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20 July 2022 Global Tax Policy and Controversy Watch | July 2022 edition EY’s Global Tax Policy and Controversy Watch highlights recent policy and administrative developments, featuring reports and Tax Alerts from our global network of tax professionals around the world. As businesses brace for more tax disputes, mitigating them requires a proactive approach. EY’s Tax Controversy Department of the Future methodology offers just that. See our new video that provides insights on the topic. OECD releases Progress Report on Amount A of Pillar One of BEPS 2.0 project and invites public comment The Organisation for Economic Co-operation and Development (OECD) Secretariat released a Progress Report on Amount A of Pillar One, a consultation document that covers many of the building blocks with respect to the new taxing right under Amount A and is presented in the form of domestic model rules. The OECD also released a Cover Note providing a revised schedule for the work on Amount A, a Frequently Asked Questions document on Amount A and a Fact Sheet providing an overview of the structure of the Amount A rules. The Inclusive Framework is seeking written comments from stakeholders on the overall design of the Amount A rules by 19 August 2022; EY will submit comments. See EY Global Tax Alerts, OECD releases Progress Report on Amount A of Pillar One of BEPS 2.0 project and invites public comment, dated 11 July 2022 and OECD releases Progress Report on Amount A of Pillar One of BEPS 2.0 project: A detailed overview, dated 15 July 2022. The OECD held its annual tax conference in Washington, DC, on 27-28 June 2022. The bulk of the discussion at the conference focused on developments with respect to Pillars One and Two of the BEPS 2.0 project. In addition, there were sessions on the OECD’s work on global mobility of workers, tax and climate change, and tax certainty. See EY Global Tax Alert, OECD and country officials discuss BEPS 2.0 Pillars One and Two and other OECD tax work, dated 30 June 2022 European Parliament adopts carbon legislation package, final negotiations with EU Member State representatives expected soon The European Parliament adopted the package of carbon legislation, with a significant majority of votes. The package includes revision of the European Union (EU) Emission Trading System (EU ETS), the new Carbon Border Adjustment Mechanism (CBAM) and the Social Climate Fund. In the EU legislative process, the next step will be negotiations of the European Parliament with the EU Member State representatives on the EU Council. See EY Global Tax Alert, European Parliament adopts carbon legislation package, final negotiations with EU Member State representatives expected soon, dated 23 June 2022. Transfer pricing is consistently cited as the most significant tax risk facing businesses. Companies in the life sciences sector are particularly affected and need to closely examine their systems and processes to ready themselves for potential controversy. See our latest article, Cross-border tax controversy on the rise: transfer pricing trends in the life sciences sector, to learn more. China Customs and Tax Authorities in Shenzhen launched a collaborative management approach for transfer pricing related to goods imported from related parties. Cyprus introduced transfer pricing rules and documentation requirements. The Netherlands issued a new transfer pricing decree which reflects the latest developments in the OECD Transfer Pricing Guidelines related to financial transactions. See EY Global Tax Alerts, China | Customs and Tax Authorities in Shenzhen launch collaborative management of transfer pricing related to goods imported from related parties, dated 28 June 2022, Cyprus introduces transfer pricing rules and documentation requirements, dated 1 July 2022 and The Netherlands issues new transfer pricing decree, dated 4 July 2022. The Argentine Government proposed a bill that would establish a one-time 15% “windfall income tax” for companies that obtained extraordinary income from the increase in international prices. The tax would apply to companies that meet certain requirements. If approved by the Argentine Congress, the bill would be enacted upon publication in the Official Gazette. See EY Global Tax Alert, Argentine Government proposes windfall corporate income tax, dated 16 June 2022. Supreme Court of Canada holds equitable remedy of rescission is not available to remedy adverse tax consequences The Supreme Court of Canada released its much-anticipated decision in Attorney General of Canada, et al. v. Collins Family Trust, et al., confirming that the equitable remedy of rescission is not available to remedy adverse tax consequences. See EY Global Tax Alert, Supreme Court of Canada holds equitable remedy of rescission is not available to remedy adverse