KPMG’s Week in Tax: 28 February - 4 March 2022
Recent tax developments from around the globe for the week of 28 February - 4 March 2022
Recent tax developments from around the globe for the week of 28 February - 4 March 2022
Tax developments or tax-related items reported this week include the following.
- Estonia: An updated transfer pricing regulation is intended to harmonize the existing transfer pricing rules with the general principles of the OECD Transfer Pricing Guidelines. Transfer pricing documentation must include a Master file, Local file, and country-by-country (CbC) report.
- Bulgaria: The Court of Justice of the European Union (CJEU) concluded that “fictitious interest” (deemed interest) assessed with regard to interest-free loans between related parties did not involve an actual payment between the companies and, accordingly, the lender could not be deemed to be a “beneficial owner” eligible under the EU Interest and Royalties Directive, and the interest could not be regarded as a “distribution of profits” within the meaning of the Parent-Subsidiary Directive.
- Belgium: The tax authority has launched its annual round of transfer pricing audits.
- OECD: The Organisation for Economic Cooperation and Development (OECD) announced the publication of a third batch of the 2021/2022 updated transfer pricing country profiles. The country profiles provide current information on key aspects of transfer pricing legislation and practice.
- Poland: The Minister of Finance—replying to a parliamentary inquiry regarding an obligation of establishing transfer pricing documentation for financial transactions involving loans—indicated that while determining whether a controlled transaction involving several loans is covered by the obligation for transfer pricing documentation, the principal value of all outstanding (unpaid) loans must be considered. Only the outstanding principal amount of a loan for the given year, however, is to be taken into account.
- Latin America: A KPMG report outlines the most pressing issues under BEPS 2.0 Pillars One and Two for Argentina, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Mexico, Panama, Peru, and Uruguay.
- Costa Rica: A new law aims to promote and regulate activities related to access, installation, connection, interaction, and control of distributed energy resources based on renewable energy sources, under a special regime of efficient, safe, and sustainable integration.
- Colombia: A KPMG report summarizes corporate, commercial, customs, and foreign exchange obligations for 2022 for legal entities with presence in Colombia.
- Colombia: A decree relating to minimum standards for the protection of personal data in Colombia indicates that the policies adopted by a business group must contain minimum standards not only for the transfer of personal data to third countries, but also to obtain the certification of good practices in the protection of personal data by the Superintendence of Industry and Commerce.
- Bahamas: An updated EU list of non-cooperative jurisdictions for tax purposes added the Bahamas to Annex II (the so-called “grey list”).
- Bahrain: Under a proposal from Parliament’s Financial and Economic Affairs Committee, traders would have the option of paying VAT on imports after selling their products—instead of having to pay VAT at the time of the customs clearance.
- Malaysia: A set of “frequently asked questions” (FAQs) provides further clarification on the application of the newly introduced withholding tax provision of Section 107D of the Income Tax Act, 1967.
- Thailand: Officials signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). Thailand is the 98th jurisdiction to sign the MLI.
- Belgium: The value added tax (VAT) rate for electricity is reduced to 6% (from 21%) for residential consumption for the period between 1 March 2022 and 30 June 2022.
- Sweden: New rules require certain foreign companies to submit a “specific information” report to the Swedish tax agency.
- South Africa: A KPMG report summarizes the tax proposals presented in the 2022 budget.
FATCA / IGA / CRS
- British Virgin Islands: The tax authority reminded all financial institutions that taxpayer identification number (TIN) information is mandatory when submitting FATCA returns, beginning with the 2020 reporting period.
- Saint Kitts and Nevis: The tax authority issued an advisory on the common reporting standard (CRS) requirement to obtain and report a date of birth for reportable persons.
- Ireland: Updated filing guidelines under the CRS regime provide guidance to financial institutions to file a correction return per the OECD schema guidelines.
- The U.S. Court of Appeals for the Sixth Circuit reversed a federal district court, and concluded that it must set aside Notice 2007-83 (regarding “listed transactions”) because the IRS’s process for issuing the notice did not satisfy the notice-and-comment procedures for promulgating legislative rules under the Administrative Procedure Act (APA).
- The Sixth Circuit denied a taxpayer’s petition for a rehearing en banc of the Sixth Circuit’s decision affirming the U.S. Tax Court’s decision upholding an IRS deficiency determination that sales income from manufacturing operations in Mexico involving a Luxembourg controlled foreign corporation (CFC) was foreign base company sales income (FBCSI) under section 954(d).
- The U.S. Tax Court issued an opinion concluding that sections 2036(a)(2) and 2038 do not require inclusion of certain life insurance policies’ cash-surrender values in the decedent’s estate because the decedent did not have any right, whether by herself or in conjunction with anyone else, to terminate the policies.
- KPMG reports (1) highlight certain guidance that may help avoid common errors encountered while preparing the Forms series 1099, and (2) examine section 6050W reporting on Form 1099-K.
State and local tax
- The New York Tax Appeals Tribunal affirmed an administrative law judge’s decision holding that an IT security services company was providing protective services, which are specifically enumerated as subject to sales tax.
- The Pennsylvania Department of Revenue issued Corporation Tax Bulletin 2022-01 addressing the proper apportionment of income by a taxpayer involved in activities subject to both special apportionment formulas and the standard single sales factor formula. The bulletin sets forth the steps for applying the Department’s split-apportionment methodology and provides examples.
- Idaho House Bill 472 adopts the Internal Revenue Code as in effect on 1 January 2022.
- Virginia House Bill 971 advances the Commonwealth’s conformity to the Internal Revenue Code as of 31 December 2021.
- West Virginia Senate Bill 451 provides that for corporate net income tax purposes, all amendments made to the laws of the United States after 31 December 2020, but prior to 1 January 2022, will be given effect to the same extent those changes are allowed for federal income tax purposes
Trade & Customs
- Both the United States and European Union continue to impose sanctions on Russian individuals and entities in response to Russia’s invasion of Ukraine.
- The Office of the U.S. Trade Representative (USTR) added new license requirements and review policies for Belarus to the Export Administration Regulations (EAR) to render Belarus subject to the same sanctions that were imposed on Russia last week.
- The USTR delivered President Biden’s 2022 trade agenda and 2021 annual report to Congress. The USTR also released the fiscal year 2022-2026 strategic plan.
The items described above are also reported as editions of TaxNewsFlash:
- Indirect Tax
- Taxation of the Digitalized Economy
- Tax Dispute Resolution
- Tax Developments Relating to Coronavirus (COVID-19)
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