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EU Public Country-by-Country Reporting: A leap forwards

The EU’s public country-by-country reporting (CbCR) Directive, published in December 2021, is currently being transposed into individual Member States’ legislation. The latest date for this to apply is for accounting periods beginning on or after 22 June 2024 (for a December year, publication would be needed by 31 December 2026 for the 31 December 2025 year-end). However, local countries can apply earlier and determine their own penalty regime. The Romanian Official Gazette has formally published the regulations to implement the Directive, effective for accounting periods beginning on or after 1 January 2023 (i.e. publish by 31 December 2024). This may accelerate the requirement to disclose country-by-country data for your EU-wide operations and countries in the EU black/grey list.

CJEU final State aid decision in the FIAT case

On 8 November 2022, the Court of Justice of the European Union (CJEU) published its final decision on two appeals regarding the formal State aid investigation by the European Commission dating back to October 2015 in relation to an Advance Pricing Agreement (“APA” or “tax ruling”) of Fiat Finance & Trade Ltd (“FFT”). The European Court of Justice annulled the European Commission’s decision setting aside the finding that FTT had received State aid.

Hong Kong gazettes bill on significantly changed FSIE regime

Hong Kong’s SAR’s Government recently gazetted the Inland Revenue (Amendment) (Taxation on Specified Foreign-sourced Income ) Bill 2022. The Bill introduced significant refinements to Hong Kong’s foreign source income exemption (FSIE) regime for four types of offshore income: interest, dividends, disposal gains from the sale of equity interests, and income from intellectual property (IP) (collectively, ‘specified foreign-sourced income’). The Bill is expected to become effective January 1, 2023.

US Tax Readiness webcast: Implications of the US midterm elections

Join our panel of specialists on Tuesday 22 November at 7pm, as they examine the potential effect of the 2022 midterm elections for a year-end tax bill, the legislative path ahead for the 118th Congress, and the expected administrative guidance from Treasury. Tax is a central piece to implementing your business' strategy in 2023 and can be a catalyst for delivering trust and driving strategic outcomes.

EU Tax News - July/August 2022

EU tax news is a bimonthly newsletter with summaries of all the relevant ECJ and national court cases and decisions, and EU policy initiatives related to EU direct tax law and state aid. The newsletter is prepared by members of PwC's EU direct tax group (EUDTG) from across Europe.

Corporate Interest Restriction

The Corporate Interest Restriction ("CIR") rules are an important part of any Group's tax compliance requirements. The rules have been in place for several years, are complex, and can be difficult to apply. There have also been a number of recent changes to how CIR returns and notifications can be submitted to HMRC, and the information that is required.

Ireland publishes Finance Bill 2022

The Irish Department of Finance recently published Finance Bill 2022 (the Bill) which would set into law the measures announced as part of the Irish budget last month. While the amendments, as expected, are primarily focused on personal taxes and the cost of living, the Bill does feature a provision amending the R&D tax credit and includes certain other business tax measures.

OECD’s second tax morale report focuses on role of MNEs and the Big Four

The OECD’s report Tax Morale II: Building Trust between Tax Administrations and Large Businesses seeks to identify ways tax administrations, multinational enterprises (MNEs), the Big Four professional services networks (Deloitte, EY, KPMG, and PricewaterhouseCoopers), and others could enhance voluntary compliance. There are a lot of best practices and new opportunities identified alongside what it calls ‘common challenges.’ This Tax Policy Alert provides a few selected extracts.

Portugal 2023 Budget proposal introduces a crypto asset tax framework and new tax incentives

The 2023 Budget proposal was recently submitted to the Portuguese Parliament. This follows the 2022 Budget, which was published in June after elections in January. In general, the government is focusing on increasing companies’ competitiveness by fostering equity and supporting increased costs resulting from current world economic conditions. One of the Budget’s most impactful tax measures is a new tax framework for crypto assets.

UK fiscal event - how the mini-budget impacts multinational companies

On 23 September, the new UK Government’s agenda to achieve economic growth was revealed by the Chancellor of the Exchequer (Kwasi Kwarteng) in his ‘fiscal event’. Whilst not a full Budget, he unveiled a host of tax changes which set out a fundamental change of direction for tax policy in the UK. Following the adverse reaction of the financial markets to these measures, a number of these proposals were withdrawn in the following weeks and Mr Kwarteng was ultimately replaced as Chancellor of the Exchequer by Jeremy Hunt on 14 October. On 17 October, Mr Hunt made his own fiscal announcement and reversed almost all the tax measures set out in the mini-budget. The position following Mr Hunt’s announcement, so far as it impacts multinational companies, is set out in this article.

OECD releases Progress Report on the Administration and Tax Certainty Aspects of Amount A of Pillar One

The OECD released for public consultation a Progress Report on the Administration and Tax Certainty Aspects of Amount A of Pillar One, which includes the rules on the administration of the new taxing right and updated tax certainty-related provisions. Amount A of Pillar One introduces a new taxing right over a portion of the profit of large and highly profitable enterprises for jurisdictions in which goods or services are supplied or consumers are located.

OECD issues new Crypto-Asset Reporting Framework

The OECD on 10 October published a much-anticipated two-part document - the Crypto-Asset Reporting Framework (CARF) and Amendments to the Common Reporting Standard (CRS) - setting forth a global tax transparency compliance framework with model rules for the automatic reporting and exchange of taxpayer information between countries relating to financial accounts and crypto-assets. The CARF, which responds to a G20 request, will be presented to G20 Finance Ministers and Central Bank Governors at their 12-13 October meeting in Washington, DC.

The OECD minimum tax: What US companies need to know

The Organisation for Economic Cooperation and Development (OECD) has been pursuing a “Two-Pillar Solution” aimed at alleviating certain global tax challenges that it believes arose from the “digitalisation of the economy.” This OECD two-pillar framework will significantly alter many international tax practices we follow today with a related impact on reported earnings.

US - FinCEN issues final beneficial ownership reporting rule

The US Treasury’s Financial Crimes Enforcement Network (FinCEN) recently issued a final rule implementing the Corporate Transparency Act’s (CTA’s) beneficial ownership information (BOI) reporting provisions. CTA, enacted in January 2021, targets tax fraud, terrorism, and money laundering by requiring US-formed corporations and limited liability companies (LLCs) and certain foreign-owned entities doing business in the United States to report to FinCEN certain information about their beneficial owners.

Digital tax megabyte for September 2022

This edition includes clarification from Kenya on the exemption for registered non-resident suppliers of digital services from issuing electronic tax invoices and news from Australia that the new Government has reintroduced plans for digital platform reporting. The European Commission has also adopted an implementing Regulation on DAC7 schema and statistical reporting. Meanwhile Colombia proposes to introduce a significant economic presence tax rule. The OECD intends to broadcast part of the Inclusive Framework meeting on 6 October 2022 (to view live or recorded).

