KPMG Week in Tax: 16 - 20 January 2023

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

• South Africa: An updated and effectively new interpretation note on intragroup loans includes additional guidance relating to the South African interest limitation rules, as well as on loans granted by a natural person or by a company (at the instance of a natural person) to a trust or a company that is a connected person in relation to a trust.
• OECD: A KPMG report discusses where Amount B will go and how to shape the discussion.
• OECD: KPMG tax professionals submitted a memo with comments on the OECD document Pillar One - Amount A: Draft Multilateral Convention Provisions on Digital Services Taxes and other Relevant Similar Measures.
• OECD: Revenue gains from the implementation of the agreement to reform the international tax system are expected to be higher than previously expected.

Read TaxNewsFlash-Transfer Pricing

• Hungary: There are updated versions of FATCA and common reporting standard (CRS) filing instructions.
• UAE: The Abu Dhabi Global Market (ADGM) issued FATCA Regulations 2022 and CRS Regulations 2022.

Read TaxNewsFlash-FATCA / IGA / CRS

• Uganda: All companies and partnerships need to submit beneficial owners’ information no later than 30 days from the date of the notice.
• Botswana: The application of the reduced value added tax (VAT) rate of 12% is extended through 31 March 2023

Read TaxNewsFlash-Africa

• Mexico: The tax administration published a list of the 177 foreign providers of digital services that are registered for tax purposes in Mexico as of 31 December 2022 (15 new entities were added to the list).
• Mexico: Version 3.6.3 of the single self-determination system (SUA) will be made available to employers as of 23 January 2023. This version of the SUA incorporates reforms applicable as of 1 January 2023.
• Mexico: The fiscal miscellaneous resolution for 2023 introduced measures applicable to digital tax receipts online (CFDI) in payroll matters.
• Guyana: Tax proposals in the 2023 budget concern VAT, excise tax, business income tax, individual income tax.

Read TaxNewsFlash-Americas

• Korea: The tax tribunal issued rulings concerning obligations to benefit from preferential tariff rates under free trade agreements with the United States and China.
• Korea: The tax tribunal held that royalties received by the taxpayer were Korea-sourced and thus subject to withholding of corporate income tax under the Korea-U.S. income tax treaty.
• China: Preferential individual income tax policies are extended for one year, until 31 December 2023.
• China: The first draft of the VAT law aims to enhance the adoption of OECD International VAT/ goods and services tax (GST) guidelines, and upgrade the status of the previously bifurcated VAT pilot program rules and regulations.
• India: The Orissa High Court held that a decision, in which the Supreme Court held that an educational institution must engage solely in education or educational activities in order to qualify for exemption (reversing its earlier “principal” or “main” activity test), applies prospectively.
• India: The Delhi High Court held that the taxpayer was the beneficial owner of fees for technical services (FTS) and eligible for the beneficial tax rate provided for FTS under the India-United States income tax treaty. There was no back-to-back arrangement between the taxpayer and its holding company for passing on the fees received by the holding company. The taxpayer was playing the role of a service provider after procuring the same from other group companies, and it had dominion over the fees received by it.
  
• India: A tribunal held that the taxpayer’s liaison office did not constitute a permanent establishment (PE) in India under the India-Switzerland income tax treaty because the taxpayer did not conduct any activity through the office other than routine communication and client coordination, and the office’s staff in India were not able to negotiate with customers, sign or finalize contracts, or otherwise run the office on their own.
• India: A tribunal rejected the taxpayer’s amalgamation plan because it did not expressly provide for compliance of provisions relating to carry forward and set off of accumulated loss and unabsorbed depreciation under section 72A of the Income-tax Act, 1961.
  
• Malaysia: A monthly report summarizes indirect and direct tax developments.
• Philippines: Taxpayers registered for VAT are no longer required to file a monthly VAT declaration (BIR Form No. 2550M).
• Thailand: The Board of Investment announced new categories relating to high precision machinery for which corporate income tax exemptions for five or eight years may be granted.

Read TaxNewsFlash-Asia Pacific

• Albania: Changes to the tax legislation become effective in 2023, concerning tax procedures, VAT, windfall profits tax on energy producers, and excise tax.
• Poland: The upper house of Parliament voted on the bill that introduces the family foundations into the Polish legal framework—making approximately 70 amendments to the bill, including introducing an obligation to evaluate the functioning of the implementing regulations after three years and submit it to the parliament.
  
