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Two weeks to 5 May 2023

Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK. 


Tax Administration and Maintenance Day 
On 27 April the government announced a package of technical tax policy proposals that supports its ambition to simplify and modernise the tax system, tackle non-compliance, make the tax system fairer for taxpayers and to make the customs system work better for traders. This policy paper provides details. 

  • Diverted Profits Tax, transfer pricing and permanent establishment reform
    Of particular interest was the announcement that the government will publish a consultation in May on simplifying and updating the following legislation:
    • Diverted Profits Tax (DPT) (increased rate on diverted UK profits);
    • permanent establishments (PEs) (right to tax non-resident entities with a UK business presence); and
    • transfer pricing (TP) (related party transactions).

The announcement added that: “This will ensure that their application is clear to taxpayers, and the outcome of their application remains consistent with the underlying policy intention, international standards and the UK’s bilateral treaties.” We eagerly await the launch of these consultations.

Finance Bill 2023
The Finance Bill is currently progressing through its Committee Stage and is not anticipated to complete its Commons stages until mid-June at the earliest.  The Bill will not become substantively enacted for UK GAAP and IFRS purposes until it does so.  It will then go through its Lords stages, with Royal Assent expected at some point between late June to late July, before Parliament closes for the summer recess on 21 July.  The Finance Bill will not be fully enacted for US GAAP purposes until that point. The full text of the amendments to the Finance Bill that have been proposed and passed during this process are available here

CGT on share for share exchanges involving non-UK companies
The Chartered Institute of Taxation (CIOT) has submitted a response to HMRC on the proposed changes to the rules for share-for-share exchanges involving non-UK close companies, as contained within the Spring Finance Bill 2023.

Pillar Two

  • At Home and Abroad - UK publishes draft legislation for domestic top-up tax
    We’ve published an article discussing the practical implications of the UK’s Pillar Two rules, particularly for overseas multinationals operating in the UK.  
  • Cross-border Tax Talks: Pillar Two: The UK’s latest instalment
    In this episode from 27 April, Doug McHoney (PwC's US International Tax Services Global Leader) and Matt Ryan discuss the second draft of the UK’s Pillar Two legislation, the probable timing of enactment, the accounting implications, the UK’s Qualified Domestic Minimum Top-up-Tax, and some of the ‘deviations’ in the UK rules.
  • Pillar Two - Application to Trusts
    Trusts are considered entities for Pillar Two purposes, and may therefore have filing and tax payment obligations under Pillar Two, but there are a number of challenges when working out how the rules apply to them.  This flyer sets out how to determine whether trusts are in the scope of the rules and how they’re impacted if they are in this flyer
  • Pillar Two webcast: When Tax Policy Meets Implementation. Administrative guidance, readiness, and compliance issues
    On this webcast held on Tuesday 25 April, our tax policy specialists reviewed unresolved technical issues, as well as the administrative guidance to date. They also discussed how countries are implementing the rules, and how businesses can deal with what we know and don’t know. In the latter category, one big question is what is being built into the regime for increasing tax certainty during the transition and beyond? Watch the replay here.

HMRC change policy on collecting late interest on interest paid gross without treaty clearance
Companies occasionally mistakenly pay interest gross (or at a reduced treaty rate) without the necessary treaty clearance.  Where the payer would have qualified for relief under the treaty, HMRC has long agreed to take no action to recover the missing withholding tax (WHT) itself but used to reserve the right to collect late payment interest.  Following the CJEU decision in a Bulgarian case (TTL EOOD), HMRC changed that policy in 2019, having concluded that the decision had determined that it was precluded under Article 56 TFEU from charging late payment interest which arose on intra-EU loan transactions or royalties where the treaty would have resulted in no (or a reduced rate of) WHT being due.  On 4 May 2023 HMRC changed policy once again, reverting to its original position.  Updating its manuals at INTM413230 with immediate effect from that date, it is now (once again) HMRC policy to seek to raise charges for late payment interest, on the basis that following Brexit it is no longer bound by the decision in TTL EOOD.  This approach will apply with immediate effect from 4 May 2023.

Reframing tax: Putting tax at the forefront of strategic decisions 
The growing demands on businesses call for a far greater strategic role for tax operations than many currently have. In this article, Stuart Higgins, our Tax Markets and Services Leader, discusses the findings of our ‘Reframing tax’ study - which looks at the goals and transformation challenges faced by more than 300 respondents and indicates the need to influence stakeholders differently to secure and protect benefits across the business.

SI 2023/461 – The International Tax Compliance (Amendment) Regulations 2023
SI 2023/461 extends the application of SI 2015/878 to exchange of information agreements entered into up to 19 April 2023.