CJEU decision in deduction of final losses - case C-538/20 (W AG)

The CJEU's judgement in the case C-538/20 (W AG) has found that Germany does not infringe the freedom of establishment by not allowing the deduction of final losses which a German company had incurred in its PE situated in the UK because Germany as the state of residence has waived its power to tax the profits (and losses) of that PE under a double tax treaty.

Internal Debt Reorganisations

Since the COVID pandemic, and in an environment of rising costs, we have seen a lot of businesses seeking to simplify and rationalise their group structures in order to respond to M&A activity, remove unnecessary entities, or resolve distributable reserve blocks. Often this activity also involves rationalising and managing intercompany loan positions, and this can often be a challenging exercise. Such programmes can carry the risk of unexpected taxable gains arising, withholding tax challenges, or the potential claw back of previously deducted management expenses.

Blackrock Holdco 5 LLC v HMRC - Upper Tribunal Decision

The Upper Tribunal has handed down its decision in the Blackrock appeal (Blackrock Holdco 5 LLC v HMRC [2022] UKUT 00199 (TCC) ). This decision, which creates legal precedent, has important implications for the deductibility of interest by companies under both the “Unallowable Purpose Rule” and the transfer pricing rules.

Digital tax megabyte for August 2022

This edition includes comments on a G24 response to the Plilar 1 Amount A Progress Report as well as Korean draft legislation and Malaysian and Swiss consultation documents for implementing Pillar 2, while Hong Kong has announced delays in implementing Pillar 2. It also includes guidance from the Irish Revenue on the deductibility of digital services taxes (DSTs) and our summation of the European Commission's report on its public consultation on 'VAT in the Digital Age'. A New Zealand Tax Bill also provides draft legislation extending the GST charge on electronic marketplace operators, as well as incorporating the OECD model rules on reporting by such platforms while Bulgaria is consulting about the adoption of the EU equivalent DAC7 provisions.

Government of Finland publishes draft bill extending capital gains taxation of non- resident companies investing in Finnish real estate

Currently, non-resident real estate investors are subject to Finnish capital gains tax when making direct disposals of Finnish real estate assets, shares in Finnish mutual real estate companies or Finnish limited liability companies directly holding majority of their assets in Finnish real estate. A draft bill published at the beginning of August is about to extend the capital gains taxation to transfers of entities holding indirectly Finnish real estate.

California legislature passes unclaimed property voluntary compliance programme

The California legislature passed a bill on 17 August authorising the Controller to establish a voluntary compliance programme (VCP) for eligible unclaimed property holders. The proposal directs the Comptroller to waive the 12% interest imposition if a holder participates in the programme and completes all the VCP requirements. The bill will be sent to Governor Gavin Newsom (D) for his consideration.

Colombian government presents tax reform bill

The leader of the left-wing coalition ‘Pacto Histórico,’ Gustavo Petro, took office as the 61st Colombian president on 7 August. Within a day of inauguration, the executive branch presented a new tax reform bill (the tax reform bill), which has the intended goals of making the Colombian tax system more egalitarian, progressive, and efficient. The government hopes to meet these goals through provisions focused on taxing high-net-worth taxpayers, preventing tax evasion and avoidance, and promoting the improvement of the public health system and the environment.

EU Tax News - May/June 2022

EU tax news is a bimonthly newsletter with summaries of all the relevant ECJ and national court cases and decisions, and EU policy initiatives related to EU direct tax law and state aid. The newsletter is prepared by members of PwC's EU direct tax group (EUDTG) from across Europe.

European Commission proposal would address distortions caused by foreign subsidies

After a period of negotiations, the Council of the European Union and the European Parliament have reached political agreement on the text of a draft regulation on foreign subsidies that, in certain cases, are distorting the internal market. This proposal aims to ensure a level playing field in the internal market. This draft regulation is an important next step that follows the Commission's publication of a White Paper on distortive subsidies in June 2020.

US - Corporate book minimum tax proposed as part of budget reconciliation bill

In the US, a corporate alternative minimum tax (book minimum tax, or BMT) has been proposed for corporations with profits over $1 billion as part of the budget reconciliation bill released on 27 July The provision, proposed to be effective for tax years beginning after 2022, could impose a minimum tax equal to the excess of 15% of an applicable corporation’s adjusted financial statement income over the corporate alternative minimum tax foreign tax credit for the tax year.

Digital tax megabyte for July 2022

This edition includes an OECD consultation on consolidated Pillar 1 Amount A materials, UK draft legislation for implementing Pillar 2 and an update on Maryland's US Sales Tax rules. It also covers Indian guidelines on crypto assets and an insight into the global indirect treatment of non-fungible tokens (NFTs). There are updates too on Kenyan amended VAT treatment of various digital services, but its failure to sanction a rise the in DST rate. We also include draft legislation on transposing the EU's DAC 7 on platform reporting for Italy, Poland and Germany with an update on the UK's plans following consultation on implementing the OECD Model Rules in this area.

Korea releases draft Pillar Two rules

As part of 2022 tax reform, the Korean Ministry of Strategy and Finance (MOSF) recently announced the introduction of draft domestic legislation for a global minimum tax. Korea’s summary draft rules, released in Korean, correspond closely to the OECD’s Pillar Two Model Rules, which was led by the OECD / G20 and has been agreed upon by 141 countries in the Inclusive Framework. Detailed legislation is expected in December.

UK publishes draft Pillar Two legislation

For inclusion in Finance Bill 2022/23, the UK has released draft legislation to introduce the OECD’s Pillar Two Model Rules into UK law. The draft legislation includes an Income Inclusion Rule (IIR), to be known in the UK as the Multinational Top-up Tax, which will apply to accounting periods beginning on or after 31 December 2023.

Derivative Hedging Transactions

In recent months, we have seen significant volatility in FX and commodity markets, and are now seeing increases in interest rates in response to rapidly rising prices. The position is often complicated, and exposures are often managed on a group basis. Fair value movements on unhedged positions, or positions managed on an overall group basis, can lead to significant cash tax exposures, and can also lead to impacts on distributable reserves.

Chilean Government presents Tax Reform Bill

The Chilean Executive Branch has submitted a comprehensive tax reform bill to the Chilean Congress, which proposes to amend certain matters related to income tax, wealth tax, and shareholder taxation. The bill also would incorporate new measures focused on preventing tax avoidance and tax evasion and would reduce the number of tax exemptions.

Election Commitments Report reveals potential Australian changes to royalty and interest deductibility

The Australian independent Parliamentary Budget Office (PBO) has released its estimates of the budget impacts of the incoming Australian Labor Party (ALP) Government’s proposed tax policy measures. This 2022 Election Commitments Report is prepared based on the election commitments of the new government. The report is not formal government policy, much less legislation. However, the report is intended to ‘hold parties to account’ regarding their election commitments.

Italian Supreme Court rules that withholding taxes levied on dividends distributed to German and US investment funds are incompatible with EU law

On 6-7 July 2022, the Tax Section of the Italian Supreme Court (“Corte di Cassazione”, the highest Court in Italy as regards tax matters) issued seven important judgments in which it ruled that Italian withholding taxes levied on dividends distributed to a German investment fund and six US investment funds are incompatible with EU law.

