Two weeks to 30 April 2021
Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
UK
Finance Bill 2021
- Hybrid & other mismatches - amendments 17 to 42 to Clause 36 and Schedule 7
Following engagement with stakeholders since the publication of Finance Bill 2021 (formally Finance (No.2) Bill), further amendments have been made to the draft legislation introduced to amend the hybrid and other mismatches rules. These latest changes are described by HMRC in this explanatory note. - Extended loss carry back - not as generous as it might appear
HMRC has updated its guidance on extended loss carry back claims for companies and unincorporated businesses to add information on submission of amended company tax returns and making a de minimis claim outside of a company tax return.
International holding structures: are they structurally sound?
In this article first published in Tax Journal, our specialists reflect on the host of international tax issues and complexities associated with international holding structures as a consequence of the continually changing external landscape.
Webcast - Using tax incentives to generate value from investments
This session in our ‘Delivering Tax: Creating value in a changing world’ webcast series looked ahead to a post-pandemic world. During the pandemic, businesses have had to make countless decisions at pace, to get through the crises they have faced, but as we move forward, post-COVID, many are now turning their attention to the medium to long term. This session focused on how businesses can use R&D and incentives to aid and accelerate recovery as well as to improve their cash and liquidity position. This is an area that has seen significant changes recently, including the newly announced super-deduction and the R&D Tax Credits consultation. Access the recording here.
Responding to the business impacts of COVID-19
Visit our global crisis centre webpage and our COVID-19 hub on TheSuite to continue to keep up to date with developments on this topic. Of particular relevance to multinational companies operating in the UK, navigate the global tax, legal and economic measures in response to COVID-19 by territory here. In relation to the UK:
- COVID-19 will force a major rethink of tax systems
As debt levels rise, governments should take a long-term view on how to balance sustainability, equity and certainty. How can governments use tax systems to provide certainty and encourage capital investment post-COVID-19? Explore global tax and economic policy issues with PwC’s Carol Stubbings and Jonathan Gillham in this article. - Business in Focus podcast series - In conversation with Vijay Bharadia of Intermediate Capital Group
From joining the FTSE 100 to donating huge sums to support COVID-19 relief efforts, it's been a pivotal year for Intermediate Capital Group (ICG). In the second instalment of our ‘In conversation with’ series, Vijay Bharadia, ICG's Chief Financial and Operating Officer, joins Marissa Thomas, PwC’s UK Tax Leader in a conversation hosted by Teresa Owusu-Adjei.
Brexit & other international trade developments
The UK has left the EU and negotiations on the future trading relationship of the UK and the EU have concluded with a deal agreed. So what next for businesses as we enter this new trading world?
- Parliament formally approves EU-UK trade and cooperation agreement
The European Parliament voted with a large majority in favour of granting its consent to the agreement setting the rules of the future EU-UK relationship. MEPs have underlined that Parliament must play a full role in monitoring how the agreement is applied, including by being involved in unilateral EU actions under the agreement and having its views taken into account. With Parliament’s consent, the agreement will enter into force once Council has concluded it by 30 April. See this European Parliament press release. - UK Trade. The New Agenda. Clarify and reinforce one vision for the UK
In our first report we set out a four-point agenda for change. This report, the second in the series, picks up on one of the action points: the need to clarify and reinforce what the UK stands for in global markets for trade and investment. - PwC EMEA Brexit and Beyond Webinar Series - A Summary
Over the last 3 months, PwC’s Asset and Wealth Management EMEA Brexit team have been hosting a series of client webinar events focused on the "Beyond Brexit" phase. These webinars have been looking at some of the post Brexit open-issues which could affect AWM’s in 2021 and beyond. In this article, we have summarised some of the key issues that these webinars have explored.
Visit our Beyond Brexit webpage for the latest updates.
Double Taxation Treaty Passport Scheme register
HMRC has updated the double taxation treaty passport scheme register which shows details of companies registered for the scheme, with 26 additions, one removal and four amendments.