Case law update 

  • High Court decides procedural issues relating to GLO restitution
    In Axa Sun Life plc & Ors v R & C Commrs & Anor [2023] BTC 10, the High Court made decisions on three procedural matters relating to the quantification of restitution arising from the CFC/Dividend GLO (‘the GLO’). You can read the judgment here.

Treaty updates

  • UK-Kyrgyz Republic Double Taxation Agreement
    The 2017 UK-Kyrgyz Republic Double Taxation Agreement is effective in the Kyrgyz Republic from 1 January 2023 for other taxes. This was previously shown as 2024 in error on the HMRC website.
  • Double Taxation Treaty Passport Scheme register
    HMRC has updated the register of overseas corporate lenders who are passport holders for Double Taxation Relief on UK loan interest. The register has been updated as at 26 April with 1,935 removals.

Approved offshore reporting funds 
HMRC has updated the list of approved offshore reporting funds to include the latest funds that have entered the Reporting Fund Regime. The list has been updated to include the funds that have entered as at 2 May 2023. View the updated list.

HMRC Manual updates

The following changes have recently been made:

  • International Manual
    HMRC has updated the following section following review:
    • INTM413230 - Transfer pricing: the main thin capitalisation legislation: The interaction between UK taxing rights and double taxation agreements (this contains the change of HMRC policy on late payment interest, discussed above)
  • Uncertain Tax Treatments by Large Businesses Manual
    HMRC has updated the following sections following review:
    • UTT17000 Penalties: contents
    • UTT17100 - Penalties: circumstances in which a penalty is chargeable overview
    • New page UTT17150 - Penalties: Exercise of Discretion
  • Corporate Finance Manual
    • HMRC has added a new section: CFM38200 - Loan relationships: tax avoidance: unallowable purpose: sources of advice
      Referrals and guidance
      This new section states: “Taxpayers may ask whether CTA09/S441-442 will apply to a future transaction, or to borrowing for certain purposes. HMRC officers should not give advice but simply refer them to the Economic Secretary’s comments at report stage (CFM38170), particularly the penultimate paragraph. Her comments embody the extent of the guidance HMRC can give. In view of the Economic Secretary’s comments, the application of S441-442 is a matter of careful judgement. Where HMRC officers consider that the unallowable purposes rules may apply to a transaction which has taken place, they are advised to submit the case to Counter Avoidance Technical Team before taking any action.”
  • International Exchange of Information Manual
    HMRC has updated the following section following review:
    • IEIM402340 - Reportable Information: Reportable Jurisdictions


Important AG Opinion in the Engie State Aid case 
European Court of Justice Advocate General, Juliane Kokott, has opined that the Commission erred in finding that Luxembourg had granted unlawful State aid to the Engie group in the form of tax advantages. If followed by the Court this could be an extremely important development in fiscal state aid. Read more in this press release.

CJEU rules that German tax treatment of income earned by a non-resident property fund from German property is not compatible with EU Law 
On 27 April 2023, the Court of Justice of the European Union (CJEU) decided in the case C-537/20 (L Fund) that Germany infringes the free movement of capital by subjecting the income earned by a foreign specialised property fund on German property income to corporate taxation, whereas resident specialised property funds are exempted from corporate tax.Read more in this PwC EUDTG Alert


Pillar Two
See our UK section above for updates on the UK implementation of Pillar Two and our international section below for updates regarding the steps other territories are taking in relation to Pillar Two.

  • Companies should prepare for inconsistent Pillar Two implementation
    In this episode from 24 April, Will Morris discusses recent developments around Pillar Two implementation and actions companies should consider taking.
  • Pillar Two webcast: When Tax Policy Meets Implementation. Administrative guidance, readiness, and compliance issues
    On this webcast held on Tuesday 25 April, our tax policy specialists reviewed unresolved technical issues, as well as the administrative guidance to date. They also discussed how countries are implementing the rules, and how businesses can deal with what we know and don’t know. In the latter category, one big question is what is being built into the regime for increasing tax certainty during the transition and beyond? Watch the replay here.
  • IASB supplementary meeting on international tax reform and SME Accounting Standard
    The International Accounting Standards Board (IASB) held a supplementary meeting on Wednesday 3 May 2023 to discuss a new project to help companies that apply the IFRS for SMEs Accounting Standard to respond to new tax rules set by the Organization for Economic Cooperation and Development (OECD).  Read more in this press release.

