KPMG Week in Tax: 6 – 10 March 2023

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

• The Biden Administration transmitted its FY 2024 budget recommendations to Congress, and Treasury released the “Green Book”—a 226-page explanation of the tax proposals. A KPMG report provides initial impressions of the tax proposals, with a more comprehensive report to follow.

Read TaxNewsFlash-Biden Tax Agenda

• Action on Decision (AOD) 2023-1 reflects the IRS acquiescence to a March 2022 decision of the U.S. Court of Appeals for the Fifth Circuit that affirmed a federal district court’s grant of summary judgment to the taxpayer that the levy imposed on exports of domestic crude oil under section 4611(b) is “tax” (and not a fee) and as such was unconstitutional.
• The U.S. Court of Appeals for the Ninth Circuit affirmed the Tax Court’s decision concluding that the IRS’s notice of final partnership administrative adjustment disallowing a loss was timely, as the taxpayer did not “file” its 2001 partnership return, either when it faxed a copy of the return to the IRS revenue agent or when it mailed a copy to the IRS attorney.
• Notice 2023-23 provides guidance to financial institutions on reporting required minimum distributions (RMDs) for 2023.
• Notice 2023-24 states that the amount of the unutilized national megawatt capacity limitation (NMCL) available for allocation is 6,000 megawatts. The notice also provides the procedures for taxpayers to apply for allocations of, and that the IRS will use to allocate, the unutilized NMCL.
• Rev. Proc. 2023-17 provides indexing adjustments for the applicable dollar amounts used to calculate the employer shared responsibility payments under section 4980H(c)(1) and (b)(1).
• The Senate voted 54-42 to confirm Daniel Werfel to be the Commissioner of Internal Revenue.
• The U.S. Court of Appeals for the Seventh Circuit affirmed a decision of the U.S. Tax Court disallowing a taxpayer’s research tax credit claimed under sections 38 and 41(a) for expenses incurred by the taxpayer’s shipbuilding subsidiary in designing and constructing 11 vessels it had never built before.

State and local tax

• District of Columbia: The District of Columbia Court of Appeals held that a hospital was not entitled to a refund of sales taxes paid on purchases of meals that were later resold to others because the hospital had not provided the seller with a valid resale certificate when it purchased the meals. The court found that the relevant statute specified a clear procedure for purchasers that wished to avoid sales tax on the ground that the purchaser intended to resell the purchased items, which the hospital did not follow.
• Multistate: The U.S. Supreme Court has issued a unanimous opinion holding that Delaware did not necessarily have the right to escheat the proceeds of certain abandoned prepaid financial instruments used to transfer funds to a named payee. The Court found that escheatment of these instruments was governed by the federal Disposition of Abandoned Money Orders and Traveler’s Checks Act, because the instruments in question were similar to money orders in both function and operation, and thus the instruments were escheated to the state where they were purchased.
• Multistate: Several states have proposed changes to their corporate surcharges or surtaxes. 
  • The governor of New Jersey released a proposed budget that would not extend the 2.5% corporation business tax surtax.
  • The governor of New York proposed extending the additional corporate franchise rate that applies to taxpayers whose business income base exceeds $5 million for three years. 
  • The governor of Connecticut proposed extending the 10% corporate surtax that had been in place for a number of years but expired at the end of 2022 for three additional years.

Read TaxNewsFlash-United States

• Kenya: The High Court issued a judgment in a case concerning the imposition of value added tax (VAT) on exported services by the Finance Act 2022. The High Court dismissed the appeal contending that Parliament acted within its constitutional mandate to introduce the amendments in the Finance Act. According to the court, the petitioners did not demonstrate the constitutional violations alleged in the petitions.
• South Africa: The section 11D research and development (R&D) tax incentive—providing for a 150% deduction for qualifying expenditure on eligible scientific or technological R&D undertaken by companies in South Africa—will be extended for another 10 years, until 31 December 2033.
• Nigeria: Tax and regulatory issues affect the payment for imported equipment by renewable energy companies in Nigeria.

Read TaxNewsFlash-Africa

• Chile: A package of economic, social and tax measures aims to help and provide immediate solutions to people affected by fires that have affected the central-southern area of Chile.
• Canada: Manitoba, the Northwest Territories, Nunavut, and Yukon tabled their respective budgets for 2023—none of which included any proposals for changes to the corporate or individual (personal) income tax rates.
• Canada: A Federal Court of Appeal decision provides further guidance on the rephrased source of income test.
• Mexico: Taxpayers required to submit informative returns—but who cannot submit them in February 2023—can do so by 15 March 2023.
• Bolivia: The tax authority issued guidance to establish the procedure and requirements for the request for the issuance of Certificates of Fiscal Credit Notes (CENOCREF) for the discounts granted by the public service companies for the distribution of electricity and potable water for domestic consumption, to the holders of the discount regime and privileges.
• Bolivia: The tax authority issued guidance to extend the deadline for certain taxpayers to register and/or confirm fiscal documents in the “VAT sales and purchases registry” for the February 2023 fiscal period. Taxpayers with a tax identification number that ends in 5,6,7,8 and 9 now have until 10 March 2023.