SI 2021/485 - The International Tax Compliance (Amendment) Regulations 2021
SI 2021/485 amends SI 2015/878 (The International Tax Compliance Regulations 2015), which gives effect to agreements and arrangements the UK has entered into with other jurisdictions to improve international tax compliance (ie EU MDR, the Common Reporting Standard (CRS) and FATCA). As a result of this amendment, arrangements entered into at 20 April 2021 for the exchange of information for the purposes of the adoption and implementation of the CRS are now covered by the Regulations (formerly only agreements at 19 April 2020 were covered).
Keeping pace with changes to UK transfer pricing documentation rules
HMRC has asked for comments on proposed changes to its transfer pricing documentation rules. While these proposals would align the UK’s current rules more closely with the documentation requirements of other jurisdictions and with the BEPS Action 13 Report, they also contain some novel features. Listen to our podcast and read more in our PwC Tax Insights here.
Compliance checks: country-by-country reporting penalties
This factsheet gives information about penalties HMRC may charge in relation to country-by-country reporting. These penalties include penalties for inaccurate information and penalties for not meeting obligations under The Taxes (Base Erosion and Profit Shifting) (Country-by-Country reporting) Regulations 2016.
EU
MEPs lay out plans for a fairer tax system fit for the digital age
Adopting their resolution a few months ahead of decisions expected from the OECD, MEPs are seeking to keep the momentum going at European level while pushing for changes on their primary concerns: 1) International tax rules set in early 20th century are not fit for the digital economy; 2) A minimum corporate tax rate urgently needed at international level; 3) Taxes should be paid where value is really created; and 4) If progress at international level stalls, the EU should go it alone. See this European Parliament press release.
MEPs talk tax havens, business taxation and tax governance reform with experts and officials
MEPs have quizzed Lyudmila Petkova (Chair of the Code of Conduct Group on business taxation) and heard from experts on how to reform the Code of Conduct Group's criteria and process. Speaking at a hearing of the European Parliament’s taxation subcommittee, Petkova said certain countries that are often considered tax havens are not on the EU list because of the criteria used. “The EU list is not a list of tax havens,” she said, explaining it was a list of countries that are not cooperative for tax purposes. EU parliamentarians passed a resolution in January that called for stricter criteria to be used so that jurisdictions like the Cayman Islands would be included in the list. Paul Tang (chair of the subcommittee on tax matters) said the hearing aimed to flesh out the concerns raised by the EU Parliament in its January resolution and help in increasing transparency of the work of the Code of Conduct Group. Read more in this European Parliament press release.
State aid: Commission adopts revised Regional Aid Guidelines
The European Commission has adopted revised EU guidelines on regional State aid (the “Regional Aid Guidelines”), setting out the rules under which Member States can grant State aid to companies to support the economic development of disadvantaged areas in the EU, while ensuring a level playing field between Member States. The revised Guidelines will enter into force on 1 January 2022. Read more in this European Commission press release.
Portugal launches legal challenge in Madeira tax perks dispute
The Portuguese Government is seeking to have a decision of the European Commission (Case T-95/21) annulled. Back in December 2020, the European Commission said that the implementation of Portugal’s Madeira Free Zone tax incentives scheme contravened EU law.
Parliament formally approves EU-UK trade and cooperation agreement
The European Parliament voted with a large majority in favour of granting its consent to the agreement setting the rules of the future EU-UK relationship. MEPs have underlined that Parliament must play a full role in monitoring how the agreement is applied, including by being involved in unilateral EU actions under the agreement and having its views taken into account. With Parliament’s consent, the agreement will enter into force once Council has concluded it by 30 April. See this European Parliament press release.
Tax policy: EU solutions to prevent tax fraud and avoidance
Fair taxation is a priority for the European Parliament. Find out how it wants to tackle issues such as tax avoidance, tax fraud and more in this European Parliament news item.
