KPMG Week in Tax: 9 - 13 January 2023

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

• South Africa: The South African Revenue Service (SARS) issued guidance on the value added tax (VAT) treatment of “scrip-lending transactions,” effective 1 April 2023.
• Botswana: The VAT rate will revert to 14% (from the 12% applicable during the past six months), effective 3 February 2023.  

Read TaxNewsFlash-Africa

• Canada: The Department of Finance announced a four cent increase to the prescribed rates used to compute certain employee taxable benefits for 2023.
• Canada: The Canada Border Services Agency (CBSA) released an updated list of 20 specific imported goods that constitute its current verification priorities.
• Caribbean: Several countries have announced changes affecting payroll and related withholdings for 2023, affecting employers, employees, and self-employed persons (including Antigua and Barbuda, Aruba, Barbados, Bermuda, Curacao, Saint Lucia, Saint Vincent and the Grenadines).
• Brazil: Recent tax developments may affect companies in the financial, insurance, and real estate sectors, including draft legislation to align Brazil’s unique transfer pricing system with the OECD Transfer Pricing Guidelines.
• Mexico: The values of the “unit of measure and update” (UMA) will be effective 1 February 2023. The UMA values have implications for tax and social security contribution determinations.
• Panama: An additional period is granted, until 13 January 2023, for the satisfaction of certain tax obligations that could otherwise generate interest, surcharges and fines.

Read TaxNewsFlash-Americas

• Cambodia: There will be new salary thresholds implemented for salary payable to resident employees from January 2023 for determining their taxable salary subject to tax on salary at the progressive tax rate by tranche.
• Cambodia: The General Department of Taxation (GDT) issued guidance to clarify the scope and imposition of the advanced tax on dividend distribution (ATDD) in Cambodia.
• Malaysia: A draft service tax guide on goods delivery services provides certain clarifications, pending the effective date of proposed expansions to the scope of services subject to service tax.
  
• Malaysia: The Ministry of Finance—prior to the implementation of sales tax on “low value goods”—has issued multiple pieces of legislation. The Royal Malaysian Customs Department has also launched the official portal for low value goods (MyLVG) allowing online submission of the application for registration. 
• Saudi Arabia: The Zakat, Tax and Customs Authority (ZATCA) of Saudi Arabia issued circulars on the VAT treatment of (1) certain supplies in the financial services industry, and (2) real estate loan portfolio insurance.
• India: The Karnataka High Court held that the taxpayer was not required to withhold (deduct tax at source) on estimated payments made to unidentifiable payees, which were reflected in the taxpayer’s books and records at year-end.
• India: The Karnataka High Court held that the beneficial 10% withholding tax rate under the appliable income tax treaty applied even though the taxpayer did not provide its PAN to the withholding agent, which would normally trigger the application of a 20% withholding rate under Section 206AA of the Income-tax Act, 1961.  
• Mongolia: Changes in tax legislation relate to the state budget, corporate income tax, import VAT and customs duty, individual income tax, and excise tax.
• Singapore: The Income Tax Board of Review held that a cement silo was not a “plant” for purposes of a capital allowance claim under Section 19A of the Singapore Income Tax Act 1947.
• Korea: The National Assembly approved tax reform measures for 2023.

Read TaxNewsFlash-Asia Pacific

• Cyprus: The Social Insurance Services Department issued an announcement that the maximum amount of insurable earnings for 2023 has been increased from the previous year. 
• Italy: The 2023 budget law introduced VAT measures concerning anti-VAT evasion checks, limit on cash payments, facilitation of electronic interfaces, supplies of methane gas, sales of pellets, and the VAT rate for early childhood products and absorbent feminine hygiene products.
  
