Four weeks to 5 January 2024
Happy New Year and welcome to our first 2024 update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
UK
Pillar Two
- Draft guidance on Multinational Top-up Tax and Domestic Top-up Tax
HMRC published further draft guidance on Multinational Top-up Tax and Domestic Top-up Tax on 21 December 2023. This release of draft guidance updates the previously-released pages on chargeability, scope, and administration. It also includes a new section on calculating the effective tax rate, and new pages which cover the application of Multinational Top-up Tax and Domestic Top-up Tax to particular types of entities. HMRC is inviting comments from stakeholders on this draft guidance until 7 February. - UK Pillar Two: Painting while the paint dries
In this Cross-border Tax Talks episode from 12 December, Doug McHoney (PwC’s International Tax Services Global Leader) is joined by Matt Ryan at PwC’s Global Tax Symposium in Rome. Doug and Matt revisit the UK Pillar Two rules for the third time, but now from an enacted law perspective. While the rules are set to apply from the beginning of 2024, the United Kingdom faces an interesting challenge as one of the early adopters of Pillar Two, with enacted legislation, followed by additional OECD guidance. Doug and Matt discuss the tricky task for UK legislators of ‘painting while the paint still dries’ (i.e., enacting legislation while the OECD guidance is still changing) and some of the key differences that need to be addressed as a result of the subsequent OECD guidance, as well as still-expected guidance in 2023 and beyond. Doug and Matt discuss from a practical perspective how UK-parented taxpayers are preparing for what is ahead, including approaches to safe harbours. They then dive into complexities created by the particularities of the UK rules around the safe harbour and other key issues, like partnerships and deferred taxes. Finally, the podcast closes with practical next steps companies operating in the UK should consider ahead of 2024. - Is Pillar Two the game changer for tax compliance?
In this article, Jonathan Howe and Doug McHoney look at how the OECD’s new global minimum tax framework will cause a step change in how companies have to think about, and deliver, global tax compliance.
Autumn Finance Bill 2023
The Autumn Finance Bill 2023 had its second reading on 13 December, selected clauses will be debated in a Committee of the Whole House on 10 January 2024.
Spring Budget date announced
The Chancellor Jeremy Hunt has commissioned the Office for Budget Responsibility to prepare an economic and fiscal forecast to be presented to Parliament alongside his Spring Budget on 6 March 2024.
HMRC Manual & guidance updates
The following changes have recently been made by HMRC following review:
- International Manual - updated 12 December
- INTM161040 - UK residents with foreign income or gains: double taxation relief: Same income Updated to clarify HMRCs approach to determining whether the same income has been taxed in two territories for the purpose of double taxation relief claims.
- INTM180010 - Foreign entity classification for UK tax purposes: Introduction - Page amended to clarify meaning of "transparent" and "opaque" and give information on purpose of guidance.
- INTM180050 - Foreign entity classification for UK tax purposes: HMRC view of Delaware LLCs in light of Anson - New page added
- Corporate Finance Manual
CFM97335 Interest restriction: public infrastructure: loans advanced through non-resident intermediaries - Intermediate non–UK companies, paragraphs 4,5 & 7 amended on 19 December. - International Exchange of Information Manual
- IEIM400090: Common Reporting Standard: Participating Jurisdictions - updated 5 January with 2024 participating jurisdictions information.
IEIM402340 - Reportable Information: Reportable Jurisdictions - updated 5 January with the list of participating jurisdictions for 2024. - IEIM300140 - Country-by-Country Reporting - Guidance on the completion of the CbC report - Guidance updated on 19 December with the amendments taking effect from 1 January 2024.
New trade and financial sanctions against Russia come into force
On 14 December 2023, the UK government introduced legislation to further sanction goods, technology, and sources of funding that could support Russia’s war against Ukraine. Read more in this news release.
Rethinking tax compliance for the new world
How can your business get compliance up to speed now, while future-proofing capabilities for the changes ahead? As the focus of tax compliance shifts from backward-looking returns to real-time reporting and its strategic impact ratchets up in areas ranging from incentives to sustainability, it’s not just operations and governance that need rethinking, but also what we mean by compliance. In this article, PwC’s Jonathan Howe explores the challenges ahead and how to gear up for this new world of compliance.