CFE Tax Advisers Europe
- CFE Tax Top 5 – Round-up of EU Tax Policy News
The latest edition looks at the following: 1) Pascal Saint-Amans: Digital Tax Agreement by October; 2) Fabrizia Lapecorella New Chair of OECD’s Fiscal Committee; 3) European Parliament: Lack of Progress in Reforming Code of Conduct Group; 4) OECD Updated Report on COVID-19 Fiscal Measures; and 5) Register Now: CFE Forum – Tax Transparency, Exchange of Information & Digital Commerce – 6 May 2021. View previous editions here. - CFE Global Tax Top 10 – April 2021
This month’s edition includes: 1) Pascal Saint-Amans: Digital tax agreement by October; 2) US proposes global minimum taxation; 3) Final Reminder: CFE Forum – Tax Transparency, Exchange of Information & Digital Commerce; 4) OECD report on COVID-19 fiscal policy measures; 5) CFE statement on cross-border provision of tax professional services; 6) Fabrizia Lapecorella new Chair of OECD’s Fiscal Committee; 7) European Parliament: Lack of progress in reforming Code of Conduct Group; 8) OECD tax dispute resolution peer review reports published; 9) CFE statement on EU digital levy consultation; and 10) OECD report on the impact of the gig economy on VAT policy & administration.
OECD
COVID-19 reports
- Tax Administration: Digital Resilience in the COVID-19 Environment
This OECD report provides a status check on the impact of digitalisation of tax administration in dealing with the COVID-19 crisis, focusing on taxpayer services, compliance risk management, remote working, IT systems and providing support for wider government. - Tax Policy Reforms 2021: Special Edition on Tax Policy during the COVID-19 Pandemic
This OECD report provides an overview of the tax measures introduced during the COVID-19 crisis across almost 70 jurisdictions, including OECD, G20 countries and 21 additional Inclusive Framework members.
Tax Inspectors Without Borders and partners pass USD 1 billion milestone in additional tax revenues for developing countries
TIWB is a joint OECD/UNDP initiative that deploys qualified experts in developing countries across Africa, Asia, Eastern Europe, Latin America and the Caribbean to help build tax capacity in the areas of audit, criminal tax investigations and the effective use of automatically exchanged information. During the fifth virtual TIWB Governing Board meeting on 27 April 2021, co-chaired by the OECD Secretary-General, Mr. Angel Gurría, and UNDP’s Administrator, Mr. Achim Steiner, participants celebrated the mobilisation of more than USD 1 billion in additional tax revenues for developing countries, with nearly three times that amount in total tax assessments. Read more in this OECD item.
Other territories
International
COVID-19 will force a major rethink of tax systems
As debt levels rise, governments should take a long-term view on how to balance sustainability, equity and certainty. How can governments use tax systems to provide certainty and encourage capital investment post-COVID-19? Explore global tax and economic policy issues with PwC’s Carol Stubbings and Jonathan Gillham in this article.
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:
- Global Digital Tax Online
In a time when information is key and compliance is vital, GlobalDigitalTaxOnline (GDTO) is an essential tool to help navigate the complex world of tax and the reporting of various digital/electronic services. Read more about our new online subscription service. - Digital service taxes: Are they here to stay?
Who should be preparing for DSTs? Not just companies offering primarily digital services or goods. DSTs can be very broad in scope, covering not only online sales, but also digital advertising, data usage, e-commerce, streaming/downloading, SaaS, and more. The time to assess and prepare is now for companies regardless of sector given the growing digitalization of commerce. Read more - Tax Readiness webcast: Are digital taxes here to stay?