• Switzerland: The National Council approved draft legislation on the tonnage tax that would replace income tax at the communal, cantonal and direct federal levels. The taxable basis of a company would be determined based on net tonnage of ships (freight capacity).
• EU: Member states had until 31 December 2022 to transpose DAC7 into national law. The directive applies from 1 January 2023, and the first reporting of data will be required by 31 January 2024. However, multiple member states have not transposed the provisions of the directions into domestic law.
• Hungary: The government published a decree to expand the scope of windfall profit taxes to the pharmaceutical industry, applicable for the years 2022 and 2023.
• Poland: The Council of Ministers passed a bill amending the law on enforcement proceedings that would enable compulsory recovery of VAT settled under special procedures. This relates to taxpayers with a place of residence or seat outside Poland, filing VAT returns in other countries.
• Poland: Recent court decisions concern (1) distribution of profits earned before transforming a sole proprietorship into an LLC; and (2) establishing transmission easement under contract without renumeration.
• Sweden: The Administrative Court of Gothenburg (Court) held that license fees paid to companies not performing development, enhancement, maintenance, protection, or exploitation (DEMPE) functions are not deductible.
• Bulgaria: Changes in the VAT law include the reporting of data regarding cross-border payments.
• Kosovo: Changes affecting the application of income tax treaties to transactions with foreign entities are applicable from 1 January 2023.
• North Macedonia: Developments in the tax legislation include amendments to the law on individual (personal) income tax and proposed amendments to the law on corporate income tax and VAT.
• UK: New guidance from HMRC proposes significant additional information requirements for research and development (R&D) claimants from 1 April 2023.
• UK: Draft legislation contains details on how the electricity generator levy will apply to groups and joint ventures, as well as policy updates such as a reduction of the threshold, indexation of the benchmark price and the ability to deduct certain exceptional costs.
• UK: The government has announced a phased introduction from April 2026 (previously April 2024) for making tax digital for income tax self-assessment.
• UK: HMRC published new guidance on the “associated companies” test for determining applicable corporation tax rate and payment deadlines.
• UK: Businesses struggling with cash flow challenges may benefit from approaching HMRC about a potential “time to pay” arrangement.

Read TaxNewsFlash-Europe

• OECD: Manal Corwin has been appointed to serve as the next Director of the OECD Centre for Tax Policy and Administration beginning 3 April 2023. Ms. Corwin is currently the partner-in-charge of KPMG’s Washington National Tax office.
• Slovakia: New guidelines for determining the content of transfer pricing documentation are effective for the tax period starting after 31 December 2022.
• Panama:  The deadline for submitting country-by-country (CbC) reports corresponding to the 2021 tax year is extended until 15 January 2023.
• Spain: The EU public CbC reporting directive was transposed into domestic law.
• North Macedonia: Proposed amendments to the corporate income tax law include changes with respect to transfer pricing reporting.
• UK: Draft transfer pricing documentation regulations were published for consultation, but the proposal for an accompanying summary audit trail (SAT) will now be delayed pending a public consultation in 2023.

Read TaxNewsFlash-Transfer Pricing

• Japan: The tax agency published “frequently asked questions” (FAQs) on (1) on the automatic exchange of information (AEOI) reporting system under the common reporting standard (CRS) regime, and (2) the AEOI process for non-residents.
• Germany: The federal central tax office (BZSt) released FATCA-related guidance concerns U.S. tax identification numbers (TINs).

Read TaxNewsFlash-FATCA / IGA / CRS

• United States: The Bureau of Industry and Security (BIS) released a final rule to amend the Export Administration Regulations (EAR) to reflect decisions made at Australia Group (AG) virtual implementation meetings and the AG plenary meetings, concerning controls on marine toxins, plant pathogens, and biological equipment.
• United States: Customs and Border Protection and Treasury’s Office of Foreign Assets Control (OFAC) released final rules making the 2023 annual inflation adjustment to civil monetary penalties.
• Brazil: The KPMG member firm in Brazil prepared a report covering updates in the field of foreign trade.

Read TradeNewsFlash-Trade & Customs

• OMB’s Office of Information and Regulatory Affairs (OIRA) received for review proposed regulations concerning information returns of brokers in virtual currency transactions.
• The IRS announced that the “tax season” for individual taxpayers will start 23 January 2023, at which time the IRS will begin accepting and processing individual income tax returns for 2022. The deadline for filing 2022 tax returns (or an extension to file) is 18 April 2023 for most taxpayers.
• The National Taxpayer Advocate released the 2022 Annual Report to Congress identifying taxpayer challenges (e.g., return processing and refund delays), describing the outlook for 2023, and providing both administrative recommendations to the IRS and legislative recommendations to strengthen taxpayer rights and improve tax administration.
• Taxpayers in California affected by the winter storms, flooding, and mudslides now have until 15 May 2023 to file various individual and business tax returns and make tax payments.
• KPMG reports this week:
  • Provide initial impressions and observations regarding final regulations on exception for U.S. real property interests held by foreign pension funds
  • Address section 163(j) considerations on the disposition of partnership property and partnership interests

Read TaxNewsFlash-United States
 

• The U.S. House of Representatives yesterday passed a bill that would rescind $7.6 billion of the $79.6 billion in additional funds appropriated for activities of the IRS under the “Inflation Reduction Act of 2022” (IRA). 
• The House of Representatives Republican caucus selected Jason T. Smith (R-MO) to chair the Ways and Means Committee.

Read TaxNewsFlash-Legislative Updates

The items described above are also reported as editions of TaxNewsFlash:

• Indirect Tax
• Taxation of the Digitalized Economy
• Tax Dispute Resolution