KPMG’s Week in Tax: 11 - 15 April 2022

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

• OECD: Comments are due 29 April 2022 on the extractives exclusion under Amount A of Pillar One—part of the ongoing work of the OECD/G20 Inclusive Framework on BEPS in implementing the two-pillar solution to address the tax challenges arising from the digitalisation of the economy.
• OECD: Comments were released on the implementation framework of the global minimum tax.
• Brazil: Following a meeting between representatives of the government of Brazil and the OECD, Brazil is now inclined to fully adopt international standards on transfer pricing—that is, the OECD Transfer Pricing Guidelines.
• Zambia: A constituent entity that is not the ultimate parent entity of a multinational enterprise (MNE) group must file a country-by-country (CbC) reporting notification and CbC report with the Zambia Revenue Authority (ZRA) in accordance with regulations introduced in Zambia effective 1 January 2021 and applicable for years of assessment ending on or after 31 December 2021.
• Australia: The transition from the Inter-bank Offered Rate (IBOR) to Alternative Reference Rates (ARRs) is nearly complete. From a tax perspective, a key consideration is whether changes to existing financial arrangements to incorporate ARRs result in a tax event or a change in the tax status of the financial arrangement. 
• Kenya: The budget statement for 2022-2023 includes a proposal that multinational enterprises (MNEs) with operations in Kenya would be required to report their activities both within Kenya and in other jurisdictions to the Kenya Revenue Authority. This proposed change follows Kenya’s ratification and deposit of the “Multilateral Convention for Mutual Administrative Assistance in Tax Matters” with the Global Forum on Transparency and Exchange of Information on Tax Matters in July 2020 and its entry into force on 1 November 2020.
• Latvia: Companies that are part of a multinational group and located in Latvia will be included in future “public” CbC reports submitted by the responsible entity of the group. 

Read TaxNewsFlash-Transfer Pricing

• UK: HMRC published residential property developer tax guidance that is expected to evolve as the tax is implemented by business.
• Poland: The tax authority issued a taxpayer-specific ruling that since the taxpayer did not make depreciation write-offs on the held real estate in line with the accounting provisions, it would not be authorized to recognize tax-deductible costs on the account of depreciation write-offs.
• Poland: Indirect tax developments include a new VAT-R form template, and a CJEU judgment regarding Poland’s ruling on the exemption from excise tax on energy products.
• Serbia: A request for a VAT refund for 2021 must be submitted by 30 June 2022 at the latest.
• Belgium: The CJEU Advocate General issued an opinion concluding that the requirement for intermediaries under the EU mandatory disclosure rules (DAC6) to notify other intermediaries (or the relevant taxpayer) of their reporting obligation did not infringe on their rights under EU law as long as the name of the intermediary claiming privilege is not disclosed to the tax authorities.
• Norway: The government unveiled proposals that would amend the current petroleum tax system and move it toward a cash flow-oriented tax system. The revised proposal is expected to be decided and possibly approved by Parliament before July 2022, and if enacted, effective beginning 1 January 2022. 
• Czech Republic: Recent VAT developments concern donations to Ukraine, the VAT treatment of leaseback transactions, and the collection of VAT on cross-border supplies of goods.
• EU: The European Council formally adopted a directive introducing reforms to currently applicable VAT rates.
• EU: The European Commission announced a public consultation and requested comments regarding the EU framework governing the excise tax (duty) rates for alcohol. The public consultation will remain open until 4 July 2022.
• Latvia: Amendments to the corporate income tax law that were passed by the Parliament in the third reading include measures for “doubtful debts” and interest expense limits.
• Latvia: The tax authority is required to publish on its website information about its decisions regarding violations of tax and customs laws. The information is available for a period of three years or until the tax authority’s decision is revoked.
• Latvia: A VAT rate of 0% can be applied to goods supplied to Ukraine when delivered to certain qualifying public benefit organizations.

Read TaxNewsFlash-Europe

• Zambia: A constituent entity that is not the ultimate parent entity of a multinational enterprise (MNE) group must file a country-by-country (CbC) reporting notification and CbC report with the Zambia Revenue Authority (ZRA) in accordance with regulations introduced in Zambia effective 1 January 2021 and applicable for years of assessment ending on or after 31 December 2021.
• Kenya: The budget for 2022-2023 includes tax proposals concerning charitable tax-exempt bodies, gains from financial derivatives, thin capitalization rules, VAT and excise tax, and import and export levies.

Read TaxNewsFlash-Africa

• Bolivia: Two deadlines—for (1) registering or confirming tax receipts or documents in the VAT purchases and sales registry for transactions conducted during March 2022, and (2) modifying information for March 2022 already reported in the VAT purchases and sales registry—were extended to 18 April and 25 April 2022, respectively.
• Canada: Investment limited partnerships that indirectly invest in real property and qualify as “selected listed financial institutions” (SLFIs) for goods and services tax / harmonized sales tax (GST/HST) purposes must file a GST/HST final return by 30 June 2022.
• Canada: Manitoba’s budget includes proposals that would adjust the education property tax rebate for property owners, introduce a new residential renters tax credit, and extend certain corporate tax credits. There are no changes to the corporate or individual (personal) tax rates.
• Canada: The federal budget introduces several measures that may have important implications for financial institutions (including banks and insurance companies).
• Costa Rica: Legal entities, private trusts, non-profit organizations, and third-party resource administrators must provide by 30 April 2022 the required information about their ultimate beneficial owners to the platform managed by the Central Bank of Costa Rica.

