KPMG’s Week in Tax: 1 - 5 August 2022
Recent tax developments from around the globe for the week of 1 - 5 August 2022
Recent tax developments from around the globe for the week of 1 - 5 August 2022
Tax developments or tax-related items reported this week include the following.
- A draft Senate reconciliation bill includes a proposed amendment to section 1061 (enacted as part of the 2017 “Tax Cuts and Jobs Act” (TCJA)) regarding certain partnership interests held in connection with the performance of services—or carried interest. A KPMG report provides high-level, preliminary observations regarding the proposed amendment to section 1061 based on the draft legislative text for the proposed Senate bill released on 27 July 2022.
- The draft Senate bill also proposes a new 15% corporate alternative minimum tax on the “adjusted financial statement income” of certain large corporations (in general, corporations reporting at least $1 billion average adjusted pre-tax net income on their consolidated financial statements) for tax years beginning after 31 December 2022. A KPMG report provides high-level, preliminary observations regarding the proposed minimum tax.
- Final regulations under section 754 remove the signature requirement from Reg. section 1.754-1(b)(1) for partnerships and their partners in making a valid election to adjust the basis of partnership property.
- The Fifth Circuit issued a decision concerning claims for refund filed by an oil and gas company. The court held that the taxpayer’s credit for renewable fuels reduced its excise tax liability such that it could only deduct the excise tax it paid out of pocket; and it affirmed a federal district court’s judgment regarding a lease-versus-sale issue and a penalty assessment.
- Notice 2022-33 extends the deadline to 31 December 2025, for amending a qualified retirement plan or individual retirement arrangement (IRA) to reflect certain legislative provisions.
- The deadline is 30 September 2022 for applications for the 2022 year filed by a qualified intermediary (QI) (including a qualified derivatives dealer), a withholding foreign partnership (WP) and a withholding foreign trust (WT).
- The IRS announced relief for taxpayers affected by storms in Kentucky. Affected taxpayers have until 15 November 2022, to file various individual and business tax returns and to make tax payments.
- The IRS extended previously announced tax relief for taxpayers in New Mexico affected by wildfires and straight-line winds and flooding, mudflows, and debris flows. Affected taxpayers now have until 30 September 2022, to file various individual and business tax returns and to make tax payments.
- The IRS announced that taxpayers on the island of St. Croix, the U.S. Virgin Islands, affected by a water shortage and “health impact from unprecedented sargassum seagrass influx” now have until 15 November 2022, to file various individual and business tax returns and to make tax payments.
State and local tax
- Michigan: A state appellate court held that sales of container-recycling machines and repair parts did not qualify for a sales and use tax exemption that is available with regard to sales of tangible personal property used to perform an industrial processing activity. The court concluded that the container-recycling machines did not perform any specifically enumerated industrial processing activity.
- Texas: The Comptroller of Public Accounts adopted amendments to a rule addressing the franchise tax research and development (R&D) activities tax credit. Previously, extensive amendments to the rule limited a taxpayer’s ability to qualify for credits. The most recent amendments, however, are more taxpayer favorable. One key change is that the revised rule addresses the disconnect between federal and state law that exists because Texas defines the Internal Revenue Code for purposes of the R&D activities tax credit as the IRC in effect as of 31 December 2011. Under the revised rule, a federal regulation adopted after 31 December 2011, is applicable if a taxable entity could have applied the regulation to its 2011 tax year. The revised rule also addresses credit carryforwards when the membership of a combined group changes.
- Botswana: Temporary reductions in value added tax (VAT) rates—effective 1 August 2022 to 31 January 2023—include a reduction to the standard rate to 12% (from 14%) and a reduction to the VAT rate on cooking oil and liquid petroleum gas to 0% (from 14%).
- South Africa: A new accounting standard that changes the way insurance contracts are accounted for will require revisions to South Africa’s income tax law.
- Uruguay: A bill proposes changes to Uruguay’s income tax on economic activities (impuesto a las rentas de las actividades económicas—IRAE) and specifically changes to the corporate income tax on certain income generated abroad and with regard to taxpayers subject to IRAE if they are members of multinational groups.
- Bolivia: Guidance modifies prior guidelines and reflects recent legislative changes regarding the failure-to-pay penalty and regarding payment facilities.