In this webcast held on 28 April 2021, we discussed the rapidly evolving environment and how DSTs are expanding beyond Europe, not just in geography, but also in scope. We talked about the impact on company operating and tax models, how a DST in one country affects entities in other jurisdictions and how companies are responding to DSTs. Watch the recording here. - UN tax committee adopts Article 12B for model treaty rules on digital services
The United Nations, through its Committee of Experts on International Cooperation in Tax Matters, has approved recommended language for bilateral treaty rules to address taxing rights around income arising from Automated Digital Services (ADS). The new Article 12B and associated Commentary will form part of the 2021 version of the UN Model Tax Convention and would have an impact only when two contracting states negotiate (or renegotiate and amend) a tax treaty between them. Therefore, it may have less widespread effect than any consensus to which countries agree in discussions being led by the OECD in conjunction with the G20 and the 139 Inclusive Framework member countries. Read more in this PwC Tax Policy alert. - Digital tax byte
The latest edition, from 30 April, includes announcements on the Biden administration tax plan and its commitment to a global minimum tax and multilateralism, as well as US thoughts on some nuances in the search for a Pillar One and Pillar Two solution plus hints from Pascal St Amans about a July agreement but an October final plan. It also includes the UN's final proposal for an Article 12B, approved in Committee. The effective date of Maryland's proposed digital advertising tax has been delayed and a complaint filed in a circuit court while Connecticut has advanced its proposals. An Irish seminar saw differing views expressed and the UK's HMRC has been sending some 'nudge' letters. - EU
See our EU section above for EU developments relating to the taxation of the digital economy.- MEPs lay out plans for a fairer tax system fit for the digital age
- MEPs talk tax havens, business taxation and tax governance reform with experts and officials
Australia
ATO proposes hybrid rules guidance
Australia’s hybrid mismatch rules include ‘imported mismatch’ rules, which may apply more broadly than OECD BEPS Action 2-compliant hybrid rules implemented in other countries. On 21 April the Australian Taxation Office (ATO) released a draft practical compliance guideline, which provides guidance on how taxpayers should apply the imported mismatch rule and what documentation is required. Read more in this PwC Tax Insights.
Belgium
See here for latest updates.
‘COVID-19’ rent free period: a new tax credit for real estate owners
Several measures were very recently adopted (for some, they existed already and were simply extended) by the Belgian legislator through its Law dd. 2 April 2021 on temporary support measures in the light of the COVID-19 pandemic. Among these measures, an incentive is made available to Belgian taxpayers with respect to real estate (including Belgian companies who benefit from a favourable corporate income tax regime). Read more in this PwC Belgium news item.
Tax Bites podcast: Tax controversies - Why prevention is better than cure
Tax disputes in Belgium and abroad are being triggered by new legislation and alternative interpretations of tax principles. Listen to our new Tax Bites podcast on tax controversies.
Canada
Federal Budget 2021
The Canadian Government’s budget was presented on 19 April 2021. It includes several international tax proposals but does not contain any proposed changes to the corporate tax rates in Canada. With this proposed budget, Canada is aligning with actions proposed by the OECD, the European Union, and many jurisdictions. Given the global momentum for such provisions, MNCs should understand how the proposals might impact their operations and should consider providing feedback on such impact as requested. This Tax Insights focuses on mandatory disclosure, DST, interest limitation, and hybrid mismatches and this Tax Insights discusses these and other tax initiatives proposed in the budget.
Cyprus
Extension of certain submission and payment deadlines
On 8 April 2021 the Cyprus Parliament voted to amend certain provisions relating to the Assessment and Collection of Taxes Law 4/78, extending the deadline for submission of certain direct tax returns and payment of certain tax liabilities. Read more in this PwC Tax Insights.
Germany
Bundestag agrees to real estate acquisition tax reform on share deals
With the backing of the coalition parties, the Bundestag has voted in favour of the law amending the Real Estate Transfer Tax Act. The legislative reform passed by the Bundestag follows the Finance Committee’s recommended resolution of 14 April 2021 (see our previous Tax & Legal Newsflash ). The approval of the Bundesrat is still pending. No date has yet been announced for the consultation in the Bundesrat.
Hong Kong
A bill on tax treatments for corporate amalgamations and transfer of assets without sale
The Inland Revenue (Amendment) (Miscellaneous Provisions) Bill 2021 was recently gazetted which, among other things, seeks to amend the Inland Revenue Ordinance to specify the tax treatment for: (1) amalgamation of companies under the court-free procedures; and (2) transfer or succession of specified assets without sale under certain circumstances (ie specified events). The provisions dealing with (1) and (2) will apply to qualifying amalgamations/specified events that take effect/occur on or after the date of commencement of the Bill. This PwC Newsflash focuses on the two issues mentioned above.
Ireland
How are CEOs responding to the changing tax landscape?
