KPMG Week in Tax: 5 – 9 June 2023

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

• Nigeria: The Finance Act 2023 was signed into law, introducing changes to various pieces of tax legislation.
• Mauritius: The 2023-2024 Budget includes corporate, individual (personal), and value added tax (VAT) and other indirect tax proposals.

Read TaxNewsFlash-Africa

• Canada: Distribution platform operators that are registrants for Quebec sales tax (QST) purposes must file the QST annual information return by 30 June 2023 for the 2022 calendar year.
• Canada: Quebec Bill 27, which received first reading, includes previously announced measures to amend several provincial tax credits and deductions, as well as to harmonize with certain federal tax measures, including to broaden eligibility for the small business deduction and support the use of the new international accounting standard for insurance contracts (IFRS 17) for income tax purposes.
• Mexico: A decree grants tax benefits and administrative facilities for taxpayers who carry out certain productive economic activities within the Isthmus of Tehuantepec. The decree is effective 6 June 2023.
• Mexico: A decree was published in the office gazette creating the Directorate for the Registry of Specialized Service Providers or Specialized Works (REPSE).
• Colombia: Two new provisions intended to increase Colombian tax revenue enacted as part of tax reform in Colombia in 2022 pose challenges for inbound investors.
• Bolivia: The tax authority issued guidance to extend the deadline for certain taxpayers to register and/or confirm fiscal documents in the “VAT sales and purchases registry” for the May 2023 fiscal period.
• Dominican Republic: The Dominican executive branch passed a law creating a national tax system of electronic invoicing.

Read TaxNewsFlash-Americas

• Australia: The Australian Taxation Office (ATO) released the final ruling regarding the deductibility of labor costs relating to the construction or creation of capital assets. The ATO maintained its view that labor costs incurred specifically in relation to the construction or creation of capital assets are capital in nature and therefore not deductible under the general deduction provision of the Income Tax Assessment Act 1997 (ITAA97)).
• Cambodia: A new law on taxation (2023) consolidates 15 types of existing taxes in Cambodia under one law and was promulgated to complement, provide consistency, and close the gaps of the existing regulations.
• India: The Central Board of Direct Taxes (CBDT) proposed an amendment in Rule 11UA and notified certain persons of an exemption from angel tax provisions.
• India: In accordance with a proposal in the 2023 budget, the CBDT announced an increase in the tax exemption for leave salary payments from INR 300,000 to INR 2.5 million.
• India: The CBDT introduced a new rule (Rule 133) prescribing the manner and the procedure for the computation of net winnings for taxability under section 115BBJ and for tax deduction under section 194BA. The CBDT also issued a circular containing guidelines for the removal of difficulties while implementing tax withheld at source provisions.
• Malaysia: The Inland Revenue Board (IRB) and the Royal Malaysian Customs Department (RMCD) issued guidelines and “frequently asked questions” (FAQs) to provide guidance on implementation of the special voluntary disclosure program 2.0 (SVDP 2.0) and the voluntary disclosure program (VDP). The latest implementation period for the programs is from 6 June 2023 to 31 May 2024. 
• Qatar: Income tax amendments provide for new permanent establishment and economic substance regulations.

Read TaxNewsFlash-Asia Pacific

• Netherlands: Effective 1 July 2023, the interest on tax due charged on individual income tax, inheritance tax, payroll tax, dividend tax, VAT, real estate transfer tax, private motor vehicle and motorcycle tax, excise duties, consumption taxes on non-alcoholic drinks, and environmental taxes will increase to 6% (from 4%).
• Hungary: The rates for the extended producer responsibility scheme (EPR) were published in the official gazette. Under the new scheme—effective 1 July 2023—producers or first domestic distributors will have to assume the financial responsibility for the costs of collection and disposal of specific types of waste generated by their products.
  
• Luxembourg: The Advocate General of the Court of Justice of the European Union (CJEU) today issued an opinion that the European Commission (EC) erred in finding that Luxembourg had granted unlawful State aid to the taxpayer because the EC incorrectly relied on the OECD Transfer Pricing Guidelines, rather than Luxembourg law, as the reference system in determining whether there was a selective advantage.
  
• Luxembourg: The law to transpose DAC7 into domestic legislation was published.
  
• Hungary: A decree amending the decree on “extra profit” surtaxes was published in the Hungarian official gazette and is effective 1 June 2023. The decree provides for changes to certain surtaxes.
  
• EU: The European Commission issued the European Semester Spring Package 2023, which includes recommendations for each of the 27 member states, along with a communication for these recommendations.
• France: The Minister for Public Accounts announced new measures against international tax and customs fraud, including a lower turnover threshold for transfer pricing documents.
• Germany: The government responded to parliamentary questions on interim findings and outcomes from the application of mandatory disclosure rules for cross-border arrangements (DAC6) since 1 July 2020.
• Greece: The tax authorities issued a decision to provide guidance on the application of the temporary solidarity contribution (“windfall profits tax”) on the fossil sector.
• Spain: The Spanish Supreme Court held that the dividend withholding tax applicable to payments made to a German alternative investment fund was in breach of the free movement of capital.
• Switzerland: The Federal Council launched a public consultation on an updated draft ordinance for the implementation of the OECD’s Pillar Two Model Rules
• Netherlands: A bill was presented to the Lower House of Parliament to transpose EU Directive 2022/253 into national legislation. The directive is based on the OECD’s Pillar Two GloBE Model Rules published at the end of 2021.