Foreign Exchange Management

The FX markets have been particularly volatile in recent months, and this is likely to remain the case given ongoing uncertainties and international developments. Managing FX exposures is therefore taking on increasing importance, and unhedged positions can cause unexpected accounting and tax considerations, including impacts on distributable reserves and cash tax liabilities.

Digital tax megabyte for June 2022

This edition includes an insight into Kenya's new ESS rules and a publication on AsiaPac's ESS and other indirect tax digital development path as well as some new VAT incentives in Thailand. An overarching Pillar 1 consultation may be announced in early July while the UK has confirmed that its Pillar 2 rules will apply to accounting periods beginning on or after 31 December 2023. Nepal and Tanzania are the latest countries to announce the potential introduction of digital services taxes. We also cover India Guidelines on application of WHT on transfer of crypto assets.

Digital tax megabyte for May 2022

The latest addition to our series of brief insights into the workings of the UK and supranational bodies reviewing the taxation of digitalisation of business. This edition includes an OECD announcement on a delay to Pillar One, our latest Africa tax report that includes digital economy insights and a proposed 6% streaming levy in Denmark..There is also insight into the UK's proposal to introduce platform reporting rules with effect from 1 January 2024.

EU Tax News - March/April 2022

EU tax news is a bimonthly newsletter with summaries of all the relevant ECJ and national court cases and decisions, and EU policy initiatives related to EU direct tax law and state aid. The newsletter is prepared by members of PwC's EU direct tax group (EUDTG) from across Europe.

Portugal: Deadlines near for TP documentation, filing APA requests

Portugal introduced changes to its Advance Pricing Agreement (APA) regime and transfer pricing (TP) documentation requirements on November 26, 2021. Following these amendments, TP documentation must be prepared by July 15 of the year following the tax calendar year (or the 15th day of the 7th month of the year following the taxpayer’s fiscal year-end). Most large taxpayers also are obliged to deliver the TP documentation file to the Portuguese Tax Authorities.

IRS releases guidance on treatment of deferred compensation expense for Section 250 FDII deduction

The IRS Office of Chief Counsel recently released Generic Legal Advice Memorandum (GLAM) 2022-001 dealing with the allocation and apportionment of deferred compensation expense for purposes of calculating the Section 250 deduction for foreign-derived intangible income (FDII). GLAM 2022-001 concludes that deferred compensation expense that relates to services provided in years prior to enactment of Section 250, but that is deductible post-enactment, may be allocated to deduction eligible income (DEI) and foreign-derived deduction eligible income (FDDEI) if the class of gross income to which the deduction relates includes DEI or FDDEI.

Digital tax megabyte for April 2022

This edition includes an OECD release on the IT format for sharing digital platform reporting information and an update on the EU attempts to adopt a Directive to implement Pillar Two. It also considers the relevance of 'nudge' letters being sent by the Indian tax authorities and the CJEU decision on Belgian tax reporting on tourist accommodation not being contrary to EU law..

EU Commission publishes proposal to implement debt-equity bias reduction allowance (‘DEBRA’)

The European Commission has published an EU Directive proposal regarding a debt-equity bias reduction allowance (DEBRA) and a limitation of the tax deductibility of exceeding borrowing costs (the proposal). This proposal, published 11 May 2022, is one of the Commission’s key actions on corporate tax, as set out in the Communication on Business Taxation for the 21st Century.

Canada introduces first package of hybrid mismatch rules

The Department of Finance recently released draft legislative proposals to address hybrid mismatch arrangements, which are cross‑border arrangements that are characterised differently under the tax laws of different countries. These proposals are the first of two separate legislative packages to implement into the Income Tax Act the recommendations of the OECD BEPS Action Plan to eliminate the tax benefits arising from hybrid mismatch arrangements.

HMRC’s latest Transfer Pricing and Diverted Profits Tax (DPT) statistics between April 2020 to March 2021 demonstrates that transfer pricing and tackling profit diversion remain a key priority area for HMRC investigators

The statistics report across a variety of transfer pricing areas, including enquiries, Advance Pricing Agreements (APAs), Mutual Agreement Procedures (MAPs), Advance Thin Capitalisation Agreements (ATCAs), DPT investigations and Profit Diversion Compliance Facility cases (PDCFs) highlighting the additional yield, number of cases and length of time to resolve cases, across each area. A summary of the statistics and our view of these are set out in this article.

Canadian Government releases 2022 federal budget

The Deputy Prime Minister and Minister of Finance, Chrystia Freeland, presented the government’s budget on 7 April. The budget does not include changes to corporate income tax rates, and does not provide an update on the expected timing of ‘anti-hybrid’ legislation, although the government is committed to releasing draft rules.

Digital tax megabyte for March 2022

This edition includes publication of the Commentary on Pillar 2 GloBE Rules together with the status of attempts to implementation those rules across the EU and also in Switzerland. We focus too on the consultation on the Implementation Framework for the GloBE Rules and on a possible extension of the EU's blacklist criteria for non-cooperative jurisdictions regarding Pillar 2.

President Biden’s FY 2023 budget proposes new “billionaire” minimum tax; renews call for corporate rate increase and other tax increases

President Biden has sent to Congress a $5.8 trillion FY 2023 budget that proposes new tax increases, including a new 20% minimum tax that would apply to certain high-income individuals, and other measures to reduce federal deficits by $1 trillion over 10 years. New business tax increase proposals include an “undertaxed profits rule” that would replace the current base erosion anti-abuse tax (BEAT). The President’s budget also re-proposes a 28% corporate income tax rate and numerous other tax provisions that were included in his FY 2022 budget.

China's first unilateral APAs under the simplified procedures have been signed

China recently signed unilateral Advance Pricing Arrangements (APAs) with two companies located in the Jiangsu Province and the Guangdong Province, respectively. These were the first two signed unilateral APA cases under the simplified procedures in China since the Public Notice on Matters Regarding the Application of Simplified Procedures of Unilateral Advance Pricing Arrangements became effective. The two cases took four months from application to formal signing, providing the companies with tax certainty on their transfer pricing arrangements in a quick and efficient manner.

Singapore Budget 2022 webcast

Singapore’s FY2022 Budget Statement was announced by the Minister for Finance on 18 February 2022. Watch our webcast (now available on-demand) as we break down the new measures and share insights on what this year’s Budget means for you and your business.

Digital tax megabyte for February 2022

This edition includes details of Pillar One consultations on Nexus/ Revenue Sourcing and on Tax Base plus the expectation of 11 similar papers and an imminent OECD Pillar Two consultation. We note also a push by the EU Council's French Presidency to see Pillar Two impacts in the EU. The US Trade Representative has meanwhile sent Canada comments on its pending DST. Singapore's Budget announced consideration of a domestic minimum top-up tax. The Danish government's proposed introduction of a streaming levy is also under the spotlight and we comment on the Dominican Republic's consultation on VAT on digital services provided by foreign suppliers. The UK is meanwhile consulting again on the possibility of an online sales tax. Malaysia is providing an amnesty covering late registration/payment of its tax on digital services.

