KPMG Week in Tax: 10 – 14 April 2023

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

• South Africa: Additional disclosure requirements for trusts were introduced following South Africa’s placement on the so-called “grey list” by the Financial Action Task Force (FATF).
• South Africa: The Department of Science and Innovation introduced a new online platform to facilitate the submission of section 11D research and development (R&D) tax incentive applications and annual progress reports.

Read TaxNewsFlash-Africa

• Canada: Manitoba's Bill 14, which enacts several tax measures that were introduced in the province's 2023 budget, received Royal Assent.
• Canada: Quebec Bill 6, which contains measures previously announced in Quebec's 2022 budget and in various information bulletins published in 2021 and 2022, received Royal Assent. Specifically, Bill 6 includes previously announced measures to amend several provincial tax credits and deductions, including to extend enhancements to the credit for investment and innovation (C3i).
• Brazil: Recent direct and indirect 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 “VAT sales and purchases registry” for the March 2023 fiscal period.
  
• Bolivia: The tax authority issued guidance concerning repetition actions.

Read TaxNewsFlash-Americas

• Hong Kong: Developments related to the taxation of family offices in Hong Kong include (1) a proposed tax concession regime for family-owned investment holding vehicles (FIHVs); (2) new Form IR1479 to be completed and filed by FIHVs; and (3) a policy statement on developing family office businesses in Hong Kong.
• Indonesia: Activities in the new capital city of Nusantara and its supporting areas may qualify for incentives relating to income tax, VAT and/or sales tax on luxury goods, and customs.
• Singapore: A new enterprise innovation scheme provides for tax deductions/allowances on qualifying expenditures per year of assessment (YA). The scheme was introduced in the 2023 budget to encourage businesses to engage in research and development (R&D), innovation, and capability development activities.
• Hong Kong: The government released a consultation document on the proposed changes to the foreign sourced-income exemption (FSIE) regime to include foreign-sourced gains from disposal of assets other than shares and equity interests. The consultation period runs through 6 June 2023.
• Malaysia: A KPMG report highlights notable tax updates and developments in April 2023.
• Philippines: The Bureau of Internal Revenue announced the availability and implementation of registration-related online transactions, functions, and features in the online registration and update system (ORUS).
• New Zealand: The Taxation (Annual Rates for 2022-2023, Platform Economy, and Remedial Matters) Act 2023 has received Royal Assent.
• UAE: The Ministry of Finance issued Ministerial Decision No. 73 of 2023 on small business tax relief following Article 21 of the Federal Decree-Law No. 47 of 2022 on the taxation of corporations and businesses.

Read TaxNewsFlash-Asia Pacific

• Czech Republic: The tax authority published guidance on the windfall profits tax, which is to be applied from 2023 to 2025.
• Czech Republic: The Ministry of Finance clarified that compensation paid to suppliers for the delivery of electricity and gas at fixed prices is subject to VAT.
• Czech Republic: A KPMG report summarizes Supreme Administrative Court decisions relating to the deductibility of advertising costs.
• Czech Republic: The tax authority issued updated information on the tax assessment of the obligations of accommodation service providers, in connection with legislative changes in effect from January 2023 concerning VAT, individual (personal) income tax, and real estate tax.
• Luxembourg: Draft legislation would introduce changes to advance pricing agreement (APA) procedures and mutual agreement procedures (MAP), transfer pricing documentation requirements, and general tax-related procedures.
• Poland: The Supreme Administrative Court held that renumeration paid to a related entity for services rendered in connection with acquiring advertisers was not subject to the limit on the deductibility of costs of intangible services under Article 15e(1) of the CIT Act as in effect until 1 January 2022.
• Poland: The Supreme Administrative Court held that expenses related to the taxpayer’s grand opening (e.g., expenses for renting a conference room, serving meals and drinks, and advertising) were tax-deductible. However, expenses related to trips to the museum for persons from outside the company or the costs of artistic performances were considered costs of representation and thus were not tax-deductible.
• Poland: The Minister of Finance published the new binding rate information (BRI) template—which becomes effective 1 July 2023.
• Ireland: Companies undertaking development activities required to address the EU medical devices regulations may qualify for research and development (R&D) tax credits.
• Greece: The dividend tax rate for dividends paid or credited in the years from 2023 onwards by ship brokering and other shipping entities of article 25 of Law 27/1975, except for ship management entities, is set at 5%. For dividends paid or credited in the years up to and including 2022, the dividend tax rate is 10%.

