Two weeks to 5 February 2021
Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
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:
- OECD updates guidance on tax treaties and the impact of the COVID-19 crisis
Our PwC Tax Policy bulletin considers the updated guidance issued by the OECD on tax treaties and the impact of the COVID-19 pandemic (included in our last edition) which deals with: 1) the creation and continuation of a permanent establishment (PE), including home office, agency, and construction-site PEs; 2) change of residence, including by entities and individuals, plus the application of tie-breaker rules to dual residents; and 3) income from employment, i.e. payments under stimulus packages, stranded workers, cross-border (frontier) workers, and teleworking from abroad. Pascal Saint-Amans, Director at the OECD’s Centre for Tax Policy and Administration discusses this guidance here.
- HMRC’s audit compliance checks on the “Eat Out to Help Out” scheme
Over the past few weeks we have seen a marked increase in HMRC audit activity regarding the 'Eat Out to Help Out' (EOTHO) scheme. HMRC had initially anticipated that the scheme would cost approximately £500m, but the eventual claim figure was £840m. HMRC has now started an information gathering and review process and has initially contacted 4,000 claimants, with selected businesses being required to attend a virtual meeting and/or telephone interview as a first step. Read more.
Making Tax Digital
- Making Tax Digital for Corporation Tax - Meeting 10 February 2021
We are delighted to invite you to join us on Wednesday 10th February, from 2:00 to 3:30pm, as we host a session on HMRC’s consultation ‘Making Tax Digital for Corporation Tax’. The event will be joined live by HMRC.
- Making Tax Digital (MTD) for Corporation Tax - A Summary of the Consultation
In advance of the 5 March deadline for the CT MTD consultation response we have set out in this article some of the key information from the consultation document, following the structure set out by HMRC.
EU MDR – Belgium grants postponement for arrangements to be reported in January and February 2021
Due to communication difficulties linked to COVID-19 Pandemic, the Belgian tax administration will apply an administrative tolerance for all arrangements that have to be reported during the months of January and February 2021 with a postponement until 28 February 2021 inclusive. The penalties for late submission will not be applied during this period. Read more in this PwC Belgium tax 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) OECD BEPS Action 14 public consultation; 2) EU Court of Auditors assesses 70 billion lost annually through corporate tax avoidance; 3) EU Commission extends scope of temporary State Aid Framework; 4) Chair of EU Business Taxation Working Group reappointed; and 5) OECD publish report on Taxing Energy Use for Sustainable Development. View previous editions here.
- CFE Global Tax Top 10 - January 2021
The latest edition looks at the following: 1) OECD virtual consultation on Pillar 1 & 3 Digital tax blueprints; 2) EU Parliament adopts resolution urging revisions to EU Tax Blacklist Process; 3) EU-UK Brexit trade deal reached; 4) EU launches digital levy consultation; 5) Applications Invited: CFE’s 2020 Albert J Raedler Medal Award; 6) EU-China Trade Agreement; 7) ECOFIN discusses Portuguese Presidency tax priorities; 8) OECD Tax & Development Day – 29 January; 9) EU to extend temporary COVID-19 State Aid Framework; 10) Vacancy: Tax Technical Officer at CFE Tax Advisers Europe.
State aid: Commission prolongs and further expands Temporary Framework to support economy in context of coronavirus outbreak
The European Commission has decided to prolong until 31 December 2021 the State aid Temporary Framework adopted on 19 March 2020 to support the economy in the context of the coronavirus outbreak. The Commission has also decided to expand the scope of the Temporary Framework by increasing the ceilings set out in it and by allowing the conversion of certain repayable instruments into direct grants until the end of next year. Read more in this European Commission press release.
OECD updates COVID-19 guidance on displaced persons and tax treaties
As noted above, our PwC Tax Policy bulletin considers the updated guidance issued by the OECD on tax treaties and the impact of the COVID-19 pandemic (included in our last edition) which deals with: 1) the creation and continuation of a permanent establishment (PE), including home office, agency, and construction-site PEs; 2) change of residence, including by entities and individuals, plus the application of tie-breaker rules to dual residents; and 3) income from employment, i.e. payments under stimulus packages, stranded workers, cross-border (frontier) workers, and teleworking from abroad. Pascal Saint-Amans, Director at the OECD’s Centre for Tax Policy and Administration discusses this guidance here.
