KPMG’s Week in Tax: 10 - 14 January 2022

Recent tax developments from around the globe for the week of 10 - 14 January 2022

Recent tax developments from around the globe for the week of 10 - 14 January 2022

Tax developments or tax-related items reported this week include the following.

Transfer Pricing

  • Bahrain: The Ministry of Industry Commerce and Tourism notified Bahrain companies on their country-by-country notification and reporting obligations indicating that the notification filing window will be open until 28 February 2022.
  • Thailand: The deadlines for country-by-country (CbC) reports are extended for the fiscal year starting on or after 1 January 2021.
  • UK: HM Treasury opened a public consultation on the implementation in the UK of Pillar Two of the OECD/G20 Inclusive Framework’s proposed solution to the tax challenges arising from digitalisation of the economy. The rules under Pillar Two would establish a global minimum tax of 15% for multinational enterprises with a turnover of at least €750 million, effective from 2023. 
  • Azerbaijan: Enacted legislation extends the transfer pricing rules to: (1) transactions involving goods or commodities trade on international stock exchanges; (2) transactions with a single non-resident of a value exceeding AZN 30 million (approximately U.S. $17.6 million); and (3) transactions with a single non-resident exceeding 30% of the total income or expenses of a resident of Azerbaijan.

Read TaxNewsFlash-Transfer Pricing

FATCA / IGA / CRS

  • Taiwan: The Ministry of Finance announced that financial institutions originally listed as “entities that present a low risk of being used to evade tax” fall within the amended definition of “governmental entity”—under the common reporting standard (CRS) regime.

Read TaxNewsFlash-FATCA / IGA / CRS

Africa

  • Nigeria: Companies that are beginning the audit and preparation of financial statements for the 2021 financial year need to consider including reports of their various tax contributions along with other financial indices as part of the financial statements and directors’ report. 
  • Mauritius: The European Commission confirmed that Mauritius has been removed from the European Union (EU) list of “high-risk third countries,” following measures taken by Mauritius to improve its anti-money laundering (AML) / combating the financing of terrorism (CFT) regime.
  • South Africa: The National Treasury released a discussion paper on the future of the section 11D—the research and development (R&D) tax incentive. Comments are due by 25 January 2022.

Read TaxNewsFlash-Africa

Americas

  • Canada: Reporting relief for certain Canadian-resident cross-border workers is extended to 2021. Previously, the reporting relief was only provided for the 2020 tax year.
  • Canada: The government of Quebec plans for further changes to the eligibility requirements for its “patent box” tax regime.
  • Canada: Employers that offer registered pension plans to their employees, and that have monthly goods and services tax (GST), harmonized sales tax (HST) and Quebec sales tax (QST) reporting periods with a 31 December 2021 year-end, must remit the amounts of GST/HST (and, if applicable, QST) related to the pension plans by 31 January 2022.
  • Canada: The Department of Finance announced a $0.02 (two cent) increase to the prescribed rates used to compute certain employee taxable benefits for 2022, including automobile allowance limits for personal use.
  • Canada: Businesses in Ontario may be eligible for a six-month interest- and penalty-free period for most provincially administered tax payments and related returns due between 1 January 2022 and 1 July 2022. 
  • Canada: Corporations and other organizations preparing financial reports need to be aware of certain 2021 Canadian income tax rate and other changes that may need to be reflected in year-end financial statements.
  • Chile: Legislative measures propose to make certain VAT law changes.
  • Mexico: The following cities and states in Mexico have published their payroll tax rates for 2022: Aguascalientes, Campeche, Guanajuato, Quintana Roo, San Luis Potosi, and Zacatecas.
  • Mexico: The values of the “unit of measure and update” (unidad de medida y actualización (UMA))—effective 1 February 2022—were announced. The UMA has implications for tax and social security contribution determinations.
  • Mexico: The state government of Querétaro increased the rate of payroll tax to 3% (from 2%) for 2022.
  • Mexico: The federal tax administration published a new version of “Revision C” regarding the payroll supplement for 2022. The new version functions under the online digital tax receipt (CFDI) system, and its use if mandatory as of 1 May 2022.
  • Bolivia: Deadlines concerning VAT documentation for December 2021 have been extended.
  • Argentina: There are new requirements for accessing the official exchange market to make payments for services provided by non-residents.
  • Argentina: Customs and trade measures effective at the beginning of 2022 concern a statistical charge of 3%, duties on export services, and duties on exports of goods and merchandise.
  • Brazil: New legislation introduces changes to the Brazilian foreign exchange rules that are intended to simplify and modernize current rules considering the financial system and regarding new technologies affecting the way companies and individuals carry out foreign exchange transactions.
  • Brazil: Changes relating to indirect taxes effective in 2022 include measures concerning the state-level sales taxes and social contributions (ICMS, PIS, and COFINS).