Read TaxNewsFlash-Americas

• Bahrain: The due date for economic substance information returns was extended from 31 March 2022 to mid-August 2022 for entities that did not have their financial statements for FY 2021 audited by 31 March 2022. Entities that have submitted their economic substance returns based on unaudited financial statements may be required to resubmit their economic substance returns based on their audited financial statements.
• Kuwait: The government is considering imposing an excise tax on tobacco products, certain beverages, and luxury goods. The proposed rate of tax currently being studied by the government would range between 10% and 25%
• Malaysia: The Royal Malaysian Customs Department (RMCD) published guidance relating to the sales tax exemption on the importation or acquisition of pallets.  
• Philippines: The Bureau of Internal Revenue has issued guidance concerning VAT certifications, among other measures.
• Thailand: The customs department has launched additional control measures for “customs free zones” (CFZs) for both CFZ establishers and the CFZ users in commercial CFZs.
• India: Australia has agreed to amend its domestic law to stop the taxation of offshore income of Indian companies providing technical services to Australian clients.
• India: The Supreme Court upheld the validity of an assessment order issued in the name of amalgamating company post amalgamation.
  
• India: The CBDT issued a new rule specifying the mechanism of calculation of taxable interest on provident fund contributions exceeding the specified limit.
  
• India: A tribunal held that income earned by the taxpayer from Indian customers with respect to subscription fees for customer relationship management was not taxable as royalty income under Section 9(1)(vi) of the Income-tax Act, 1961 or under Article 12 of the India-Singapore income tax treaty. All equipment and machines relating to the services provided by the taxpayer were under its control and were outside India and the subscribers did not have any physical access to the equipment through which services were provided.
• India: The Central Board of Direct Taxes (CBDT) inserted a new rule detailing the manner of taxation of income from a retirement benefits account maintained in a notified country from tax year 2021-22 onwards.
• India: The CBDT issued a notification prescribing e-Dispute Resolution Scheme, 2022 and its rules.

Read TaxNewsFlash-Asia Pacific

• A notice provides the 2022 inflation adjustment factor and reference prices used in determining the availability of the credit for renewable electricity production under section 45.
• The U.S. Tax Court issued a memorandum opinion upholding the IRS’ determination that the taxpayer failed to classify approximately 99 individuals as employees during tax years 2016-2018 and was therefore liable for federal employment taxes, additions to tax, failure-to-deposit penalties, and accuracy-related penalties for the years at issue.
• The IRS announced that taxpayers who may need to take additional actions related to qualified opportunity funds (QOFs) should begin receiving letters in the mail in April.
   

State and local tax

• Kentucky: The General Assembly voted to override the governor’s veto of legislation containing significant tax law changes such as a gradual, potential reduction (and possible elimination) of the state’s current 5% individual income tax rate; the addition of 35 new services subject to sales and use tax; a new 6% excise tax for motor vehicle sharing or rentals; and a new tax on electric vehicle charging stations.
• Puerto Rico: The deadline for filing tax returns—and also for corporations to file corporate annual reports and for limited liability companies (LLCs) to remit annual fees—has been postponed to 25 April 2022 (from the original due date of April 18, 2022).
• New York City: A new law will allow a New York City (City) partnership or resident S corporation to elect to be subject to a new 3.876% entity level tax. An owner of the electing entity is entitled to a credit against his/her City personal income tax equal to the owner’s direct share of City passthrough entity tax (PTET) paid. The new tax is effective for tax years starting on or after 1 January 2023. 
• Maryland: A state appellate court held that a tribal corporation taxpayer that was not subject to federal income tax (and thus did not have federal taxable income) was not subject to Maryland corporate income tax.
  
• Oklahoma: The state’s Supreme Court in a case concerning when corporate income taxes are deemed paid for purposes of filing a timely claim for refund, held that the taxpayer’s taxes were deemed paid when it filed its return on the extended due date—although the high court found that the statute was, after examining all the relevant statutes and the federal rules, ambiguous.
  
• Washington State: A state appellate court affirmed the City of Tacoma’s interpretation of the apportionment provisions for services income under the state’s B&O tax.

Read TaxNewsFlash-United States

• Poland: The list of states and territories subject to the CRS reporting obligation for 2021 was published in the official gazette.
• Cayman Islands: The Department for International Tax Cooperation (DITC) issued enforcement guidelines related to the CRS regime.
• Luxembourg: An updated version of “frequently asked questions” (FAQs) related to the common reporting standard (CRS) regime includes two new FAQs.

Read TaxNewsFlash-FATCA / IGA / CRS

• United States: The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued a new Russia-related general license authorizing the wind down of transactions involving certain joint stock companies.
• Thailand: The customs department has launched additional control measures for “customs free zones” (CFZs) for both CFZ establishers and the CFZ users in commercial CFZs.
• Costa Rica: A new law defines and promotes a national policy for encouraging the integration of customs information and the establishment of inspection scanners in ports, airports, and land border crossings in Costa Rica.
• Costa Rica: Resolution number DGA-079-2022 establishes the guidelines applicable to the logistics companies benefiting from the “free zone” regime.
• Kenya: A proposal in the budget for 2022-2023 would reduce certain import and export levies.

Read TradeNewsFlash-Trade & Customs

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)