Two weeks to 29 October 2021
Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
Autumn Budget - 27 October
On Wednesday 27 October, the Chancellor presented his second Budget of the year along with a response to the latest economic forecasts and a Comprehensive Spending Review. See our Budget webpage for our reaction videos, expert insights and a recording of our webcast where we discussed the implications of the Budget announcements on business. Further analysis will be posted to our Budget hub as and when it becomes available.
Finance Bill 2021-22
The Finance Bill will be published on 4 November. Explanatory Notes on the Bill will be available in the Vote Office and the Printed Paper Office and placed in the Libraries of both Houses on that day. Copies of the Explanatory Notes will also be available on GOV.UK.
UK agrees transition toward new global tax system
Following the recent OECD announcement, the UK has agreed a route forward to transition away from its Digital Services Tax (DST) towards a new global tax system that will ensure multinationals pay their fair share in the countries where they do business. The deal struck by the UK, US and other European countries outlines a DST-credit system which will bridge the gap between the UK's DST and the start of the new system – which is due to be implemented in 2023. See this Government press release.
Are companies missing out on patent box tax savings?
Companies exploiting patented technology in the UK have been able to benefit from significant tax savings since the introduction of the patent box in 2013. The patent box effectively provides a 10% rate of corporation tax arising from patented technology. Read more.
Tax Treaty updates
- Double Taxation Treaty Passport Scheme register
HMRC has updated its Double Taxation Treaty Passport Scheme register with 42 additions and 6 amendments.
On 14 October 2021, the UK Government published a synthesized text of the country's double tax agreement with Oman, as modified by the BEPS multilateral instrument (BEPS MLI).
Pandora Papers: MEPs call for investigations, clampdowns and new laws
The European Parliament has called for thorough investigations to be launched into any wrongdoing exposed by the Pandora Papers that took place in EU jurisdictions. Adopting a resolution by 578 votes in favor, 28 against, and 79 abstentions, MEPs identified what they see as the most urgent measures the EU needs to take to close loopholes that currently allow for tax avoidance, money laundering and tax evasion on a massive scale. Read more in this press release.
CFE Tax Advisers Europe
CFE Tax Top 5 – Round-up of EU Tax Policy News
The latest edition looks at the following: 1) US, UK & EU countries agree transitional repeal of unilateral digital taxes; 2) Platform for Collaboration on Tax publish 2021 report; 3) Register now: CFE conference on Professional Judgement in Tax Planning on 25 November 2021; 4) EU Commission launches review of EU economic governance; and 5) OECD report on carbon pricing in times of COVID-19.View previous editions here.
As reported in our previous edition, 136 out of the 140 countries of the OECD Inclusive Framework on Base Erosion and Profit Shifting (IF) politically committed to potentially fundamental changes to the international corporate tax system which aim to ensure that multinationals pay a ‘fair share’ of tax irrespective of where their operations are based. Watch this webcast replay (from 20 October) in which our panelists and subject matter specialists discuss the agreement, remaining work and implementation challenges, and what these mean for multinational enterprises, tax authorities, and other stakeholders.
Progress continues in making tax dispute resolution more effective and in improving tax transparency through Country-by-Country reporting
Under OECD/G20 Inclusive Framework on BEPS, 140 jurisdictions have committed to implement minimum standards to improve the taxation of multinational enterprises (MNEs) worldwide. The OECD has released the latest outcomes of the implementation of BEPS Action 13 on the transparency of global operations of large MNEs and BEPS Action 14 on the resolution of tax related disputes between jurisdictions.
- BEPS Action 13: Country-by-Country Reporting – Compilation of 2021 Peer Review Reports
This annual peer review report reflects the outcome of the fourth review which considered all aspects of implementation. It contains the review of 132 jurisdictions which provided legislation or information pertaining to the implementation of CbC reporting.
- BEPS Action 14: Mutual Agreement Procedure – 7 new peer reviews
New peer review reports on improving tax dispute resolution mechanisms have been published for Brazil, Bulgaria, China, Hong Kong, Indonesia, Russia, and Saudi Arabia. Read more in this OECD item.
