KPMG Week in Tax: 11 – 15 September 2023

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

• Kenya: The Finance Act 2023 introduced a new affordable housing levy (AHL) effective 1 July 2023.

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• Bolivia: The deadline for the presentation of affidavits and payment of tax obligations for the fiscal period of August 2023, for taxpayers whose NIT (número de identificación tributaria) ends in digits 0, 1 and 2, has been extended to 18 September 2023.
• Colombia: The government submitted before Congress a proposal containing the new labor reform, which includes some of the provisions presented in the first proposal in modified form and also introduces new provisions.
• Mexico: The economic package for the year 2024 does not include any proposed changes to the tax laws.
• Mexico: The Secretary of Finance and General Treasury of the State of Nuevo León published an agreement establishing the reduction in the payment of payroll tax (ISN) to taxpayers who invest in the state of Nuevo León in productive activities within the electromobility sector (i.e., use of vehicles that use electricity as the main source of energy).
• Mexico: The tax administration published a list of the 196 foreign providers of digital services that are registered for tax purposes in Mexico as of 31 August 2023. With the most recent report, 12 new entities were registered in the last two months, while two entities were deregistered.

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• Australia: Entities that are not an authorised deposit-taking institutions (ADIs) will no longer satisfy its “financial institution” requirements for the purposes of a third-party refund from an income tax account.
• Australia: The Australian Taxation Office (ATO) issued an advisory on what expenditure is eligible for the small business technology investment boost.
• Australia: The ATO released a communications protocol governing ATO objections, following the Inspector General of Taxation’s 2022 interim report on the ATO’s administration and management of objections.
• Australia: The federal government introduced legislation that proposes to reduce the income tax compliance burden on the general insurance industry caused by misalignment between the income tax law and the adoption of the new accounting standard (AASB 17).
• Australia: With the shift to Single Touch Payroll (STP) Phase 2, employers are now required to report pre-sacrificed salary amounts and separately report the salary sacrificed amounts.
• Cambodia: The Ministry of Economy and Finance issued guidance regarding the procedures for requesting input value added tax (VAT) credits and VAT refunds. 
• Hong Kong: The government launched a one-month consultation on a proposed patent box regime, which will introduce tax concessions for onshore profits from qualifying intellectual properties (IPs).
• India: A tribunal held that a Singaporean company was eligible for benefits under the India-Singapore income tax treaty on capital gains arising from transfers of shares of Indian companies.
• Sri Lanka: The government published a notice deferring the proposed bill dated 31 August 2023 that would remove the simplified VAT scheme (SVAT) effective 1 January 2024 to 1 January 2025.
• Sri Lanka: The Inland Revenue (Amendment) Act No. 14 of 2023, amending the Inland Revenue Act No. 24 of 2017, was certified by the Speaker on 8 September 2023 and is effective from 1 April 2023.
• Sri Lanka: The Social Security Contribution Levy (Amendment) Act No. 15 of 2023 was certified by the Speaker on 8 September 2023 and includes new or revised exemptions for articles and exemptions.

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• Albania: The new income tax law includes changes to the taxation of individuals’ business income.
• Bulgaria: The State Budget Act for 2023 introduced a new reporting obligation for VAT-registered persons.
  
• Cyprus: The Council of Ministers extended the zero VAT rate measure for another six months. The extension was granted as the existing term expires at the end of October.
  
• Cyprus: The government reduced the special levy on interest receivable from 30% to 17%. The reduction is aimed at increasing the income of mainly middle-class households and medium-sized businesses with deposits.
  
• Czech Republic: The General Financial Directorate issued guidance on the application of VAT to gratuitous supplies of goods. Under the new guidance, donations of perishable food and non-food goods with a minimum expiry date is facilitated and donations to charitable institutions or directly to persons in need is allowed.
• Czech Republic: The Municipal Court in Prague held that the taxpayer’s arrangement did not constitute an accommodation service subject to VAT, but instead was a VAT-exempt lease of real estate. The court further determined that the arrangement involved an abuse of rights.
  
• Czech Republic: The Supreme Administrative Court decided a case concerning the tax deductibility of management services. It explained in detail the taxpayer's obligations when proving services and what the taxpayer can reasonably expect with respect to their previous successful defense of expenses in a previous corporate income tax inspection.
  
• EU: The European Commission (EC) proposed a directive on business income taxation framework (BEFIT) that provides common rules for determining the corporate tax base for EU-based entities that are part of a group with global consolidated revenues above a certain threshold.
  
• EU: The EC issued a proposal for a directive on establishing a head office tax system for micro-, small- and medium-sized enterprises (SMEs) and amending Directive 2011/16/EU.
  
• Greece: Law 5047/2023 transposes into Greek legislation DAC7—requiring operators of digital platforms to collect and report to the competent tax authorities the details of sellers operating through these platforms, while also providing for the automatic exchange of this information between the tax authorities of the member states.
  
• Netherlands: The caretaker government launched an internet consultation on a draft bill for the new “Box 3” (wealth tax) regime to replace the current regime.
  
