Four weeks to 8 January 2021
Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK.
UK
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:
- Debating the potential shift in the 2021 tax landscape and the impact on UK business
With the pandemic initiating the biggest upheaval for UK plc in modern times and the UK’s transition period coming to an end on 31 December, this combined impact will no doubt affect the tax landscape. Register here to watch a recording of our recent live virtual event where reflected on the challenges that tax departments have had to contend with in 2020 and look ahead to the tax changes we may see in the expected March Budget and other potential tax developments in 2021. - Business in Focus podcast series
In this episode, host Rowena Morris is joined in our virtual studio by Rob Lewis, PwC’s Mid-Market Restructuring Leader, and Jo Walton, a partner in our Operational Restructuring business. We examine the steps businesses can take now to recover while navigating uncertainty and planning for challenges that are yet to come. - UK Economic Update
As well as having serious implications for people’s health and the NHS, the coronavirus (COVID-19) pandemic continues to have a significant impact on businesses and the economy. As the situation develops, we’re updating our analysis of the UK economic impact regularly to help you with your response and planning.
Brexit
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?
- Deal done but disruption still to come?
So a deal has been done, but what does that now mean, a sigh of relief? Yes. But a time to relax? Afraid not. Read more. - Receiving interest, royalties or dividends payments from the EU
HMRC has published new guidance to remind taxpayers that, from 1 January 2021, since EU directives no longer apply to payments to the UK, some EU countries may start to deduct tax from payments of interest, royalties and dividends. Taxpayers should consider whether the terms of the double tax treaty between the UK and the state of the payer could reduce or eliminate the withholding, and whether they need to make a new or revised claim to the tax authorities of that country. Although, for the UK, the Directive itself does not apply to payments of interest and royalties paid on or after 1 January 2021, the domestic legislation is still in force and so its provisions still apply to payments of interest and royalties paid from the UK to EU Member States. - Government publishes Taxation (Post-transition Period) Bill
On 8 December 2020 the Government published the Taxation (Post-transition Period) Bill, which takes forward changes to our tax system to support the smooth continuation of business across the UK. It will ensure legislation required for VAT, customs and excise duties and processes to support the practical implementation of the Northern Ireland Protocol is in place by the end of the Transition Period. It will also implement further changes to the tax system which are required ahead of the end of the Transition Period, including the introduction of a new system for collecting VAT on cross-border goods. - United Kingdom and European Union confirm Brexit Deal for social security
The UK Government and the EU Commission have announced that a Deal has been agreed for social security. From 1 January 2021, the current EU coordination rules on social security will be replaced by the Trade and Cooperation agreement, which includes a Protocol on Social Security Coordination. This will ensure individuals who move between the UK and the EU after 1 January 2021 to access reciprocal healthcare cover and that cross-border workers and their employers are only liable to pay social security contributions in one state at a time. Read more.
Major announcement re DAC6 in the UK
Following the agreement of the EU/UK Trade and Cooperation Agreement (TCA) on Christmas Eve, to great surprise HMRC laid some amending regulations on 29 December 2020 which fundamentally change the application of EU MDR/DAC6 in the UK. Put simply, HMRC has removed the obligation to make disclosures of cross-border arrangements unless these relate to the ‘D hallmarks’ (i.e. the ones which relate to CRS avoidance and opaque ownership structures). This is very significant, as it removes all of the hallmarks which typically impact on normal commercial transactions. Read more.
Budget date 2021 announced
The Chancellor of the Exchequer, Rishi Sunak, has announced that the government will publish the Budget on Wednesday 3 March 2021.
UK tax treaties
- Review of double tax treaties 2020/21
The Chartered Institute of Taxation (CIOT) have written to the HMRC Tax Treaty Team regarding a review of Double Taxation Treaties 2020/21. See their response here. - UK explains MLI changes to Danish tax treaty
HMRC has released the synthesized text of the country's double tax agreement with Denmark, as modified by the MLI. The provisions of the MLI came into force in the UK on 1 October 2018 and in Denmark from 1 January 2020 and are effective for: 1) taxes withheld at source, from 1 January 2020; 2) Corporation Tax, from 1 April 2021; 3) Income Tax and Capital Gains Tax, from 6 April 2021; and 4) all other taxes levied by Denmark, for taxable periods beginning on or after 1 January 2021. - HMRC update UK-Bosnia-Herzegovina double tax treaty information
A new document, Synthesised text of the Multilateral Instrument (MLI) and the 1981 Yugoslavia - UK Double Taxation Convention - in force, has been added to this HMRC page.
