International tax update for multinationals operating in the UK - period to 7 June 2024

Two weeks to 7 June 2024

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

UK

Pillar Two

Pillar Two registrations~As reported in our previous edition, HMRC has launched a new online system for taxpayers to use to register that they are in the scope of Pillar Two (for both the Multinational Top-up Tax and Domestic Top-up Tax) and published guidance relating to it. This PwC alert is now available, covering this development and the introduction of similar compliance procedures in other territories.

Case law update

UTT considers treaty abuse case & how to determine main purpose - Burlington Loan Management DAC
The Upper Tribunal has dismissed an appeal by HMRC against the First-tier Tribunal's decision in a case that concerned the interpretation of the anti-abuse provision in the interest article of the UK-Ireland double tax treaty (UK-Ire treaty) and, in particular, how to determine a person’s main purpose. The interest income at issue was payable by a UK company in administration. The debt claim to which it related was transferred by a Cayman company to an Irish company, which altered the withholding tax (WHT) analysis because the interest article in the UK-Ire treaty was more favourable than the equivalent in the UK-Cayman double tax treaty. Provided none of the persons connected to the assignment of the debt claim had a main purpose of taking advantage of the interest article in the UK-Ire treaty, the UK company could pay interest to the Irish company without having to deduct WHT. The Upper Tribunal rejected HMRC's arguments that the transaction was driven by UK tax arbitrage and that the FTT had misinterpreted the treaty provision and made errors of law and fact. Read the decision here.

HMRC Manual & guidance updates

Double Taxation Relief Manual

30 May
DT2140PP: Guidance by country contents: Pages for San Marino added.

International Manual

5 June
INTM620730: Offshore Receipts in respect of Intangible Property (ORIP): Glossary of terms: Meaning of full treaty territory - Removal of reference to Hong Kong.

International Exchange of Information Manual - updated 28 May
IEIM904300: Reporting Process - Contact email updated

UK – MLI Arbitration Profile
The OECD has published the MLI Arbitration Profile for the United Kingdom. This document contains information on the United Kingdom’s arbitration position under Part VI of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI).

EU

Infringement proceedings regarding the implementation of tax transparency rules on digital platforms
The Commission has called on Germany, Hungary, Poland and Romania to fulfil their obligation to cooperate with other Member States on tax transparency of income realised through digital platforms required under the seventh Directive on Administrative Cooperation in tax matters (DAC7). Read more in this PwC blog.

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 3 June includes: 1) European Elections: UseYourVote This Week From 6 – 9 June 2024; 2) OECD Update on Pillar 1 Progress; 3) Opinion of AG Kokott in Case C-432/23: F, Ordre des Avocats du Barreau de Luxembourg on Professional Secrecy of a Lawyer Under DAC; 4) European Commission May Infringement Package; and 5) Industry & Tax Professionals Call for Clearer VAT Guidance on Charitable Donations. Visit their latest news page here.
Global Tax Top 10 – May 2024
This edition includes: 1) OECD Update on Pillar 1 Progress; 2) EU Elections: #UseYourVote This Week from 6 to 9 June; 3) EU Council of Ministers Approve Faster Directive; 4) Tax Inspectors Without Borders 2024 Report Published; 5) CFE & Accountancy Europe Joint Members’ Only Webinar on New EU AML Rules: Changes for Practitioners; 6) EU Commission Launches Evaluation of Directive on Administrative Cooperation; 7) CFE Statement on EU Dispute Resolution Directive; 8) US Will Not Support Global Minimum Wealth Tax: Secretary of Treasury; 9) EU Commission May Infringement Package; and 10) Industry & Tax Professionals Call for Clearer VAT Guidance on Charitable Donations.

OECD

Pillar One

The Inclusive Framework on BEPS sets sights on Multilateral Convention signature by end of June as negotiations on a Pillar One package nears completion
The 16th meeting of the Inclusive Framework on Base Erosion and Profit Shifting (the IF) took place in Paris from 28 May to 30 May 2024, with more than 400 delegates representing 140 delegations (including 127 countries and jurisdictions and 13 observers) participating in the meetings. Following productive discussions on remaining open issues related to Pillar One, the IF is reportedly nearing completion of the negotiations on a final package on Pillar One (which includes a text of the Multilateral Convention (MLC) for Amount A and a framework for Amount B) with the goal of reaching a final agreement in time to open the MLC for signature by the end of June. See this OECD item.

