KPMG Week in Tax: 28 November - 2 December 2022

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

• Africa: A monthly summary of tax developments includes an overview of tax incentives for start-up companies in Nigeria, an update on tax law changes in Mozambique, and several proposed tax law changes in South Africa subject to public consultation.
• Ghana: The 2023 budget includes direct and indirect tax proposals—including an additional pay-as-you-earn (PAYE) tax band with a tax rate of 35%, and an increase to the value added tax (VAT) rate.
• Zimbabwe: The budget for 2023 includes tax-related proposals concerning VAT and a real estate investment trust (REIT) exemption, among other items.

Read TaxNewsFlash-Africa

• Canada: The federal government introduced several new and complex tax rules this year, such as the new mandatory disclosure rules and the new excessive interest and financing expenses limitation (EIFEL) rules. Even though these rules have not yet been enacted, company owners and managers may want to consider them in assessing their 2022 tax situation. 
• Panama: A new administrative procedure through which tax obligations may be eliminated—referred to as “extraordinary payment agreements”—has been introduced.

Read TaxNewsFlash-Americas

• Hong Kong: A new income tax treaty with Mauritius was signed. Benefits include reduced withholding tax  rates for interest and royalties, elimination of withholding tax on service/consultancy fees, and a tax exemption for business profits in the absence of a permanent establishment (PE).
• Hong Kong: Following publication of draft legislation regarding the revised foreign-sourced income exemption (FSIE) regime, the Legislative Council formed a committee to consider the legislation and invited comments on the proposed law. The government subsequently provided responses to the comments received. In addition, the government recently indicated that it has reached an agreement with the EU to adopt the “headline rate” approach for the participation exemption under the FSIE regime.
• India: A tribunal held that capital gain recognized by a Mauritian company on a sale of shares in an Indian company was not taxable in India under the old India-Mauritius income tax treaty.
• Japan: The KPMG member firm in Japan has prepared a report that provides a general overview of the tax system in Japan—current through 31 October 2022.
• Philippines: The Bureau of Internal Revenue (BIR) issued guidance to address questions regarding the tax treatment of equity-based compensation. 
• Singapore: Impending goods and services tax (GST)-related changes concern overseas vendors selling low-value goods, an increase in the GST rate to 8%, and the arranging of insurance and international transport and overseas accommodation for Singapore consumers.
• Thailand: The Thai Cabinet approved a VAT exemption measure for data center business operators, effective 9 November 2022.
• Vietnam: The government issued a decree amending the tax administration rules applicable to e-commerce platform owners. Under the decree, e-commerce platform owners no longer have tax withholding obligations for households. Instead, they are required to report on a quarterly basis to the General Department of Taxation (GDT) providing relevant information about the family business and individuals participating in the sale of goods or providing services on the e-commerce platforms.

Read TaxNewsFlash-Asia Pacific

• Austria: The Ministry of Finance announced a proposal for the introduction of a solidarity contribution on surplus profits (“windfall tax”) generated by companies in the oil, gas, coal, and refinery industries in accordance with the EU regulation on an emergency intervention to address high energy prices.
• Belgium: A law published in the gazette extends assessment, investigation, objection, and retention periods for both income tax and VAT.
• Belgium: Customers not subject to periodic VAT filings but that do have a Belgian VAT number that they communicate to their supplier must also notify the latter of the fact that they do not meet the requirements for the application of the reverse-charge mechanism.
• Belgium: The Court of Cassation held that interest earned on foreign regulated savings deposits held with a credit institution established in the European Economic Area (EEA) is exempt from Belgian individual income tax.
• Croatia: A draft proposal for an “extra profits tax” would apply to corporate profit taxpayers, regardless of the type of performed business activity.
  
