Two weeks to 28 October 2022
Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
UK
Autumn Statement
The Autumn Statement is now due to be delivered on 17 November, following the decision by the new Prime Minister Rishi Sunak and his Chancellor of the Exchequer Jeremy Hunt to defer the date of the Medium Term Fiscal Plan (originally scheduled for 31 October). The Statement follows the Chancellor’s reversal of the majority of the measures announced in the ‘mini-Budget’ held on 23 September by his predecessor, Kwasi Kwarteng.
- Register here to join our panel on Friday 18 November at 9am as they discuss the announcements and what they could mean for businesses and the economy as a whole.
Visit our dedicated webpage for our reactions and analysis.
Corporate Interest Restriction
The Corporate Interest Restriction ("CIR") rules are an important part of any Group's tax compliance requirements. The rules have been in place for several years, are complex, and can be difficult to apply. There have also been a number of recent changes to how CIR returns and notifications can be submitted to HMRC, and the information that is required. In the run up to what is for many a key filing deadline at the end of December, it will be important to consider the CIR position as early as possible, making sure notifications have been submitted and elections considered where necessary. Read more for some considerations and how we can help with CIR modelling, calculations, elections and preparation or review and submission of returns.
In search of purpose
This note examines some of the themes emerging from recent Tribunal cases on the use of targeted anti-avoidance rules to question whether or not transactions have a main purpose of tax avoidance, which may be of assistance to taxpayers who are considering transactions or who are contemplating the prospect of a HMRC enquiry in this area.
Treaty updates
- New Luxembourg/UK double tax treaty brought into effect
SI 2022/1055, laid before Parliament on 12 October 2022, brought into effect a new double tax treaty agreed between the UK and Luxembourg. The new treaty largely updates existing provisions to bring them into line with the OECD Model tax convention on income and capital, and includes the BEPS minimum standards.It also deals with the allocation of taxing rights for various purposes. This explanatory memorandum provides a breakdown of the 2022 update, on an article-by-article basis. - Double Taxation Treaty Passport Scheme register
HMRC has updated the register of overseas corporate lenders who are passport holders for Double Taxation Relief on UK loan interest. The register has been updated with 97 additions, 2 amendments and 50 removals.
HMRC Manual updates
- CTM60310 - Close companies: tests: 35% or more voting power held by public
An update has been made to the Corporate Tax Manual, at CTM60310, relating to the close company (35% or more voting power held by public) test.
Economic Crime and Corporate Transparency Bill 2022
HM Treasury has added a factsheet on beneficial ownership to its series covering the different measures contained in the Economic Crime and Corporate Transparency Bill 2022. View it here.
EU
EU Tax News - July/August 2022
EU tax news is a bimonthly newsletter with summaries of all the relevant ECJ and national court cases and decisions, and EU policy initiatives related to EU direct tax law and state aid. The newsletter is prepared by members of PwC's EU direct tax group (EUDTG) from across Europe. Read the latest edition here.
ELTIF Regulation amendments: A provisional agreement has been reached
On 19 October 2022, a little less than a year after the Commission presented its original proposal to amend the European Long-Term Investment Funds (“ELTIF”) Regulation (“Regulation”) and following a month of negotiations, the European Parliament and the Council, under the Czech presidency, have reached a provisional agreement on the amendments of the Regulation to make these investment funds more attractive. 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 24 October includes: 1) EU Parliament’s FISC: Reform of corporate taxation & lessons learned from the Pandora Papers; 2) CFE ECJ TaskForce Opinion Statement on the EFTA Court decision in Case E-3/21, PRA Group Europe; 3) UN Committee of Experts on International Cooperation in Tax Matters: 25th Session; 4) 2022 Global Forum Plenary Meeting: 9 – 11 November; and 5) Register now: Conference Targeting the ‘Bad Apples: Enablers of Tax Avoidance’ (Zagreb, 2 December 2022). Visit their latest news page here. - CFE issues opinion statement on PRA Group Europe case
The CFE ECJ Task Force has issued an Opinion Statement on the EFTA Court decision of 1 June 2022 in Case E-3/21, PRA Group Europe, on the discriminatory interaction between the “interest barrier” and group contributions.