EU Tax News - January/February 2022

EU tax news is a bimonthly newsletter with summaries of all the relevant ECJ and national court cases and decisions, and EU policy initiatives related to EU direct tax law and state aid. The newsletter is prepared by members of PwC's EU direct tax group (EUDTG) from across Europe.

Are you complying with the new Mexican controlling beneficiary tax obligation?

The tax reform published in the Official Gazette in November 2021, added a new obligation for Mexican parties. As of 1 January 2022, Mexican legal entities, trusts incorporated under the Mexican legislation, and contracting parties in any other Mexican legal agreement (e.g., Asociación en Participación), must obtain and keep as part of their books and records the applicable, trustworthy, complete, and updated relevant information to each of their ultimate controlling beneficiaries.

New business registry for filing annual returns and beneficial ownership register coming to Ontario

Businesses operating in Ontario should ensure that they are aware of, and comply with, the following: 1) effective 19 October 2021, Ontario corporations and non-Canadian extra-provincial corporations must register and file their annual returns using the Ontario Business Registry; 2) beginning 1 January 2023, privately held Ontario corporations will be required to create and maintain a register of individuals who hold significant control; and 3) retroactive to 25 October 2021, non-competition provisions in Ontario employment agreements are prohibited and void (exceptions apply).

Transfer pricing podcast: The opening – Transfer pricing is a critical piece of the Pillar Two chessboard

In this TP Talks episode, Horacio Peña (PwC’s Global Transfer Pricing Leader), Kartikeya Singh (Transfer Pricing Principal in PwC’s US National Tax practice), and Giorgia Maffini (Transfer Pricing and Tax Policy Director with PwC UK) discuss the OECD Pillar Two Model Rules, including an overview of the rules, some of the nuances and elements of complexity, and highlights the role of transfer pricing in the new system of Pillar Two taxation.

US Tax readiness webcast: The future of tax - What's your workforce and tax technology strategy in 2022?

Watch the replay where our specialists discussed how businesses are facing a growing list of challenges in 2022 and are increasingly relying on their people and technology systems to do more. Companies have to execute a variety of tasks in order to adhere to burdensome compliance requirements, workforce issues, and evolving tax policy, including OECD’s Pillar Two.

2022/23 Hong Kong Budget

Hong Kong's Financial Secretary announced the 2022/23 Budget on 23 February, outlining the government’s latest tax and fiscal policy directions, support measures and resources allocation with a view to revitalise the economy and relieve the community’s burden.

Italy issues final circular on hybrid mismatch arrangements

The Italian Tax Authorities recently published the final version of the interpretative Circular Letter on hybrid mismatch arrangements rules, as governed by Legislative Decree 142/2018 that implements the EU’s anti-tax avoidance directives through domestic Italian legislation and that also considers the OECD BEPS report(s) on Action 2.

Observations on key changes to Austria’s revised Transfer Pricing Guidelines

Following the publication of Austria’s draft Transfer Pricing Guidelines (draft ATPG) in 2020, the Austrian Federal Ministry of Finance issued the final Austrian Transfer Pricing Guidelines (ATPG 2021 or Guidelines) in October 2021. The ATPG 2021 extensively revise the 2010 Transfer Pricing Guidelines (ATPG 2010) and aim to reflect the OECD BEPS project-related developments, latest jurisprudence, and administration practice in Austria. This insight provides a comprehensive overview of the key changes in the final ATPG 2021 compared to the draft ATPG, as well as the ATPG 2010.

OECD launches Public Consultation on Pillar 1 draft Model Rules on Revenue Sourcing and Nexus

On 4 February 2022, the OECD released draft Model Rules with respect to nexus and revenue sourcing under Amount A of Pillar One. Comments to the draft Model rules are due by 18 February 2022. This alert provides a short overview of the draft Model Rules and some initial observations. It should be noted that this is the first in a series of several sets of rules that the OECD is expected to release over the coming months, with very short comment periods, as part of a 'rolling consultation'.

Mexico extends tax benefits for IPOs & bonds

The Mexican Government has published a Decree that extends, and in some cases expands to fiscal year 2025, the tax benefits initially granted through a previous Decree. That previous Decree, published in January 2019 (originally ending in FY 2021), related to the withholding tax on interest paid by Mexican residents for publicly traded corporate debt bonds and a reduced tax rate for certain taxpayers on the capital gain obtained from the sale of public shares through an initial public offering (IPO).

Observations on Q&As issued by China’s STA on “Anti-Tax Avoidance During Pandemic Prevention and Control”

On 30 September 2021, the International Taxation Department of China’s State Taxation Administration (STA) released its “Questions and Answers on Anti-Tax Avoidance During Pandemic Prevention and Control” (the "Q&A") on its portal. This is the first time that the STA has provided, in written form, prescriptive instructions for tax authorities and MNEs when analyzing the impact of the COVID pandemic from a transfer pricing perspective.

India Budget 2022 - impact on foreign investors and multinationals

The Indian Finance Minister presented the Union Budget for 2022-23 (Budget 22) on 1 February 2022. With India’s current-year economic growth estimated to be 9.2%, Budget 2022 focuses on infrastructure spending with an aim to boost growth amid continued disruption from the COVID-19 pandemic. It also makes a strong pivot toward the digital economy, climate change, clean energy transition, and ease of living.

Cyprus Parliament passes bills aimed at international ‘tax abuse,’ extends DAC6 deadline, and updates treaties

The Cyprus Parliament recently passed two bills amending the Cyprus tax legislation, with the goal of strengthening the Cyprus tax framework in order to prevent abuse, evasion, and avoidance of tax. In addition, the Cyprus Tax Authority (CTA has announced an additional extension of the submission deadline for DAC6 reports (without penalties) to 31 January 2022. Cyprus also has several treaty updates.

Digital tax megabyte for January 2022

This edition includes the publication of Nigeria's Finance Act 2021 with tis effective 6% Digital Service Tax (DST).and the announcement by the UAE of a Federal corporate tax with rates potentially tailored to the Pillar Two minimum tax regime. We've seen the launch of an EU consultation on digital VAT, as well as of a Ukrainian Information Notice for VAT on e-services. We also comment on debates around an e-levy in Ghana and the optimism being shown in relation to changes to US GILTI.

EU Tax News - November/December 2021

EU tax news is a bimonthly newsletter with summaries of all the relevant ECJ and national court cases and decisions, and EU policy initiatives related to EU direct tax law and state aid. The newsletter is prepared by members of PwC's EU direct tax group (EUDTG) from across Europe.

