Global Tax Policy and Controversy Watch | April 2023 edition

In the spotlight

Why now is the time to prepare for the global tax transformation

The EY 2023 Global Tax Policy and Controversy Outlook's narrative piece focuses on the intensifying global activity around BEPS 2.0 Pillar Two, new transparency requirements and a plethora of sustainability and other tax measures. The article draws from the observations of EY Tax professionals in 70 jurisdictions gathered in the annual Outlook survey.

Read the article and download the detailed jurisdiction reports.

Why is tax governance key in an era of more tax risk and controversy?

The EY 2023 Tax Risk and Controversy Survey reveals that businesses are bracing for a new era of tax risk. EY secured the views of more than 2,100 tax and finance leaders across 47 jurisdictions and 20 industry sectors during January and February this year, making it the largest sample in the survey's history.

Read the article, dated 28 March 2023.

Key highlights

OECD holds public consultation meeting on compliance and tax certainty aspects of the Pillar Two global minimum tax

During the 16 March 2023 meeting, three panels discussed key questions related to the December 2022 consultation document on tax certainty for Pillar Two, including why tax certainty is important for the implementation of the GloBE rules and how differences/issues in the application of the rules can be prevented or resolved. In addition, two panels discussed key questions related to the December 2022 consultation document on the GloBE information return, including simplification of the data points and the return and standardization of administration.

See EY Global Tax Alert, OECD holds public consultation meeting on compliance and tax certainty aspects of Pillar Two global minimum tax, dated 29 March 2023.

BEPS 2.0 Pillar Two implementation activity

Japan has enacted its 2023 tax reform bill, which includes the Pillar Two income inclusion rule (IIR) effective for fiscal years beginning on or after 1 April 2024. The UK has published legislation for implementing the Pillar Two IIR and qualified domestic minimum top-up tax. The German Federal Ministry of Finance has published a discussion draft of legislation implementing the EU Pillar Two directive, providing an opportunity for public comment.

See EY Global Tax Alerts, Japan enacts 2023 tax reform bill including legislation to implement IIR to align with OECD BEPS 2.0 Pillar Two, dated 30 March 2023; UK publishes legislation for multinational top-up tax and domestic top-up tax, dated 27 March 2023; and Germany Federal Ministry of Finance publishes draft BEPS 2.0 Pillar Two implementation bill, dated 22 March 2023.

EY comments on BEPS 2.0 consultation documents identify key issues impacting tax certainty for multinationals

The BEPS 2.0 project is gaining steam. It is important that clients keep up to date with these developments and consider the potential impact on their controversy strategy.

Read the latest Global Tax Controversy monthly flash news article, EY comments on BEPS 2.0 consultation documents identify key issues impacting tax certainty for multinationals, dated 17 March 2023.

News items

Australian Treasury releases Exposure Draft Bills on thin cap changes and tax transparency disclosure of information

The two Exposure Draft Bills and Explanatory Material were released for consultation on the Australian government's proposals to amend the thin capitalization rules to limit debt deductions of MNEs to 30% of EBITDA and, separately, to require listed and unlisted Australian public companies to disclose information on the number of subsidiaries and their country of tax domicile.

See EY Global Tax Alert, Australian Treasury releases Exposure Draft Bills on thin cap changes and tax transparency disclosure of information, dated 17 March 2023.

Bulgaria introduces measures for addressing high energy prices

Following the October 2022 EU Regulation 2022/1854 on emergency intervention to address high energy prices, Bulgaria introduced an obligation for electricity producers and traders to pay special purpose contributions.

See EY Global Tax Alert, Bulgaria introduces measures for addressing high energy prices, dated 28 March 2023.

Honduran Government to file tax reform bill before the National Congress

The bill would significantly reform the current tax system, including establishing a worldwide income tax that would apply to all local source and foreign source income, eliminating bank secrecy for tax purposes and ratifying the Convention on Mutual Administrative Assistance in Tax Matters.

See EY Global Tax Alert, Honduran Government to file new tax reform before the National Congress, dated 22 March 2023.

Japan offers clarity on Companies Act and PE

The Japanese Tax Authority confirmed that a representative and registration in Japan, as required under the Companies Act, does not create a permanent establishment (PE). This ruling is the first to publicly provide guidance concerning the PE implications of a foreign corporation's obligations under the Companies Act.

See EY Global Tax Alert, Japan's Tax Authority confirms that a representative and registration in Japan as required under Companies Act does not create a PE, dated 16 March 2023.

Kenya Tax Appeals Tribunal reiterates that private ruling is binding on Tax Authority

The Tax Appeals Tribunal held that without proof of material nondisclosure or misinformation, the Kenya Revenue Authority is bound by its own private ruling.

See EY Global Tax Alert, Kenya Tax Appeals Tribunal reiterates that private ruling is binding on Tax Authority, dated 27 March 2023.

