Two weeks to 5 March 2021
Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
UK
Budget 2021 - the roadmap for recovery
In his much anticipated second Budget, the nation was looking for safety, security, support, substance, and ultimately reassurance that the Government will do what it can to protect jobs and income. The Chancellor focused on three key priorities: emergency measures for the COVID-19 pandemic; repairing public finances; and stimulating economic recovery.
- A summary of the key announcements from an international corporate tax and treasury perspective for multinational companies.
- Marissa Thomas (PwC’s Head of Tax) comments on this year's Budget.
- Check out our Budget2021 web page for a full breakdown of all of the announcements.
- If you missed our live session on Thursday, 4 March 2021, where we explored the latest tax issues and how they will impact businesses, following the Chancellor's budget announcements, you can watch it here.
- What’s next:
- Finance Bill - Finance Bill will be published on 11 March.
- Tax Day - The government will publish a range of tax-related consultations and calls for evidence on 23 March.
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:
- Tax reform needed to address unsustainable public finances, warns Treasury Committee
The Treasury Committee has published a unanimously-agreed report as part of its inquiry into Tax After Coronavirus. The headlines include: 1) Now is not the time for tax rises or fiscal consolidation, but significant fiscal measures, including revenue raising, will probably be needed in the future; 2) Government’s tax lock manifesto commitment will come under significant pressure; 3) Moderate increase in corporation tax could raise revenue without damaging growth; 4) Government should prioritise reforming stamp duty land tax; and 5) Government should introduce temporary three-year loss carry-back for trading losses and increase investment incentives for business.
Double Taxation Convention between the United Kingdom and Sweden
A Protocol to the Double Taxation Convention with Sweden was signed on 23 February, giving effect to certain OECD/G20 base erosion and profit shifting recommendations that protect tax treaties against avoidance activities, ensuring that the UK’s double taxation agreement with Sweden meets the minimum OECD/G20 recommended standards. Read more in this Written Ministerial Statement.
PwC’s Digital Tax Academy - our tax training at your fingertips
Digital Tax Academy is PwC's new online tax learning and development solution, a curated suite of technical and soft skills courses for tax professionals, designed by our subject matter experts and delivered via our cutting edge online learning platform, Learning Lab. Whether you need to upskill on a particular piece of tax regulation, or wish to continue your team's professional development, Digital Tax Academy can equip tax teams with the skills and knowledge to maximise their influence and impact on how tax is managed within your organisation. We have a wide range of international tax courses that are available now or over the next few weeks, from fundamental principles to specialist deep dives. Please contact your PwC tax advisor or sign up here for a free trial. Find out more here.
EU
European Council adds Dominica to the EU list of non-cooperative jurisdictions and removes Barbados
The European Council recently adopted conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes, deciding to add Dominica to the EU list of non-cooperative jurisdictions (Annex I of the conclusions) and to remove Barbados from that list. See this European Council press release.
Council approves greater corporate transparency for big multinationals
Ministers of Internal Market and Industry recently met virtually to discuss a proposal for Directive on the so-called Public Country-by-Country Reporting. Under this proposal, revived under the current Portuguese Presidency of the Council of the European Union, multinational enterprises with consolidated revenue of more than 750 million euro during the last two consecutive years would be obliged to publish certain tax related information on their websites. Read more in our PwC Tax Policy alert and this European Council press release.
CJEU rules the ordinary tax credit method provided for by DTTs compatible with the free movement of capital
On 24 April 2019, the French Supreme Administrative Court asked for a preliminary ruling on the Société Générale case (C-403/19) to the Court of Justice of the European Union (CJEU). The CJEU delivered its Judgment on 25 February 2021 without any Advocate General’s opinion. Read more in this PwC EUDTG newsalert.
