Two weeks to 4 August 2023
Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
- Our Pillar Two Country Tracker
Our Pillar Two Country Tracker (last updated 4 August) provides the status of Pillar Two implementation in different countries and regions, including information about safe harbours.
HMRC Manual & guidance updates
The following changes have recently been made by HMRC following review:
- Corporate Finance Manual
- CFM96620 - Interest restriction: alternative calculation: group-EBITDA (chargeable gains) election: overview. Updated 2 August.
- CFM96600 - Interest restriction: alternative calculation Updated 2 and 3 August
- International Exchange of Information Manual
- Country-by-Country reporting: Exceptions to the filing obligation -
- IEIM300060: Country-by-Country reporting: Exceptions to the filing obligation. Updated 27 July due to a major change in OECD guidance. Updated 1 August adding a paragraph on exceptions
- IEIM300120 - Country-by-Country reporting: Examples of filing and notification obligations Until 26 July 2023, UPEs and UKEs were required to notify HMRC for each period covered by a CbC report. This requirement was removed by The Taxes (Base Erosion and Profit Shifting) (Country-by-Country Reporting) (Amendment) Regulations 2023 (legislation.gov.uk).
- IEIM300110 - Country-by-Country reporting: Directions relating to notification requirements Until 26 July 2023, UPEs and UKEs were required to notify HMRC for each period covered by a CbC report. This requirement was removed by The Taxes (Base Erosion and Profit Shifting) (Country-by-Country Reporting) (Amendment) Regulations 2023 (legislation.gov.uk).
- IEIM300200 - Country-by-Country reporting: Penalties - New guidance applies
- Luxembourg parliament approves new Luxembourg/UK double tax treaty
On 19 July 2023, the Luxembourg Parliament voted to approve the draft law n°8160 transposing the new double tax treaty between Luxembourg and the United Kingdom which was signed on 7 June 2022. The Luxembourg State Council confirmed no second hearing was required. The entry into force is subject to the exchange of the ratification instruments. Assuming said exchange of ratification instruments happens before year-end, the new treaty should be effective on 1 January 2024. Read more in this PwC alert.
Talking Tax, July 2023
Welcome to the latest edition of Talking Tax, bringing you a range of views and insights from specialists across our business. This month’s must read article is “Embedding change by prioritising your people” - How can you make sure your digital investment is driving change and your people have the skills they need to make the most of new technology and the motivation and trust to embrace and embed it?
EU and the Philippines to start scoping exercise for a free trade agreement
The EU and the Philippines have announced their intention to explore the relaunch of negotiations for an ambitious, modern, and balanced free trade agreement (FTA) – with sustainability at its core. Read more in 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 24 July includes: 1) OECD Tax Report to G20 Finance Ministers; 2) EU Parliament Subcommittee on Tax Matters Hearing on the Role of Enablers in Tax Evasion; 3) CFE Professional Affairs Conference: “Tax Adviser 2030: Evolution or Revolution for Tax Practice, Policy and Administration?” 4) OECD Tax Talks Webinar – Two-Pillar Solution Update; and 5) EU Tax Symposium – 24 & 25 October. Visit their latest news page here.
- Global Tax Top 10 - July 2023
This edition includes: 1) OECD Tax Report to G20 Finance Ministers; 2) Spanish EU Presidency to Focus on EU Strategic Autonomy & Industrial Policy; 3) European Commission Publishes Progress Report on Pillar 1; 4) CFE Professional Affairs Conference: ‘Tax Adviser 2030: Evolution or Revolution for Tax Practice, Policy & Administration?’; 5) OECD & IF Members Extend Freeze on National DSTs Until End-2024; 6) EU Parliament Subcommittee on Tax Matters Hearing on the Role of Enablers in Tax Evasion; 7) OECD Invites Input on Amount B, Pillar 1 (Transfer-Pricing); 8) CFE Opinion Statement in Case C-83/21 Airbnb Ireland and Airbnb Payments UK; 9) EU Tax Symposium – 24 & 25 October; and 10) OECD Launches New BEPS Multilateral Convention Matching Database.