EU
Pillar Two
- A new era for corporate taxation in the EU enters into force
Ground-breaking new EU rules came into effect from 1 January 2024 introducing a minimum rate of effective taxation of 15% for multinational companies active in EU Member States. Read more in this PwC blog. - Election to delay application of the IIR and UTPR under Article 50 of the Pillar Two Directive
As at 12 December 2023, five EU member states (Estonia, Latvia, Lithuania, Malta, and Slovakia) have formally notified the Commission of their intention to elect for a delayed application of the IIR and UTPR in accordance with Article 50 of the Pillar Two Directive, having declared that no more than twelve ultimate parent entities of groups within the scope of this Directive are located in their territories. - Commission publishes technical FAQs
The European Commission has published frequently asked questions regarding “the suggested correct interpretation and transposition” of the EU Pillar Two Directive.
State aid ruling - CJEU rules that Luxembourg did not grant State aid to Amazon
The Court of the Justice of the European Union (CJEU) rendered its judgment on 18 December 2023 in the case regarding the appeal brought by Amazon group companies and Luxembourg against the judgment of the General Court of the European Union (“GC”) of 12 May 2021. In essence, the CJEU upheld the GC judgment despite errors in the GC’s reasoning. This was because the European Commission’s (EC) decision had to be annulled in any event because of the incorrect determination of the reference system, rather than for the reasons given by the GC. Read more in our EUDTG alert.
CJEU rules that Portuguese additional solidarity tax on the banking sector legislation is not in line with EU Law
In this recent judgment, the CJEU ruled that the Portuguese additional solidarity tax on the banking sector legislation is not in line with EU law. The current judgment reaffirms, once more, that legislation rendering one legal form less attractive for economic operators compared to another is not in line with EU law. It further emphasizes that covert discriminations encompass not only those based on the location of a company’s seat but also any covert forms of discrimination that, through the application of other differentiation criteria (such as the legal operating form), result in the same discriminatory outcome. Read more in our EUDTG alert.
MEPs: Open accession talks with Ukraine, Moldova and Bosnia and Herzegovina
Members of the European Parliament have urged the European Council to commit to talks with Ukraine, Moldova, and Bosnia and Herzegovina on EU membership. 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 12 December includes: 1) ECJ Annuls Tax Findings in Engie State Aid Case; 2) Spanish EU Presidency Last ECOFIN Meeting; 3) Calviño Appointed to the European Investment Bank; Vestager Returns to Brussels; 4) EU Approves Artificial Intelligence Act; and 5) OECD Forum on Tax and Crime in Rome, Italy. Visit their latest news page here. - CFE’s 2023 Tax Policy Report
CFE Tax Advisers Europe has published its 2023 Tax Policy Report. The Tax Policy Report is an annual publication which provides a detailed analysis of significant primary law and tax policy developments at both EU and international level that have occurred over the course of the year which would be of interest to tax advisers. It also includes an overview of selected CJEU case-law and relevant European Commission decisions.
OECD
Pillars One and Two
- OECD releases further Pillar Two GloBE Administrative Guidance and timeline update for Pillar One
The OECD Secretariat published its third set of Administrative Guidance on the Global Anti-Base Erosion Model Rules (GloBE rules) of Pillar Two on 18 December 2023, intended to clarify the operation of the GloBE rules. This will be incorporated into a revised version of the GloBE Commentary, along with the earlier sets of guidance released in February and July 2023, which according to the OECD will be released in 2024. This latest release is the final set of guidance supplementing and clarifying the Pillar Two rules before they come into effect in many countries from 1 January 2024. Further guidance is expected in 2024 across a range of issues.
Concerning Amount A of Pillar One, a statement was also published noting that “members of the Inclusive Framework (IF) reaffirm their commitment to achieve a consensus-based solution and to finalise the text of the Multilateral Convention (MLC) by the end of March 2024, with a view to hold a signing ceremony by the end of June 2024.” In addition to recognizing that work to resolve the outstanding issues on the text of the MLC will go on into 2024, the IF statement mentions that this includes work to extend the standstill on Digital Services Taxes (DSTs) and other relevant similar measures (which is currently set to expire at the end of this year). Read more in our Tax Policy Alert.
- Webinar: Update of the economic impact assessment of the Global Minimum Tax
You can register here for this OECD webinar taking place on Tuesday 9 January at 2pm (UK), where the latest results on the impacts of the GMT on the taxation of MNEs will be discussed. The analysis uses new and unique data on MNE worldwide activity and comprehensive estimates of global low-taxed profit to estimate the impact of the GMT. It also extends previous OECD impact assessment work by incorporating a revised methodology that captures the final design of the GMT. A replay will be available here after the event. - While the Pillar Two Administrative Guidance provides much needed direction on the GloBE Rules, there are a few surprises. In this Policy on Demand episode from 19 December, Will Morris talks about that and what’s to come.
