KPMG Week in Tax: 19 – 23 June 2023

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

• Chile: The deadline for filing transfer pricing affidavits was extended through 30 September 2023 for any taxpayer required to file between 1 July 2023 and 30 September 2023.
• Korea: The Tax Tribunal held that the tax authority’s imputation of an arm’s length rate of interest on overdue accounts receivable from the taxpayer’s foreign affiliate was reasonable.
  
• Australia: The Federal Court issued a decision on a procedural matter in a case relating to the tax authority’s denial of interest deductions with respect to foreign related-party financing which reveals that the tax authority has abandoned its reliance on transfer pricing arguments and apparently is relying solely on general anti-avoidance provisions.
  
• Germany: Legislation to implement EU Directive 2021/2101—introducing “public” country-by-country (CbC) reporting for certain undertakings and branches—was published in the federal law gazette.
  
• Switzerland: Swiss voters approved implementing the global minimum tax in Switzerland. The Federal Council is now allowed to adopt respective global anti-base erosion (GloBE) rules and the domestic top-up tax within an implementation ordinance.
  
• United States: The staff of the Joint Committee on Taxation (JCT) released a document analyzing the possible effects of adopting the components of the OECD’s Pillar Two global minimum tax, both worldwide and in the United States.
  
• KPMG reports published this week:
  • Address transfer pricing considerations in mergers and acquisitions (M&A)
  • Summarize the findings of a survey on the control of risk and development, enhancement, maintenance, protection, and exploitation (DEMPE) frameworks with respect to France, Italy, and Spain
  • Examine the transfer pricing issues that companies need to take into account in their ESG-related tax planning

Read TaxNewsFlash-Transfer Pricing

• Luxembourg: The tax authority issued a newsletter notifying Luxembourg reporting financial institutions that the new taxpayer identification number (TIN) codes published by the U.S. tax authority (IRS) will be accepted by the tax authority.
• South Korea: A revised version of the common reporting standard (CRS) regulations includes updated lists of participating jurisdictions and reportable jurisdictions.

Read TaxNewsFlash-FATCA / IGA / CRS

• East Africa: The East African Community (EAC) member countries of Kenya, Rwanda, Tanzania, and Uganda presented their budgets for 2023-2024.
• South Africa: The 2023 tax season for individuals opens 7 July 2023.

Read TaxNewsFlash-Africa

• Costa Rica: The General Directorate of Taxation (DGT) has updated the list of cross-border digital service providers subject to the 13% value added tax (VAT) rate. Other recent developments concern modifications to the technical provisions of electronic receipts for tax purposes, and the 30 June due date for first partial payment of corporate income tax.

Read TaxNewsFlash-Americas

• Australia: Proposed legislation includes new thin capitalisation rules, as well as requirements for public companies to disclose information about subsidiaries and thin capitalisation. Other tax-related legislation passed both Houses of Parliament.
• Australia: The Federal Court issued a decision on a procedural matter in a case relating to the tax authority’s denial of interest deductions with respect to foreign related-party financing which reveals that the tax authority has abandoned its reliance on transfer pricing arguments and apparently is relying solely on general anti-avoidance provisions.
• Australia: Treasury released for consultation a draft bill that includes amendments to the non‑arm’s length income provisions announced in the 2023‑2024 budget. The consultation closes on 7 July 2023.
• Bahrain: Updated VAT guides relate to the treatment of supply of investment-grade gold.
• Sri Lanka: The KPMG member firm in Sri Lanka prepared reports about tax developments concerning, among others, tax exemptions and employment income.
• Saudi Arabia: The Zakat, Tax and Customs Authority (ZATCA) announced the criteria for selecting the sixth group of taxpayers that will be required to comply with the second phase of implementation of the electronic invoicing (e-invoicing) system.
• Hong Kong: The Inland Revenue Department (IRD) published two advance ruling cases and updated its illustrative examples on the foreign-sourced income exemption (FSIE) regime.

Read TaxNewsFlash-Asia Pacific

• EU: The European Parliament adopted a resolution on lessons learned from the Pandora Papers—calling for the adoption of measures to fight tax avoidance and money laundering.
• EU: The European Commission (EC) published a proposal for a next generation of “own resources.” The proposal includes a temporary new own resource based on company profits. If approved, each EU member state would be required to contribute a new levy equivalent to 0.5% of surplus corporate profits.
  