Moldova joins the Inclusive Framework
The Republic of Moldova joins international efforts against tax avoidance by joining the OECD/G20 Inclusive Framework on BEPS, an international collaboration with over 145 member countries and jurisdictions. Read more in this OECD item.

Tax Transparency in Latin America 2024
The annual Tax Transparency in Latin America report is a key output of the Punta del Este Declaration, a Latin American initiative established in 2018 to tackle tax evasion, corruption and other financial crimes. The 2024 edition covers 15 Latin American countries and aims at informing decision makers and citizens on the latest progress and remaining challenges in improving tax transparency in the region. Read the report here.

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

United Nations

Zero Draft Terms of Reference for a United Nations Framework Convention on International Tax Cooperation
The UN’s Bureau of the Ad Hoc Committee has published the “Zero Draft Terms of Reference” (ToR) for a UN Framework Convention on International Tax Cooperation (Convention) for public consultation. The deadline for Member States and other stakeholders to send written comments is 21 June. The comments will inform the preparation of the draft text that will be the basis for the discussions and negotiations during the Second Session. Read more in this UN news item.

Other territories

International

International Tax News - May 2024
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) Canada introduces a bill to enact Pillar Two; 2) First Belgian Pillar Two Compliance Milestone; 3) Australian Government hands down the 2024-25 Federal Budget; and 4) Kenya releases Finance Bill 2024.

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 5 June, we cover:

progress on the US State of California's data extraction tax proposal;
updates on Nepal's Budget impacting its permanent establishment (PE), VAT and DST rules.

Digital tax megabyte - May 2024
A collection of the brief insights throughout May 2024 of the type provided on an ad hoc basis in our Latest digital tax byte update (see above).

Environmental, Social and Governance (ESG)
LinkedIn Live: Three ways sustainability reporting can be transformative
Join PwC UK's LinkedIn Live broadcast on 25 June, where Mark Batten, Banking and Capital Markets Leader; Paolo Taurae, Non-financial Assurance Leader; and Gurpreet Kaur, Director, will be joined by guest speakers to explore how organisations can go beyond compliance and use reporting as a catalyst for change. Sign up to join the broadcast at https://bit.ly/3ReXvdE.

Armenia
Spain agrees to add BEPS provisions to Armenian double tax treaty
Spain has confirmed the completion of its internal procedures for the entry into effect of the provisions of the Multilateral BEPS Convention under Article 35(7)(b). Spanish authorities deposited an instrument with the OECD, as depository for the BEPS multilateral instrument, to add its double tax treaty with Armenia to its list of covered agreements for purposes of the BEPS MLI. See: OECD notification.

Australia

Australia’s foreign investment framework
On 1 May 2024, the Treasurer announced reforms to streamline and strengthen Australia’s foreign investment framework, in order to deliver a stronger, faster and more transparent approach to foreign investment. Australia’s foreign investment policy provides a summary of Australia’s policy approach, regulatory framework, who needs to submit a proposed foreign investment and how proposed investments are reviewed.

Update on Australian public country-by-country reporting
The Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024 containing the proposed public country-by-country reporting (CbCR) rules was recently introduced into Australian Parliament. The rules, which are intended to take effect for reporting periods commencing on or after 1 July 2024, will require public disclosure of certain tax information by large groups with a presence in Australia.

Austria

Austrian Ministry of Finance (BMF) publishes draft of the Austrian Tax Amendment Act 2024
On 3 May 2024, the Austrian Ministry of Finance (BMF) published a draft of the AbgÄG 2024 (Austrian Tax Amendment Act 2024; AbgÄG 2024). Included in the amendments in this draft are: 1) it is intended that the loss utilisation rules for a new group parent become stricter; 2) the low-taxation tests for CFC and local anti-hybrid purposes should be extended by national top-up taxes in accordance with Pillar Two; 3) the temporary CbCR safe harbour rule is to be extended to include groups of companies that are not obliged to prepare a country-by-country report (CbCR). Changes to the simplified calculation for hybrid structures are also being considered. Read more in this PwC alert.

Azerbaijan

Azerbaijan set to ratify BEPS MLI
Azerbaijan's parliament, the Milli Majlis, has approved draft legislation on the implementation of the BEPS multilateral convention (also known as the MLI). The MLI will come into effect for Azerbaijan's treaties from the first day of the fourth month following the country depositing its instrument of ratification with the OECD.

