Global Tax Policy and Controversy Watch | March 2023 edition

In the spotlight

What to know about the 2023 EY Tax risk and controversy survey results – join our webcast

In these webcasts scheduled for 5 April, Americas/EMEIA time zones, and 12 April, Asia Pacific time zones, panelists will explore 2023 survey results from 2,127 respondents globally, discussing global and regional trends in how these senior tax and finance professionals perceive and manage tax risk and controversy now and looking ahead. If you have not yet registered, please do so now through the above links.

Key highlights

OECD releases revised methodology for BEPS Action 14 peer reviews and updates on reporting of MAP and APA statistics

The revised methodology seeks to increase efficiencies and improve dispute resolution timelines. The Organisation for Economic Co-operation and Development (OECD) and Inclusive Framework on Base Erosion and Profit Shifting (BEPS) also announced new data points to be reported in the annual Mutual Agreement Procedure (MAP) Statistics and the creation of a new annual framework for reporting Advance Pricing Arrangement (APA) statistics.

See Global Tax Alert, OECD releases revised methodology for BEPS Action 14 peer reviews and updates on reporting of MAP and APA statistics, dated 17 February 2023.

OECD publishes Manual on Handling of Multilateral Mutual Agreement Procedures and Advance Pricing Arrangements

The Manual on the Handling of MAPs and APAs (MoMA) is intended as a guide to multilateral MAP and APA processes from both a legal and procedural perspective, without imposing a set of binding rules. The MoMA covers four topics: (i) the basis for handling multilateral MAP and APA cases; (ii) procedural aspects to consider in multilateral cases; (iii) examples of multilateral cases; and (iv) the ideal timeline for a typical multilateral case.

See Global Tax Alert, OECD publishes Manual on Handling of Multilateral Mutual Agreement Procedures and Advance Pricing Arrangements, dated 23 February 2023.

Singapore and Hong Kong plan to implement GloBE Rules and domestic top-up tax in 2025

Singapore announced in its Budget 2023 that it plans to implement the Global Anti-Base Erosion (GloBE) Rules (i.e., Income Inclusion Rule (IIR) and Undertaxed Profits Rule (UTPR)) and domestic top-up tax for businesses with financial years starting on or after 1 January 2025. A number of existing incentive regimes were extended under the budget announcement, signaling that tax incentive regimes in Singapore will remain. Hong Kong also announced in its 2023/24 Budget that it intends to implement the GloBE Rules and domestic minimum top-up tax starting from 2025.

See Global Tax Alerts, Singapore plans to implement GloBE Rules and Domestic Top-up Tax as of 1 January 2025, dated 24 February 2023 and Hong Kong announces 2023/24 Budget, dated 23 February 2023.

HMRC evolves its compliance approach with new “Guidelines for Compliance”

Revenue authority compliance strategy is rapidly evolving, including moving away from costly interventions and focusing increasingly on compliance assurance. A new program from His Majesty’s Revenue and Customs (HMRC) — Guidelines for Compliance — propels this evolution forward and may soon be replicated by other jurisdictions.

Read the latest Global Tax Controversy monthly flash news article, HMRC evolves its compliance approach with new “Guidelines for Compliance,” dated 14 February 2023.

News items

ECOFIN adopts revised list of non-cooperative jurisdictions for tax purposes

On 14 February 2023, the Council of the European Union (EU) held an Economic and Financial Affairs Council (ECOFIN) meeting where Finance Ministers adopted a revised list of non-cooperative jurisdictions for tax purposes. The British Virgin Islands, Costa Rica, Marshall Islands and Russia were added to Annex I (the so-called “black” list). Albania, Aruba and Curaçao were added to Annex II (the so-called “gray” list), while Barbados, Jamaica, North Macedonia and Uruguay were removed.

See Global Tax Alert, ECOFIN adopts revised list of non-cooperative jurisdictions for tax purposes, dated 15 February 2023.

Budget activity

Botswana’s Minister of Finance and Development presented the 2023 Budget to Parliament. Malaysia’s Prime Minister presented the revised Budget for 2023 to Parliament.

See Global Tax Alerts, Botswana’s Government presents 2023 Budget to Parliament, dated 14 February 2023 and Malaysia | Indirect tax measures in Budget 2023, dated 6 March 2023.

Brazilian Supreme Court overrules use of res judicata in certain cases

An appeal is expected on the grounds that res judicata should only be impacted on a prospective basis.

See Global Tax Alert, Brazilian Supreme Court overrules use of res judicata in cases where such use is against the Supreme Court’s holding, dated 16 February 2023.

Cyprus Tax Authority issues FAQs on new transfer pricing legislation

The Frequently Asked Questions (FAQs) address several aspects of the application of the new transfer pricing legislation that was effective 1 January 2022. A key item addressed is the revocation of Interpretive Circular 3 (dated 30 June 2017) on back-to-back financing arrangements.