Taxation of asset holding companies in alternative fund structures (second stage consultation)
The UK Government issued its response to the UK Asset Holding Company ("AHC") consultation by providing a summary of the main points raised by industry stakeholders in response to the initial questions posed and by publishing a second consultation seeking views on the design features of an AHC tax regime which will close on 23 February 2021.
Publicly accessible registers of company beneficial ownership in the UK Overseas Territories
In July 2020, a written ministerial statement welcomed the statements from eight Overseas Territories committing to introduce publicly accessible registers of company beneficial ownership. In a welcome step forward, the British Virgin Islands’ Government have also committed to adopt publicly accessible registers, meaning that all of the United Kingdom’s inhabited Territories are committed to adopt such registers. This is a major change, and the unanimous action from all the Overseas Territories demonstrates their commitment to tackle flows of illicit finance. Read more in this latest written ministerial statement.
EU
DAC6 Pulse: Issue 8 - December 2020
In our DAC6 Pulses we keep you informed about the implementation of EU MDR (aka DAC6) in the different EU member states. This edition focuses on the beginning of the DAC6 live reporting period for all territories, with the exception of Poland, Germany, Finland and Austria, that did not exercise the option to postpone the initial deadlines for the first reporting.
EU sets out tax policy priorities for next four years
The EU's Council, Parliament, and Commission have published their policy priorities for the period to 2024, which include measures to promote fair and transparent taxation. The institutions have reached an agreement on the EU's Multiannual Financial Framework for 2021-27. This includes a roadmap for the introduction of new tax measures. Read more in this press release.
CFE Tax Advisers Europe
- CFE Tax Top 5 – Round-up of EU Tax Policy News
The latest edition [dated 21 Dec 2020] looks at the following: 1) Brexit Deal Not Reached by EU Parliament Deadline; 2) EU Publishes “EU Digital Age” Proposals for Digital Companies; 3) EU Commission Publishes Proposal to Confer Implementing Powers on EU VAT Committee; 4) EU Legislative Priorities for 2021 & 2020 – 2024 Policy Objectives; and 5) Public Input on OCED Pillar 1 & 2 Consultation Published. View previous editions here. - CFE’s Global Tax Top 10 – December 2020
This edition covers: 1) EU Parliament calls for wider scope on EU tax blacklist; 2) 2020 Global Forum on Tax Transparency plenary meeting; 3) EU leaders reach agreement on long-term budget; 4) OECD publishes 2020 Tax Revenue Trend Report; 5) Applications open: CFE’s 2020 Albert J Raedler medal award; 6) EU Council conclusions on EU tax challenges; 7) Chile deposits instrument of ratification for OECD’s BEPS MLI; 8) CFE’s Tax advisers’ professional affairs virtual conference; 9) African tax administration forum toolkit for exchange of information; and 10) AG Kokott: Belgian excess profit rulings constitute ‘State aid scheme’.
OECD
Pillar One and Two Blueprints
- Public comments received on the Reports on Pillar One and Pillar Two Blueprints
On 12 October 2020, as part of the ongoing work to develop a solution to the tax challenges of the digitalisation of the economy, the OECD/G20 Inclusive Framework on BEPS invited public comments on the Reports on the Pillar One and Pillar Two Blueprints. The OECD has now published the public comments received here. - Public consultation meeting on the Reports on the Pillar One and Pillar Two Blueprints
This virtual public consultation meeting being held on 14 - 15 January 2021, will focus on the key questions identified in the consultation document and raised in the written submissions received as part of the consultation process. The Pillar One meeting is at 12:30 - 16:30 CET on 14 January and Pillar Two at 13:00 - 16:30 CET on 15 January. You can watch the livestream here.
OECD publishes information on the state of implementation of the hard-to-value intangibles approach by members of the Inclusive Framework on BEPS
The OECD has published jurisdiction-specific information on the implementation of the hard-to-value intangibles ("HTVI") approach. To date, 40 jurisdictions have provided information on whether their domestic legal system provides for transfer pricing rules aimed at transactions involving HTVI. See this OECD item.
OECD releases guidance on the transfer pricing implications of COVID-19
On 18 December, the OECD issued Guidance on transfer pricing implications of the COVID-19 pandemic as part of its efforts to provide policy recommendations to respond to the COVID-19 pandemic. The 31-page document, which represents the consensus view of the 137 members of the Inclusive Framework on BEPS, is intended to provide guidance to help address challenges in applying transfer pricing rules in years impacted by the pandemic. The Guidance maintains that the arm’s-length principle (ALP) remains the applicable standard for purposes of evaluating controlled transactions in the economic environment shaped by the COVID-19 crisis. Read more.