OECD presents international tax update to G20 Leaders
This report provides an update on the G20’s international tax agenda, including work on addressing the tax challenges arising from the digitalisation of the economy; summarises three reports requested under the Italian G20 Presidency on Tax Policy and Climate Change, Developing Countries and BEPS, and Tax and Fiscal Policies after the COVID-19 Crisis; and includes an update on recent developments in tax transparency and the work on BEPS.
Platform for Collaboration on Tax Progress Report 2021
This report provides a snapshot of the Platform for Collaboration on Tax Partners’ – International Monetary Fund, OECD, United Nations and World Bank Group – co-operation in domestic resource mobilisation during the COVID-19 pandemic. The report highlights that the PCT Partners are committed to deepening their tax collaboration further with a revamped work programme to help countries develop resilient tax systems and better fiscal policies in response to the crisis.
Mexico and Rwanda join regional initiatives for tax transparency
Mexico and Rwanda have joined the Punta del Este Declaration and Yaoundé Declaration respectively, adding their voices to these important regional initiatives for tax transparency and exchange of information for tax purposes. See this OECD item.
Taxation of the digital economy
Keep track of the number of international initiatives that are underway to address the tax problems caused by digitalisation of our economy:
- US compromises with the UK, France, Italy, Spain and Austria on digital services taxes and trade actions
Austria, France, Italy, Spain, the UK and the US recently issued a joint statement on a compromise reached regarding digital services taxes and related unilateral measures. It follows the OECD Inclusive Framework statement of 8 October, which contained details on unwinding existing DSTs and an agreement not to introduce further unilateral measures in the lead-up to the implementation of Pillar One. Read more in this PwC Tax Alert.
- The new international tax framework and Canada’s digital services tax
Deputy Prime Minister and Minister of Finance, Chrystia Freeland, has confirmed Canada’s commitment to the OECD’s international agreement, and announced that Canada still intends to move ahead with legislation finalizing a digital services tax (DST) by 1 January 2022 (as announced in the federal government’s 2021 budget). However, the DST would only be imposed if the multilateral convention implementing Pillar One has not come into force by 31 December 2023. In that event, the DST would be payable as of 2024 in respect of revenues earned since 1 January 2022. Read more in this PwC Tax Insights.
- Digital tax byte
The latest edition from 1 November includes further G20 endorsement of the Inclusive Framework Statement on 8 October. G20 leaders met in Rome 30 and 31 October to discuss leading issues including the project on which they had mandated the OECD to seek agreement on the international tax treatment of the digitalisation of the economy.
- Digital tax megabyte for October 2021
This edition includes announcements around a new OECD/G20 Inclusive Framework Statement on 8 October, while the Irish Budget on 12 October gave a little more detail on Ireland's plans and G20 Finance Ministers gave a brief endorsement. A subsequent agreement then covered transitional relief for DSTs in UK, France, Italy, Spain and Austria while India seems to have indicated it will await 'implementation' of the deal. We also cover updates on the US domestic proposals which are linked to the deal, a Latvian proposal that would have introduced a DST and the news that Canada will progress its DST legislation but hold it in abeyance for now.
ATO’s decision impact statement on the Glencore transfer pricing case
The Australian Taxation Office (ATO) recently released its decision impact statement in relation to the transfer pricing decision in Commissioner of Taxation v Glencore Investments Pty Ltd, affirming that the decision outcome was ‘mostly unfavourable to the Commissioner’. The decision impact statement follows the High Court’s refusal in May 2021 for the Commissioner to apply for special leave to appeal the decision of the Full Federal Court of Australia. Read more.
See here for latest updates.
Belgian government announces measures to transition Belgian economy post-covid
The Belgian Government recently reached an agreement on the Belgian budget. The budget agreement combines a number of measures to transition the Belgian economy after Covid in an environmentally balanced manner. Some points will need further agreement with the social partners, and some measures are taken explicitly in view of the recent surge of energy prices. See this PwC tax news item.
The new international tax framework and Canada’s digital services tax
As reported above, following the OECD’s recent announcement that 136 countries, including Canada, had committed to fundamental changes to the international corporate tax system, Deputy Prime Minister and Minister of Finance, Chrystia Freeland, confirmed Canada’s commitment to this international agreement, and announced that Canada still intends to move ahead with legislation finalizing a digital services tax (DST) by 1 January 2022 (as announced in the federal government’s 2021 budget). However, the DST would only be imposed if the multilateral convention implementing Pillar One has not come into force by 31 December 2023. In that event, the DST would be payable as of 2024 in respect of revenues earned since 1 January 2022. Read more in this PwC Tax Insights.
