Two weeks to 6 August 2021
Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
UK
US-UK competent authority agreement resolves Brexit issue for some UK companies
The IRS has released two competent authority agreements entered into by the US and the UK to express their agreement on the application of certain aspects of the limitation on benefits article of the US-UK income tax treaty (Article 23). The two countries have agreed that neither Brexit nor NAFTA’s replacement by the USMCA should adversely impact the ability of US or UK tax residents to qualify as ‘equivalent beneficiaries’ under the US-UK income tax treaty. They have therefore clarified their shared understanding that ‘a resident of a Member State of the European Community’ continues to include a UK resident for the purposes of the US-UK treaty. Taxpayers may wish to review their treatment of any affected payments since the effective date of Brexit (31 January 2020). Read more in this PwC Tax Insights.
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 COVID related tax developments. 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.
Brexit & other international trade developments
The UK has left the EU and negotiations on the future trading relationship of the UK and the EU have concluded with a deal agreed. So what next for businesses as we enter this new trading world?
- US-UK competent authority agreement resolves Brexit issue for some UK companies
As noted above, the UK and US have agreed that Brexit (and NAFTA’s replacement by the USMCA) should not adversely impact the ability of US or UK tax residents to qualify as ‘equivalent beneficiaries’ under the US-UK income tax treaty. See further above.
- Business in Focus podcast series - A once in a generation opportunity for UK trade
In a new trading environment, what areas do UK businesses need to prioritise in order to drive growth? In this episode, International Trade Lead Partner Matt Alabaster and Sam Myers, Her Majesty's Trade Commissioner for Asia Pacific join host Emily Khan to discuss the role of trade in driving growth and innovation at home and abroad. - Make trade and investment a team sport
In our first report we set a four-point agenda for change; this report is the final in the series, and picks up on one of the action points: the need for the UK to play to make trade and investment a team sport. - Play to our strengths and focus our efforts
In our first report we set a four-point agenda for change; this report is the fourth in the series, and picks up on one of the action points: the need for the UK to play to our strengths and focus our efforts.
Visit our Beyond Brexit webpage for the latest updates.
HMRC consult on reporting rules for digital platforms
HMRC is seeking views until 22 October on its implementation of the OECD Model Reporting Rules, which require digital platforms to report details of the income of sellers on their platform to the tax authority and also to the sellers. Read the consultation here.
FII GLO - Supreme Court judgment issued
In Test Claimants in the Franked Investment Income Group Litigation v IRC [2021] UKSC 31, the Supreme Court delivered its judgment on various matters in relation to appeals from the Court of Appeal judgments in Test Claimants in the Franked Investment Income Group Litigation v IRC [2010] BTC 265 and Test Claimants in the Franked Investment Income Group Litigation v IRC [2016] BTC 44.
PwC webcast 16 August 2021: Plastic Packaging Tax - are you ready?
We are pleased to invite you, and other colleagues from your business who may become involved in plastic packaging tax (PPT), to a webcast on 16 August 2021. The webcast will be hosted by Jayne Harrold, our UK Environmental Taxes leader, along with colleagues from other countries where PPT is to be introduced. The webcast topics will include identifying who is liable for the tax, the products which are specifically included in, or excluded from, the scope of PPT, and at what point in the chain the liability to PPT arises. We’ll also discuss how businesses may wish to review their packaging strategy in order to manage the impact of PPT. Register here.
EU
Commission overhauls anti-money laundering and countering the financing of terrorism rules
The European Commission has announced a package of legislative proposals to strengthen the EU's anti-money laundering and countering terrorism financing (AML/CFT) rules. The package includes a proposal for the creation of a new EU authority to fight money laundering and includes new virtual currency disclosure rules. Read more in this European Commission press release.
CFE Tax Advisers Europe
- CFE Tax Top 5 – Round-up of EU Tax Policy News
The latest edition looks at the following: 1) EU Study: Minimum tax substance carve-out will increase tax competition & decrease taxable revenue; 2) OECD: Nominal corporate income tax rates continue to fall; 3) CFE opinion statement on issues with the supply of goods with transport under e-commerce rules; 4) EU invests in innovative projects to decarbonise the Single Market; and 5) OECD: Updates to transfer-pricing country profiles. View previous editions here. - CFE Global Tax Top 10 - July 2021
This edition includes: 1) 130 countries sign historic agreement on international tax reform; 2) EU: landmark climate policy package; 3) OECD: Global Forum publishes peer-review reports on EOIR; 4) EU Commission publishes anti-money laundering legislative package; 5) OECD tax report on sustainable home working; 6) State Aid: Nike loses procedural challenge to Commission & Commission appeals General Court ruling in Amazon case; 7) CFE EU Tax Policy Report: Semester 1 2021; 8) New EU VAT rules enter into force; 9) EU delays digital levy plans; and 10) CFE Opinion Statement on issues with the supply of goods with transport under e-commerce rules.
