KPMG Week in Tax: 7 – 11 August 2023

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

• Korea: The Ministry of Economy and Finance (MOEF) announced the tax reform proposal for 2023, which includes proposed changes to the Korean Pillar Two global minimum tax rules and acceleration of the deadline for submitting certain transfer pricing documentation.
• Luxembourg: The draft law implementing the OECD’s Pillar Two model rules as set out under the EU Minimum Tax Directive was filed with the Parliament.
  
• Bermuda: The government released a public consultation document on the implementation of a new corporate tax regime within scope of the Pillar Two global minimum tax rules.
  
• Australia: The Australian National Audit Office (ANAO) is undertaking an audit to assess the effectiveness of the Australian Taxation Office’s (ATO) management of transfer pricing for related-party debt.
  

Read TaxNewsFlash-Transfer Pricing

• Barbados: Following a recent extension for FATCA and common reporting standard (CRS) reports to 2 August 2023, the Barbados Revenue Authority (BRA) updated the AEOI portal to reflect new submission dates. The deadline was further extended to 11 August 2023.
• India: The tax authority issued a circular clarifying the reporting of accounts other than U.S. reportable accounts under the CRS regime.
  
• OECD: A document entitled the International Standards for Automatic Exchange of Information in Tax Matters: Crypto-Asset Reporting Framework and 2023 Update to the Common Reporting Standard contains revisions to the cryptoasset reporting framework (CARF) and CRS amendments.

Read TaxNewsFlash-FATCA / IGA / CRS

• Mauritius: The tax amnesty program—renewed as part of the Finance Act 2023—provides for a full waiver of penalties and interest on all outstanding tax amounts as of 2 June 2023, under an assessment issue or a return submitted on or before 2 June 2023.
• Ghana: The Minister of Finance presented the 2023 mid-year budget review to parliament. The mid-year budget did not introduce additional taxes on businesses and entrepreneurs but rather focused on enhancing existing tax administration measures.
  
• South Africa: Draft legislation seeks to treat resident and non-resident employers equally from an employees’ tax (pay-as-you-earn (PAYE)) perspective and aims to align with the employer’s obligations in relation to skills development levies and unemployment insurance fund contributions.
  

Read TaxNewsFlash-Africa

• Costa Rica: A draft bill would introduce a 15% tax on passive income (expressly from dividends, interest, capital gains and royalties), subject to allowances for foreign credit taxes, from assets located or rights economically used outside the national territory.
• Bermuda: The government released a public consultation document on the implementation of a new corporate tax regime within scope of the Pillar Two global minimum tax rules.
• Mexico: The Secretary of Finance and General Treasury of the State of Nuevo León published an agreement that establishes the general rules for the collection of lodging taxes between the tax authorities and intermediaries or facilitators, whether natural or legal persons.
  
• Venezuela: The Organic Law for the Coordination and Harmonization of the Tax Powers of States and Municipalities (LOCAPTEM) was approved and sanctioned in a second discussion by the National Assembly on 18 July 2023, and its constitutionality was confirmed by Judgment No. 0956 of the Constitutional Chamber of the Supreme Court of Justice dated 20 July 2023. It is expected to be published in the official gazette.

Read TaxNewsFlash-Americas

• Malaysia: Recent tax developments relate to the deduction for listing expenses incurred by technology-based company; installment payments for outstanding taxes for prior years; updated indirect tax forms; and sales tax on low value goods (LVG) guide.
• Cambodia: Guidance from the Ministry of Economy and Finance—effective 1 August 2023—provides for transparent and consistent implementation of value added tax (VAT) for enterprises that import or distribute imported cigarettes.
• Korea: The Ministry of Economy and Finance (MOEF) announced the tax reform proposal for 2023 that could have implications on foreign invested companies.
• Philippines: The Bureau of Internal Revenue (BIR) issued a ruling that scanned copies of receipts/bills evidencing business expenses did not satisfy the substantiation and record-keeping requirements for deductibility of expenses.
• Australia: The government introduced reforms requiring non-charitable not-for-profits (NFPs) to notify eligibility to self-assess their income tax exempt status and submit an annual self-review return.
• Australia: The federal government announced a review into the regulatory frameworks for tax services firms, as well as for large consulting, accounting and auditing firms.
• Australia: The New South Wales (NSW) government introduced legislation that would introduce various reforms across NSW state taxes, including the introduction of state penalties for breaches of confidential tax information.
• India: The Delhi Bench of the Income-tax Appellate Tribunal held that payments by Indian customers to a U.S. company for cloud computing services were not taxable as royalties or fees for technical services under the U.S.-India income tax treaty because there was no transfer of copyrights, intellectual property, or any exclusive licenses or rights to the customers, and the provision of the services did not “make available” any technical knowledge or skills to the customers.
• India: The Bombay High Court held that the tax authority could not issue reassessment notices to the taxpayer on the basis of a subsequent authority for advance ruling (AAR) in a different taxpayer’s case that was contradictory to the binding AAR in the taxpayer’s own case.
• Singapore: The Monetary Authority of Singapore (MAS) released details of the proposed philanthropy tax incentive scheme (PTIS) for qualifying donors with single family offices (SFOs) operating in Singapore.

