KPMG Week in Tax: 27 – 31 March 2023

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

• Brazil: The Chamber of Deputies passed Provisional Measure No. 1,152, which would enact significant changes to the Brazilian transfer pricing system—shifting from Brazil’s historical, formula-based transfer pricing rules to an arm’s length standard consistent with the OECD Guidelines.
• Serbia: The Ministry of Finance adopted the rulebook on arm’s length interest rates for 2023.
• United States: The IRS released the Advance Pricing and Mutual Agreement (APMA) program’s annual report on advance pricing agreements (APAs) for 2022. The number of APAs executed fell significantly, from 124 in 2021 to 77 in 2022.
• KPMG report:  KPMG LLP tax professionals compare the U.S. cost-sharing arrangements (CSA) rules and OECD cost contribution arrangement (CCA) guidance, pointing out similarities and differences, and discuss the circumstances under which a CSA and a CCA can be considered equivalent.
  
• Vietnam: The Convention on Multilateral Administrative Assistance in Tax Matters (MAAC) was signed to implement international cooperation for tax administration and prevention of tax evasion and avoidance.
• Sweden: Draft legislation would implement into Swedish law EU Directive 2021/2201, requiring qualifying multinational enterprises doing business in the EU to publicly disclose certain information on a country-by-country (CbC) basis.

Read TaxNewsFlash-Transfer Pricing

• Proposed regulations concern the new income tax credit for the purchase of qualifying new clean vehicles, including new plug-in electric vehicles powered by an electric battery meeting certain requirements and new qualified fuel cell vehicles. The IRS released updated frequently asked questions (FAQs) related to the clean energy credit in light of the proposed regulations.
• Proposed regulations provide guidance on the application of the reinstated excise taxes imposed on certain chemicals and certain imported substances (known as the Superfund chemical taxes).
• Notice 2023-28, regarding the reinstated excise taxes imposed on certain chemicals and substances under sections 4661 and 4671 (often referred to as “Superfund” excise taxes), extends temporary relief provided by Notice 2022-15.
• Rev. Proc. 2023-20 clarifies that for any petition accepted by the IRS, for purposes of refund claims under section 4662(e), the date on which a taxable substance is added to the Secretary’s list of taxable substances is the first day of the calendar quarter in which the petition is filed (for an interested person) or the day on which the petition is deemed filed (for an importer or exporter). 
• Rev. Rul. 2023-2 concludes that the basis adjustment under section 1014 generally does not apply to the assets of an irrevocable grantor trust not included in a deceased grantor’s gross estate for federal estate tax purposes.
• The IRS issued a release concerning the electronic filing of Form 8038-CP, “Return for Credit Payments to Issuers of Qualified Bonds,” used to claim tax credit payments under section 6431 relating to interest on build America bonds, recovery zone economic development bonds, new clean renewable energy bonds, qualified energy conservation bonds, qualified zone academy bonds, and qualified school construction bonds.
• Taxpayers in Mississippi affected by tornadoes and severe storms now have until 31 July 2023 to file various individual and business tax returns and make tax payments.
• KPMG reports address (1) notable highlights from section 48D proposed regulations (advanced manufacturing investment credit), and (2) stock repurchase excise tax and funding rule considerations for inbound taxpayers.

State and local tax

• A report, prepared by the KPMG State and Local Tax practice, provides a summary of state and local tax developments for the first quarter of 2023 in table format.
• New Jersey: Assembly Bill 5323 would make significant revisions to New Jersey’s corporation business tax laws, including making changes to the definition of entire net income and the rules requiring combined reporting.
• Rhode Island: The state tax authority confirmed that infrastructure as a service (IaaS), platform as a service (PaaS), and software as a service (SaaS) are all subject to sales and use tax as long as there is a charge to a Rhode Island customer for the use of the virtual infrastructure, platform, or for software that is accessed through the internet or on a vendor-hosted server.
• South Dakota: Recently enacted legislation temporarily (until 30 June 2027) reduced the gross receipts tax rate to 4.2% (from 4.5%), effective 1 July 2023. The gross receipts tax is South Dakota’s sales tax equivalent.

Read TaxNewsFlash-United States

• South Africa: New dispute resolution rules set out the processes and procedures that are to be followed when lodging an objection and appeal, when utilizing alternative dispute resolution, or when a matter is before the Tax Board or Tax Court.
• Africa: A monthly summary of tax developments includes an overview of the global BEPS 2.0 (Pillar Two) updates, and the latest on the Nigerian guidelines on withholding and self-accounting for value added tax (VAT).

Read TaxNewsFlash-FATCA / IGA / CRS

• South Africa: New dispute resolution rules set out the processes and procedures that are to be followed when lodging an objection and appeal, when utilizing alternative dispute resolution, or when a matter is before the Tax Board or Tax Court.
• Africa: A monthly summary of tax developments includes an overview of the global BEPS 2.0 (Pillar Two) updates, and the latest on the Nigerian guidelines on withholding and self-accounting for value added tax (VAT).