COVID-19 has added to an already chaotic international tax reform landscape. In addition to preparing for the fundamental shift in international tax revenue allocation arising from the OECD and EU tax reforms, organisations also need to prepare for domestic tax changes which will enable governments to pay for Covid-19 related debt. Increasing tax competition and tax protectionism are evident within the EU and in the wider global economy. Tax policy uncertainty remains a key threat to organisations in 2021. But how do CEOs, particularly Irish CEOs, feel about these issues and the impact on their business? Read more in this PwC Ireland tax insight.
Minister Donohoe announces establishment of Commission on Taxation and Welfare
The Minister for Finance, Paschal Donohoe, TD, has announced the establishment of the Commission on Taxation and Welfare, chaired by Professor Niamh Moloney. The Commission will look at how best to support economic activity while ensuring sufficient resources available to meet costs of public services. Read more in this press release.
Speech by Paschal Donohoe TD, to Virtual Seminar on International Taxation with the Department of Finance
The Irish government recently hosted an international tax policy seminar, featuring a range of officials and business leaders. Read this speech by Ireland’s Minister for Finance, Paschal Donohoe who has said that Ireland remains committed to international tax reform discussions but is concerned by plans for a global minimum tax rate.
Navigating the Corporation Tax risk and controversy landscape
We have recently seen a renewed focus on Corporation Tax audit and appeals activity. This is largely a result of the additional resources Revenue have allocated to its larger corporate divisions. There has also been an increase in the volume and quality of data available to Revenue. An increase in information sharing between tax authorities, the increasing complexity in the Corporation Tax legislation, as well as a focus on companies that claim significant tax reliefs have driven more interventions. Read more in this PwC Tax Insights article.
Tax Risk and Controversy webcast
The third of our series of webcasts on tax risk and controversy focuses on the corporation tax landscape. Our expert panel explores the risk areas that Revenue is examining during an audit, together with the documentation it is requesting and testing. We also discuss some of the corporation tax matters being brought before the Tax Appeals Commission, including the application of statutory time limits to claims, assessments and initiation of Revenue queries.
Mexico
Mexico approves significant changes for subcontracted services
The Mexican Senate approved legislation on 20 April that will modify the tax and labor law treatment of subcontracted services in Mexico. These law reforms may result in significant financial impacts to Mexican investments, as well as human resource considerations. Read more in this PwC Tax Insights.
New Zealand
New Zealand parliament passes omnibus tax bill
The Taxation (Annual Rates for 2020-21, Feasibility Expenditure and Remedial Matters) Act has been enacted and is now in force. In this PwC news alert, we consider the amendments arising from the Finance and Expenditure Select Committee’s recommendations following the submissions process, and we also discuss new measures that were introduced by way of a supplementary order paper (SOP).
Portugal
Portugal launches legal challenge in Madeira tax perks dispute
The Portuguese Government is seeking to have the European Commission annul the European Commission’s December 2020 decision (in Portugal v Commission (Case T-95/21)) that the implementation of Portugal’s Madeira Free Zone tax incentive scheme was contrary to EU law.
Portugal extends CIT and VAT filing deadlines
Order 133/2021-XXII, which was published recently in the Official Gazette, adjusts the 2021 calendar of tax obligations free of any charges or penalties for the taxpayers. It includes: 1) VAT return deadlines extended; 2) 2020 Corporate Income Tax return filing deadline extended until 30 June 2021; and 3) the acceptance of invoices in PDF format until 30 September 2021. Read more in this PwC Portugal newsflash.
Russia
Denouncing the double tax treaty (DTT) with the Netherlands
On 12 April, a draft law on denouncing the tax treaty with the Netherlands was submitted to the State Duma and published on the Russian Government’s website. Read more in this PwC Russia Tax Flash.
South Africa
CIT Audit letters
The South African Revenue Service has announced that Corporate Income Tax (CIT) Audit Letters will now indicate actual dates for submission of relevant material. Failure to adhere to the stipulated deadlines may result in refunds being withheld or assessments being raised. See more in this SARS news item.
Switzerland
COVID-19 webinar series
See here for upcoming and recorded webinars. For the latest updates on current topics, see this PwC Switzerland Insights page.
