KPMG’s Week in Tax: 19 - 23 September 2022

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

• Bahrain: The ultimate parent entity of a multinational enterprise (MNE) resident in Bahrain will be required to prepare and file the country-by-country (CbC) report by 31 December 2022 for the financial year ended 31 December 2021.
• United States: The U.S. Securities and Exchange Commission (SEC) has signaled its support for the Financial Accounting Standards Board’s (FASB) project to prioritize corporate public CbC reporting.
• Korea: Transfer pricing-related decisions of the Tax Tribunal concern (1) the arm’s length interest rate on late-paid trade receivables, and (2) advance pricing agreement (APA) application information used for transfer pricing adjustments.

Read TaxNewsFlash-Transfer Pricing

• Finland: The tax administration has accepted the EU law-based comparability of non-listed Luxembourg-based SICAV funds with Finnish tax-exempt contractual-based funds. As a result, the tax administration has granted the SICAV funds with full withholding tax refunds with respect to Finnish-sourced dividends.
• Netherlands: The 2023 Tax Plan package proposes changes with regard to income tax, payroll tax and social security contributions, VAT, and excise and consumption taxes.
• Belgium: The Constitutional Court invalidated provisions in the domestic legislation implementing the mandatory automatic exchange of information for cross-border arrangements (DAC6), that provided that an intermediary bound by a professional privilege sanctioned by criminal law cannot invoke such privilege with respect to the periodic reporting of marketable arrangements.
• UK: The government is expected to make a fiscal statement on 23 September 2022 that could include changes in tax policy.
• UK: The Office of Tax Simplification (OTS) published a report on the tax and social security implications of hybrid and remote working both within the UK and internationally.
• UK: HM Revenue & Customs has invested in additional resources to check the accuracy of research and development (R&D) relief claims.

Read TaxNewsFlash-Europe

• India: Recent tribunal and court decisions concern (1) minimum alternate tax provisions, and (2) the responsibility to quote the correct Harmonized System of Nomenclature (HSN) code and the corresponding goods and services tax (GST) rate, among others.
• India: The Central Board of Direct Taxes (CBDT) issued guidance regarding the implementation of provisions of section 194R—requiring withholding of a 10% tax on the value of certain benefits provided to resident recipients—that were amended by the Finance Act, 2022.
• Korea: Customs-related decisions of the Tax Tribunal involved (1) whether import of portable microphone qualified for preferential tariff rate under Korea-Association of Southeast Asian Nations (ASEAN) free trade agreement, and (2) the transaction value of an item in question and determining the customs value based on the fallback method.

Read TaxNewsFlash-Asia Pacific

• Canada: Qualifying online marketplace facilitators will be required to file their first annual information return for British Columbia’s provincial sales tax (PST) for the period of 1 July 2022 to 30 June 2023, by no later than 31 August 2023.
• Canada: The Federal Court of Appeal found that a corporate taxpayer operating a restaurant must include the gratuities it paid to its employees when computing its Canada pension plan contributions and employment insurance premiums for those employees.

Read TaxNewsFlash-Americas

• Rev. Proc. 2022-35 updates prior IRS guidance and adds Turkey to the current published list of countries with which the Treasury Department and the IRS have determined it is appropriate to have an automatic exchange relationship with respect to the information collected under Treas. Reg. §§1.6049-4(b)(5) and 1.6049-8(a) relating to payments of deposit interest of $10 or more made by U.S. financial institutions to nonresident alien individuals. 
• A legal advice memorandum (from the Office of the Chief Counsel) confirms that when a taxpayer’s Paycheck Protection Program (PPP) loan is forgiven based upon misrepresentations or omissions, the taxpayer is not eligible to exclude the forgiveness from income and must include in income the portion of the loan proceeds that were forgiven based upon misrepresentations or omissions.
• The U.S. Securities and Exchange Commission (SEC) has signaled its support for the Financial Accounting Standards Board’s (FASB) project to prioritize corporate public CbC reporting.
• The IRS announced updated information on the pre-screening and certification process of the Work Opportunity Tax Credit (WOTC).
• OMB’s Office of Information and Regulatory Affairs (OIRA) completed its review of final regulations concerning beneficial ownership information reporting under the “Corporate Transparency Act.” The final regulations can now be expected to be published in the Federal Register—the exact date being unknown.
• OIRA received for review final regulations providing guidance under section 36B regarding the premium tax credit.

State and local tax

• Puerto Rico: Taxpayers affected by Hurricane Fiona now have until 15 February 2023 to file various individual and business tax returns and make tax payments. The deadline for filing monthly sales and use tax returns and remitting payments of the related tax has also been extended to 27 September 2022 (from 20 September 2022).
• Missouri: The Supreme Court held that a taxpayer did not qualify for sales and use tax manufacturing exemptions for purchases of computers and networking equipment used to generate vehicle history reports for customers.
• North Carolina: The state tax authority ruled that the provision of optional Helpdesk technical support was a taxable service contract subject to sales and use tax.
• Pennsylvania: The Commonwealth court held that certain out-of-state sellers did not have the minimum contacts necessary under the due process clause to be required to collect state sales tax for the tax years at issue. The court found that the sellers did not place their merchandise in the stream of commerce with the expectation that the merchandise would be purchased by consumers in Pennsylvania, and had not availed themselves of Pennsylvania’s protections, opportunities, and services.
• South Carolina: The state’s highest court held that membership fees that entitled bookstore customers to discounts on merchandise and free shipping were subject to sales and use tax because they were part of the “gross proceeds of sales.”

Read TaxNewsFlash-United States

• The IRS’ Exempt Organizations and Government Entities division recently published a new Technical Guide on the tax exemption of business leagues, chambers of commerce, real estate boards, and boards of trade described under section 501(c)(6).
• The IRS announced updated information on the pre-screening and certification process of the Work Opportunity Tax Credit (WOTC). Although the credit generally is not available to tax-exempt organizations, a special provision allows tax-exempt organizations to claim the WOTC against the employer's share of Social Security tax for hiring qualified veterans. 
• FEMA’s disaster declaration following Hurricane Fiona in Puerto Rico allows certain employer-sponsored charities to provide disaster relief programs for affected employees.

Read TaxNewsFlash-Exempt Organizations

• The Office of the U.S. Trade Representative (USTR) made a technical correction to the Harmonized Tariff Schedule of the United States (HTSUS) to add Curaçao as a beneficiary country for purposes of the Caribbean Basin Trade Partnership Act (CBTPA).

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)