OECD
MLI
- Hong Kong SAR will soon implement the MLI
To give effect to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (Multilateral Instrument or MLI) in Hong Kong SAR, an order was gazetted on 30 September 2022 and tabled at the Legislative Council on 19 October 2022 for negative vetting. Hong Kong SAR has listed 39 comprehensive double taxation agreements as treaties covered by the MLI. The provisions of the MLI will have effect in Hong Kong SAR on 1 April 2023 (for taxes withheld at source) or 1 April 2024 (for other taxes) at the earliest. Read more in this PwC news flash. - MLI effective for Lesotho from 1 November
The BEPS Multilateral Instrument is due to become effective from 1 November 2022 for African nation Lesotho, with the provisions effective immediately for the country's tax agreements with the UK, Seychelles, and Mauritius, and from 1 January 2023, for its treaty with South Africa. Lesotho has also listed its treaties with Eswatini and Botswana as covered agreements for the purposes of the BEPS MLI but both territories have yet to sign up to the pact.
See https://oe.cd/mli.
OECD’s second tax morale report focuses on role of MNEs and the Big Four
The OECD’s report Tax Morale II: Building Trust between Tax Administrations and Large Businesses seeks to identify ways tax administrations, multinational enterprises (MNEs), the Big Four professional services networks (Deloitte, EY, KPMG, and PricewaterhouseCoopers), and others could enhance voluntary compliance. There are a lot of best practices and new opportunities identified alongside what it calls ‘common challenges.’ This Tax Policy Alert provides a few selected extracts.
OECD amends Common Reporting Standard to expand scope and enhance reporting
The OECD recently published Amendments to the Common Reporting Standard (CRS) to expand its scope to include digital financial products, such as specified electronic money products and central bank digital currencies (CBDCs). In coordination with the release of the Crypto-Asset Reporting Framework (CARF), changes also are made to the definitions of “financial asset” and “investment entity” so that the CRS covers derivatives that reference crypto-assets and are held in custodial accounts and investment entities investing in crypto-assets. Read more in this PwC Tax Insights.
15th meeting of the Global Forum on Transparency and Exchange of Information for Tax Purposes
The 2022 Global Forum plenary meeting will be held at FIBES Conference and Exhibition Centre in Seville, Spain, from Wednesday 9 to Friday 11 November 2022. The three-day meeting will bring together ministers, other high-level authorities and delegates from more than 100 member jurisdictions. The event is jointly organised by the Global Forum and the Spanish Ministry of Finance and Civil Service (Ministerio de Hacienda y Función Pública). The meeting will be broadcast live and will be streamed here.
Other territories
International
International Tax News - September 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) UK government reveals how the mini-budget impacts multinational companies; 2) Uruguay proposes changes to corporate income tax rules; 3) New Zealand tax authority held consultation on potential implementation of Pillar Two; 4) Hong Kong proposes refinements to foreign source income exemption regime.
Digital tax byte
The latest addition to our series of brief insights into the workings of the UK and supranational bodies reviewing the taxation of digitalisation of business. The latest edition, from 25 October, includes the publication of draft Pillar 2 legislation in the Netherlands, an update on various VAT issues to consider in the Gulf Cooperation Council states and the release by the OECD of a Crypto Asset Reporting Framework (and update to CRS for financial institutions). It also covers a ruling outlawing Maryland's state digital advertising tax, the likely implementation of the Danish media cultural contribution and Turkish investigations into cloud and software licensing services.