Colombia enacts tax reform legislation
Tax Reform Bill No. 2155, which incorporates various changes to Colombia’s national tax system, was published on 14 September. The Colombian Government is expected to issue regulations with respect to the tax changes covered in this PwC Tax Insights. Companies investing or carrying out business in Colombia should assess the potential impacts of the tax reform on their operations and capital structures.
Social Democrats, Greens and Liberals ready to start coalition negotiations
On 15 October 2021, the leaders of Germany’s Social Democrats (SPD), climate-friendly Greens and pro-business Free Democrats (FDP) presented their initial exploratory paper which also includes several tax issues. Tax increases are to be largely avoided, no tax cuts are planned. However, the issues addressed so far may still be subject to changes during future coalition negotiations and it should be expected that further topics might yet be brought up. Thus it is still a long way down the road until a joint coalition agreement can be signed since there are still several tricky questions remaining which will have to be brought in line by the acting team players and their political parties. See this PwC tax blog.
Finance Bill 2021
On 22 October 2021, the Irish Government released the Finance Bill 2021, including the necessary legislative provisions to enact tax changes announced in the 2022 Budget as well as other anti-avoidance and technical changes to the tax code. Visit our PwC Ireland Finance Bill 2021 webpage.
- See the key measures likely to affect domestic and international large corporations.
- Read more here on the introduction of interest limitation rules and reverse anti-hybrid rules in Ireland
- Finance Bill 2021 introduces changes relating to ‘Ireland to Ireland’ transactions and the ‘authorised OECD approach’ (AOA) for the attribution of profit to branches. Read more here on the impact and effect of Finance Bill 2021 on Transfer Pricing rules.
Italy issues draft circular on hybrid mismatch arrangements
The Italian Tax Authorities recently launched a public consultation on the draft interpretative Circular Letter which covers the application of the hybrid mismatch arrangements rules. Both Italian and foreign multinationals should consider the potential impact of those rules as currently interpreted by the Draft Circular, proactively analyze their position for Italian tax purposes and document their analysis in case of an audit. Read more in this PwC Tax Insights.
The Malaysian government’s Budget 2022 reflects an inclusive, “Keluarga Malaysia” approach, in line with the policies and strategies outlined in the 12th Malaysia Plan. Budget 2022 focuses on recovery, rebuilding national resilience and catalysing reform, to drive socio-economic recovery activities and the national development agenda. See our webpage for key highlights from the Budget, insights from our tax experts, related publications and more.
Mexico joins regional initiative for tax transparency
Mexico has joined the Punta del Este Declaration, adding its voice to the important regional initiative for tax transparency and exchange of information for tax purposes. See this OECD item.
Decree with clarifications on Anti-hybrid Mismatch rules
On 1 January 2020, the Dutch act implementing the Second EU Anti Tax Avoidance Directive (ATAD2) entered into force. This legislation aims to combat tax avoidance making use of so-called ‘hybrid mismatches’. In practice, this legislation has led to a number of questions. On 11 October 2021, the Ministry of Finance published a Decree which gives answers to some of these questions. The Decree entered into force on 12 October 2021. Read more in this PwC tax news item.
Implementation of the UBO exemption for listed entities
By 10 January 2020, the registration of Ultimate Beneficial Owner (UBO) for corporations and other legal entities within the EU/European Economic Area (EEA) had to be in place, while the deadline for trusts and similar legal arrangements followed two months later. These obligations stem from the fourth and fifth Anti-Money Laundry Directive (the Directive). All corporations and other legal entities incorporated in the EU/EEA must register their UBOs, but the Directive provides for an exemption for listed companies. It is apparent that the UBO exemption has been implemented and/or interpreted in different ways across the EU/EEA. Read more in this PwC tax news item.
US/Norway double tax treaty - US RICs in principle entitled to treaty benefits
The Norwegian Tax Appeal Board issued a decision 4 November 2020 (published 19 April 2021) in which tax treaty benefits for US Regulated Investment Companies (“RIC”) were discussed. In contrast to previous practice, the Tax Appeal Board found that RICs in principle were entitled to treaty benefits. However, the RIC in question failed to pass the Limitation of Benefit clause (LOB) in the tax treaty and was not granted a reduced withholding tax rate. The decision could be of great interest to RICs investing in Norway. Read more in this recent PwC tax blog.
