KPMG’s Week in Tax: 27 June - 1 July 2022

Recent tax developments from around the globe for the week of 27 June - 1 July 2022

Recent tax developments from around the globe for the week of 27 June - 1 July 2022

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

Asia Pacific

  • Australia: The Australian Taxation Office (ATO) finalized a tax determination relating to the treatment of the U.S. global intangible low-taxed income (GILTI) provisions in the context of the Australian hybrid mismatch rules.
  • Australia: The Australian Labor Party announced that it will replace the existing thin capitalization safe harbor debt test (60% of assets) with the Organisation for Economic Cooperation and Development’s (OECD’s) recommended test (30% of “earnings before interest, taxes, depreciation and amortization” (EBITDA)). As a result, it is expected that a significantly higher proportion of real estate investment trusts (REITs) will need to rely on the arm’s length debt test, which could lead to an increase in compliance costs.
  • Bahrain: The tax authority updated the list of goods subject to excise tax. The tax authority also announced, in cooperation with the customs authority, the arrival of the first shipment of cigarettes with excise digital stamps into Bahrain.
  • Malaysia: The tax authority recently implemented a tax amnesty and voluntary disclosure program for taxpayers to resolve unpaid indirect taxes. The tax authority has agreed to extend the payment period for the first phase to 14 July 2022 (applicable for applications made on or before 30 June 2022).
  • Philippines: The Court of Tax Appeals en banc issued decisions related to tax audits and compromise penalties.
  • Vietnam: Recent guidance and developments concern interest rate subsidies, electronic transactions, one-way remittances, and the strategy on investment cooperation in the 2021 - 2030 period.

Read TaxNewsFlash-Asia Pacific

Europe

  • Slovakia: A proposed amendment to the value added tax (VAT) law generally would be effective 1 January 2023 (except for a new reporting obligation of providers of payment services effective 1 January 2024).
  • Slovakia: The National Council approved a bill that aims to reduce the excessive regulatory burden on businesses in Slovakia that were economically affected by the COVID-19 pandemic. The new measures are effective 1 September 2022 (originally effective 1 May 2022).
  • Slovakia: The Slovak Parliament approved legislation incorporating the seventh directive on administrative cooperation (DAC7) in the field of taxation directive—the directive for EU Member States to collect and automatically exchange information on income earned by sellers on digital platforms.
  • Switzerland: The Geneva tax authorities announced that a real estate company may, under certain conditions, “step-up” its real estate assets when its shares have previously been sold and subject to tax, thus avoiding potential double taxation of capital gain on real estate.
  • Belgium: Reduced VAT rates have been extended for face masks and hydroalcoholic gels, and supplies of electricity, gas, and heat.
  • Germany: The Lower Tax Court of Düsseldorf held that the dual consolidated loss rule, which was amended in 2013, cannot be applied retroactively. 
  • Germany: The Bundestag (lower house of the German parliament) adopted a law amending the interest on back taxes and tax refunds.
  • Germany: The Federal Tax Court (BFH) held that a Cyprus-domiciled taxpayer is entitled to a refund of German withholding tax imposed on interest it received on a convertible bond only if such taxpayer satisfies the substance requirements of either the new or the old version of the German anti-treaty/directive shopping rule.
  • Germany: Legislation to implement tax relief measures for coping with the coronavirus (COVID-19) pandemic was enacted. The legislation includes new measures as well as extensions of existing measures.
  • Germany: Tax relief legislation was enacted in May 2022 that includes an energy-related lump-sum amount that is to be paid out by employers to their employees in September 2022.
  • Poland: The deadline for submitting the CIT-8E return was extended until 30 September 2022. The extension applies to all lump-sum corporate income taxpayers with tax years ending from 1 December 2021 through 31 May 2022.
  • Poland: The Supreme Administrative Court issued decisions that concern (1) the meaning of “one-off transaction value,” and (2) dividend income taken into account in allocating indirect costs.
  • Estonia: The VAT rate on media outlets will be reduced to 5% (from 9%) for both printed and digital media effective 1 August 2022. The excise duty rate on diesel fuel carrying a fiscal marker (special-purpose diesel fuel) was reduced to the minimum rate permitted in the European Union from 1 June to 31 December 2022.
  • Serbia: The deadline for certain electronic invoice (e-invoice) obligations is 1 July 2022.
  • UK: A KPMG report provides background and implications of the delayed implementation of Pillar Two (now scheduled for 31 December 2023).
  • UK: A KPMG report examines how qualifying employee-owned companies can pay compliant tax-free bonuses.
  • UK: The government issued draft legislation for a 25% “windfall tax” on extraordinary energy (oil and gas) profits realized by UK oil and gas companies.