OECD
New OECD data highlights the importance of the international tax reform discussions
New data, released in the OECD's annual Corporate Tax Statistics publication on 29 July, underlines the importance of the two-pillar plan being advanced by over 130 members of the OECD/G20 Inclusive Framework on BEPS to reform international taxation rules and ensure that multinational enterprises pay a fair share of tax wherever they operate. Read more in this OECD item.
Progress towards a fairer global tax system continues as additional countries bring their preferential tax regimes in line with international standards
The OECD/G20 Inclusive Framework on BEPS has approved new outcomes on the review of preferential tax regimes, which groups 139 countries and jurisdictions on an equal footing for multilateral negotiation of international tax rules. Read more in this OECD item.
OECD releases eight new BEPS Action 14 peer review assessments
Under BEPS Action 14, jurisdictions have committed to implement a minimum standard to improve the resolution of tax-related disputes between jurisdictions. The OECD has recently released eight new peer review reports for Argentina, Chile, Colombia, Croatia, India, Latvia, Lithuania and South Africa. Read more in this OECD item.
Corporate effective tax rates for R&D
R&D tax incentives have become a widely used policy tool to promote business R&D. How do they shape firms’ incentives to invest in R&D? This OECD taxation working paper contributes a methodology to construct forward-looking effective tax rates for an R&D investment that reflect the value of expenditure-based R&D tax incentives. The new estimates cover 48 countries and consider the case of large profitable firms.
OECD updates transfer pricing country profiles to include new fields on financial transactions and permanent establishments
The OECD has published updated transfer pricing country profiles, reflecting the current transfer pricing legislation and practices of 20 jurisdictions. These updated profiles also contain new information on countries' legislation and practices regarding the transfer pricing treatment of financial transactions and the application of the Authorised OECD Approach (AOA) to attribute profits to permanent establishments. See this OECD item.
Other territories
International
International Tax News - June 2021
Among the topics featured in this month's edition are: 1) Hungary adopts reverse hybrid mismatch rules; 2) Argentina amends corporate income tax and withholding on dividend rates effective January 2021; 3) Denmark significantly changes its CFC rules; and 4) New Spanish DST and financial transactions regulations.
Taxation of the digital economy
Keep track of the number of international initiatives that are underway to address the tax problems caused by digitalisation of our economy:
- Digital tax byte
The latest edition from 2 August includes the UK's consultation on the implementation of digital platform reporting rules.
- Digital tax megabyte for July 2021
This edition includes the G20 agreement/ Inclusive Framework Statement, postponement of details of an EU digital levy, Canada's GST/HST draft legislation, Gibraltar's rate increase reaction to Pillar 2 and confirmation of assent to Kenya's Finance Act 2021. The IMF has also published a Technical Note on recommended VAT measures on imported digital services and low-value imported goods. A primer on deferred tax will help shed light on the related issues being discussed on the Pillar 2 discussions.
Environmental, Social and Governance issues (ESG)
- PwC webcast 16 August 2021: Plastic Packaging Tax - are you ready?
We are pleased to invite you, and other colleagues from your business who may become involved in plastic packaging tax (PPT), to a webcast on 16 August 2021. The webcast will be hosted by Jayne Harrold, our UK Environmental Taxes leader, along with colleagues from other countries where PPT is to be introduced. The webcast topics will include identifying who is liable for the tax, the products which are specifically included in, or excluded from, the scope of PPT, and at what point in the chain the liability to PPT arises. We’ll also discuss how businesses may wish to review their packaging strategy in order to manage the impact of PPT. Register here. - Tax Readiness: ESG - Bringing your reporting & investment strategy to life
In this US webcast taking place Wednesday 25 August at 7pm, we will explore two key focus areas of Environmental, Social, and Governance (ESG) - Reporting and Investment - and how they relate to tax and the increased demands for transparency. Register here. - Tax Insights: Carbon taxes and international trade: What are the key issues?