Pillars One and Two
- OECD guidance: Companies and developing countries raise questions
It’s been a couple of weeks since the OECD released its most recent guidance on Pillars One and Two. In this Policy on Demand episode from 31 July, Will Morris (PwC’s Global Tax Policy Leader) shares questions and concerns he is hearing from companies and developing countries and discusses how bipartisan Ways and Means involvement can be beneficial.
- Webcast: The current state of the OECD's two-pillar solution
While there is uncertainty around Pillar One (both on the timeline and on whether a critical mass is achievable), many countries have begun implementing Pillar Two. Watch our webcast from 27 July for the latest updates on the OECD's two-pillar solution here.
- Updated Pillar Two Country Tracker
We’ve updated our Pillar Two Country Tracker to include information about safe harbours, the ability to expand all content, and added updated country profiles. We’re also working to develop export options, so we’ll keep you updated as the tool develops.
Tax and Investment by Multinational Enterprises
Multinational entities - especially those engaged in profit shifting - don’t respond as strongly to tax changes as domestic firms do, signalling they are less sensitive to tax than researchers thought, according to an OECD working paper.
Strengthening the fight against BEPS and improving tax transparency in West Africa
As part of the European Union’s Fiscal Transition Support Programme, the OECD and the Global Forum on Transparency and Exchange of Information for Tax Purposes have collaborated with the Economic Community of West African States and the West African Economic and Monetary Union commissions in the development of three community legal tax instruments. Read more.
International Tax News, Edition 121 - July 2023
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) OECD presents report to G-20 Finance Ministers and releases key documents under Pillar One and Pillar Two; 2) Germany publishes anti-hybrid rules draft guidance, draft Pillar Two implementation bill, and discussion draft on RETT; 3) Nigeria’s FIRS issues assessments to international petroleum tankers and transport vessels; and 4) United States Senate approves the US-Chile Treaty with reservations that need to be approved by Chile.
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. This edition, from 2 August, includes: 1) changes to the French DST Guidance (mainly in relation to ancillary services); 2) we highlight some updates to our Pillar Two country tracker.
Digital tax megabyte for July 2023
This edition, to the end of July, includes: 1) information about Kenya's Finance Act 2023 making changes to digital tax provisions; 2) a Nigerian VAT case in which it was held a Non-Resident digital platform provider could be asked to fulfil VAT obligations on behalf of their customers; 3) the US Multistate Tax Commission has advocated no B2B exemption is required on digital taxes; 4) The OECD has provided updates on measures addressing the digitalisation of the economy - both direct and indirect taxes.
Environmental, Social and Governance (ESG)
Create a movement, not a silo - The evolution of the sustainability leader
Alongside embracing data and tech, sustainability leaders are finding a powerful ally by empowering their workforce to tackle emissions from the ground up. Read more in our latest article.
DAC7: Austrian Ministry of Finance (BMF) releases technical details on reporting procedure
With the Austrian Digital Platform Reporting Requirement Act (DPMG) entering into force on 1 January 2023, operators of certain digital platforms are now obligated for the first time to report to the Austrian Tax Authority (among others) tax-relevant information on reportable suppliers concerning the year 2023 by 31 January 2024. The BMF has now released information on the technical details of the reporting procedure. Read more in this PwC news item.
See here for latest updates.
Tax Bites Podcast
- Future-proofing your statutory reporting function - how to accommodate compliant local statutory ledgers in your Business ERP? (Part 3)
In this third episode of our mini series we look at the ideal end state – dual ledger accounting. How do you ensure you meet the local statutory and tax requirements while reaping the benefits of centralization and standardisation across countries? We discuss a.o. how important it is for the STAT and TAX function to be involved in ERP transformation projects and address their requirements from the start, as well as how to monitor the continuously changing e-invoicing and e-reporting obligations to be future proof.
- Future-proofing your statutory reporting function - how to improve your statutory financials production by solving your data challenges (Part 2)
In this second episode of our mini series we first dive deeper into the types of STAT data, as well as GAAP to STAT differences and how to accommodate for these in the most preferred way. Then we explore the use of a stat production tool like Workiva, how this can help multinational companies to standardise and streamline the preparation of statutory financial statements.
- Future-proofing your statutory reporting function (Part 1) - as reported in our previous edition.