CFE Tax Advisers Europe
- CFE Tax Top 5 – Round-up of EU Tax Policy News
The latest edition looks at the following: 1) Agreement on Digital Tax within reach after US Policy ‘U-Turn’; 2) EU ministers endorse Public Country-by-Country Reporting; 3) OECD calls on countries to target professional enablers of tax crimes; 4) OECD Tax Talks: Save the Date & Register; and 5) ECJ Judgment in C-403/19 Société Générale (Double Juridical Taxation of Dividends). View previous editions here. - CFE Global Top 10 - February 2021
The latest edition looks at the following: 1) Agreement on Digital Tax within reach after US Policy ‘U-Turn’; 2) EU Council updates EU Tax Blacklist; 3) OECD publish report on Taxing Energy Use for Sustainable Development; 4) EU Ministers endorse Public Country-by-Country Reporting; 5) OpenLux: Tax Investigation into Luxembourg by Le Monde; 6) EU Commission publishes Digital Targets Roadmap; 7) OECD calls on countries to Target Professional Enablers of Tax Crimes; 8) EU TAXUD publishes Brexit Rules of Origin Guide; 9) OECD BEPS Action 14 Public Consultation; and 10) EU Court of Auditors assesses 70 Billion lost annually through corporate tax avoidance.
OECD
OECD Tax Talks webcast
With a number of recent and upcoming developments in the OECD’s international tax agenda, experts from the Centre for Tax Policy and Administration recently gave an update on their work. Topics included: 1) Update on G20; 2) Tax and digitalisation update on Pillar One and Pillar Two; 3) Tax policy; 4) COVID-19 response – tax treaties and transfer pricing; 5) BEPS implementation and tax transparency; and 6) Tax and crime. You can watch the recording here.
OECD agrees new peer review process to foster transparency on tax rulings
In order to maintain and further improve transparency on tax rulings, the OECD/G20 Inclusive Framework on BEPS, which groups over 135 countries and jurisdictions on an equal footing for multilateral negotiation of international tax rules, approved the process for the BEPS Action 5 peer review of the transparency framework for the years 2021 to 2025. This includes enhanced Terms of Reference for assessing the implementation of the minimum standard and a streamlined Methodology, adopting a risk-based approach towards the peer reviews. Read more in this OECD item.
OECD presents international tax update to G20 Finance Ministers
In addition to an update on the progress being made to address the tax challenges arising from the digitalisation of the economy, the report also provides an update on the other G20 tax deliverables (tax transparency, implementation of the BEPS measures and capacity building to support developing countries), which continue to produce successful results.
OECD calls on countries to crack down on the professionals enabling tax and white collar crimes
Countries should increase efforts to better deter, detect and disrupt the activities of professionals who enable tax evasion and other financial crimes, according to a new OECD report.
Other territories
International
Taxation of the digital economy
- Agreement on Digital Tax within reach after US Policy ‘U-Turn’
The new US Secretary of Treasury Dr Janet Yellen has confirmed that President Biden’s administration is ready to drop the ‘safe harbour’ requirement, a key obstacle to an international agreement on Pillar One concerning taxation of the digital economy. At the G20 meeting on Friday, Secretary Yellen said the US was no longer advocating for safe harbour implementation, and will engage robustly to address both pillars of the OECD project, the tax challenges of digitisation and a robust global minimum tax, a US official was quoted for the Financial Times. See this CFE report from 1 March 2021. - Digital tax byte
The latest edition, from 5 March, includes a delay Bill on the US State of Maryland's digital advertising tax, announcements by South Africa and Japan that they would consider a DST and the UK Budget announcement that the rate of Diverted Profits Tax would increase. - Digital tax megabyte - February 2021
This edition includes some changes in India's Union Budget, Sierra Leone's Finance Act, the announcement of a Polish advertising tax and Maryland being the first State in the US to introduce a digital advertising tax (both then called into question), while a UK review of business rates that might also have seen an online sales tax as a partial alternative has been delayed until autumn 2021.
International Tax News - January 2021
Among the topics featured in this month's edition are: 1) Public comments on OECD Blueprints for Pillar One and Pillar Two; 2) Peru’s new limitation on interest expense deductibility; 3) Irish tax residency grandfathering provisions ended December 31, 2020; and 4) Korea extends excess corporate earnings tax, increases carryforward opportunities.
Australia
Monthly Tax Update - March 2021
Welcome to the March edition 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.
Employer interventions for homework: updated guidelines beyond COVID-19
As many questions on the possible financial contributions that employers may make to the various home office costs incurred by their employees remained unanswered in the Circular of 14 July 2020, a new Circular (2021/C/20) was published by the Federal Public Service for Finance on 26 February 2021. Note that this Circular applies beyond the COVID-19 pandemic. Its content was discussed with the social security authorities aligning the tax and social security treatment. Read more in this PwC Belgium news item.
