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

Transfer Pricing

  • United States: The U.S. Tax Court upheld the requirements under Treas. Reg. §1.482-1(h)(2) (2006) that must be met before the IRS “will take into account the effect of a foreign legal restriction” under section 482 and found that Brazilian legal restrictions at issue in the case did not satisfy such requirements.
  • OECD: A KPMG report on the administrative guidance related to the Pillar Two global anti-base erosion (GloBE) rules provides general observations and detailed descriptions of the issues of particular importance to U.S companies.
  • EU: The General Court of the European Union held that the EU Council should have granted access to the documents prepared in its working groups throughout the discussions on the EU public country-by-country reporting file.  
  • Qatar: A new law includes provisions relevant to transfer pricing concerning a new definition of the arm’s length principle and additional transactions with foreign associated enterprises.

Read TaxNewsFlash-Transfer Pricing

FATCA / IGA / CRS

  • Finland: The tax administration issued updated guidance regarding U.S. taxpayer identification number (TIN) reporting requirements for FATCA purposes.
  • UK: HMRC issued on 3 February 2023, updated guidance regarding U.S. tax identification number (TIN) reporting requirements for FATCA purposes.

Read TaxNewsFlash-FATCA / IGA / CRS

Africa

  • Botswana: The 2023-2024 budget includes tax proposals to improve VAT compliance, strengthen the tax audit function, and introduce a digital marking and tracking solution of excisable goods.
  • Mauritius: A variable capital company (VCC)—a new type of fund structure in Mauritius—is eligible (1) to obtain a tax residency certificate upon filing of their tax returns, and (2) for tax benefits including the partial exemption regime. As such, its effective tax rate may be considerably reduced.
  • Nigeria: Recent developments in the Nigerian mining sector are described in the latest update of a recurring report.

Read TaxNewsFlash-Africa

Americas

  •  Brazil: Recent tax developments may affect companies in the financial, insurance, and real estate sectors.
  • Bolivia: The tax authority issued guidance to extend the deadline for certain taxpayers to register and/or confirm fiscal documents in the “purchases and sales registry” for the January 2023 tax period.
  • Mexico: The general provisions for the Registry of Specialized Service Providers or Specialized Works (Repse) are effective 4 February 2023.
  • Canada: The prescribed interest rates will increase for income tax and for pertinent loan or indebtedness (PLOI) purposes for the second quarter of 2023.
  • Canada: Residential property owners must determine whether they are liable for a new 1% annual underused housing tax (UHT)—and if so—file a separate UHT return and pay any related UHT by 30 April 2023 for each qualifying residential property they owned on 31 December 2022.
  • Colombia: The Colombian tax authority issued guidance on the new single-use plastic products tax introduced by the 2022 Colombian tax reform law.

Read TaxNewsFlash-Americas

Asia Pacific

  • India: The Delhi High Court held that a tax residency certificate was sufficient evidence of residency for purposes of qualifying for benefits under the India-Singapore income tax treaty.
  • Japan: The ruling governing coalition in December 2022 agreed to an outline of tax reform proposals for 2023.
  • Qatar: A new law introduced a global minimum tax as well as numerous exceptions to its source-based taxation system to prevent double non-taxation.

Read TaxNewsFlash-Asia Pacific

Europe

  • France: Notable tax-related measures in the finance law for 2023 include (1) a two-phase repeal of the contribution on companies’ added value (CVAE), (2) implementation of the EU regulation on addressing energy prices, and (3) adjustment of the tax regime for major sporting events.
  • EU: A KPMG report summarizes the EU’s Green Deal Industrial Plan that was released on 1 February 2023.
  • Bulgaria: The Supreme Administrative Court upheld the tax authority’s assessment of withholding tax on deemd interest related to interest-free loans granted between related parties.
  • Denmark: The Danish Ministry of Taxation launched a public consultation on the proposed tax transparency rules for service providers facilitating cryptoasset transactions (DAC 8).
  • EU:  The EC sent letters of formal notice to 14 EU member states that had not notified or only partially notified the national measures transposing DAC7 into domestic legislation. 
  • Italy: The tax authorities launched a public consultation on a draft circular providing clarifications on the Italian patent box regime, as amended by the 2022 budget law.
  • Poland: The head of the VAT department at the Ministry of Finance announced the new “Slim VAT 4 package.” The details remain unknown but work on the new package would start in 2024.
  • Poland: The KPMG member firm in Poland prepared a report that includes summaries of court decisions relating to real estate companies, as well as regarding the deductibility of intangible services costs incurred by an acquired subsidiary.
  • Poland: The Supreme Administrative Court held that in evaluating whether certain agents qualify for the reduced VAT rate applicable to fertilizer under the new VAT matrix, it is inadmissible to refer to the definition of fertilizers provided by the relevant regulations, but it is admissible to rely on external systemic interpretation (i.e., other provisions) to the extent that the resulting interpretation is not detrimental to taxpayers.
  • Romania: Government Ordinance no. 16/2023, transposing DAC7 into Romanian law, was published in the official journal.
  • Spain: A royal decree on packaging and packaging waste seeks to align Spain’s packaging legislation with the new extended producer responsibility scheme set in place by the EU.
  • Sweden: The government study reviewing the taxation of capital assets for natural persons who move abroad has been suspended.  
  • Sweden: The special investigator submitted to the government an interim report on the proposal for implementation of the EU global minimum tax directive.
  • Sweden: The Supreme Administrative Court referred to the CJEU a case regarding the withholding tax treatment of foreign public sector pension institutions.
  • Switzerland: Annual gross income reported in VAT returns will determine the obligation of streaming or television service providers to invest in Swiss filmmaking under the amended Film Act.
  • Switzerland: Requests for the administrative assistance procedure available to foreign tax authorities for obtaining information from Switzerland have increased significantly in recent years. 
  • UK: Capital gains tax changes from 6 April 2023 could affect how employees benefit from “save as you earn” (SAYE) options.
  • UK: The requirement that only certain classes of shares can be used in a tax-advantaged company share option plan (CSOP) will be removed from 6 April 2023.