- In this Tax Bites podcast, we share a first critical look at the items addressed by the Administrative Guidance published by the OECD on Monday 18 December 2023.
2022 Peer Review Reports on the Exchange of Information on Tax Rulings
The OECD has released the latest peer review assessments for 131 jurisdictions in relation to the compulsory spontaneous exchange of information on tax rulings. This is the seventh annual peer review of the implementation of the BEPS Action 5 minimum standard on tax rulings, which aims to provide tax administrations with the necessary information concerning their taxpayers to efficiently tackle tax avoidance and other BEPS risks.
Dividend tax fraud - Raising awareness of dividend stripping schemes
The OECD has released a new report which is intended to raise awareness of dividend stripping frauds and provides a number of recommendations for countries around recognising the risk, improving domestic co-ordination and expanding international co-operation.
Tim Power elected new Chair of the OECD Committee on Fiscal Affairs
The committee has elected Mr. Tim Power, Deputy Director for Business and International Tax in His Majesty’s Treasury of the United Kingdom, as its new Chair. He will also serve as Co-Chair of the OECD/G20 Inclusive Framework on BEPS. Read more in this OECD item.
MLI
Latest updates, the text of the BEPS Convention, the explanatory statement, background information, database, and positions of each signatory and parties are available at https://oe.cd/mli.
Other territories
International
International Tax News - December 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) Czech Republic, Denmark, and Finland implement Pillar Two; 2) Colombia finalises Significant Economic Presence rule; 3) EU Court of Justice rules that Luxembourg did not grant State aid to Engie, Amazon; and 4) US Treasury releases guidance on the GloBE rules and foreign tax credit.
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. In this edition, from 21 December, we cover:
- Colombia's proposed significant economic presence measures;
- provisional EU deal on employment status for digital platform workers;
- countries have agreed a March/June 2024 timeframe for Pillar One Amount A materials;
- further Administrative Guidance on Pillar Two GloBE rules;
- New Zealand has published guidance on its forthcoming digital platform operator reporting rules; and
- Japan is set to introduce consumption tax obligations on B2C type digital service platforms.
Digital tax megabyte - December 2023
A collection of the brief insights throughout December 2023 of the type provided on an ad hoc basis in our Latest digital tax byte update (above).
Environmental, Social and Governance (ESG)
- Job greening in the UK Financial Services Sector
The financial services sector needs more people with green skills or our ambitions for net zero could be at risk. That’s according to a new report from @PwC UK, the @Financial Services Skills Commission and the Aldersgate Group. Read more.
Australia
Updated guidance on R&D claims
The Australian Taxation Office (ATO) has released two new taxpayer alerts to warn entities and their advisers about their concerns regarding incorrect Research and Development (R&D) tax incentive arrangements the ATO is reviewing. These alerts are about expenditure incurred to associated entities and activities conducted overseas for foreign related entities. Read more in this news item from the ATO.
ATO welcomes decision in Pepsi vs Commissioner of Taxation
As reported previously, The Australian Taxation Office has welcomed the decision by the Federal Court in relation to PepsiCo, Inc. v Commissioner of Taxation. The Court delivered an oral judgment on 30 November but the full judgment is now available to the public. The decision may however be subject to appeal. See this ATO press release
Barbados
Barbados consults on corporate income tax shake-up including top up tax
The Barbados Government has been consulting on draft legislation to amend its Corporate Income Tax Act and to introduce a Qualifying Domestic Minimum Top-Up Tax (QDMTT) for large multinational enterprises. The consultation closed on 5 January 2024 and the Government is aiming to have the laws adopted by parliament by the end of the month. Most significantly, the draft legislation proposes imposing corporate income tax at a rate of 9% on companies operating in Barbados, with a rate of 5.5% applying to those with gross income of BBD2m (USD1m) or less, while a zero rate will apply to class 1 insurers and a two percent rate will apply to class 2 and class 3 insurers. There are a number of exceptions to this general rule, including (as expected) an exception for companies whose Ultimate Parent Entity (UPE) is in a jurisdiction which has not implemented an Income Inclusion Rule (IIR) or whose Constituent Entities are not subject to an IIR or an Undertaxed Profits Rule (UTPR). For such entities there will be no application of the Qualifying Domestic Minimum Top-Up Tax until 2025.