Environmental, Social and Governance (ESG)
- Chief Sustainability Officers: What it takes to lead Driving progress on the ESG agenda
Across UK boardrooms there’s growing consensus on the need for a Chief Sustainability Officer (CSO). More than one third of large UK businesses are thought to have a CSO in post, something which has accelerated in recent years. But with no rulebook, and a growing list of environmental, social and governance (ESG) concerns for businesses, how can CSOs create lasting change? Read more. - Vietnam ESG Readiness Report 2022: From ambition to impact
PwC Vietnam and the Vietnam Institute of Directors (VIOD) jointly conducted a survey earlier in the year to find out how businesses in Vietnam are (in reality) approaching and handling ESG matters. Where are these companies on the ESG journey? What are they thinking and feeling about ESG and the imperative for green growth? What support is needed to move the needle on ESG? Find out more in this Vietnam ESG Readiness report 2022.
Visit our dedicated ESG webpage.
Australia
Australian Federal Budget
The Australian Federal Budget, which was released on 25 October, announces Australia’s fiscal outcomes and spending initiatives, as well as significant proposed tax changes. The fiscal outcomes show that Australia’s economy remains robust. The tax changes and spending measures could significantly impact businesses investing into Australia. Read our PwC Tax Insights. Visit PwC Australia’s Budget webpage for further tax insights and analysis .
- Multinational tax reforms confirmed
The Budget delivers on the Government’s pre-election commitment to implement a package of measures focused on multinational business tax reforms - some of the most significant and far-reaching tax integrity measures we’ve seen in years. Read more. - Business taxes
With the focus firmly on multinationals in this Federal Budget and progressing the Government’s election commitment to remove customs duty and Fringe Benefits Tax for certain zero or low emissions vehicles, there is very little else in the way of tax measures for business in general. Read more.
Belgium
See here for latest updates.
Budget includes temporary minimum tax, abolishes NID for some & amends FTC on royalties
The Belgian Government recently reached agreement on the federal budget. Key topics that shaped the agreement include addressing the ongoing energy crisis, limiting the budgetary deficit, and stimulating employment. The budget contains several important tax, energy, and business competition measures. The agreed-upon measures now must be enacted into law and go through the required parliamentary procedure before they can be published into the Official Gazette and enter into force on 1 January 2023. Read more in this PwC Tax Insights.
Podcast: Looking ahead at tax policy in uncertain times
This podcast is the first of a series of podcasts dealing with the most pressing concerns for business in today’s economic environment. Listen here.
Canada
OECD releases amendments to the Common Reporting Standard
The OECD recently released amendments to the Common Reporting Standard (CRS). Participating jurisdictions, including Canada, will need to agree to these amendments and update their domestic legislation (i.e. for Canada, Part XIX of the Income Tax Act) to implement the more significant changes. While this process is expected to take at least 12 to 18 months, Canadian financial institutions should start planning for the policy, procedural and operational changes that will be required. This PwC Tax Insights provides details on the amendments to the CRS and highlights some of the more significant changes for Canadian financial institutions.
Germany
Trade tax liability of real estate trading partnership not before acquisition of first property
The Supreme Tax Court decided that the actual trade tax liability of a real estate trader arises at the earliest with the conclusion of the purchase agreement for a first property. It is only after the completion of the purchase that he is in a position to offer his services on the market. Read more in this PwC blog.
Hong Kong
Hong Kong SAR will soon implement the MLI
To give effect to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (Multilateral Instrument or MLI) in Hong Kong SAR, an order was gazetted on 30 September 2022 and tabled at the Legislative Council on 19 October 2022 for negative vetting. Hong Kong SAR has listed 39 comprehensive double taxation agreements as treaties covered by the MLI. The provisions of the MLI will have effect in Hong Kong SAR on 1 April 2023 (for taxes withheld at source) or 1 April 2024 (for other taxes) at the earliest. Read more in this PwC news flash.
Ireland
Ireland publishes Finance Bill 2022
The Irish Department of Finance recently published Finance Bill 2022, which would set into law the measures announced as part of the Irish budget last month. While the amendments, as expected, are primarily focused on personal taxes and the cost of living, the Bill does feature a provision amending the R&D tax credit and includes certain other business tax measures. Read more in this PwC Tax Insights.
