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Cyprus addresses DAC6, prevention of tax abuse, and treaties with Egypt and Germany

The Cyprus Parliament on March 18 approved the draft Bill amending the Law on Administrative Cooperation in the Field of Taxation, implementing DAC6. In addition, the Cypriot Ministry of Finance submitted two bills to Parliament to amend tax legislation to strengthen Cyprus’ tax framework for preventing tax abuse, tax evasion, and tax avoidance. The new tax treaty between Cyprus and Egypt, which was signed on October 8, 2019, and which entered into force on July 31, 2020, is effective as of January 1, 2021.

Kansas enacts significant corporate income tax changes

Pursuant to a legislative override of the governor’s veto, S.B. 50 which was recently enacted, provides the following changes applicable for tax years beginning after December 31, 2020: 1) 100% subtraction modification for GILTI and 163(j) disallowed interest; 2) Decoupling from IRC Section 118 capital contribution changes enacted by the 2017 tax reform act (the 2017 Act); and 3) Modifying business meal expense deductions. Additionally, for net operating losses incurred in tax years beginning after December 31, 2017, Kansas replaces its 10-year NOL carryforward with an unlimited carryforward. Finally, Kansas extends the filing deadline for 2020 corporate income tax returns to be one month following the federal deadline.

Kansas eases incentive requirements and allows credit transfer

Senate Bill 65, enacted on 15 April 2021, eliminates certain requirements from the High Performance Incentive Program (HPIP). Effective upon enactment, taxpayers no longer have to qualify for the Kansas Industrial Training (KIT) or Kansas Industrial Retraining (KIR) workforce training tax credits, or make required investments in employee training, to qualify for the HPIP. For projects placed in service on and after 1 January, 2021, a taxpayer may transfer up to 50% of HPIP tax credits to another taxpayer.

International tax update for multinationals operating in the UK - period to 30 April 2021

Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK. This issue includes:1) an article where our specialists reflect on the host of international tax issues and complexities associated with international holding structures as a consequence of the continually changing external landscape.

Digital service taxes: Are they here to stay?

Digital Service Taxes, or DSTs, have been permeating the trade environment since 2018, but COVID-19 and the OECD’s digitalization of the economy project, commonly referred to as BEPS 2.0, have accelerated the focus on DSTs. The stated aim of DSTs is to ensure that “market” countries get increased taxing rights over the profits of tech-based multinational companies that sell into their local market, and collect data from and target advertisements at local audiences, regardless of their physical presence.

Australian Taxation Office proposes hybrid rules guidance

Australia’s hybrid mismatch rules include ‘imported mismatch’ rules, which may apply more broadly than OECD BEPS Action 2-compliant hybrid rules implemented in other countries. On April 21, the Australian Taxation Office (ATO) released a draft practical compliance guideline, which provides guidance on how taxpayers practically should apply the imported mismatch rule and what documentation is required.

New Zealand parliament passes omnibus tax bill

The Taxation (Annual Rates for 2020-21, Feasibility Expenditure and Remedial Matters) Act has been enacted and is now in force. In this PwC news alert, we consider the amendments arising from the Finance and Expenditure Select Committee’s recommendations following the submissions process, and we also discuss new measures that were introduced by way of a supplementary order paper (SOP).

International tax update for multinationals operating in the UK - period to 16 April 2021

Highlights of this edition include: 1) Webcast - Using tax incentives to generate value from investments; 2) Tax Readiness webcast: Are digital taxes here to stay? 3) US Senate Finance Democrats and Treasury Secretary Yellen call for international tax policy changes; and 4) The latest podcast in our Tap into Tax series - Catching the international tax policy train.

Korean Tax Update - April 2021

This edition includes: 1) MOEF announces tax expenditure plan for 2021; 2) MOEF announces measures to combat real estate speculation; 3) NTS launches Task force to establish income data management system; 4) Notes to corporate local income tax return filing by April 30; and 5) Rulings update.

IRS defines ‘restaurant’ for food and beverage deduction

Under Section 274(n), a taxpayer generally may deduct only 50% of the taxpayer’s otherwise allowable business expenses for food and beverages. The Consolidated Appropriations Act, 2021, removed this limitation for business expenses paid or incurred after 2020 and before 2023 for food or beverages provided by a restaurant. The IRS has released Notice 2021-25, which provides guidance on what is a ‘restaurant’ for this purpose.

German real estate transfer tax (RETT) reform back on track

In October 2019, the German coalition government issued a joint press release announcing that the proposed reforms to the German Real Estate Transfer Tax Act (RETTA) would be delayed until the first half of 2020. At that time, the parties failed to reach a solution in the first half of 2020 and progress had since halted. Efforts have now started to adopt the original draft with few amendments despite the requests for changes.

International tax update for multinationals operating in the UK - period to 2 April 2021

Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK. This edition includes: 1) our “Doing business and investing in the UK'' guide, providing insight into the key aspects of business expansion, from establishing an entity to navigating employment legislation; 2) latest US tax developments.

