KPMG Week in Tax: 18 - 22 September 2023

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

• South Africa: Draft legislation would amend the taxation of nonresident beneficiaries of trusts by repealing application of the conduit principle to such beneficiaries.

Read TaxNewsFlash-Africa

• Canada: Businesses that received interest-free loans under the Canada emergency business account (CEBA) program now have until 18 January 2024 (previously 31 December 2023) to repay these loans to qualify for partial loan forgiveness.
• Canada: The Department of Finance announced a new temporary rebate would essentially remove the goods and services tax (GST) (and federal portion of the harmonized sales tax (HST)) on qualifying new rental apartments. Draft legislation has not yet been released.
• Colombia: The Supreme Tax Court provisionally suspended the tax authority’s interpretation that the taxable person for purposes of the single-use plastic products tax is the producer or importer of single-use plastic products, because the tax authority failed to refer to or apply the definition of producer and importer contained in article 50 of Law 2277 of 2022, resulting in a violation of the law.

Read TaxNewsFlash-Americas

• Australia: The New South Wales budget for 2023-2024 proposes stamp duty and land tax changes.
• Australia: Treasury opened a consultation on a single average benchmark recovery rate for use by businesses to calculate and claim excise refunds on returned duty-paid petroleum recovered through vapor recovery units (VRUs). The consultation closes on 3 October 2023.
  
• Australia: Treasury released for consultation four pieces of draft legislation that seek to strengthen the Australian tax system and give greater powers to regulators.
  
• Australia: Updated shipping reform (tax incentives) regulations 2023 outline the training and management requirements for a shipping exempt income notice or certificate to be issued to an Australian registered vessel.
  
• Bahrain: The National Bureau for Revenue (NBR) released the first version of the value added tax (VAT) deregistration manual for taxpayers in Bahrain.
  
• India: The Bombay High Court held that a reassessment notice issued beyond a period of three years after the end of the assessment year, and without the approval of specified authorities, was invalid.
  
• India: The Bombay High Court held that an Indian taxpayer was entitled to a refund of taxes paid under protest on behalf of a nonresident U.S. company not subject to tax in India.
  
• Pakistan: A KPMG report summarizes federal and provincial sales tax withholding requirements in Pakistan.
  
• Philippines: The Bureau of Internal Revenue (BIR) issued amended guidance on VAT-related issues for registered business enterprises (RBEs).
  
• Saudi Arabia: A draft regulation on Zakat collection released for public consultation aims to explain the provisions for Zakat collection in Saudi Arabia and to clarify the obligations of Zakat payers and ZATCA. The due date to submit comments and feedback is 17 October 2023.
  
• Saudi Arabia: The Minister of Finance approved amendments to the income tax and Zakat regulations.
  
• Thailand: The Thai Cabinet approved the Ministry of Finance’s proposal to maintain the reduced VAT rate of 7% for another year—from 1 October 2023 to 30 September 2024.
  
• Thailand: The Thai Revenue Department issued guidance to assist tax officers in determining the individual (personal) income tax implications for foreign-sourced income brought into Thailand by Thai tax residents.
  
• UAE: The Ministry of Finance published a cabinet decision on the application of a new reverse charge mechanism on the local supplies of electronic devices, for VAT purposes.

Read TaxNewsFlash-Asia Pacific

• Belgium: The Constitutional Court held that the domestic provisions implementing Article 8ab(5) of DAC6 are invalid in so far as they require intermediaries subject to legal professional privilege to notify other intermediaries who are not their clients.
• Belgium: The General Court of the Court of Justice of the European Union (CJEU) issued a judgment that certain tax exemptions on certain “excess” profits granted by Belgium to companies forming part of multinational groups constitute unlawful aid. The General Court held that the European Commission (EC) was right to find that the Belgian tax scheme relating to excess profit infringes EU State aid rules.
• France: Officials from the French tax administration announced a new draft implementation calendar of the country's electronic invoicing (e-invoicing) mandate.
• Germany: The government approved an updated draft bill aimed at strengthening growth opportunities, investment, and innovation as well as tax simplification and tax fairness.
• Ireland: The Minister for Finance signed a commencement order that provides for an increase in the effective tax rate of its knowledge development box to 10% (effective from 1 October 2023).
• Italy: Law no. 111 of 2023, which directs the government to reform the tax system, became effective 29 August 2023. The law specifically directs the government to issue, within 24 months of its effective date, one or more legislative decrees to overhaul the tax system.
• Italy: The Italian Supreme Court held that a non-resident company is eligible for the domestic participation exemption regime for capital gains when selling a substantial participation in an Italian company.
• Netherlands: Tax measures in the 2024 Tax Plan concern corporate income tax, individual income tax, VAT, payroll taxes, and environmental taxes.
• Netherlands: The 2024 Tax Plan includes proposed changes related to payroll taxes and social security contributions.
• Poland: The Supreme Administrative Court held that real estate tax could be imposed on fuel and gas dispensers because fuel dispensers constitute building equipment making it possible to use the building in accordance with its intended purpose, and therefore are a structure.
• Switzerland: Import duties on almost all industrial goods will be unilaterally eliminated effective from 1 January 2024.
• UK: The First-tier Tribunal dismissed an appeal by a platform company facilitating the sale of academic papers (essays, coursework, etc.), finding that the company was acting as principal as opposed to an agent for VAT purposes.
• Ukraine: A bill was submitted to the Ukrainian Parliament proposing the introduction of a 5% windfall tax on the amount of net interest income generated by banks.