Asia is levelling the playing field towards more tax transparency, but commitment and progress are still needed to achieve its full potential 
An OECD report published during the opening sessions of the fourth meeting of the Asia Initiative, held in New Delhi, India on 27 April, Tax Transparency in Asia 2023: Asia Initiative Progress Report acknowledges progress achieved in Asia between 2009 and 2022 in implementing transparency and exchange of information (EOI) for tax purposes.  Read more in this OECD item.


  • Ivory Coast set to ratify the MLI
    The Ivory Coast's Council of Ministers recently approved a decree to ratify the BEPS multilateral instrument (MLI). The MLI will come into effect for the Ivory Coast's treaties from the first day of the fourth month following the country depositing its instrument of ratification with the OECD – that is, it would become effective from 1 August 2023, if the country were to ratify the deal during April.

Other territories


International Tax News - Edition 118, April 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) Japan’s 2023 tax reform proposals include an outline for Pillar Two legislation; 2) United Kingdom releases draft Pillar Two legislation; 3) Australia releases draft of intangible payment deduction denial; and 4)India Annual Budget 2023 introduces additional amendments in the tax laws.

Digital tax byte
The latest edition in our series of brief insights into the workings of the UK and supranational bodies reviewing the taxation of digitalisation of business. This edition, from 3 May, includes access to the recording of our latest webcast of 25 April on Pillar Two.

Digital tax megabyte for April 2023 
This edition, to the end of April, includes: 1) Uganda proposes Digital Services Tax; 2) Kenya publishes new digital marketplace VAT regulations; 3) Taiwan penalties imminent for online platform reporting discrepancies; 4) Alaska proposes market apportionment for “digitized services”; 5) Maryland DST court proceedings continue in Supreme State court; 6) Egypt publishes guidelines on new digital supplier VAT registration rules; 7) New Zealand passes Act to introduce reporting and GST changes for various online platforms; 8) Canadian Budget 2023 sets out DST, Pillar 1 and Pillar 2 plans; 9) Ireland seeks feedback on implementation of GloBE rules including a domestic top-up tax; 10) Kenya proposes to drop its DST and join the two-Pillar agreement; 11) UN Tax Committee approves Subject to Tax Rule (STTR) Model Treaty provision; and 12) UN Tax Committee discusses a Fast Track Instrument for digital treaty updates.

Environmental, Social and Governance (ESG) 

  • People are at the heart of a resilient business
    The focus on the ‘S’ of ESG is undoubtedly intensifying and organisations need to ensure social implications are factored into their strategy. A recent article, authored by Wendy van Tol, Barry Murphy and Emma Cox, offers further insight on  the practical actions organisations can take to define and address the ‘S' clearly, and measure it in a meaningful way.
  • How demand-driven sustainability reporting can deliver value
    As the sustainability data and reporting ecosystem is constantly evolving, PwC has commissioned a report to establish an independent view of the sustainability reporting landscape. This found that demand from stakeholders is increasingly growing and changing, and that customers see the value in product-level reporting as an aid for informed decision making. The report sets out practical recommendations on how companies can respond to user demand, and how robust reporting creates value. Read more.
  • Nature reporting regulation: what’s next?
    The threat of nature loss has prompted a heightened scrutiny on the role of business in our fight against biodiversity loss and land degradation, with the UK government making commitments to halt and reverse some of the impact by 2030. Renewed interest and shared responsibility means nature will hold more of a presence in sustainability reporting, with Target 15, aiming to restore natural ecosystems. See what businesses should be doing to get ahead of the regulatory requirements and help lead us to a more nature-positive economy. Read more.
  • Tackling inequality: an agenda for business action
    Market economies have delivered - and continue to deliver - enormous benefits to huge swathes of the global population. It is, however, only fair to concede that the current models are now also contributing to widening unsustainable economic and social gaps. The challenge is how to harness the power of market economies to address these challenges and improve outcomes for all. To tackle inequality, business practices and models must change. Read more.

Monthly Tax Update - May 2023 
Welcome to the May 2023 edition of Australia's Monthly Tax Update, keeping you up to date on the latest Australian and international tax developments.


Austrian Income Tax Guidelines Amendment Decree 2023 published 
On 31 March 2023, the Austrian Federal Ministry of Finance published the approximately 360-page final Income Tax Guidelines Amendment Decree 2023. This decree is intended to update the Austrian Income Tax Guidelines (EStR), in particular by incorporating the changes from the Austrian Ecosocial Tax Reform Act 2022 Part I (ÖkoStRefG), the Austrian Tax Amendment Act 2022 (AbgÄG), the Inflation Relief Package Part II, the Ordinance on Withholding Tax Relief for Personnel Leasing, and the Ordinance on Determining Tax Data for Cryptocurrencies. This PwC news item provides an overview of the most important amendments.