Canadian 2022 Annual tax filing and remittance deadlines for corporations

Canadian corporations are required to file annual income and capital tax returns (due six months following each taxation year-end), and to meet several other Canadian annual filing and remittance deadlines. This Tax Insights outlines some of the more common compliance requirements to be considered at this time of year. Others also may apply (e.g. T4A information return to report certain benefits to shareholders).

Key insights from the 2021 US final foreign tax credit regulations

The 2021 Final Regulations were published in the Federal Register on 4 January 2022, and represent the third set of final regulations that have been issued with respect to the core provisions of the US foreign tax credit regime following the 2017 Tax Cut and Jobs Act. The 2021 Final Regulations are among the most significant developments in the US FTC regime during its 100+ year existence, as they fundamentally change the definition of what is a creditable foreign income tax under Sections 901 and 903.

Digital tax megabyte for December 2021

This edition includes the publication by the Model Rules for the 15% minimum ETR under Pillar Two of the G20/OECD Inclusive Framework digitalisation project and by the European Commission on proposals to implementation them across the EU. There is also a warning from the Australian tax authorities for businesses to be prepared for Pillar One and Pillar Two changes. It also provides an update on the US Senate Finance Committee progress on the Build Back Better reconciliation bill, Canada consulting on its deferred DST, a Nigerian statement on the reasons they wouldn't sign the global deal and plans for Cyprus to increase its tax rate as a result of Pillar Two. The UK concluded its G7 presidency with an acknowledgement of the digital tax achievement.

Digital tax megabyte for December 2021

A collection of the brief insights throughout November 2021 of the type provided on an ad hoc basis in our Latest digital tax byte update. This edition includes the publication by the Model Rules for the 15% minimum ETR under Pillar Two of the G20/OECD Inclusive Framework digitalisation project and by the European Commission on proposals to implementation them across the EU. There is also a warning from the Australian tax authorities for businesses to be prepared for Pillar Oen and Pillar Two changes. It also provides an update on the US Senate Finance Committee progress on the Build Back Better reconciliation bill, Canada consulting on its deferred DST, a Nigerian statement on the reasons they wouldn't sign the global deal and plans for Cyprus to increase its tax rate as a result of Pillar Two. The UK concluded its G7 presidency with an acknowledgement of the digital tax achievement.

Senate Democrats release initial Build Back Better reconciliation tax proposals

Senate Finance Committee Chairman Ron Wyden has released 1,180 pages of draft Finance amendment bill text for Senate consideration of the “Build Back Better” reconciliation bill (H.R. 5736). The Finance amendment bill text would amend H.R. 5736 as passed on 19 November by the House. Chairman Wyden noted that the bill text is subject to further revisions.

European Parliament votes to pass public country-by-country reporting

Following a final debate between MEPs in the European Parliament plenary session, a majority of MEPs voted on 11 November to pass changes to amend Directive 2013/34/EU, which deals with financial reporting of certain types of undertakings (the EU Accounting Directive). This vote follows the political agreement reached with the Council in June and a further updated text that was agreed in September 2021. The amendments have become known as public country-by-country reporting (pCbCR) requirements.

Australian R&D tax offset - understanding affiliates and connected entities is key to getting your aggregated turnover calculation correct

The concepts of aggregated turnover, connected entity and affiliate are important in determining the type of research and development (R&D) offset available to an R&D entity. The determination of aggregated turnover can be a complex and time consuming exercise. Recently, the Australian Taxation Office (ATO) has issued four tax determinations to provide guidance to taxpayers when calculating their aggregated turnover.

US - House delays vote on Build Back Better reconciliation bill, passes infrastructure bill

House Democratic leaders on 5 November announced that they would delay voting on a $1.75 trillion “Build Back Better” reconciliation bill (H.R. 5376) that includes more than $1.5 trillion in business, international, and individual tax increase provisions. A group of moderate House Democrats insisted that a vote on the bill should be held only after the Congressional Budget Office reports on the total cost of the legislation. Additional offsets include increased IRS enforcement measures and savings from the repeal of a Medicare prescription drug rebate rule.

Mexico’s 2022 budget includes numerous tax changes

The Mexican Congress recently approved several changes to different tax laws as part of the proposed 2022 budget. These changes include amendments to the Mexican Income Tax Law (MITL), the Value-Added Tax Law (VATL), and the Mexican Federal Tax Code (MFTC). These amendments are still pending publication in the Federal Official Gazette; most of them are expected to enter into force on 1 January 2022.

Australian Taxation Office releases decision impact statement on the Glencore transfer pricing case

The Australian Taxation Office (ATO) recently released its decision impact statement in relation to the transfer pricing decision in Commissioner of Taxation v Glencore Investments Pty Ltd, affirming that the decision outcome was ‘mostly unfavourable to the Commissioner’. The decision impact statement follows the High Court’s refusal in May 2021 for the Commissioner to apply for special leave to appeal the decision of the Full Federal Court of Australia.

Digital tax megabyte for October 2021

This edition includes announcements around a new OECD/G20 Inclusive Framework Statement on 8 October, while the Irish Budget on 12 October gave a little more detail on Ireland's plans and G20 Finance Ministers gave a brief endorsement. A subsequent agreement then covered transitional relief for DSTs in UK, France, Italy, Spain and Austria while India seems to have indicated it will await 'implementation' of the deal. We also cover updates on the US domestic proposals which are linked to the deal, a Latvian proposal that would have introduced a DST and the news than Canada will progress its DST legislation but hold it in abeyance for now.

US compromises with the UK, France, Italy, Spain and Austria on digital services taxes and trade actions

Austria, France, Italy, Spain, the United Kingdom and the United States have issued a joint statement on a compromise reached regarding digital services taxes and related unilateral measures. It follows the OECD Inclusive Framework statement of 8 October which contained details on unwinding existing DSTs and an agreement not to introduce further unilateral measures in the lead-up to the implementation of Pillar One.

The new international tax framework and Canada’s digital services tax

Following the OECD’s recent announcement that 136 countries, including Canada, had committed to fundamental changes to the international corporate tax system, Deputy Prime Minister and Minister of Finance, Chrystia Freeland, confirmed Canada’s commitment to this international agreement, and announced that Canada still intends to move ahead with legislation finalizing a digital services tax (DST) by 1 January 2022 (as announced in the federal government’s 2021 budget). However, the DST would only be imposed if the multilateral convention implementing Pillar One has not come into force by 31 December 2023. In that event, the DST would be payable as of 2024 in respect of revenues earned since 1 January 2022.

US Treasury defers applicability dates for foreign currency guidance

Notice 2021-59, recently released, states that Treasury and the IRS plan to defer the applicability dates of certain final Section 987 regulations and certain related regulations by an additional year, now to tax years beginning after 7 December 2022. These regulations already had been deferred under prior Notices, including most recently under Notice 2020-73 to tax years beginning after 7 December 2021.

ECJ rules the Spanish Financial Goodwill amortization regime constitutes an aid scheme

The European Court of Justice (“ECJ”), sitting as the Grand Chamber, recently dismissed all the appeals lodged by different beneficiaries of the regime and the Kingdom of Spain against the decisions of the General Court of the European Union in November 2018. The dispute between the Spanish Government, the impacted companies and the European Commission has been ongoing for more than fifteen years.

