Two weeks to 30 September 2022
Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
UK
Fiscal event
On Friday 23 September 2022, Chancellor of the Exchequer Kwasi Kwarteng held a fiscal event. It saw the unveiling of tax changes for businesses and individuals, as the Government looks to introduce measures which drive economic growth.
- Our instant reaction
We summarise the key announcements here. Whilst the announcement that the rate of corporation tax will remain at 19% was well trailed in advance, a headline rate of 19% (possibly combined with other incentives) in a world where 15% may become the accepted minimum makes the UK look suddenly more attractive again for foreign investors. - Cancellation of planned increase in corporate tax rate
Now that the previously announced increase in the rate of corporation tax has been cancelled, any companies that have taken steps to minimise the immediate impact of that increase, may wish to revisit and confirm whether the actions previously taken remain appropriate or if alternative claims should now be made. See here. - Stamp Duty Land Tax measures
All the SDLT related announcements are summarised here. - Key announcements for employers and employees
See here. - The Retained EU Law (Revocation and Reform) Bill 2022
The mini-budget included the announcement of an automatic sunset of EU regulations by 31 December 2023, with all government departments required to review, replace or repeal retained EU law. The Retained EU Law (Revocation and Reform) Bill was subsequently introduced to Parliament on 22 September 2022, to facilitate the repeal and replacement of retained EU law. Read more in this news release.
Visit our dedicated web page for further insights and reaction videos.
Certificate of Residence (CoR) requests - reminder of new online procedure
Large Business customers previously sent CoR requests to their Customer Compliance Manager (CCM) or to the Large Business Contact Us Mailbox. In April 2022, HMRC introduced an new online process for CoR requests (Online RES1 form), which enables taxpayers to send such requests straight to the correct team for processing. Read more on their webpage here.
Uncertain tax treatment - check if you need to notify HMRC
Guidance on when you do not need to notify HMRC has been updated on their website here.
Treaty updates
- HMRC update UK-Luxembourg double tax treaty information
The '2022 UK-Luxembourg memorandum of understanding on arbitration under Part VI of the Multilateral Instrument' has been added. See here.
GAAR Advisory Panel opinion: Extraction of cash (or equivalent) using trust interests, limited liability partnership and the novation of loans
This GAAR Advisory Panel opinion, recently published on the HMRC website, can help you recognise when arrangements may be abusive tax arrangements.
Importance of transfer pricing implementation in a tax dispute environment
This article provides an insight into how tax authorities are interrogating TP implementation along with the nature of evidence that authorities typically expect a taxpayer to retain in order to demonstrate they are taking reasonable care in ensuring their TP policies are properly implemented and operationally effective.
New transfer pricing documentation requirements for UK businesses
The Chartered Institute of Taxation (CIOT) has responded to draft legislation published in July on New transfer pricing documentation requirements for UK businesses, which sets out new transfer pricing documentation requirements for the largest UK businesses to retain, and produce upon request, a master file, local file and summary audit trail.
Talking Tax
Our Talking Tax series brings you a range of views and insights from specialists across our business. Read the September edition and subscribe to receive future editions direct to your inbox.
The rise and rise of the Tax Global Process Owner
Read our blog post on the rise of the Tax Global Process Owner, and the skills and requirements to be a successful GPO.
How to strike the right balance of people plus technology
The relationship between people and technology has not always been an easy one, but when businesses strike the right balance - of human ingenuity combined with the power of technology - they can achieve great things. Listen to this latest Business in Focus podcast.
EU
CJEU decision in deduction of final losses - case C-538/20 (W AG)
On 22 September 2022, the Court of Justice of the European Union (CJEU) rendered its judgement in the case C-538/20 (W AG) finding that Germany does not infringe the freedom of establishment by not allowing the deduction of final losses which a German company had incurred in its permanent establishment (PE) situated in the UK because Germany, as the state of residence, has waived its power to tax the profits (and losses) of that PE under a double tax treaty. Read more in our PwC EUDTG alert.
