August 19, 2022
Global Tax Policy and Controversy Watch | August 2022 edition
In the spotlight
It's time to think and act globally on employment tax risks
The business world arguably continues to get smaller and more connected — and more complex and riskier from an employment tax perspective. Does this make the case for creating a global employment tax leader within your organization? A new article addresses the need to be proactive on employment tax compliance issues in order to avoid tax controversy.
Read the article, It's time to think and act globally on employment tax risks, dated 25 July 2022.
G20 Finance Ministers reiterate commitment to BEPS 2.0 two-pillar implementation and call for action to finalize work
On 15-16 July 2022, the G20 Ministers of Finance and Central Bank Governors met in Bali, Indonesia. The G20 Chair's summary issued at the conclusion of the meeting includes a reiteration of the G20 Finance Ministers' ongoing commitment to implement the agreement on the G20/OECD BEPS 2.0 two-pillar international tax package, with a call for action to finalize Pillar One, including by signing the Multilateral Convention in the first half of 2023, and to complete the negotiations that would allow the development of the Multilateral Instrument for implementation of the Subject to Tax Rule under Pillar Two. In advance of the meeting, the OECD released the OECD Secretary-General Tax Report to G20 Finance Ministers and Central Bank Governors, providing an overview of the latest international tax developments including updates on Pillars One and Two.
See EY Global Tax Alert, G20 Finance Ministers reiterate commitment to BEPS 2.0 two-pillar implementation and call for action to finalize work, dated 19 July 2022.
Korea announces 2022 tax reform proposals
On 21 July 2022, Korea's Ministry of Economy and Finance announced the 2022 tax reform proposals, including proposals for a decrease in the headline corporate income tax rate from 25% to 22% that would be effective for fiscal years beginning on or after 1 January 2023 and for a special corporate income tax rate of 10% on taxable income up to KRW500 million that would apply to qualified small- and medium-sized enterprises. The proposals also include new global minimum tax rules to align with BEPS 2.0 Pillar Two.
See EY Global Tax Alerts, Korea announces 2022 tax reform proposals and Korea's 2022 tax reform proposals include new global minimum tax rules to align with OECD BEPS 2.0 Pillar Two, both dated 1 August 2022.
US enacts climate and energy bill with corporate AMT
On 16 August 2022, United States (US) President Joe Biden signed the Inflation Reduction Act of 2022, to finance climate and energy provisions and an extension of enhanced Affordable Care Act subsidies with a 15% corporate alternative minimum tax on adjusted financial statement income for corporations with profits over US$1 billion, a stock buyback tax, increased Internal Revenue Service enforcement funding, and rules allowing Medicare to negotiate prescription drug prices.
See EY Global Tax Alerts, Inflation Reduction Act of 2022 substantially changes tax code provisions related to energy transition and renewable energy, Enactment of Inflation Reduction Act extends expanded premium tax credits under the Affordable Care Act and Inflation Reduction Act includes 15% corporate minimum tax on book income, each dated 16 August 2022.
Global Tax Controversy monthly flash news — latest article
Businesses need policies and processes that can prevent and detect value-added tax (VAT) errors when they occur. How can voluntary disclosures be a beneficial tool in dealing with VAT errors? Find out in a new article, Voluntary disclosures — a valuable tool for dealing with VAT errors, dated 13 July 2022.
OECD releases 2022 update on peer review of preferential tax regimes and no or only nominal tax jurisdictions
The OECD released an update on the results of the peer reviews of jurisdictions' domestic laws under Action 5 (harmful tax practices) of the OECD/G20 BEPS Project. The updated results cover new decisions on 12 preferential tax regimes, bringing the total number of tax regimes that have been reviewed, or are under review, to 319. Two regimes of Armenia and one of Pakistan were classified as "potentially harmful" and will be subject to further evaluation by the Forum on Harmful Tax Practices. The remaining nine regimes on which new decisions were announced have been abolished, are being amended, are under review or are considered to be "not harmful."
See EY Global Tax Alert, OECD releases 2022 update on peer review of preferential tax regimes and no or only nominal tax jurisdictions, dated 29 July 2022.
Luxembourg and Germany publish draft DAC7 rules
The Luxembourg Minister of Finance submitted a draft law, and the Germany Ministry of Finance published a draft implementation bill on the due diligence procedures and reporting requirements for platform operators in connection with DAC7. Other European Union (EU) Member States have already passed national DAC7 implementation legislation. However, the German draft implementation act and its explanatory memorandum shed some new light on uncertainties around the interpretation of DAC7 by the EU Member States. Member States are required to transpose DAC7 into national law by 31 December 2022.
See EY Global Tax Alerts, Luxembourg publishes draft tax transparency rules for digital platforms, dated 28 July 2022 and German Federal Ministry of Finance publishes draft DAC7 implementation bill, dated 25 July 2022.
