KPMG’s Week in Tax: 15 - 19 August 2022
Recent tax developments from around the globe for the week of 15 - 19 August 2022
Recent tax developments from around the globe for the week of 15 - 19 August 2022
Tax developments or tax-related items reported this week include the following.
- President Biden signed into law the “Inflation Reduction Act” (H.R. 5376)—legislation that contains tax measures, including a corporate alternative minimum tax of 15%; an excise tax of 1% on corporate stock buy-backs; energy-related tax credits; and additional funding for the IRS for taxpayer services and enforcement. Read a KPMG report [PDF 1.5 MB] (73 pages) providing analysis and observations of the tax law changes.
- The Treasury Department and IRS released initial guidance on changes to the tax credit for electric vehicles under the Inflation Reduction Act. The new requirement that qualifying electric vehicles were assembled in North America is now effective.
- The IRS Independent Office of Appeals invited public input on best practices for conducting video conferences with taxpayers and tax professionals who have cases pending before Appeals.
- OMB’s Office of Information and Regulatory Affairs (OIRA) received for review proposed regulations concerning electronically filed returns.
- Notice 2022-34 announces that the IRS and Treasury Department intend to amend the regulations under section 987 to defer—once again—the applicability date of the final regulations under section 987, as well as certain related final regulations, by one additional year. The final regulations will apply to tax years beginning after 7 December 2023.
- Rev. Rul. 2022-15 provides that the rates of interest will increase with regard to tax underpayments and tax overpayments for the calendar quarter beginning 1 October 2022.
State and Local Tax
- New York State: Legislation currently pending the governor’s signature would allow a passthrough entity to elect to pay a passthrough entity tax (PTET) in New York City if the entity elects into the New York State PTET by 15 September 2022.
- Arkansas: Legislation that accelerates a phased-in corporate rate reduction was enacted. For tax years beginning on or after 1 January 2023, the highest corporate rate imposed on income exceeding $25,000 will drop to 5.3% (from 5.7%). In addition, effective for tax years beginning on or after 1 January 2022, Arkansas updated its conformity to IRC section 179 as it exists on 1 January 2022.
- California: The California Senate is preparing to vote on Assembly Bill 1951, which would make the current partial sales and use tax exemption for manufacturing and R&D equipment into a full exemption from both state and local sales and use taxes on and after 1 January 2023 and before 1 January 2028.
- New Mexico: The state tax authority issued proposed gross receipts tax rules on the taxability of digital advertising under current law.
- Certain measures in the new law commonly referred to as the “Inflation Reduction Act of 2022” could affect or benefit exempt organizations—measures including a book minimum tax on corporations with average annual adjusted financial statement income of more than $1 billion, clean energy tax credits, and tax incentives.
- Final regulations provide guidance to states regarding the process by which they may obtain or inspect certain returns and return information (including information about final and proposed denials and revocations of tax-exempt status) for the purpose of administering state laws governing certain tax-exempt organizations and their activities.
- Canada: Draft legislation provides details on the Canada recovery dividend—the additional 1.5% tax on banks and life insurers and tax changes to address International Financial Reporting Standards for Insurance Contracts (IFRS 17).
- Canada: Draft legislation concerning the excessive interest and financing expenses limitation (EIFEL) rules is proposed to apply to tax years beginning in 2023. However, a revised version of the rules that could include additional changes is expected to be issued for public consultation.
- Canada: Amended draft legislation to expand the mandatory disclosure requirements would require individuals, corporations, trusts, and partnerships to disclose certain transactions to the Canada Revenue Agency (CRA), generally within 45 days of entering into that transaction, among other changes. The revised rules would begin to apply in 2023 (instead of 2022).
- Canada: A consultation paper outlines possible changes to the general anti-avoidance rule (GAAR) that will affect how the Canada Revenue Agency (CRA) and courts address potential aggressive tax planning in the future. Comments are due 30 September 2022.
- Canada: Draft legislation would increase the disbursement quota rate to 5% (from 3.5%) for charities and non-profit organizations (NPO) that have fiscal periods beginning on or after 1 January 2023.
- Canada: Ontario Bill 2 reintroduces corporate income tax measures contained in Ontario’s previous 2022 budget bill.
- Costa Rica: The General Directorate of Taxation extended until 15 November 2022 the deadline for filing income tax returns for dormant companies, using the simplified form D-101 in the virtual tax administration system.
- Philippines: The Bureau of Internal Revenue issued guidelines on VAT exemptions for senior citizens and persons with disabilities on certain online purchases.
- Thailand: Foreign companies can operate e-commerce business in Thailand by applying for (1) a foreign business license, and/or (2) a foreign business certificate.
- UAE: A new service enables companies and individuals to apply for voluntary disclosures for all errors and omissions that occurred during the drafting and submitting of customs declarations.
- Malaysia: A KPMG monthly summary of tax developments includes a discussion of income and indirect tax developments.
- Poland: Recent indirect tax developments concern the Slim VAT 3 package, supplementary obligations imposed on payment service providers, and “first occupation” for VAT purposes.
- Poland: Tax developments relating to company reorganizations concern a clearance opinion on cross-border mergers, and proposed simplifications in the company reorganization processes.
FATCA / IGA / CRS
- Hungary: An updated version of the FATCA filing instructions includes the addition of a series of codes developed by the U.S. tax agency (IRS) that can be used by reporting financial institutions when the account is missing U.S. tax identification numbers (TINs).
- United States: The U.S. Tax Court issued an opinion concerning the transfer pricing method for the determination of income from intercompany licenses for intangible property required to manufacture certain medical devices and leads. The Tax Court, on remand from the Eighth Circuit, concluded that the taxpayer did not meet its burden to show that its allocation under the comparable uncontrolled transactions (CUT) method and its proposed unspecified method satisfied the arm’s length standard, but that the IRS’s modified comparable profits method (CPM) resulted in an abuse of discretion and that the wholesale royalty rate for both devices and leads is 48.8%.
- Indirect Tax
- Taxation of the Digitalized Economy
- Tax Dispute Resolution
- Tax Developments Relating to Coronavirus (COVID-19)
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.