Two weeks to 4 February 2022
Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
UK
Super-deduction - are your clients making the most of their claims?
The super-deduction and special rate allowance are both generous tax reliefs. However, there are a number of complex rules that companies must navigate in order for them to be sure that they meet the criteria and will benefit from the reliefs on their expenditure between now and March 2023. Read more about what sort of assets qualify, the pitfalls and what companies should do where they hope to benefit from the relief.
Double tax treaty updates
- CIOT responds to consultation on double taxation treaties
The Chartered Institute of Taxation (CIOT) has published its response to the HMRC stakeholder consultation Review of Double Taxation Treaties 2022/23. Read their response here. - Double Taxation Treaty Passport Scheme register
HMRC have updated the register with 57 additions and 2 amendments. See this HMRC page.
HMRC updates list of approved offshore reporting funds
HMRC have updated the list of approved offshore reporting funds to include the funds that have entered the Reporting Fund Regime as of 1 February 2022.
Talking Tax: Transforming how we view tax compliance and harnessing its true value
The world may be changing at an incredibly fast rate, but one of the things that remains is the need for all companies to have an unwavering focus on ‘compliance’. This month Sally Bradley, our Tax Managed Services Leader, and Jonathan Howe, our Tax Compliance Market Leader, discuss the importance of transforming how we see tax compliance to harness its value.
EU
EU Tax News - November/December 2021
EU tax news is a bimonthly newsletter with summaries of all the relevant ECJ and national court cases and decisions, and EU policy initiatives related to EU direct tax law and state aid. The newsletter is prepared by members of PwC's EU direct tax group (EUDTG) from across Europe. Read the latest edition here.
MEPs put forward proposals for fairer and simpler taxation to help the economic recovery
MEPs have called for legislation to modernise tax systems to reduce tax evasion and avoidance and help SMEs, thereby making tax policy fit for the 21st Century. MEPs of the economic and monetary affairs committee are urging the Commission to come forward with a series of proposals both to better fight tax evasion and avoidance and also to facilitate tax compliance requirements, notably for SMEs. Read more in this European Parliament press release.
CFE Tax Advisers Europe – EU Tax Policy News Top 5
The latest edition looks at: 1) EU Business Taxation Code of Conduct Group: Semester 1 2022 Work Programme; 2) ECJ Decision on Spanish Obligation to Provide Tax Information: Commission v Spain – C-788/19; 3) Draft European Parliament Resolution on a European Withholding Tax Framework; 4) European Court of Auditors Assess Energy Taxation, Carbon Pricing and Energy Subsidies in the EU; and 5) EU Commission Proposes a European Declaration on Digital Rights & Principles. View previous editions here.
OECD
Pillar Two Model Rules
- Podcast: Week in Review with Will Morris
It is the busiest time ever in international tax for many companies. In this podcast, Will Morris shares why companies should focus on Pillar 2 and watch out for the release of commentary in the coming weeks. He also answers the question that he received most this week: Is this real?
Pillar One Model Rules - OECD launches public consultation on first building block
The OECD’s Inclusive Framework has announced that for Amount A of Pillar One, it is launching a public consultation that will occur in stages, by releasing Secretariat working documents on each building block to obtain feedback quickly and before the work is finalised in order to remain within the political timetable agreed in October 2021.On 4 February, the first building block was released for public comments. The Draft Rules for Nexus and Revenue Sourcing have been agreed for release by the Inclusive Framework to obtain public comments, but the draft rules do not reflect consensus regarding the substance of the document. Interested parties are invited to send their written comments no later than 18 February 2022. For Amount B of Pillar One, a public consultation document will be issued in mid-2022, with a public consultation event to follow the comment period. See this OECD announcement.
OECD takes first step in accession discussions with Argentina, Brazil, Bulgaria, Croatia, Peru and Romania
The OECD Council decided today to open accession discussions with six candidates to OECD Membership – Argentina, Brazil, Bulgaria, Croatia, Peru and Romania. This follows careful deliberation by OECD Members on the basis of its evidence based Framework for Consideration of Prospective Members and the progress made by the six countries since their first respective requests for OECD membership. See this OECD announcement.
Hong Kong’s carried interest tax break isn’t harmful, OECD says
The OECD recently published new decisions from the Forum on Harmful Tax Practices (FHTP) about whether nine preferential tax regimes could be detrimental to other countries’ tax bases. It concluded that Hong Kong’s profits tax break for carried interest distributed by private equity funds is not a harmful tax practice under action 5 of the base erosion and profit-shifting project.