Public consultation meeting on the 2020 Review of BEPS Action 14
As part of the ongoing work of the OECD/G20 Inclusive Framework on BEPS (Inclusive Framework), the OECD invited public comments on the 2020 Review of BEPS Action 14. This public consultation meeting held on 1 February, focused on the key questions identified in the consultation document and raised in the written submissions received as part of the consultation process. You can watch the recording of the meeting on the OECD website.
11th meeting of the OECD/G20 Inclusive Framework on BEPS
The 11th plenary meeting of the OECD/G20 Inclusive Framework on BEPS was held virtually and open to the public, allowing a glimpse into the various international tax-related workstreams undertaken by the Inclusive Framework to date. This work to end international tax avoidance through global co-operation, is especially timely in light of the fiscal challenges countries will face in the aftermath of the COVID-19 crisis. The event took stock of the unparalleled transformation in international tax policy and administration in recent years, discussed current challenges and what the future holds. You can watch the replays of both days here.
OECD article: Building Better Taxation in a Digital World
As a developing and emerging country, but also a large economy, Indonesia is seeing an amazing transformation driven by digitalization. During the pandemic, education, health services, and physical activities across the economy are being transformed and digital transactions increased by 25 percent as of July 2020. There is great potential, but we also know that we do not yet have a global agreement on how to treat and tax this digital economy. Read more in this OECD article by the Minister of Finance for the Republic of Indonesia.
Digital tax byte
The latest edition, from 5 February, includes some changes in India's Union Budget and the announcement of a Polish advertising tax.
Digital tax megabyte
A collection of the brief ‘Digital tax byte’ insights published throughout January 2021. This edition includes: delays in application of elements of the Spanish and Italian DSTs; updates on the reviews being undertaken by the office of the US Trade Representative into other countries' digital taxes; indications of the direction of the new US Biden administration; the EU seeking public comments on an the concept of a new digital sales tax; and an interesting EU court decision that may cast a question over a Pillar Two style approach.
Australia PE concession
The Australian Taxation Office has updated its guidance on whether the presence of employees in Australia, due to the impacts of COVID-19, may create a permanent establishment. This approach is applicable until 30 June 2021.
OECD releases guidance on the transfer pricing implications of COVID-19 - Australian considerations
For taxpayers with international related-party dealings (IRPDs) and impacted by COVID-19, it will be important to understand the OECD and ATO Guidance when supporting their transfer pricing positions for the COVID-19 impacted income year. It is worth noting that such impact is not limited to the economic and financial effects of COVID-19. It extends, and is not limited to, changes in the Australian entity's functional profile, its bearing and control of risks, supply chain, intercompany transactions and business strategies. Read more in this PwC Australia tax alert.
Monthly tax update: February 2021
Welcome to the February edition (and first 2021 edition) of Australia's Monthly Tax Update, keeping you up to date on the latest Australian and international tax developments.
See here for latest updates.
EU MDR – postponement for arrangements to be reported in January and February 2021
Due to communication difficulties linked to COVID-19 Pandemic, the Belgian tax administration will apply an administrative tolerance for all arrangements that have to be reported under EU MDR (aka DAC6) during the months of January and February 2021 with a postponement until 28 February 2021 inclusive. The penalties for late submission will not be applied during this period. Read more in this PwC Belgium tax news item.
Debt waivers without a tax cash out (?)
The Belgian Minister of Finance recently announced an extension of the scope of the existing Belgian tax exemption for debt waivers to non-judicial debt reorganizations. This is very relevant for debt restructurings involving Belgian debtors, especially as the 2018 Belgian tax reform introduced a cap on the amount of certain tax attributes (such as carried forward tax losses) that can be used to offset taxable profit in a certain year. Read more in this PwC Belgium tax news item.
New Anti-Abuse Rules for Indirect Taxes
The bill introducing an annual tax on securities accounts also plans to introduce new specific and general anti-abuse rules applicable to all the indirect taxes ruled by the Code of Various Duties and Taxes (CVDT). As regards the tax on securities accounts, these anti-abuse rules would retroactively apply from 30 October 2020 to counter restructuring of portfolios to avoid the tax before the law enters into force (“effets d’anticipation” / ”anticipatieve effecten”). As regards the other taxes under the CVDT, they would apply on the day following the publication of the law in the Belgian official journal. Read more in this PwC Belgium news item.