See here for latest updates.

R&D wage withholding tax exemption – Strict interpretation of start dates confirmed in case law leading to altered interpretation of fiscal authorities 
The tax audits with respect to the application of the partial withholding tax exemption for research and development with respect to income year 2021 are ongoing. With recent case law on the subject, two critical elements should be considered during these types of audit. Read more in this PwC news item.

Mandatory disclosure rules ─ taxpayers, advisers and promoters need to prepare 
The federal government has tabled Bill C-47, which includes legislation to implement revised and expanded disclosure rules relating to tax avoidance transactions and uncertain tax treatments, commonly referred to as the mandatory disclosure rules. These measures were initially announced in the 2021 federal budget, with draft legislative proposals released in February and August 2022. Royal assent of Bill C‑47 is expected in June 2023. Read more in this PwC Tax Insights.

Supreme Tax Court confirms final losses of UK branch not deductible for German parent company
In its decision of 22 September 2022, the European Court of Justice upheld the German rule that the final losses of a permanent establishment located in the United Kingdom are not deductible for the German head office. Germany’s Supreme Tax Court has now delivered its final decision, confirming German resident companies cannot offset losses from a branch located in another EU country from their domestic taxable income if, under the relevant double tax treaty (here: between the UK and Germany), there is no German right of taxation for the foreign branch income. Read more in this PwC blog.

DDT being a tax on distributed profits not eligible for beneficial double tax treaty rate 
In a recent ruling, it was held that dividend distribution tax (DDT) under section 115-O of the Income-tax Act 1961 is an additional tax levied on the company and not on the shareholder. Accordingly, benefit of the lower tax rate per the relevant double tax treaty for taxation of dividend will not be available in case of nonresident shareholders. However, the Tribunal observed that lower tax rate benefits can be extended to nonresident shareholders of only those countries where such treaty protection has been specifically agreed upon. Read more in this PwC alert.

Supreme Court affirms High Court’s decision that attribution of profit is essentially a question of fact 
The Supreme Court dismissed the Revenue’s appeal and inter-alia held that the question of what proportion of profits can be reasonably attributed to the operations in India is a question of fact; therefore, the Income-tax Appellate Tribunal’s (Tribunal) ruling and High Court’s decision calls for no interference. Read more in this PwC alert.

UK-Kyrgyz Republic Double Taxation Agreement
The 2017 UK-Kyrgyz Republic Double Taxation Agreement is effective in the Kyrgyz Republic from 1 January 2023 for other taxes. This was previously shown as 2024 in error on the HMRC website.

Middle East
UAE CT: Federal Tax Authority Decisions No. 5, 6 & 7 and Ministerial Decisions No. 82 & 83 releases 
The Federal Tax Authority (“FTA”) issued three decisions on 7 April 2023: 1) Decision No (5) of 2023 with regards to conditions for change in Tax Period; 2) Decision No (6) of 2023 with regards to the Tax Deregistration timeline; and 3) Decision No (7) of 2023 with regards to the provisions of exemption from corporate tax. All as mentioned under the Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Business (hereinafter referred to as the ‘CT Law’). These Decisions will come into effect as of 1 June 2023. Read more in this PwC Alert.

Cabinet Decision No. 37 of 2023 Release: Qualifying Public Benefit Entities
On 7 April 2023, the Cabinet of Ministers issued Decision No (37) of 2023 with regards to details on Qualifying Public Benefit Entities (“QPBE”) as mentioned under the Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Business (hereinafter referred to as the ‘CT Law’). This Decision came into effect the day following its publication. Read more in this PwC Alert.

Dutch Spring Memorandum 2023: The most important announcements for the real estate industry  
On 28 April, the Dutch Ministry of Finance published its Spring Memorandum 2023 (Voorjaarsnota 2023) which includes updates on the budget for 2023 as well as announcements on intended tax changes for 2024 and beyond. This PwC Newsalert summarises the most relevant announcements for the real estate industry.

For the latest updates on current topics, see this PwC Switzerland Insights page.

Tax Update - April 2023 
The latest edition includes: 1) Ministry of Economic Affairs (“MOEA”) updated Frequently Asked Questions (“FAQs”) on “Application Portal of Investment tax Credit (“ITC”) for Smart Machinery, 5G Network, and Cyber Security Products or Services” by incorporating guidance on applicability of cyber security ITCs. 2) Ministry of Finance (“MOF”) announced bulk assessment of FY2021 corporate income tax (“CIT”) returns and FY2020 undistributed earnings returns which have not been selected for tax audit and which have been assessed as filed; and 3) MOF announced income query service for tax year 2022 shall start from April 28, 2023 to May 31, 2023.