New tax law No.30 introduced to boost economy and align with BEPS actions
The Egyptian government has introduced a package of tax reform amendments affecting both multinational corporations on the international tax front and local corporations on the domestic front. Generally, the new law No. 30 is aimed at boosting the economy and streamlining the taxation of various items of income. The international tax measures are designed to keep up with the constant flow of international tax developments worldwide, which are aligned with the international best practices and the OECD BEPS package, and aim to curtail profit-shifting opportunities for MNEs. As a result, the Egyptian tax authority is likely to intensify scrutiny of international transactions. The modifications will be effective starting 16 June 2023 and are expected to be followed by the executive regulations from the Ministry of Finance in the coming months. Some of the key changes on the international front include: expanding the PE definition, abolishing the WHT exemption for loans over three years and reducing the thin-cap ratio to 2:1 over five years. Read more in this PwC tax alert.
Germany releases draft Growth Opportunities Act
As reported in our previous edition, the German Ministry of Finance recently sent a draft bill, the "Growth Opportunities Act,” to the German Industry Associations for consultation. The bill introduces an investment grant for certain investments aiming to achieve energy savings and proposes adjustments to national and international tax law provisions. Businesses should monitor the proposed changes to the interest capping rule and introduction of the interest rate capping rule. This PwC Tax Insight focuses on some of the key international tax aspects.
German tax consequences of the removal of a British limited company from the UK commercial register
The German Federal Ministry of Finance has commented on the German tax consequences of a UK limited company being removed from the British register of companies (Companies House) after 31 December 2020. Read more in this PwC blog.
Updates on (i) proposed refinements to the FSIE regime and (ii) tax certainty enhancement scheme for onshore equity disposal gains
Earlier this year, the Financial Services and the Treasury Bureau (FSTB) launched two consultation exercises on legislative proposals to (i) refine the foreign-sourced income exemption (FSIE) regime for foreign-sourced disposal gains; and (ii) introduce a tax certainty enhancement scheme for onshore equity disposal gains (Enhancement Scheme). In late July, the Inland Revenue Department (IRD) organised engagement sessions with stakeholders providing updates on the changes to these legislative proposals in response to comments received during the consultation exercises. We are pleased that the Government has taken up many recommendations made by stakeholders (including PwC). This PwC news flash summarises the changes to the refined FSIE regime and the Enhancement Scheme, followed by our take on these changes.
Receipts from cloud-computing services not taxable as royalty, FTS or FIS as per the India-USA double tax treaty
The Delhi bench of the Income-tax Appellate Tribunal was of the view that receipts from cloud computing services are not taxable as fees for included services (FIS), as they do not satisfy the ‘make available’ clause under Article 12(4)(b) of the India-USA double tax treaty. Moreover, the receipts are also not taxable as ‘royalty’ under the provisions of Article 12(3) of the India-USA treaty. Read more in this PwC tax insight.
No profits could be attributed to PE in India, when contract for supply of goods (at offshore level) was incurring loss at global operational level
The taxpayer, a tax resident of Japan, earned revenues from technical collaboration agreements and from execution of projects in India for customers in the railway and power sectors through project and branch offices (which were admitted permanent establishments) in India. Revenue alleged that the profits earned from offshore supply of equipment would also be attributed to the PEs in India, and accordingly attributed a portion of the overall revenues to the PE in India. Upon perusal of all facts and the relevant provisions of the India–Japan double tax treaty, the Delhi bench of the Income-tax Appellate Tribunal was of the view that, when the contract for supply of goods (at an offshore level) was incurring losses at an operational level, no profit could be attributed to the PE in India. Read more in this PwC tax insight.
High Court rules commission income received under commissionaire agreement is not FTS, and subscription fees received are not ‘royalty’
The Delhi High Court has held that although the promotion, sale and distribution of publications or rendering of support services as per the commissionaire agreement involve human intervention, it is not covered in the category of technical or consultancy services. Moreover, the court observes that no special skills or knowledge are required to render such services, nor is any professional advice or specialised service rendered that could be categorised as a technical service. Therefore, the High Court holds that the commission income cannot be taxed as fees for technical services (FTS) in India. On the issue of subscription fees for e-journals received by the taxpayer from other Indian entities, the High Court holds that such fees cannot be considered as ‘royalty’. The reason being that there was nothing on record to demonstrate that the taxpayer has granted the copyright to the concerned subscribers. All that the taxpayer has done is sell the copyrighted publication to the concerned entities, without conferring any copyright on the said material. Read more in this PwC tax insight.