See Global Tax Alert, Cyprus Tax Authority issues FAQs on new transfer pricing legislation, dated 24 February 2023.

France implements regulations under DAC7 with respect to digital platforms

The regulation under EU Directive DAC7 (Council Directive 2021/514 of 22 March 2021) imposes an obligation on digital platforms for information reporting to the tax authorities on revenue generated by platform users.

See Global Tax Alert, France implements regulations under DAC7 with respect to digital platforms, dated 27 February 2023.

German Federal Parliament approves Single-Use Plastics levy

The legislation provides an overview of the scope, levy principles, refunds and penalties. The levy will be paid by businesses who place a product in the market for the first time (including distance sales) with first payment expected in 2025. Following approval by the German Federal Parliament, the next step is approval by the German Federal Council.

See Global Tax Alert, German Federal Parliament approves Single-Use Plastics levy, Federal Council approval is next step, dated 3 March 2023.

Germany implements new reporting obligations for foreign entities with direct or indirect ownership in German real estate

The German Sanctions Enforcement Act II creates new obligations for non-German entities to report their Ultimate Beneficial Owners (UBOs) to the German UBO register if they either directly or indirectly (via shares) own German real estate.

See Global Tax Alert, Germany implements new UBO reporting obligations for foreign entities with direct or indirect ownership in German real estate, dated 13 February 2023.

Hong Kong to further revise its foreign source income exemption regime to expand scope of disposal gain

As a response to the recent update of EU guidance, Hong Kong announced that it will further revise its foreign source income exemption regime by the end of 2023 in relation to the scope of foreign-sourced disposal gains to enable Hong Kong to be removed from the EU watchlist of non-cooperative jurisdictions for tax purposes.

See Global Tax Alert, Hong Kong to further revise its foreign source income exemption regime to expand scope of disposal gain, dated 20 February 2023.

Kenya gazettes regulations on financial derivatives

The regulations provide guidelines on the treatment of income accruing from financial derivatives. This follows the introduction of a new 15% withholding tax on gains from financial derivatives earned by nonresident persons.

See Global Tax Alert, Kenya gazettes Income Tax (Financial Derivatives) Regulations, 2023, dated 16 February 2023.

Kenya publishes draft National Green Fiscal Incentives Policy Framework

The Framework outlines policy goals and guiding principles, situational analysis of green fiscal reforms across key sectors in Kenya and green fiscal policy interventions.

See Global Tax Alert, Kenya publishes draft National Green Fiscal Incentives Policy Framework, dated 17 February 2023.

Qatar enacts amendments to Income Tax Law

The amendments relate to the scope of taxable activities, exemptions, noncompliance penalties, and powers of the General Tax Authority. The amendments also include provisions reinforcing Qatar’s commitment to the BEPS 2.0 project, before the more detailed introduction of Pillar Two rules in the future.

See Global Tax Alert, Qatar enacts amendments to Income Tax Law, dated 14 February 2023.

UK packaging waste regulations are effective as of 28 February 2023

The regulations require producers of packaging to collect and report data on the amount and type of packaging they put in the market in England. This data is needed to calculate the fees that these producers will be required to pay to cover the cost of managing this packaging as part of the Extended Producer Responsibility (EPR) for packaging scheme that is planned to start in 2024.

See Global Tax Alert, UK packaging waste regulations are effective as of 28 February 2023, dated 2 March 2023.

US Tax Court approves agreement resolving APA cancellation case

The US Internal Revenue Service (IRS) has indicated that it intends to rewrite the applicable guidance on requesting and obtaining APAs in light of the decision in this case, but no timeline has been announced. Until new guidance is released, the IRS has the burden of proving the grounds supporting an APA cancellation.

See Global Tax Alert, US Tax Court approves agreement by Eaton Corporation and the IRS resolving APA cancellation case, dated 16 February 2023.

For additional information with respect to this Alert, please contact the following:

• Matt Andrew, Asia-Pacific Tax Policy Leader, Auckland
• Barbara M. Angus, Global Tax Policy Leader, Washington, DC
  
• Julie Byrne, Global Tax Policy, Washington, DC
  
• Jorge Libreros Calderon, Latin America North Tax Controversy Leader, Panama City
  
• Martin Caplice, Asia-Pacific Tax Controversy Leader, Sydney
  
• Bryon Christensen, United States Tax Controversy Leader, Seattle
  
• Luis Coronado, Global Tax Controversy Leader, Singapore
  
• Cathy Koch, Americas Tax Policy Leader, Washington, DC
  
• Jean-Pierre Lieb, EMEIA Tax Policy and Controversy Leader, Paris
• Paul Mulvihill, Canada Tax Controversy Leader, Ottawa
• Rodrigo Munhoz, Latin America South Tax Controversy Leader, São Paulo
  
• Gilad Shoval, Israel Tax Controversy Leader, Tel Aviv

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.