KPMG Week in Tax: 20 - 24 March 2023

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

• Egypt: The tax authority published guidance clarifying the value added tax (VAT) on digital services regime. Nonresident vendors of remote services to customers in Egypt are required to register under a new “simplified vendor registration mechanism” and charge VAT effective from 1 June 2023.
•  Egypt: Representatives of the governments of Qatar and Egypt signed an income tax treaty that aims to eliminate double taxation, prevent tax evasion, and promote investments and trade exchange between the two countries. 
• Nigeria: The Federal Inland Revenue Service (FIRS) issued guidelines on the administrative and compliance obligations of companies charged with the responsibility to withhold VAT at source and/or self-account for VAT on taxable supplies.

Read TaxNewsFlash-Africa

• Bolivia: The “fourth group of taxpayers” must issue fiscal documents only through the assigned online billing modality as of 1 June 2023.
• Canada: Alberta Bill 10 includes the framework for a new 12% non-refundable agri-processing investment tax credit.
• Canada: Provincial budgets delivered this week in New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, Quebec, and Saskatchewan include tax measures.
• Chile: As a result of the forest fires that have affected the Ñuble, Biobío and Araucanía regions, and its declaration under the constitutional state of emergency of catastrophe, the Internal Revenue Service of Chile issued instructions on associated donations and expenses.

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• Australia: The federal government released exposure draft legislation in relation to proposed changes to the thin capitalisation rules. The rules are proposed to apply for income years beginning on or after 1 July 2023.
• Australia: The government released the first tranche of draft legislation requiring Australian public companies to disclose information on their subsidiaries, including details on tax residence, in their financial reports—effective for financial years commencing 1 July 2023.
• Bahrain: Starting from 19 March 2023, importation of waterpipe tobacco products without a digital stamp will be prohibited through the customs points of entry in Bahrain.
• India: The Supreme Court held that a taxpayer claiming input tax credit for purposes of Karnataka value added tax (VAT) must provide proof of the relevant transaction.
• Israel: A new proposal would, if approved, require non-resident vendors of digital services and low-value goods to register for, collect, and remit VAT.
• Philippines: The Bureau of Internal Revenue clarified the effects of publishing the list of taxpayers who cannot be located.
• Qatar: Representatives of the governments of Qatar and Egypt signed an income tax treaty that aims to eliminate double taxation, prevent tax evasion, and promote investments and trade exchange between the two countries.
• Qatar: The tax authority extended the deadline by one month, until 31 May 2023, for income tax return filing and payment for entities with years ended 31 December 2022.
• UAE: The tax authority published an updated VAT guide on input tax apportionment. The guide is not legally binding, but is intended to provide assistance in understanding and applying the VAT legislation with regards to input tax apportionment and special methods for input tax apportionment.

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• Belgium: A “windfall profits tax” on electricity producers—enacted in December 2022—applies from 1 August 2022 to 30 June 2023.
• Belgium: The Chamber of Representatives passed draft legislation that would modernize the existing VAT compliance and VAT refund processes, as well as the VAT procedural rules (referred to as the so-called “VAT chain” reform).
• Bulgaria: The Ministry of Finance published a proposal for the introduction of a temporary solidarity contribution on all sectors (in addition to the already applicable solidarity contribution on the fossil fuel sector).
• EU: The European Commission published a working paper regarding VAT on non-fungible tokens (NFTs).
• EU: The European Parliament Committee on Economic and Monetary Affairs (ECON Committee) adopted a set of recommendations arising from the report on lessons learned from the Pandora Papers.
• Greece: Updated lists of non-cooperative jurisdictions and preferential tax regime countries were published.
• Ireland: Finance Act 2022 introduced structural changes to the research and development (R&D) tax credit aimed at aligning the credit with international tax reform. 
• Latvia: A KPMG tax card for 2023 provides information for businesses and individuals looking to understand tax obligations in Latvia.
• Lithuania: The Ministry of Finance announced a proposal for the introduction of a temporary solidarity contribution on the banking sector.
• Malta: The Commissioner for Revenue published clarifications in relation to the notification requirements for intermediaries, who are subject to legal professional privilege, to notify other intermediaries of their reporting obligation under DAC6.
• Montenegro: Parliament enacted amendments to the tax law that include measures relating to real estate sales tax and corporate income tax. 
• UK: The Court of Appeal confirmed that s403D(1)(c) of the Income and Corporation Taxes Act 1988 (ICTA), which was in force in the periods in question, was compatible with the freedom of establishment. 