This PwC Insight examines key issues arising from the interaction of carbon border adjustments and international trade. - In conversation with Charley Davies of Provident Financial Group
In the latest installment of our ‘In conversation with’ series, Charley Davies, General Counsel and Company Secretary at Provident Financial Group, joins Dan Schwarzmann, PwC’s Head of Market Initiatives and Industries in a conversation hosted by Teresa Owusu-Adjei, PwC’s Head of Legal and Financial Services Tax Partner. Charley, Dan and Teresa discuss the importance of living your brand values - and doing the right thing for your people as well as your customers. From making the hard decisions to maintaining the focus on wellbeing, join us for an inspirational and uplifting episode of purpose in action.
Australia
A simpler system for employee share schemes
The Australian Federal Government has released for consultation draft legislation that will implement previously announced reforms to regulatory and tax arrangements for employee share schemes (ESS). These reforms should make it easier for businesses to offer ESS and will support Australian businesses to attract and retain the talent they need to compete on the global stage. Read more in this PwC Tax Alert.
Australia - Monthly tax update: August 2021
Welcome to the August 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.
China (excluding Hong Kong)
Shenzhen Qianhai extends the preferential tax policy of 15% CIT rate to 2025 to further boost the vigorous development of modern service enterprises
The Ministry of Finance and The State Taxation Administration recently issued a joint Notice (Circular 30), renewing and updating the preferential CIT policy of 15% CIT rate in Qianhai from 1 January 2021 to 31 December 2025. The Shenzhen Tax Bureau subsequently issued guidelines specifying the detailed procedures and filing methods for enterprises to enjoy the preferential policy. This PwC News Flash summaries the key contents of Circular 30 and the guidelines.
Cyprus
Cyprus delays deadline for annual company levy
Cyprus's Department of Registrar of Companies has recently announced that companies will be allowed more time this year to pay the annual levy. Cyprus has enacted legislation to push forward the deadline for 2021 from 30 June to 31 December 2021. The Department confirmed that companies paying the levy by the end of the year will avoid any additional charge being imposed.
Germany
Penalties due to incomplete cross border documentation in breach of EU law?
In its referral to the European Court of Justice (ECJ) for a preliminary ruling, the Regional Tax Court of Bremen has raised doubts as to whether the penalty surcharge under Section 162 (4) Fiscal Code due on failure to present proper documentation in cross border business relations is in line with the freedom of establishment in Art. 49 TFEU and the freedom to provide services (Art. 56 TFEU). Read more in this PwC tax blog.
Cum-ex trading is tax evasion
In a recent decision, the Federal Court of Justice held that claiming a refund or credit for withholding tax in the wake of cum-ex schemes is a criminal act of tax evasion. The proceeds obtained in these illegal transactions and the benefits derived therefrom may be collected. Read more in this PwC tax blog.
Indonesia
New DTT between Singapore and Indonesia now in force
The updated double tax treaty between Singapore and Indonesia, signed on 4 February 2020, was ratified and entered into force on 23 July 2021. It includes reductions to rates of withholding tax on cross-border income and new provisions to tackle tax treaty abuse. This PwC tax bulletin produced in February 2020 provides details of the updated treaty.
Japan
2021 Japan Tax Reform: incentives to promote corporate transformation and encourage growth
In order to promote corporate transformation and encourage growth in the post COVID-19 environment, the Japanese government is revising the Industrial Competitiveness Enhancement Act (ICEA). This newsletter explains the structure of the revised ICEA, as well as outlining the tax measures that are provided for each of the three areas of focus of the ICEA.
Japan establishes new exempted structures for investment management businesses
The Financial Services Agency of Japan will introduce new business structures to attract foreign investment management businesses, where they may enjoy exemption from registration as a financial instruments business operator. The new exemption structures will come into force by November 2021. This newsletter provides an overview and describes the key requirements of these exemptions.
New rules allow Japanese tax authorities to unilaterally appoint local tax administrator of foreign taxpayer
In March 2021, as a part of Japan’s 2021 Tax Reform, the Diet passed into law a new measure that allows the Japanese tax authorities to assign a tax administrator to a non-resident taxpayer that the authorities believe has a Japanese tax payment obligation. Under this new measure, the tax authorities will have the ability to designate certain domestic parties, either related or unrelated to the offshore taxpayer (eg unrelated operators of digital platforms “platformers”), as a tax administrator. This law will apply from 1 January 2022. Read more in this PwC tax update.