Read TaxNewsFlash-Americas

Asia Pacific

  • Malaysia: Payments made by companies in monetary form to their authorised agents, dealers or distributors arising from sales, transactions or schemes carried out by them, are subjected to 2% withholding tax.
  • Azerbaijan: Changes to the tax law effective 1 January 2022 concern, among other items, the rules for permanent establishments, the tax treatment of offshore income or revenue, transfer pricing rules, and controlled foreign company (CFC) rules.
  • UAE: The tax authority introduced procedures to resolve tax penalty liabilities in installments and for the administrative waiver of penalties.
  • Cambodia: Guidance addresses which language and currency to use in accounting records and financial statements, effective 1 January 2022.
  • India:  A tribunal held that marketing services are not taxable as fees for technical services (FTS) under a provision of the Income-tax Act, 1961 because such services were rendered by the taxpayer outside India and were used in business carried on outside India by an Indian company.
  • India: A tribunal quashed “revisionary proceedings” initiated by the Commissioner regarding the Assessing Officer’s final order that was issued pursuant to the Dispute Resolution Panel’s (DRP) direction. The tribunal observed that an order given pursuant to the DRP’s direction is not available for the revisionary proceedings, and that once the Assessing Officer issues an order in accordance with the directions issued by the DRP, this cannot be revised by the Commissioner.
  • India: The Karnataka Appellate Authority for Advance Ruling (appellate AAR) upheld an order from a lower AAR and concluded that vouchers traded by the taxpayer are goods and not actionable claims.
  • India:  The Central Board of Direct Taxes (CBDT) issued a notice prescribing a new “faceless” appeal scheme, with an effective date of 28 December 2021.
  • India: The Central Board of Indirect Taxes and Customs issued guidance to clarify the treatment of “automobile parts” for customs tariff purposes.

Read TaxNewsFlash-Asia Pacific

Europe

  • Switzerland: The Swiss Parliament proposed increased VAT rates to help fund the Swiss pension system.
  • Cyprus: New forms are available regarding declarations of amounts withheld for the special contribution for defense and for the general healthcare system from payments of interest and dividends. 
  • Poland: The Ministry of Finance issued a decree extending the deadline for collecting and transferring certain individual (personal) income tax advance payments.
  • Albania: The parliament passed legislation that includes provisions addressing money laundering, the definition of beneficial owner, and certain categories of professionals (such as lawyers and notaries) and others under the anti-money laundering rules.
  • Bulgaria: A reduced VAT rate of 9% for certain goods and services has been extended through 31 December 2022.

Read TaxNewsFlash-Europe

Trade & Customs

  • Netherlands: A new customs declaration system (DMS) is to be implemented before 1 January 2023.
  • India: The Central Board of Indirect Taxes and Customs issued guidance to clarify the treatment of “automobile parts” for customs tariff purposes.
  • Argentina: Customs and trade measures effective at the beginning of 2022 concern a statistical charge of 3%, duties on export services, and duties on exports of goods and merchandise.
  • United States: A company based in Hong Kong agreed to remit approximately $5.2 million to settle its potential civil liability for apparent violations of the Iranian transactions and sanctions regulations.
  • United States: U.S. Customs and Border Protection reported that if the U.S. Food and Drug Administration (FDA) receives an entry with the “FDA message” set on an entry type not subject to FDA import requirements, the FDA will reject the entry data. 
  • United States: The effective date for an interim final rule—concerning controls on certain cybersecurity items for national security and anti-terrorism reasons—has been delayed to 7 March 2022.

Read TradeNewsFlash-Trade & Customs

United States

  • The IRS corrected an error in Table 4 of Rev. Proc. 2021-54 regarding discount factors for the 2021 accident year for use by insurance companies in computing discounted unpaid losses under section 846.
  • The National Taxpayer Advocate released a report to Congress identifying taxpayer challenges—focusing on the taxpayer implications of processing and refund delays.
  • Taxpayers in Washington State that were affected by November 2021 flooding and mudslides now have until 15 March 2022 to file individual and business tax returns and to make certain tax payments.
  • Notice 2022-5 extends and provides new temporary relief for certain requirements regarding the low-income housing credit available under section 42 for qualified low-income housing projects.
  • The IRS announced the “tax season” opens 14 January 2022 when the IRS will begin accepting and processing individual income tax returns for 2021. Most tax returns filed by individual taxpayers will be due 18 April 2022.
     

State and local tax

  • Puerto Rico: The Municipal Revenue Collection Center approved a program regarding the collection of delinquent real property taxes. The purpose of the program is to provide taxpayers an opportunity to update their records and to pay outstanding amounts of real property taxes, with relief from interest and penalties. 
  • Oregon: The state’s Supreme Court held that a “voice over internet protocol” (VoIP) service provider was required to collect the state’s emergency “E-911 tax” for a tax period that pre-dated the Wayfair decision.
  • Pennsylvania: A commonwealth court concluded that a taxpayer was not a manufacturer for purposes of the sales and use tax exemption. The taxpayer created prepackaged frozen meals by taking separate food products and transforming them into prepackaged, ready-to-use meals. The court found that this process did not result in the kind of substantive change necessary to qualify for the manufacturing exemption.
  • Tennessee: The Department of Revenue issued a letter ruling concluding that certain separately stated fees associated with the sale of platform computer software were subject to sales and use tax.
  • Texas: A state appeals court concluded that a taxpayer was entitled to a sales and use tax exemption for electricity used at its manufacturing plant. The subject manufacturing involved the imprinting of cash register tapes for retail and grocery stores.

Read TaxNewsFlash-United States

The items described above are also reported as editions of TaxNewsFlash:

 

 

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