Barbados, Germany and Pakistan ratify MLI and Switzerland moves towards doing so
Barbados, Germany and Pakistan have each deposited their instruments of ratification for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (Multilateral Convention or MLI). For all three countries, the MLI will enter into force on 1 April 2021. In addition, Switzerland notified the confirmation of the completion of its internal procedures for the entry into effect of the provisions of the MLI with respect to its treaties with the Czech Republic and Lithuania in accordance with Article 35(7)(b) of the MLI. See here for the latest list of signatories and parties to the MLI.
Transparency on tax rulings now the global norm, according to new peer review assessments for over 120 jurisdictions
As part of continuing efforts to improve tax transparency, the OECD/G20 Inclusive Framework on BEPS (Inclusive Framework) has reviewed the progress made by 124 jurisdictions in spontaneously exchanging information on tax rulings, in accordance with the BEPS Action 5 minimum standard. The conclusions show that transparency on tax rulings is now a fully-entrenched part of the international tax framework, with 20,000 tax rulings having been identified and 36,000 exchanges between jurisdictions having taken place. Read more in this OECD item.
Other territories
International
Coronavirus business updates
As noted above, we have summarised the reliefs and measures which are being put forward by global governments in response to the pandemic here (last updated on 8 January), as well as an overview of the back to work provisions being introduced.
International Tax News - November 2020
Among the topics featured in this edition are: 1) Hungary to introduce specific amendments to corporate tax legislation; 2) Australia proposes expanded eligibility for tax incentives - more multinationals would qualify; 3) Hong Kong signs tax treaty with Georgia; and 4) Brazil - Foreign reimbursements related to partner-administrators or expatriate costs.
Implementation of the UBO-registration requirement in 28 EU and EEA countries
By 10 January 2020 an obligation for Ultimate Beneficial Owner (UBO) registration within the European Union and the European Economic Area had to be implemented. This obligation derives from the fourth and fifth Anti-Money Laundry Directive. This PwC publication builds on the previous PwC research work of December 2019 and includes an overview of six specific aspects in relation to which the obligation for UBO registration shows remarkable differences in 28 EU/EEA countries and Gibraltar.
Tax and legal aspects of real estate investments around the globe - 2020 edition
Real Estate Going Global provides you with a summary of the tax and legal aspects of real estate investments from 50 countries including an overview of the tax system in the respective jurisdiction and a detailed guide to investing in property in the respective jurisdiction. Read more.
Key tax issues at year end for real estate investors 2020/2021
International tax regimes are diverse, complex and variant, and are usually full of fixed dates, terms and deadlines. These dates, terms and deadlines need to be observed carefully in order to avoid penalties and to receive certain tax reliefs or exemptions. At year end these obligations become even more difficult to understand and fulfil, particularly for real estate investors with investments in numerous countries. This publication gives investors and fund managers an overview of year-end to-dos and important issues in real estate taxation in 46 tax systems worldwide.
Australia
ATO updates guidance on expanded SGE definition
The Australian Taxation Office has released updated guidance to reflect recent legislative changes that broaden the definition of a significant global entity (SGE). As of 1 July 2019, the SGE definition applies to entities belonging to groups of entities whose annual global income is over AUD1bn (USD773m), and regardless of whether audited consolidated financial statements have been prepared. As a result, entities previously not in scope of the SGE definition may now be considered an SGE, even in circumstances where they belong to a group that has not prepared audited consolidated financial statements.
Austria
New interest limitation rule: Introduction planned for 1 January 2021
A legislative motion implementing a new interest limitation rule into the Austrian Corporate Income Tax Act was recently introduced. These provisions are required as the European Commission considers that Austria's existing measures limiting the deduction of interest expenses do not meet the standard required under the first Anti Tax Avoidance Directive. Corporations subject to unlimited tax liability, as well as corporations subject to limited tax liability with a permanent establishment (PE) in Austria, are within the scope of the new rules which enter into force on 1 January 2021 and are applicable to fiscal years beginning after 31 December 2020. A company’s financing expenses will – with numerous exceptions – be deductible only up to a maximum extent of 30% of the EBITDA. See this PwC Austria item for an overview.
Belgium
See here for latest updates.