Korea
Korean Tax Update
Topics covered in this edition include: 1) NTS Audit Direction for the Second Half of 2022; 2) Foreign Financial Account Reporting Marks a Record High since 2018; 3) Korea Customs Service Announced Measures to Boost the Growth of Duty Free Retail Business; and 4) Rulings update.
Lesotho
MLI effective for Lesotho from 1 November
The BEPS Multilateral Instrument is due to become effective from 1 November 2022 for African nation Lesotho, with the provisions effective immediately for the country's tax agreements with the UK, Seychelles, and Mauritius, and from 1 January 2023, for its treaty with South Africa. Lesotho has also listed its treaties with Eswatini and Botswana as covered agreements for the purposes of the BEPS MLI but both territories have yet to sign up to the pact. See https://oe.cd/mli.
Luxembourg
Luxembourg draft budget law 2023
The 2023 budget was unveiled on 12 October 2022, and the related bill, 8080, was released by the Luxembourg government. Aside from several measures designed to reinforce purchasing power, continue efforts to dampen inflation in the property market, and to support the country’s journey to net-zero, the Budget introduced a clarification on how the reverse hybrid rules should function, as well as new official deadlines for filing of tax returns for individuals, corporate tax, municipal business tax and net wealth tax. Read more in this PwC news item.
New regulatory requirements for Luxembourg Credit Institutions and Luxembourg branches of non-EU credit institutions linked to the new CSSF Circular 22/821 (Long Form Report)
The Commission de Surveillance du Secteur Financier (CSSF) recently issued Circular 22/821 whereby the long form report following the requirements of Circular 01/27 as amended, is replaced by a self-assessment questionnaire (SAQ) to be completed by the credit institutions and the Luxembourg branches of non-EU credit institutions (the institutions). It also introduces Agreed Upon Procedures (AUP) reports to be issued by the réviseurs d’entreprises agréés (REA) of the institutions. Only institutions closing their financial year on or after 31 December 2022 are subject to this new Circular 22/821. Read more in this PwC news item.
Malta
Malta announces tax cuts in 2023 Budget
The Minister for Finance and Employment presented the Budget for 2023 on 24 October. Among the various tax relief measures, it was announced that the reduced stamp duty rate on certain transfers of family businesses and the intra-group transfer of capital allowances for certain companies will be extended further. Visit PwC Malta’s dedicated Budget webpage for further insights.
Netherlands
Supreme court decision on dynamic treaty interpretation
In a recent judgment, the Supreme Court ruled that limited meaning (‘beperkte betekenis’) should be given to the OECD model tax convention commentary of a later date, if this commentary is not merely meant as a 'specification or clarification' (‘precisering of verduidelijking’) of a previously concluded tax treaty. The case at hand concerned the interpretation of the concept of employer as part of the employment income article in the treaty for the avoidance of double taxation between the Netherlands and Germany. Read more in this PwC news item.
Portugal
Portugal 2023 Budget proposal introduces a crypto asset tax framework and new tax incentives
The 2023 Budget proposal was recently submitted to the Portuguese Parliament. This follows the 2022 Budget, which was published in June after elections in January. In general, the government is focusing on increasing companies’ competitiveness by fostering equity and supporting increased costs resulting from current world economic conditions. One of the Budget’s most impactful tax measures is a new tax framework for crypto assets. Read more in this PwC Tax Insights.
Switzerland
For the latest updates on current topics, see this PwC Switzerland Insights page.
US
Interest capitalisation provisions may reduce Section 163(j) interest disallowance
The 2017 tax reform act amended Section 163(j) to limit the amount of business interest a taxpayer may deduct. A taxpayer may reduce the amount of disallowed interest by increasing the amount of capitalised interest, which is not subject to disallowance. Several provisions under the Code - including Sections 263(a), 263A, and 266 -- require or allow taxpayers to capitalise interest to property. Interest that is capitalised into tangible property is recovered over a period of time as depreciation, while interest that is capitalised into inventory is recovered as cost of goods sold. Read more in this PwC Tax Insights.