USTR proposes potential tariffs pending six digital tax investigations and closes four others

The United States Trade Representative (USTR) recently published updates to digital service tax (DST) investigations regarding Austria, India, Italy, Spain, Turkey, the UK, Brazil, the Czech Republic, the EU, and Indonesia. The USTR has terminated its investigations regarding Brazil, the Czech Republic, the EU, and Indonesia because those jurisdictions either have not adopted or not implemented a DST during the period of investigation. For the other countries, the investigatory process is continuing, and the USTR has proposed a list of goods for potential tariffs.

US Senate Finance Democrats, Treasury Secretary Yellen call for international tax policy changes

Building off President Biden’s recent proposals for infrastructure spending to be paid for with corporate tax increases, Senate Finance Committee Chairman Ron Wyden (D-OR) joined with Finance members Sherrod Brown (D-OH) and Mark Warner (D-VA) in releasing a nine-page paper outlining a framework for overhauling US international tax policy. In a separate event, Treasury Secretary Janet Yellen highlighted the tax proposals announced last week by President Biden that call for increasing the US minimum rate on global income and increasing the US corporate tax rate to 28%.

Biden infrastructure plan includes numerous ESG proposals

President Joe Biden on March 31 announced a $2 trillion "American Jobs Plan" focused on infrastructure and other spending initiatives, including tax incentives for clean energy and domestic manufacturing. He also proposed a 'Made in America Tax Plan' containing corporate tax increase proposals designed to offset the costs of the American Jobs Plan infrastructure spending. In advance of the President’s remarks, the White House released an outline of specific infrastructure proposals and corporate tax increase offsets. This PwC Insight focuses on the tax-related aspects of President Biden’s plan related to environmental, social, and governance (ESG) issues.

White House lists corporate tax offsets for Biden infrastructure plan

President Joe Biden held an event in Pittsburgh on 31 March 2021 to announce a $2 trillion "American Jobs Plan'' focused on infrastructure and other spending initiatives, with part of the cost of his proposals to be offset by corporate tax increase proposals. In advance of the President’s remarks, the White House released an outline of specific infrastructure proposals and corporate tax increase offsets.

Key trade and policy considerations for US inbound companies

Global trade will play a key role in economic recovery efforts in the United States and around the world. Business supply chains continue to be affected by the implementation of the updated free trade agreements in Canada and Mexico. The Biden administration is expected to continue negotiating separate free trade agreements with the European Union and the United Kingdom, as well as pursuing new trade agreements with other nations.

Spain enacts ATAD 2 anti-hybrid rules

The Spanish government on March 9 amended the Corporate Income Tax law and the Non-Resident Income Tax law to address hybrid mismatches. The stated purpose of these amendments is to enact into Spanish domestic law the anti-hybrid rules included in EU Directive 2016/1164, dated July 12, 2016 (‘ATAD 1), as amended by EU Directive 2017/952, dated May 29, 2017 (ATAD 2).

European Union Adopts Mandatory Exchange of Information for Digital Platform Operators

The Council of the European Union has adopted an EU Directive expanding the scope of automatic exchange of information to digital platform operators and amending existing provisions on administrative cooperation in the field of taxation (“DAC7”). DAC7 introduces the 6th amendment to the Directive 2011/16/EU on administrative cooperation in the field of taxation (“DAC”).

EU expands reporting obligations under DAC7 and DAC8 for the digital economy and crypto assets

While EU Member States, advisors and taxpayers are still navigating the DAC6 landscape, the European Union is moving quickly to expand reporting obligations in the digital world. On March 10, the European Parliament (EP) adopted the DAC7 text featuring the new digital platform reporting rules proposed last year by the EU Commission. On March 22, the EU Council adopted the new rules, applicable January 1, 2023. Separately on March 10, the Commission launched a public consultation on DAC8, which would impose reporting obligations for e-money and crypto assets.

US Federal COVID relief to states restricts use for ‘net tax’ reductions

The American Rescue Plan Act enacted on March 11 provides over $195 billion in direct aid to states but includes a provision prohibiting the use of those funds to “either directly or indirectly offset a reduction in the net tax revenue” of a receiving state. Businesses should monitor tax measures potentially impacted by this provision and the status of Treasury guidance on the issue.

Hong Kong proposes relaxation of deduction of foreign taxes for profits tax purpose

The Inland Revenue (Amendment) (Miscellaneous Provisions) Bill 2021 was recently gazetted. The Bill, among other things, seeks to amend the Inland Revenue Ordinance to enhance the deduction of foreign taxes for profits tax purposes as a means for relieving double taxation in Hong Kong. Upon enactment of the Bill, the revised rules on foreign tax deduction will take effect from the year of assessment 2021/22.

Korean Tax Update - March 2021

This edition includes: 1) The National Assembly approved Bill to amend the Special Tax Treatment Control Law; 2) Amended Enforcement Rules of Tax Laws have been proclaimed; 3) NTS expands the ‘Advance Verification for R&D Tax Credit’; and 4) Rulings update.