Belgium
See here for latest updates.
Belgian Federal Government approves law introducing a minimum tax for multinational companies
Belgium approved the final law introducing a minimum tax for multinational companies and large domestic groups on 14 December, transposing the EU’s Minimum Tax Directive (EU Directive 2022/2523) into domestic law. The next step is the publication in the Belgisch Staatsblad / Moniteur Belge so that the law can enter into force on 31 December 2023. Read more in this PwC news item.
Bosnia and Herzegovina
MEPs: Open accession talks with Ukraine, Moldova and Bosnia and Herzegovina
Members of the European Parliament have urged the European Council to commit to talks with Ukraine, Moldova, and Bosnia and Herzegovina on EU membership. See this press release.
Canada
Federal government tables Bill C-59
- Changes to the general anti-avoidance rule (GAAR)
The federal government recently tabled Bill C-59, which includes legislation that amends the general anti-avoidance rule (GAAR) in section 245 of the Income Tax Act (the Act). The amendments are intended to strengthen the GAAR by: 1) introducing a preamble to guide the interpretation of the GAAR, effective upon royal assent of Bill C-59; 2) for transactions that occur after 2023: a) lowering the “avoidance transaction” standard; b) introducing an economic substance rule; c) applying a three-year extension of the normal reassessment period; 3) implementing a penalty, effective for transactions that occur on or after the later of 1 January 2024 and the day on which Bill C-59 receives royal assent. This PwC Tax Insights provides an overview of these legislative changes. - Excessive interest and financing expenses limitation (EIFEL) regime
Bill C‑59 includes legislation to implement the excessive interest and financing expenses limitation (EIFEL) rules. The EIFEL rules are intended to restrict Canadian taxpayers’ net interest and financing expense deductions based upon a percentage of their “tax‑EBITDA.” The legislation in Bill C‑59 includes some changes to the draft legislation that was released in August 2023. This PwC Tax Insights summarises the key changes to the rules since the August 2023 release.
Chile
US-Chile treaty enters into force
The US-Chile income tax treaty and accompanying protocol entered into force on 19 December 2023. The Treaty is effective for taxes withheld at source beginning 1 February 2024, and for other taxes, for taxable periods beginning on or after 1 January 2024. Read more in this PwC Tax Insights.
Colombia
Colombia provides regulatory framework for significant economic presence rule
The Colombian Government recently issued Executive Decree 2039, which provides a regulatory framework for applying the significant economic presence (SEP) rule. The SEP rule was introduced by Law 2277 of 2022 and will enter into force on 1 January 2024. Taxpayers should evaluate their transactions with Colombian individuals and entities in light of the SEP regulatory framework. They should consider its potential impact in their SEP analyses, including the potential obligation to register. Read more in this PwC Tax Insights.
France
France introduces updated transfer pricing regulations
France’s Finance Bill for 2024, adopted on 16 December, through article 22, introduces four measures reinforcing the French tax administration’s control of transfer pricing policies applied by multinational groups operating in France. Read more in this PwC Tax Insights.
Germany
Update: Bundesrat approves introduction of a global minimum tax
On 15 December, Germany's upper house of parliament (the Bundesrat) endorsed domestic legislation to transpose the EU's Minimum Tax Directive (EU Directive 2022/2523) into domestic law. A 15% minimum corporate tax rate will therefore be imposed on large multinational and domestic groups (or companies) with a combined turnover of at least EUR750. Read more in this PwC blog.
Bundesrat approves a partial implementation of the Growth Opportunities Act into the Act to Promote the Secondary Credit Market
On 15 December 2023, the Bundesrat approved the partial implementation of the contents of the Growth Opportunities Act in the Act to Promote the Secondary Credit Market. This includes changes to the interest limitation rule and adjustments resulting from the introduction of the Act for the Modernisation of Partnerships. Read more in this PwC blog.