Read TaxNewsFlash-Asia Pacific

• Albania: The Albanian Council of Minister approved amendments to the “Methodology for valuation of the taxable value of real estate (buildings) used for residential or commercial purposes.”
• Albania: The Albanian Council of Minister approved a series of decisions implementing various tax and legal incentives for the development of technological and scientific parks for high-tech and innovation industries, research and development (R&D) of new and improved products and services, and scientific and technology professionals.
• Czech Republic: The Coordination Committee of the General Financial Directorate and the Chamber of Tax Advisors of the Czech Republic clarified certain changes to the VAT Act in connection with new construction regulations. The changes will be effective from 1 January 2024 and concern the construction industry and the supply and lease of real property.
• Czech Republic: The Supreme Administrative Court held that a taxpayer was entitled to claim input VAT with respect to advertising services that were to be rendered within motorcycle races, among other things by placement on the jersey of a racer who due to injury had only been racing for three months out of the year, because the taxpayer continued to receive the advertising services although not directly on the track during races.
• Czech Republic: The government's draft consolidation package limits the right to deduct VAT for passenger vehicles in category M1 with a purchase price of over CZK 2 million, with no exception for taxpayers who provide cars under finance lease arrangements, which would result in double taxation from a VAT perspective (i.e., application of VAT on both leasing companies and their customers).
• Hungary: A new corporate income tax credit has been introduced for investments in connection with the production of batteries, solar panels, wind turbines, heat-pumps, electrolysers and equipment for carbon capture usage and storage, as well as related equipment and critical raw materials, to help foster the transition towards a “net zero” economy.
• Poland: Recent court decisions concern the costs of foreign posting, withholding on foreign payments, and an increased real estate tax.
• Poland: The Minister of Finance issued a notice regarding new maximum 2024 rates for real estate tax and transportation tax and other local fees (including marketplace and advertising fees).
• UK: HMRC proposed changes to the tax treatment of employee trusts.
• UK: HMRC published new guidance on corporation tax relief for the cash cost of net-settling and cash cancelling employee share awards.

Read TaxNewsFlash-Europe

• Final regulations provide 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 2023-60 addresses the availability of administrative exemptions from, and waivers of, the requirement to file certain returns and other documents in electronic form. The notice also provides information about the procedure to request a waiver of the requirement to file electronically Forms 1120, 1120-S, and 1120-F, and information about failed attempts to file electronically Forms 1120 using IRS filing systems.
• The U.S. Court of Appeals for the Seventh Circuit affirmed a decision of the U.S. Tax Court holding that a professional basketball franchise (a partnership) was not entitled to deduct approximately $10.7 million representing deferred compensation liabilities in 2012 because the deferred compensation amounts were not paid to the players in 2012 and were not includible in the players’ gross incomes for 2012.
• The U.S. Court of Appeals for the District of Columbia Circuit affirmed a decision of the U.S. District Court for the District of Columbia holding that an exaction under section 4980H is a “tax” for purposes of the Anti-Injunction Act, which strips courts of jurisdiction over suits having the “purpose of restraining the assessment or collection of any tax” under section 7421(a). Accordingly, the D.C. Circuit affirmed the district court’s dismissal of the appellant’s suit for lack of jurisdiction.
• OMB’s Office of Information and Regulatory Affairs (OIRA) completed its review of an interim final rule relating to coronavirus (COVID-19) state and local fiscal recovery funds. Treasury can now be expected to release the interim final rule for publication in the Federal Register, but the exact date of publication is not yet known.
• The IRS Large Business & International (LB&I) division updated its list of compliance campaigns by adding a new campaign: Inflated cost of goods sold.

State and local tax

• California: The California Office of Tax Appeals ruled that property, payroll, and sales associated with deductible cooperative member income are not excluded from the apportionment formula.
  
• Michigan: The state Supreme Court held that income from the sale of a business was included in the tax base but excluded from the sales factor denominator under the statutory formula, and such exclusion did not result in tax disproportionate to the taxpayer’s business activities in Michigan.
  
• Michigan: The Department of Treasury issued a comprehensive Revenue Administrative Bulletin (RAB) addressing the taxation of computer software, computer software service contracts, and digital goods.
  
• New Hampshire: Beginning on or after 1 January 2024, a deduction will be allowed for any interest expense disallowed under IRC section 163(j). Conversely, an addition will be required for an IRC section 163(j) carryforward generated in tax years commencing after 1 January 2024.
  
• Ohio: The state Supreme Court held that certain pieces of equipment used in fracking were exempt from sales and use tax under the expanded sales and use tax exemption for oil and gas production.

Read TaxNewsFlash-United States

• President Biden signed into law H.R. 4004—the United States-Taiwan Initiative on 21st-Century Trade First Agreement Implementation Act.
• The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) made additions to the specially designated nationals list (SDN list) and issued a Russia-related “frequently asked question.”
• 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 additional nuclear nonproliferation controls on China and Macau—in response to China’s military modernization efforts, military-civil fusion strategy, and expansion of its nuclear forces.
• U.S. OFAC issued a Russia-related general license and two Belarus-related general licenses.
• U.S. OFAC published sanctions compliance guidance for the provision of humanitarian assistance to Syria. OFAC also amended one Syria “frequently asked question.”
• The World Trade Organization (WTO) issued two panel reports in cases brought by India and the United States. The panel reports provide a brief description of the disputes and note that solutions have been reached.

Read TradeNewsFlash-Trade & Customs

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

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