Norwegian Register of Beneficial Owners enters into force on 1 November - what actions needs to be taken now?
On 1 November this year, the requirement for identification of beneficial owners will enter into force. The purpose of the new rules is for public authorities, AML reporting entities and the general public to have better access to information about who actually controls companies in Norway. See this PwC blog for an overview of what actions need to be taken now.
Tax, VAT and accounting implications of Norwegian Public-Private Partnerships (OPS)
In recent years, the Public-Private Partnership-model (“Offentlig privat samarbeid”, OPS) has been frequently used for the construction of Norwegian hospitals, schools and roads. For enterprises seeking to participate in Norwegian PPP-tenders, the model raises distinctive issues under Norwegian tax, VAT and accounting law which bidders must have an awareness of. Read more in this PwC blog.
More digitization in communication between taxpayers and the tax authorities
As part of the broad tax reform within the Polish Deal (“Polski Ład”), it is planned to further extend the scope of digitization in communication between taxpayers and the tax authorities. According to the draft law, entities conducting business activity will be obliged to keep account books, revenues and expense ledger and register of fixed assets and intangible assets using computer software. Read more in this PwC Alert.
Rwanda joins regional initiative for tax transparency
Rwanda has joined the Yaoundé Declaration, adding its voice to the important regional initiative for tax transparency and exchange of information for tax purposes. See this OECD item.
Swedish Tax Agency is more focused on the attribution of profits to Swedish branches
The most recent court cases from the administrative courts show that the Swedish Tax Authority (STA) has more focus on reviewing foreign entities’ permanent establishments and branches in Sweden in relation to the OECD’s report on the attribution of profits to permanent establishments. In this article we give some recommendations on what to think about regarding attribution of profits.
Disagreement on whether Swedish interest deduction rules are compatible with EU law
Unlike the European Commission, the Swedish government is of the view that the interest deduction limitation rules on related party debt (which were introduced in the corporate sector in 2019) are compatible with the EU law. It remains to be seen what will happen with this issue going forward, but the matter may end up in the Court of Justice of the European Union. Read more in this PwC blog.
Tax Update - October 2021
This edition includes: 1) Ministry of Economic Affairs has announced a draft amendment to Article 10-1 of Statute for Industrial Innovation; and 2) Ministry of Finance announces amendment to Enforcement Rules of the Income Tax Act.
Law number 7338 enacted
Law number 7338, amending various tax laws including the corporate income tax law, the income tax law, the tax procedural law and other tax laws, was approved in the Parliament on 14 October 2021. Read more in this PwC tax bulletin.
President Biden announces Build Back Better framework agreement
President Biden announced on 28 October a framework agreement on “Build Back Better” legislation that the House could consider as early as 29 October. The framework agreement outlines spending provisions that are described as costing $1.75 trillion over 10 years, and revenue offsets that are believed to add up to nearly $2 trillion over the same period. A revised version of the Build Back Better legislation reflecting the framework agreement has been released by the House Rules Committee. Read more in this PwC Tax Insight.
- Revised Build Back Better bill — key business and individual tax provisions
This PwC Insight provides an analysis of key business and individual provisions proposed as part of the revised Build Back Better bill and includes a chart summarizing effective dates in the bill.
- Corporate book profits minimum tax proposed as offset for Build Back Better reconciliation bill
Senate Democrats are proposing new tax increase measures to offset the cost of “Build Back Better” reconciliation legislation in response to objections from Senator Krysten Sinema (D-AZ) to increasing the marginal tax rates for corporate, individual, and capital gains income. Read more in this PwC Tax Insights.
US Treasury defers applicability dates for foreign currency guidance
Notice 2021-59, recently released, states that Treasury and the IRS now plan to defer the applicability dates of certain final Section 987 regulations and certain related regulations by an additional year, to tax years beginning after 7 December 2022. These regulations had already been deferred under prior Notices, including most recently under Notice 2020-73 to tax years beginning after 7 December 2021. Read more in this PwC Tax Insight.