- Australia: A bill would require operators of electronic distribution platforms to report information to the Australian Taxation Office (ATO) relating to transactions facilitated through their platforms.
- Vietnam: A decree revises prior guidance regarding the value added tax (VAT) treatment relating to real estate transfers, power plants, and investment projects.
- Philippines: The lifting of a suspension on the issuance of “mission orders” allows revenue officers to once again conduct certain operations—including verification of complaints involving alleged violations of the tax law—and to carry out the mandate to collect taxes.
- Bahrain: The tax administration conducted field inspections of 80 commercial establishments and, as a result, detected 35 violations of the VAT rules.
- Hong Kong: Under the commercial building allowances regime, annual allowances at 4% of the construction costs of a commercial building are granted to Hong Kong taxpayers as tax relief for the construction costs incurred. The annual allowances can be claimed by taxpayers over a maximum period of 25 years. When a taxpayer subsequently sells a commercial building and the amount of consideration received by the taxpayer is greater than the tax residual value of the building immediately before the sale, the excess is taxable as a balancing charge, subject to a cap of the total commercial building allowances previously granted—effectively a claw-back of the commercial building allowances previously allowed to the taxpayer.
- Hong Kong: A district court held that a foreign limited liability company (LLC) and a UK limited liability partnership (LLP) were “associated” corporate bodies within the meaning of section 45 of the Stamp Duty Ordinance, although the LLP did not have any “issued share capital” similar to that of a company limited by shares. Accordingly, the court held that the intra-group transfer of the shares in a Hong Kong company from the LLP to the LLC was entitled to the stamp duty relief under section 45.
- Malaysia: Proposed legislation includes a measure concerning the sales tax on low-value goods. Under those proposed changes, online sellers would need to register for sales tax and then to charge sales tax on goods brought into Malaysia.
- Malaysia: Guidance relating to the service tax exemption on the provision of digital payment services by local non-bank providers clarifies that certain domestic non-bank service providers that satisfy the relevant qualification requirements are exempt from charging service tax on digital payment services.
- Indonesia: Guidance was released regarding taxation of the coal mining sector.
- Gibraltar: A bill provides further information on the budget measures affecting companies, including a new penalty regime for companies; audited accounts to be submitted with the company tax return; and an additional marketing allowance.
- EU: KPMG member firms submitted a response to an EC public consultation on a proposed EU Directive regarding rules on a debt-equity bias reduction allowance and on limiting the deductibility of interest for corporate income tax purposes.
- Poland: A new version of a draft bill to implement an EU directive regarding single-use plastics was released.
- Poland: Summaries of recent indirect tax developments include reports that actual VAT refund deadlines are shorter than the statutory deadlines and a court held that depleted mineral deposits are subject to real estate tax.
Trade & Customs
- United States: The Bureau of Industry and Security (BIS) of the U.S. Commerce Department announced an update to the list of aircraft that have flown into Russia or Belarus in apparent violation of the Export Administration Regulations (EAR) and added the first 25 foreign-produced aircraft that BIS has identified as apparently violating the de minimis threshold for U.S. components.
- Greece: Legislation incorporates into the Greek domestic law Directive (EU) 2060/262 and thus amends provisions of the Greek Customs Code to revise the terms and conditions under which the movement of goods between EU Member States are subject to customs (excise) duties.
- United States: Customs and Border Protection (CBP) reminded importers of the treatment of steel and aluminum imported from countries subject to Section 232 customs duties.
- United States: CBP issued a release listing specific adjustments to certain customs user fees and corresponding limitations that will be effective 1 October 2022.
- United States: Treasury’s Office of Foreign Assets Control announced action against companies used by Iran’s largest petrochemical brokers to facilitate the sale of Iranian petroleum and petrochemical products from Iran to East Asia.
- A KPMG reference guide highlights modifications to the 2021 Form 990-series returns, schedules, and corresponding instructions (as well as the Form 4720 and instructions) for tax years beginning in 2021, and includes commentary on changes from the prior year’s versions of the forms.
FATCA / IGA / CRS
- UAE: The Ministry of Finance issued a set of “frequently asked questions” (FAQs) related to its automatic exchange of information (AEOI) portal under the FATCA and common reporting standard (CRS) regimes.
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