• Cyprus: Amendments regarding the imposition of the 0.40% tax payable upon the sale of immovable property were published.
• Cyprus: The Council of Ministers approved an amendment regarding the conditions that must be satisfied for the imposition of VAT on the supply of buildings.
• EU: The Court of Justice of the European Union (CJEU) held that the Anti-Money Laundering Directive (AMLD) 5 provision requiring member states to provide access to beneficial ownership data to any member of the general public was invalid.
• EU: The EU Council approved the European Parliament's position on the regulation on foreign subsidies distorting the internal market.
• Finland: The tax authorities published clarifications on the upcoming transposition of DAC7 into domestic law.
• Germany: The Fiscal Court of Münster held that amendment of an income tax treaty cannot lead to a taxable disjunction of assets (exit tax).
• Germany: The government has published a decree providing guidance on the application of the stock exchange exception under the real estate transfer tax.
• Germany: The lower house of Parliament (Bundestag) adopted the law on implementation of DAC7 and modernization of German tax procedures. DAC7 would introduce an obligation for operators of certain digital platforms to provide the tax authorities with information on income derived by sellers through these platforms, which would be automatically exchanged between EU member states.
• Ireland: The government announced the introduction of a solidarity contribution on surplus profits (“windfall tax”) generated by companies in the oil, gas, coal, and refinery industries.
• Italy: The new recapitulative statement is required to recover import VAT effective 30 November 2022.
• Netherlands: The District Court of Overijssel held that a floating solar park was not considered immovable property subject to property tax.
• Poland: A bill amending the VAT law and certain other acts (commonly referred to as the “SLIM VAT 3 package”) was published on the government‘s website.
• Poland: The bill on family foundations was passed by the government and submitted to the Lower House of the Polish Parliament. Pursuant to the bill, family foundations would technically remain corporate income taxpayers yet remain under subjective exemption—meaning that any revenue earned from asset distribution would not be taxed at the foundation level. 
• Poland: The Supreme Administrative Court held that the provisions of the Council Directive on a common system of taxation applicable to interest and royalty payments made between associated companies of different member states do not apply to situations when at least one potential beneficiary is a third party located outside the European Economic Area (EEA).
• Spain: The government has published a royal decree introducing reverse hybrid mismatch rules in accordance with the Anti-Tax Avoidance Directive 2017/952 (ATAD 2), effective 1 January 2022. The law generally aims to address tax avoidance as a result of a difference in treatment of the entity by the Spanish tax authority as compared to the investor jurisdiction.
• UK: The Court of Appeal disallowed management expense relief for advisor fees on the disposal of a business.
• UK: The Office of Tax Simplification (OTS) published its review of UK taxation of income from residential property.

Read TaxNewsFlash-Europe

• China: The tax authority published the advance pricing arrangement (APA) annual report for 2021, which details the progress of the APA program in China, covering the statistical data of the APA from 2005 to 2021.
• Germany: The lower house of Parliament adopted a law that would provide that in the event of a tax audit, transfer pricing documentation must invariably be submitted (i.e., without separate request by the tax authority). In addition, the deadline would be shortened to 30 days from the date of the disclosure of the audit order instead of 60 days.
• KPMG report: KPMG tax professionals highlight key takeaways from the OECD’s 2021 mutual agreement procedure (MAP) statistics and awards.
• KPMG report: The sports industry and soccer in particular moves billions of dollars around the world. Soccer's global importance, plus recent moves by multinational enterprises into the industry, may bring closer attention from tax authorities.
• Poland: Legislation to implement EU Directive 2021/2101—introducing “public” country-by-country (CbC) reporting for certain undertakings and branches—was announced.
• Qatar: The tax authority confirmed that every taxpayer must maintain reasonable transfer pricing documentation locally in Qatar that captures functional and economic analysis and the conclusion of arm’s length pricing, which goes beyond the requirement to file the transfer pricing declaration and also applies to taxpayers otherwise not required to file the Master file and Local file on the Dhareeba portal.

Read TaxNewsFlash-Transfer Pricing

• Notice 2022-61 provides guidance on the prevailing wage and apprenticeship requirements that must be satisfied in order to qualify for the “bonus rates” available for the clean energy and climate tax incentives under the “Inflation Reduction Act of 2022.”
• Rev. Rul. 2022-23 provides the rates of interest with regard to tax underpayments and tax overpayments for the calendar quarter beginning 1 January 2023. The rates of interest will increase for the first calendar quarter of 2023.
• The U.S. Tax Court unanimously held that the 90-day time limit under section 6213(a) to file a deficiency petition is a jurisdictional deadline, and thus not subject to equitable tolling.
• There are no changes to the tier 2 tax rates for 2023 (that is, with respect to compensation paid in 2023). Tier 2 taxes imposed on railroad employees, employers, and employee representatives are a source of funding for benefits under the Railroad Retirement Act.

Read TaxNewsFlash-United States

• U.S. Customs and Border Protection (CBP) issued guidance on the European Union (EU) steel limit modifications for goods from Germany and Luxembourg. Two limits for the EU steel tariff-rate quota (TRQ) program were updated to align with production capabilities in Germany and Luxembourg.
• The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced that a Delaware-incorporated virtual currency exchange with operations in the United States and elsewhere agreed to remit over $362,000 to settle its potential civil liability for apparent violations of sanctions against Iran. The virtual currency exchange also agreed to invest an additional $100,000 in certain sanctions compliance controls.

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)