Australian Taxation Office issues Taxpayer Alert on treaty shopping arrangements to obtain reduced withholding tax rates
Taxpayer Alert 2022/2 provides examples of treaty shopping arrangements that the Australian Taxation Office (ATO) views as higher-risk arrangements that will warrant increased scrutiny. The ATO recommends that taxpayers review their arrangements to identify transactions that may produce similar treaty benefits (i.e., reduced withholding tax) under Australia's tax treaties, whether as a result of a restructuring or acquisition.
See EY Global Tax Alert, Australian Taxation Office issues Taxpayer Alert on treaty shopping arrangements to obtain reduced withholding tax rates, dated 29 July 2022.
Brazilian Federal Revenue Service and Inter-American Development Bank hold seminar as part of process to present new Brazilian transfer pricing system
On 29 June 2022, the Brazilian Federal Revenue Service and the Inter-American Development Bank held a seminar to discuss in detail various topics related to the new Brazilian transfer pricing system proposal, which would implement the arm's-length principle in Brazil. Additionally, the proposed system's commodity concept would follow market practice and its definition of intangible would align with the OECD Transfer Pricing Guidelines.
See EY Global Tax Alert, Brazilian Federal Revenue Service and the Inter-American Development Bank hold seminar as part of process to present new Brazilian transfer pricing system, dated 22 July 2022.
China's new Stamp Duty Law is now in effect
China's new Stamp Duty Law covers the definition of taxpayers, taxable scope and stamp duty rates, among other matters, although no fundamental changes were made to the existing system. The new law also provides details and guidance on how tax basis is determined under different circumstances, as well as how "taxpayer" is determined in situations where a contract is entered into or executed by multiple parties. The law came into effect on 1 July 2022.
See EY Global Tax Alert, China's new Stamp Duty Law is now in effect, dated 18 July 2022.
New Colombian Government expected to propose tax reform
A new Colombian Government took office on 7 August 2022 and is expected to announce a tax reform proposal. Based on announcements by campaign members and individuals appointed to high positions in the new administration, the proposal is expected to establish anti-evasion measures, raise COP50 trillion per year in revenue and increase taxes on individuals.
See EY Global Tax Alert, New Colombian Government expected to propose tax reform, dated 4 August 2022.
German Ministry of Finance issues first draft of Annual Tax Act 2022 including provisions regarding extraterritorial taxation of IP
The German Ministry of Finance published the first draft of the Annual Tax Act 2022, proposing several changes concerning different areas of taxation, including elimination of nonresident taxation of royalty income and capital gains relating to rights solely because these rights are registered in a public German book or register. Additionally, the draft includes proposed changes to the valuation rules for real estate and increased amortization rates for residential buildings.
See EY Global Tax Alert, German Ministry of Finance issues first draft of Annual Tax Act 2022 including provisions regarding extraterritorial taxation of IP, dated 28 July 2022.
New Hungarian transfer pricing rules impose additional reporting requirements and require adjustments to the median
A new Hungarian law sets out important changes to the transfer pricing rules, introducing a significant additional reporting obligation regarding intercompany transactions as part of the corporate income tax return and a requirement for transfer pricing adjustments to be made to the median. The new law is effective for the current financial year and requires taxpayers to significantly alter compliance processes.
See EY Global Tax Alert, New Hungarian transfer pricing rules impose additional reporting requirements and require adjustments to the median, dated 21 July 2022.
The Netherlands issues new decree on profit attribution to permanent establishments
The Dutch State Secretary of Finance published a new decree related to the profit attribution to permanent establishments. The Decree replaces the previous decree dated 15 January 2011 and reflects the changes in this area resulting from the OECD/G20 BEPS project.
See EY Global Tax Alert, The Netherlands issues new decree on profit attribution to permanent establishments, dated 18 July 2022.
UK Government releases multiple documents for consultation
The United Kingdom (UK) Government released multiple consultation documents ahead of potential inclusion in Finance Bill 2022/23. Issues addressed include implementation of BEPS 2.0 Pillar Two, transfer pricing documentation, research and development tax relief reforms, changes to the Qualifying Asset Holding Companies rules, double taxation relief, and improving data collection by HMRC (the UK Tax Authority).
See EY Global Tax Alerts, UK publishes draft legislation on new transfer pricing documentation requirements, dated 26 July 2022 and UK Government releases draft legislation on new multinational top-up tax, dated 21 July 2022.
US enacts legislation aimed at US competitiveness in microchips, science and research
On 9 August 2022, US President Biden signed the CHIPS (Creating Helpful Incentives to Produce Semiconductors) and Science Act (HR 4346), a US$280 billion bill that aims to build a domestic US supply chain for semiconductor chips, while also spending billions on scientific and technological research to keep US industries competitive with China and other rivals. The Act includes US$52.7 billion in funding for semiconductor manufacturing subsidies, grants and loans.
See EY Global Tax Alert, US enacts $280 billion 'Chips-Plus' bill aimed at keeping US competitive in microchips, science and research, dated 28 July 2022.
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