Cyprus NID assessed as ‘not harmful’ and its exchange of information rated ‘largely compliant’
We consider the status of the Cyprus notional interest deduction (NID) regime and Cyprus’ draft budgetary plan for 2021 in this Tax Insight. Following the EU Code of Conduct Group assessing the NID regime as ‘not harmful’, taxpayers may wish to consider utilising it and should monitor additional clarification and developments under the draft budget to evaluate the potential impact to their existing and planned structures.
CTA extends provisions related to tax residency and permanent establishment during the COVID-19 crisis
The Cyprus Tax Authority (CTA) recently issued Implementing Directive No. 07/2021, extending the application of Implementing Directive No. 04/2020 (issued on 27 October 2020) that clarified the Cyprus Income Tax Law provisions (Article 2) relating to tax residency and PE during the COVID-19 crisis. It clarifies that the provisions of the Implementing Directive No.04/2020 will continue to apply in 2021 as long as restrictions related to COVID-19 are still in place globally. Read more in this PwC Cyprus Tax Insights.
German draft bill adopted on modernization of withholding tax relief procedure
As reported previously, the German government recently adopted a draft bill on the modernization of the relief from withholding taxes and the certification of withholding tax paid. It includes changes to the withholding tax and relief procedure and an adjustment of the German anti-treaty-shopping rules which may impact the current withholding tax position of foreign beneficiaries. The German government’s approval of the bill is the first step in the legislative process, so companies should monitor possible further changes and relevant transactions and group structures should be evaluated based on the new rules. Read more. As the draft bill does not include the envisaged abolishment of the German extraterritorial IP taxation for German registered rights, the German tax authorities are expected to focus again on the enforcement of those rules. Multinationals should continue to evaluate their IP structure and transactions in order to identify potential German registered IP and evaluate respective German compliance requirements.
Increase of tax loss carry-back and further Corona aid planned for companies
Following the decisions of the coalition committee on 3 February 2021, further Corona aid for companies is planned. According to an announcement from the Federal Ministry of Finance, it is planned to increase the current tax loss carryback for 2020 and 2021 to a maximum of EUR 10 million or EUR 20 million (for jointly assessed couples). Read more in this PwC Germany tax blog.
Financial Secretary Paul Chan Mo-po will announce the 2021/22 Hong Kong Budget on 24 February, outlining the government's plan for the economy and proposals for taxation developments. To help you get prepared and stay ahead of change, see here for our budget predictions on factors that could potentially affect you and your business.
PwC's 2021 India Budget Webcast
The India Union Budget 2021 was presented by the Honourable Finance Minister on 1 February 2021. As India looks to recover from the impact of the pandemic and move forward with resilience, there are huge expectations from this budget. Join our panel of experts in this webcast to understand how India’s Union Budget 2021 could impact foreign investors and multinational companies with Indian interests. Also see this PwC India budget page for our analysis and insights.
OECD article: Building Better Taxation in a Digital World
As reported above, as a developing and emerging country, but also a large economy, Indonesia is seeing an amazing transformation driven by digitalization. During the pandemic, education, health services, and physical activities across the economy are being transformed and digital transactions increased by 25 percent as of July 2020. There is great potential, but we also know that we do not yet have a global agreement on how to treat and tax this digital economy. Read more in this OECD article by the Minister of Finance for the Republic of Indonesia.
Navigating the tax risk and controversy landscape
The Tax risk and controversy landscape is changing. Over recent years, Revenue have significantly increased the level of resources devoted to audits and enhanced their risk profiling and data interrogation capabilities. As a result, Revenue interventions are becoming more onerous, data requests more granular and disputes or assessments more frequent. See this PwC Ireland page to explore the factors shaping the landscape and the actions companies can take to proactively manage the monetary, reputational and business risks that can arise from their interactions with Revenue.
Overview of the Tax risk and controversy environment
In this webcast, Tax Partner Ronan Finn is joined by PwC directors Aidan Lucey and Danielle Cunniffe to discuss the macro tax risk and controversy landscape and recent developments in Revenue and the Tax Appeals Commission.
Italy publishes digital service tax regulation and defers payment date to March 16, 2021
Following a public consultation from 16 to 31 December 2020, the Italian Revenue Agency recently published the final executive regulation providing guidance on the Italian digital service tax (IDST). Read more in this PwC Tax Insights.
Consultation on the extension of Jersey’s economic substance regime to partnerships
The Government of Jersey is consulting stakeholders on proposals to extend the economic substance regime to partnerships. The consultation opened on 1February and will close on 1 March 2021.
