KPMG Week in Tax: 17 - 21 July 2023

• South Africa: The South African Revenue Service (SARS) introduced the pay-as-you-earn (PAYE) administrative penalty solution. The interim solution provided SARS with the ability to impose PAYE administrative penalties for the failure to submit EMP501 reconciliations on time.

Read TaxNewsFlash-Africa

• Dominican Republic: The Dominican executive branch filed a draft law before the Congress that would modify certain tax assessment, audit and payment procedures.

Read TaxNewsFlash-Americas

• Australia: The Minister for Defence registered a determination that allows a refund of goods and services tax (GST), wine tax, or luxury car tax for certain defence-related international obligations.
• Malaysia: As announced during the re-tabling of the Malaysia Budget 2023, the Inland Revenue Board (IRB) introduced the implementation of e-invoicing in phases from 1 June 2024 to 1 January 2027 for targeted taxpayers.
  
•  Sri Lanka: A bill to amend the Inland Revenue Act, No. 24 of 2017 has been ordered to be published by the Minister of Finance, Economic Stabilization and National Policies in the government Gazette.
  
•  Singapore: A recent decision of the valuation review board concerns the use of the profits method to value property for property tax purposes.
  
• Australia: The Australian Taxation Office (ATO) released a draft legislative instrument that allows the correction of fuel tax errors made in a tax period, to be done in a later tax period in specified circumstances.
  
• Australia: The ATO issued an advisory on claiming research and development (R&D) tax incentives following the recent decision of the Federal Court
  
• Bahrain: The Minister of Finance and National Economy confirmed the introduction of corporate income tax in Bahrain during the weekly parliamentary session. Bahrain is expected to implement a standard corporate income tax regime similar to other jurisdictions.
  

Read TaxNewsFlash-Asia Pacific

• Luxembourg: The administrative court upheld the tax authority’s decision to deny permanent establishment (PE) status to the U.S. branch of a Luxembourg resident company. The decision was based on the Luxembourg concept of PE applicable before 1 January 2019.
• Poland: Reports about tax-related legislative developments concern mandatory e-invoicing legislation and proposed solidary contribution for coal sector.
• Poland: A report includes summaries of recent decisions of the Supreme Administrative Court concerning preferential corporate rate, residential depreciation repeal, and the deductibility of certain expenses.

Read TaxNewsFlash-Europe

• The Organisation for Economic Cooperation and Development (OECD) released a public consultation document on Amount B under Pillar One, which builds on and takes into account comments received in response to a prior consultation document released on 8 December 2022.
• The OECD released a report following the agreement by 138 countries and jurisdictions on an Outcome Statement that summarized the package of deliverables developed by the Inclusive Framework on the remaining elements of the two-pillar solution to address the tax challenges arising from the digitalization of the economy, which includes new guidance on the Pillar Two rules.
• A KPMG report examines how the latest Pillar Two guidance from the OECD may assuage some frustrations from U.S. businesses about the undertaxed profits rule (UTPR), even if temporarily.

Read TaxNewsFlash-BEPS

• Korea: The Seoul Administrative Court held that the taxpayer’s payments to an affiliate under a purported cost sharing agreement were, in fact, cost sharing expenses and not royalties. 
• A KPMG report covers the treatment of stock-based compensation in transfer pricing.

Read TaxNewsFlash-Transfer Pricing

• Antigua and Barbuda: The Inland Revenue Department of Antigua and Barbuda updated its automatic exchange of information (AEOI) portal to reflect the new submission dates for FATCA and common reporting standard (CRS) reports. The deadline for the submission of both FATCA and CRS reports has been extended to 19 September 2023.
• UAE: The Ministry of Finance issued a new FATCA and CRS risk assessment questionnaire user guide (v1.0).
  
• Germany: The federal central tax office (BZSt) issued guidance that includes updates regarding the reporting deadline for the 2022 reporting period. Notably, the CRS deadline has been extended to 31 August 2023.

Read TaxNewsFlash-FATCA / IGA / CRS

• The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is taking action to further implement the commitments that G7 leaders made on February 24, 2023 and May 19, 2023. The designations announced by OFAC and the Department of State are measures to inhibit Russia’s access to battlefield supplies and target revenue generators.
• The Office of the United States Trade Representative (USTR) released a notice making conforming amendments to two previously reinstated exclusions associated with the Section 301 investigation of China’s acts, policies, and practices related to technology transfer, intellectual property, and innovation.
• The Bureau of Industry and Security (BIS) of the U.S. Department of Commerce released a final rule amending the Export Administration Regulations (EAR) by adding four entities to the entity list under the destinations of Greece, Hungary, Ireland, and North Macedonia.
• BIS announced civil penalties against a manufacturer of defense weapon systems and a defense contractor to resolve alleged violations of the antiboycott provisions of the EAR in connection with a 2019 trade show in Bahrain.

Read TradeNewsFlash-Trade & Customs

• The IRS released an advance version of Notice 2023-55 announcing temporary relief for taxpayers determining whether a foreign tax is eligible for a foreign tax credit under sections 901 and 903.
• The U.S. Court of Appeals for the Third Circuit held that the 90-day time limit under section 6213(a) to file a deficiency petition is not a jurisdictional deadline, and thus is subject to equitable tolling.
• A KPMG report covers IRS alternative dispute resolution and prevention programs and how their underutilization impedes effective tax administration

State and local tax

• The Delaware Secretary of State’s Office confirmed that letters were mailed on or around 14 July 2023 inviting companies to join the state’s unclaimed property voluntary disclosure agreement (VDA) program. As stated in previous mailings, companies that do not respond and enroll in the VDA program within 90 days of the date of the letter will be referred to Delaware’s Department of Finance for audit.
• Senate Bill 1534 sets the stage for eventually replacing Hawaii’s existing motor fuel excise tax with a mileage-based road usage charge for all vehicles. The first part of that plan is to subject electric vehicles to a mileage-based road usage charge, effective 1 July 2025.
• A Maryland Supreme Court issued an opinion setting forth its reasons for ordering a lower court to dismiss a lawsuit brought by two companies challenging the constitutionality of Maryland’s digital advertising tax.
• The Massachusetts Department of Revenue set forth the Commissioner’s interpretation of the Appellate Tax Board’s decision in Akamai Technologies. Based on the Board’s decision, the Department determined that corporations selling access to software that allows customers to input their own information, manipulate the software, and run reports without interaction with the corporation or its employees, are engaged in the manufacture and sale of tangible personal property.
• Assembly Bill 5323 makes significant revisions to New Jersey’s corporation business tax laws, including codifying certain of the Division of Taxation’s current positions, refining the state’s conformity to the “Tax Cuts and Jobs Act,” and revising New Jersey’s combined reporting provisions. 

Read TaxNewsFlash-United States
 

Legislative Updates

• Republican members of the Ways and Means Committee introduced a bill entitled the “Unfair Tax Prevention Act.” The bill would increase the U.S. base erosion and anti-abuse tax (BEAT) where foreign countries adopt Pillar Two’s undertaxed profits rule (UTPR).
• The Joint Committee on Taxation (JCT) released a document that describes the legal and economic background on the U.S. taxation of cross-border activities.

Read TaxNewsFlash-Legislative Updates

The items described above are also reported as editions of TaxNewsFlash:

• Indirect Tax
• Taxation of the Digitalized Economy
• Tax Dispute Resolution