New legislation impacting 30% EBITDA rule
The Belgian legislator has published new legislation to address criticism by the European Commission of (inter alia) the way in which Belgium has implemented the “EBITDA interest limitation rule”. This might impact the financing of real estate, entities that perform factoring activities, or entities active in “long-term public infrastructure projects”. The scope of grandfathered loans might also be affected by these changes. Read more in this PwC Belgium news item.
Update COVID-19 and cross-border employment: agreements extended
We reported in our previous edition the extension until 31 March 2021 of the mutual agreements between Belgium, France and the Netherlands, which includes a “force majeure tolerance” for cross-border workers in relation to COVID-19 (travel) restrictions. Belgium has now announced that its agreements with Germany and Luxembourg are also extended until 31 March 2021. See our PwC Belgium news page here.
Canada
Canada preserves preferential tariff benefits with the UK
On 22 December 2020, Global Affairs Canada announced that Canada and the UK had signed a Memorandum of Understanding which ensures that preferential tariff treatment on trade between the two countries will continue after 1 January 2021. The Canada-European Union Comprehensive Economic and Trade Agreement (CETA) ceased to apply to the UK on 1 January 2021 but the UK-Canada Trade Continuity Agreement (TCA) has not yet taken effect. Without this Memorandum of Understanding, Canada-UK trade would otherwise not benefit from preferential tariff treatment from 1 January 2021 until the TCA enters into force. Read more in this PwC Tax Insights.
How a Biden administration could impact Canadian taxpayers
With the US Electoral College due to cast their votes on 14 December, Joseph R. Biden is expected to become the 46th President of the United States in January 2021. However, it is not yet known which political party will control the US Senate. Canadian taxpayers should be aware of how the results of the 2020 US election could impact their cross-border tax situation. Read more in this PwC Tax Insight.
Chile
New Chilean regulations on indirect Chilean asset transfers may increase reporting obligations
Chilean Tax Authorities issued Resolution N°119/2020 on 29 September, amending the reporting requirements for indirect transfers of Chilean assets beginning 1 January 2021, including for shares in a Chilean company, movable or immovable property located in Chile, and Chilean permanent establishments. The new requirements may increase compliance requirements for companies involved in the underlying transactions. Read more.
China (see also Hong Kong below)
China releases Foreign Investments Security Review Measures to strengthen regulatory control over foreign investment
The National Development and Reform Commission and the Ministry of Commerce have jointly released the Foreign Investments Security Review Measures, with the aim to effectively prevent and defuse national security risks while actively promoting foreign investment. These measures will come into force on 18 January 2021 and will have major and material impacts on foreign investment projects in certain areas of investment. Read more in this PwC China tax news flash.
Ecuador
Ecuador approves resolution providing temporary tax treaty application relief
The Ecuadorian Tax Authorities issued a Resolution during November 2020 providing temporary relief with respect to certain tax treaty requirements established in a previous resolution from 2018. The temporary relief of the obligation to provide an advance tax residence certificate to Ecuadorian withholding agents should ease access to treaty benefits in Ecuador for foreign investors that are experiencing delays or difficulties in obtaining a tax residence certificate under the current circumstances. Read more.
Egypt
Ministry of Finance issues new guidelines on non-residents capital gains tax procedures
On 13 December 2020, the Egyptian Ministry of Finance published guidelines (effective 14 December 2020) relating to capital gains realised by non-residents. It addresses questions regarding: i) the process for filing CGT returns; ii) obtaining treaty relief; iii) obtaining tax clearance certificates, and iv) penalties for non-compliance. Read more in this PwC tax news item.
Finland
Finland amends corporate tax residency rules
Finland recently updated legislation which changes Finnish corporate tax residency rules with effect from 1 January 2021. Under the change, overseas businesses will be considered to be tax resident in Finland if the company is effectively managed in Finland.
Tax and Legal news - December 2020
The latest tax and legal news from Finland. Read the latest edition.
France
France gazettes 2021 Finance Law
The French Government published the 2021 Finance Law in the Official Journal on 30 December 2020. The Bill includes numerous recently announced corporate tax reliefs. The bill increases the annual turnover threshold for small companies to qualify for the 15 percent concessionary rate of corporate tax to EUR10m, from EUR7.63m, with effect from 1 January 2021. Read more in this PwC France news item.