Pillar Two Implementation: Second Feedback Statement
Ireland's Department of Finance has launched a second Feedback Statement for consultation until 21 August, to continue progress towards transposition of the EU Minimum Tax Directive (Council Directive (EU) 2022/2523) (“the Directive”) into Irish legislation, to provide for the Pillar Two Global anti-Base Erosion (GloBE) rules. It follows from the first Pillar Two Implementation Feedback Statement published in March this year, which contained draft legislative approaches to key elements of the GloBE rules together with consultation questions in respect of the proposed design of remaining elements of the rules and approaches to administration.
European Commission approves the proposal to make the whole of Southern Italy a Special Economic Zone
During a recent meeting in Brussels, Executive Vice-President of the European Commission and Commissioner for Competition, Margrethe Vestager, welcomed the proposal relating to the establishment of a whole Special Economic Zone (ZES) which includes all the regions in the South of Italy. The Government’s proposal aims to extend to the whole of Southern Italy the procedures of simplification and acceleration of the investments and the tax supports provided to companies that set up or invest in the ZES. Read more in this PwC blog.
MOEF announces Korea’s tax reform proposals for 2023
The Ministry of Economy and Finance (MOEF) released the government’s tax reform proposals on 27 July 2023. The proposals include measures to supplement the domestic global minimum tax rules which were introduced to be implemented from the fiscal year starting on or after 1 January 2024. While the proposed measures largely reflect the OECD Pillar Two Model Rules and related Commentary, it is notable that the application of the UTPR is proposed to be delayed for one year. The tax reform proposals also introduce new reporting requirements relating to offshore trusts and employee stock-based compensations in order to strengthen rules against tax avoidance. This PwC newsflash highlights selected key tax reform proposals related to the domestic global minimum tax rules and other proposed changes affecting multinational enterprises doing business in Korea as well as domestic corporations.
Luxembourg releases draft law to implement global minimum tax
Luxembourg’s Council of Ministers approved legislation to implement the global minimum tax for large multinational enterprises on 28 July 2023 and on 4 August 2023, the Luxembourg draft law to implement the global minimum tax was released and follows the complex rules set out by the EU Pillar Two Directive. The draft law is complemented with a high-level budget assessment, though without providing an indication on the expected additional revenue to be collected by Luxembourg through the Pillar Two rules and only recognizing that additional resources would be required for the Luxembourg direct tax administration. Read more in this PwC alert.
UAE Corporate Tax - Cabinet Decision Release: Administrative Penalties
Cabinet Decision No. (75) of 2023, dated 10 July 2023, was issued on the Administrative Penalties for Violations Related to the Application of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (the “CT Law”). The Decision details the penalties that will apply from 1 August 2023 to taxpayers in case they don’t comply with the provisions of the CT Law. Read more in this PwC alert.
Tax Policy Bulletin - July 2023
In this edition we cover: 1) Prime Minister rules out introducing wealth tax or capital gains tax if re-elected; 2) Tax Principles Reporting Bill; 3) Interpretation Statement released in relation to the interest limitation rules and short-stay accommodation; 4) Special reports on various recent tax changes, including rollover relief under the bright-line and interest limitation rules, GST rules for platforms, GST apportionment, and build-to-rent tax rules; and 5) Round-up of open consultations, recent tax cases, and other recent developments.
EU and the Philippines to start scoping exercise for a free trade agreement
As reported above, the EU and the Philippines have announced their intention to explore the relaunch of negotiations for an ambitious, modern, and balanced free trade agreement (FTA) – with sustainability at its core. Read more in this press release.
2023 draft tax legislation
On 31 July 2023, National Treasury (NT) and the South African Revenue Service (SARS) published the 2023 Draft Tax Bills and Draft Regulations for comment (due by 31 August 2023). Read this PwC Alert for more details.
For the latest updates on current topics, see this PwC Switzerland Insights page.