US compromises with the UK, France, Italy, Spain and Austria on DST and trade actions
Austria, France, Italy, Spain, the UK and the US recently issued a joint statement on a compromise reached regarding digital services taxes and related unilateral measures. It follows the OECD Inclusive Framework statement of 8 October which contained details on unwinding existing DSTs and an agreement not to introduce further unilateral measures in the lead-up to the implementation of Pillar One. Read more in this PwC Tax Alert.
IRS issues guidance on LLC eligibility for tax-exempt status
The IRS recently issued Notice 2021-56, which sets forth standards that a limited liability company (LLC) must satisfy to be recognised as tax-exempt under Section 501(c)(3). The Notice also requests comments from the public on specific issues relating to tax-exempt status for LLCs; these comments are due by 6 February 2022. Read more in this PwC Tax Insight.
Form W8 series updated to comply with new tax requirements
The IRS recently released new final versions of the following forms and instructions: 1) Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals), and Instructions for Form W-8BEN; 2) Form W-8BEN-E, Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting (Entities), and Instructions for Form W-8BEN-E; and 3) Form W-8ECI, Certificate of Foreign Person’s Claim That Income Is Effectively Connected With the Conduct of a Trade or Business in the United States, and Instructions for Form W-8ECI. See this PwC Tax Insight.
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Webcasts & podcasts:
- Tax Readiness: Cloud Transformation - Leveraging Tax to Drive Change and Increase ROI
Register here to join our panel of PwC specialists on Wednesday 17 November at 8pm for a discussion on how aligning with tax can help reduce the costs of cloud transformations by utilizing technology, identifying refund opportunities, and maximizing incentives such as R&D credits and applicable state and local tax benefits.
- Cross-border tax talks - BEPS 2.0 Update: not IF but when
In this episode from 26 October, Doug McHoney (PwC's US International Tax Services Co-Leader) is in PwC's brand new studio in Washington, DC with Will Morris. In addition to being PwC’s Deputy Global Tax Policy Leader, Will is also Chair to the American Chamber of Commerce to the European Union and Chair to the Business Industry Advisory Committee to the OECD. Doug and Will discuss the journey thus far to Pillar One and Pillar Two.
A number of previous webcasts are available for replay in our US tax reform hub here, including:
- Tax Readiness: Simplifying the complexity of tax reporting
In this webcast held on 20 October, we explored effective solutions to meet extensive tax reporting requirements in a prioritised, cost efficient manner, as well as planning for what's around the corner in this ever-changing regulatory environment. Watch the replay here.
- Tax Readiness: Elevating Tax in a Hot Deal Market
In this replay from 29 September, PwC professionals from our Tax, Deals and Value Chain Transformation practices had a timely discussion on the important role tax plays in the current deals environment including a discussion of opportunities for the tax department to add value as an integral part of the deal process.
- Tax Readiness: Q3 financial reporting considerations
In this webcast which took place on 22 September, our panel of Tax Accounting Services (TAS) specialists took a deep dive into relevant tax accounting matters and recent tax developments. Watch the replay here.
- Tax Readiness: US tax legislation advances under budget reconciliation
Watch the replay from this webcast held on 21 September 2021, in which our policy specialists explored the tax proposals being considered by the House of Representatives as part of “Build Back Better” reconciliation legislation, potential issues and challenges facing tax executives, and what companies should be doing in anticipation of potentially large scale changes.
For regular updates on this topic, check out our US tax reform hub on The Suite here.
Formalising taxing rules on cross border e-commerce and digital business
Circular 80/2021 provides detailed guidance on the Law on Tax Administration on various matters. This PwC Newsbrief focuses on the tax filing mechanism for foreign companies doing e-commerce, digital business and other business in Vietnam without a permanent establishment. There is a specific definition for e-commerce and digital business.
Decision 29 on special investment incentives
On 6 October, the Government issued Decision 29/2021/QD-TTg on special investment incentives available for R&D and large investment projects specified in the Law on Investment. The Decision took effect on the signing date. Read more in this PwC NewsBrief.
Approval of tax support measures
On 19 October, the National Assembly approved 406/NQ-UBTVQH15 introducing certain tax policies to support corporate and individual taxpayers impacted by COVID-19. See this PwC NewsBrief.