German Tax Court decides on the establishment of a domestic place of management by exercising a comprehensive power of attorney through a German service provider
Non-resident real estate investors in Germany usually rely on a longstanding jurisprudence that by managing German real estate from abroad no permanent establishment (PE) is established in Germany. In 2022, the German Federal Fiscal Court (BFH) confirmed that a German service provider may establish a PE for a non-resident landlord only under exceptional circumstances (ruling of 23 March 2022, III R 35/20). However, the BFH referred the underlying case back to the lower court in order to determine if the German service provider created a domestic place of management (for details, please see our Real Estate Tax Services News No. 5 from August 2022). Now, the Lower Tax Court of Brandenburg (FG Berlin-Brandenburg, ruling of 28 June 2023, 11 K 11108/17) published its decision that the landlord was subject to German trade tax, as it had a place of management in Germany in the premises of the German service provider that it had commissioned to manage the property. Read more in this PwC alert.
Hong Kong
Consultation on implementation of global minimum tax and Hong Kong minimum top-up tax launched
The Hong Kong Government published its much-anticipated consultation paper on the implementation of the global minimum tax and the domestic minimum top-up tax in December. The consultation is open until 20 March 2024, with the expectation that draft legislation will be published in the second half of 2024. This PwC newsflash summaries the key features and our observations.
Refinements to the FSIE regime and tax certainty enhancement scheme for onshore equity disposal gains passed into law
Two important tax legislative bills were recently passed into law:
- The Inland Revenue (Amendment) (Taxation on Foreign-sourced Disposal Gains) Bill 2023 (FSIE Bill 2023), together with the proposed Committee Stage Amendments that only involve minor textual amendments, were passed by the Legislative Council on 29 November 2023. The FSIE Bill 2023 seeks to refine the existing foreign-sourced income exemption regime under the Inland Revenue Ordinance by expanding the scope of assets in relation to foreign-sourced disposal gains to cover assets other than equity interests.
- On 6 December 2023, the Inland Revenue (Amendment) (Disposal Gain by Holder of Qualifying Equity Interests) Bill 2023 (Enhancement Scheme Bill) that proposes the implementation of the tax certainty enhancement scheme (Enhancement Scheme), passed its third reading in the LegCo unamended. It is expected that the Enhancement Scheme Bill will be gazetted as an amendment ordinance on 15 December 2023. The Enhancement Scheme will apply to gains (i) derived from an eligible onshore equity disposal that occurs on or after 1 January 2024 and (ii) accrue in or after the year of assessment 2023/24.
Read more in this PwC alert.
India
CBDT amends Safe Harbour Rules
The Central Board of Direct Taxes (CBDT) has recently amended the Safe Harbour Rules for international transactions, ie rules 10TA and 10TD of the Income-tax Rules, 1962 (the Rules), vide a notification. These latest amendments are with respect to the definition of operating expense and operating revenue and the scope of intra-group loan transactions that will be covered within the ambit of the Safe Harbour Rules. The amendments will come into force from 1 April 2024. Read more in this PwC alert.
Ireland
Finance Minister notes Ireland’s application of effective 15% corporation tax rate for in-scope businesses
The Minister for Finance Michael McGrath has welcomed the beginning of the application of the minimum effective corporation tax (Pillar Two) rules in Ireland from 31 December 2023. Ireland will continue to apply the 12.5% corporation tax rate (which has been in effect since 2003) for businesses out of scope of the agreement, ie businesses with revenues less than €750 million. This means that over 99% of companies operating in Ireland are outside of the scope of the global minimum effective tax rate of 15%. Read more in this press release.
Japan
Common Misunderstandings about Transfer Pricing Regulations in Japan ― Inbound Companies
In this newsletter, we explain the points where inbound companies are likely to be misled with respect to Japanese transfer pricing taxation rules.
2024 Tax Reform Proposals: Introduction of consumption tax remittance obligation for B2C-type digital service platforms
The ruling parties in Japan recently published their 2024 Tax Reform Proposals (“Proposals”). This PwC alert provides an overview of the major revisions in the consumption tax rules contained in the Proposals, which would be relevant to both foreign digital service providers and platform operators.
Jersey
Jersey and Bahrain strengthen bilateral ties
Following two days of attendance at COP28, on 6 December 2023 Jersey’s Chief Minister signed a Memorandum of Understanding alongside Bahrain’s Foreign Minister to enhance collaboration in areas such as heritage, the digital sector, financial regulation and tax. Read more in this press release.
Act declaring that the Finance (2024 Budget) (Jersey) Law 202- has immediate effect
Jersey has enacted legislation to give effect to measures announced in the government plan for 2024 to 2027, announced in September. The Finance Law 2024 introduces a 150 percent super deduction for investment in the RegTech sector, for firms innovating in the IT field to boost regulatory and compliance processes.
