Two weeks to 29 March 2024
Welcome to the latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
UK
Pillar Two
- Client webcast: Pillar Two - From readiness to reality, 18 April
We will be holding a webinar session on Pillar Two on Thursday 18 April (between midday and 1pm). Matt Ryan, UK Pillar Two Leader, will be joined by Andy Wiggins, our Global Tax Accounting Leader and specialists from our International Tax Practice to discuss three key areas, as well as exploring how UK-parented businesses are implementing the necessary steps for Pillar Two financial reporting through to compliance. Register here to join the discussions. -
Updated PwC Data Input Catalog
PwC’s Pillar Two Data Input Catalog defines the data requirements for Pillar Two, giving in-scope MNEs a comprehensive understanding of the amount of work that lies ahead of them and can help MNEs anticipate the unique challenges they will face. We recently published an updated version of this Data Input Catalog to account for the OECD administrative guidance released in December 2023. This is available to download directly on our Pillar Two website, along with other resources such as the Pillar Two Country Tracker. Please get in touch with your usual PwC contact if you would like to discuss this or anything else in relation to Pillar Two.
HMRC Manual & guidance updates
- Corporate Finance Manual
- Updated 21 March
CFM51095 Derivative Contracts: Non-UK resident companies starting to carry on a UK property business - New section added - Where an election has been made into the Disregard Regulation. - Updated 20 March
CFM96710 Interest restriction: joint ventures: overview - New sentence added to Group-interest and Group-EBITDA section - CFM97270 Interest restriction: public infrastructure: meaning of insignificant for members of a joint election - New paragraph added at the bottom of example 1
- CFM97320 Interest restriction: public infrastructure: limited recourse of financial instruments - New example 2 added
- CFM98693 Interest restriction: administration: UK group company: interaction with "loss-buying" rules in CTA10/PT14 - second to last paragraph updated.
- Updated 21 March
- Corporate Intangibles Research and Development Manual - updated 18 March
Addition of page CIRD81805 - Restriction of nominations and assignments
Case law update
- Upper tribunal considers whether distributions by a non UK company are ‘dividends not of a capital nature’
In Beard v R & C Commrs [2024] BTC 509, the Upper tribunal considered whether payments made by a company incorporated in Jersey (and domiciled in Switzerland) out of its share premium account constituted ‘dividends not of a capital nature’ for UK tax purposes (and were therefore chargeable to income tax in the UK). The UT dismissed the taxpayer’s appeal, broadly affirming the earlier decision of the FTT and the principles established by the UT in the First Nationwide case. You can read the decision here. - Upper tribunal rules non-doms not liable to UK tax on payments an offshore company they control made to a third party offshore company
In R & C Commrs v Sehgal & Anor [2024] BTC 510, the Upper tribunal (UT) considered whether the respondents (UK resident but non domiciled individuals) should be liable on the remittance basis in respect of certain payments made by an offshore company controlled by them to a third party offshore company, in consequence of which, amongst other things, the respondents were released from liability under an indemnity they had given on a sale of shares in a UK company which they had previously controlled. The UT found that, whilst the earlier FTT decision contains errors of law, on a correct analysis it agreed with the final result and accordingly the appeal was dismissed. You can read the decision here. - FTT denies Barclays a capital loss deduction for loan arrangement
In Barclays Bank plc [2024] TC 09115, the FTT ruled that Barclays must repay costs associated with an £800 million corporate tax deduction because it improperly valued reserve capital instruments (RCIs) used to entice Saudi funding during the 2008 financial crisis. Read the full decision.
EU
Reform of the Statute of the Court of Justice adopted
The European Council recently gave its final green light to the reform of the Statute of the Court of Justice of the European Union, aimed at ensuring more effective administration of justice by the Court of Justice and the General Court. The reform has been undertaken in the context of a steady increase in the number of cases brought before the Court of Justice. It takes advantage of the capacities of the General Court to deal with additional workload as a result of a previous reform, which led to an increase of the number of judges at the General Court. See this press release.