E-filing and 3% tax return: foreign entities must be registered before 15 January 2021
From 2021, entities subject to the French 3% on real estate tax will have to submit their tax returns in a dematerialised way. In order to file the French 3% tax return on time (i.e. no later than 15 May 2021) electronically, the French tax administration has just, at the beginning of January, announced that foreign entities will have to be registered in France before 15 January 2021. Read more.
Germany
German Bundesrat approve Finance Bill 2020
In its plenary session of 18 December 2020, the Bundesrat approved the Finance Bill 2020. The package contains necessary adjustments to EU law and to the case law of the European Court of Justice as well as legislative actions to the case law of the Supreme Tax Court. In addition, it addresses the need for regulatory adjustments that has arisen in various individual tax laws. Furthermore, measures are planned for more digitization (in particular the implementation of the VAT digital package) and for combating various tax planning structures. Contrary to earlier plans the “1:1 implementation” of the ATAD Directive into national law is not included. Read more in this PwC Germany tax blog.
Hong Kong
New tax treaty between Hong Kong and Serbia now in force
The comprehensive double taxation agreement between Hong Kong and Serbia, signed in August 2020, entered into force on 30 December 2020. It will have effect in respect of Hong Kong tax for any year of assessment beginning on or after 1 April 2021. See this Hong Kong government press release.
Ireland
Finance Act 2020
Finance Act 2020, which was signed on 21 December 2020, clarifies and codifies many of the tax measures announced on Budget day. What does the legislation mean for you and your business? Our experts give their insights here.
Italy
Italy provides draft guidance on the digital service tax
Italy’s digital services tax became effective 1 January 2020, with a sunset clause linked to the outcomes of the OECD’s Pillars. Businesses that earn Italian digital revenues above certain thresholds are subject to the tax, and a traditional ‘nexus’ is not required. For FY 2020, the 3% tax must be paid by 16 February 2021 and a specific tax return must be filed by 31 March 2021. Read more.
New dividend withholding and capital gain tax exemption for “regulated” EU and EEA Funds
The Budget law 2021 introduces a new tax regime applicable to EU / EEA “regulated” investments funds. EEA means Norway, Iceland and Liechtenstein. Pursuant to the new provisions, EU / EEA “regulated” investment funds will become exempt (starting from 1 January 2021) from Italian income taxes on Italian source dividends and capital gains deriving from any Italian equity investment held. No exemption is provided for FTT purposes. Due to Brexit becoming effective on the same day, UK funds will not be able to benefit from this provision. Read more in this PwC Italy tax blog.
Italian 2021 Budget Law introduces a tax reduction for dividends received by “non-profit” entities
Italy’s recently published 2021 Budget Law provides for the reduction to 50% of the taxable quota of profits received by non-commercial entities operating in the “non-profit” industry that carry out specific activities in the public interest. Read more in this PwC Italy tax blog.
Japan
2021 Japan tax reform proposals
The ruling parties in Japan recently published their 2021 Tax Reform Proposals. It is expected that most of the items contained in the 2021 Tax Reform Proposals will be passed into law in March 2021. See here for a summary of the major items contained in the proposals.
Korea
Korean Tax Update - December 2020
This edition includes: 1) The National Assembly Approves the Government’s Tax Reform Bill; 2) Government’s Strategy for Innovative Growth of Free Trade Zones; and 3) Rulings update.
Luxembourg
Luxembourg Budget Law 2021 voted – tax rates pegged
The Luxembourg Parliament recently voted to approve the 2021 Budget Law, and it will now become law. Its provisions include a number of measures that amend or extend the tax legislation. The draft text of the legislation (Bill n°7666) had been submitted to Parliament on 14 October 2020. For the 2021 tax year, all corporate tax rates are to remain unchanged – the headline overall effective corporate tax rate thus remains 24.94%. No new personal taxes, or any major reform of the personal tax regime for 2021, are now contemplated, and personal income tax rates will also remain unchanged. Read more in this PwC Luxembourg news item.
Luxembourg: Extension for filing of the 2019 tax returns
The Luxembourg Prime Minister recently made a statement extending the deadlines for the filing of the 2019 tax returns as follows: 1) Up to 31 March 2021 for individual’s tax returns and municipal business tax returns for individuals. This will be formally confirmed through the introduction of a draft bill in front of the Luxembourg Parliament in early January 2021. 2) No formal similar extension is provided as such for the 2019 corporate income tax returns. The direct tax authorities have however been instructed to show exceptional flexibility and not to impose penalties for late filing for those tax returns as long as they are filed by 31 March 2021 at the latest. See this PwC Luxembourg news item.
