KPMG’s Week in Tax: 14 - 18 March 2022

Recent tax developments from around the globe for the week of 14 - 18 March 2022

Recent tax developments from around the globe for the week of 14 - 18 March 2022

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

Transfer Pricing and BEPS

  • OECD: The Organisation for Economic Cooperation and Development (OECD) published commentary on the Pillar Two model rules, in furtherance of its goal of providing a precise template for governments to move forward with Pillar Two of the two-pillar solution to address the tax challenges arising from digitalisation and globalisation of the economy.
  • EU: The Economic and Financial Affairs Council (ECOFIN) failed to reach political agreement on the revised proposal for an EU minimum tax directive.

Read TaxNewsFlash

FATCA / IGA / CRS

  • Anguilla: The reporting deadlines for FATCA and the common reporting standard (CRS) returns for the 2021 reportable year will remain 31 May 2022.
  • Germany: Guidance provides updated information concerning the CRS regime.
  • Luxembourg: The tax authority issued a newsletter about the tax identification number (TIN) field for FATCA reporting purposes.
  • Barbados: The deadline for FATCA and CRS reports for pre-2021 years was extended until 15 April 2022. 
  • Saint Kitts and Nevis: Financial institutions with FATCA and CRS reporting obligations are required to register with the tax authority through its AEOI Portal.

Read TaxNewsFlash-FATCA / IGA / CRS

Trade & Customs

  • U.S. proposed legislation, if enacted, would suspend normal trade relations with Russia and Belarus.
  • The European Union (EU) has imposed duties on imports of “stainless steel cold-rolled flat products” originating in Indonesia and India.
  • The European Council has agreed to adopt further restrictive measures against Russia in response to the situation in Ukraine.
  • The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) designated certain Russian and Belarusian individuals and one entity pursuant to the Sergei Magnitsky Rule of Law Accountability Act of 2012.
  • U.S. Customs and Border Protection (CBP) announced that merchandise produced or manufactured by a specific Chinese sporting goods company will be detained at all U.S. ports of entry as a result of a CBP investigation indicating that the sporting goods company uses North Korean labor in its supply chain.

Read TradeNewsFlash-Trade & Customs

Americas

  • Canada: As a reminder, the deadline for financial institutions in Canada to file annual goods and services tax (GST), harmonized sales tax (HST), and Quebec sales tax (QST) returns is 30 June 2022.
  • Chile: Taxpayers subject to the simplified VAT regime for digital services that mistakenly declare and enter an amount of VAT greater than actually due may request a refund or imputation of the excess VAT paid.
  • Chile: Digital service providers without domicile in Chile may request a modification of their choice of tax period and currency for declaration and payment of VAT once a year, between 21 and 31 January of each year.
  • Barbados: The 2022 budget includes tax-related measures concerning COVID-19 contribution levies, VAT, and customs and import duties, among others.
  • Mexico: The second resolution of modifications to the miscellaneous tax resolution 2022 includes, among other items, measures concerning the online digital tax receipt system, corporate mergers in the taxpayer registry, and standards for determining the type of hydrocarbon or petroleum products.

Read TaxNewsFlash-Americas

Asia Pacific

  • Australia: Businesses currently facing the high cost of fuel need to consider fuel excise tax credits.
  • India: A tribunal—in a case concerning whether there was a permanent establishment in India under the India-Japan income tax treaty—held that the premises of the joint venture did not constitute a fixed place permanent establishment in India. 
  • India: The Bombay High Court—in a case concerning the question of withholding tax at source by a foreign holding company even though the transaction (the purchase of shares) was undertaken by its wholly owned subsidiary company—found that the taxpayer was not the purchaser of shares. 
  • New Zealand: A number of changes to the dividend and income attribution rules for closely held companies are being proposed to address perceived opportunities to avoid the 39% individual (personal) tax rate.
  • Philippines: Guidance provides clarifications regarding certain issues pertaining to the VAT treatment of transactions by registered business enterprises—particularly registered export enterprises.
  • Bahrain: The economic substance information returns are due 31 March 2022 for entities that carry out a “relevant activity” or have a “relevant activity” code on their commercial registration.
  • Thailand: The Thai Cabinet approved two tax relief measures to support the trading in digital assets and the investment in Thai start-ups.
  • Hong Kong: The government has commenced the formal consultation process on the proposed profits tax exemption for family office business in Hong Kong. The new tax exemption is expected to apply from year of assessment 2022/2023.
  • Malaysia: The “instrument of ratification” for the Regional Comprehensive Economic Partnership (RCEP) agreement was submitted to the Association of Southeast Asian Nations (ASEAN) Secretariat.