Other territories
International
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:
- OECD’s Pillars 1 & 2
See our OECD section above. - Digital tax byte
The latest edition from 1 February includes the expectation of an imminent OECD Pillar Two consultation and the push by the EU Council's French Presidency to see Pillar Two impacts in the EU. - Digital tax megabyte for January 2022
This issue includes the publication of Nigeria's Finance Act 2021 with its effective 6% Digital Service Tax (DST).and the announcement by the UAE of a Federal corporate tax with rates potentially tailored to the Pillar Two minimum tax regime. We've seen the launch of an EU consultation on digital VAT, as well as of a Ukrainian Information Notice for VAT on e-services. We also comment on debates around an e-levy in Ghana and the optimism being shown in relation to changes to US GILTI.
Environmental, Social and Governance (ESG)
- ESG Legal event
Our next event in this ESG series will be held on 8 February 2022, where we will focus on the ‘G’ element - Governance, of the ESG agenda. Register your place here.
A recording of our previous events in this series can be viewed here. - Transfer pricing podcast: Putting the TP into ESG
In this episode, we feature an excerpt from PwC’s Global Transfer Pricing Conference, focusing on ESG factors as drivers of value creation and levers to manage risks, concentrating on supply chain/value chain analysis, tax transparency, intercompany financial transactions, and deals.
Australia
Monthly Tax Update: February 2022
Welcome to the February edition (and first for 2022) of Australia's Monthly Tax Update, keeping you up to date on the latest Australian and international tax developments.
Belgium
See here for latest updates.
Brazil
Brazil is invited to start the OECD accession process
As reported above, the Brazilian government recently received the news that the 38 members of the Council of the Organization for Economic Cooperation and Development (OECD) unanimously decided to invite Brazil to begin the formal process of joining the organization, which brings together the world's most advanced economies. Read more in this joint press release by the Ministry of Foreign Affairs, the Office of the President’s Chief of Staff and the Ministry of Economy.
Canada
2022 Annual tax filing and remittance deadlines for corporations
Canadian corporations are required to file annual income and capital tax returns (due six months following each taxation year-end), and to meet several other Canadian annual filing and remittance deadlines. This Tax Insights outlines some of the more common compliance requirements to be considered at this time of year. Others also may apply (e.g. T4A information return to report certain benefits to shareholders).
China
Observations on Q&As issued by China’s STA on “Anti-Tax Avoidance During Pandemic Prevention and Control”
On 30 September 2021, the International Taxation Department of China’s State Taxation Administration (STA) released its “Questions and Answers on Anti-Tax Avoidance During Pandemic Prevention and Control” (the "Q&A") on its portal. This is the first time that the STA has provided, in written form, prescriptive instructions for tax authorities and MNEs when analyzing the impact of the COVID pandemic from a transfer pricing perspective. Observations on the Q&A related to transfer pricing are provided in this Tax Insight.
Observations on OECD peer review on implementation of CbCR and MAP in Mainland China and Hong Kong SAR
The peer review reports evaluate the progress made by jurisdictions of the OECD/G20 Inclusive Framework on BEPS (IF), including Mainland China and Hong Kong SAR, in implementing the BEPS Action 13 and Action 14. The reviews show positive results for Mainland China and Hong Kong SAR, which indicate both competent authorities’ continuous efforts and commitment to participate in global efforts to address BEPS issues. Read more in this PwC Tax Insights.
Cyprus
Cyprus Parliament passes bills aimed at international ‘tax abuse,’ extends DAC6 deadline, and updates treaties
The Cyprus Parliament recently passed two bills amending the Cyprus tax legislation, with the goal of strengthening the Cyprus tax framework in order to prevent abuse, evasion, and avoidance of tax. In addition, the Cyprus Tax Authority has recently announced an additional extension of the submission deadline for DAC6 reports (without penalties) to 31 January 2022 and several treaty updates. Read more in this PwC Tax Insights.
Hong Kong
Observations on OECD peer review on implementation of CbCR and MAP in Mainland China and Hong Kong SAR
As reported above, the peer review reports evaluate the progress made by jurisdictions of the OECD/G20 Inclusive Framework on BEPS (IF), including Mainland China and Hong Kong SAR, in implementing the BEPS Action 13 and Action 14. Read more in this PwC Tax Insights.
Hong Kong’s carried interest tax break isn’t harmful, OECD says
As reported above, the OECD recently published new decisions from the Forum on Harmful Tax Practices (FHTP) about whether nine preferential tax regimes could be detrimental to other countries’ tax bases. It concluded that Hong Kong’s profits tax break for carried interest distributed by private equity funds is not a harmful tax practice under action 5 of the base erosion and profit-shifting project.