Read TaxNewsFlash-Africa

• Canada: The federal budget for 2023 introduces new changes to broaden the alternative minimum tax (AMT) by disallowing certain deductions and increasing the AMT capital gains inclusion rate to 100% (from 80%). The budget also asks for public feedback on changes to the general anti-avoidance rule and introduces changes to allow employee ownership trusts to acquire and hold shares of a business.
• Canada: The Canada Revenue Agency will waive penalties and interest for any late-filed underused housing tax (UHT) return and for any late-paid UHT, provided the affected owner files any required returns and pays any related UHT by 31 October 2023.
• Costa Rica: Recent tax and customs related developments are summarized in a report from the KPMG member firm in Costa Rica.

Read TaxNewsFlash-Americas

• Philippines: The Fiscal Incentives Review Board (FIRB) issued a resolution to allow the existing registered business enterprises (RBEs) in the information technology-business processing management (IT-BPM) to transfer their registration to the Board of Investments from the investment promotion agency administering an economic zone or freeport zone where their project is located.
• Hong Kong: The government launched a consultation on a proposal to clarify the non-taxation of onshore gains from the disposal of equity interests in Hong Kong, which would become effective 1 January 2024. Comments on the proposal will be accepted through 22 May 2023.
• Thailand: The Thai Cabinet approved a draft Royal Decree to exempt taxes on the trading of investment tokens (i.e., digital tokens that specify the right of a person to participate in an investment in a project or business).
• Saudi Arabia: The Board of Directors of the Zakat, Tax and Customs Authority (ZATCA) approved amendments to the excise tax regulations concerning the licensing of a designated place for the destruction of non-consumable excise goods and refunding excise tax related to such goods.

Read TaxNewsFlash-Asia Pacific

• Estonia: Amendments to the taxation of income received in a pension investment account became effective 1 January 2023 and apply retroactively to 2 January 2022. The purpose of the amendments is to align income taxation with investment account regulation and reduce the risk of double taxation.
• Estonia: The Parliament approved amendments to the Electricity Market Act, providing an income tax exemption for small “green” electricity producers (i.e., using renewable energy sources like solar panels or wind turbines)) that sell surplus electricity.
• Spain: The National High Court held that a Spanish branch that rendered support services to its foreign head office was not conducting an independent economic activity and thus, because such services were performed within the “same legal entity,” they were not subject to VAT.
• Sweden: The Supreme Administrative Court held that a foreign tax carryforward could be used to offset Swedish tax on foreign-source interest income in the current year, even though such income was not subject to any foreign tax in the current year. 
• Poland: A Minister of Finance decree extends—to 30 June 2023—the deadline for fulfilling selected obligations related to corporate income tax.
• Poland: Decisions of the Supreme Administrative Court concern (1) the limitation period for tax liabilities related to COVID-19, (2) research and development (R&D) costs, and (3) real estate tax.
• Poland: The Public Finance Committee approved proposed amendments to the VAT law (commonly referred to as the Slim VAT 3 package) and certain other laws.
• Poland: A new version of the bill amending the VAT law and certain other laws aims to align the currently applicable provisions with changes resulting from the implementation of the national e-invoicing system (KSeF). 
• Germany: The law that governs measures against business relationships with non-cooperative tax jurisdictions became effective 1 January 2022.
• Germany: The German Federal Tax Court (BFH) held that the shareholder of a corporation is not entitled to challenge a notice of assessment issued against the corporation concerning the separate assessment of the amount of the tax-specific capital contribution account.
• Germany: The BFH held that profits from the sale of cryptocurrencies are taxable only if there is less than one year between the purchase and sale.
• EU: A provisional agreement between the European Parliament and the Council would raise the EU's binding renewable target for 2030 to a minimum of 42.5% (from 32%). Negotiators also agreed that the EU would aim to reach 45% of renewables by 2030.
• EU: The EC announced that political agreement was reached between the European Parliament and the Council to boost the number of publicly accessible electric recharging and hydrogen refueling stations across the EU’s main transport corridors and hubs.

Read TaxNewsFlash-Europe

• United States: The Bureau of Industry and Security (BIS) of the U.S. Department of Commerce today released for publication in the Federal Register an order renewing the temporary denial of export privileges of a Russian airline.
• United States: The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced that a U.S. bank agreed to pay over $97 million to settle its potential civil liability for apparent violations of sanctions against Iran, Syria, and Sudan.
  
• United States: A multi-asset digital money platform has agreed to remit approximately $72,000 to settle its potential civil liability for apparent violations of sanctions against Cuba, Iran, and Venezuela. 
• United States: OFAC issued an amended Russia-related “frequently asked question” concerning “exit tax” payments prior to the divestment of assets located in Russia.
• United States: BIS released a final rule amending the Export Administration Regulations (EAR) by adding 11 entities to the entity list.  The final rule also amends the EAR to explicitly confirm that the foreign policy interest of protecting human rights worldwide is a basis for adding entities to the entity list.
• Switzerland: The Federal Office of Customs and Border Security (FOCBS) on 1 June 2023 will begin operation of the first version of “Passar”—the new goods traffic system for the digital processing of customs procedures in Switzerland.
• UK: Parliament announced that legislation to ratify the Australia-UK free trade agreement will be receiving Royal Assent.

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)