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• Germany: The Ministry of Finance launched a consultation on a discussion draft to implement the OECD’s Pillar Two model rules as set out under the EU minimum tax directive.
• Korea: The advance customs valuation arrangement (ACVA) program is intended for taxpayers to determine customs value prior to import declaration (even after import declaration) in cooperation with the customs authorities. A KPMG report examines the coordination with transfer pricing.
• Korea: The Tax Tribunal held that the tax authority is entitled to re-assess the arm’s length interest rate on a related-party loan when the loan bore an interest rate (8%) seemingly higher than the conventional rate and the taxpayer failed to provide evidence of its arm’s length nature.
• Montenegro: Parliament enacted amendments to the tax law that include a measure requiring that transactions between a Montenegrin branch office and its non-resident headquarters be included in the transfer pricing documentation Local file.
• Spain: The Ministry of Finance launched a public consultation on the transposition into Spanish law of EU Directive 2022/2523 on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the EU. The public consultation period ran from 6 March 2023 to 24 March 2023.
• Sweden: The Ministry of Finance released a memorandum with proposed additions and clarifications to the interim report on the proposal for implementation of the EU global minimum tax directive that was submitted to the government in February 2023.

Read TaxNewsFlash-Transfer Pricing

• Singapore: An updated version of FATCA “frequently asked questions” (FAQs) and guidance provides temporary relief for reporting Singapore financial institutions unable to obtain and report U.S. taxpayer identification numbers (TINs) of pre-existing U.S. reportable accounts.
• Honduras: Guidance outlines temporary relief provided to Model 1 foreign financial institutions that are unable to report missing U.S. TINs for pre-existing accounts.
• Isle of Man: The Income Tax Division issued an industry advisory notice providing updates regarding the reporting of U.S. TIN codes for FATCA purposes.

Read TaxNewsFlash-FATCA / IGA / CRS

• The Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury Department published its first set of guidance materials to aid the public in understanding final regulations that require many corporations, limited liability companies, and other entities created in or registered to do business in the United States to report beneficial ownership information to FinCEN.
• The IRS revised FAQs on Form 1099-K (Payment Card and Third Party Network Transactions).
• Proposed regulations would implement the advanced investment credit under section 48D established by H.R. 4346, “The CHIPS and Science Act of 2022,” to incentivize the manufacture of semiconductors and semiconductor manufacturing equipment within the United States.
• Notice 2023-27 announces that the Treasury Department and IRS intend to issue guidance treating certain nonfungible tokens (NFTs) as section 408(m) collectibles and requests comments on such treatment.
• Taxpayers in New York affected by December 2022 winter storms and snowstorms now have until 15 May 2023 to file various individual and business tax returns and make tax payments.

State and local tax

• California: The Controller’s website was updated to provide details of the recently established unclaimed property voluntary compliance program (VCP), including a form for interested holders to start the process of applying for participation in the VCP.
• Colorado: The state tax authority issued a private letter ruling concluding that proceeds from real estate sales were not included in the receipts factor because although the taxpayer was regularly engaged in the rental of real estate, it rarely sold properties. However, because the two properties sold were related to the operation of the taxpayer's trade or business, the income arising from the sale of the two properties was apportionable income.
• Florida: A circuit court held in the taxpayers’ favor that the costs of performance sourcing rule applied based on the transactions and activities of the taxpayer, not the activities of the taxpayer’s customers.
• Louisiana: State tax authorities submitted an informational report to the state legislature addressing the feasibility of creating a centralized processor of state and local sales and use tax, and collecting and distributing local sales and use tax revenues on a daily basis.
• Montana: Recently enacted Senate Bill 124 provides that all apportionable income will be sourced to Montana by use of a single receipts factor, effective for tax years beginning after 31 December 2024.

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•  The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) released a final rule amending and reissuing the Belarus Sanctions Regulations.
• 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 32 persons to the unverified list (UVL).

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)