KPMG Week in Tax: 15 – 19 May 2023

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

• Nigeria: The Finance Act, 2022—which has been passed by the National Assembly but is undergoing some reviews before being assented to by the President—includes tax measures.
• South Africa: The South African Revenue Service (SARS) reviewed the value added tax (VAT) registration application process to mitigate the risk of fraudulent VAT registrations and claims.
• South Africa: A new enhanced tax compliance status (TCS) application form facilitates the consolidation of the foreign investment allowance and emigration TCS applications into a single application, referred to as “Approval International Transfer (AIT).”
• Uganda: Bills tabled before the parliament concern income tax, VAT, excise duty, lotteries and gaming, and tax procedures.

Read TaxNewsFlash-Africa

• Canada: The deadline for filing annual goods and services tax (GST), harmonized sales tax (HST), and Quebec sales tax (QST) returns is 30 June 2023 for financial institutions in Canada.
• Canada: Legislation in British Columbia including corporate income tax measures received Royal Assent. The bill also extends the farmers’ food donation tax credit and the interactive digital media tax credit.
  
• Mexico: The tax administration published a list of the 185 foreign providers of digital services that are registered for tax purposes in Mexico as of 30 April 2023. With the most recent report, only three new entities were added to the list.

Read TaxNewsFlash-Americas

• Hong Kong: The Legislative Council passed the bill for the concessionary tax regime for single family offices, under which investment profits will be exempted from profits tax when specific conditions are met.
• New Zealand: The 2023 budget includes few tax-related proposals, one of which would align the trust tax rate (currently 33%) with the top individual (personal) tax rate of 39%.
  
• Singapore: The Income Tax Board of Review held that the true nature of the consideration received by the taxpayers must be discerned not only from the mere label used in the sale and purchase agreement, but also from the actual substance of the transaction in question.
  
• Bahrain: The National Bureau for Revenue (NBR) announced that the digital stamps electronic system will start to receive digital stamps orders for certain goods subject to excise tax.
  
• Australia: An updated draft practical compliance guideline deals with the Australian Taxation Office’s compliance approach to intangibles arrangements involving foreign related parties.
  
• Australia: The government proposed significant changes to the petroleum resource rent tax (PRRT) regime following its review of gas transfer pricing (GTP) arrangements. 
  

Read TaxNewsFlash-Asia Pacific

• Denmark: The Supreme Court issued a decision in two cases on the withholding tax exemption under the Interest and Royalties Directive (2003/49/EC). In both cases, the Supreme Court found that the direct recipient of the payment was not the beneficial owner of the interest.
• EU: The Economic and Financial Affairs Council of the EU (ECOFIN) reached agreement on the proposal to extend the council directive administrative cooperation to cover the exchange of information on cryptoassets, as well as tax rulings for individuals (DAC8).
  
• EU: The European Parliament adopted a resolution proposing new taxes as own resources.
  
• France: The CJEU held that the French tax integration scheme is incompatible with EU freedom of establishment.
  
• Spain: The Supreme Court held that Spanish tax regulations run contrary to the EU principle of free movement of capital as they lead to unjustified differential treatment of certain non-resident non-undertakings for the collective investment in transferable securities (UCITS) funds with respect to Spanish-resident non-UCITS funds.
  
• Lithuania: A new temporary solidarity contribution (“windfall tax”) aimed at Lithuanian and EU credit institutions operating in Lithuania is effective as of 15 May 2023.
  
• Switzerland: The Geneva cantonal parliament voted to adopt a proposal to eliminate the municipal business tax and increase the cantonal income tax rate from 14% to 14.7% (combined cantonal/municipal and federal rate).
  
• EU: Rules for the new carbon border adjustment mechanism (CBAM) were published in the official journal of the EU on 16 May 2023 and became effective 17 May 2023.
  
• EU: The EU Finance Ministers reached agreement on new tax transparency rules for all service providers facilitating transactions in cryptoassets for customers resident in the EU.
  
• Greece: Circular E. 2031/2023 provides guidance on business income earned by individuals from the performance of single or recurrent transactions with the purpose of generating profit.
  
• Poland: The Supreme Administrative Court held that a company using a leased passenger car for its own purposes was subject to the tax-deductible expense limitation under Article 16(1)(49a) of the Corporate Income Tax Act.
  
• Poland: A draft decree was published to determine the fee per piece of single-use plastic packaging.
  
• UK: HMRC updated its guidance on the restriction for interest deductions for loans with an “unallowable purpose.”
  
• UK: HMRC has proposed changes to (1) the construction industry scheme gross payment status for subcontractors, (2) payroll reporting following a public consultation on data collection, and (3) rules on compliance errors relating to “off-payroll working.”
  
• UK: Public consultations concern (1) the modernization of stamp taxes on share transfers, (2) a new reserved investor fund regime, (3) simplification of construction industry scheme for contractors and deemed contractors, and (4) taxation of lending or staking of cryptoassets.
  

Read TaxNewsFlash-Europe

• Australia: An updated draft practical compliance guideline deals with the Australian Taxation Office’s compliance approach to intangibles arrangements involving foreign related parties.
• Channel Islands and Isle of Man: The governments of Guernsey, Jersey, and the Isle of Man issued a joint statement describing their agreed approach to implementation of the OECD’s Pillar Two global minimum tax framework.
  
• Czech Republic: The Ministry of Finance launched a consultation on a draft bill to implement the OECD’s Pillar Two model rules as set out under the EU minimum tax directive.
  