Middle East
Oman: Budget 2021 & 10th Five year development plan (2021-2025) - continued focus on diversification & maintaining deficit
His Majesty Sultan Haitham bin Tarik issued two Royal Decrees on 1 January 2021, published in the Official Gazette on 3 January 2021, promulgating the Tenth Five-year Development Plan (RD 1/2021) and the 2021 State Budget (RD 2/2021). In this News Alert, we set out the key features of the 2021 State Budget and the 10th FDP.
Oman: New Foreign Capital Investment Law - List of prohibited activities
The new Foreign Capital Investment Law (the New FCIL) was published last year, in July 2019, and became effective from 1 January 2020. The New FCIL has significantly relaxed the rules and restrictions on foreign investment, streamlined the registration and licensing procedures for foreign investors and aligned foreign investors’ rights and incentives to those given to local investors. One of the biggest changes in the New FCIL was allowing 100% foreign ownership in a number of sectors. Read more in this PwC tax news item.
United Arab Emirates: Economic substance reporting
The filing deadline for revised Notification(s) and Substance Report(s) for FY19 under the new UAE Economic Substance Regulations has just been extended to 31 January 2021. This additional 1 month window will be year end welcome news for those still completing their ESR filing obligations. Of course we strongly recommend any filings are completed as soon as possible. Don’t forget you can still use our free, online Economic Substance Reporting tool to compile your ESR Report offline and in advance of this revised deadline to ensure you are ready. Access the ESR tool here or talk to us today for specialist support on your obligations under the Economic Substance Regulations, and to understand if you meet the Economic Substance Tests.
Netherlands
Dutch Senate approves 2021 tax changes
The Dutch Senate recently approved the 2021 Tax Plan package and the legislative proposals that were presented on Budget Day. Our PwC Netherlands site has been updated during the parliamentary process to reflect the latest information and you can find a full list of the final measures.
Poland
Deadline related to the fulfilment of certain obligations under the new rules for charging withholding tax in Poland extended
On 30 December 2020, a regulation regarding the exclusion or limitation of the application of art. 26 par. 2e of the Corporate Income Act and a draft regulation regarding the exclusion or limitation of the application of art. 41 par. 12 of the Personal Income Act providing for the extension of the deadline related to the fulfillment of obligations resulting from the new rules for collecting withholding tax until 30 June 2021, was published in the Journal of Laws of the Republic of Poland. See this PwC Poland news item.
Russia
Tax treaty changes pave way for increase in WHT to 15% on outbound dividends & interest
The Russian prime minister has approved for ratification the protocols amending the double tax treaties with Luxembourg and Malta. The draft federal law on ratifying the protocols will be submitted to the State Duma shortly. After it passes, it will be reviewed by the Federation Council and signed by the President. Both protocols provide for an increase in the tax withholding rate to 15% on dividends and interest.
Serbia
New tax treaty between Hong Kong and Serbia now in force
The comprehensive double taxation agreement between Hong Kong and Serbia, signed in August 2020, entered into force on 30 December 2020. It will have effect in respect of Hong Kong tax for any year of assessment beginning on or after 1 April 2021. See this Hong Kong government press release.
Sweden
New verdict from the Supreme Administrative Court regarding the interpretation of the interest deduction limitation rules in relation to a fund structure
The Supreme Administrative Court (the SAC) recently published its verdict regarding the interpretation of the interest deduction limitation rules. The key issue in the case was who would be considered the lender to a Swedish portfolio company in a fund structure where the fund itself lacked legal capacity. An expected request for the European Court of Justice's assessment regarding the compatibility of the Swedish interest deduction limitation rules with EU law was denied. Read more in this PwC Sweden tax blog.
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.
New agreements between Switzerland and the United Kingdom take effect
The Switzerland-EU bilateral agreements ceased to apply to the United Kingdom at the end of the Brexit transition period. These agreements will be succeeded by a series of follow-up agreements that Switzerland negotiated with the UK as part of its Mind the Gap strategy (including Mind the Gap+). Most of the existing rights and obligations between the two countries will continue to apply. Read more in this press release.
Taiwan
Taiwan Tax Update December 2020
In this issue: 1) Ministry of Finance issued tax ruling stipulating that costs and expenses associated with tax exempt COVID-19 subsidies, allowances, incentives, or compensations (“subsidies”) received by profit-seeking enterprises are fully tax deductible; 2) Taiwan-Czech tax treaty to come into force on 1 January 2021; and 3) Taiwan and Saudi Arabia signed Taiwan-Saudi tax treaty on 2 December 2020.