Canada
Canada Emergency Wage Subsidy and Canada Emergency Rent Subsidy – Extended to June 2021
The Deputy Prime Minister and Minister of Finance recently announced the extension of the Canada Emergency Wage Subsidy (CEWS), Canada Emergency Rent Subsidy (CERS) and Lockdown Support programs as well as some modifications and additions to the rules. This Tax Insights discusses these changes. The extension means that many businesses and organizations that have been negatively impacted by the COVID-19 pandemic will continue to receive government funding through to June 2021. This is welcome relief for companies struggling to pay their employees’ remuneration, office rent or mortgage payments.
China (see also Hong Kong below)
Webinar: China's Foreign Investments Security Review Measures - How will they impact your business?
China recently released the Foreign Investments Security Review Measures which require foreign investors to pass certain reviews from the perspective of national security when investing in specific areas and industries in China. The Measures came into force on 18 January 2021 and have major and material impacts on certain foreign investment projects and transactions. Watch this recent webcast where the key issues that foreign investors may face after the Measures are enacted, and the resulting business impacts were discussed.
Cyprus
Introduction of 0.4% levy on Cyprus real estate disposals
The Cyprus Parliament has voted to amend certain provisions relating to the Central Agency for Equal Distribution of Burdens (Creation, Objects, Responsibilities, and Other Related Matters) Law of 1989, as amended, aiming to finance the activities of this Central Agency through the introduction of a 0.4% levy on Cyprus real estate disposals. The 0.4% levy is to be imposed on the sale proceeds from all disposals of immovable property which is within the current control of the Republic. The amendments (outlined in this PwC Tax Insights) were gazetted on 22 February 2021, which is their effective date.
Denmark
Denmark adopts new rules for mandatory submission of transfer pricing documentation
The Danish Parliament has adopted amendments that further tighten its comprehensive transfer pricing documentation regulations. The amendments introduce a mandatory submission requirement of the Master file and Local files (of all Danish entities) to the Danish Tax Authority within 60 days after the income tax return due date. The new rules are effective for income years starting from 1 January 2021. Read more in this PwC Tax Insights.
Finland
Tax and Legal news - February 2021
The latest tax and legal news from Finland. Read the latest edition.
Germany
Update: Increase of tax loss carry-back and further Corona aid planned
As reported previously, following the decisions of the coalition committee on 3 February 2021, further Corona aid for companies is planned. In a meeting on 5 March, the Bundesrat (the upper chamber, representatives of all members of the federation) approved the bill in the version adopted by the Bundestag. Read more in this PwC Germany tax blog.
German IP nexus rules: Ministry of Finance circular simplifies WHT & capital gains tax procedures
As reported previously, the German Ministry of Finance has issued a circular that provides updated filing and withholding procedures for royalties attributable to IP registered in a German book or register. By taking advantage of this new simplified process within the prescribed time limits, taxpayers have an opportunity to avoid penalties that may otherwise be imposed. Read more in this PwC Tax Insights.
German draft bill for a “Tax Haven Defence Act” published
As reported in our last edition, further analysis is now available on the recently published draft bill for a so-called "Tax Haven Defence Act", which provides for the implementation of defence measures in regard to business relationships or shareholdings with reference to certain non-cooperative states. Read more in this PwC newsalert.
Hong Kong
2021/22 Hong Kong Budget
Financial Secretary Paul Chan Mo-po announced the 2021/22 Hong Kong Budget on 24 February, outlining the government’s plan for the economy and proposals for taxation developments. Find out from us how the budget will affect you and your business by visiting our PwC Hong Kong budget page.
Ireland
Updated guidance on transfer pricing rules & documentation requirements
The Irish Revenue Commissioners recently issued Revenue eBrief No. 037/21 and updated guidance on transfer pricing rules and documentation requirements.
Liechtenstein
New CbCR Rules 2020
Liechtenstein has enacted new country by country reporting (CbCR) rules that will apply for 2020 and beyond. The original Liechtenstein CbCR law has been in place since 1 January 2017 and has now been amended by the new rules with the goal of aligning the legislation with more recent guidance published by the OECD. Read more in this PwC Tax Insights.
