and the Netherlands and Switzerland (FNS countries), respectively. Read more in this PwC Tax Insights.
Mere access to server located abroad to obtain reports is not taxable as royalty income
The Delhi bench of the Income-tax Appellate Tribunal has rejected the Tax Officer’s (TO) contention that payments made for obtaining candidate reports by accessing the server located outside India are taxable as royalty income. The Tribunal concluded that mere access to use the server or software to download the reports does not tantamount to transfer of any licence or copyright in the software such that it is covered within the purview of Article 13 of the India-UK double tax treaty. Read more in this PwC Tax Insight.
Ireland
Finance (No.2) Bill 2023
The Irish Department of Finance published the Finance (No.2) Bill 2023 on 19 October. The Bill clarifies and codifies many of the tax measures announced on Budget Day. On our dedicated webpage, our experts share their insights and analysis on how the Bill might impact you and your business, including:
- What will Finance (No.2) Bill 2023 mean for large corporates?
The main legislative changes proposed in the Finance Bill that are likely to impact domestic and international corporations include the introduction of legislation to transpose the EU Directive on Pillar Two, amendments to outbound payments legislation and changes to the Research & Development (‘R&D’) tax credit. Read more. - Finance (No.2) Bill 2023—key Pillar Two measures
The draft legislation in Finance (No.2) Bill 2023 follows the earlier release of two Pillar Two implementation feedback statements. Read more.
Middle East
UAE Corporate Tax - key priorities before 1 January 2024
UAE Corporate Tax (CT) will become effective for many businesses from 1 January 2024, and there are many things to consider in order to prepare for implementation. These include understanding the CT implications of your legal, financial, and operational profile, as well as planning the people, processes and systems required to comply with the rules. This PwC news item highlights some of the key areas businesses should prioritise before the end of 2023.
Netherlands
Pillar Two Bill - Memorandum of Amendment
On 13 October 2023, the State Secretary for Finance presented the Memorandum of Amendment to the Bill on Minimum Taxation 2024 (Pillar Two) to the Dutch parliament. The publication of the Memorandum of Amendment is the next step towards implementation by 31 December 2023. The Memorandum makes some editorial improvements to the Bill on Minimum Taxation 2024. It also implements some parts of the OECD administrative guidance. Read more in this PwC news item.
New Zealand
Tax Policy Bulletin - October 2023
Tax Policy Bulletin is a regular round-up of recent tax headline news. In this edition we cover: 1) the latest on Inland Revenue's Tax Governance campaign; 2) proposed changes to the bright-line test in relation to flood-affected property; 3) Inland Revenue's review of the donation tax credit rules; and 4) a round-up of open consultations and other recent developments.
Poland
New draft of the WHT guidelines confirms the strict interpretation of the “beneficial ownership” requirement
The Polish Ministry of Finance published a draft of the new withholding tax (WHT) guidelines. The draft is highly significant for the whole real estate market, as it can impact the access to the WHT exemptions / reduced rates on interest and dividend payments made by Polish property companies to their foreign holding platforms. In particular, it is worth noting that - in many areas - the strict beneficial ownership requirements do not really correspond with business reality and with how the real estate market operates. It is expected that many standard holding platforms may find it difficult to meet the beneficial ownership conditions set by the authorities. Read more in this PwC alert.
South Africa
2023 Draft tax bills - National Treasury’s and SARS’ response to public comments
On 25 October 2023, National Treasury and the SA Revenue Service responded to public comments, received during the Standing Committee of Finance (SCoF) meetings in September 2023 and in public workshops, on the proposed 2023 tax legislation. Importantly, the proposed amendment to the Foreign Business Establishment exemption will be withdrawn pending the Constitutional Court judgment in the Coronation case and Practice Note 31 will remain in effect until 1 January 2025 for further consultations. Read more in this PwC alert.
Tax Synopsis - September 2023
This edition covers: 1) Exports of goods: Risk of non-compliance; 2) Dispute proceedings from a tall vantage point; and 3) SARS watch.
Sweden
Pillar Two - draft bill submitted to the Legal Council
In December 2022, the EU adopted a directive formalising Pillar Two. By the end of 2023, all member states are required to have introduced national rules reflecting the directive, with the national rules to be applied from 2024. In February and March 2023, an initial proposal (“SOU”) and an addition (memorandum) to the Swedish rules for implementing the EU directive were published. On 31 August 2023, the Swedish government submitted a draft bill detailing the implementation of the EU directive to the Legal Council. The recently approved draft bill includes certain news and interesting aspects, which are outlined in this PwC blog.
Switzerland
For the latest updates on current topics, see this PwC Switzerland Insights page.
Tunisia
MLI soon in force for Tunisia
The BEPS multilateral instrument (MLI) will become effective for treaties signed by Tunisia from 1 November 2023.
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.
US
Countdown to Pillar Two: Have you completed these key actions?