Read TaxNewsFlash-Europe

• A KPMG report focuses on the role of transfer pricing in responsible tax practices and sets forth suggestions of what multinational corporations may need to be doing going forward in terms of tax transparency and transfer pricing.
• Luxembourg: Draft legislation would introduce changes to advance pricing agreement (APA) procedures and mutual agreement procedures (MAP), transfer pricing documentation requirements, and general tax-related procedures.
• Australia: The Treasury released draft legislation for public country-by-country (CbC) reporting of certain tax information by multinational enterprises (MNEs).

Read TaxNewsFlash-Transfer Pricing

• Cayman Islands: The Department for International Tax Cooperation of the Cayman Islands issued an industry advisory release containing the following updates to FATCA and common reporting standard (CRS) deadlines.

Read TaxNewsFlash-FATCA / IGA / CRS

• A KPMG report provides initial observations on the guidance on energy community production and investment tax credits under the “Inflation Reduction Act of 2022” (IRA).
• The IRS released the IRS Data Book, 2022 detailing the IRS tax activities during fiscal year 2022. More than 262.8 million tax returns were processed and approximately $4.9 trillion in federal taxes was collected during fiscal year 2022.
• Rev. Proc. 2023-15 provides a safe harbor method of accounting that taxpayers may use to determine whether expenses to repair, maintain, replace, or improve natural gas transmission and distribution property must be capitalized as improvements under section 263(a) or as the costs of property produced by the taxpayer for use in its trade or business under section 263A, or are allowable as deductions under section 162.
  
• Rev. Rul. 2023-8 obsoletes Rev. Rul. 58-74, effective as of 31 July 2023, because there are insufficient facts in the ruling to properly analyze whether the taxpayer’s failure to deduct certain research and experimentation (R&E) expenditures, when it deducted other R&E expenditures, constituted a method of accounting or an error.
  
• Proposed regulations identify transactions that are the same as, or substantially similar to, certain micro-captive transactions as listed transactions, a type of reportable transaction, and certain other micro-captive transactions as transactions of interest, another type of reportable transaction.
  
• Proposed regulations regarding supervisory approval of certain penalties assessed by the IRS address uncertainty regarding various aspects of supervisory approval of penalties that have arisen due to recent judicial decisions.
  
• Notice 2023-30 addresses the safe harbor deed language for extinguishment and boundary line adjustment clauses under charitable conservation easements, as required by section 605(d)(1) of the SECURE Act 2.0. The notice also describes the process conservation easement donors may use to amend an original eligible easement deed to substitute the safe harbor language for the corresponding language in the original deed.
  
• Taxpayers in Tennessee affected by tornadoes and severe storms now have until 31 July 2023 to file various individual and business tax returns and make tax payments.
   

State and local tax

• Colorado: House Bill 23-1006, which was recently signed into law, requires employers to annually notify employees of the availability of certain state and federal credits, in addition to providing the annual withholding tax notice.
• Georgia: Senate Bill 56, which has been sent to the governor for signature, would conform to the Internal Revenue Code as amended through 1 January 2023. However, IRC section 174 would be treated as it was in effect before the enactment of the “Tax Cuts and Jobs Act” (TCJA). The bill would also impose sales and use tax on the retail purchase of specified digital products, other digital goods, or digital codes sold to an end user in Georgia, provided that the end user receives or will receive the right of permanent use of such products or codes and the transaction is not conditioned on continued payment by the end user.
• New Mexico: The governor vetoed almost every provision of House Bill 547, a comprehensive tax package. The governor had publicly expressed concerns with the cost of the bill, which would have reduced the state’s gross receipts tax, adopted numerous new tax credits, and new gross receipts tax deductions. The bill would have also required most corporations to use single sales factor apportionment.
• West Virginia: Recently enacted House Bill 3286 provides a new subtraction for publicly traded companies intended to offset the financial statement effect of recent apportionment law changes. These recent changes include moving to single sales factor apportionment and market-based sourcing and the repeal of the throw-out rule.

Read TaxNewsFlash-United States

• The Bureau of Industry and Security (BIS) of the U.S. Commerce Department a final rule amending the Export Administration Regulations (EAR) by adding 28 entities under 32 entries to the entity list. The final rule also modifies two existing entries on the entity list under the destinations of China and Russia.
• The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) issued Russia-related general licenses and a new Russia-related “frequently asked question.”
• BIS released an order renewing the temporary denial of export privileges of a Russian airline.
• The U.S. Department of State released a final amending the International Traffic in Arms Regulations (ITAR) to expand the types of defense articles that may be exported and defense services that may be furnished under Canadian and treaty exemptions.
• India’s new foreign trade policy—announced 31 March 2023 and effective 1 April 2023— introduces plans such as the remission of duties or taxes on export products and rebate of state and central taxes and levies.

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