Luxembourg
Payments to EU-listed "non-cooperative" countries - update
The Luxembourg income tax law provisions that govern the tax deductibility of expenses incurred by corporate taxpayers are changing with effect from 1 March 2021. A new provision disallows the tax deduction of interest or royalties to a related party accruing as due from that date if the beneficiary is a corporate entity established in a country that is listed by the Council of the European Union as being “non-cooperative” for tax purposes. A revised version of this “non-cooperative” jurisdictions list was approved by the Council on 22 February 2021, and publication in the Official Journal of the EU of the revised list is expected imminently. Read more in this PwC news item.
Netherlands
Consultation on proposed legislation on mismatches arm's length principle
On 4 March 2021 the Dutch Government presented a consultation document on proposed legislation that unilaterally addresses transfer pricing mismatches. Companies, advisors and other interested parties can respond to the proposal until 2 April 2021. The purpose of the proposed legislation is to remove mismatches that arise as a result of the application of the arm's length principle that give rise to situations where profits of multinational companies remain untaxed. Read more in this PwC Netherlands tax news item.
Philippines
How FIST will help revive the economy
President Rodrigo R. Duterte recently signed the Financial Institutions Strategic Transfer (FIST) Act. It aims to ensure liquidity in the financial system by encouraging private sector investment in non-performing assets (NPAs). A central feature of the proposed law is the creation of a special type of corporation (called a FIST Corporation) which may be established by interested investors to acquire non-performing loans and assets of financial institutions. Read more in this PwC Philippines tax news item.
How FIST will help revive the economy - Part 2
The FIST Act aims to buoy the struggling economy by increasing liquidity in the financial system. The law will serve as a catalyst for more efficient and less costly transfers of non-performing assets (NPAs), from the custody of the financial institutions to FIST corporations, and ultimately to end-users, by granting certain tax and fee privileges on such transactions. Read more in this PwC Philippines tax news item.
Russia
Tax monitoring: new document forms and formats for the internal control framework
The Russian Federal Tax Service has published a draft order “On Approving the Requirements for Establishing the Internal Control Framework” for public discussion. The draft contains updated document forms and formats for the internal control framework that is used in tax monitoring and logically extends the current order. Read more in this PwC Russia Tax Flash.
South Africa
Important amendments to the Tax Administration Act 2011
The Tax Administration Laws Amendment Act 2020, (‘the TALAA’), was enacted on 22 January 2021. This Act has introduced a number of important changes impacting taxpayers. The purpose of this Alert is to outline the key issues arising from these amendments and to highlight a few of the areas which may give rise to constitutional issues in the future.
Tax Synopsis - February 2021
This issue includes: 1) VAT treatment of prepaid vouchers; 2) Agreement establishing the Africa Continental Free Trade Area – Ready, Set … Go? 3) An interesting development for VDP applicants as well as for the South African Revenue Service on VDP interest; and 4) SARS watch.
Switzerland
COVID-19 webinar series
See here for upcoming and recorded webinars. For the latest updates on current topics, see this PwC Switzerland Insights page.
Switzerland publishes updated safe harbour interest rates for 2021
The SFTA recently published two circulars outlining the safe harbour interest rates applicable to shareholder and intercompany loans, denominated in Swiss Francs and foreign currencies, applicable for 2021. Read more in this PwC Switzerland Tax Insights.
Taiwan
Taiwan Tax Update - February 2021
This edition includes: 1) Automatic exchange of Financial Account Information between Taiwan and the United Kingdom is expected to commence from September 2021; and 2) Sales of books can apply VAT exemption effective from 1 March 2021.
US
Senate to begin action on House-passed COVID relief legislation
The US Senate this week is expected to begin consideration of the $1.9 trillion ‘American Rescue Plan Act’ that was approved by a House vote of 219 to 212 in the early hours of 27 February. The House-passed legislation includes tax relief and tax increase provisions that are estimated by the Joint Committee on Taxation (JCT) staff to reduce overall federal revenues by $590.7 billion over 10 years. Read more in this PwC Tax Insights.
Tax Court decision addresses key research credit issues
The US Tax Court recently held that a taxpayer was not entitled to Section 41 research credits for activities conducted by its shipbuilding subsidiary regarding development of a tanker and dry dock. In a 61-page opinion, the court found that the subsidiary did not perform ‘qualified research’ as defined in Section 41(d) and that ‘the includible amount of QREs for each of the Apex tanker and the dry dock pursuant to section 41(a) and (b) [therefore] was zero.’ Read more in this PwC Tax Insights.
State tax policy changes on the horizon, but is 2021 the year?