Barbados

Pillar Two update
On 24 May, the Income Tax Act (Amendment) 2024 and Corporation Top-up Tax Bill 2024 were published in the Barbados Official Gazette with assent from the Governor-General. The Barbados House of Assembly approved the bills on 7 May and the Senate on 15 May. This enacts both bills in the country. Further details (including an overview of the newly introduced QRTCs) can be read in this Tax Alert, prepared by our PwC Barbados colleagues.

Belgium

See here for latest updates.

Pillar Two update
in our previous edition, to comply with the Pillar Two requirements, groups in scope of the rules have to register at the Crossroads Bank for Enterprises. Groups that are already subject to Pillar Two (ie from 1 January 2024) need to notify by 13 July 2024 at the very latest. Other groups must file the form within 30 days of the start of the fiscal year for which a group enters into the scope of the Pillar Two rules. Read more in our Digital tax megabyte for May 2024.

Belgian law amending the investment deduction and innovation income deduction regime published in the Official Gazette
On 29 May 2024, the law of 12 May 2024 containing various tax provisions was published in the Belgian Official Gazette. This law implements several changes to the regime of the investment deduction and the innovation income deduction (IID). Key features of the new legislation are summarised in this PwC alert.

Belgian Tax Authorities publish additional guidelines in view of the Co-Operative Tax Compliance Programme and details on what they consider to be a “mature” Tax Control Framework (TCF)?
With its launch in 2018, and with the ultimate goal of (i) achieving faster legal certainty for companies and (ii) improving compliance with tax obligations, the Belgian Co-operative Tax Compliance Programme (CTCP) introduced a mindshift, from a reactive tax audit modus to a collaborative, proactive approach based on legitimate expectations between tax authorities and taxpayers, increased transparency and trust, and faster legal certainty. The Belgian tax authorities have now published (i) an updated version of its initial CTCP brochure, including more details on the programme, as well as (ii) a preparation guide (/checklist) in view of (key) requirements to meet their expectations on having a “well defined” Tax Control Framework. Read more in this PwC alert.

Canada

Finance releases draft legislation for the clean hydrogen and clean technology manufacturing investment tax credits
On 2 May 2024, federal Bill C-69, an Act to implement certain provisions of the budget tabled in Parliament on 16 April 2024, was tabled in the House of Commons. Bill C-69 includes the legislation to implement the clean hydrogen investment tax credit (Clean Hydrogen ITC) and the clean technology manufacturing investment tax credit (Clean Technology Manufacturing ITC). Further information and the key changes in Bill C-69 (as compared to the 20 December 2023 draft legislation) can be found in this PwC alert.

Germany

Update: Federal Ministry of Finance publishes draft bill for the Finance Act 2024
On 17 May 2024, the Federal Ministry of Finance (MoF) sent a draft bill for the Finance Act 2024 (FA 2024) to the professional associations for comments by 24 May 2024. The draft has now also been published on the MoF website. The law is intended to implement changes to various areas of German tax law which need adjustment. The focus is on adjustments required by EU law and case law of the European Court of Justice (ECJ), the German Federal Constitutional Court, and the German Supreme Tax Court. Furthermore, follow-up amendments to previous legislative changes will be made. The Federal Cabinet adopted the draft bill of the Finance Act 2024 on 5 June. This PwC blog summarises the key content.

Hungary

Ireland

Pillar Two update

Pillar Two compliance procedures
Irish entities subject to Pillar Two must register with the Irish Revenue regarding each applicable tax (IIR, Undertaxed Profits Rule (UTPR), and Qualified Domestic Top-up Tax (QDTT)) within 12 months of the first fiscal year end in which the entity is subject to the tax. Read more in this PwC alert.
Pillar Two in Ireland: It takes a village
In this Cross-border Tax Talks episode from 30 May, Doug McHoney (PwC's Global International Tax Services Leader) and Peter Reilly (PwC International Tax Partner & Ireland’s Tax Policy Leader) discuss Ireland’s implementation of Pillar Two whilst at PwC’s EMEA International Tax Academy in Prague. Doug and Peter dive into why Irish policy makers agreed to adopt the Pillar Two regime, how Ireland is incorporating the OECD guidance, the potential effects on the Irish economy and current tax regime, the ways Irish multinationals are preparing, and the potential ramifications in the future.

