KPMG Week in Tax: 19 - 23 December 2022

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

• Canada: Alberta Bill 2, which received Royal Assent, includes tax-related measures that will (1) resume indexing the individual (personal) income tax system for inflation, and (2) suspend the provincial tax on gasoline and diesel from January to June 2023.
• Canada: Payments of interest on family income-splitting loans for 2022 are due 30 January 2023.
• Canada: Bill C-32, which implements some of the outstanding tax measures announced in the 2022 and 2021 federal budgets, received Royal Assent.
• Canada: The KPMG member firm in Canada prepared a report providing an overview of certain goods and services tax (GST) and other indirect tax changes from 2022.
• Mexico: The deadline for issuing electronic receipts using version 4.0 (CFDI 4.0) is extended to 1 April 2023.
• Colombia: Congress enacted the tax reform proposed by the government that includes a minimum tax of 15%, surcharges, and a digital services tax, among other measures.

Read TaxNewsFlash-Americas

• Sri Lanka: VAT amendments concern the VAT rate, threshold, and exemption removal.
• Sri Lanka: The Supreme Court special determinations under Article 120 and 121 of the Constitution in relation to the Inland Revenue (Amendment) Act No 45 of 2022 and Value Added Tax (Amendment) Act No 44 of 2022 affect the effective date of the amendments in those Acts.
• Sri Lanka: The Inland Revenue (Amendment) Act No 45 of 2022 includes changes to corporate income tax and individual income tax.
  
• Hong Kong: The draft legislation on the revised foreign-sourced income exemption (FSIE) regime and its subsequent amendments proposed by the government were passed by the Legislative Council.
• Hong Kong: The Court of Appeal held that upfront lump-sum spectrum license fees paid by a telecommunication service provider must be capitalized and were not deductible.
• Philippines: The Bureau of Internal Revenue (BIR) issued Revenue Memorandum Order (RMO) No. 55-2022 suspending all field audit and other field operations of the BIR relative to examinations and verifications of taxpayers’ books of accounts, records and other transactions—from 16 December 2022 to 8 January 2023.
• UAE: The Ministry of Finance released the Federal Decree-Law No. 47 of 2022 on the taxation of corporations and businesses and updated related “frequently asked questions” (FAQs) section, which include provisions relating to the oil and gas and other natural resources sector.
• India: The GST Council recommended changes in GST rates, measures for facilitation of trade, and measures streamlining GST compliance.
• India: The KPMG member firm in India prepares reports highlighting recent court decisions, guidance, and other news concerning indirect tax topics—including GST and excise tax.
• Thailand: The KPMG member firm in Thailand published a tax calendar for 2023.
• New Zealand: The KPMG member firm in New Zealand issued a review of tax developments in 2022.

Read TaxNewsFlash-Asia Pacific

• EU: A KPMG report summarizes and provides analysis and observations of the “Fit for 55” package, which is embedded within the European Green Deal and encompasses 14 legislative proposals designed to align current EU laws with the EU’s climate ambitions.
• Italy: The Court of Justice of the European Union (CJEU) held that provisions introduced into Italian law in 2017 requiring the reporting of information and withholding of tax with respect to short-term property rentals are not precluded by EU law. However, the court held that the obligation to appoint a tax representative constitutes a disproportionate restriction on the freedom to provide services.
• Latvia: The Council Directive (EU) 2021/514 (DAC7) is being incorporated into Latvian law and will require digital platform operators to provide information on income generated by vendors—effective 1 January 2023.
  
• Latvia: Amendments to the law on excise tax introduce changes to the application of excise tax to distance sales of excise goods.
• Latvia: The “Regulations Regarding Low-Tax or Tax-Free Countries and Territories” are expected to be amended, from 1 January 2023, to add three jurisdictions (Anguilla, the Bahamas, and Turks and Caicos) to the list of low-tax or tax-free countries and territories.
• Netherlands: The upper house of Parliament on 20 December 2022 adopted the 2023 Tax Plan package and various other tax bills. 
• Serbia: The Serbian Parliament has approved amendments to the laws concerning electronic invoicing, property taxes, value added tax (VAT), customs, and tax procedure and administration.
  
• Belgium: Proposed legislation being considered in parliament would change the taxation of copyright income earned by individuals under the Belgian copyright regime.
• Belgium: Following the corporate tax reform of 2017, the application of certain corporate tax deductions is limited to €1 million, increased by 70% of the taxable income exceeding €1 million (system of the “korf/corbeille”).
• Poland: The bill on family foundations was passed by the lower house of the Polish Parliament (Sejm) and will now be sent to the upper house of Parliament.
• Netherlands: A KPMG report summarizes tax developments that concern financial institutions.
• Netherlands: The government responded to a report on the effectiveness and efficiency of the regimes for fiscal investment institutions and exempt investment institutions.