EC proposes to address high energy prices through excess profits taxes and consumption reductions
The European Commission (EC) published, on 14 September, a proposal for a Council Regulation on an emergency intervention to address high energy prices. Read more in this PwC Tax Policy bulletin.
MEPs discuss tax policy with Commissioner Gentiloni
In a recent meeting, held by the economic and monetary affairs committee, MEPs discussed tax policy with Commissioner Gentiloni on Monday, focusing on a windfall profits tax, and the implementation of the global minimum corporate tax rate, among other topics. Read more in this press release.
MEPs urge Ireland to move forward on international tax reform
Members of the European Parliament’s Subcommittee on Tax Matters recently travelled to Ireland and met government representatives, parliamentarians, stakeholders and multinationals. While meeting representatives of the multinationals it became apparent that these companies will not leave Ireland even if the government increased its tax rate. See this press release.
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 19 September includes: 1) State of the Union: EU Commission Plans to Introduce Windfall Tax on Energy Companies; 2) EU Commission to Launch BEFIT Consultation & Proposal; 3) OECD: Action 14 Tax Dispute Resolution Stage 2 Peer Reviews Published; 4) OECD: Action 14 Tax Dispute Resolution Stage 2 Peer Reviews Published; and 5) Forum on Tax Administration Publishes Tax Capacity Building Guide. Visit their latest news page here.
OECD
Pillar One Model Rules - Amount A
- Comments on progress report on Amount A
These comments by the BEPS Monitoring Group (BMG) respond to the public consultation document issued by the OECD secretariat on behalf of the inclusive framework on BEPS, on the proposed pillar 1 amount A tax certainty framework.
MLI
- OECD publishes French BEPS MLI arbitration profile
The OECD has recently published a new arbitration profile for France, detailing how the country applies the provisions on arbitration from the BEPS multilateral instrument (BEPS MLI). See https://oe.cd/mli.
14th meeting of the OECD/G20 Inclusive Framework on BEPS
Certain sessions of the 14th plenary meeting of the OECD/G20 Inclusive Framework on BEPS will be available for the public to watch online on the afternoon of Thursday 6 October, allowing a glimpse into the various international tax-related work streams undertaken by the over 135 member countries and jurisdictions of the Inclusive Framework.
Bilateral Advance Pricing Arrangement Manual
Bilateral Advance Pricing Arrangements (“BAPAs”), in a growing number of cases, have successfully contributed to providing advance tax certainty to both taxpayers and tax administrations, ensuring predictability in the tax treatment of international transactions. However, stakeholders have identified obstacles that prevent an optimal use of BAPAs. In continuing with its commitment to advancing the tax certainty agenda, the FTA MAP Forum, in conjunction with the FTA Large Business International Programme, has developed the Bilateral Advance Pricing Arrangement Manual (“BAPAM’) which is intended as a guide for streamlining the BAPA process.
Tax policy is playing a key role in promoting economic recovery and responding to the energy price shock
Tax policy is playing a critical role as countries seek to promote economic recovery from the COVID-19 pandemic and respond to the impact of rapid increases in energy prices, according to a new OECD report. Read more.
Assessing tax relief from targeted investment tax incentives through corporate effective tax rates
This OECD taxation working paper develops a methodology to calculate forward-looking corporate effective tax rates (ETRs) summarising tax relief from investment tax incentives into comparable indicators. It presents ETR indicators for seven Sub-Saharan African countries.
Other territories
International
International Tax News - August 2022
International Tax News is designed to help multinational organisations keep up with the constant flow of tax developments. Read the latest edition here. Among the topics featured in this month's edition are: 1) European Commission proposal would address distortions caused by foreign subsidies; 2) Cyprus introduces ‘super-deduction’ for scientific research and R&D expenditure; 3) Mexican Decree expands tax benefits for IPOs and bonds; and 4) Significant Economic Presence: Taxation of the Digital Economy In Colombia.
