KPMG Week in Tax: 1 – 5 May 2023

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

• Kenya: New regulations concern the application of the value added tax (VAT) on digital services provided by non-residents.
• Nigeria: The government introduced new excise taxes on alcoholic beverages, tobacco, single use plastics, and telecommunications services, and an import tax on imported vehicles.
• Botswana: Amendments to the transfer duty and VAT laws are effective 3 May 2023.

Read TaxNewsFlash-Africa

• Canada: For the third quarter of 2023: (1) there is no change to the prescribed income tax interest rate for taxable benefits, overpaid taxes, and underpaid taxes from the rate for the second quarter of 2023; and (2) there is an increase to the prescribed interest quarterly rate that is used to determine the deemed interest income inclusion from a PLOI—the rate is estimated to increase to 8.44% (from 8.40%).
• Chile: Law No. 21,420 modified the concept of taxable “service” for VAT purposes effective 1 January 2023, but the modification does not apply to services included in certain public tenders and purchases awarded or contracted prior to 1 January 2023.
• Bolivia: Supreme Decree No. 4850 establishes the tax treatment of nonresident individuals under the individual (personal) income tax regime (RC-IVA). Beginning 1 January 2023, nonresident individuals subject to tax must declare and pay 13% RC-VAT on a monthly basis.

Read TaxNewsFlash-Americas

• Hong Kong: Draft legislation implementing the risk-based capital (RBC) regime for Hong Kong insurers would introduce various changes to the taxation of Hong Kong insurers.
• Philippines: The Fiscal Incentives Review Board (FIRB) issued guidance encouraging all investment promotion agencies, other government agencies, registered business enterprises (RBEs), and other registered enterprises that are required to submit the annual tax incentives report and annual benefits report to the FIRB, to utilize the online submission module in the fiscal incentives registration and monitoring system (FIRMS).
• Australia: The government released draft legislation that would deny large multinational deductions for payments relating to intangibles to related entities in low-corporate-tax jurisdictions. The KPMG member firm in Australia submitted comments in response to the draft legislation, noting concerns with the breadth of the measures as currently drafted.
• Bahrain: Businesses could expect the introduction of corporate income tax, at least in the first instance, on multinational enterprises (MNEs) with annual consolidated revenues exceeding BHD 342 million from financial years (FYs) commencing 1 January 2024.
• Cambodia: The General Department of Taxation (GDT) issued guidance to clarify the rules regarding the timing of the imposition of withholding tax on various transactions.
• Saudi Arabia: Beginning 1 November 2023, taxpayers with revenues subject to VAT exceeding SAR 150 million for the year 2021 or 2022 must comply with phase 2 of the electronic invoicing (e-invoicing) mandate.
• Saudi Arabia: The government announced four new special economic zones (SEZs) in Saudi Arabia, along with a public consultation on draft legislation regarding the tax and customs treatment of the SEZs.
• India: The Finance Bill 2023 did not include an extension of section 194LD of the Income-Tax Act, 1961, under which foreign portfolio investors benefit from a concessional 5% withholding tax rate on interest income earned from rupee-denominated bonds of an Indian company, a government security or investment made in municipal debt securities.

