KPMG Week in Tax: 17 – 21 April 2023

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

• Lithuania: The government published a draft law to transpose the EU public country-by-country (CbC) reporting directive into domestic law.
• Saudi Arabia: The Board of Directors of the Zakat, Tax and Customs Authority (ZATCA) approved amendments to the transfer pricing bylaws that will—effective for financial years (FYs) starting on or after 1 January 2024: (1) extend applicability of the transfer pricing bylaws to Zakat payers, and (2) introduce advance pricing agreement (APA) provisions for tax and Zakat payers.
  

Read TaxNewsFlash-Transfer Pricing

• Finland: The tax administration published updated instructions for missing U.S. taxpayer identification numbers (TINs) for FATCA purposes.
• Germany: The federal central tax office (BZSt) released updated FATCA guidance.
• Mongolia: The OECD announced that Mongolia has committed to implement the international standard for automatic exchange of financial account information (AEOI) in tax matters by 2026.
• Bermuda: The Ministry of Finance issued updated guidelines for financial institutions to review, collect and report information under the common reporting standard (CRS) regime.

Read TaxNewsFlash-FATCA / IGA / CRS

• IRS Commissioner Daniel Werfel testified before the Senate Finance Committee at a hearing entitled “The President’s Fiscal Year 2024 IRS Budget and the IRS’s 2023 Filing Season.”
• The Joint Committee on Taxation (JCT) released a document providing a description of the energy-related tax changes made by the “Inflation Reduction Act of 2022.”

Read TaxNewsFlash-Legislative Updates
 

• The U.S. Tax Court affirmed determinations of the IRS that annuity payments received by the taxpayers from charitable remainder trusts were taxable to them as ordinary income under sections 664 and 1245.
• Proc. 2023-22 provides issuers of qualified mortgage bonds and issuers of mortgage credit certificates with nationwide average purchase prices and average area purchase price safe harbors for residences in the United States.
• Rev. Proc. 2023-21 provides the domestic asset / liability percentages and domestic investment yields needed by foreign life insurance companies and by foreign property and liability insurance companies to compute their minimum effectively connected net investment income under section 842(b) for tax years beginning after 31 December 2021.
• Taxpayers in Indiana affected by recent 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

• Arkansas: Two bills were signed into law in that reduce the corporate income tax rate and phase out the throwback rule.
• Kentucky: Recently enacted House Bill 360 revised the definition of telemarketing services to include services provided via text message. The bill also added language that taxable telemarketing services provided via “other modes of communication” specifically includes services provided via “various forms of social media.”
• Washington State: An appellate court held that several investment fund limited liability companies (LLCs) did not qualify for a business and occupation (B&O) deduction for investment income.

Read TaxNewsFlash-United States

• Kenya: The president announced plans to review the currently applicable digital service tax and to align it with the two-pillar solution currently being developed by the OECD Inclusive Framework.
• Uganda: The government issued the draft 2023 tax amendment bill that includes a proposal for the introduction of a digital services tax to be levied at 5% on non-residents providing digital services to customers in Uganda.
• Nigeria: The Tax Appeal Tribunal in Benin held that it had jurisdiction to hear and determine claims by the Bayelsa State tax authority regarding the enforcement of Bayelsa State infrastructure maintenance and development levies, and that the taxpayer was liable for such levies for the 2011 to 2018 tax years.

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• Canada: Saskatchewan’s Bill 133 extends the manufacturing and processing exporter tax incentive by one year, to 31 December 2023 (from 31 December 2022).
• Mexico: The lodging tax rate was increased to 4% (from 3%) in the State of Guerrero. The increase applies to taxpayers providing temporary tourist accommodation services in houses, apartments, residences, villas, condominiums, and all types of non-hotel facilities, either directly or through intermediaries, promoters, facilitators or digital platforms.

Read TaxNewsFlash-Americas

• Thailand: The Director-General of the Revenue Department issued a notice outlining the value added tax (VAT) requirements of an e-tax invoice, effective 6 January 2023.
• India: The Delhi High Court upheld the withdrawal—effective 1 January 2022—of the exemption from goods and services tax (GST) for certain passenger transportation services (i.e., by metered cabs, auto rickshaws and unairconditioned stage carriage) booked through an electronic platform.
• Kazakhstan: The Ministry of Finance introduced amendments to the rules for excess VAT refund.

Read TaxNewsFlash-Asia Pacific

• Sweden: The Ministry of Finance released a memorandum proposing tax law changes related to the new rules for cross-border divisions, conversions and mergers between EU member states which became effective 31 January 2023.
• Estonia: The government approved a new coalition program for 2023–2027 that would increase of the corporate income tax rate to 22% (from 20%) and eliminate the reduced corporate income tax rate of 14% applicable to regularly paid dividends.
• EU: The EC adopted an implementing regulation to establish the criteria for determining whether the information exchanged under an agreement between the tax authorities of EU member states and a non-EU country is equivalent to that specified in Council Directive (EU) 2021/514 (DAC7).
• EU: The European Economic and Social Committee (EESC) adopted a supportive opinion of the proposal for an extension of the directive on administrative cooperation (DAC) to cover the exchange of information on cryptoassets, as well as tax rulings for individuals (DAC8).
• Italy: Draft legislation for the implementation of DAC7 into domestic law would be effective from 1 January 2023, and initial reporting would be required by 31 January 2024.
• Spain: The Spanish National Appellate Court held that Spain is required to allow the deduction of directly related expenses when calculating the withholding tax due for royalties paid to companies resident in an EU member state. 
• Spain: The plenary session of the Constitutional Court has agreed to hear a constitutional challenge brought by the regional government of Andalusia against article 3 of Law 38/2022, introducing the temporary solidarity tax on large fortunes (ITSGF).
• Poland: The Provincial Administrative Court in Lublin dismissed a taxpayer’s complaint with respect to the tax authority’s failure to issue an opinion that dividends paid to a Dutch company were exempt from withholding tax.
• UK: A KPMG report examines pension tax changes in the Spring Finance Bill 2023.

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• The Bureau of Industry and Security (BIS) of the U.S. Department of Commerce imposed a $300 million civil penalty against a U.S. technology company to resolve alleged violations of U.S. export controls related to selling hard disk drives (HDDs) to a Chinese technology company in violation of the foreign direct product (FDP) rule.
• BIS released a proposed rule concerning certain instruments for the automated synthesis of peptides identified by BIS as a Section 1758 emerging and foundational technology.
• BIS renewed—for the second time—an order temporarily denying export privileges of a Russian airline.
• The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) published an alert warning U.S. persons about possible evasion of the price cap on crude oil of Russian origin, particularly involving oil exported through the Eastern Siberia Pacific Ocean (ESPO) pipeline and ports on the eastern coast of Russia.
• The European Commission (EC) announced that the World Trade Organization (WTO) has ruled in favour of the EU in a case challenging India's tariff on key information and communication technology (ICT) products.
• The UK government announced a new consultation, “Addressing carbon leakage risk to support decarbonization.”

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