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 29 September includes: 1) clarification from Kenya on the exemption for registered non-resident suppliers of digital services from issuing electronic tax invoices; 2) news from Australia that the new Government has reintroduced plans for digital platform reporting; 3) The European Commission has also adopted an implementing Regulation on DAC7 schema and statistical reporting; 4) Colombia proposes to introduce a significant economic presence tax rule; and 5) the OECD intends to broadcast part of the Inclusive Framework meeting on 6 October 2022 (to view live or recorded).
Environmental, Social and Governance (ESG)
- Net Zero Economy Index 2022
Economy-wide net zero ambitions continue to scale up, but progress on decarbonisation over the past 12 months has declined. Our Net Zero Economy Index (NZEI), an indicator of the progress G20 members have made in reducing energy-related CO2 emissions and decarbonising their economies, shows that at just 0.5%, the global rate of decarbonisation in 2021 was at its lowest level in over a decade. Read more. - Tax Readiness: ESG Tax Incentives in the Inflation Reduction Act
Join our panel of specialists on Tuesday 4 October at 6pm, as they discuss the various tax and investment opportunities and how companies should consider these credits as a part of their broader ESG goals and strategy. Register here.
Visit our dedicated ESG webpage.
Australia
Stapled structures, securitisation trusts and Part IVA
A single judge of the Federal Court recently handed down his judgement in Minerva Financial Group Pty Ltd v Commissioner of Taxation [2022] FCA 1092. The case related to the ATO's challenge under the general anti-avoidance provisions in Part IVA of the Income Tax Assessment Act 1936 to the Liberty group's structure. Read more in this PwC tax alert.
Draft ruling proposes change to US and UK double tax treaties impacting financial institutions
The Australian Tax Office has issued a draft ruling which is open for comments from the public until 11 November 2022. Article 11(3)(b) of both treaties provides that interest from Australia is not to be taxed there when it “is derived by a financial institution which is unrelated to and dealing wholly independently with the payer” and goes on to define the term ‘financial institution’. The new draft ruling proposes clarifying that definition, by stipulating that a financial institution needs to provide payment that directly requires repayment.
Belgium
See here for latest updates.
Expected notional interest rate deduction
The standard notional interest deduction (NID) rate for assessment year 2024 is expected to amount to 0.943%. For SMEs, the NID rate would be 1.443%. These rates should still be confirmed by a notice published in the Belgian Official Gazette. Read more in this brief PwC news item.
Belgian Council of Ministers approves draft legislation implementing DAC 7 into Belgium law
Council of Ministers have approved preliminary draft legislation introducing new provisions and technical amendments for administrative cooperation between European member states in the field of taxation. The proposal to implement EU Directive 2021/514, better known as “DAC 7”, introduces, among others, reporting obligations for digital platform operators. Read more in this PwC news item.
Cyprus
Amendment to the Cyprus Income Tax Law for investments in innovative SMEs
On 26 July 2022, amendments to Article 9A of the IT Law were gazetted and are effective from 14 February 2022 (ie retroactively), and will apply until 31 December 2023. This Article provides for a tax deduction from income tax for investments in innovative SMEs, subject to certain requirements. Read more in this PwC Tax Insights.
France
OECD publishes French BEPS MLI arbitration profile
The OECD has recently published a new arbitration profile for France, detailing how the country applies the provisions on arbitration from the BEPS multilateral instrument (BEPS MLI).
Germany
CJEU decision in deduction of final losses - case C-538/20 (W AG)
As reported above, the Court of Justice of the European Union (CJEU) recently rendered its judgement in the case C-538/20 (W AG) finding that Germany does not infringe the freedom of establishment by not allowing the deduction of final losses which a German company had incurred in its permanent establishment (PE) situated in the UK because Germany as the state of residence has waived its power to tax the profits (and losses) of that PE under a double tax treaty. Read more in our PwC EUDTG alert.