Read TaxNewsFlash-Europe

• Canada: A report of the mutual agreement procedure (MAP) program for 2021 highlights that the Canada Revenue Agency (CRA) closed more MAP cases in 2021 compared to 2020 but took more time to complete each case on average (over 20 months).
• Liechtenstein: The government prepared a consultation draft for implementation of the OECD’s Pillar Two global minimum tax of 15%.
• Luxembourg: The Advocate General of the CJEU issued an opinion that the European Commission (EC) erred in finding that Luxembourg had granted unlawful State aid to the taxpayer because the EC incorrectly relied on the OECD Transfer Pricing Guidelines, rather than Luxembourg law, as the reference system in determining whether there was a selective advantage.
• France: The Minister for Public Accounts announced new measures against international tax and customs fraud, including a lower turnover threshold for transfer pricing documents.
• Switzerland: The Federal Council launched a public consultation on an updated draft ordinance for the implementation of the OECD’s Pillar Two Model Rules
• Netherlands: A bill was presented to the Lower House of Parliament to transpose EU Directive 2022/253 into national legislation. The directive is based on the OECD’s Pillar Two GloBE Model Rules published at the end of 2021.
• A KPMG report examines the transfer pricing implications of trends in the automotive industry.

Read TaxNewsFlash-Transfer Pricing

• Saint Kitts and Nevis: The reporting deadlines for FATCA and the common reporting standard (CRS) have been extended to 29 August 2023 (from 31 May 2023).
• Spain: A bill implementing DAC7 was published in the Official State Gazette. The bill is aimed at improving the existing tax reporting framework to address challenges posed by the digitization of the economy and includes additional reporting requirements for reporting financial institutions with respect to reportable account holders.
• British Virgin Islands: Due to technical difficulties users are facing while attempting to file through the BVI Financial Account Reporting System (BVIFars), penalties will not be issued for late filings.

Read TaxNewsFlash-FATCA / IGA / CRS

• Notice 2023-42 provides relief for corporations that did not pay estimated tax related to the new corporate alternative minimum tax (CAMT).
• Notice 2023-41 provides that the applicable reference price for purposes of determining the marginal well production credit (MWC) under section 45I for qualified natural gas production from qualified marginal wells during tax years beginning in calendar year 2022 is $3.43 per 1,000 cubic feet (Mcf).
• Proposed regulations identify certain Malta personal retirement scheme transactions as a listed transaction, a type of reportable transaction.
• President Biden intends to nominate Marjorie Rollinson to be IRS Chief Counsel.
• The U.S. Court of Appeals for the Eighth Circuit affirmed a decision of the district court holding that the fair market value of stock in a closely-held corporation, for purposes of valuing the stock interest in the corporation held by the estate of a deceased shareholder, included life insurance proceeds intended for the redemption of the deceased shareholder’s stock interest.
• A KPMG report discusses the U.S. foreign tax credit implications of the new provisions intended to increase Colombian tax revenue enacted as part of tax reform in Colombia in 2022.
• A KPMG report examines state specific nil filing requirements and “reasonable penalties” assessed in an attempt to force compliance.
   

State and local tax

• Colorado: The state Supreme Court issued four decisions addressing the effect of COVID-19 on commercial property tax valuations.
• Minnesota: House File 2887, a comprehensive transportation policy and funding bill, was signed into law on 24 May 2023. In addition to making numerous motor fuel and vehicle tax changes, the legislation imposes a new 50 cent retail delivery fee on retailers in certain circumstances.
• Nebraska: Legislation recently signed into law provides for individual income tax relief and adopts a new elective pass-through entity tax; it also reduces individual and corporate income tax rates. Currently, the rate applied to a corporation’s taxable income in excess of $100,000 is 7.25%. Under the bill, the rate will be incrementally reduced to a flat 3.99% rate for tax years beginning on or after 1 January 2027.
• Virginia: A Virginia appellate court held that a taxpayer was permitted to elect the single sales factor apportionment method allowed to manufacturers meeting certain criteria on an amended return. 

Read TaxNewsFlash-United States
 

Legislative Updates

• The House Ways and Means Committee Chairman Jason Smith (R-MO) released three tax bills to be considered by the committee. 
• The House Ways and Means Committee marked up and voted out of committee to now be considered by the full House seven tax-related bills.

Read TaxNewsFlash-Legislative Updates

• The IRS publicly released a generic legal advice memorandum (GLAM) that addresses whether developing paid name, image, and likeness (NIL) opportunities for collegiate student-athletes furthers an exempt purpose under section 501(c)(3). The memorandum concludes that an organization that develops paid NIL opportunities for student-athletes will, in many cases, be operating for a substantial nonexempt purpose—serving the private interests of student-athletes—which is more than incidental to any exempt purpose furthered by the activity.

Read TaxNewsFlash-Exempt Organizations

• The U.S. Departments of Commerce, Justice, State, and Treasury have issued an advisory concerning Iran’s unmanned aerial vehicle (UAV)-related activities.
• The U.S. Department of Homeland Security (DHS) added two entities and eight subsidiaries to the Uyghur Forced Labor Prevention Act (UFLPA) entity list for working with the government of Xinjiang to recruit, transport, transfer, harbor or receive forced labor or Uyghurs, Kazakhs, Kyrgyz, or members of other persecuted groups out of Xinjiang.
• Importers in the United States must continue to carefully navigate numerous court decisions and customs rulings, which sometimes appear to be in conflict, when making “country of origin” determinations, particularly in the context of applying the punitive Section 301 tariffs on Chinese-origin goods as high as 25%.
• U.S. Customs and Border Protection (CBP) issued guidance concerning COVID-19-related duties and product exclusions under the Section 301 investigation of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation.
• The Canada Border Services Agency (CBSA) released amendments to the valuation for duty (VFD) regulations that are intended to confirm that, when an importer “arranges” to resell goods to a Canadian customer prior to importing the goods into Canada, the value for duty of the goods is based on the selling price to the Canadian customer.

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