Implementation of Interest Limitation Rules in Ireland

Interest limitation rules ("ILR"), as required by the EU Anti Tax Avoidance Directive, are set to be transposed into Irish law later this year and take effect from 1 January 2022. The existing Irish interest deductibility rules will remain in effect after 1 January 2022 and taxpayers will need to compute tax liabilities by reference to the new ILR and the old deductibility rules. The Department of Finance acknowledges the complexity that will ensue and has sought stakeholder engagement by way of a Feedback Statement process. The first part of this process closed for public comments on 8 March 2021.

Maryland interprets new tax on digital products; provides filing, payment extension

The Maryland Comptroller has issued guidance on the expansion of the state’s sales and use tax to a digital product or code, specifying which items are considered taxable digital products if delivered electronically, explaining exclusions and exemptions from tax, and applying economic nexus and marketplace facilitator rules to digital products. The tax must be collected beginning March 14, 2021. The Comptroller has provided an extension to July 15, 2021 to file and pay tax, and relief from interest and penalties if the tax is paid by that date. The requirement to collect the tax from customers has not been delayed.

EU Directive proposals would widen public country-by-country reporting

The EU Member States’ negotiating mandate on public country-by-country reporting (public CbCR) was established under the Portuguese Presidency of the Council on the basis of its compromise draft following the informal Council video conference on 25 February 2021. The mandate also was approved by Member State permanent representatives in the ‘Coreper’ meeting on 3 March 2021.

New Zealand Tax Tips: March 2021

This edition of Tax Tips provides a recap of the New Zealand Government's COVID-19 support measures and also discusses the NZ Inland Revenue's new exposure draft on the administration of the imported hybrid mismatch rule, which sets out the steps Inland Revenue expects taxpayers to have undertaken before claiming deductions for cross-border related party payments.

Inbounds should engage now on US tax and trade policy

The Biden Administration and Congress are focused on responding to the COVID-19 pandemic and its economic impact, while also preparing to consider significant tax law changes impacting business and individuals. Important changes in trade policy also are likely. Foreign companies and investors will need to engage early with policymakers to educate them about the vital role they play in the US economy and about their unique concerns.

The US FDI landscape in 2021

Following the challenging economic climate of 2020 and the change of presidential administrations in January, 2021 is shaping up as a crucial year for foreign direct investment (FDI) in the United States. There are several key trends and points worth noting.

Wisconsin appellate court rules Department cannot challenge DRD from non-corporate entities in prior years

The Wisconsin Court of Appeals on February 25 upheld a lower court decision concluding that Wisconsin’s dividend received deduction (DRD) - which requires that a distribution be received with respect to ‘common stock’ - applies to a distribution made from a foreign LLP that elected to be taxed as a corporation for federal income tax purposes.

EU members debate proposal on public country-by-country reporting

During an informal video conference on 25 February 2021, a majority of EU Member States (through their Ministers of Internal Market and Industry) expressed support for the compromise text of a proposed Directive on public country-by-country reporting (pCbCR). The disclosure of certain tax information by undertakings and branches is now supported by 15 Member States, including the current Presidency (Portugal) as a non-tax matter that requires a ‘qualified majority’ of votes to proceed.

Webinar: China's Foreign Investments Security Review Measures - How will they impact your business?

China recently released the Foreign Investments Security Review Measures which require foreign investors to pass certain reviews from the perspective of national security when investing in specific areas and industries in China. The Measures came into force on 18 January 2021 and have major and material impacts on certain foreign investment projects and transactions. Watch this recent webcast where the key issues that foreign investors may face after the Measures are enacted, and the resulting business impacts were discussed.

German IP nexus rules: Ministry of Finance circular simplifies WHT & capital gains tax procedures

The German Ministry of Finance has issued a circular that provides updated filing and withholding procedures for royalties attributable to IP registered in a German book or register. By taking advantage of this new simplified process within the prescribed time limits, taxpayers have an opportunity to avoid penalties that may otherwise be imposed.

US SALT trends, Opportunities for US inbound companies in 2021

We expect several state and local tax trends to impact US inbound companies in 2021. These trends include: 1) President Biden’s tax proposals and continued conformity; 2) an increase in state and local taxation, specifically at the local level; 3) enhanced state focus on transfer pricing; 4) greater opportunity for tax credits and incentives changes in consumption taxes; and 5) telecommuting nexus. Inbound companies should evaluate their US state tax exposure risk and determine whether the anticipated changes in 2021 could have a material effect on such exposure.

India budget 2021—Impact on foreign investors and multinationals

The Indian Finance Minister recently presented the Union Budget 2021 against the backdrop of a challenging economic environment due to COVID-19. In view of India’s tax reform measures to date, Budget 2021 maintains the same overall tax structure, but contains several measures that aim to attain tax certainty, facilitate tax administration, and reduce tax disputes. Multinational entities should analyze the impact of key Budget proposals on their operations, including a helpful provision to create a new board for advance rulings.

Visit our US Tax Reform hub

US Tax Reform could give rise to sweeping, complex changes for companies with a US footprint. To help you stay informed, we'll be updating this hub with all the latest comments and analysis as the situation develops.