Allowable depreciation after acquisition of share in asset-managing partnership
According to a ruling of the Supreme Tax Court, the shareholder (partner) of an asset-managing partnership who has acquired his share for a consideration, can claim depreciation on the jointly owned depreciable assets on a pro rata basis and only in accordance with his acquisition costs and the remaining useful life of the respective asset at the time the share was acquired. Read more in this PwC tax blog.
Attribution of taxable income in fiduciary cases
The Supreme Tax Court decided in the specific case of a Contractual Trust Arrangement that a fiduciary relationship within the meaning of Section 39 (2) No. 1 Sentence 2 of the German Fiscal Code which is recognized for tax purposes may still exist after insolvency proceedings were initiated over the assets of the trustor. Read more in this PwC tax blog.
Greece
Legislative amendments
Law 4972/2022 was recently published in the Government Gazette introducing various tax law amendments covering stamp duty, transfer pricing, penalties for non-transmission of retail receipts, special solidarity tax and more. Read more in this PwC Tax Flash.
Hong Kong
Proposed refinements to foreign source income exemption regime: Hong Kong as an effective investment holding platform
The consultation launched by the Hong Kong SAR government (the Government) on its proposal to refine Hong Kong’s foreign source income exemption regime for passive income ended in mid-July. This PwC News Flash discusses the practical impact of the proposed changes, and what the Government should consider in order to effectively implement and administer the refined regime, and maintain the competitiveness of Hong Kong’s business environment.
India
Interest earned on non-convertible debentures and bonds shall be treated as same for applying the beneficial tax rate of 5% as per section 194LD
The Delhi bench of the Income-tax Appellate Tribunal has held that a beneficial tax rate of 5%, prescribed under section 194LD read with section 115(A)(1)(a)(iiab) of the Income-tax Act, 1961 (the Act), shall be available on interest income earned from investments made in rupee denominated non-convertible debentures (NCD). Read more in this PwC Tax Insights.
Ireland
Budget 2023
Budget 2023 was published on 27 September by Ministers Paschal Donohoe and Michael McGrath against a cost of living crisis. There were also important announcements concerning the corporate tax regime, and a broader review of other areas including personal taxes, the taxation of certain investment funds and life policies. What does Budget 2023 mean for you and your business? Read the key measures and visit our Budget 2023 webpage to stay up to date with the latest insights.
MEPs urge Ireland to move forward on international tax reform
As reported above, Members of the European Parliament’s Subcommittee on Tax Matters recently travelled to Ireland and met government representatives, parliamentarians, stakeholders and multinationals. While meeting representatives of the multinationals it became apparent that these companies will not leave Ireland even if the government increased its tax rate. See this press release.
Italy
Hybrid Mismatches: documentation burdens on taxpayers in view of the approaching deadline for the income tax return filing
The first tax return after issuance of Circular Letter No. 2/2022 on hybrid mismatches arrangements by the Italian Revenue Agency (ex art. 6-11 of Legislative Decree 142/2018) is due next November (for calendar taxpayers). A key matter is the extent to which a taxpayer must have an appropriate documentation in place, supporting the “anti-hybrid” analysis performed before submission of the 2022 tax return. Read more in this PwC tax blog.
Netherlands
Dutch Budget proposes tax changes - increased burdens related to CO2 emissions
On Budget day, 20 September, the Dutch government published the 2023 Tax Package, including proposed changes to Dutch tax legislation that are envisaged to take effect on 1 January 2023. For (larger) corporate taxpayers, the Package proposes limited changes to the corporate income tax system. However, for a specific group of companies that are subject to the Emission Trading System (ETS), there would be an increased burden related to their (future) CO2 emissions. The government’s proposals may be amended during parliamentary discussions. Read more in this PwC Tax Insights.