Read TaxNewsFlash-Europe

• Spain: The tax authority published guidance with respect to what constitutes “intermediation” through a digital interface, which constitutes a service subject to digital services tax (DST).  
• OECD: The Organisation for Economic Cooperation and Development (OECD) issued (1) a public consultation document on draft multilateral convention provisions on digital services taxes and other relevant similar measures, and (2) a Pillar Two implementation package.

Read TaxNewsFlash-BEPS

• KPMG reports published this week cover:
  • The public consultation document under Pillar One on draft multilateral convention provisions on digital services taxes
  • The Pillar Two implementation package
  • Announcements made by various countries on implementation of the global anti-base erosion (GloBE) rules
  • Europe, Middle East, and Africa (EMA) transfer pricing insights
  • Year-end transfer pricing considerations for Belgian taxpayers
• Morocco: The tax authority temporarily suspended the requirement for certain companies to file a country-by-country (CbC) report in Morocco.
• Latvia: The tax authority may impose a penalty for failure to comply with the transfer pricing documentation requirements—in an amount up to 1% of the value of the controlled transaction, capped at €100,000.
• UAE: The Ministry of Finance released the Federal Decree-Law No. 47 of 2022 on the taxation of corporations and businesses and updated related FAQs section, which include new transfer pricing rules. 
• Serbia: The Ministry of Finance adopted the rulebook on arm’s length interest rates for 2022.

Read TaxNewsFlash-Transfer Pricing

• Canada: The Canada Revenue Agency (CRA) issued updated versions of certain FATCA and common reporting standard (CRS) self-certification forms.
• UK: HMRC issued guidelines instructing financial institutions and individuals on the steps to take when there are human rights concerns with information being transmitted under the automatic exchange of information (AEOI).

Read TaxNewsFlash-FATCA / IGA / CRS

• The Senate Appropriations Committee released legislative text of an omnibus appropriations bill, a $1.7 trillion measure to fund the government through the end of the 2023 fiscal year. The bill includes limited tax provisions. The bill will be considered by the full Senate if it meets the 60-vote threshold required to proceed, and, if passed by the Senate, sent to the House of Representatives for its consideration. 

Read TaxNewsFlash-Legislative Updates

• The IRS released FAQs regarding energy efficient home improvements and residential clean energy property credits.
• There was no change to the quarterly list of countries that require (or may require) participation in, or cooperation with, an international boycott (within the meaning of Internal Revenue Code section 999(b)(3)).
• Notice 2023-4 provides the combined percentage increase—indexing factor—to be used by group health plan and health insurance issuers to calculate the “qualifying payment amount” for items and services provided during 2023.
• Notice 2023-6 provides guidance on the new sustainable aviation fuel (SAF) credits under sections 40B and 6426(k). The notice also provides guidance on the related credit and payment rules under sections 34(a)(3), 38, 87, and 6427(e)(1), and rules related to the section 4101 registration requirements.
• Notice 2023-8 provides additional guidance for brokers to comply with the final regulations under section 1446(f) (and certain provisions of the final regulations that apply to section 1446(a)) that relate to withholding on the transfer of an interest in a publicly traded partnership (PTP).
• The U.S. Treasury Department plans to provide guidance before year’s end on tax provisions of the “Inflation Reduction Act of 2022” (IRA).
• Taxpayers in Florida affected by Hurricane Nicole now have until 15 March 2023 to file various individual and business tax returns and make tax payments.
• KPMG LLP professionals prepared a report that examines the core principles of section 704(c) and how the ceiling rule may result in unanticipated consequences for taxpayers.A
   

State and local tax

• A KPMG report provides a “year-end checklist” and summary of state and local tax developments for the fourth quarter of 2022 in table format.
• Florida: The state tax authority issued guidance concluding that receipts from sales of access to online learning services were subject to communications services tax (CST). The taxpayer contended that its service should be considered an exempt information service. However, the tax authority noted that the definition of information service expressly excludes any “video service,” and in its view, the taxpayer’s cloud-based platform that allowed customers to stream and download educational courses was subject to the CST as a “video service.”
  
• Ohio: Enrolled House Bill 223 expands an existing sales tax deduction for bad debts by allowing vendors to deduct bad debts on certain third-party accounts affiliated with the vendor. The deduction would be allowed even though the debt is charged off on the books of the third party and not the books of the vendor.
  
• Kansas: The sales tax rate on food and food ingredients will be reduced to 4% on 1 January 2023. The sales tax rate on food will further decrease the following year and will be reduced to zero on 1 January 2025.
  
• Virginia: Sales of food for home consumption and essential personal hygiene products made on or after 1 January 2023 will be subject to a reduced 1% rate.

Read TaxNewsFlash-United States

• The European Commission (EC) announced that the Committee on Customs of the Free Trade Agreement between the EU and Singapore has adopted a decision amending the “origin protocol” of that free trade agreement.
• The Bureau of Industry and Security (BIS) of the U.S. Commerce Department released a final rule amending the Export Administration Regulations (EAR) by modifying one entity on the entity list, under the designation of Russia.
• The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) issued a FAQ concerning the price cap and petroleum products from Russia.

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)