tax consequences, dated 22 June 2022. In response to EU concern over potential double non-taxation arising from Hong Kong’s foreign source income exemption (FSIE) regime for certain passive income, Hong Kong has launched a consultation on a proposed refinement to the FSIE regime. This refinement is intended to enable Hong Kong to be removed from the EU watchlist of non-cooperative jurisdictions for tax purposes. The related legislative bill is planned to be introduced in the last quarter of 2022 so as to bring the refined FSIE regime into force from 1 January 2023 with no grandfathering arrangements. See EY Global Tax Alert, Hong Kong proposes to refine its foreign source income exemption regime for certain passive income, dated 30 June 2022. The changes proposed by the Polish Government affect several areas of taxation, with most of the proposals related to areas that were covered by the most recent reform implemented as of 1 January 2022. Highlights include postponement of the effective date of the new “minimum tax” to 1 January 2023, no implementation of the tax deductibility limitations regarding so-called “hidden dividends,” and changes to the “shifted profits tax” and withholding tax regimes. See EY Global Tax Alert, Poland proposes significant changes to Corporate Income Tax law, dated 7 July 2022. Puerto Rico enacted Act 52 on 30 June 2022, which allows companies to elect a 10.5% tax on industrial development income from sales of goods and services instead of the 4% excise tax on foreign corporations, which the latest United States (US) foreign tax credit regulations do not consider as creditable. In addition to changing the excise tax regime, Act 52-2022 includes amendments to the incentives laws and other statutes, including the Puerto Rico Internal Revenue Code of 2011 as amended. See EY Global Tax Alert, Puerto Rico enacts legislation allowing companies to replace 4% excise tax on foreign corporations with new, possibly creditable, tax on industrial development income, dated 8 July 2022. Saudi Arabia’s Zakat, Tax and Customs Authority announced the relaunch of the ZATCA’s initiative to cancel fines and financial penalties for certain taxes from 1 June 2022 to 30 November 2022. The amnesty, which had been first launched in 2020, was relaunched to reduce the economic effects of the COVID-19 pandemic on businesses in Saudi Arabia. See EY Global Tax Alert, Saudi Arabia relaunches tax amnesty initiative, dated 20 June 2022. The Court of Justice of the EU declared that certain Spanish provisions regulating the compensation for damages caused by legislative acts that are in breach of EU law are themselves in breach of the principle of effectiveness. These principles limit the procedural and substantive autonomy of the Member States when they set the conditions for State liability for breaches of EU law. See EY Global Tax Alert, CJEU rules that Spanish rules on compensation for damages by the State are against EU law, dated 30 June 2022. On 23 June 2022, the Swiss Federal Council published a dispatch and a proposed constitutional amendment for the implementation in Switzerland of Pillars One and Two of the BEPS 2.0 project. The dispatch provides the basis for the upcoming discussions in the Swiss Parliament, culminating in a public vote likely to take place in June 2023. See EY Global Tax Alert, Swiss Federal Council releases dispatch on constitutional amendment for BEPS 2.0 implementation in Switzerland, dated 24 June 2022. The US Supreme Court decision in this case will resolve the divergent positions held by the two appellate courts on whether the penalty for non-willful failure to report applies on a per annual filing basis or a per account basis. See EY Global Tax Alert, US Supreme Court grants cert to hear FBAR penalty application case, dated 28 June 2022. Matt Andrew, Asia-Pacific Tax Policy Leader, Auckland | matt.andrew@nz.ey.com Barbara M. Angus, Global Tax Policy Leader, Washington, DC | barbara.angus@ey.com Julie Byrne, Global Tax Policy, Washington, DC | julie.byrne@ey.com Jorge Libreros Calderon, Latin America North Tax Controversy Leader, Panama City | jorge.libreros@lan.ey.com Martin Caplice, Asia-Pacific Tax Controversy Leader, Sydney | martin.caplice@au.ey.com Bryon Christensen, United States Tax Controversy Leader, Seattle | bryon.christensen@ey.com Luis Coronado, Global Tax Controversy Leader, Singapore | luis.coronado@sg.ey.com Cathy Koch, Americas Tax Policy Leader, Washington, DC | cathy.koch@ey.com Jean-Pierre Lieb, EMEIA Tax Policy and Controversy Leader, Paris | jean.pierre.lieb@ey-avocats.com Paul Mulvihill, Canada Tax Controversy Leader, Ottawa | paul.f.mulvihill@ca.ey.com Rodrigo Munhoz, Latin America South Tax Controversy Leader, São Paulo | rodrigo.munhoz@br.ey.com Gilad Shoval, Israel Tax Controversy Leader, Tel Aviv | gilad.shoval@il.ey.com Document ID: 2022-5686 |