District Court rules for FedEx regarding FTC provision in Section 965 regulations 
The US District Court for the Western District of Tennessee recently issued an order granting FedEx’s motion for partial summary judgment in its challenge of a foreign tax credit (FTC) provision in the final Section 965 regulations, and denying the government’s cross motion for partial summary judgment. Any appeal to the court’s decision would lie with the US Court of Appeals for the Sixth Circuit. Read more in this PwC Tax Insights.

FASB changes accounting for tax credit investments 
The FASB recently issued ASU 2023-02, Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force). ASU 2023-02 expands the use of the proportional amortization method of accounting - currently allowed only for investments in low-income housing tax credit (LIHTC) structures - to equity investments in other tax credit structures that meet certain criteria. Read more in this PwC alert.

Policy on Demand series 

  • Prepare for debt limit negotiations to go down to the wire
    Last week, the House passed a bill to temporarily suspend the debt ceiling and reduce federal spending. In this episode from 1 May, Rohit Kumar discusses the latest developments around the debt limit discussions and encourages companies to be prepared for negotiations to go down to the wire.
  • Companies should prepare for inconsistent Pillar Two implementation
    In this episode from 24 April, Will Morris discusses recent developments around Pillar Two implementation and actions companies should consider taking.
  • Week in Review
    • In this episode from 5 May, Mark Prater discusses the need to accelerate debt limit negotiations and whether debt limit legislation could include major tax relief. He encourages companies to focus on next week’s formal debt limit discussions and behind-the-scenes efforts to reach agreement.
    • In this episode from 28 April, Janice Mays discusses how the debt limit bill passed by House Republicans is a big step towards negotiating a resolution with Democrats.

Tax Readiness webcast series

  • Tax Readiness: Demystifying the data dilemma - How tax can stay ahead of constant change
    Consistent, reliable data is the pinnacle of success and a critical component in building operational readiness in tax. It can help manage reporting obligations, alleviate internal and external demands, and serve as the cornerstone of compliance and implementation for required changes (eg Pillar Two). Watch this webcast replay from 18 April to join our panel of specialists for a “how to” discussion on realising a future-ready, data-driven tax function powered by a new baseline of capabilities.
  • Tax Readiness: Q1 Financial reporting considerations
    Register here to watch the replay from 28 March where our panel of PwC specialists take a deep dive into key tax accounting and reporting reminders and discuss recent tax developments.
  • Tax Readiness: Deals Outlook - The tax perspective
    In this webcast from 2 March, our panel reviews the recently launched US Deals 2023 outlook and discusses key tax issues and opportunities including the new stock buyback excise tax, divestitures, expiring provisions, and state and local taxes. Watch the replay here.

State and local tax

  • Tax Readiness: 5 years later - The impact of Wayfair and tax reform on state taxation
    It has been almost five years since the US Supreme Court decided South Dakota v. Wayfair and struck down the long standing “physical presence” nexus test, and a little more than five years since the Tax Cuts and Jobs Act rewrote the federal income tax laws for the first time since 1986. Watch the replay of this webcast from Tuesday 25 April where our panel discussed the evolving compliance challenges produced by these two events and how companies are implementing leading practices to reduce costs, minimise risk, and produce cash tax savings.
  • Colorado regulation changes impact NOLs, FSI exclusion, and Section 78 subtraction
    The Colorado Department of Revenue recently announced adoption of several rule changes affecting: 1) Colorado’s net operating loss (NOL), 2) foreign source income (FSI), and 3) the Section 78 dividend subtraction.  Read more in this PwC Tax Insights.
  • Colorado’s updated CARES Act guidance may require amended returns
    The Department issued guidance in April 2023 reflecting that CARES Act retroactive provisions applied in prior tax years. Read more in this PwC Tax Insights.
  • New York budget adopts various tax increases, other changes
    The New York Legislature approved FY 24 budget legislation, which extends increased corporate tax rates and makes other changes, after lengthy negotiations with Governor Kathy Hochul who is expected to sign the legislation. Read more in this PwC Tax Insights.
  • Washington court denies investment funds deduction for “amounts derived from investments”
    A recent Washington Court of Appeals decision, Antio LLC v. Department of Revenue, affirmed the trial court’s summary judgement in favour of the Department of Revenue. The trial court had determined that a group of investment funds, operating as limited liability companies (LLCs), were not eligible to deduct “amounts derived from investments” when calculating their business and occupation (B&O) taxes. 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.