ECJ AG weighs in on Dutch intra-group lending tax dispute
Advocate General (AG) Nicholas Emiliou of the Court of Justice of the European Union (the CJEU) rendered his opinion on 14 March in case C-585/22. The case concerned the compatibility of the Dutch interest deduction limitation anti-profit shifting rule with EU law.
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 25 March includes: 1) United Nations (UN) 28th Session of the Committee of Experts on International Cooperation in Tax Matters; 2) OECD Publishes 6th Peer Review Report on Prevention of Treaty Shopping; 3) CFE Forum | 18 April 2024 | Brussels: Sharing the Tax Pie; 4) TAXUD Consultation on Tax Dispute Resolution Mechanisms in the EU; and 5) EU Updates Taxation Trends Data. Visit their latest news page here.
OECD
Tax Readiness: Pillar Two is here! How businesses are responding to the new GloBE rules (New DF 01b)
Beginning in 2024, Pillar Two became effective in many jurisdictions just after more OECD administrative guidance was published in December 2023. This new guidance is intended to clarify the operation of the GloBE rules. In this webcast replay from 27 March, our panellists will explore some common traps for the unwary, the new anti-arbitrage rules for the Transitional CbCR Safe Harbour; how businesses are developing a holistic data and technology strategy, and what steps businesses should be taking to ensure compliance.
Prevention of Tax Treaty Abuse – Sixth Peer Review Report on Treaty Shopping
The OECD released the latest peer review report assessing jurisdictions' efforts to prevent tax treaty shopping and other forms of treaty abuse under Action 6 of the OECD/G20 BEPS Project on 20 March. A revised peer review document forming the basis of the assessment of the BEPS Action 6 minimum standard was also released. Read more in this OECD item.
New peer review reports on transparency and exchange of information on request
The Global Forum on Transparency and Exchange of Information for Tax Purposes has published eight new peer review reports assessing transparency and the exchange of information on request for Armenia, Bulgaria, Cameroon, Egypt, Georgia, Kenya, Malta and Romania.
MLI
Latest updates, the text of the BEPS Convention, the explanatory statement, background information, database, and positions of each signatory and parties are available at https://oe.cd/mli
Other territories
International
International Tax News - March 2024
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) Australia releases Pillar Two exposure draft legislation; 2) Germany enacts significant changes to interest deduction limitations; 3) Italy implements investment management exemption; and 4) Singapore implements global minimum tax effective January 2025.
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 27 March, we cover:
- progress in the WTO in extending the moratorium on duties on e-commerce;
- two Australian developments for those dealing with software or intangibles more generally;
- appeals against the US State of Maryland's digital advertising tax will be heard in the coming months;
- we also reflect on the extension of the DST agreement between the US and Turkey.
Environmental, Social and Governance (ESG)
- How can businesses reduce energy costs, bolster efficiency and improve commercial performance?
From harnessing green growth to leveraging digital transformation, discover how businesses can move away from short-term, reactive measures and embrace a transformative approach to energy management. Read more.
Australia
Exposure draft legislation released for Pillar Two in Australia
On 21 March 2024, the Australian Treasury released for consultation until 16 April, exposure draft legislation to implement a global and domestic minimum tax in Australia. As part of implementing this measure, exposure draft subordinate legislation in the form of Rules, and accompanying explanatory materials have also been released. In addition, Treasury has released a consultation paper seeking feedback on interactions with Australia’s hybrid mismatch rules, foreign hybrid entity rules, foreign income tax offsets, and controlled foreign company rules.
Australia’s new thin capitalisation regime
On 27 March 2024, Treasury Laws Amendment (Making Multinationals Pay Their Fair Share - Integrity and Transparency) Bill 2023 completed its passage through Federal Parliament. This Bill contains the amendments to introduce a new thin capitalisation regime that will apply to most taxpayers with effect for income years commencing on or after 1 July 2023. These measures have been through a number of iterations over the past year.
