KPMG’s Week in Tax: 12 - 16 September 2022

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

• Belgium: The incremental notional interest deduction for assessment year 2024 is 1.933%. The rate is increased by 0.5% for small and mid-size enterprises (SMEs), resulting in a rate of 2.433%. The rates (highest since 2015) are subject to official confirmation.
• Gibraltar: The Court of Justice of the European Union (CJEU) issued a judgment that the Gibraltar tax authority may apply a domestic rule to prevent double taxation of amounts recovered as unlawful State aid.
• Netherlands: The Lower House of Parliament passed a bill that would tax holders of a substantial interest in a company who borrow more than €700,000 from the company on the excess as income from a substantial interest—effective 1 January 2023 and taking into account the level of debt as of 31 December 2023.
• UK: The Advocate General of the CJEU released an opinion finding that a UK VAT regulation providing that an online intermediary platform is, in principle, liable to pay VAT is valid.
• UK: The Advocate General of the CJEU issued an opinion finding that the UK group transfer rules are not contrary to EU law.
  
• EU: The European Commission (EC) proposed a regulation that would provide for a solidarity contribution on surplus profits in the EU fossil sector.
• EU: The EC proposed to prohibit products made with forced labor from the EU market.
• Germany: The Court of Justice of the European Union (CJEU) issued a judgment finding that a holding company that performs and purchases services subject to VAT that it subsequently contributes to its subsidiary has no right to recover the VAT on costs directly attributable to the contribution.
• Poland: Government-backed funding, in addition to tax incentives and other forms of aid, is available for certain businesses. Although the selection method and criteria for financing projects is currently unknown, the announcements will be made available on an ongoing basis.
• Czech Republic: A draft amendment to the value added tax (VAT) law would impose new record keeping and reporting obligation on “payment service providers” beginning 1 January 2024.
  
• Czech Republic: The government released a working paper on extraordinary profits tax (“windfall tax”) that discusses the possible introduction of the tax on various sectors.
• Ireland: The 2023 budget is scheduled to be announced on 27 September 2022.
• Spain: Spanish companies have until 30 September 2022 to file a claim for the refund of VAT paid in other EU countries during 2021. In cases of VAT paid in non-EU countries, companies must file claims for refund directly with the tax authorities of each such country, in accordance with the applicable deadlines.

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• Canada: Ontario Bill 2, which includes measures that concern the regional opportunities investment tax credit and the Ontario book publishing tax credit, received Royal Assent.
• Mexico: Four entities were added to the list of foreign providers of digital services that are registered for tax purposes in Mexico as of 31 August 2022.
• Mexico: The economic package for the year 2023 does not include any significant proposed changes to existing taxes.
• Bolivia: The legislative assembly passed a law that reflects certain budget measures for 2022 including tax incentives and changes to the rates of excise tax.

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• UAE: Excise tax guidance includes a new excise tax user guide for clearing companies, clarification EXTP008 about the calculation of financial guarantees for purposes of excise tax in designated zones, and minor changes to existing excise tax guides.
• Philippines: The Fiscal Incentives Review Board (FIRB) temporarily extended the work-from-home arrangement for certain registered business enterprises.
• Qatar: Taxpayers/importers of excisable products may be penalized for delayed excisable product registration, as well as for delayed submission of excise tax returns.
• India: The Central Board of Indirect Taxes and Customs (CBIC) issued guidance for filing or revising goods and services tax (GST) transitional credit forms (Form GST TRAN-1 and TRAN-2) on the GST network common portal.

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• British Virgin Islands: The tax authority issued a notice to financial institutions with reminders related to a primary user update in the BVI financial account reporting system (BVIFars) portal.
• Luxembourg: The tax authority is conducting reviews of the FATCA and common reporting standard (CRS) compliance of investment funds and other Luxembourg entities administered or resident in Luxembourg, based on the updated version of the CRS “frequently asked questions” (FAQs) issued in April 2022.
• Malta: A fact-finding questionnaire to better understand how FATCA and the common reporting standard (CRS) are being implemented in practice aims to identify practical difficulties faced by financial institutions.

Read TaxNewsFlash-FATCA / IGA / CRS

• The application period for the Compliance Assurance Process (CAP) program for 2023 ends 15 November 2022.
• A “request for information” concerns future regulations to implement the advanced explanation of benefits and good faith estimate requirements of the “No Surprises Act” (enacted as part of the Consolidated Appropriations Act, 2021). 
• Notice 2022-39 provides (1) rules that claimants must follow to make a one-time claim for the credit and payment allowable under sections 6426(d) and 6427(e) for alternative fuels sold or used during the first, second, and third calendar quarters of 2022; and (2)  instructions for how a taxpayer’s liability for the excise tax imposed by section 4081 may be reduced by claiming the alternative fuel mixture credit allowable under section 6426(e) for the first and second calendar quarters of 2022.   
• Rev. Proc. 2022-36 provides the domestic asset / liability percentages and domestic investment yields needed by foreign life insurance companies and by foreign property and liability insurance companies to compute their minimum effectively connected net investment income under section 842(b) for tax years beginning after 31 December 2020.
• OMB’s Office of Information and Regulatory Affairs (OIRA) received for review final regulations concerning the “average income test” under section 42(g) for purposes of the low-income housing credit.
• A KPMG report examines the accounting consequences of tax credits.

State and local tax

• Colorado: An amendment to Denver’s municipal code exempts from the city’s sales and use tax base any government fee imposed directly on a consumer and separately stated on an invoice. In particular, the exemption will apply to the state retail delivery fee and the city’s disposable bag fee.
• Idaho: A new law reduces Idaho’s corporate income tax rate to 5.8% (from 6%)—effective 3 January 2023. The legislation also reduces the individual income tax rate and provides for rebates for individual taxpayers.
• Illinois: A taxpayer will be considered subject to tax in a foreign country for purposes of applying “throwback” or “throwout” even if the taxpayer is protected from taxation in the foreign country due to an income tax treaty with the United States—effective for tax years ending on or after 31 December 2022.
• New Jersey: The governor released proposed legislation intended to (1) alleviate the tax burdens imposed on residents who are assigned to work locations outside of the state, and (2) reduce the tax credits provided to residents who pay income taxes to other states.

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• The Bureau of Industry and Security (BIS) of the U.S. Commerce Department released a final rule that expands the existing sanctions against Russia and Belarus under the Export Administration Regulations (EAR).
• The Department of the Treasury's Office of Foreign Assets Control (OFAC) issued Russia-related guidance items—including general licenses, determinations pursuant to executive orders, and new and amended “frequently asked questions” (FAQs). 
• OFAC published preliminary guidance on the implementation of a maritime services policy—constructed as a ban on services—and related price exception for seaborne Russian oil. 
  

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)