Read TaxNewsFlash-Europe

United States

  • The U.S. Tax Court upheld the requirements under Treas. Reg. §1.482-1(h)(2) (2006) that must be met before the IRS “will take into account the effect of a foreign legal restriction” under section 482 and found that Brazilian legal restrictions at issue in the case did not satisfy such requirements.
  • The IRS intends to issue opinion letters on 28 February 2023 (or as soon as possible thereafter) for pre-approved defined benefit plans that were updated for changes in plan qualification requirements listed in Notice 2020-14 and that were filed with the IRS during the third six-year remedial amendment cycle for pre-approved defined benefit plans established under Rev. Proc. 2016-37. 
  • The U.S. Tax Court released a memorandum opinion holding that gain recognized by a nonresident alien individual partner on a sale of her interest in a U.S. partnership, that was attributable to inventory items, may be treated as U.S.-source income and thus subject to tax in the United States.
  • The White House released a fact sheet setting forth the president’s statement on his economic plan that mentions a number of tax proposals the president intends to include in his budget that he is expected to send to Congress on 9 March. Read TaxNewsFlash-Biden Tax Agenda
  • KPMG reports published this week:
    • Provide a detailed explanation of accounting for income taxes, designed to assist in an understanding of the application of ASC 740
    •  Aim to identify the players, the components, and the motives that will drive the tax legislative agenda in the current Congress—read TaxNewsFlash-Legislative Updates
    • Discuss issues presented by the Tax Cuts and Jobs Act (TCJA) provision requiring mandatory capitalization of section 174 costs for taxpayers within the engineering and construction (E&C) industry
    • Examine U.S. GAAP and IFRS considerations of key tax provisions in the “Inflation Reduction Act of 2022” and H.R. 4346, “The CHIPS and Science Act of 2022” (updated to address IFRS considerations)

State and local tax

  • A KPMG report summarizes significant state and local tax developments that may affect return and/or payment obligations of companies engaged in the asset management industry for tax years beginning in 2022, and includes a table listing states that have enacted a passthrough entity tax as a workaround for the federal SALT cap on taxes that may be deducted as an itemized deduction. 
  • The Arizona Court of Appeals upheld a superior court’s order that a taxpayer was renting application software subject to the state’s transaction privilege tax (TPT). In the court’s view, the taxpayer had automated its services through the use of software, and imposing tax on amounts charged to customers did not constitute a discriminatory tax on electronic commerce.
  • The Michigan Tax Tribunal held that a provider of waste disposal services was not eligible for the rolling stock use tax exemption, which applies to purchases made by persons engaged in the business of carrying persons or property of others across state lines.
  • The Texas Comptroller formally adopted revised 34 TAC §3.334, which provides that local sales taxes from internet orders fulfilled at warehouses or distribution centers in Texas (assuming those locations are not places of business of a seller) will be sourced to the delivery location.
  • The Wisconsin Department of Revenue addressed the state’s nonconformity with Internal Revenue Code section 174, as amended by the “Tax Cuts and Jobs Act,” stating that taxpayers with research and experimentation (R&E) expenses have the following options for Wisconsin tax purposes: (1) elect to deduct the expenses in the year paid or incurred; (2) elect to defer the expenses and deduct ratably over at least 60 months; or (3) elect to treat the expenses as capital expenditures amortizable over a useful life, if determinable.

Read TaxNewsFlash-United States

Trade & Customs

  • The Bureau of Industry and Security (BIS) of the U.S. Commerce Department released a final rule amending the Export Administration Regulations (EAR) by adding six entities to the entity list, under the destination of China.
  • The Office of the U.S. Trade Representative (USTR) released a notice making amendments to the reinstated exclusions in the Section 301 investigation of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation.
  • U.S. Customs and Border Protection (CBP) modified an existing “withhold release order” (WRO) on certain imports of synthetic disposable gloves from Malaysia to allow shipments of the Malaysian company to enter into the United States.
  • The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) has published guidance regarding the price cap policy for crude oil and petroleum products of Russian origin.

Read TradeNewsFlash-Trade & Customs

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

 

 

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