Barbados
Barbados 2024/25 Budget
The Prime Minister of Barbados and Minister of Finance, Economic Affairs and Investment presented the Government’s Budgetary Proposals and Financial Statement 2024 covering the fiscal period 2024 to 2025 on Monday 18 March 2024. The corporate tax reforms announced by the Prime Minister include: 1) the creation of a corporate tax rate of 5.5% applicable to resident entities registered under the Small Business Act; 2) the creation of a corporate tax rate of 9% applicable to the majority of resident entities; 3) the imposition of a 15% top-up tax applicable to resident entities that are members of in-scope MNEs; 4) the implementation of Job and Research & Development refundable tax credits; and 5) the creation of a the new Intellectual Property (IP) tax regime. Read more in this PwC budget alert.
Belgium
See here for latest updates.
Belgian draft law amending the law introducing a minimum tax for multinational companies
On 6 March 2024, the Belgian government submitted a draft law to parliament, which is intended to amend the law of 19 December 2023 on the introduction of a minimum tax for multinational companies and large domestic groups. If the draft law is approved, it would be applicable to financial years starting on or after 31 December 2023. Read more in this PwC alert.
In this Tax Bites Podcast, we delve again into the intricate world of Pillar 2, what countries have done so far and we put a spotlight on Belgium’s implementation of the new rules. Join us as we dissect the latest updates and explore the nuances of Belgium’s implementation of this global tax initiative.
New wave of Belgian transfer pricing audits
The Belgian tax authorities have recently initiated a new wave of transfer pricing audits. Many taxpayers have already or will soon receive an in-depth questionnaire requesting bulk taxpayer information in relation to their transfer pricing arrangements. Read more in this PwC news item.
Brazil
Brazil Tax Reforms: muito complicado!
In this Cross-border Tax Talks episode from 26 March, Doug McHoney (PwC’s International Tax Services Global Leader) is in São Paulo, Brazil for the first Latin American recording of the CBTT with PwC Brazil’s International Tax Leader Dr. Romero Tavares. Doug and Romero discuss what makes Brazil’s tax system so unique – from its transfer pricing rules to its full inclusion regime. They also dive into expected Brazilian tax changes, the many acronyms that make up the indirect tax system, Pillar One, and what effect Pillar Two will have on Brazil’s taxpayers.
Germany
Bundesrat approves the Mediation Committee compromise on the text of the Growth Opportunities Act
On 22 March 2022, after tough negotiations, the Bundesrat (Federal Council) approved the compromise reached by the Mediation Committee on the text of the Act to Strengthen Growth Opportunities, Investment and Innovation as well as Tax Simplification and Fairness (Growth Opportunities Act). Read more in this PwC blog.
Withholding tax on income of foreign artists performing in Germany
In a recent ruling, the Supreme Tax Court has commented on the tax treatment of fees paid to artists with limited tax liability for their performances in Germany. A key criterion for tax deduction at source is the intention to make a profit and the commercial objective of the performances in Germany. Read more in this PwC blog.
Hong Kong
Inland Revenue (Amendment) (Tax Concessions for Intellectual Property Income) Bill 2024 gazetted
The Hong Kong Government published the Inland Revenue (Amendment) (Tax Concessions for Intellectual Property Income) Bill 2024 in the Gazette on 28 March to implement the "patent box" tax incentive, thereby encouraging enterprises to forge ahead with more research and development (R&D) activities and promote intellectual property (IP) trading, strengthening Hong Kong's competitiveness as a regional IP trading centre. Read more in this press release.
India
Lower tax rate for royalties and FTS under the India-Spain Double Tax Treaty notified
The Ministry of Finance recently issued a notification invoking the most-favoured nation (MFN) clause under India’s double tax treaty with Spain. As per the notification, the Central Government modified the treaty by importing a lower tax rate of 10% for royalties and fees for technical services (FTS) from the India-Germany treaty. Read more in this PwC alert.