Read TaxNewsFlash-Asia Pacific

Europe

  • Greece: The tax administration released detailed guidance, including examples, regarding controlled foreign corporations (CFCs).
  • Italy: Guidance provides new rules for VAT “bad debt” relief in relation to insolvency proceedings and reflects a change from prior guidelines concerning how to recover VAT (if charged in past invoices) by means of credit notes.
  • Serbia: The deadline for filing annual individual (personal) income tax returns for 2021 is 16 May 2022.
  • Bulgaria: Changes to the corporate income tax include provisions concerning sale-leaseback agreements, the transposition of EU anti-tax avoidance rules into Bulgarian domestic tax law, the tax rate for one-off tax expenses, and the tax treatment of food vouchers provided to employees.

Read TaxNewsFlash-Europe

United States

  • Rev. Proc. 2022-17 provides the annual depreciation deduction limitations under section 280F for automobiles placed in service in 2022. The section 280F limitations are required to be adjusted for inflation for automobiles placed in service after 2018.
  • Announcement 2022-6 provides that, effective 14 March 2022 (and until further notice), the IRS will not accept applications for opinion letters on prototype IRAs (traditional, Roth and SIMPLE IRAs), SEPs (including salary reduction SEPs (SARSEPs)), and SIMPLE IRA plans.
  • OMB’s Office of Information and Regulatory Affairs (OIRA) received for review proposed regulations providing guidance under section 36B regarding the premium tax credit.
  • The U.S. Tax Court issued an opinion concluding that a taxpayer must use the same method to characterize its controlled foreign corporation (CFC) stock for purposes of computing its foreign tax credit under section 904 as the method used by the CFC for interest expense apportionment.
  • The U.S. Court of Appeals for the Sixth Circuit affirmed a “reviewed opinion” of the U.S. Tax Court upholding the validity of the regulations under section 170 with respect to the rules for charitable donations of conservation easements.
  • The excess business loss regime—which takes effect again for tax years beginning in 2021—may disallow losses for individuals, trusts, and estates. A KPMG report considers how section 461(l) applies, explores ambiguous areas, and contemplates possible solutions.

State and local tax

  • Idaho: House Bill 563 (pending action by the governor) would: (1) adopt single-sales factor apportionment and market-based sourcing for receipts from sales other than sales of tangible personal property; and (2) revise definitions used in the apportionment statute and clarify the provisions around the use of an alternative apportionment formula.
  • New Jersey: Under federal law, taxpayers cannot deduct wages that are the basis of the credits. Guidance regarding the federal employee retention credit—a refundable tax credit of 50% (or 70% for wages paid during the first three quarters of 2021) of up to $10,000 in wages paid by an eligible employer—clarifies that corporate taxpayers are not allowed New Jersey state deductions for disallowed federal wage expenses. 
  • New Mexico: Newly enacted legislation reduces the state’s gross receipts tax rate to 5% (down from 5.125%) effective 1 July 2022. The legislation provides for a further reduction of the gross receipts tax rate with an effective date of 1 July 2023 but provides a rate increase if the gross receipts tax fails to generate sufficient revenue.
  • New York: A state appellate court affirmed a decision of the tax appellate tribunal, holding that a corporate owner of a disregarded “single member limited liability company” (SMLLC) that was an SEC-registered broker-dealer could not source receipts that were derived outside of that SMLLC broker-dealer relationship using the state’s broker-dealer customer sourcing rules.
  • Pennsylvania: Regarding the federal employee retention credit, the Department of Revenue announced that there is no statutory provision allowing deductions for disallowed federal wage expenses for corporate net income tax purposes and that corporate taxpayers are not allowed state deductions for disallowed federal wage expenses.  

Read TaxNewsFlash-United States

Cooperatives

  • Notice 2022-13 provides a waiver of the addition to tax under section 6654 for underpayment of estimated income tax by qualifying farmers and fishermen. The addition to tax is waived for farmers and fishermen who, by 18 April 2022 (or for those taxpayers who reside in Maine or Massachusetts, by 19 April 2022) file their 2021 federal income tax return and also pay in full any tax reported as due on the return.

Read TaxNewsFlash-Cooperatives

Exempt Organizations

  • The IRS Tax Exempt and Government Entities (TE/GE) division published technical guides concerning religious and apostolic associations section 501(d), excise taxes on self-dealing under section 4941, and excise taxes on taxable expenditures under section 4945.

Read TaxNewsFlash-Exempt Organizations

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

 

 

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