KPMG Week in Tax: 24 – 28 July 2023

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

• KPMG LLP this week published multiple reports concerning the new guidance on Pillar Two rules, and the public consultation on Amount B under Pillar One.
• UK: The government published a statutory instrument implementing the new UK transfer pricing documentation requirements.

Read TaxNewsFlash-Transfer Pricing

• France: The Ministry of Finance announced a delay in implementing the electronic invoicing (e-invoicing) and electronic reporting (e-reporting) mandates originally set to begin in July 2024.
• Ireland: Resulting from the new changes introduced by Finance Act 2022, the research and development (R&D) tax credit will now be paid out to all claimants, regardless of the corporation’s tax position, in three instalments over three years.
• Luxembourg: A new bill would substantially modify the investment tax credit for companies to promote investments into digital transformation, as well as ecological and energy transition.  
• Luxembourg:  Draft law 8207—implementing the new reporting obligations for payment services providers (PSPs)—was unanimously adopted in a first vote.
• Luxembourg: The Advocate General of the Court of Justice of the European Union (CJEU) issued an opinion on the value added tax (VAT) treatment of activities carried out by a member of a board of directors of a legal person. The Advocate General is of the opinion that the activity carried out by the individual does not fulfill the conditions for him to be considered as an independent taxable person.
• Cyprus: An amendment to the VAT law introduces reduced VAT rates of 3% and 0% for certain goods and services.
• North Macedonia: The government has re-submitted to parliament the draft amendments to the corporate income tax law and the VAT law, as well as the draft law on the temporary solidarity (windfall profits) tax. The drafts were initially submitted last year.
• Poland: Recent tax-related updates include information on Polish personal identification (PESEL), tax consequences of voluntary redemption of shares without remuneration, and a tax exemption under the corporate income tax law.
• Slovakia: A draft amendment to the Slovak VAT Act proposes several major changes, with planned effective dates of 1 July 2024 and 1 January 2025 (except for amendment of reporting obligation of providers of payment services, which is proposed to be effective from 31 March 2024).
• UK: The government published draft legislation for Finance Bill 2023, together with explanatory notes, new consultations, and responses to several closed consultations.

Read TaxNewsFlash-Europe

• Kenya: The High Court at Nairobi decided that the Kenya Revenue Authority’s failure to issue an objection decision within the stipulated 60 days meant that the objection by the taxpayer had been allowed.
• South Africa: A guide on the VAT treatment of non-life insurance and reinsurance mainly focuses on the VAT implications relevant to the industry, but also addresses the basic VAT principles pertaining to life insurance.

Read TaxNewsFlash-Africa

• Vietnam: The General Department of Taxation has instructed provincial tax departments to focus on accelerating the VAT refund handling process, and at the same time monitor the implementation of the VAT refund procedure.
• Bahrain: The National Bureau for Revenue announced they have extended the VAT return submission and payment deadline for the June and second quarter 2023 tax periods to 1 August 2023.
  
• Saudi Arabia: The Zakat, Tax and Customs Authority of Saudi Arabia (ZATCA) has extended the amnesty initiative that waives the fines and penalties relating to corporate income tax, withholding tax, VAT, excise tax, and real estate transaction tax. The initiative, which expired on 31 May 2023, is extended until 31 December 2023.

Read TaxNewsFlash-Asia Pacific

• Portugal: The tax authority issued updated FATCA and common reporting standard (CRS) user manuals for communication to reporting financial institutions.
• Ireland: The Irish Revenue Commissioners issued updated automatic exchange of information (AEOI) guidance under the FATCA and CRS regimes.
  
• Japan: The tax agency published an updated version of “frequently asked questions” (FAQs) under the CRS regime.

Read TaxNewsFlash-FATCA / IGA / CRS

• The IRS released a generic legal advice memorandum clarifying its position on the intersection of supply chain disruptions and full or partial suspensions of business for purposes of the employee retention credit (ERC)—a refundable tax credit for businesses and tax-exempt organizations.
• The IRS issued a release asking for public input on improvements to certain post-filing alternative dispute resolution (ADR) programs currently offered to taxpayers.
• Final regulations authorize the assessment of any erroneous refund of excess employment tax credits.
• The U.S. Court of Appeals for the Third Circuit affirmed the U.S. Tax Court holding that a generic drug manufacturer can deduct as ordinary and necessary business expenses legal fees incurred in defending itself against patent infringement suits.
• The IRS recently issued a notice that allows an optional deferral of the effective date of the foreign tax credit final regulations published on 4 January 2022. A KPMG report discusses accounting for income taxes considerations of the notice under U.S. generally accepted accounting principles (US GAAP).
• Notice 2023-50 announces that under section 613A(c)(6)(C), the applicable percentage for purposes of determining percentage depletion on marginal properties for calendar year 2023 is 15%.
• Notice 2023-51 provides the inflation adjustment factor and reference price for calendar year 2023 for the renewable electricity production credit under section 45. The notice also provides the credit amounts for calendar year 2023 under section 45. These reference price and credit amounts were previously announced by the IRS and Treasury Department.
   

State and local tax

• A report of U.S. state and local tax developments concerning technology-related tax issues, for the second quarter of 2023, provides updates in table format and covers topics such as the taxability of software, guidance on digital equivalents, and other items.
• California: The Office of Tax Appeals (OTA) concluded that a taxpayer furnishing go-karts to customers at its indoor racing venue was engaged in leasing tangible property, rather than providing a non-taxable amusement service.
• Mississippi: Following a law change earlier this year, the Department of Revenue announced that beginning 1 July 2023, purchasers of computer software and/or computer software services may apply for a computer software direct pay permit.
  

Read TaxNewsFlash-United States
 

Legislative Updates

• The U.S. Senate Finance Committee Chairman introduced legislation that would revoke the tax exemption for certain large sports leagues and deem certain sovereign wealth funds as ineligible for favorable withholding rules applicable to sovereign wealth funds.

Read TaxNewsFlash-Legislative Updates

• The IRS released a generic legal advice memorandum clarifying its position on the intersection of supply chain disruptions and full or partial suspensions of business for purposes of the employee retention credit (ERC)—a refundable tax credit for businesses and tax-exempt organizations.
• The U.S. Senate Finance Committee Chairman introduced legislation that would revoke the tax exemption for certain large sports leagues and deem certain sovereign wealth funds as ineligible for favorable withholding rules applicable to sovereign wealth funds.
• The IRS Tax Exempt and Government Entities (TE/GE) division published four new technical guides— comprehensive, issue-specific documents that update and combine the existing IRS.gov Audit Technique Guides with other technical content. 

Read TaxNewsFlash-Exempt Organizations

• United States: U.S. Customs and Border Protection (CBP) released a general notice announcing that CBP is adjusting certain customs user fees and corresponding limitations for fiscal year (FY) 2024.
• United States: A compliance note summarizes procedures for voluntarily self-disclosing violations of U.S. sanctions and export control laws.
  
• Canada: Legislation to fight against forced labor and child labor (Bill S-211) was passed in May 2023 and comes into effect on 1 January 2024.

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