KPMG Week in Tax: 20 - 24 February 2023

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

• South Africa: The 2023 budget includes indirect and direct tax proposals.
• South Africa: Carbon tax-related measures proposed in the 2023 budget would become effective 1 January 2023.
• Kenya: Insurers transacting in permanent health, annuities, and all pension classes of life insurance are exempted from the Insurance Premium Levy (IPL) for a period of five years—effective 1 December 2022.
• Nigeria: The Tax Appeal Tribunal (Lagos) held that a network facilities provider was not a telecommunications company and therefore not subject to the National Information Technology Development Agency (NITDA) levy.
• Africa: The KPMG member firm in the Netherlands prepared a report summarizing recent tax developments.

Read TaxNewsFlash-Africa

• Mexico: The tax authority of the State of Nuevo Leon published the general rules for the issuance of an opinion on compliance with tax obligations.
• Mexico: The tax authority of the State of Nuevo Leon published an agreement to facilitate withholding of payroll tax, which is effective beginning 1 February 2023 until 31 December 2023.
• Mexico: The general rules for correct compliance with the financial code were published by the State of Mexico, as well as the state income law for fiscal year 2023.

Read TaxNewsFlash-Americas

• China: The State Taxation Administration published clarifications on procedures relating to the 2022 annual reconciliation filing.
• Singapore: The goods and services tax (GST) legislation from 1 January 2023 has been amended to allow GST claims on both the purchase and related running expenses of a motor car for businesses that offer chauffeur service or cars for lease or hire.
• Indonesia: An implementing regulation provides further guidance on the amended general provisions of the reformed value added tax (VAT) law.
  
• Philippines: The Supreme Court issued a resolution that only a letter of authority (LOA) can vest authority in a new revenue officer.
• Hong Kong: The 2023-2024 budget includes proposals concerning income tax and property and stamp tax.
• Pakistan: The “mini budget” includes measures regarding income tax, sales tax rates, and federal excise duty rates.
• Cambodia:  The General Department of Taxation (GDT) further clarified and added some rules and procedures for the implementation of the VAT on electronic commerce (e-commerce) transactions.
• India: The GST Council made certain recommendations regarding amnesty schemes, adoption of reports of the Group of Ministers, changes in GST tax rates for a few items and measures for the facilitation of trade.
• Korea: The Supreme Court held that goods provided as “free samples” were not actually supplied without cost, and the value of such goods for customs and VAT purposes must be computed based on the total price paid under the supply contract by the total amount provided under the contract (including the free samples).

Read TaxNewsFlash-Asia Pacific

• Belgium: The Court of Appeal in Ghent held that a qualitative evaluation must be made as to whether renovations of an old building are so far-reaching and entail sufficient added value as to constitute new construction for VAT purposes.
• Malta: A new legal notice extends by one year the temporary measure allowing entities with excess capital allowances, as a result of losses suffered during the COVID-19 pandemic, to be surrendered to other group entities and thus to be utilized in basis year 2022 (in addition to basis year 2021).
• Malta: The tax authority extended the deadline for the electronic filing of VAT returns that were due by 22 February 2023, as well as the associated VAT payment, to 28 February 2023.
• EU: The European Commission (EC) launched a public consultation on a draft implementing regulation to clarify practical and procedural aspects related to the application of the foreign subsidies regulation on foreign subsidies distorting the internal market. The consultation runs until 6 March 2023.
• Lithuania: Recent VAT developments concern the: (1) VAT deduction available on purchased electric cars; (2) application of reduced VAT rates; (3) deduction of input VAT when the seller is insolvent; and (4) obligation to adjust VAT deductions in the event of the taxable person being placed in liquidation procedure.
• UK: The Court of Justice of the European Union (CJEU) decided that the UK group transfer rules are not contrary to EU law.
• Isle of Man: The budget for 2023 does not include any major changes with respect to the income tax and national insurance regimes. The main immediate tax change announced was the tapering of individual (personal) allowances.
• Denmark: The tax authority has launched an automatic check of the figures reported in boxes A and B on VAT returns against the figures reported in “EU sales without VAT,” in order to improve its ability to audit information in VAT declarations.
• Lithuania: A KPMG “tax card” for 2023 provides a quick reference tool for the most common tax rates and amounts in Lithuania.
• Poland: The Polish Constitutional Tribunal held that although the term “joint venture” is not defined in the tax law, a uniform interpretation of the notion of joint venture has developed under case law.
• Poland: The Supreme Administrative Court held that a taxpayer could deduct costs of compensation paid to an employee for early termination of an employment contract.
  
• Poland: A draft decree extending 2022 reporting deadlines was published on the government’s website. Both the deadlines for submitting the corporate income tax-8 return and for paying the tax for 2022 shown in annual statements would be postponed by three months (i.e., until 30 June 2023).
• Spain: Order HFP/115—establishing the list of countries, territories and harmful tax regimes considered non-cooperative jurisdictions, which entered into force on 11 February 2023—was published in the Official State Gazette.
• UK: Employers must file their 2022/2023 employment-related securities returns on or before 6 July 2023, and this year more information is mandatory.
• UK: HM Revenue & Customs published guidance on the reporting of common reporting standard (CRS) avoidance arrangements and opaque offshore structures under mandatory disclosure rules that are effective from 28 March 2023.
• UK: A KPMG report outlines what arrangements fall within the employer-financed retirement benefit schemes (EFRBS) tax regime, what reporting obligations arise, and what companies can do to confirm whether their EFRBS compliance position is up to date.

