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14 December 2022 Global Tax Policy and Controversy Watch | December 2022 edition Please join us on 12 January 2023 for an EY Global webcast focusing on the dynamics of the BEPS 2.0 project “BEPS 2.0: New OECD releases and ongoing implementation activity.” Register here. Tax governance is rapidly growing in importance. Increased interest in Environmental, Social and Governance reporting, and new national-level requirements from many revenue authorities have made tax policy, tax strategy and governance of tax operations core elements of a company’s operations and risk management. See the latest Global Tax Controversy monthly flash news article, EY Global Tax Controversy Flash Newsletter (Issue 52) | Gaining control: the growing need for good governance in tax, dated 15 November 2022. OECD holds Tax Certainty Day addressing MAP developments and tax certainty under Pillars One and Two On 22 November 2022, the Organisation for Economic Co-operation and Development (OECD) held its fourth annual OECD Tax Certainty Day. During the event, the OECD released the 2021 statistics on Mutual Agreement Procedures (MAPs) and presented the 2021 MAP awards. There were also updates on other activities in the MAP Forum, the International Compliance Assurance Programme and the ongoing work on tax certainty under the Base Erosion and Profit Shifting (BEPS) 2.0 Pillars One and Two. See Global Tax Alert, OECD holds Tax Certainty Day addressing MAP developments and tax certainty under Pillars One and Two, dated 1 December 2022. The OECD published the compilation of the outcomes of the fifth annual peer review of the minimum standard on Action 13 (Transfer Pricing Documentation and Country-by-Country Reporting (CbCR)) of the BEPS project. The Compilation covers 134 jurisdictions and reflects that implementation of CbCR has been found to be largely consistent with the Action 13 minimum standard. However, 28 jurisdictions have received a general recommendation to either put in place or finalize their domestic legal or administrative framework and 27 jurisdictions have received one or more recommendations to make improvements to specific areas of their reporting frameworks. See Global Tax Alert, OECD releases outcomes of fifth peer review on BEPS Action 13 and updates CbCR guidance, dated 4 November 2022. European Union (EU) Finance Ministers agreed on revisions of the mandate of the Code of Conduct for Business Taxation during the Economic and Financial Affairs (ECOFIN) Council meeting. The revisions will expand the scope of the Code from preferential measures to cover tax features of general application. This will apply to tax features that are introduced or modified on or after 1 January 2023 and that create opportunities for double non-taxation or can lead to the double or multiple use of tax benefits for the same amount of income. See Global Tax Alert, EU Finance Ministers agree on Code of Conduct mandate reform, dated 10 November 2022. The EU formally adopted the new Regulation on foreign subsidies distorting the internal market, which is expected to become applicable in the second quarter of 2023. In essence, the Regulation partly extends the EU’s State aid prohibition to State aid provided by third countries, focusing on large public procurement procedures and mergers and acquisition transactions that take place in the EU. See Global Tax Alert, EU Member States give final approval to Foreign Subsidies Regulation, dated 5 December 2022. On 17 November 2022, the Colombian Congress approved the tax reform bill submitted by the Colombian Government. The tax reform bill establishes a 15% minimum tax rate (but the calculation is not necessarily aligned with BEPS 2.0 Pillar Two). It also increases taxes on nonresident entities. See Global Tax Alert, Colombian Congress approves tax reform bill, dated 22 November 2022. Through a Presidential Decree enacted on 10 November 2022, a reform to Law regulations determines how to apply the lower income tax rates as a benefit for new investments and companies signing an Investment Agreement with the Ecuadorian Government. There are also new conditions for asset depreciation and the deductibility limit for income tax purposes on royalties, technical services and administrative and advisory services involving related parties. See Global Tax Alert, Ecuador enacts new regulations on Income Tax, including lower income tax rates for new investments, dated 23 November 2022. Based on the European Union Single-Use Plastics Directive regulations, the German Government has now approved a governmental draft for legislation to implement a Single-Use Plastics levy in Germany. The legislation is in draft status with the next steps being consultation with the German Federal Parliament and the German Federal Council. It is expected that the law will pass in the first quarter of 2023. See Global Tax Alert, German Government releases draft legislation for a Single-Use Plastics levy in Germany, dated 