Luxembourg submits draft legislation introducing public CbCR

The draft legislation submitted to Luxemburg's Parliament to implement the EU public country-by-country reporting (CbCR) directive includes provisions (1) allowing in-scope groups under certain conditions to defer the disclosure of commercially sensitive information for up to five years and (2) exempting undertakings from the obligation to post the report on their website if they instead post a notice regarding the exemption and referring to the official Register where the report has been lodged. The new reporting obligations will apply to financial years starting on or after 22 June 2024.

See EY Global Tax Alert, Luxembourg submits draft legislation introducing public country-by-country reporting for multinational enterprises, dated 22 March 2023.

Nigeria rules that network facilities/infrastructure providers should not be subject to the NITDA levy

Nigeria's Tax Appeal Tribunal ruled that a company that does not qualify as a telecommunications company, even if it is active in the sector, is not subject to the National Information Technology Development Act (NITDA) levy.

See EY Global Tax Alert, Nigeria's Tax Appeal Tribunal rules that network facilities/infrastructure providers should not be subject to the National Information Technology Development Act levy, dated 20 March 2023.

Poland defers deadline for Corporate Income Tax and Shifted Profits Tax

Poland's Ministry of Finance has issued a decree deferring the deadline for filing and paying corporate income tax until 30 June 2023.

See EY Global Tax Alert, Poland defers deadline for Corporate Income Tax and Shifted Profits Tax, dated 30 March 2023.

Saudi Arabia amends Implementing Regulations on excise tax

The amended provisions of the Excise Tax Implementing Regulations relate to excise tax procedures, including refunds, postponement of excise tax payments on imports and audit procedures, and are effective as of 24 February 2023.

See EY Global Tax Alert, Saudi Arabia amends Implementing Regulations on excise tax, dated 31 March 2023.

Saudi Arabia announces third wave of Phase 2 e-invoicing integration

The General Authority for Zakat, Tax and Customs Authority announced the criteria for taxpayers to be included in the third wave of Phase 2 e-invoicing integration.

See EY Global Tax Alert, Saudi Arabia amends Implementing Regulations on excise tax, dated 31 March 2023.

Türkiye introduces additional corporate tax for 2022

The additional tax is on corporations that benefitted from certain exemptions and deductions to be claimed in their corporate tax returns for 2022.

See EY Global Tax Alert, Türkiye introduces additional tax for 2022, dated 23 March 2023.

Türkiye introduces tax amnesty

On 12 March 2023, a new tax amnesty law in Türkiye was published in the Official Gazette and entered into force.

See EY Global Tax Alert, Türkiye introduces tax amnesty, dated 23 March 2023.

UAE issues additional guidance on determination of tax residency for individuals

In a Ministerial Decision, the Ministry of Finance provided additional details regarding the requirements for a natural person to qualify as tax resident in the UAE.

See EY Global Tax Alert, UAE issues additional guidance on determination of tax residency for individuals, dated 21 March 2023.

UK increases Plastic Packaging Tax rate

Effective 1 April 2023, the rate of the Plastic Packaging Tax will increase to £210.82 per ton (from £200 per ton).

See EY Global Tax Alert, UK increases Plastic Packaging Tax rate, dated 17 March 2023.

UK Chancellor delivers Spring Budget 2023

The Budget, delivered on 15 March 2023, confirms the increase in the main rate of UK corporation tax to 25% from 1 April 2023 and includes several tax incentives announced to offset the increase for certain targeted companies. The Budget also includes changes to the Energy Profits Levy and detail on the Electricity Generator Levy.

See EY Global Tax Alert, UK Chancellor delivers Spring Budget 2023, dated 16 March 2023.

UK Government launches consultation on a carbon border adjustment mechanism

The new consultation on "addressing carbon leakage risk to support decarbonisation" is wide-ranging, covering several interrelated policies including a carbon border adjustment mechanism, mandatory product standards on embodied emissions, other policy measures designed to boost demand for low carbon products, and emissions reporting.

See EY Global Tax Alert, UK Government launches consultation on a carbon border adjustment mechanism and other measures, dated 30 March 2023.

Uruguay announces tax reductions for individual taxpayers and small to medium-sized companies

The Uruguayan President proposed (1) tax reductions to Personal Income Tax and Social Security Assistance Tax through a bill submitted to Congress and (2) benefits for micro and small companies through ministerial decrees.

See EY Global Tax Alert, Uruguay's President announces tax reductions that would alleviate some tax burdens for individual taxpayers and small to medium-sized companies, dated 16 March 2023.

US Budget includes few new international tax proposals, largely reprising proposals from prior budgets

The US Treasury explanation of the revenue proposals in the Biden Administration's FY2024 budget covers multiple international tax proposals that were included in prior budgets and describes a few international tax measures that are new in this budget.

See EY Global Tax Alert, US FY2024 Budget includes few new international tax proposals, largely reprising proposals from prior budgets, dated 20 March 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

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

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