Ireland
Payment and receipt of interest and royalties without deduction of income tax
The Irish Revenue has updated Tax and Duty Manual 08-03-06 ‘Payment and receipt of interest and royalties without deduction of income tax’ to:
- reflect the introduction of the outbound payments defensive measures contained in Chapter 5 of Part 33 of the Taxes Consolidation Act 1997;
- provide additional guidance in respect of the application of interest withholding tax to interest paid to Irish partnerships and foreign tax transparent entities; and
- provide additional guidance on payments of interest to tax transparent entities where members of those entities may avail of the rate of withholding tax provided for under the terms of a double taxation agreement.
Controlled Foreign Company rules
The Irish Revenue has updated Chapter 11 of Tax and Duty Manual Part 35b-01-01 - Controlled Foreign Company (CFC) Rules, which refers to section 835YA of the Taxes Consolidation Act 1997 and concerns Irish defensive measures in respect of the CFC rules, to reflect an amendment introduced by Finance (No. 2) Act 2023. This manual will also be updated in due course to reflect Pillar Two related consequential amendments made to the CFC rules in Finance (No. 2) Act 2023.
Parliamentary Budget Office (PBO) publishes report contextualising the growth of Ireland's Corporation Tax (CT) receipts
The Parliamentary Budget Office (PBO) has published a report contextualising the growth of Ireland's Corporation Tax (CT) receipts. It highlights the risks affecting CT, including concentration risk, volatility risk and the implications of international tax reforms. It also discusses tax windfalls, transfer pricing, and places Ireland’s CT yield in an international context. Read more in this press release.
Netherlands
Dutch Supreme Court on interest deduction and finance costs
The Dutch Supreme Court recently ruled in a case about interest deduction on shareholder loans and the tax treatment of financing costs (arrangement fees). The case concerns a private equity structure with which a company was purchased. According to the Supreme Court, the interest is not deductible to the extent that the structure for the purchase was set up to avoid a rule to restrict interest deduction (Article 10a of the Dutch Corporate Tax Act 1969). In addition, the Supreme Court decided in this judgement that the one-off costs for taking out a loan may be charged directly to the result, unless this includes prepaid interest. Read more in this PwC news item.
Offsetting WHT only in developing countries is EU-compliant
The Dutch Supreme Court has ruled that Article 36 of the 2001 Unilateral Decree for the Avoidance of Double Taxation (the Decree) is not contrary to the free movement of capital. According to Article 36 of the Decree, a credit against Dutch corporate income tax is provided for dividend, interest, royalty income paid from a payer resident in a developing country and subject to tax there, whether or not at the source. Read more in this PwC news item.
The importance of the dividend tax repurchase facility
Dutch listed companies are currently allowed to repurchase their own shares without being subject to dividend tax, under certain conditions. However, this share buyback facility for dividend tax will be abolished starting from 1 January 2025, unless new legislative measures are introduced. This provides a good opportunity to explain the importance of the share buyback facility and the potential consequences of its abolition. Read more in this PwC news item.
New Zealand
Tax Tips - March 2024
In this edition of Tax Tips we cover recent changes to the Tax Bill currently before Parliament, including a number of proposals which support the Government’s election promises including: 1) Trustee Tax rate; 2) Pillar Two; 3) Property tax settings rewind; 4) Proposals to tax non-resident online casinos; 5) Tax changes for donated trading stock; and 6) New GST rules for platform operators that provide short stay accommodation, ride sharing, or food/beverage delivery services.
Passage of major tax bill welcomed
The passing of legislation giving effect to coalition Government tax commitments has been welcomed by Finance Minister Nicola Willis. The bill includes enacting an OECD-led global tax initiative aimed at ensuring large multinationals pay a minimum tax rate of 15 per cent in participating countries and making adjustments to the tax treatment of back-dated lump sum payments from ACC and MSD to ensure they are taxed fairly. The bill is expected to pass into law before 1 April 2024. Read more in this press release.
Switzerland
For the latest updates on current topics, see this PwC Switzerland Insights page.
Thailand
Draft law on Pillar Two in Thailand issued for public consultation
The Revenue Department recently published a consultation paper in the form of a proposed draft law concerning the Pillar Two global minimum tax rules for Thailand. The draft law closely follows the guidance issued by the OECD under the Global Anti-Base Erosion (GloBE) Rules and proposes the three tax-charging mechanisms be included which will be applicable to Thai taxpayers falling within the scope of the rules. They are: 1) Domestic Minimum Top-up Tax (DMTT), 2) Income Inclusion Rule (IIR); and 3) Undertaxed Payments Rule (UTPR). Read more in this PwC alert.