US
Election 2020:
- Georgia Senate runoff results increases prospects for Biden tax proposals
Prospects for action on President-elect Joe Biden’s tax proposals have increased significantly with Georgia Senate runoff election results putting Democrats on track to control the Senate as well as the House. Based on unofficial results, Democratic candidate Raphael Warnock is projected by the Associated Press to have defeated incumbent Senator Kelly Loeffler (R-GA) and Democratic candidate Jon Ossoff is leading former Senator David Perdue (R-GA). Democratic victories in the two Georgia races would result in a 50-50 Senate with the tie-breaking vote of Vice President-elect Kamala Harris giving Democrats a de facto 51-50 majority. Read more. - Tracking the top policy issues at play and their business impact
While the US election outcome faces legal actions in several states, and control of the Senate is still undecided, businesses are nonetheless looking ahead to January when the 117th Congress will convene to certify the election results and likely put Democrat Joe Biden on course to take the oath on Inauguration Day. Visit our PwC US election web page to keep up to date with developments.
Year-end government funding bill includes COVID-19 economic relief and tax extenders
The US Congress recently approved a $2.4 trillion legislative package to fund the federal government through the end of the fiscal year, provide further COVID-19 economic relief, and extend certain expiring tax provisions. Additional measures include provisions to eliminate ‘surprise’ medical billing. The House passed the legislation by a vote of 359 to 53 and the Senate voted 92 to 6 to clear the legislation for President Trump’s expected signature. Read more.
Final and proposed PFIC regulations: Additional analysis
The US Treasury and the IRS recently released Final Regulations (which finalize with modifications the 2019 Proposed Regulations published on 11 July 2019) under Sections 1291, 1297, and 1298, and Proposed Regulations under Sections 250, 951A, 1291, 1297, and 1298. The Final Regulations retain the basic approach and structure of the 2019 Proposed Regulations. The New Proposed Regulations provide additional guidance with respect to certain definitional and mechanical issues under the passive foreign investment company (PFIC) rules, including the application of the Section 1297(b)(2)(A) active banking exception. This Insight covers the key provisions of the Final Regulations and the Proposed Regulations.
Final regulations clarify qualified transportation fringe rules
The 2017 tax reform act generally eliminated the deduction for business expenses for providing employees with qualified transportation fringe benefits and for providing or paying for employee commuting. The IRS and Treasury have finalized regulations proposed in June 2020 on these disallowances. The final regulations provide helpful clarifications, especially as regards the application of the exceptions for QTFs to the disallowance and how the rules apply during the COVID-19 pandemic. Read more.
Treasury and IRS release final Section 163(j) regulations
Treasury and the IRS have released Final Regulations under Section 163(j). Treasury previously released proposed regulations under Section 163(j) on 28 July 2020 (published on 14 September 2020 in the Federal Register). Section 163(j), which was modified by the 2017 Tax Reform Act and the CARES Act, limits US business interest expense deductions to the sum of business interest income, 30% (or 50%, as applicable) of adjusted taxable income (ATI), and the taxpayer’s floor plan financing interest for the tax year. Read more in this PwC Tax Insights.
IRS and Treasury release Section 451 final regulations
The IRS and Treasury have released regulations under Section 451(b) and (c) and Section 1275, finalizing regulations proposed on 9 September 2019. Section 451(b), as added by the 2017 tax reform act, provides that an accrual-method taxpayer must recognize an item as gross income under the all-events test no later than when the item is taken into account as revenue in the taxpayer’s applicable financial statement. Section 451(c) allows taxpayers to elect a limited deferral for certain advance payments. Section 1275 provides special rules for debt instruments. Read more in this PwC Tax Insights.
Final Section 162(m) regulations released
The US Treasury and the IRS recently released final regulations under Section 162(m). Section 162(m), as amended by the 2017 tax reform act, provides that a publicly held corporation may not deduct more than $1 million per year for remuneration paid to its covered employees. The final regulations generally apply to tax years beginning on or after the date final regulations are published in the Federal Register. Read more in this PwC Tax Insights.
New Jersey enacts new tax incentive programs
New Jersey recently enacted the New Jersey Economic Recovery Act of 2020. The Act creates a new flagship incentive program called New Jersey Emerge (NJ Emerge), which provides business tax credits for companies increasing employmentor making new investments in the state. NJ Emerge replaces the previous primary incentive program, Grow NJ, which expired on June 30, 2019. The Act also creates other incentives for targeted real estate development, historic preservation, brownfield redevelopment, and start-up businesses. Various eligibility periods apply under the new programs. Read more in this PwC Tax Insights.