US State and local budget processes were significantly disrupted by the impact of COVID-19. States and localities now confront difficult tax and budget choices in the current and upcoming legislative sessions. Read more in this PwC Tax Insights.
Maryland expands sales tax base to include digital products and codes
Maryland has expanded its sales tax base to include digital products and codes, as the House (on 8 February) and the Senate (on 12 February) overrode Governor Larry Hogan’s (R) veto of 2020 House Bill 932. The new law is effective 30 days after the override vote (ie 14 March 2021). Read more in this PwC Tax Insights.
Ohio municipal income tax refund rules create reporting burdens for employers
Ohio provides temporary withholding relief for municipal income taxes imposed on employees. During the COVID-19 emergency and for 30 days after the conclusion of that period, an employee generally is deemed to perform services at the employee’s principal place of work regardless of where the employee actually works. This results in simplifying employer withholding at the location of the principal workplace even when employees are performing their services elsewhere. The Regional Income Tax Agency (RITA), which represents over half of Ohio cities, recently issued policy guidance on the employer reporting burdens relative to these refund claims. Read more in this PwC Tax Insights.
Pennsylvania announces new voluntary compliance program for businesses with in-state inventory
The Pennsylvania Department of Revenue has announced a 90-day voluntary compliance program to run until 8 May 2021 which allows any business that has inventory, or stores property, in the state but that is not registered to collect and pay Pennsylvania taxes to become compliant. The program offers a limited look-back period and penalty relief. Read more in this PwC Tax Insights.
Wisconsin appellate court rules Department cannot challenge DRD from non-corporate entities in prior years
On 25 February, the Wisconsin Court of Appeals upheld a lower court decision concluding that Wisconsin’s dividend received deduction (DRD) - which requires that a distribution be received with respect to ‘common stock’ - applies to a distribution made from a foreign LLP that elected to be taxed as a corporation for federal income tax purposes. Read more in this PwC Tax Insights.
Webcasts & podcasts:
- Tax Readiness: International tax planning post-election
Register here to join us for this webcast on Wednesday 17 March 2021 at 6pm. - Q1 Financial Reporting Considerations
Join us for this webcast on Wednesday 24 March at 7pm. Register here. - Tap into Tax podcast
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 episodes: - Dive into trade policy
In this episode from 3 March, Scott McCandless (Principal in PwC’s Tax Policy Services Practice) and Jeremiah Coder (Director in PwC’s Global Tax Policy group) do a deep dive into the trade landscape. Scott and Jeremiah break down what you need to know about digital taxes, US trade relationships, Brexit and the Biden administration’s outlook on trade. - State and local tax policy outlook
Julie Allen, Margie Dhunjishah, Jennifer Jensen and Rob Ozmun discuss the state legislative and policy outlook for both income/franchise and indirect taxes in this episode from 2 March. - The new age of tax sustainability
In this special edition episode from 22 February, we focus on a topic gaining more visibility in 2021 in the C-suite - tax sustainability and governance.
Further episodes in this series are available here, as well as on Spotify and other streaming services.
- Cross-border tax talks
- Trading places: Trade considerations for tax professionals
In this episode from 4 March, Doug McHoney (PwC's US International Tax Services (ITS) Leader) and Chris Desmond (PwC’s Global Trade Services Practice Leader) discuss the global trade landscape.
Previous episodes in this fabulous series of podcasts can be found here, as well as on Spotify, YouTube and other streaming services.
Replays:
A number of previous webcasts are available for replay in our US tax reform hub here, including:
- Tax Readiness: State and Local Tax implications of a remote workforce
Watch the replay from this webcast held on 3 March 2021. - Tax Readiness: Settlements and judgements - Review of Section 162(f)/6050X final regulations
You can watch the replay here of this webcast from 16 February 2021. - 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. - 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.
Other updates
For regular updates on this topic, check out our US tax reform hub on The Suite here.
Vietnam
Draft Circular on tax administration includes guidance on cross-border e-commerce and digital business
A draft Circular provides detailed guidance on the Law on Tax Administration on various matters. This Newsbrief focuses on the tax filing mechanism for foreign suppliers doing e-commerce and digital business in Vietnam. By giving only a short timeline for public consultation, the Ministry of Finance indicates its intention to finalise this Circular promptly. We therefore recommend businesses who are affected by the new guidance to study and assess the potential impact thereof and prepare for the compliance process.