- 2023 Tax Plan and Pillar 2: Tax accounting considerations
In contrast to previous years, the Dutch Tax Plan 2023 contains limited changes in the field of Dutch Corporate Income Tax (CIT). Yet, the limit and rate changes proposed to the first CIT bracket will likely have tax accounting implications for small and medium sized companies. In addition, we also provide an update on the 15 percent global minimum tax (Pillar 2) developments in the Netherlands and the tax accounting implications thereof. Read more in this PwC news item. - Box 3 updates Dutch Tax Plan 2023
On Budget Day 2022, the Dutch government presented two proposed laws regarding changes to the box 3 taxation. One of them concerns the codification of the restoration of rights following the Dutch Supreme Court ruling. The second bill regulates the transitory regime for the years 2023 to 2025. As of 2026, a box 3 system based on taxation over actual return can be introduced. Read more. - Dutch Budget Day 2022 from a Deals tax perspective - webcast recording.
Norway
Increased taxation of income from natural resources - onshore wind power and hydro power production
The Norwegian Government announced that the National Budget for 2023 will include proposals for resource rent taxation of onshore wind power and an increase of the resource rent tax rate for hydro power. Read more in this PwC tax blog.
South Africa
Application of revised interest deductibility limitation rules imminent for provisional taxpayers
A significant change to the rules on the limitation of deductions for interest payable to creditors where the interest is not subject to sufficient tax or is not imputed as part of the net income of a controlled foreign company is imminent. Corporate taxpayers who have not yet considered the implications of these revised rules have, in some instances (depending on their year of assessment), less than a month to prepare themselves for the effect this will have on upcoming provisional tax payments. Read more in this PwC tax alert.
Switzerland
For the latest updates on current topics, see this PwC Switzerland Insights page.
Increase in Swiss VAT rates
Swiss voters recently approved the AHV 21 proposal, and so endorsed an increase in Swiss VAT rates from 1 January 2024. Read more.
US
New Jersey adopts new rules on combined reporting and other significant tax issues
New Jersey recently adopted several regulatory amendments and new rules involving combined reporting, net operating losses, GILTI, and other tax issues. Significant changes are summarised in this PwC Insight.
Policy on Demand series
- The ripple effect of UK's mini-budget
In this episode from 26 September, Thomas Rees, a Partner at PwC’s International Tax Desk in New York, joins us to discuss how businesses are responding and questions he's hearing. - Week in Review
- In this episode from 30 September, Larry Campbell discusses how enacting bipartisan legislation to address government funding and other issues (like energy project permitting reforms and a year-end tax bill) can be difficult, given the current polarised political environment. He addresses the question he has received most, which is whether Congress is likely to act on a year-end tax bill that reinstates Section 174 expensing.
- In this episode from 23 September, Pat Brown shares his insights on the broad scope of guidance that Treasury needs to issue around provisions of the Inflation Reduction Act. He encourages companies to prioritise their issues and submit comments to Treasury.
Cross-border tax talks
- Reshaping US Transfer Pricing: Impact of Medtronic
In this episode from 28 September, Doug McHoney (PwC Global International Tax Services Leader) welcomes first-time guest Kristina Novak (Washington National Tax Services Transfer Pricing Principal) and returning guest Alex Voloshko (PwC’s Value Chain Transformation Leader) to discuss the Medtronic case. They highlight the key takeaways including intellectual property considerations, transfer pricing trends, licensing models, business transformation trends for customers, and of course, a brief discussion of how Pillar Two will fit in.
Tax Readiness webcast series:
- Tax Readiness: ESG Tax Incentives in the Inflation Reduction Act
Join our panel of specialists on Tuesday 4 October at 6pm, as they discuss the various tax and investment opportunities and how companies should consider these credits as a part of their broader ESG goals and strategy. Register here. - Tax Readiness: Q3 financial reporting considerations
Register here to watch the replay from this webcast held on 28 September, where our panel of Tax Accounting Services (TAS) specialists takes a deep dive into relevant tax accounting matters and recent tax developments. On this webcast, we discussed key financial reporting considerations for the IRA and CHIPS Act as well as the current economic environment.
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.