• Netherlands: The Deputy Minister of Finance sent a memorandum in response to the report regarding the bill on the Minimum Profit Tax Act 2024 to the Lower House of Parliament.
  
• Netherlands: The Dutch Mobility Directive Implementation Act—implementing Directive (EU) 2019/2121 and providing changes in the procedures for domestic and cross-border mergers, divisions and conversions—became effective 1 September 2023.
  
• Poland: The Deputy Minister of Finance announced that the Ministry is abandoning further works on proposed amendments to the Polish tax code, upon which consultations were launched in June 2023.
  
• Poland: The Ministry of Finance issued a draft decree exempting certain properly documented supplies of goods or services from the obligation to issue structured invoices.
  
• UK: HMRC have decided not to appeal two recent tax cases that mean employers may be able to reclaim national insurance contributions (NIC) paid on car allowances.
  
• UK: HMRC is targeting non-compliance within the research and development (R&D) tax regime.
  
• UK: Legislation will be introduced to preserve the 0% stamp duty charge where UK companies list overseas when EU law supremacy ends on 1 January 2024.
  

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• Netherlands: The Deputy Minister of Finance sent a memorandum in response to the report regarding the bill on the Minimum Profit Tax Act 2024 to the Lower House of Parliament.
• EU: The EC proposed a directive on transfer pricing relating to the implementation of common rules for determining the transfer pricing approach for EU-based entities, based on OECD principles.
• A KPMG report explains the challenges transfer pricing practitioners are currently facing with developing an arm’s-length transfer pricing range for North American retail distribution companies and offer some practical solutions.

Read TaxNewsFlash-Transfer Pricing

• Notice 2023-64 provides additional interim guidance on application of the new corporate alternative minimum tax (CAMT). The guidance is designed to help corporations determine whether CAMT, which imposes a 15% minimum tax on the adjusted financial statement income (AFSI) of large corporations with average annual AFSI in excess of $1 billion, applies to them and how to compute the tax.
• The IRS announced an immediate moratorium through at least the end of the year on processing new employer retention credit (ERC) claims.
  
• The IRS is requesting comments from taxpayers and advisors about improving and expanding tax certainty and issue resolution options for business taxpayers.
• The IRS released a preview of proposed changes to certain sections of Form 6765, Credit for Increasing Research Activities. The preview is provided by the IRS to solicit feedback in advance of the formal draft release process for form changes. 
• The U.S. Court of Appeals for the First Circuit affirmed a decision of the U.S. Tax Court holding that the taxpayer was required to immediately recognize ordinary income under section 367(d)(2)(A)(ii)(II) as a result of a constructive transfer of intangible property to a foreign corporation, and pay the tax due in a lump sum.
  
• Taxpayers in Georgia affected by Hurricane Idalia now have until 15 February 2024 to file various individual and business tax returns and make tax payments.
  
• The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) announced that persons affected by certain natural disasters—the Hawaii wildfires and Hurricane Idalia in parts of Florida—have until 15 February 2024 to file the “Report of Foreign Bank and Financial Accounts” (FBAR) for the 2022 calendar year.
  
• A KPMG report discusses the initial guidance issued by the IRS on section 174 specified research or experimental (SRE) expenditures.
   

State and local tax

• California: The Office of Tax Appeals (OTA) concluded that it did not have jurisdiction to determine if a regulation was properly promulgated.
• California: The Office of Administrative Law finalized amendments to a regulation addressing marketplace sales. As revised, there are numerous changes to the regulation, including addressing the statutory carve out for websites that merely advertise tangible personal property for sale and refer a purchaser to the seller to complete the sale.
  
• New Jersey: The Division of Taxation released a technical bulletin addressing corporation business tax nexus for privilege periods ending on and after 31 July 2023.
• New York: In a non-precedential decision, an Administrative Law Judge (ALJ) for the New York Division of Tax Appeals ruled in a broker-dealer taxpayer’s favor in a dispute involving the application of the customer-based sourcing rules for such entities. Although the taxpayer lost on the issue of who was the relevant customer for purposes of applying the customer-based sourcing rules, the ALJ determined the Division’s method to allocate the receipts factor overstated the factor. 

Read TaxNewsFlash-United States
 

Legislative Updates

• The Senate Committee on Finance unanimously approved the chairman’s mark of the “United States-Taiwan Expedited Double-Tax Relief Act.”
• A KPMG report outlines the major issues facing Congress this fall and how congressional action in the coming months could implicate tax policy.

Read TaxNewsFlash-Legislative Updates

• The Bureau of Industry and Security (BIS) of the U.S. Department of Commerce issued a final rule amending the Export Administration Regulations (EAR) to make a technical correction that also serves to clarify provisions of the EAR that pertain to the release of “software.”
• The U.S. Department of the Treasury announced new sanctions that target Russian military-linked persons and Russia’s industrial base, financial institutions, and technology suppliers, in response to Russia’s war against Ukraine.

Read TradeNewsFlash-Trade & Customs

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