KPMG Week in Tax: 29 May – 2 June 2023

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

• Israel: The Central-Lod District Court upheld the tax authority’s claim of a deemed taxable transfer of functions, assets, and risks pursuant to a post-acquisition royalty arrangement and research and development (R&D) contract.
• Australia: The New South Wales legislative assembly passed a housing growth support bill that would replace the special infrastructure contribution system with a new broad-based charge called the housing and productivity contribution.
• Australia: Treasury released a discussion paper for consultation on proposed financial institutions supervisory levies for the 2023‑2024 financial year.
  
• Malaysia: The Finance Act 2023—effective 1 June 2023—includes no material differences from the Finance Bill 2023. However, the special voluntary disclosure program 2.0, which was supposed to commence on 1 June 2023, was postponed.
• Saudi Arabia: The Zakat, Tax and Customs Authority (ZATCA) determined the criteria for selecting the targeted taxpayers in the fifth wave for implementing the “Integration Phase” of electronic invoicing (e-invoicing). The fifth wave included all taxpayers with revenues subject to value added tax (VAT) that exceeded 100 million Saudi Riyals during 2021 or 2022. VAT-registered taxpayers meeting the criteria need to integrate e-invoicing solutions with the “FATOORA platform” starting from 1 December 2023.
• Saudi Arabia: The ZATCA provided guidance on the treatment of service permanent establishments in the context of income tax treaties.
• Philippines: The Department of Finance (DOF) amended the requirements for the income tax exemption of foreign-sourced dividends received by a domestic corporation.
• Philippines: The Bureau of Internal Revenue (BIR) issued Revenue Memorandum Circular (RMC) No. 52-2023, which provides for the optional filing and payment of monthly VAT for VAT-registered persons.

Read TaxNewsFlash-Asia Pacific

• Germany: The Court of Justice of the European Union (CJEU) held that a lease of operating equipment is not subject to VAT under the EU VAT directive if the lease is ancillary to a VAT-exempt lease of property.
• Poland: The Central Electronic System of Payment Information (CESOP)—a centralized European system for collecting and exchanging cross-border payment information aimed at detecting and combatting VAT fraud in cross-border internet sales of goods and services—was published in the Polish journal of laws. The new reporting requirements become effective 1 January 2024, and first CESOP reports must be filed by 30 April 2024 for the first quarter of 2024.
• UK: The Supreme Court issued a decision on the definition of “structure” for capital allowance purposes.
• UK: The Court of Appeal found that there was no time limit for seeking judicial review of HMRC’s decision to reject the taxpayers’ application for income tax credits under extra-statutory concession.
• UK: New international disclosure regulations based on the OECD’s mandatory disclosure rules (MDR) came into effect in the UK in March 2023.

Read TaxNewsFlash-Europe

• Africa: A summary of tax developments for May 2023 covers Benin, Botswana, Egypt, Kenya, Nigeria, Sierra Leone, South Africa, and Uganda.
• Tanzania: The Tax Revenue Appeals Board held that the retained earnings of a resident company were subject to withholding tax.

Read TaxNewsFlash-Africa

• Canada: Ontario's Bill 85—which includes the new 10% refundable manufacturing investment tax credit and alters the phase-out of the small business deduction for certain corporations—received Royal Assent.
• Canada: Saskatchewan's Bill 133—which extends the Saskatchewan manufacturing and processing exporter tax incentive by one year, to 31 December 2023 (from 31 December 2022)—received Royal Assent.
• Canada: The 2023 provincial budget for Prince Edward Island introduces a five-bracket system beginning in 2024 (replacing the current three-bracket and surtax system). Another measure increases the basic personal income tax exemption to $12,750 CAD (from $12,000).
• Chile: Congress approved the mining royalty bill, which will become law in Chile following its enactment and publication in the official gazette. The new mining royalty replaces the current tax system and the mining specific tax (MST) applicable on mining income, creating a new regulatory tax framework for the mining industry.

Read TaxNewsFlash-Americas

• Israel: The Central-Lod District Court upheld the tax authority’s claim of a deemed taxable transfer of functions, assets, and risks pursuant to a post-acquisition royalty arrangement and R&D contract.
• Malaysia: The Income Tax (Transfer Pricing) Rules 2023 were published in the official gazette and are effective for year of assessment (YA) 2023 and subsequent YAs. The new rules will significantly enhance and strengthen the position of the Malaysia Inland Revenue Board (MIRB) on transfer pricing enforcement.
• A KPMG report explores the complexity of today’s transfer pricing environment and provides suggestions for multinational corporations to take a practical, commonsense approach in analyzing, benchmarking, and defending their related-party transactions.

Read TaxNewsFlash-Transfer Pricing

• Saint Lucia: The Inland Revenue Department issued an updated version of FATCA guidelines and procedures.
• British Virgin Islands: The tax authority announced that the annual fee for use of the BVI financial account reporting system (BVIFars) portal is on track for implementation in 2023. Once the portal is live, the tax authority will provide additional details on the process for making payment through the portal and the available options for payment.
• Dominican Republic: The General Directorate of Internal Taxes issued updates regarding the reporting of U.S. taxpayer identification number (TIN) codes for FATCA purposes for calendar years 2022 (due by 30 September 2023) onwards.
• Luxembourg: Parliament passed a bill implementing Council Directive (EU) 2021/514 (DAC7) that affects the common reporting standard (CRS) for reporting financial institutions with respect to reportable account holders.
• Saudi Arabia: Updated automatic exchange of information (AEOI) regulations in Saudi Arabia provide that all reporting financial institutions are required to carry out an annual audit for FATCA and CRS reporting and subsequently submit a certificate of compliance to ZATCA.

Read TaxNewsFlash-FATCA / IGA / CRS

• The U.S. Congress passed H.R. 3746 (the “Fiscal Responsibility Act of 2023”), to increase the federal debt limit. The bill specifically would suspend the federal debt limit through 1 January 2025. The bill must now be signed by President Biden.

Read TaxNewsFlash-Legislative Updates

• Final regulations relating to the use of actuarial tables in valuing annuities, interests for life or a term of years, and remainder or reversionary interests adopt regulations that were proposed in May 2022, with certain modifications.
• The U.S. Senate Foreign Relations Committee voted (20-1) to advance the income tax treaty with Chile to a full Senate vote.
• Proposed regulations provide additional guidance on the program under section 48(e) to allocate environmental justice solar and wind capacity limitation with respect to certain solar and wind facilities placed in service in connection with low-income communities.
• Notice 2023-44 provides additional guidance on the program under section 48C(e) to allocate $10 billion in credits ($4 billion of which may only be allocated to projects located in certain energy communities census tracts) for qualified investments in eligible qualifying advanced energy projects.  

State and local tax

• Minnesota House File 2887, a comprehensive transportation policy and funding bill that was signed into law, imposes a new 50 cent retail delivery fee on retailers in certain circumstances.
• New York State’s recent budget bill included a measure under which “active” limited partners will be treated as general partners who have IRC section 1402(a) net earnings from self-employment for purposes of the metropolitan commuter transportation mobility tax (MCTMT). 

Read TaxNewsFlash-United States

• The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) issued designated an Iran-based technology company, two senior employees, and an affiliated company based in the United Arab Emirates (UAE) for their roles in facilitating the Iranian regime’s censorship of the Internet in Iran.
• OFAC issued a Russia-related general license—Authorizing certain debt securities servicing transactions involving International Investment Bank.

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