Digital tax megabyte for September 2021

This edition includes the latest from both sides of the US Congress on international tax reform and from the Philippines Parliament on VAT for digital services, proposals from the Czech Ministry of Finance on reporting by platforms in accordance with DAC7, Vietnam's incoming regime that goes beyond reporting to require withholding at source and Pakistan's application of withholding tax to online marketplaces. Some recent developments in relation to VAT on e-services in South Africa warrant attention. Singapore has clarified aspects of its e-commerce GST regime.

EU Tax News - July/August 2021

EU tax news is a bimonthly newsletter with summaries of all the relevant ECJ and national court cases and decisions, and EU policy initiatives related to EU direct tax law and state aid. The newsletter is prepared by members of PwC's EU direct tax group (EUDTG) from across Europe.

New Zealand Government introduces omnibus tax bill

On 8 September 2021, the Government introduced the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Bill to Parliament. The Bill will be referred to the Finance and Expenditure Select Committee shortly for public consultation, and is expected to be passed by 31 March 2022. The Bill contains a variety of policy and technical changes.

US webcast: US tax legislation advances under budget reconciliation

Watch the replay from this webcast held on Tuesday 21 September 2021, where our policy specialists explored the tax proposals being considered by the House of Representatives as part of “Build Back Better” reconciliation legislation, potential issues and challenges facing tax executives, and what companies should be doing in anticipation of potentially large scale changes.

CJEU decision on Belgian excess profits regime

The European Court of Justice has decided the Belgian excess profits regime constitutes an aid scheme and has referred the case back to the General Court. The current dispute between the Belgian government, the impacted Belgian companies and the Commission has been ongoing for many years.

House Ways and Means Committee approves reconciliation tax bill

The House Ways and Means Committee on 15 September approved tax increase and tax relief proposals that are to be acted on by the House of Representatives as part of ‘Build Back Better’ reconciliation legislation. Significant business and international provisions in the Ways and Means Committee-approved bill include changes to the corporate tax rate, new interest expense rules, modifications to international provisions, and the extension of expensing for research and experimental costs under Section 174.

Nontaxable IRC Sec. 965 income ruled included in calculation of Arkansas NOL

An Administrative Law Judge (ALJ) ruled that the calculation of a taxpayer’s Arkansas net operating loss (NOL) carryforward must be adjusted to include the taxpayer’s IRC Sec. 965 income excluded from Arkansas taxable income. Although IRC Sec. 965 income is not subject to tax in Arkansas, state law requires nontaxable income to be added to a taxpayer’s gross income when measuring an Arkansas NOL carryforward.

Cyprus receives approval of its Recovery and Resilience Plan, extends DAC6 deadline and ratifies Dutch treaty

The EU Economic and Financial Affairs Council (ECOFIN) recently approved the European Commission’s positive assessment of the Cyprus Recovery and Resilience Plan. In June, the Cyprus Tax Authority announced an additional extension of the submission deadline for DAC6 reports (without penalties) to 30 September 2021 and also the first tax treaty between Cyprus and the Netherlands, which was signed on 1 June 2021, was ratified by Cyprus.

New Canadian GST/HST filing requirement for non-residents that provide services to Canadians

Unbeknown to many non-residents of Canada, as of 1 July 2021, non-residents that provide services to persons that reside in Canada may be required to: 1) register for Canada’s Goods and Services Tax and Harmonized Sales Tax (GST/HST), and 2) charge and collect GST/HST on services that they provide to Canadian residents that are not registered for GST/HST. Although the primary target of the new rules was electronic supplies made through a “digital platform” and “accommodation platform operators,” the rules apply to most services including investment advisory and portfolio management services.

US - Streamlined filing may lengthen transition tax lookback period

The IRS recently updated its webpage to clarify that a taxpayer that uses the agency’s streamlined filing compliance procedures must include in its submission the tax year in which the Section 965 transition tax is levied (generally, 2017 and/or 2018), if the taxpayer is not compliant with Section 965. Accordingly, the lookback period for any streamlined filing submission involving specified foreign corporations (SFCs) with a Section 965(a) inclusion in 2017 must include 2017 and all subsequent years affected. In addition, taxpayers must account for and report Subpart F income and Section 956 amounts in their submission.

Unexpected DAC6 reporting obligations may arise in Portugal

Portugal transposed the EU DAC6 rules into law on 21 July 2021. This EU Directive covers the mandatory automatic exchange of tax information related to reportable cross-border arrangements. Following this implementing law, the Portuguese tax authorities (PTA) published guidelines on the practical implementation of DAC6 in Portugal. The PTA’s guidelines may create unexpected reporting obligations in Portugal for a ‘relevant taxpayer’ regarding cross-border arrangements when a Portuguese nexus exists.

Digital tax megabyte for August 2021

This edition includes updates on reporting by platforms with the draft legislation on Australia's new Bill, UK consultation on its proposals and Malaysia's guidance on its tourism tax. On Pillars 1 and 2, the US Senate committee on finance has published for consultation its proposals on relevant international tax reform, Barbados has signed up to the IF Statement and Switzerland has reiterated conditions for signing. And Pascal St Amans has noted that not all taxes on digital transactions may be considered the same.

US - House approves budget resolution, action to come on reconciliation tax bill

In the US, on 24 August 2021, the House voted 220 to 212 to approve the Senate-passed fiscal year 2022 budget resolution that provides reconciliation instructions for spending and tax relief provisions that would be offset in part by corporate and individual tax increases. The House action also calls for a House vote, without amendments, on September 27 on the bipartisan infrastructure bill recently approved by the Senate.

International Tax News - July 2021

Among the topics featured in this month's edition are: 1) Hong Kong - Revising the statutory framework to prepare for tax return e-filing; 2) Spain - New anti-fraud legislation entered into force; 3) United Kingdom - The end of patent box grandfathering; 4) Uruguay - Tax measures in response to COVID-19.

Pennsylvania updates tax credit and deduction programs

Enacted on 30 June 2021, H.B. 952 provides an update to Pennsylvania’s Qualified Manufacturing Innovation and Reinvestment Deduction (QMIRD). Applicable to tax years beginning after 31 December 2020, the deduction applies to Pennsylvania taxable income (i.e., post-apportionment). H.B. 952 provides updated deadlines for a number of credit and incentive programs in the state and also makes changes to the administration of tax credit programs.

UK ratifies protocol to UK/Germany double tax treaty

The UK ratified the protocol to its double tax treaty with Germany on 26 May 2021, giving UK domestic effect to the protocol which was signed by the two countries on 12 January 2021. Germany has also recently incorporated the protocol into its domestic legislation and exchange of instruments of ratification is therefore expected shortly.