Read TaxNewsFlash-Europe

Africa

  • South Africa: The Supreme Court of Appeal held that VAT in respect of indemnity payments—made by the taxpayer relating to loan cover payments made for its unsecured lending business—was not deductible. 

Read TaxNewsFlash-Africa

Americas

  • Canada: The budget implementation bill received Royal Assent. The bill includes several tax measures from the 2022 budget including a new luxury tax.
  • Canada: Quebec announced new harmonization measures with respect to certain business income tax, indirect tax, and individual (personal) tax measures, as well as other changes to certain Quebec business income tax measures.  
  • Canada: Goods that originate from Ukraine will be granted relief from customs duties for one year, until 9 June 2023.

Read TaxNewsFlash-Americas

Transfer Pricing

  • Australia: The Australian Labor Party announced that it will replace the existing thin capitalization safe harbor debt test (60% of assets) with the Organisation for Economic Cooperation and Development’s (OECD’s) recommended test (30% of “earnings before interest, taxes, depreciation and amortization” (EBITDA)). As a result, it is expected that a significantly higher proportion of real estate investment trusts (REITs) will need to rely on the arm’s length debt test, which could lead to an increase in compliance costs.
  • Malta: Following the global project to reform the international tax system to prevent base erosion and profit shifting (BEPS), the Maltese government has committed to implementing specific transfer pricing rules in accordance with the current global standards related to the arm’s length principle.
  • UK: A KPMG report provides background and implications of the delayed implementation of Pillar Two (now scheduled for 31 December 2023).

Read TaxNewsFlash-Transfer Pricing

FATCA / IGA / CRS

  • Cayman Islands: The Department for International Tax Cooperation issued an updated version of the enforcement guidelines related to the common reporting standard (CRS) framework.
  • Germany: An updated Ministry of Finance (BMF) letter contains amendments related to the FATCA and CRS regimes.
  • Switzerland: A KPMG report examines the considerations for Swiss banks of the transition to the new transmitter control code application for filing information returns electronically (FIRE) reporting.
  • Channel Islands: The government of Jersey issued reporting reminders for the FATCA and common reporting standard (CRS) regimes.

Read TaxNewsFlash-FATCA / IGA / CRS

United States

  • Proposed regulations to amend the existing estate tax regulations under section 2053 were published in the Federal Register this week. The proposed regulations require calculating the present value of the amount of a deductible claim or expense described in section 2053(a) and Reg. section 20.2053-1(a) that is not paid or to be paid on or before the third anniversary of the decedent’s date of death (this three-year period being defined as the “grace period”). 
  • Rev. Proc. 2022-26 provides the exclusive procedures for requesting a determination under section 4672(a)(2) that a substance be added to or removed from the list of substances under section 4672(a) subject to the excise tax imposed by section 4671(a).
  • Notice 2022-30 announces that the Treasury Department and IRS intend to amend the regulations under sections 59A and 6038A to defer the applicability date of certain provisions relating to the reporting of qualified derivative payments (QDPs) until tax years beginning on or after 1 January 2025.
  • Notice 2022-31 provides guidance about legislative changes made by the “American Rescue Plan Act of 2021” to the election of alternative minimum funding standards under section 430(m) for a defined benefit pension plan that is a community newspaper plan or any other plan that is sponsored by an eligible newspaper plan sponsor.
     

State and local tax

  • Iowa: Senate File 2367, which was recently signed into law, makes changes to the administration of Iowa’s sales and use taxes. Under the revised law, businesses will either file and pay monthly or annually, depending on the amount of tax collected. Senate File 2367 also makes certain changes to Iowa’s sales and use tax exemptions and incrementally reduces the bank franchise tax to 3.5% (from 5%).
  • Oregon: The U.S. Supreme Court denied certiorari in an Oregon Supreme Court decision 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.
  • Washington State: A state appeals court recently upheld a lower court’s dismissal of a lawsuit challenging the City of Seattle’s payroll expense tax. The tax, which was approved in 2020, applies to businesses with payroll of more than $7 million in the prior calendar year. In addition, the U.S. Supreme Court denied certiorari in a Washington State Supreme Court decision upholding the constitutionality of Washington State’s 1.2% business and occupation (B&O) tax surcharge on specified financial institutions.

Read TaxNewsFlash-United States
 

Legislative Updates

  • The staff of the Joint Committee on Taxation (JCT) released an annual overview of the federal tax system.

Read TaxNewsFlash-Legislative Updates

Trade & Customs

  • Officials from the European Union (EU) and New Zealand today concluded negotiations for a trade agreement.
  • The G7 member countries—Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States—agreed to implement significant commitments to support Ukraine and hold Russia accountable for the conflict in Ukraine. The U.S. Treasury Department then issued releases implementing those G7 commitments.

Read TradeNewsFlash-Trade & Customs

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

 

 

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