8 November 2022. The bill on the proposed refinement of the foreign source income exemption (FSIE) regime is substantially consistent with the proposed framework in the original consultation but with several positive enhancements. The Bill is currently under review by the Hong Kong Legislative Council and is expected to take effect from 1 January 2023. See Global Tax Alert, Hong Kong introduces bill to refine its foreign source income exemption regime, dated 21 November 2022. In his Autumn Statement, the United Kingdom (UK) Chancellor addressed taxation and spending. From a business tax perspective, the Chancellor announced a new Electricity Generator Levy, changes to the Energy Profits Levy and a rebalancing of innovation tax reliefs while reaffirming the commitment to implementing Pillar Two. Also announced were tax increases for individuals and employers in the form of a lower threshold at which the UK’s 45% additional rate starts to apply and further freezing of other tax thresholds until April 2028. See Global Tax Alert, UK Chancellor delivers Autumn Statement, dated 17 November 2022. The OECD released the fourth edition of its annual Corporate Tax Statistics publication together with an updated database. The OECD also released its 2022 Revenue Statistics report, showing that tax-to-GDP ratios for 2021 increased in 24 of 36 OECD countries, declined in 11 and remained unchanged in 1 country. The OECD further released its 2022 Consumption Tax Trends report, showing that consumption tax revenues slightly decreased overall in 2020 to 9.9%. See Global Tax Alert, OECD releases corporate tax statistics and the 2022 revenue statistics and consumption tax trends, dated 7 December 2022. The bill includes changes relating to the taxation of transactions between non-German entities relating to IP registered in Germany. See Global Tax Alert, OECD releases corporate tax statistics and the 2022 revenue statistics and consumption tax trends, dated 7 December 2022. On 22 November 2022, Mexico published the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) in the Federal Official Gazette. Following publication in the Official Gazette, the MLI must be deposited with the OECD to complete the ratification and notification process. See Global Tax Alert, Mexico publishes MLI in Federal Official Gazette | Timeline for entry into force will be triggered once instrument of ratification is deposited with the OECD, dated 28 November 2022. On 6 December 2022, the Dutch State Secretary of Finance published a Decree regarding the application of the Dutch hybrid provisions in the Dutch Dividend Withholding Tax Act 1965 and the Conditional Withholding Tax Act 2021. The new Decree provides favorable guidance for scenarios involving a Dutch disregarded entity (withholding agent) making a payment of dividends, interest, or royalties to another hybrid entity. See Global Tax Alert, Netherlands issues favorable withholding tax Decree dealing with disregarded entities, dated 6 December 2022. The Singapore Parliament has passed the Goods and Services Tax (Amendment) Bill. Key amendments include a rate change for 2023 and 2024, extension of the Overseas Vendor Registration and Reverse Charge regimes and changes to the treatment of travel arranging services. See Global Tax Alert, Singapore passes Goods and Services Tax (Amendment) Bill 2022, dated 5 December 2022. The Resolution outlines the rules to determine when a person (i.e., a natural or legal person) may be considered a tax resident of the United Arab Emirates (UAE) and addresses associated administrative matters such as the formalities for the issuance of Tax Residency Certificates and the issuance of further clarifications and directives for the implementation of the Resolution. See Global Tax Alert, UAE issues resolution on tax residency, dated 16 November 2022. The United States (US) Treasury Department released proposed regulations on foreign tax credits, which would amend the final foreign tax credit regulations published on 4 January 2022 (as amended by technical corrections to those regulations published on 27 July 2022). Among other things, the proposed regulations would significantly relax the cost recovery requirement by providing that a foreign tax law need only allow for recovery of "substantially all" of each item of significant cost or expense, regardless of the principles underlying any disallowances. See Global Tax Alert, Treasury releases latest proposed regulations on foreign tax credit, dated 18 November 2022. US IRS will consider applying the economic substance doctrine and related penalties more frequently in transfer pricing audits The IRS will now only require approval from a supervisor for assertion of the economic substance doctrine and imposition of penalties related to economic substance. See Global Tax Alert, US IRS will consider applying the economic substance doctrine and related penalties more frequently in transfer pricing audits, dated 30 November 2022.
Document ID: 2022-6219 |