Tax characteristics of the new merger
The Revenue Department recently issued a tax ruling regarding the tax consequences of an amalgamation under Section 1238(2) of the Civil and Commercial Code (CCC) (a “new merger”). In the ruling, the Revenue Department state that a new merger under Section 1238(2) of the CCC, in which one company continues to exist while the other company is merged into the existing company, does not fall within the definition of an amalgamation of limited companies under Section 73 of the Revenue Code. Instead, it has the same characteristics as an entire business transfer of trade for tax purposes, making Section 74(1)(c) of the Revenue Code applicable. Read more in this PwC alert.
US
Revised Form W9 provides clarity, requires disclosure
The IRS recently released a revised version (dated March 2024) of Form W-9, Request for Taxpayer Identification Number and Certification, and Instructions for the Requester of Form W-9. While the Form W-9 remains substantially unchanged, the revision to line 3a, which provides the federal tax classification of the provider of the form, is intended to provide clarity for limited liability companies (LLCs). New line 3b requires a flow-through entity to indicate whether it has direct or indirect foreign partners, owners, or beneficiaries when it provides the Form W-9 to another flow-through entity. Read more in this PwC Tax Insights.
Policy on Demand series
- Options diminishing for tax bill
Congress is in the middle of a two-week recess, but behind the scenes, tax staffers continue to work. In this episode from 1 April, Scott McCandless, a former tax staffer himself, discusses what’s happening in the Senate with the House-passed tax package. - IRS funding cuts, tax bill in Senate, where do we go from here?
Another government shutdown was averted over the weekend with enactment of a $1.2 trillion appropriations package, which rescinds $20 billion of IRS funding. Meanwhile, Senate Majority Chuck Schumer started the process of putting the House-passed tax bill on the Senate calendar. In this episode from 25 March, Mark Prater shares his insights on where we go from here. - Election Watch: 21 March 2024
In this episode from 21 March, Roz Brooks joins Janice Mays and Rohit Kumar on this month’s Election Watch to focus on the Ohio Republican Senate primary, look ahead to how state elections will shape the administration, and how the election will impact regulatory focus. - Direct pay regs provide clarity, but more guidance needed
In this episode from 21 March, Randa Barsoum discusses recently-issued regulations on direct payment of certain clean energy tax credits and the CHIPS Act advanced manufacturing investment credit and additional guidance on key issues needed by companies. - Week in Review
- 29 March - On today’s episode, the topics – and tensions – may sound like they are on repeat (and they are), but important as ever: the clock is ticking (again) on government funding and the future of the tax bill will depend on Senate Majority Leader Schumer’s processing the bill.
- 22 March - Chances for passage of the House-passed tax bill languishing in the Senate dim considerably if it is not passed by April 15. In this episode, Pam Olson discusses how failure to pass the bill likely will raise concerns about tax policy negotiations in 2025.
Tax Readiness webcast series
- Tax Readiness: Pillar Two is here! How businesses are responding to the new GloBE rules (New DF 01b)
Beginning in 2024, Pillar Two became effective in many jurisdictions just after more OECD administrative guidance was published in December 2023. This new guidance is intended to clarify the operation of the GloBE rules. In this webcast replay from 27 March, our panellists explored some common traps for the unwary, the new anti-arbitrage rules for the Transitional CbCR Safe Harbour; how businesses are developing a holistic data and technology strategy, and what steps businesses should be taking to ensure compliance. - Tax Readiness: Understanding the Office of Appeals as IRS expands enforcement
Join our panel of PwC specialists with decades of Appeals experience on Wednesday 3 April at 7pm, as they discuss what you should know about resolving tax disputes involving large corporations and high-income individuals with the Office of Appeals, with a particular focus on changes over recent years. Register 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.