Read TaxNewsFlash-Europe

• Denmark: The Danish Supreme Court overturned a decision of the High Court, and upheld the tax authority’s transfer pricing adjustments with respect to intercompany transactions between the taxpayer, an oil and gas company, and two of its subsidiaries.
• Italy: The government published a draft bill to implement the OECD’s Pillar Two Model Rules as set out under the EU Minimum Tax Directive.
  
• Kenya: The Cabinet Secretary, National Treasury and Economic Planning published for public input and comments draft transfer pricing rules that would replace the currently effective rules from 2006.
  
• OECD: Comments were released on the OECD’s public consultation document on Amount B under Pillar One following release of the agreed outcome statement on BEPS 2.0.
  
• Sweden: The Ministry of Finance released a draft bill to implement the OECD’s Pillar Two Model Rules as set out under the EU Minimum Tax Directive.

Read TaxNewsFlash-Transfer Pricing

• The U.S. Treasury Department's Community Development Financial Institutions (CDFI) fund announced $5 billion in New Markets Tax Credits (NMTCs)—which permits individual and corporate taxpayers to receive a non-refundable tax credit against federal income taxes for making equity investments in community development entities.
• The U.S. Treasury Department and IRS—along with the Department of Labor (DOL) and the Department of Health and Human Services (HHS)—released proposed regulations regarding the fees established by the No Surprises Act for the federal independent dispute resolution (IDR) process, as established by the Consolidated Appropriations Act, 2021.
• The U.S. Court of Appeals for the Federal Circuit overturned a decision of the federal claims court granting summary judgment in favor of the government on the grounds that the claims court erred by applying a hybrid legal standard that improperly conflated the step transaction doctrine and economic substance doctrines.
• The IRS announced it plans to establish a new work unit focused on large or complex passthrough entities to help with recently announced high-income compliance efforts.
• The U.S. Treasury Department released an interim final rule to implement the amendments made by the “Consolidated Appropriations Act, 2023” with respect to the Coronavirus State Fiscal Recovery Fund and the Coronavirus Local Fiscal Recovery Fund.

State and local tax

• Arkansas: Legislation is pending that would further reduces Arkansas’ individual and corporate income tax rates.
• Florida: The Department of Revenue issued revised guidance on the state’s “certified audit program,” which gives taxpayers the opportunity to hire qualified CPA firms to review their sales and use and local option tax compliance to identify exposures and underpayments.
• Kansas: The Secretary of the Department of Revenue filed a notice in the Kansas Register announcing that the normal corporate income tax rate will be reduced to 3.5% (from 4%) effective 1 January 2024. The surtax rate remains the same.
• Oregon: Guidance was issued on how P.L. 86-272 applies for purposes of the City of Portland Business License Tax, Multnomah County Business Income Tax, and Metro Supportive Housing Services Business Income Tax.
• Tennessee: The Tennessee Court of Appeals recently affirmed a chancery court’s conclusion that a taxpayer qualified for an industrial machinery sales tax exemption. The taxpayer at issue rented hygienically clean textiles to its customers for a single use, after which the textiles were retrieved to be sanitized by the taxpayer so they could be rented out again. 

Read TaxNewsFlash-United States

• U.S. Customs and Border Protection (CBP) has modified a “withhold release order” (WRO) on disposable gloves produced by a Malaysian corporation and its subsidiaries due to successful remediation of forced labor indicators in the company’s supply chain. CBP will now allow imports of disposable gloves manufactured by the Malaysian corporation and its wholly owned subsidiaries to enter the United States, provided they are otherwise in compliance with U.S. laws.
• The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced that two companies—a multinational conglomerate and a U.S. financial institution—have agreed to settle their potential civil liabilities for apparent violations of sanctions against Iran.
• The World Trade Organization (WTO) announced that China appealed the panel report in the case brought by the United States alleging that China imposed illegal retaliatory tariffs on U.S. products in response to U.S. Section 232 actions on steel and aluminum.
• The Bureau of Industry and Security (BIS) of the U.S. Department of Commerce issued a release announcing updates to its list of controlled “common high-priority” items identified as critical to Russia’s war effort on Ukraine.

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