Channel Island funds post-Brexit - Part I
In the first of a two-part blog, we’re addressing some of the marketing challenges AIFMs have experienced since 1 January 2021 with the falling away of MiFID passporting rights. Our second part, to be issued in early February, will discuss the future of the Channel Islands for fund domiciliation.
Luxembourg limits deductions for interest and royalties owed to ‘non-cooperative’ tax jurisdictions
The Luxembourg Parliament unanimously voted on 28 January to amend the income tax law provision governing the tax deductibility of expenses that corporate taxpayers incur. It disallows deductions for interest or royalties owed to associated corporate entities established in jurisdictions that the EU Council considers non-cooperative in tax matters and will apply to expenses accruing on or after 1 March 2021. Read more.
Luxembourg 2021 Budget Law - introducing “taxe d’abonnement” reduction
The Luxembourg Parliament approved the 2021 Budget Law which became the Law of 19 December, 2020. Its provisions include a number of measures that amend or extend the tax legislation, including a new opportunity of “taxe d’abonnement” reduction that will apply to investment funds investing in sustainable activities as defined by the taxonomy (Regulation (EU) 2020/852). Read more in this PwC Luxembourg tax item.
Middle East Financial Services Tax Outlook 2021
As we begin 2021, there have already been a number of significant developments in the tax space. Middle East financial institutions should be aware of what is coming over the next 12 months, and begin considering how they plan to respond to these developments. This PwC Middle East page contains our high level summary of a number of select key developments we want to bring to your attention.
Significant expansion of the Covid-19 support and recovery scheme
The government has announced new support measures to help businesses through the corona crisis with a substantial expansion of the support and recovery package for the economy and labour market that the government had presented on 28 August 2020. Read more in this PwC Netherlands tax news item.
Court of Appeal opts for dynamic interpretation of treaty, but deems no economic employer
The Court of Appeal of Den Bosch did not deem an economic employer to be present in a case brought by PwC. In its judgment of 31 December 2020, the Court reached a different conclusion than that of the Zeeland-West Brabant District Court earlier in these proceedings. However, the Court follows a dynamic interpretation of treaties to determine whether an economic employer is present. Read more in this PwC Netherlands tax news item.
Special Administrative Region (SAR) - new eligibility test & additional benefits
The Russian Ministry of Finance recently introduced a draft law that expands the eligibility criteria for receiving multinational holding company (MNHC) status and introduces additional benefits, including tax exemption on exchange differences, 5% income tax on all income received, and 10% tax on dividends, interest or royalties paid to the MNHC. However, companies will need to invest and meet physical presence requirements in a given Special Administrative Region. Read more in this PwC Russia Tax Flash.
Thin capitalisation - applying the 12.5 coefficient on leasing-related income
In a case involving OOO De Lage Landen Leasing, the Russian Supreme Court has overturned lower court decisions adopted in favour of the tax authorities and sent the case for a retrial. The dispute concerned the application of the 12.5 thin capitalisation coefficient by the leasing company to income generated from related activities. In the audited period, only companies engaged exclusively in leasing activity were eligible to apply the 12.5 coefficient. The Company and the tax authorities disagreed on the issue of exclusiveness. Read more in this PwC Russia Tax Flash.
Singapore Budget 2021 webinar
The Singapore 2021 Budget Statement will be delivered on 16 February 2021 by Deputy Prime Minister and Minister for Finance, Mr. Heng Swee Keat. Register for this webinar, taking place on 22 February 2021, where our Guest of Honour, Ms Indranee Rajah (Minister in the Prime Minister's Office and Second Minister for Finance and National Development), will join us for our panel session where we will deep dive into how the Budget measures will help businesses address the near-term challenges and long-term needs.
Tax Synopsis - January 2021
This issue includes: 1) Another VAT hurdle; 2) The influence of transfer pricing adjustments on value for customs purposes; and 3) SARS watch.
Sweden introduces mandatory withholding tax on foreign companies’ invoices for work performed in Sweden
New regulations on withholding tax came into force on 1 January 2021. Swedish companies will be obliged to withhold tax at source on invoices from foreign companies if services are performed in Sweden and the company does not provide a Swedish F-tax certificate. The new rules will apply regardless of whether or not the foreign company concerned has a permanent establishment (PE) in Sweden. Read more in this PwC Sweden tax blog.