Read TaxNewsFlash-Americas

• Vietnam: The Ministry of Finance has set out directives concerning the inspection and examination on the fulfillment of state budget obligations.
• Indonesia: Government Regulation No. 49 Year 2022 provides guidance on the categories and classifications for non-VAT-able goods and services.
• New Zealand: The “Taxation (Annual Rates for 2022-23, Platform Economy, and Remedial Matters) Bill” was reported back from the Finance and Expenditure Committee (FEC) with a number of recommendations to tax-related measures.
• Hong Kong: The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) becomes effective in respect of some of the Hong Kong treaties from 1 April 2023 (for withholding taxes) and year of assessment 2024/2025 (for other taxes).

Read TaxNewsFlash-Asia Pacific

• EU: A study on the tax compliance costs faced by European companies aims to quantify and compare the tax compliance burden faced by companies in the EU.
• Croatia: The tax authorities issued guidance on the calculation and reporting of the new extra profit tax.
• Czech Republic: A revised list of non-cooperative jurisdictions reflects the recent updates to the EU list of non-cooperative jurisdictions adopted by the Council of the European Union.
• France: The tax authorities issued two rulings on the application of dividend withholding tax on payments to non-residents in connection with certain financial transactions resulting in deemed dividend equivalents.
• Netherlands: The tax authorities issued a ruling providing clarifications on when an employee working from home constitutes a permanent establishment in the Netherlands for a foreign company.
• Greece: The Ministry of Finance issued a decision for determining the main and auxiliary activities linked to maritime transport, and whose revenues are eligible to be covered by the tonnage tax regime.
• Belgium: The Minister of Finance released a proposal for the first phase of the proposed large tax reform.
  
• Netherlands: The Dutch Supreme Court held that if there is a business-motivated ”10a transaction,” the associated debt is, in principle, also business-motivated if the relevant funds were not diverted.
• Spain: A draft law would create a new regional individual (personal) income tax credit for foreign taxpayers investing in qualifying properties and securities in Madrid. 
• Spain: The Draft Order on tax Form 718 for the temporary solidarity tax on large fortunes (ITSGF) is now subject to the period for comments and public consultation until 15 March 2023.
• Poland: The government is working on a new tax on the “windfall profits” of mining and fuel companies.
• Poland: Recent tax updates concern tax-deductible costs in revenue and expense ledgers, and a clearance opinion on mutual trademark transactions.
• Cyprus: The tax authority announced that the sending and receiving of tax assessment/contribution notices has been delayed and therefore the time frame for objecting to such notices has been extended by two months from the date listed in such notices.
• The KPMG member firms in Moldova and Serbia prepared “tax cards” for 2023.

Read TaxNewsFlash-Europe

• Cyprus: The tax authorities published a set of “frequently asked questions” (FAQs) to clarify certain provisions of the new transfer pricing legislation law.
• Luxembourg: The government published a draft law to transpose the EU public country-by-country (CbC) reporting directive into domestic law.
  
• Poland: The Ministry of Finance announced a public consultation until 17 March 2023 on draft clarifications of the transfer pricing regulations related to the cost-plus method.
• KPMG report: Transfer pricing practitioners need to understand how their business treats or intends to treat internal carbon pricing and apply their expertise to create an arm’s-length methodology to support the internal CO₂ price (ICP) and the associated allocations of intercompany carbon fees.

Read TaxNewsFlash-Transfer Pricing

• Mauritius: The tax authority issued a release regarding the disclosure of U.S. taxpayer identification numbers (TINs) in FATCA returns. Beginning this year, when the U.S. TIN is not available, financial institutions will be required to use specific U.S. TINs in their FATCA returns.
• Ireland: The tax authority published updates to FATCA tax and duty manuals to reflect the latest guidance issued by the IRS regarding missing U.S. TINs.
• Malta: Revised automatic exchange of information (AEOI) implementing guidelines include updates to the section on reporting of U.S. TIN codes for FATCA purposes for the reporting years 2023 and 2024. 

Read TaxNewsFlash-FATCA / IGA / CRS

• The Office of the U.S. Trade Representative (USTR) today submitted to Congress its budget justification for FY 2024—including its strategic objectives, accomplishments, and measurements for success for the upcoming fiscal year.
• The U.S. International Trade Commission released a final rule to make technical amendments to its rules—relating to safeguard actions and injury to domestic industries from imports sold at less than fair value or from subsidized exports—to conform with changes made by the United States-Mexico-Canada Agreement (USMCA) Implementation Act.
• U.S. Customs and Border Protection (CBP) issued guidance on the increased Section 232 duties on imports of aluminum and derivative aluminum products from Russia.

Read TradeNewsFlash-Trade & Customs

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

• Indirect Tax
• Tax Dispute Resolution