Korea
Korea’s Tax Reform Proposals for 2021
The Korean Ministry of Economy and Finance has released the government’s tax reform proposals for 2021. The proposals intend to: i) help drive recovery from the COVID-19 pandemic crisis; ii) increase fiscal support to drive growth of designated strategic technologies and emerging industries to shape the future of growth; iii) increase tax incentives to reduce the economic bipolarization that has deepened during the COVID-19 pandemic; and iv) reinforce anti-tax avoidance measures. Read more in this PwC item.
Malta
Eco-friendly Retail Investment Grant Scheme
As announced in Malta’s budget for 2021, the importation of single-use plastic has been banned in Malta as of January 2021 and, with effect from January 2022, the sale of such plastic products will also be banned. The Malta Enterprise Corporation (MEC) has recently launched an incentive scheme to support retail shops and other businesses in the retail value chain to invest in in-store eco-friendly solutions that allow for the sale of their products through reusable containers, and in related investments required to implement and facilitate the reduction of single-use plastic packaging in their operations. Read more in this PwC Tax Insights.
Mexico
Mexico delays deadline for complying with the tax implications of the recent outsourcing reform
Mexico’s Congress recently extended the entry into force of the tax implications for the recently approved outsourcing reform. The approval for the extension was published in the Official Gazette on 31 July. In order to meet the extended deadlines, companies should have the controls and tools necessary to comply with the new obligations regarding new outsourcing limitations and rules. Read more in this PwC Tax Insights.
Pakistan
Finance Act 2021
The Federal Government presented Finance Bill 2021 in the National Assembly on 12 June 2021. After debate in the Senate and National Assembly, the Government passed Finance Act 2021 with certain modifications and subsequent amendments made in the Bill during that process. The amendments made to fiscal laws by Finance Act 2021 are made effective from 1 July 2021. This Memorandum summarises certain major amendments made.
Singapore
New DTA between Singapore and Indonesia now in force
As reported above, the updated double tax treaty between Singapore and Indonesia, signed on 4 February 2020, was ratified and entered into force on 23 July 2021. It includes reductions to rates of withholding tax on cross-border income and new provisions to tackle tax treaty abuse. This PwC tax bulletin produced in February 2020 provides details of the updated treaty.
South Africa
Emergency tax measures to address effects of COVID-19 and unrest
The Minister of Finance recently held a media briefing to provide further detail relating to these measures which was followed by the release of an explanatory note. This PwC Alert provides an overview of these tax measures, which are generally previously used measures that have been reintroduced.
Tax Synopsis - July 2021
This edition includes: 1) Doubtful debt allowance on lease receivables – does it fail the simplicity test? 2) Emigration and South African retirement funds: Proposal to tax withdrawals of retirement interests; 3) 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.
Taiwan
Taiwan Tax Update - July 2021
This edition covers: 1) Ministry of Finance announced amendment to Guideline for Income Tax Filing of Consolidated Income from House and Land Transactions due to introduction of Joint Property Tax System 2.0 effective from 1 July 2021; 2) MOF announced tax ruling to provide flexibility to Taiwan tax authority when negotiating cross border Bilateral or Multilateral Advance Pricing Agreement to test actual controlled transaction result against arm’s length range; and 3) Companies that distribute earnings from retroactive increase to beginning balance of 2018 retained earnings due to changes in accounting principle during the period Special Act for COVID-19 is in force may deduct said earnings distribution from tax base of 2018 ARE tax.
Taiwan grants flexibility for income adjustments for cross-border bilateral or multilateral APAs
In line with international tax trends, the Taiwan Ministry of Finance (MOF) recently issued a Decree which grants flexibility for income adjustments for cross-border bilateral or multilateral advance pricing arrangements (BAPAs). The new Decree stipulates that when the Taiwan tax authorities negotiate cross-border BAPAs with the competent authorities of the treaty partners, both authorities may determine the method of examining whether the controlled transactions fall within the arm's-length range. Read more.
US
US-UK competent authority agreement resolves Brexit issue for some UK companies
As reported above, the IRS has released two competent authority agreements entered into by the US and the UK to express their agreement on the application of certain aspects of the limitation on benefits article of the US-UK income tax treaty (Article 23). Under the new agreements, the two countries have agreed that neither Brexit nor NAFTA’s replacement by the USMCA should adversely impact the ability of US or UK tax residents to qualify as ‘equivalent beneficiaries’ under the US-UK income tax treaty. Taxpayers may wish to review their treatment of any affected payments since the effective date of Brexit (31 January 2020). Read more in this PwC Tax Insights.