Fourth quarter US 2020 state and local tax developments
This publication highlights significant US state tax developments published during October-December 2020. Items include: 1) State tax considerations of the GILTI high-tax exclusion election; 2) Election results have significant impact on state and local tax; 3) New Jersey enacts corporate income tax changes; and 4) Texas proposes significant changes to margin tax sourcing rule.
Top tax accounting considerations for year-end 2020
As we close out the calendar year, we reflect on 2020 developments impacting financial reporting. There has been considerable activity with financial reporting implications, including accounting for the impacts of COVID-19, as well as regulatory and legislative developments both in the United States and abroad. PwC’s US Tax Accounting Services team has prepared this ‘Top tax accounting considerations for year-end 2020’ publication, which highlights key areas that could have an impact on financial statements.
Webcasts, blogs and podcasts:
- Tax Readiness: Issues under the Section 451 Final Regulations
Register here to join us on Thursday, 14 January 2021 at 6pm where we will discuss significant issues arising under the recently published Section 451 final regulations dealing with recognizing income under the all-events test and the advance payment deferral method. - Tax Readiness: Embracing the future of mobility
Join us for this latest webcast on Thursday, 21 January 2021 at 4pm. Register here. - 2021 Tax Policy Outlook: The Changing Horizon
Register here to join us for this webcast on Thursday, 28 January at 7pm. - Tap into Tax
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 episode:
Further episodes in this series are available here, as well as on Spotify and other streaming services.
- Cross-border tax talks
- Supply and demand: key value chain considerations in 2021
In this episode, Doug McHoney (PwC's US International Tax Services (ITS) Leader) and Alex Voloshko (PwC's Value Chain Transformation Leader and ITS Partner in PwC's Washington National Tax Services office) discuss key considerations for value chains in 2021.
Previous episodes in this fabulous series of podcasts can be found here, as well as on Spotify, YouTube and other streaming services.
- Looking back at 2020 – Lessons learned that can shape the road ahead
The job of a tax executive has never been more difficult. Shifting tax and reporting obligations, the accelerating pace of business changes, and increased scrutiny from tax authorities are just a few of the challenges on the horizon. As tax directors prepare for the coming year, they will be well served by embracing the details, investing in their people, and fostering strong relationships with their C-suite leaders. Their ‘no regret’ actions now will help propel them on the road ahead. Read more in this blog.
Replays:
A number of previous webcasts are available for replay in our US tax reform hub here, including:
- Tax Readiness: New tax legislation and what it means
Watch this replay from this recent webcast held on Thursday, 7 January. - State Tax Outlook for 2021 and beyond
Watch the replay from this webcast held on Tuesday, 15 December. - 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. - Are you prepared for the tax & accounting implications in the transition from LIBOR?
Register here to watch the on demand replay of this webcast. - Tax Readiness: Q4 financial reporting considerations webcast
Register here to watch the recording of this webcast held on Wednesday, 9 December. - Election 2020: How tax leaders are navigating uncertainty
If you missed this webcast on Thursday, 3 December, you can watch the replay here. - PwC Pulse on Election webcast Part III
Now that the 3 November Election has passed, are you prepared for how potential policy and regulatory shifts may impact your business? This was recorded as an on-demand webcast. Register here to have the recording emailed to you to watch at your convenience.
Other updates
For regular updates on this topic, check out our US tax reform hub on The Suite here.
Vietnam
Corporate income tax treatments for a number of COVID-19 related expenses
Due to the ongoing COVID-19 outbreak, enterprises have been incurring a number of expenses for the COVID-19 prevention and control measures including: 1) expenses incurred for foreign experts’ quarantine; 2) expenses incurred for foreign experts’ COVID-19 tests, examinations and treatment; 3) allowances paid for employees severely impacted by the social distancing caused by the COVID-19 pandemic; 4) donations, sponsorships made for COVID-19 prevention and control activities; and 5) depreciation set aside for fixed assets provisionally inactive due to the COVID-19 pandemic impacts. The existing rulings are silent on the specific treatment for the aforementioned expenses. Nonetheless, in this PwC Newsbrief we provide you with the brief of the following Resolution and some relevant guidance as recently issued by the General Department of Taxation and local tax departments for your further reference.