Italy

First implementation of the administrative and tax breaks provided for investments in Simplified Logistics Zones (“SLZ”)
Law 27 December 2017, n. 205, article 1, par 61 et seq., provides for the possibility of establishing Simplified Logistics Zones (SLZ) in the port areas of the more developed regions, as identified by European legislation, in order to encourage the creation of conditions favourable to the development of new investments. To implement the provisions of this legislation, the decree of the President of the Council of Ministers dated 4 March 2024, n. 40 came into force on 17 April 2024, containing the “Regulation for the establishment of Simplified Logistics Zones (SLZ) pursuant to article 1, paragraph 65, of law 27 December 2017, n.205”. The decree is aimed at creating favourable conditions in economic, financial and administrative terms to allow, in the areas concerned, the development of already operating businesses, as well as the establishment of new businesses. Read more in this PwC blog.

Kenya

Moldova

Moldova joins the Inclusive Framework on BEPS
The Republic of Moldova joins international efforts against tax avoidance by joining the OECD/G20 Inclusive Framework on BEPS, an international collaboration with over 145 member countries and jurisdictions. Read more in this OECD item.

Nepal

Nepal Budget proposes changes to PE, VAT and DST rules for digital services
The Nepal Budget was introduced on 28 May 2024, which proposed amendments in relation to permanent establishment (PE), Digital Service Tax (DST) and VAT on digital services. In particular, the definition of 'permanent establishment' (PE) as stipulated in the Nepal Income Tax Act 2002 would be amended so that non-resident entities that maintain a substantial digital presence in Nepal could be deemed to have a PE in the country irrespective of whether their servers are located outside Nepal, provided they engage in data or service transactions within Nepal for a minimum of ninety days over the preceding twelve months. It is expected that the Government of Nepal may come up with directives/clarifications for the implementation of this amendment and its interplay with the DST provisions. Read more in the latest edition of our Digital Tax Byte.

New Zealand

New Zealand’s 2024 Budget has been announced
The Coalition Government’s first Budget has been well-signalled, with the announcements on 30 May focused on the previously announced tax relief package alongside significant public sector savings. While limited, the new spending revealed today is focused on health, education, and law and order. Read our Budget 2024 commentary, including the need to know numbers and announcements.

Poland

Romania

Singapore

Singapore updates guidance for variable capital companies
The Inland Revenue Authority of Singapore (IRAS) has published a second edition of its guidance for variable capital companies, the first update since publication in August 2020. The Variable Capital Companies (VCC) framework is a corporate structure for investment funds in Singapore that offers flexibility and cost savings. A VCC can be set up as a single fund or an umbrella fund with multiple sub-funds, each with its own investment strategy and shareholders. The VCC framework also allows existing overseas funds to redomicile to Singapore by transferring their registration to Singapore as VCCs.

South Africa

Tax implications of trust distributions to non-SA tax residents
Prior to 1 March 2024, the so-called ‘conduit pipe’ principle applied where the beneficiary of a SA tax resident trust had a vested right to the income of the trust in the year of assessment in which the income arose, ie the income was taxable in the hands of the vested beneficiary (irrespective of the tax residence status of the beneficiary) and not in the hands of the SA trust. With effect from 1 March 2024 (and applicable in respect of years of assessment commencing on or after this date) the conduit pipe principle will only apply where the vested beneficiary is a SA tax resident. Accordingly, where a non-resident beneficiary has a vested right in the SA trust’s income, the income will be taxable in the hands of the SA trust (instead of in the hands of the beneficiary). This change aligns the tax treatment of a SA trust’s income with that of its capital gains (ie where the non-resident beneficiary(s) has a vested right to a capital gain of the trust). Read more in this PwC Tax Alert.

Spain

MLI update
Spain has confirmed the completion of its internal procedures for the entry into effect of the provisions of the Multilateral BEPS Convention under Article 35(7)(b). Spanish authorities deposited an instrument with the OECD, as depository for the BEPS multilateral instrument, to add its double tax agreement with Armenia to its list of covered agreements for purposes of the BEPS MLI. See: OECD notification.

Sweden

Interest on the tax account is rising - take charge of your interest costs
It has probably not escaped anyone that interest rates have increased significantly in recent years. This means a need to rethink the management of the company's tax account. The interest is usually not visible on the tax account until it is time to pay it, which can be an unpleasant surprise. Read more in this PwC blog.

Switzerland

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

Taiwan

Tax update - May 2024
This edition includes: Draft amendment to the Income Tax Act which aims to optimise the withholding tax system was sent to the Legislative Yuan for review.