Korea
Korean Tax Update - December 2023
The latest edition includes: 1) National Assembly Subcommittee Passes Modifications to the Initial Tax Reform Proposals for 2023; 2) Government Announces Draft Amendments to the Presidential Decree in relation to Global Minimum Tax; 3) Korea and Iran Agree to Revise the Income Tax Treaty for Avoidance of Double Taxation; and 4) Rulings update.
Luxembourg
Vote of the law for the implementation of Pillar Two minimum taxation rules in Luxembourg
On 20 December 2023, the Luxembourg Parliament voted to approve the draft law n°8292 transposing the EU’s Minimum Tax Directive (EU Directive 2022/2523) into domestic law. Read more in this PwC news item.
Vote of the new Luxembourg investment tax credits regime to accelerate sustainability transformation
The Luxembourg Parliament recently voted to approve bill n°8276, revamping the investment tax credits available under article 152bis of the Luxembourg Income Tax Law (“LITL”). The aim of the Law is to support Luxembourg companies in their digital and ecological/energetic transformation. Read more in this PwC news item.
Middle East
UAE issues guide outlining criteria to determine natural persons subject to Corporate Tax and their compliance requirements
In a recent news release, the Federal Tax Authority issued new guidance outlining the criteria to determine natural persons subject to the Corporate Tax Law that came into effect on 1 June 2023. The guide provides a comprehensive and simplified explanation and instructions for natural persons realising income in the UAE, enabling them to determine whether they are subject to Corporate Tax.
Jersey and Bahrain strengthen bilateral ties
Following two days of attendance at COP28, on 6 December 2023 Jersey’s Chief Minister signed a Memorandum of Understanding alongside Bahrain’s Foreign Minister to enhance collaboration in areas such as heritage, the digital sector, financial regulation and tax. Read more in this press release.
Saudi Arabia: New Transfer Pricing Guidelines for Zakat payers
On 26 November 2023, the Zakat, Tax and Customs Authority (“ZATCA”) issued detailed guidelines on the Zakat treatment of related party transactions applicable to Zakat payers maintaining statutory accounts (“the Guidelines”). The much awaited Guidelines provide Zakat payers with important clarifications and practical examples on what may be considered as “related party transactions” and the applicable Zakat treatment in light of the application of the Transfer Pricing Bylaws to such transactions. Read more in this PwC alert.
Moldova
MEPs: Open accession talks with Ukraine, Moldova and Bosnia and Herzegovina
Members of the European Parliament have urged the European Council to commit to talks with Ukraine, Moldova, and Bosnia and Herzegovina on EU membership. See this press release.
Netherlands
Minimum profit tax 2024 in next phase: update
The Dutch Minimum Taxation Act 2024, also known as Pillar Two, provides for a minimum effective tax rate of 15% per jurisdiction for large international enterprises (annual turnover exceeding 750 million euros). On 19 December 2023, this legislative proposal was adopted by the Senate. This PwC article provides background to the new legislation and addresses the second Memorandum of Amendment of the 2024 Tax Plan.
Singapore
Singapore explains changes to foreign-sourced income regime
The Inland Revenue Authority of Singapore (IRAS) has released a new e-Tax Guide which explains the income tax treatment of gains or losses from the sale or disposal of any movable or immovable property situated outside Singapore (referred to as “foreign assets”) and is relevant to entities that derive gains or losses from the sale of foreign assets.
Economic Substance Requirement
The foreign-sourced disposal gains tax regime provided in section 10L of the Income Tax Act 1947 took effect from 1 January 2024. Under the tax regime, certain gains from the sale or disposal of foreign assets are treated as income chargeable to tax when received in Singapore. Foreign-sourced disposal gains from the sale or disposal of a foreign asset (not being an intellectual property right) will not be treated as income chargeable to tax in Singapore if the entity has adequate economic substance in Singapore. Read more here from the Inland Revenue Authority of Singapore (IRAS).
Enterprise Innovation Scheme (EIS)
The IRAS has released new guidance on the newly introduced Enterprise Innovation Scheme, which was announced in the 2023 Budget. Besides enhancement to existing tax measures and an introduction of a new tax measure, the EIS also enables eligible businesses to opt to convert up to $100,000 of total qualifying expenditure for each year of assessment into cash at a conversion rate of 20%.