• Poland: Tax-related court cases concern whether a company that establishes a tax group with other entities may still enjoy the protective force of tax rulings obtained before formation and whether a taxpayer may obtain a ruling on tax scheme reporting requirements.
• Poland: The Minister of Finance published a draft decree that would apply a 0% VAT rate to free-of-charge deliveries of goods or provisions of service to the Governmental Agency for Strategic Reserves, healthcare entities, and local government units aimed at supporting victims of the conflict in Ukraine.
• Cyprus: The tax authority announced the commencement of the gradual implementation of the new single tax administration portal, which will progressively replace the TAXISnet website. Taxpayers must update their electronic address (e-mail).
• Cyprus: Self-service establishments must register with the relevant register by 6 February 2023.
• Jersey: Following the introduction of economic substance rules for partnerships effective for the 2022 tax year, Parliament approved new annual tax reporting for partnerships.
• Czech Republic:  A regional court held that the thin capitalization rules did not apply to interest paid on bonds issued by a commission agent on behalf of individual principals.
• Czech Republic:  A new list of “questions and answers” (Q&As) concerns the obligations of digital platform operators arising from the new reporting obligation relating to sellers and sales made through these platforms. The first report, for 2023, is due 31 January 2024.
• Czech Republic: The Supreme Administrative Court (SAC) has referred a preliminary question to the Court of Justice of the European Union (CJEU) whether it is possible to deny the right to VAT exemption for supplies of goods to another EU member state if the supply to a specific customer is not proved.
• Greece: A circular provides instructions on the procedure for the adjustment of taxable profits of a legal entity following a tax audit of intra-group transactions pursuant to Article 50 (1A) of the Income Tax Code.
• Spain: The 2023 general state budget law includes numerous direct and indirect tax measures, the most significant of which concern VAT, corporate income tax, and individual (personal) income tax.

Read TaxNewsFlash-Europe

• Taxpayers in parts of Georgia and Alabama affected by storms now have until 15 May 2023 to file various individual and business tax returns and make tax payments.
• The IRS Large Business and International (LB&I) division publicly released two “practice units” concerning accounting methods.
• The IRS issued a reminder that to avoid penalties, employers must file Forms W-2 and other wage statements by 31 January 2023.
• A petition has been filed pursuant to Rev. Proc. 2022-26, requesting that 4,4’- isopropylidenediphenol-epichlorohydrin copolymer be added to the list of taxable substances under section 4672(a).
• Rev. Proc. 2023-14 provides the annual depreciation deduction limitations under section 280F for automobiles placed in service in 2023. The section 280F limitations are required to be adjusted for inflation for automobiles placed in service after 2018.
• A KPMG report summarizes comments from representatives of the U.S. Securities and Exchange Commission (SEC) about accounting for income taxes during the 2022 AICPA Conference on Current SEC and PCAOB Developments.

State and local tax

• Minnesota: A new law updates Minnesota’s conformity to generally adopt the Internal Revenue Code as amended through 15 December 2022, for both individual income tax and corporate franchise tax purposes. 
• Missouri: Certain sales and use tax law changes enacted in Missouri during the 2021 legislative session became effective 1 January 2023, including the state’s economic nexus provisions that apply to out of state retailers and marketplace facilitators. In addition, as of 1 January 2023, purchases qualifying for the exemption are also exempt from local sales tax.
• Ohio: House Bill 45 authorizes the state tax authority to establish and administer a tax and fee amnesty program with respect to qualifying delinquent taxes and fees. However, the amnesty program will be implemented only if necessary to meet the obligations required to be paid from the state general fund in 2023. If that determination is made, the amnesty program will operate during two consecutive months in 2023, as designated by the tax authority.
• Washington State: The Washington Board of Tax Appeals held that a retailer taxpayer was not entitled to claim the bad debt sales tax credit and business and occupation (B&O) tax deduction on uncollectible amounts charged to the store’s branded private label credit card.

Read TaxNewsFlash-United States

• The staff of the Joint Committee on Taxation (JCT) released a report listing federal tax provisions expiring in years 2022 through 2034.

Read TaxNewsFlash-Legislative Updates

• A KPMG report discusses the use of cooperatives in cases where existing models of granting ownership for digital networks may fall short.

Read TaxNewsFlash-Cooperatives

• An update to a final rule concerns the Export Administration Regulations (EAR) and implements necessary controls on advanced computing integrated circuits, computer commodities that contain such integrated circuits, and certain semiconductor manufacturing items. The rule makes an initial update to the controls by adding the same controls implemented with respect to China, to Macau.
• The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) issued Russia-related general licenses and “frequently asked questions” (FAQs).
• Officials from the United States and European Union (EU) signed a tariff-rate quota agreement.

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