India
India Budget 2022 - impact on foreign investors and multinationals
The Indian Finance Minister presented the Union Budget for 2022-23 (Budget 2022) on February 1, focussed on infrastructure spending with an aim to boost growth amid continued disruption from the COVID-19 pandemic. It also makes a strong pivot toward the digital economy, climate change, clean energy transition, and ease of living. This PwC Insight highlights some key Budget 2022 tax proposals affecting foreign investors and multinational enterprises doing business in India.
Ireland
Investing in Ireland
This edition of foreign direct investment (FDI) in Ireland highlights the ever-expanding FDI sector in Ireland as we enter the New Year. In this edition we summarise key findings from IDA Ireland's recent report which highlights the positive 2021 results for FDI in Ireland and we also discuss talent and data governance and its relevance for FDI in Ireland.
Italy
Stability Law 2022: main updates on tax incentives for businesses
Law no. 234 (so-called Stability Law 2022), published on 30 December 2021, postponed the main tax credits for businesses (including those for R&D, technological innovation, design, and aesthetic conception and those for the purchase of capital goods 4.0) and it introduced a new Patent Box regime. Read more about the main changes in this PwC tax blog.
The new draft version of Accounting Principle OIC 34 on the “Revenues”
In November 2021, the Italian Accounting Standard Board ("OIC") published in draft for consultation the national accounting standard OIC 34 relating to the "Revenues", which will apply to financial statements starting from the fiscal years beginning on or after 1 January 2023. The purpose of accounting standard OIC 34 is to regulate the criteria for the recognising, classifying, and evaluating of the revenues, as well as the information to be reported in the explanatory notes. Read more in this PwC tax blog.
Jersey
Consultation on new rules for the provision of information by partnerships to Revenue Jersey
In the light of new rules in Jersey on economic substance requirements for partnerships, Revenue Jersey is proposing to change the way it interacts with partnerships and their partners. The main proposals are: (1) new responsibilities for partnerships - from 2023 they will have to submit a new Combined Notification containing details of economic substance and tax information if applicable; and (2) new responsibilities for partners - from 1 January 2023 all partners will be responsible for reporting their share of any taxable partnership income in their own Jersey income tax return. Every partner will be assessed by Revenue Jersey on their own share of taxable partnership income, and the joint assessment of general partnerships will be discontinued. Similarly, every partner will be responsible for discharging the tax liability arising on their own share of partnership income. The Jersey Government has launched a new consultation, open until 31 March 2022, on these proposals.
Middle East
Introduction of a federal corporate tax in the United Arab Emirates
On 31 January 2022, the UAE Ministry of Finance (MoF) announced the introduction of a federal corporate tax (CT) in the UAE that will be effective for financial years starting on or after 1 June 2023. The key features of the proposed UAE CT regime are a 0% CT for small businesses and startups, exemptions for UAE based headquarters and international business hubs, no taxation on foreign direct investment, no taxation on personal income, and a minimal compliance burden for businesses. Read more in this PwC Tax news alert.
UAE: Extension of the timeframe to benefit from the redetermination of penalties until 31 December 2022
A new Cabinet Decision No. 108/2021 was recently issued extending the timeframe for taxpayers to benefit from the 70% redetermination (discount) on penalties up until 31 December 2022. The original deadline granted under the previous Cabinet Decision No. 49/2021 was 28 June 2021. Read more in our PwC Tax news alert.
Oman ratifies the double tax treaty with Qatar
Royal Decree (RD 4/2022) was issued in January 2022 by His Majesty the Sultan of Oman, ratifying the treaty which was published in the Official Gazette in the same month.The English translation of the treaty has not yet been published. In November 2021, Oman and Qatar signed a double tax treaty, which is marked as the first such treaty signed between Oman and a GCC country. Read our PwC tax news alert for a summary of the key provisions of the treaty.
Financial Services Tax & Legal Update - January 2022
Welcome to the latest edition picking up on a range of current hot topics relevant to the financial services industry. As we enter 2022 there are some very important tax developments in the coming months. Read more for key local and regional developments.
Netherlands
Pillar 2 and implications for Dutch business
Following the publications of the OECD’s Pillar 2 Model Rules and the European Commission’s proposed Pillar 2 Directive, this article examines the impact of Pillar 2 on international and Dutch business with certain recommendations for companies.
Poland
Communication from the Ministry of Finance regarding postponing deadlines concerning CIT and SFS
The Ministry of Finance recently published on its website information about initiated work on extending the deadlines for submitting CIT returns and tax payments as well as for preparing, approving and submitting financial statements for 2021. According to the announcement, the Ministry of Finance’s proposal to extend the deadline shall apply to all taxpayers giving them an additional 3 months to submit their CIT return and pay the tax due. Read more in this PwC news alert.