South Africa
PwC Synopsis - November/December 2023
In the latest edition we look at: 1) mining royalty tax; 2) the taxation of forex gains or losses arising from exchange items; and 3) SARS watch.
Switzerland
For the latest updates on current topics, see this PwC Switzerland Insights page.
Switzerland enacts Pillar Two rules
The Swiss Federal Council has decided on Switzerland’s roadmap for implementing the global minimum tax into domestic law. To prevent erosion of the tax base in favour of other countries, the entry into force date of the Qualifying Domestic Minimum Top-up Tax (QDMTT) is set for 1 January 2024. The implementation of the other elements of the Pillar Two Rules (the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR)) is postponed. Read more in this PwC Tax Insights.
Taiwan
Tax Update - December 2023
The December edition includes: 1) Ministry of Finance (“MOF”) announced amendments to Regulations Governing Assessment of Profit-seeking Enterprise Income Tax; and 2) MOF released Tax Ruling No. 11204681100 addressing income tax implication on sales of international carbon credits from reduced emissions under credited quotas traded on the Taiwan Carbon Solution Exchange (“TCX”) by foreign profit-seeking enterprises.
Turkey
Amendment to the participation exemption regime for foreign sourced dividends
Law number 7491, published in the Official Gazette on 28 December 2023, is bringing an easier path to a partial (50%) tax exemption while the full exemption still stands for those who can qualify. The only requirements to benefit from the 50% exemption are: 1) a minimum holding of 50% in the share capital of the foreign company; and 2) the dividends must be remitted to Turkey by the date corporate income tax is due. Read more in this PwC alert.
Ukraine
MEPs: Open accession talks with Ukraine, Moldova and Bosnia and Herzegovina
Members of the European Parliament have urged the European Council to commit to talks with Ukraine, Moldova, and Bosnia and Herzegovina on EU membership. See this press release.
US
Treasury releases guidance on the GloBE rules and foreign tax credit
Treasury and the IRS recently released Notice 2023-80, announcing their intention to issue proposed regulations to address application of the foreign tax credit (FTC) and related rules and the dual consolidated loss (DCL) rules to certain types of taxes described in the GloBE Model Rules. The Notice also extends and modifies the temporary relief described in Notice 2023-55 for determining whether a foreign tax is eligible for an FTC under Sections 901 and 903. The Notice addresses application of the temporary relief with respect to partnerships and their partners. Comments on the guidance provided on the GloBE Model Rules and the FTC and the GloBE Model Rules and DCLs should be submitted by 9 February 2024. Read more in this PwC Tax Insights and view our Policy on Demand episode entitled ‘FTC guidance provides certainty, includes surprises’.
IRS releases CAMT guidance for certain CFC distributions and additional rules for determining an AFS
The IRS has released Notice 2024-10, providing additional guidance on the application of the corporate alternative minimum tax (CAMT), which is effective for tax years beginning after 31 December 2022. The Notice provides interim guidance on several issues, including additional rules for determining the adjusted financial statement income (AFSI) of a US Shareholder when a controlled foreign corporation (CFC) pays a dividend to the US Shareholder or another CFC. The Notice also modifies and clarifies the interim guidance provided in Notice 2023-64 regarding the applicable financial statement (AFS) to be used by members of a tax consolidated group. Read more in this PwC Tax Insights and view our Policy on Demand episode entitled ‘Latest CAMT guidance and what’s next’.
US-Chile treaty enters into force
The US-Chile income tax treaty and accompanying protocol entered into force on 19 December 2023. The Treaty is effective for taxes withheld at source beginning 1 February 2024, and for other taxes, for taxable periods beginning on or after 1 January 2024. Read more in this PwC Tax Insights.
Year-end guidance issued on Section 174 contract research and method changes
The IRS recently issued guidance to taxpayers on Section 174 research and experimental (R&E) expenditures in Notice 2024-12 and Rev. Proc. 2024-9. Notice 2024-12 modifies and clarifies the interim guidance set forth in Notice 2023-63, issued earlier this year. Rev. Proc. 2024-9 provides procedural guidance for taxpayers to obtain automatic consent to change methods of accounting for expenditures paid or incurred in tax years beginning after 31 December 2021, in reliance on interim guidance under Sections 174 and 460 set forth in Notice 2023-63. Significantly, Rev. Proc. 2024-9 provides optionality on the treatment under Section 460 of total allocable Section 174 costs for taxpayers that account for income from long-term contracts under the percentage-of-completion method (PCM). Read more in this PwC Tax Insights.