• EU: The EC has proposed new rules to make withholding tax procedures in the EU more efficient and secure for investors, financial intermediaries (e.g., banks) and member state tax administrations.
  
• Poland: The Supreme Administrative Court held that invoices issued earlier than 30 days before the tax point in VAT are not fictitious.
  
• Poland: The Supreme Administrative Court held that a company pursuing business activities in a special economic zone under four separate permits could maintain a single set of documentation for all corporate income tax-exempt activities specified in the permits.
  
• Poland: A bill amending the Budget Act for 2023 would extend until the end of 2023 at least (from 30 June 2023) reduced VAT rates for food under the Inflation Shield program (0% versus the usual 5% rate).
  
• Poland: Legislation passed by the Lower House of the Polish Parliament mandates e-invoicing beginning 1 July 2024, with the reservation that taxpayers under subjective and objective tax exemption will be expected to use it only from 1 January 2025.
  
• Poland: The Minister of Health published a regulation revoking the state of health emergency relating to the coronavirus (COVID-19) pandemic effective 1 July 2023. The revocation will have an effect on a number of tax matters, including tax scheme reporting, individual rulings, and residence certificate preferences.
  
• Spain: The Ministry of Finance published draft e-invoicing regulations. Taxpayers have until 10 July 2023 to submit observations.

Read TaxNewsFlash-Europe

• Notice 2023-37 modifies prior guidance in response to the end of the coronavirus (COVID-19) public and national health emergencies.
• Notice 2023-46 provides that the inflation adjustment factor for the carbon oxide sequestration credit under section 45Q for calendar year 2023 is 1.3471.
• Notice 2023-49 provides that the reference price under section 45K(d)(2)(C) for calendar year 2022, applicable in determining the amount of the enhanced oil recovery credit under section 43, the marginal well production credit for qualified crude oil production under section 45I, and the applicable percentage under section 613A to be used in determining percentage depletion in the case of oil and natural gas produced from marginal properties, is $93.97.
• The U.S. Court of Federal Claims held that the value of anticipated cash grants under section 1603 of the “American Recovery and Reinvestment Act of 2009” (ARRA) was a separate intangible asset for purposes of allocating the plaintiffs’ purchase price under section 1060 between grant-eligible tangible property and grant-ineligible intangibles.
  
• The U.S. Senate voted (95-2) to approve the income tax treaty with Chile. The treaty will not be ratified and enter into force until Chile completes an additional approval process and mutual notification of approvals by both countries is made.
  
• The U.S. Tax Court released a memorandum opinion holding that the taxpayer was not entitled to deduct net operating loss (NOL) carryovers in 2010, 2011, and 2012, attributable to passthrough losses claimed in 2007, 2008, and 2009, because the taxpayer failed to substantiate that he had sufficient basis in his interest and was at risk so as to be allowed to deduct the losses.
  
• The National Taxpayer Advocate released her mid-year report to Congress identifying key objectives for upcoming fiscal year.
  
• The U.S. Treasury Department and IRS released a notice that provides the 2023 inflation adjustment factor and reference prices used in determining the availability of the credit for renewable electricity production under section 45.

Read TaxNewsFlash-United States

Legislative Updates

• The staff of the Joint Committee on Taxation (JCT) released a document analyzing the possible effects of adopting the components of the OECD’s Pillar Two global minimum tax, both worldwide and in the United States.

Read TaxNewsFlash-Legislative Updates

• EU: The European Council has approved an eleventh package of sanctions against Russia for its aggression against Ukraine—including trade, transport, and energy measures.
• Korea: The Tax Tribunal held (2022-Customs-0029, 3 April 2023) that imported plastic toys were classified as “other construction sets and constructional toys” subject to a 0% tariff rate under a World Trade Organization (WTO) agreement.
  
• United States: The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) announced a settlement with the Latvian subsidiary of an international financial institution in Stockholm, Sweden for 386 apparent violations of OFAC's Crimea sanctions.
  
• United States: The Bureau of Industry and Security (BIS) released three notices renewing the temporary denial of export privileges of Russian airlines.

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