KPMG’s Week in Tax: 26 - 30 September 2022
Recent tax developments from around the globe for the week of 26 - 30 September 2022
Recent tax developments from around the globe for the week of 26 - 30 September 2022
- South Africa: The number of transfer pricing adjustments imposed by the South African Revenue Service (SARS) has increased significantly over the last couple of years. In addition, when SARS applies the results of a transfer pricing benchmarking study during the course of an audit, it usually selects the median as the arm’s length margin or price (without necessarily demonstrating that based on the relevant facts and circumstances the median margin or price is actually arm’s length).
- Belgium: The deadline for filing Local file forms (275LF) is 17 October 2022.
- Switzerland: The exchange of tax-related information with Russia has been suspended, including the automatic exchange of country-by-country reports.
- Germany: Draft legislation on the modernization of the tax procedures law would provide that in the event of a tax audit, transfer pricing documentation would be required to be submitted (i.e., without a separate request by the tax authority).
FATCA / IGA / CRS
- United States: The IRS will replace the existing public/private key pairs used for encryption for FATCA filings on 14 October 2022. After that date, to file FATCA reports, a new public key will need to be downloaded from International Data Exchange Services (IDES).
- Finland: The tax administration issued an updated version of FATCA technical guidance that concerns corrections.
- Switzerland: The exchange of tax-related information with Russia has been suspended, including the automatic exchange of information on financial accounts and country-by-country reports, the exchange of information on request, and the spontaneous exchange of information.
- Mauritius: The income tax treaty with Angola was published in the gazette of the Mauritius government. The treaty will enter into force when it is published in the local government gazette of Angola and the government of Angola notifies the government of Mauritius of the completion of the procedures under its local law for the entry into force of the treaty.
- Canada: Under upcoming measures, intermediaries and third-party logistics providers may be responsible for duties and taxes related to the import of e-commerce goods into Canada, along with owners and importers.
- Canada: Audit activities related to the annual federal 10% excise tax on cross-border insurance premiums have increased. The Canada Revenue Agency (CRA) is sending excise tax returns to businesses with foreign head-offices.
- Bolivia: The tax authority issued guidance related to online billing modality and the unified agricultural regime (régimen agropecuario unificado).
- Bahrain: The National Bureau for Revenue (NBR) sent an email to taxpayers containing steps for accessing “relationship manager” details on the NBR portal. Relationship managers have been assigned to help taxpayers with queries and for sharing key updates.
- Hong Kong: The Inland Revenue Department announced that it will introduce a procedure that allows taxpayers to seek an opinion from the Commissioner of Inland Revenue on their compliance with the economic substance requirements under the revised foreign-sourced income exemption regime.
- Philippines: Revenue Memorandum Circular No. 130-2022 extended the electronic filing / filing of returns and the payment of corresponding taxes due, as well as the submission of reportorial documents by one day—until 27 September 2022.
- Malaysia: The tax authority agreed to extend the payment period for the second phase of a tax amnesty and voluntary disclosure program for taxpayers to resolve unpaid indirect taxes to 14 October 2022 for applications made on or before 30 September 2022.
- Ireland: Budget 2023 includes various measures concerning income tax, business tax, and indirect taxes.
- Italy: The Italian Supreme Court held that a Swiss social security institute subject to tax in Switzerland (even though exempt from income taxes) is entitled to a refund of the withholding tax imposed on dividends distributed by Italian companies.
- Spain: The Advocate General of the Court of Justice of the European Union (CJEU) issued an opinion proposing that a judgment of the General Court and a decision of European Commission regarding the “Spanish tax leasing scheme” be partially annulled.
- Germany: Draft legislation for the 2022 Annual Tax Act includes proposals relating to digitalization, procedural simplification, legal certainty and tax equality, as well as implementation of the coalition agreement and adaption to EU law, Court of Justice of the European Union (CJEU) case law, and judgements of the German Federal Fiscal Court.
- Germany: The Federal Ministry of Finance (BMF) published draft legislation on the implementation into German law of EU Council Directive 2021/514 (“DAC 7”) and the modernization of the tax procedures law.
- Germany: The Lower Tax Court of Cologne held that a taxpayer was not entitled to an exemption from German withholding tax under the German Anti-Treaty/Directive Shopping Rule (section 50d (3) EStG).