FASB issues guidance on income tax disclosures
On December 14, the FASB issued a final standard on improvements to income tax disclosures. The standard requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. The standard is intended to benefit investors by providing more detailed income tax disclosures that would be useful in making capital allocation decisions. Read more in this PwC Tax Insights.
Cross-border Tax Talks podcast
- Gen AI in Tax: a new frontier
In this episode from 4 January, Doug McHoney (PwC’s International Tax Services Global Leader) is with Dom Megna, a New York-based tax partner leading PWC's US Tax Reporting and Strategy Practice. Doug and Dom discuss Artificial Intelligence (AI) and its place in tax. They focus on four areas - what is conversational AI, machine learning, deep learning, and generative AI (a subset of deep learning). They also cover some impacts of AI: AI for tax practitioners, how AI will affect people’s jobs, data opportunities and architecture, Pillar Two, responsible AI, and the ROI of AI. - Taxing FX of Branches: the new Section 987 regulations
Doug McHoney (PwC’s International Tax Services Global Leader) is joined by Rebecca Lee (WNTS ITS Partner) in this episode of Cross-Border Tax Talks podcast from 19 December. Rebecca, a frequent guest on the podcast, specializes in financial transactions and digital assets. Doug and Rebecca discuss the history and intent of Section 987, which is generally to address the taxation of foreign exchange gains/losses from a foreign branch operating in a different functional currency than its home office.
Policy on Demand series
- Will Morris on Pillar Two answers and surprises
While the Pillar Two Administrative Guidance provides much needed direction on the GloBE Rules, there are a few surprises. In this episode from 19 December, Will Morris talks about that and what’s to come. - Latest CAMT guidance and what’s next
In this episode from 18 December, Nita Asher walks through Notice 2024-10, the latest CAMT guidance, issued on 15 December. This is the fifth interim guidance on the CAMT, which is effective for tax years beginning after 31 December 2022. And as for next steps, taxpayers have a short window to comment – until 15 January 2024. - FTC guidance provides certainty, includes surprises
The recently released Notice 2023-80 addresses three different aspects of the foreign tax credit and other rules. While there is some certainty in the guidance, there are some surprises as well. In this episode from 14 December, Wade Sutton and Elizabeth Nelson walk through the details of the notice and what taxpayers can expect in the coming months. - Week in Review
15 December - With tax legislation off the table until 2024, companies should be on the look-out for Treasury guidance on CAMT and the stock buyback excise tax as well as OECD country-by-country safe harbour FAQs with anti-arbitrage rules before year-end. Watch now.
Tax Readiness webcast series
- Tax Readiness: 2024 Tax Policy Outlook
Join our panel of PwC policy specialists on Wednesday 17 January at 7pm, as they review our 2024 Tax Policy Outlook and outline the upcoming tax policy decisions to be made and delve into the significant hurdles faced by business leaders. This includes strategies on effectively engaging with policymakers and the public to garner support for tax policies that foster future economic growth, business investments, and job creation. Register here. - Tax Readiness: Future of Tax - Topics shaping the tax agenda
The opportunity for Tax to enable and influence business strategy has never been greater – from business model reinvention, to climate investments, and Pillar Two. In this webcast replay from 12 December, we share the new capabilities that leading tax functions are prioritising to support their organisation's broader commercial strategy.
State and Local tax
- Pennsylvania adopts federal grantor trust rules
The Pennsylvanian Governor recently signed a tax bill that incorporates federal grantor trust rules into Pennsylvania’s income tax law, which now requires any person treated as an owner of an irrevocable grantor-type trust to pay state personal income tax on the trust’s income regardless of their receipt of such income. Read more in this PwC Tax Insights.
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.
Vietnam
Resolution on Global Minimum Tax policy in Vietnam
The long-awaited Resolution was finally approved by the National Assembly on 29 November, and came into effect from 1 January 2024. The Resolution provides that Vietnam will adopt: 1) the Qualified Domestic Minimum Top-Up Tax (“QDMTT”) rule; and 2) the Income Inclusion Rule (“IIR”). This aims to protect Vietnam’s tax base in light of the fact that many countries that have investments in Vietnam have announced that they will introduce the IIR from 2024 (eg Japan, Korea, etc.). This provides some transparency and certainty for business in Vietnam, particularly as more countries implement global minimum tax rate policy rules. Read more in this PwC alert.