Senate advances bipartisan infrastructure package with cryptocurrency reporting and Superfund excise tax proposals
President Biden and a bipartisan group of Senators recently announced an infrastructure agreement that calls for $550 billion in new spending together with revenue offsets that include new cryptocurrency information reporting requirements and reinstating a Superfund tax on chemicals. Read more in this PwC Tax Insights.
Demystifying deferred tax accounting
Regulatory and legislative developments in the United States and abroad have generated continued interest in the financial accounting and reporting framework, including accounting for income taxes. Fundamental to the income tax accounting framework is an understanding of deferred tax accounting. In this publication we provide a refresher of the deferred tax accounting model and why deferred taxes are an important measure within the financial statements.
Maryland updates digital products sales tax guidance
The Maryland Comptroller’s Office recently released revised versions of Tax Tip #29, updating the Comptroller’s interpretation of the digital products sales tax provisions amended by S.B. 787 enacted on 30 May. The legislation (and therefore the Comptroller’s revised guidance) applies retroactively to 14 March 2021, the effective date of the digital products sales tax. Sellers and purchasers should analyze the Comptroller’s revised guidance as to whether they should change their taxability determinations, revisit their contracting and invoicing practices, and potentially seek refunds of tax paid under the Comptroller’s original guidance. Read more in this PwC Tax Insights.
Tennessee Letter Ruling addresses partnership basis step-up and push-down treatment
In Letter Ruling 21-06 (6/10/21), the Tennessee Department of Revenue addressed the franchise and excise tax implications when a partnership makes an IRC Sec. 754 election to step up the adjusted basis of its assets for federal income tax purposes, and the partnership elects to “push down” the purchase accounting adjustments resulting from the purchase that gave rise to the IRC Sec. 754 election. Read more in this PwC Tax Insights.
Subscribe for US tax alerts
You can sign up for Tax Alerts issued by the US to be emailed to you. Subscribe using the link on this page.
Webcasts & podcasts:
- Tax Readiness: Crypto Market Insights 2021 - Latest trends
Register here to join us for this webcast on Thursday 12 August 2021 at 7pm, where our Trust and Consulting panel will examine corporate strategies, operational effects, regulatory restrictions, risk factors, accounting implications, and future policy changes. - Tax Readiness: ESG - Bringing your reporting & investment strategy to life
In this webcast taking place Wednesday 25 August at 7pm, we will explore two key focus areas of Environmental, Social, and Governance (ESG) - Reporting and Investment - and how they relate to tax and the increased demands for transparency. Register here. - Cross-border tax talks
- Bringing code to the Code: Tech trends in International Tax
In this episode from 4 August, Doug McHoney (PwC's US International Tax Services (ITS) Leader) is live at the Westminster Studios with John McDonald (Quantitative Solutions & Technologies Managing Director) to discuss the role of technology in tax.
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: Are uniform corporate tax rules finally on the horizon?
Watch this replay from Tuesday 20 July 2021, where we provided an update on the recent OECD and G-20 negotiations to help those in Tax, Treasury, Operations and the C-Suite navigate this complicated landscape. - Tax Function of the Future: R&D Innovation and Cloud
Register here for the replay of this webcast, held on Wednesday 16 June 2021, where we explored why quantifying the bottom line tax impact of cloud computing while serving as a strategic partner for cloud efforts, such as R&D and ERP, are both critical tasks for Tax. - Q2 financial reporting considerations
Watch this replay from Wednesday 23 June 2021, where our panel of Tax Accounting Services (TAS) specialists took a deep dive into relevant tax accounting matters and recent tax developments. - Tax Readiness: Key state tax legislation and trends - What you need to know to navigate change
This webcast, held on Tuesday 8 June 2021, focused on key state legislation impacting corporate, passthrough entity, individual, and indirect taxes. Register here to watch the replay. - Tax Readiness: Treasury's Green Book is back, adding detail to President Biden's tax proposals
Register here to watch the relay of our webcast, held on 3 June 2021, in which our PwC panel walked through the Treasury's 'Green Book,' which adds details to President Biden's FY22 Budget proposals, and informs Congress.
Other updates
For regular updates on this topic, check out our US tax reform hub on The Suite here.