Section 871(m) dividend equivalent rules phase-in period further extended
Treasury and the IRS recently issued Notice 2024-44, providing a further extension of the transition relief phase-in period of the regulations under Section 871(m) for select transactions through 2026. The notice also extends the phase-in period previously provided for certain Section 871(m) regulations provisions and permits withholding agents to apply the transition rules from Notice 2010-46 in 2025 and 2026. Notice 2024-44 also provides that the anti-abuse rule in Reg. 1.871-15(o) will continue to apply to the phased-in application of the Section 871(m) regulations and that, as a result, a transaction that otherwise would not be treated as a Section 871(m) transaction may be treated as such. Read more in this PwC Tax Insights.

IRS updates domestic content credit bonus guidance
The IRS has released Notice 2024-41, which updates guidance in Notice 2023-38 on the domestic content credit bonus. The domestic content bonus may increase the credit amount for qualified facilities under Section 45 or Section 45Y, energy projects under Section 48, or qualified facilities and energy storage technologies under Section 48E (collectively, applicable projects). Notice 2024-41 expands and modifies a safe harbour list in Notice 2023-38 classifying applicable projects as steel/iron or manufactured products and provides a new safe harbour for classifying applicable project components and calculating a project’s domestic cost percentage. Read more in this PwC Tax Insights.

Policy on Demand series

Obligations, next steps from clean electricity guidance
In this episode from 5 June, Randa Barsoum discusses what companies need to know about the newly-released proposed guidance on the clean electricity production and investment credits established by the Inflation Reduction Act.
Rohit Kumar on possible sweeping tax reform in 2025
In this episode from 3 June, Rohit Kumar discusses how prospects for Senate passage of the House-passed tax continue to narrow, but the scope of the 2025 tax reform could be sweeping.
Tax law landscape after Supreme Court decisions
In this episode from 28 May, Pat Brown shares his insights on three closely watched Supreme Court cases that could have a significant impact on US tax law.
Week in Review

7 June - With the election less than five months away, Congress shifts its focus to major matters defining campaign agendas, and debates on next year's funding have already begun. Keep an eye out for signals from Senate Majority Leader Schumer on next moves for the House-passed tax bill, as well as reports from Ways & Means Republicans on what they are learning in their 2025 tax teams process. Watch here.
31 May - Companies are waiting for more regulatory guidance from Treasury, while the approval of Pillar One and the implementation of Pillar Two face challenges. Now is the time to focus on how dimming prospects for Senate passage of the bipartisan House tax bill and OECD developments may affect the coming 2025 tax policy discussions. Watch here.

Tax Readiness webcast series

Tax Readiness: Q2 Financial reporting considerations
Join our panel of PwC specialists on Wednesday 19 June at 7pm, as they discuss tax accounting considerations and recent tax developments. On this webcast, we will discuss financial reporting considerations relating to intraperiod tax allocations, intercompany transactions and valuation allowances, including the potential Pillar two impacts, as well as other hot topics and commonly asked questions. Register here.
Tax Readiness: Private capital tax trends
Watch the replay from this webcast held on 4 June, where our panel discussed the latest tax trends and regulatory changes impacting the private capital industry - from portfolio companies to investors. Register now to gain actionable insights into how the ever-evolving tax landscape is shaping business strategies and operational considerations for private capital firms.

State and local tax

California’s proposed tax on data extraction transactions stalled
Sen. Steve Glazer’s (D) digital advertising tax legislation, SB 1327, stalled in the full Senate, which convened on 24 May, the last day for each house to pass bills introduced in that house. Glazer presented several other bills, but opted not to bring SB 1327 to a vote. Glazer can still introduce SB 1327 for a vote on the Senate floor any time before the legislative session ends 31 August, but he has reportedly stated that he doubts he can garner the two-thirds support needed for the bill’s passage. Read more in the latest edition of our Digital Tax Byte.
US state income tax digest - June 2024
Welcome to the latest edition of US State Income Tax Digest, which highlights significant income and business tax legislation, regulatory adoptions, judicial decisions, and administrative guidance.

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.

Vietnam

Draft decree on investment support fund in Vietnam
The Ministry of Planning and Investment (“MPI”) has released a draft decree on the establishment of an investment support fund for public comment, with a view to maintaining attractiveness to foreign investors as well as to encourage investments in certain sectors. In accordance with the draft decree, a fund will be established to grant cash support to eligible taxpayers in the high-tech industries. The fund will be financed by top-up tax revenue as the result of the application of the global minimum tax rate policy in Vietnam and other appropriate sources. The cash support is exempted from corporate income tax. Read more in this PwC alert.

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International tax update for multinationals operating in the UK - period to 7 June 2024

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