• EU: An action was brought before the General Court seeking the annulment of the EU minimum tax directive.
  
• Switzerland: Transfer pricing topics of particular focus in Swiss audits and ruling requests include intangible property (IP), service transactions, good transactions, financial transactions, and transfer pricing documentation.
  
• Indonesia: An overview of the current transfer pricing environment in Indonesia, including documentation requirements, topics related to the end of the coronavirus pandemic, year-end adjustments, advance pricing agreements (APAs), common challenges faced by taxpayers, and potential solutions to recurrent tax disputes.
  

Read TaxNewsFlash-Transfer Pricing

• Saint Vincent and the Grenadines: The automatic exchange of information (AEOI) portal was updated to reflect that the submission deadline for reporting common standard return (CRS) and FATCA returns is 31 May 2023.
• South Africa: The FATCA and CRS third-party data annual submissions process for the 2023 reporting period (covering the period from 1 March 2022 through 28 February 2023) started on 1 April 2023 and ends on 31 May 2023.
  
• British Virgin Islands: The tax authority issued updates regarding the reporting of U.S. taxpayer identification number (TIN) codes for FATCA purposes for calendar years 2022 (due by 31 May 2023) onwards.
  
• Guernsey: There has been no change in the deadline for FATCA and CRS reporting.
  

Read TaxNewsFlash-FATCA / IGA / CRS

• The U.S. Supreme Court unanimously affirmed the U.S. Court of Appeals for the Sixth Circuit, in upholding the judgment of a federal district court that denied petitions to quash IRS summonses issued to banks of the taxpayer’s wife and taxpayer’s lawyers on the grounds that the IRS failed to notify them of the summonses.
• The U.S. Tax Court held that expenses used to determine the orphan drug credit under section 45C must also be taken into account in determining certain elements of the research credit under section 41, with the result that a taxpayer claiming both credits receives a reduced research credit.
  
• The U.S. Tax Court held that a taxpayer may claim as part of its cost of goods sold (COGS) in computing its excise tax liability under section 4081 only the excise tax that the taxpayer actually incurred or paid, taking into account any tax credits claimed by the taxpayer under section 6426.
  
• Rev. Proc. 2023-23 provides the inflation-adjusted limits related to health savings accounts (HSAs) and high deductible health plans (HDHPs) for calendar year 2024.
  
• The IRS released three “practice units” concerning the interest expense limitations under section 267(a)(3) and section 163(j), and dividend distributions with a debt issuance.
  
• The IRS submitted a report to Congress that evaluates the feasibility of providing taxpayers with the option of a free, voluntary, IRS-run electronic filing system, commonly referred to as “Direct File.” The IRS is taking steps to begin a pilot project for the 2024 filing season to further assess customer support and technology needs and the ability to overcome the potential operational challenges identified in the report.
  
• OMB’s Office of Information and Regulatory Affairs (OIRA) received for review from Treasury an interim final rule relating to coronavirus (COVID-19) state and local fiscal recovery funds.
  
• A KPMG report discusses the issues relating to whether paid or reimbursed travel expenses may be taxable or nontaxable to employees, focusing in particular on the analysis of the location of an employee’s tax home, including whether a personal residence may be considered a tax home.

State and local tax

• Colorado: Recently signed Senate Bill 23-143 allows a retailer to pay the retail delivery fee on behalf of a purchaser effective 1 July 2023, and exempts “qualified businesses” from the retail delivery fee.
• Florida: House Bill 7063, a comprehensive tax relief package initially proposed by Governor DeSantis, has passed both chambers of the Florida legislature and is expected to be signed into law. The bill does not make any major corporate income tax changes but does update the state’s conformity statute by adopting the Internal Revenue Code as in effect on 1 January 2023.
  
• Indiana: Senate Bill 419, an omnibus tax bill that includes a potpourri of tax changes, was recently signed into law. The bill makes a number of corporate income tax changes, including but not limited to allowing a deduction for the amount of specified research and experimental (R&E) expenditures charged to capital account for the tax year. 
  

Read TaxNewsFlash-United States

• The U.S. Tax Court released a memorandum opinion holding that the taxpayer, an accountable care organization (ACO), did not meet its burden of showing that it is an organization described under section 501(c)(4) qualifying for exemption from federal income tax under section 501(a).

Read TaxNewsFlash-Exempt Organizations

• The Bureau of Industry and Security (BIS) of the U.S. Department of Commerce released a final rule implementing additional sanctions under the Export Administration Regulations (EAR) against Russia and Belarus.
• U.S. Customs and Border Protection (CBP) issued a report detailing recommended guidelines for submissions of forced labor supporting documents.
  
• BIS issued a temporary denial order suspending the export privileges of a Florida company, Russian airline, freight forwarder in the Maldives, and two Russian nationals residing in Florida, for attempting to divert electronics and aircraft parts to Russia.
  
• BIS also released an order renewing the temporary denial of export privileges of a Russian airline.
  
• BIS amended the Export Administration Regulations (EAR) adding 71 entities to the entity list. These entities will be listed on the entity list under the destinations of Armenia, Kyrgyzstan, and Russia.
• The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced settlement agreements between OFAC and a U.S. cosmetics company and with a former senior executive of the cosmetics company related to apparent violations of the Iranian Transactions and Sanctions Regulations.
  
• OFAC released a final rule amending the South Sudan Sanctions Regulations.
  
• The European Commission (EC) released proposals for the reform of the EU Customs Union.
  

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