Withholding Tax Reform: Strengthening the Swiss debt capital market
On 15 April 2021, the Federal Council adopted the dispatch on an amendment to the Withholding Tax Act. The withholding tax reform is intended to strengthen the debt capital market in Switzerland and to increase the attractiveness of the location for group financing activities by abolishing withholding tax on domestic interest. However, interest paid to domestic natural persons on customer credit balances is excluded. Furthermore, the securities and asset management business is to be stimulated by abolishing the transfer stamp tax on domestic bonds. At the same time, the Federal Council is opening the consultation process on an extension of the group notification procedure for withholding tax. Read more in this PwC Insights item.
Turkey
Corporate income tax rate increased
With the Law no. 7316 amending the Law on Collection Procedure of Public Receivables, published on 22 April 2021, the corporate income tax rate increases to 25% for the year 2021 and to 23% for the year 2022. See this brief PwC Turkey Tax bulletin.
US
How business can build trust under the Biden administration
Business leaders have an opportunity to continue building trust with stakeholders, while also shaping policy and managing the risk to their businesses. How companies choose to act will determine whether they build on this foundation or squander it. Read more in this PwC blog.
Kansas eases incentive requirements and allows credit transfer
Senate Bill 65, enacted on 15 April 2021, eliminates certain requirements from the High Performance Incentive Program (HPIP). Effective upon enactment, taxpayers no longer have to qualify for the Kansas Industrial Training (KIT) or Kansas Industrial Retraining (KIR) workforce training tax credits, or make required investments in employee training, to qualify for the HPIP. For projects placed in service on and after 1 January 2021, a taxpayer may transfer up to 50% of HPIP tax credits to another taxpayer. Read more in this PwC Tax Insights.
Texas proposes significant changes to research and development tax treatment
The Comptroller has submitted significant proposed amendments to Texas Admin Code Sec. 3.599, concerning the research and development activities franchise tax credit. The publication triggers a 30-day period of public commentary. The earliest date of adoption is 16 May 2021. Read more in this PwC Tax Insights.
Webcasts & podcasts:
- Tax Readiness: The intersection of ESG and Tax
Register here to join our webcast on Wednesday 5 May 2021 at 7pm to learn more about environmental, social and governance (ESG) and how tax leaders can engage with the C-suite to align tax with ESG transformation. - Tax Readiness: Preparing for Deals in a Changing Environment
Please join us on Thursday 20 May 2021 at 7pm where PwC professionals from our Tax and Deals practices will be having a timely discussion of the many factors impacting the current deals environment including the prevalence of ESG, the use of SPACs, and anticipated tax changes. Register here. - Tap into Tax podcast
This PwC podcast series combines perspectives from our tax technical specialists and our professionals focusing on the evolving tax function for a holistic look at tax. Since our last edition, two episodes have been released:
Previous episodes in this series are available here, as well as on Spotify and other streaming services.
Replays:
A number of previous webcasts are available for replay in our US tax reform hub here, including:
- Tax Function of the Future: Keeping pace with the new operating tempo
Watch this replay from 20 April 2021 to explore how high priority policy changes and other disruption are shaping the C-suite agenda and impacting Tax functions. Together, we will walk through tangible examples of how companies can operationalize to meet new Tax function challenges now and beyond. - Tax Readiness: Are digital taxes here to stay?
You can register here to watch the replay from 28 April 2021, in which we discussed the rapidly evolving environment, and how Digital Services Taxes (DSTs) are expanding beyond Europe, not just in geography, but also in scope. - Tax Readiness: How to comply with the new final stewardship regulations
Register here to watch the replay from this webcast on Wednesday 7 April 2021. - Q1 Financial Reporting Considerations
You can watch the replay here of this webcast held on Wednesday 24 March 2021. - Tax Readiness: International tax planning post-election
Register here to watch the replay from this webcast on Wednesday 17 March 2021.
Other updates
For regular updates on this topic, check out our US tax reform hub on The Suite here.
Vietnam
Decree now finalised on extension of deadlines for tax and land rental payments in 2021
Similar to last year, on 19 April the Government released Decree 52 regarding the extension of deadlines for payment of taxes and land rental fee applicable for the 2021 tax year. The Decree took effect from the signing date. Read more in this PwC Vietnam NewsBrief.