California will require marketplace facilitators to collect information from high-volume sellers
California recently enacted S.B. 301, requiring the collection of certain information from “high-volume third-party sellers” which, in any continuous 12-month period during the previous 24 months, have 200 or more sales of “new or unused consumer products” and at least $5,000 in gross revenue from marketplace sales to California residents. The legislation is intended to identify stolen goods resold through marketplaces. “Consumer product” means tangible personal property that is distributed in commerce and normally used for personal, family, or household purposes. Read more in this PwC Tax Insights.
Policy on Demand series
- Early voting, campaigning, and the state of play
Early voting in some states is underway and heavy hitters are on the campaign trail. In this episode, Todd Metcalf and Mark Prater share their thoughts on recent developments and trends impacting the state of play for this election. - Week in Review
- In this episode from 28 October, Janice Mays discusses how Republicans recently foreshadowed their oversight issues if they take control of Congress in the midterm elections. She discusses the question she has received most which is whether Congress will address Section 174 during a lame duck session. She encourages companies to focus on the 4 November deadline for submitting comments to Treasury and the IRS on the energy tax credits.
- In this episode from 21 October, Mark Prater talks about his key takeaways from this week - both regulatory and legislative - and answers the question he received most this week: when and what will we see in guidance on the complex and consequential book minimum tax.
Cross-border tax talks
- Pillar Two: A German Perspective
In this episode from 26 October, Doug McHoney (PwC Global International Tax Services Leader) is at PwC’s Global Transfer Pricing Conference in Berlin, Germany. Doug honours Ocktoberfest by donning lederhosens to host Arne Schnitger, PwC International Tax Partner based in Berlin. Arne hosts the German tax podcast Frisch Serviert - der Steuerpodcast. They discuss Pillar Two issues in the EU, the US, and Germany, the differences approaches each jurisdiction takes when calculating the tax, the US book minimum tax, GILTI, refundable credits, allocation of expenses, the German implementation process, tax return filing, operational readiness, German anti-hybrid rules, and German Section 49.
Tax Readiness webcast series
- Tax Readiness webcast: Creating value - Is tax aligned to support and enhance your business' strategic priorities?
Register here to join our panel of specialists on Thursday 3 November at 6pm, as they discuss innovative ways to create operational efficiencies and strategically reduce costs. We will review the types of business transformations companies are undertaking and how tax serves as a strategic business partner within your organisation to enhance the value of those efforts. - Tax Readiness: Building a productive and resilient tax reporting strategy
Watch the recording of this webcast held on 27 October, where our panel discuss how practical, sustainable data and reporting solutions can help ease workforce pressures (e.g., widening labour gap, economic uncertainty, inflation, etc.) and compliance challenges moving forward. Watch here. - Tax Readiness: ESG Tax Incentives in the Inflation Reduction Act
In this webcast held on 4 October, our panel of specialists discussed the various tax and investment opportunities and how companies should consider these credits as a part of their broader ESG goals and strategy. Watch here.
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
Vietnam ESG Readiness Report 2022: From ambition to impact
As reported above, PwC Vietnam and the Vietnam Institute of Directors (VIOD) jointly conducted a survey earlier in the year to find out how businesses in Vietnam are (in reality) approaching and handling ESG matters. Where are these companies on the ESG journey? What are they thinking and feeling about ESG and the imperative for green growth? What support is needed to move the needle on ESG? Find out more in this Vietnam ESG Readiness report 2022.
Zambia
2023 Zambia Budget
The Government of Zambia announced numerous significant changes to the country's tax regime, including the mining tax regime, in a Budget released on 30 September. Read more in this PwC bulletin.