Read TaxNewsFlash-Europe

• OECD: The Secretary-General Tax Report to the G20 Finance Ministers and Central Bank Governors provides updates on the latest developments in international tax reforms, including on the OECD’s base erosion and profit shifting (BEPS) initiatives, tax transparency efforts and other G20 tax deliverables.
• South Africa: The 2023 budget includes a proposal to introduce a legislative framework to empower the South African Revenue Service (SARS) to conclude bilateral advance pricing agreements (APAs).
• Hong Kong: The 2023-2024 budget proposes application of the global minimum effective tax rate on large multinational enterprise groups and implementation of the domestic minimum top-up tax starting from 2025 onwards.
• Korea: The Tax Tribunal held that the tax authority was not entitled to adjust the transfer prices for only certain of the taxpayer’s local distributors when such distributors conducted similar businesses and had similar functions, risks, and asset profiles.

Read TaxNewsFlash-Transfer Pricing

• Guernsey: The tax authority issued guidance under the FATCA and common reporting standard (CRS) regulations.
• Australia: The Australian Taxation Office (ATO) issued updates regarding the reporting of U.S. taxpayer identification number (TIN) codes for FATCA purposes for calendar years 2022, 2023 and 2024.
• Kenya: The Cabinet Secretary for the National Treasury issued regulations guiding the implementation of the CRS in Kenya—effective 1 January 2023.
• South Africa: SARS issued updates to its guidance providing clarifications on the application of certain codes provided for the TIN data fields for FATCA submissions.
• Singapore: The deadline for registration of an entity that became a reporting Singapore financial institution between 1 January 2022 and 31 December 2022 (both dates inclusive) under the CRS is 31 March 2023.

Read TaxNewsFlash-FATCA / IGA / CRS

• Final regulations treat members of a consolidated group as a single U.S. shareholder for purposes of applying section 951(a)(2)(B) with respect to CFC-to-CFC distributions of previously taxed earnings and profits (PTEP) under section 959(b) (section 959(b) distributions).
• Final regulations amend the rules for filing electronically partnership returns, corporate income tax returns, unrelated business income tax returns, withholding tax returns, certain information returns, registration statements, disclosure statements, notifications, actuarial reports, and certain excise tax returns.
• Proposed regulations relating to the use of forfeitures in qualified retirement plans include a deadline for the use of forfeitures in defined contribution plans.
• OMB’s Office of Information and Regulatory Affairs (OIRA) completed its review of proposed regulations concerning information returns of brokers in virtual currency transactions.
• The U.S. Treasury Department and IRS, jointly with the Department of Labor and the Pension Benefit Guaranty Corporation, released a notice of final forms and instructions revisions for annual reporting of employee benefit plans.
• “Disaster area taxpayers” in parts of Alabama, California, and Georgia now have until 16 October 2023 to file various federal individual and business tax returns and make tax payments. The deadline was previously postponed to 15 May for these areas.
• KPMG reports provide observations from:
  • Notice 2023-20 (guidance regarding certain insurance related issues under corporate alternative minimum tax)
  • Notice 2023-18 (guidance on qualifying advanced energy project credit under section 48C)
     

State and local tax

• The Pennsylvania Supreme Court upheld a “benefits-received” interpretation of the income-producing activity test for sourcing receipts from sales of services.
• The California Controller interpreted the state’s unclaimed property laws in relation to unclaimed brokerage accounts. Specifically, the Controller determined that it believes the escheatment of unclaimed brokerage accounts is covered by Cal. Civ. Pro. Code § 1520 governing “miscellaneous intangibles” rather than § 1516, which addresses stock and other intangible interests in a business association.
• The Louisiana Board of Tax Appeals held that subscriptions to a cloud-based storage plan were not subject to New Orleans sales taxes because the taxpayer’s cloud storage services were included in the definition of “Internet Access” under the Internet Tax Freedom Act; and, therefore, the city could not impose sales taxes on subscriptions sold to city customers.
• The Louisiana Board of Tax Appeals concluded that a taxpayer was entitled to a manufacturing machinery and equipment sales tax exclusion although most of its customers were related parties and the items at issue were manufactured from pipe provided by customers.
• The Tennessee Department of Revenue determined that, in computing “net earnings” under Tennessee law, taxpayers are entitled to the full amount of the IRC section 250(a) deduction to which they are entitled under federal law as it relates to foreign-derived intangible income (FDII).

Read TaxNewsFlash-United States

• The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) issued a new determination targeting the metals and mining sector of the Russian economy under Executive Order 14024.
• The Bureau of Industry and Security (BIS) of the U.S. Commerce Department released a final rule expanding and strengthening existing sanctions against Russia and Belarus, including the scope of the Export Administration Regulations (EAR)’s Russian and Belarusian industry sector sanctions and “luxury goods” sanctions.
• BIS released a final rule amending the EAR to impose new export control measures on Iran.
• BIS released two final rules amending the Export Administration Regulations (EAR) entity list.
• The U.S. Department of State finalized an interim final rule to better organize the purposes and definitions of the International Traffic in Arms Regulations (ITAR).
• U.S. Customs and Border Protection (CBP) issued guidance concerning duties and product exclusions under the Section 301 investigation of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation.
• OFAC and BIS issued guidance on authorized transactions and licensing for exports following the earthquake in Türkiye and Syria.
  
• The EC proposed to renew the suspension of import duties, quotas, and trade defence measures on Ukrainian exports to the European Union—known as the Autonomous Trade Measures—for another year. 

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)