US MTC policy would limit protections from state tax under P.L. 86-272

The Multistate Tax Commission (MTC) recently adopted a revised “statement of information” on the application of Public Law 86-272, which bars states and localities from imposing net income taxes where in-state business activities are limited to solicitation of sales of tangible personal property and ancillary activities. The revised statement takes the position that taxpayers generally engage in unprotected in-state business activities “when a business interacts with a customer via the business’s website or app.”

Disclosure of Uncertain Tax Treatments to HMRC

Large businesses must comply with a new requirement to disclose to HMRC ‘uncertain tax treatments (UTT)’ in Corporation Tax, VAT and PAYE returns due to be filed on or after 1 April 2022. This is a significant change, including for those businesses with a ‘low risk’ rating. HMRC is expected to publish detailed guidance shortly.

US Senate approves budget resolution, House returning to consider budget

Following the Senate’s August 10 approval of a $1 trillion bipartisan infrastructure bill, the Senate early in the morning of August 11 completed action on a fiscal year 2022 budget resolution that would provide reconciliation instructions for up to $3.5 trillion in spending and tax relief provisions that would be offset in part by corporate and individual tax increases. House leaders late on August 10 announced that the House would return early from its August recess to consider the Senate budget resolution during the week of August 23. The House had not been scheduled to return until September 20.

US Senate passes bipartisan infrastructure bill; debate to begin on FY 2022 budget resolution

The US Senate has voted 69 to 30 to pass a $1 trillion bipartisan infrastructure bill that includes $550 billion in new spending on highways, bridges, waterways, transit, airports, the electric grid, and broadband. The legislation resulted from months of negotiations by President Biden and a group of Democratic and Republican Senators to reach an agreement to increase spending on infrastructure without tax rate increases. The Senate bill includes other tax and non-tax offsets, including a new cryptocurrency information reporting requirement that is the subject of ongoing debate and a measure reinstating Superfund excise taxes on chemicals.

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 July 31. 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.

Korea’s Tax Reform Proposals for 2021

The Korean Ministry of Economy and Finance (MOEF) released the government’s tax reform proposals for 2021 (the ‘proposals’). 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.

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 expressed agreement is in light of Brexit and the USMCA, which replaced the NAFTA. 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.

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.

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.

International tax update for multinationals operating in the UK - period to 23 July 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) Details of draft legislation published on HMRC "Legislation Day"; 2) 130 countries and jurisdictions have joined a new two-pillar plan to reform international taxation rules; and 3) An overview of the UK patent box regime.

IRS issues guidance on adjustments for CSAs with reverse claw-back provisions for stock-based compensation

The IRS on July 16 released AM 2021-004, a legal advice memorandum issued by Associate Chief Counsel (International) (the "CCM"). The CCM provides non-taxpayer-specific legal advice regarding the potential timing and amount of adjustments arising from transfer pricing examinations of stock-based compensation (SBC) costs involving taxpayers' cost-sharing agreements (CSAs) that included so-called "reverse claw-back" provisions which are assumed to have been triggered by a final decision in the Altera litigation.

Treasury ‘Green Book’ release marks start of US tax policy process affecting Inbounds

Foreign companies investing and operating in the United States will want to carefully review the Green Book, which contains important new details regarding tax proposals that would make sweeping changes to the US international tax rules enacted as part of the 2017 tax reform law (Tax Cuts and Jobs Act, or TCJA). This Insight looks at the key international tax proposals affecting inbound companies.

Michigan Appeals Court exempts advertising materials mailed out-of-state from use tax

A long-standing tax dispute has existed in Michigan regarding what constitutes a taxable ‘use’ of direct mail shipped from outside the state. The state has often asserted that the act of directing mailings into the state or the ability to recall an item from the US Postal Service (USPS) would constitute sufficient ‘control’ over the mailings to create a use tax consequence. The Michigan Court of Appeals recently affirmed that a corporation did not have ‘sufficient retention of control’ of advertising materials printed out-of-state and delivered by a third party vendor to Michigan customers to constitute ‘use’ of such materials in-state.

California elective pass-through entity tax bill awaits governor’s signature

California is one step closer to joining the growing number of states adopting pass-through entity (PTE) tax legislation in response to the 2017 federal tax reform legislation. For federal income tax purposes, the 2017 tax reform limited individuals’ itemized deduction to $10,000 for their separately stated state and local income, sales, and property taxes (SALT).

Brazilian Federal Government proposes income tax reform

The Brazilian Federal Government recently announced the second phase of its proposed comprehensive tax reform, focusing on income tax. This proposal is in addition to the more than 20 tax bills that were already being intensively debated in the National Congress, particularly in the Senate. The government’s current proposal for corporate tax reform and/or reintroduction of a dividend withholding tax would significantly increase the Brazilian tax burden on many businesses, particularly on foreign investors.

130 countries agree on a new international corporate tax framework

On July 1, 130 countries of the 139 members of the OECD Inclusive Framework on Base Erosion and Profit Shifting committed to fundamental changes to the international corporate tax system. The 130 countries include the G7 members (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States), emerging economies like Brazil, China and India, and jurisdictions like Switzerland, Singapore, Bermuda, and the Cayman Islands. However, Ireland, Hungary, Estonia, Barbados, Kenya, Nigeria, Peru, Sri Lanka, Saint Vincent and the Grenadines did not sign on to the consensus.

OECD aligns more closely with the EU on reporting obligations for digital platform operators

On 22 June 2021 the OECD issued a report entitled “Model Reporting Rules for Digital Platforms: International Exchange Framework and Optional Module for Sale of Goods.” The Report introduces an optional module to the model reporting rules for digital platform operators published by the OECD in July 2020, extending the scope of the model reporting rules to the sale of goods and the rental of transportation means. Furthermore, the Report provides for an international legal framework to exchange information on income derived through digital platforms.

Tax accounting considerations of the Treasury “Green Book”

On May 28, the Department of the Treasury released the General Explanation of the Administration's Fiscal Year 2022 Revenue Proposals (“Green Book”), outlining a number of proposed amendments to the Internal Revenue Code (“IRC”), including significant changes for corporate taxpayers. Among other considerations, these proposals represent changes to existing corporate tax regimes, and have important implications from both an income and non-income tax accounting perspective.

International tax update for multinationals operating in the UK - period to 25 June 2021

Our latest update includes: 1) a recording of our PwC panel’s recent discussion of how the G7 Finance Ministers’ agreement might affect your business; and 2) an invitation to a webcast where we will explore the tax and legal considerations of hybrid working. The ITT update will be taking its summer vacation early this year, so our next edition will be published on 26 July.

ATO considers certain payments for software distribution rights are royalties

The Australian Taxation Office has released a draft taxation ruling which sets out the Commissioner of Taxation’s preliminary views on the income tax treatment of receipts from the distribution and licensing of software, as distinct from “simple use” by end-users of the software. The draft ruling has a particular focus on the circumstances where receipts will be treated as royalties under arrangements involving the distribution of packaged software, digital software distribution and cloud computing arrangements including software-as-a-service (SaaS). This has the potential to be quite broad such that any business where software is fundamental to the delivery of services should also consider the draft ruling.