Switzerland
The new international tax environment
The Base erosion and profit shifting 2.0 project led by the OECD, better known as BEPS 2.0, will lead to significant changes in Switzerland’s tax policies and its policy for promoting Switzerland as an attractive business location. Read more in this PwC insights.
For the latest updates on current topics, see this PwC Switzerland Insights page.
Taiwan
Taiwan reports on the automatic exchange of tax data
Taiwan’s Ministry of Finance has announced statistics on financial account information exchanged with Japan, Australia, and the UK under automatic exchange of information (AEOI) procedures.
Turkey
Corporate tax reduction for exporters and manufacturers
Law number 7351, passed on 19 January 2022, allows for a corporate tax rate reduction of 1% on income generated from manufacturing and exportation. Manufacturers who also engage in exportation shall benefit from the reduction for manufacturing only, they may not claim a second reduction for exportation. Read more in this PwC tax bulletin.
New tax exemption: Conversion to Turkish Lira time deposit accounts
Law number 7352 providing a tax exemption for gains in case of conversion of the foreign currency accounts to Turkish Lira time deposit accounts was published in the Official Gazette on 29 January 2022. Read more in this PwC tax bulletin.
Inflation accounting - Postponed
Law number 7352, published in the Official Gazette on 29 January 2022, postpones the implementation of inflation accounting until the end of 2023. The gains and losses arising from inflation accounting in 2023 will not be taxable or tax-deductible. Read more in this PwC tax bulletin.
US
2022 Tax Policy Outlook: Managing constant change
Learn how tax plays a key role in your business while the stakes continue to be high in regards to managing potential changes to US and global tax policy. Read more, listen to our podcast, and register below for our webcast on 17 February where the panel will be discussing this further.
Taxpayers should consider immediate action to adopt the LIFO inventory method to expense high inflation
A taxpayer required to maintain inventories must use a cost flow method such as first-in, first-out (FIFO) and last-in, first-out (LIFO). Under the LIFO method, the goods most recently produced or acquired are deemed to be sold first. Thus, when costs are rising, LIFO generally results in higher cost of goods sold and lower taxable income. Taxpayers experiencing rising inventory costs should consider adopting LIFO. Because of a conformity requirement, taxpayers must make this decision before issuing financial reports, although US companies with a foreign parent must issue LIFO statements to the parent, which may be able to report on a FIFO basis in its worldwide financial statements. Read more in this PwC Tax Insights.
Treasury releases final Section 958 regulations and proposed PFIC regulations with key changes
Treasury and the IRS recently published final regulations under Section 958 on determining stock ownership and proposed regulations regarding the treatment of domestic partnerships and S corporations that own stock of passive foreign investment companies (PFICs) and their domestic partners and shareholders. Read more in this PwC Tax Insights.
Divided Sixth Circuit panel affirms Tax Court subpart F decision; Whirlpool petitions for rehearing
The US Court of Appeals for the Sixth Circuit in Whirlpool v. Commissioner recently affirmed the US Tax Court’s May 2020 decision. The Tax Court had held that Whirlpool’s controlled foreign corporation (‘CFC’) in Luxembourg had earned subpart F foreign base company sales income (‘FBCSI’) from supplying appliances manufactured in Mexico. Read more in this PwC Tax Insights.
Los Angeles City Business Tax annual filing due 28 February
Taxpayers conducting business in the City of Los Angeles, as well as in neighboring cities, may be subject to the annual Los Angeles City Business Tax (LACBT) with a filing deadline of 28 February 2022. Companies may unknowingly be subject to the LACBT due to broad nexus standards that include regularly soliciting business in Los Angeles. Read more in this PwC Tax Insights.
North Carolina OAH invalidates the denial of franchise tax affiliate receivables deduction
The North Carolina Office of Administrative Hearings (OAH) recently concluded that the franchise tax deduction for receivables made to affiliated corporations violated the dormant Commerce Clause of the US Constitution because the deduction was only allowed regarding affiliates doing business in North Carolina. This constituted a burden on interstate commerce that was not applicable to intrastate commerce and, therefore, the deduction denial was unconstitutional as applied to this taxpayer. Read more in this PwC Tax Insights.
New Jersey expands possible benefit of Business Alternative Income Tax
S 4068 was recently signed which revises the Business Alternative Income Tax (BAIT) by amending the calculation of the tax base ‒ i.e., “distributive proceeds” ‒ to include all of the distributive share of partnership income of residents that is subject to tax under the New Jersey Gross Income Tax Act. Prior to the amendment, “distributive proceeds” was defined as the net income, dividends, royalties, interest, rents, guaranteed payments, and gains of a pass-through entity (PTE), derived from or connected with sources within New Jersey for both resident and nonresident members. The changes are effective as of 1 January 2022. Read more in this PwC Tax Insights.