- Luxembourg: The tripartite (government, employers, and unions) verbally agreed to a series of measures—an “anti-inflation package”—that would introduce a temporary 1% decrease in value added tax (VAT) rates on certain goods and services.
- Notice 2022-44 provides the 2022-2023 special per diem rates for taxpayers to use in substantiating the amount of ordinary and necessary business expenses incurred while traveling away from home.
- Notice 2022-45 extends the deadline for amending an eligible retirement plan (including an individual retirement arrangement (IRA) or annuity contract) to reflect the provisions of the laws that provide special tax treatment with respect to a COVID-19-related distribution or a qualified disaster distribution, respectively. The extended amendment deadline applicable to a qualified retirement plan or section 403(b) plan that is not a governmental plan or an IRA is 31 December 2025.
- The Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury Department released final regulations requiring certain entities to file with FinCEN reports that identify two categories of individuals: (1) the beneficial owners of the entity, and (2) individuals who have filed an application with specified governmental authorities to create the entity or register it to do business.
- Taxpayers in Florida affected by Hurricane Ian now have until 15 February 2023 to file various individual and business tax returns and make tax payments.
- The Puerto Rico Treasury Department (PRTD) issued guidance to provide relief to taxpayers and their authorized representative in response to the aftermath of Hurricane Fiona.
- Taxpayers affected by September storms, flooding, and landslides in Alaska now have until 15 February 2023 to file various individual and business tax returns and make tax payments.
- The IRS Large Business and International (LB&I) division released an updated memorandum for all employees assigned to section 965 examinations to provide updated guidance with respect to the extended statute of limitations for section 965 issues.
- The U.S. Tax Court released a memorandum opinion holding that when a subsidiary member of a consolidated group disposes of all of its assets, a member of the consolidated group that owns the subsidiary’s stock must include in income for the year of disposition any excess loss account (ELA) with respect to such stock regardless of whether the subsidiary may be entitled to deductions for one or more subsequent years.
State and local tax
- California has enacted Senate Bill 851, which provides that the owner’s pro rata share of California passthrough entity tax (PTET) paid by the entity must be included in the owner’s California tax liability for purposes of the other state tax credit (OSTC) calculation. The legislation is effective for tax years beginning on or after 1 January 2022 and before 1 January 2026.
- The Colorado Department of Revenue announced that it will accept cryptocurrency as payment for several types of taxes through the PayPal cryptocurrencies hub, where taxpayers will be able to select their desired cryptocurrency to use for payment.
- The Illinois Tax Tribunal held that a taxpayer was not entitled to an abatement of late payment penalties on the basis that it acted in good faith and exercised ordinary business care and prudence when it determined that an affiliate was an 80/20 company excluded a from the Illinois unitary group because the taxpayer failed to provide any documentation or analysis to support that determination.
- The Louisiana Board of Tax Appeals held that a taxpayer was entitled to use the formula applicable to manufacturing entities to allocate its taxable capital to Louisiana. The taxpayer developed software that customers accessed over the internet. The board concluded that the taxpayer’s software was tangible personal property that the taxpayer transformed from raw materials into a finished product. As such, the taxpayer was a manufacturer entitled to use the manufacturing allocation formula.
- Notice 2022-43 provides an extension of the replacement period for sales of livestock that were sold due to drought conditions (and thus allows the taxpayer to defer tax on any gains from forced sales pursuant to section 1033(e)).
- The IRS announced tax relief for taxpayers in certain regions of Alaska affected by September 2022 storms, flooding, and landslides, and taxpayers in Florida affected by Hurricane Ian. Therefore, certain employer-sponsored charities are allowed to provide disaster relief programs for affected employees.
Trade & Customs
- The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) released final rules amending the Central African Republic sanctions regulations and the Western Balkans stabilization regulations, reissuing them in their entirety.
- OFAC released quarterly reports of license applications requesting authorization to export agricultural commodities, medicine, and medical devices to Iran and Sudan under the specific licensing regime set forth in Section 906 of the “Trade Sanctions Reform and Export Enhancement Act of 2000.”
- Indirect subsidiaries of banks in Switzerland and Monaco that specialize in wealth management and corporate and investment banking agreed to remit approximately $720,000 and $401,000 to settle potential civil liabilities for apparent violations of Cuba, Iran, Sudan, Syria, and Ukraine-related sanctions programs.
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)
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