Real Estate news: The new double tax treaty between Belgium and France: Changing the rules of the game

The current double tax treaty (DTT) between France and Belgium dates from 1964 and has been updated throughout the years via various protocols and most recently the Multilateral Instrument (MLI). The Belgian and French government decided a couple of years ago to conclude a new DTT with the objective to achieve a BEPS compliant text. A draft version of this new DTT that would be submitted to the Flemish government for approval was briefly published on the website of the Flemish government and gave some more insights on the expected content. The entry into force is not yet known.

International Tax News - May 2021

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) Hong Kong's tax treatments for corporate amalgamations; 2) Uruguay Corporate deductions – Micro and small enterprises; 3) US Treasury ‘Green Book’ describes Biden’s tax proposals for businesses; and 4) G7 Finance Ministers commit to Pillars One & Two, including global minimum tax rate of ‘at least’ 15%.

EU Tax News - March/April 2021

EU tax news is a bimonthly newsletter with summaries of all the relevant ECJ and national court cases and decisions, and EU policy initiatives related to EU direct tax law and state aid. The newsletter is prepared by members of PwC's EU direct tax group (EUDTG) from across Europe.

G7 Finance Ministers commit to Pillars One & Two, including global minimum tax rate of ‘at least’ 15%

The G7 Finance Ministers announced an agreement on June 5, in which the participating countries committed to new taxing rights that allow countries to reallocate some portion of profits of large multinational companies to markets (i.e., where sales arise—'Pillar One’), as well as enact a global minimum tax rate of at least 15% (‘Pillar Two’). The meeting marked an early test of whether the US position on the OECD Inclusive Framework’s ‘Taxation of the Digitalising Economy’ project would provide momentum to finding a common base for agreement.

Treasury ‘Green Book’ describes Biden’s tax proposals for businesses

The US Treasury on May 28 released the much-anticipated 'General Explanations of the Administration’s Fiscal Year 2022 Revenue Proposals' ('Green Book'). The Green Book serves as a guidepost for the Administration’s proposed tax legislation, describing current law, proposed law, the Administration’s policy rationale for the proposals, and revenue projections. While the Green Book reflects the Biden Administration’s recommendations, Congress will be responsible for drafting and enacting any tax legislation.

Aozora - FTT concludes LoB clause is not an ‘express provision’ denying credit relief

The First-tier Tax Tribunal (FTT) in Aozora GMAC Investments (Aozora) v HMRC has allowed the taxpayer’s appeal, ruling that the Limitation of Benefits clause in the US-UK double tax treaty is not an ‘express provision’ that relief by way of credit is not to be given under the treaty and therefore that it does not prohibit Aozora from claiming unilateral credit relief in the UK. Taxpayers considering whether they are entitled to credit relief in the UK for tax that is not relieved by an applicable double tax treaty should consider the potential implications of this ruling for their own arrangements and seek advice where necessary.

Digital tax megabyte for May 2021

This edition includes announcements on India's SEP thresholds, Australia's proposed sharing economy reporting regime and revised USTR hearings on DSTs. The progress of US domestic proposals may impact on Pillar One and Two discussions and ATAF has put forward its revised proposals. The EC has released a Communication including its intentions on digital measures. Kenya's 2021 Finance Bill has proposed some changes to the definition of a PE, the DST and VAT rules while the IMF has released a paper on the challenges faced by countries in setting VAT rules.

International tax update for multinationals operating in the UK - period to 28 May 2021

Welcome to our latest update on recent developments in international and treasury tax of interest to multinationals operating in the UK. Highlights in this edition are: 1) FTT concludes LoB clause is not an ‘express provision’ denying credit relief; 2) EU General Court delivers two State aid judgments in Amazon and Engie; 3) The rise of hybrid working: How to transform your organisation for our changed world; 4) The post-pandemic world of work: can you let employees work from anywhere? and 5) Our April edition of International Tax News.

US Treasury report provides details on President Biden’s tax proposals

The US Treasury has released a 114-page “Green Book” general explanation of tax proposals included in President Joe Biden’s fiscal year (FY) 2022 budget submission to Congress, also released the same day. The Green Book provides new details on proposals to increase corporate and individual taxes to help offset the $4.1 trillion combined cost of President Biden’s previously proposed American Jobs Plan and American Families Plan.

US income tax treaties at the start of the Biden Administration

At a public forum in April 2021, a Treasury official stated the United States desires to amend existing income tax treaties with Switzerland and Israel, and that the United States has opened tax treaty negotiations with Colombia, has completed tax treaty negotiations with Norway and Romania, and is engaged in ongoing tax treaty discussions with Croatia. This treaty activity contrasts with recent US tax treaty history, where, in 2019, following a lengthy hiatus in the tax treaty approval process, four US tax treaty protocols, which had been negotiated and signed years before, entered into force.

International Tax News - April 2021

Among the topics featured in this month's edition are: 1) Canada’s 2021 budget addresses mandatory disclosure, DST, interest limitation, and hybrid mismatches; 2) Australian Tax Office proposes hybrid rules guidance; 3) France updates list of non-cooperative states and territories; and 4) New CIT preferential policies for small and thin-profit enterprises (STEs) and super R&D deduction.

2021-22 Victorian State Budget

The 2021-22 Victorian State Budget was delivered on 20 May 2021 by Treasurer Tim Pallas. The key feature of the 2021-22 Budget was the recovery from the economic impact of COVID-19. However, the resulting cost is manifested in another key feature of the Budget, tax increases and new taxes and levies.

Tax Policy Bulletin - EC releases ‘Communication on Business Taxation for the 21st Century’

The European Commission released a “Communication on Business Taxation for the 21st Century” on 18 May 2021, setting a tax agenda for the next two years with five key actions. The aim is to align the EU tax framework with the new realities of the globalised and digitalised economy post-Covid, and to ensure that Member States’ tax systems are fit for purpose.

Australian temporary loss carry-back rules - What you need to know

The temporary loss carry-back rules were a welcome announcement by the Government in the Federal Budget handed down on 6 October 2020. These rules are designed to provide temporary cashflow support to companies that were previously in a tax paying position but who now find themselves in a tax loss position due to the COVID-19 pandemic and/or through obtaining faster deductions for depreciation under the new instant asset write-off measures. The regime, as originally announced, was to be in place for three years. In the 2021-22 Federal Budget, the Government announced it would be extended for an additional year.

Australia: 2021-22 Federal Budget insights

Treasurer Josh Frydenberg handed down the 2021-22 Australian Federal Budget on Tuesday 11 May 2021. A key focus of this year’s Budget is to attract and retain the ‘best and brightest’ talent in Australia, encourage workforce participation, reduce compliance costs, build confidence and certainty in the tax system. It is no surprise that tax measures play a key role in delivering this agenda. A number of measures announced are relevant to global employers and their mobile employees.

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).

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.