IRS issues temporary foreign tax credit relief
Treasury and the IRS on July 21 issued Notice 2023-55, which announces temporary relief for taxpayers in determining whether a foreign tax may be creditable under Sections 901 or 903 in a tax year beginning on or after 28 December 2021, and ending on or before 31 December 2023. Read more in this PwC Tax Insights. In this Policy on Demand episode from 26 July, Elizabeth Nelson and Micah Gibson share their insights on the relief and encourage companies to consider the compliance and financial statement implications.
Pillar Two and Financial Services: What’s the deal?
In this Cross-border Tax Talks episode from 26 July, Doug McHoney (PwC's International Tax Services Global Leader) is joined by first-time guest Winnie Tang (International Tax Partner in PwC’s Financial Services practice in New York). Doug and Winnie take a rapid fire tour of the Financial Services and Deals space in light of the Pillar Two Transition Period, touching on the definitions of funds, REITs, excluded entities, management company structures, POPEs, Pillar Two in the Deals space, and many more particularities taxpayers should be aware of.
Policy on Demand series
- Stay engaged with Congress on tax policy issues
The House Ways and Means Tax Subcommittee held a 19 July international tax hearing focusing on the OECD global tax agreement. In this episode from 24 July, Janice Mays shares her insights on the hearing, legislative action we may see after the August recess, and how companies should stay engaged with Congress during the recess on domestic and international tax policy issues.
- FTC relief: Compliance and financial statement considerations
As noted above, on 21 July the IRS issued Notice 2023-55 providing temporary relief for taxpayers determining their eligibility to use foreign tax credits for tax years 2022 and 2023. In this episode from 26 July, Elizabeth Nelson and Micah Gibson share their insights on the relief and encourage companies to consider the compliance and financial statement implications.
- Week in Review
- 4 August - There remains a wide gap between the spending proposals of the House and Senate that could be difficult to close by the September 30 deadline to avoid a government shutdown. In this episode, Todd Metcalf encourages companies to take steps to encourage Congress to come to consensus on federal spending and tax legislation this year.
- 28 July - Congress will have a short period of time to address unresolved issues and pass legislation to fund the federal government when it returns from its August recess. In this episode, Mark Prater encourages companies to focus on statements from Congressional leadership, appropriators, and tax writers on how they view the unfolding September work period.
Tax Readiness webcast series
- Tax Readiness: Monetizing energy tax credits - Direct pay, transfer, and tax equity
This webcast taking place on Tuesday 15 August at 5pm, will examine the ins and outs of direct payment and transfer of many of the clean energy credits extended or enacted by the Inflation Reduction Act of 2022. Register here to join our panel of specialists as they discuss issues related to financing clean energy projects.
- Tax Readiness: Changing the game for tax with Generative AI
The transformative power of generative AI has the potential to revolutionise the way we work in tax. Watch the replay here from this webcast held on 19 July, where our panel of specialists discuss how tax functions can harness the power of GenAI to enhance operations, drive value and why prioritising a responsible, trusted approach is critical to achieve sustained outcomes.
State and local tax
California OTA allows apportionment factor representation relating to deductible income
In the Appeal of Southern Minnesota Beet Sugar Cooperative (SMBSC), the California Franchise Tax Board (FTB) sought to exclude Appellant’s Minnesota-based cooperative activities from the apportionment factor because those activities generated income deductible under R&TC section 24404, consistent with the FTB’s published position in Legal Ruling 2006-01. The Office of Tax Appeals (OTA) opinion dismissed the FTB’s position and concluded “there is no language in the UDITPA to support FTB’s position that unitary business activities are excluded from the apportionment formula if they relate to deductible income.” Read more in this PwC Tax Insight.
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.
Draft resolution on Global Minimum Tax policy in Vietnam issued for public consultation
The Ministry of Finance is preparing a draft resolution on Global Minimum Tax policy to submit to the Vietnamese National Assembly. On 25 July, a draft resolution was released for public comments. The draft resolution provides insights into the implementation of Global Minimum Tax policy in Vietnam. This is proposed to take effect from 1 January 2024. Read more in this PwC Alert.
New restrictions on bank lending
On 28 June, the State Bank of Vietnam issued Circular 06/2023/TT-NHNN amending various regulations on lending by Vietnamese banks and branches of foreign banks. Circular 06 will come into effect on 1 September 2023. Read more in this PwC Alert.