Forecast 2021: What to expect from the new administration
In this podcast from 4 February, PwC's Public policy leader discusses all the goings-on in Washington, and gives her advice to CFOs on what to expect from the new administration. Visit our PwC US election web page to keep up to date with developments.
Tax & Investment in the USA: Key tax developments for global companies operating in the US
This publication provides updates on recent tax and trade issues and developments of interest to global companies operating in the United States (US Inbounds). In this edition of Tax & Investment in the USA, we cover the following topics: 1) US elections; 2) Trade developments; 3) BEAT regulations; and 4) Section 163(j) regulations.
US Congress enacts enhanced beneficial ownership reporting for US-formed entities
Key takeaways from the legislation: 1) The legislation imposes a significant reporting obligation on all US-formed corporations and LLCs, and certain foreign-owned entities doing business in the US; 2) Even for entities that will be excluded from reporting specific beneficial ownership information, the general due diligence and reporting framework creates serious potential compliance burdens; 3) Treasury/FinCEN will have to adopt implementing regulations within 12 months, which will define much of the reporting framework.
Final regulations clarify fines and penalties disallowance, information reporting
The IRS and Treasury have released final regulations under Section 162(f) and Section 6050X, Section 162(f) generally disallows a deduction for certain payments to the government or another entity for violations of law. Section 6050X requires the government or entity to file an information return. The final regulations significantly expand the exception to disallowance for amounts paid or incurred for restitution or remediation or to come into compliance with law. Read more.
Observations on developments and recent trends from the director of the IRS’s APMA program
During PwC’s recent Global Tax Controversy and Dispute Resolution (TCDR) Conference, David Swenson, Global Leader of PwC’s Global TCDR Network, interviewed John Hughes, Director of the IRS Advance Pricing and Mutual Agreement (APMA) program, which carries out MAP and APA negotiating responsibilities on behalf of the office of the US Competent Authority (USCA). The interview included recommendations to taxpayers for achieving favorable results across a number of important topics facing taxpayers in today’s dispute prevention and resolution environment. Read more.
Tax news and developments affecting company aircraft
This issue of the Aircraft Club newsletter discusses the final regulations on the disallowance of the deduction for expenses for employee commuting, including by company aircraft.
Webcasts, blogs and podcasts:
- Tax Readiness: Settlements and judgements - Review of Section 162(f)/6050X final regulations
Register here to join us for this webcast on Tuesday, 16 February 2021 at 8pm.
- Q1 Financial Reporting Considerations
Join us for this webcast on Wednesday, 24 March at 7pm. Register here.
- Tap into Tax
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. Listen to the latest episode:
Further episodes in this series are available here, as well as on Spotify and other streaming services.
- Cross-border tax talks
- Bring SALT to the table: Key state and local topics
In this episode, Doug McHoney (PwC's US International Tax Services (ITS) Leader) and Rob Ozmun (State and Local Tax (SALT) Partner in PwC's Washington National Tax Services office) peel the onion on how state and local tax issues can impact cross-border planning, and vice versa.
Previous episodes in this fabulous series of podcasts can be found here, as well as on Spotify, YouTube and other streaming services.
- 2021 Tax Policy Outlook: The Changing Horizon
From the White House to the halls of Congress, the policy priorities on the horizon of 2021 are hanging in the balance. What do a global pandemic, economic challenges, and political divisions mean for tax legislation? In this podcast we discuss the potential impacts and our 2021 Tax Policy Outlook: The Changing Horizon.
A number of previous webcasts are available for replay in our US tax reform hub here, including:
- 2021 Tax Policy Outlook: The Changing Horizon
Watch the replay from this webcast on 28 January 2021.
- Tax Readiness: Renewed interest - What to know about the Final Section 163(j) Regulations
Watch the replay from this webcast on 26 January 2021.
- Tax Readiness: Embracing the future of mobility
You can watch the replay from this webcast held on 21 January 2021.
- Tax Readiness: New tax legislation and what it means
Watch this replay from this webcast held on Thursday, 7 January.
- US Inbound Insights: US Economic, Policy and Tax Webcast
In this webcast our PwC panel shared potential implications of the US elections on US operations of global companies headquartered outside the United States. Watch the replay here.
- Are you prepared for the tax & accounting implications in the transition from LIBOR?
Register here to watch the on demand replay of this webcast.
For regular updates on this topic, check out our US tax reform hub on The Suite here.