Readiness for the increased Pillar Two tax compliance complexity is top of mind for many companies and proper preparation can ease the burden. This PwC blog sets out the key steps we recommend companies take between now and the end of November.
Proposed regulations address triangular reorganisations and inbound nonrecognition transactions
Treasury and the IRS have issued proposed regulations (REG-117614-14) providing guidance on the taxation of cross-border triangular reorganisations and related transactions. The Proposed Regulations modify regulations previously announced in Notice 2014-32 and Notice 2016-73. Notice 2014-32 addressed transactions that Treasury viewed as exploiting certain aspects of final regulations published on 19 May 2011 under Section 367(b) (the 2011 Final Regulations). Notice 2016-73 contained additional rules to address transactions that Treasury viewed as exploiting the 2011 Final Regulations, as modified by the rules announced in Notice 2014-32, and announced that additional regulations would be issued under Section 367. Comments are due by 5 December 2023. Read more in this PwC Tax Insights.
IRS leverages IRA funding to launch enforcement and service initiatives
The IRS recently issued IR-2023-194 announcing several new initiatives leveraging Inflation Reduction Act (IRA) funding to increase its enforcement efforts focused on large corporations. This is in addition to previously announced initiatives centred on increasing compliance among high-income, high-wealth individuals and complex partnerships. As the IRS is ramping up its enforcement efforts, it continues to work to improve customer service and modernise core technology infrastructure. Read more in this PwC Tax Insights.
IRS permanently extends ability to electronically sign certain tax forms, returns, and documents
The IRS recently updated Section 10.10.1 (IRS Electronic Signature (e-Signature) Program) of the Internal Revenue Manual (IRM) to permanently extend the ability of taxpayers and their representatives to sign digitally or by an image of their signatures on certain forms and returns as well as certain compliance-interaction-related forms and documents. The IRS in 2020 adopted these electronic signature procedures as a temporary response to the COVID pandemic and in 2021 extended the temporary procedures to 31 October 2023. Read more in this PwC Tax Insights.
Policy on Demand series
- Upcoming international guidance: optimism, with contingencies
With a number of international tax issues currently in the works at the Treasury Department, in this episode from 23 October, Wade Sutton and Laura Williams speak with Pat Brown about the status and impact of anticipated guidance. - Uncertainty continues with Speaker race and OECD project
In this episode from 16 October, Chairman Dave Camp shares what he’s hearing about the latest state of play for House elections on a new Speaker. Last week, the OECD released guidance under Amount A of Pillar One of the OECD’s two-pillar framework. Will Morris provides context and his next steps. - Week in Review
- 27 October - New House Speaker Mike Johnson has indicated that he supports addressing the November 17 budget deadline with another continuing resolution until next January or even April, jeopardising the likelihood of a year-end tax bill. Watch here.
- 20 October - Companies are considering the potential consequences of the tax concepts enshrined in the OECD's Pillar One Amount A guidance. Stay tuned to the upcoming OECD conference in Washington, DC to hear what the OECD has to say about the state of play around Pillar One and upcoming Pillar Two guidance. Watch here.
Tax Readiness webcast series
- Tax Readiness: Don't leave value on the table - Elevating your compliance function
As new technologies emerge and reporting expands globally, businesses need to continue to update and develop their technology systems to keep pace with the ever-increasing demands. A connected data strategy is the foundation for a streamlined compliance process and opens the door to opportunities in transformation, ERP integration and increased global coordination. Register here to join our panel of specialists on Wednesday 7 November at 8pm as they discuss how businesses can embrace an updated data strategy to help manage reporting and compliance while building value outside of the tax department. - Tax Readiness: What taxpayers need to know about the recent Section 174 and CAMT guidance
In recent weeks, Treasury and the IRS have released critical guidance in two notices that propose rules potentially affecting a vast array of taxpayers - Section 174 guidance and new corporate alternative minimum tax (CAMT) guidance. In this webcast from 9 October, our panelists share their insights from these notices and how businesses should consider responding. Watch the replay here. - Tax Readiness: Insights from the new digital asset reporting regulations
Treasury and the IRS released much anticipated proposed regulations regarding information reporting for Digital Assets. Watch the replay here from our webcast on 5 October where our specialists discuss the scope of these regulations, required obligations, and what steps impacted taxpayers should be taking now in order to prepare. The panel shares policy insights, industry perspective, as well as practical solutions for companies currently involved or looking to be involved in this fast emerging industry.
Further information
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.
Vietnam
Proposed amendments to EPR regulations under draft Environmental Protection
Decree
The 2020 Environmental Protection Law and Decree 08/2022/ND-CP introduced the concept of Extended Producer Responsibility (“EPR”), which specifies the responsibilities of manufacturers and importers with regard to the recycling and treatment of discarded products and packages. The Government is now developing a draft decree (“Draft”) amending Decree 08. Read more in this PwC newsbrief.