Read TaxNewsFlash-Asia Pacific

• Romania: The CJEU held that the Merger Directive does not apply to purely internal reorganizations and, consequently, national courts are not required to interpret domestic provisions consistently with the Merger Directive. The decision also confirmed the conditions that should be met in order for local courts to be bound to interpret local regulations in accordance with EU law.
• Belgium: The European Commission (EC) referred Belgium to the CJEU for failing to correctly transpose the controlled foreign corporation (CFC) rules under the EU Anti-Tax Avoidance Directive (ATAD).
• France: The French Supreme Court issued a decision on how to determine the foreign tax credit available for French parent companies in relation to foreign-source dividends that are exempt from French corporate income tax under the Parent-Subsidiary Directive.
• Germany: The Ministry of Finance published guidance providing for a dynamic approach in using OECD commentary to interpret income tax treaties.
• Luxembourg: The Advocate General of the Court of Justice of the European Union (CJEU) issued an opinion that the EC erred in finding that Luxembourg had granted unlawful State aid to the taxpayer.
• Malta: The Commissioner for Revenue published updated “frequently asked questions” (FAQs) providing clarifications on the reporting rules in respect of cross-border arrangements (DAC6).
• Netherlands: The Spring Memorandum 2023 includes a number of proposed direct and indirect tax changes.
• Spain: The Supreme Court held that the notification requirements for intermediaries to notify other intermediaries of their reporting obligation under DAC6 were inconsistent with EU law.
• Italy: The first-level tax court of Pescara issued a series of decisions confirming that the Italian tax treatment of dividends paid to investors in the United States was discriminatory and in breach of EU law, as already established by the Italian Supreme Court in a series of decisions issued in July 2022.
• UK: The Court of Appeal upheld HMRC’s decision to refuse business premises renovation allowances for expenditure on the conversion of a former flight training centre into a hotel.
• UK: The final draft electricity generator levy legislation includes changes to the treatment of joint ventures and significant minority shareholders. The legislation also clarifies certain administrative points.
• UK: The new tax subsidy control regime requires taxpayers to self-assess their compliance and protect against potential challenges from competitors.
• UK: The government published a series of tax policy and consultation documents as part of its work to deliver a modern, simple, and fairer tax system.

Read TaxNewsFlash-Europe

• United States: The IRS Large Business and International (LB&I) division released a memorandum providing employees of the treaty and transfer pricing operations practice area interim guidance with respect to requests from taxpayers for an advance pricing agreement (APA) with the IRS.

Read TaxNewsFlash-Transfer Pricing

• Cayman Islands: The Department for International Tax Cooperation (DITC) issued an updated version of the DITC portal user guide that includes instructions for financial institutions on the common reporting standard (CRS) compliance file upload form.
• UK: HM Revenue & Customs (HMRC) issued amended CRS regulations.
• United States: The IRS beginning 17 May 2023 will no longer support the use of existing IRS accounts to access the qualified intermediary (QI), withholding foreign partnership (WP), and withholding foreign trust (WT) application and account management system (QAAMS).
  
• Singapore: Reporting Singaporean financial institutions need to submit their FATCA and CRS return(s) for calendar year 2022 by 31 May 2023.

Read TaxNewsFlash-FATCA / IGA / CRS

• Proposed regulations would, in certain cases, terminate the continued application of section 367(d) arising from a previous transfer of intangible property (IP) to a foreign corporation when the IP is repatriated to certain U.S. persons.
• Notice 2023-36 invites recommendations for items to be included on the 2023-2024 Priority Guidance Plan—used by the IRS and Treasury Department each year to identify and prioritize tax issues to be addressed through regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance.
• The U.S. Tax Court released a memorandum opinion holding that under Rev. Proc. 93-27, the taxpayer, a partnership for U.S. federal income tax purposes, did not recognize any income upon the receipt of an interest in an upper-tier partnership because such interest was a profits interest granted in exchange for services provided to or for the benefit of a lower-tier partnership.
• The IRS beginning 17 May 2023 will no longer support the use of existing IRS accounts to access the qualified intermediary (QI), withholding foreign partnership (WP), and withholding foreign trust (WT) application and account management system (QAAMS).
• Certain taxpayers in California and Florida affected by severe storms now have until 15 August 2023 to file various individual and business tax returns and make tax payments.
• A KPMG report explains how the end of the coronavirus (COVID-19) emergency declaration has repercussions for how employers provide benefits and reimburse employees for pandemic-related expenses.
   

State and local tax

• Arizona: The Arizona Tax Court held that a laundry business was not entitled to state and city sales tax exemptions for purchases of equipment and chemicals used to transform unusable, soiled linens into disinfected linens suitable for use in healthcare facilities.
• Michigan: The Department of Treasury issued a notice in response to legislation effective 26 April 2023 providing that delivery and installation charges are not included in the “sales price” under certain conditions.
• Tennessee: A significant tax package has been sent to the governor for signature. The bill makes numerous corporate excise and franchise tax changes, including adopting IRC section 168 as it exists and applies under the so-called “Tax Cuts and Jobs Act,” and phasing in single receipts factor apportionment over a three-year period. 

Read TaxNewsFlash-United States

• The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) issued a Russia-related general license—authorizing transactions related to energy.
• OFAC announced that a U.S. company agreed to remit over $7.5 million to settle potential civil liability for almost 66,000 apparent violations of multiple U.S. sanctions programs.

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