San Francisco taxes - Filings due 28 February 2022
Companies engaging in business in San Francisco (the city) must register in the city and pay a license fee. Additionally, businesses may be subject to up to three city taxes: the San Francisco Gross Receipts, Homelessness Gross Receipts, and Commercial Rents taxes. The 2021 filing and final payment deadline for these taxes is 28 February 2022. The deadline for paying license fees for the 2022-2023 period is 31 March 2022. See this PwC Tax Insights.
Subscribe for US tax alerts
You can sign up for Tax Alerts issued by the US to be emailed to you. Subscribe using the link on this page.
Webcasts, blogs & podcasts:
- Tax Readiness webcast: 2022 Tax Policy Outlook - Managing Constant Change
Join our panel of specialists on Thursday 17 February at 9pm as we dive into this year’s Tax Policy Outlook, discussing the key role that tax can play around potential changes to US and global tax policy, a world of technological disruption, fractured geopolitics, the enduring impacts of the COVID-19 pandemic, and increased focus on ESG concerns. Register here. - Tax Readiness podcast: 2022 Tax Policy Outlook
An ongoing pandemic, midterm elections, and an ever changing business environment are just a few themes as we look ahead into 2022. In this podcast, Janice Mays and Rohit Kumar discuss the legislative outlook for 2022, what to watch ahead of the midterm elections, and how Congress is acting on global developments. - Podcast: Week in Review with Will Morris
It’s the busiest time ever in international tax for many companies. In this podcast, Will Morris shares why companies should focus on Pillar 2 and watch out for the release of commentary in the coming weeks. He also answers the question that he received most this week: Is this real? - Global business and tax concerns
Companies are operating in a fast-changing environment steeped in global and domestic business and tax uncertainty. In this podcast, Ken Kuykendall and Carol Stubbings share their perspectives on what they are seeing at the global level around uncertainty and challenges. - Pulse Survey: Executives on inflation, workforce, taxes
This podcast discusses key highlights of PwC’s 2022 Pulse Survey on the most profound issues affecting companies and that are top of mind of the more than 600 C-suite and other executives surveyed. - Cross-border tax talks: All aboard! The Pillar Two train is leaving the OECD and EU stations
In this episode from 21 January, Doug McHoney (PwC's US International Tax Services Co-Leader) is joined by Calum Dewar (PwC ITS Partner and leader of PwC’s Integrated Global Structuring Practice, heading our Outbound, Inbound, and Value Chain Transformation teams). Doug and Calum discuss Pillar Two Model Rules, the OECD/G20’s Inclusive Framework, the EU Directive, and more specifically the Income Inclusion Rule, the Under Tax Payment Rule and how country-by-country GILTI and the new final FTC regulations could impact the result for US MNCs.
Replays:
A number of previous webcasts are available for replay in our US tax reform hub here, including:
- Tax Readiness: Impacts of the 2021 final foreign tax credit regulations
The Treasury and IRS recently released final regulations addressing various aspects of the foreign tax credit (FTC) regime. Listen to our panel of PwC specialists in this webcast held on Wednesday 19 January as they discuss these final regulations and the impact they may have on taxpayers. Register here for the replay. - Tax Readiness: The OECD's Pillar Two Model Rules on a global minimum tax
Watch the replay from this webcast held on Monday 10 January 2022, where our panel discussed the Model Rules, including definitions, scope, timeline, tax accounting issues, administration of the rules, and touch briefly on the 22 December EU draft Directive on minimum taxes, as well as the interactions with current US legislative proposals. - Tax Readiness: Q4 financial reporting considerations
In this webcast from 9 December, we discussed financial reporting impacts of enacted and proposed tax law changes in the US and around the world. We also covered key tax accounting reminders related to the year-end reporting cycle. Register here to watch the replay.
Other updates
For regular updates on this topic, check out our US tax reform hub on The Suite here.
Vietnam
Decree 15/2022 guiding the 2% VAT rate cut in 2022 and tax deductibility of COVID-19 sponsor expenses
Following the Resolution on fiscal and monetary policies to support the Socio-Economic Development and Recovery Program which is effective from 11 January 2022 to 31 December 2023, the Government has released Decree 15/2022 to provide guidance on the 2% VAT reduction and tax deductibility of COVID-19 sponsor expenses. Read more in this PwC NewsBrief.