KPMG Week in Tax: 25 – 29 September 2023

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

• OECD: Armenia deposited their instrument of ratification for the MLI, which will enter into force on 1 January 2024.
• Japan: A KPMG report summarizes 2023 tax reform amendments to the electronic preservation system for account books aimed at improving productivity through digitalization of accounting, promoting telework, digitizing tax information, and enhancing the spread of excellent uniform national tax-related account books.
• India: A tribunal held that a buyback of shares by the taxpayer company was, in intent and effect, a distribution of accumulated profits taxable as a deemed dividend and thus subject to dividend distribution tax.
• Australia: The Australian Taxation Office (ATO) registered two legislative instruments that allow taxpayers to correct fuel tax and goods and services tax (GST) errors for prior tax periods in specified circumstances.
• Australia: The Senate Economics Legislation Committee delivered its report on proposed legislation to amend Australia's interest limitation rules and require Australian public companies to disclose information about their subsidiaries. The Committee has recommended that the bill be passed subject to technical amendments to the interest limitation rules, and the measure requiring public companies to disclose information about their subsidiaries be passed unamended.
• Korea: The Tax Tribunal held that a “distribution fee” paid by the taxpayer, a Korean company, to its foreign parent company, was a royalty payment subject to withholding tax.
• Korea: The Supreme Court held that raw pharmaceutical products provided free of charge under a purchase agreement were not “free of charge imports” as defined in Article 17(1) of the Enforcement Decree of the Customs Act, and therefore their customs value could be determined under Article 30 of the Customs Act.
• Saudi Arabia: The Minister of Finance approved additions and amendments to the rules for calculating Zakat on financing activities.

Read TaxNewsFlash-Asia Pacific

• Slovakia: New guidance provides information on the method of proving the identity of the beneficial owner of income.
• Spain: The General Court of the Court of Justice of the European Union (CJEU) annulled a 2014 decision of the European Commission (EC) declaring the Spanish tax regime allowing deductions for indirect acquisitions of shareholdings in foreign companies to be unlawful State aid.
  
• UK: The latest version of the draft legislation on undertaxed profits rule (UTPR) and other amendments to the UK Pillar Two rules is open for a further period of consultation until 25 October 2023.
  
• Austria: Recent tax developments concern value added tax (VAT), a withholding tax exemption, and the taxation of executive remuneration.
  
• Poland: The Ministry of Finance published a new draft tax explanation on withholding tax to clarify the interpretation and application of selected provisions of the Polish corporate income tax law and the Polish individual (personal) income tax law concerning withholding tax.
  
• Poland: The Regional Administrative Court in Warsaw held that the conditions for exemption under the corporate income tax law can be satisfied by an entity that is not the immediate dividend beneficiary, but a beneficial owner thereof.
  
• Poland: The Supreme Administrative Court held that a company can offset losses incurred by its branch in Romania under the same conditions as those applicable to losses incurred in Poland.
  
• Poland: The Regional Administrative Court in Wroclaw held that a delivery of goods as a result of fraud to a place from which they were stolen is not subject to VAT.
  
• Poland: The Advocate General of the Court of Justice of the European Union issued an opinion that Article 203 of Directive 2006/112/EC on the interpretation of the common system of VAT.
  
• Albania: The new income tax law includes changes to the corporate income tax, and in particular to how the corporate income tax applies to specific long-term contract.

Read TaxNewsFlash-Europe

• OECD: Eswatini signed the MLI—becoming the 101st jurisdiction to join the MLI.
• OECD: Côte d'Ivoire deposited their instrument of ratification for the MLI, which will enter into force on 1 January 2024.
• South Africa: KPMG reports examine how income tax amendments affect accounting for the insurance industry.
• Africa: A KPMG report provides a summary of tax developments for September 2023.

Read TaxNewsFlash-Africa

• Slovakia: The Ministry of Finance published draft legislation introducing a so-called “top-up tax,” intended to implement the OECD Pillar Two and EU global minimum global tax directive.
• UK: The latest version of the draft legislation on undertaxed profits rule (UTPR) and other amendments to the UK Pillar Two rules is open for a further period of consultation until 25 October 2023.
• Poland: Amendments to the decrees on transfer pricing reporting related to corporate income tax and individual (personal) income tax became effective 16 September 2023.
• Korea: The Tax Tribunal held that a “distribution fee” paid by the taxpayer, a Korean company, to its foreign parent company, was a royalty payment subject to withholding tax.

Read TaxNewsFlash-Transfer Pricing

• The U.S. Treasury Department and IRS released the 2023-2024 Priority Guidance Plan—used each year to identify and prioritize tax issues to be addressed through regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance.
• Proposed regulations would provide guidance on how taxpayers will report liability for the excise tax imposed under section 5000D on manufacturers, producers, or importers of certain “designated drugs.”
• Notice 2023-65 provides guidance on the new energy efficient home credit under section 45L.
• Notice 2023-68 provides the 2023-2024 special per diem rates for taxpayers to use in substantiating the amount of ordinary and necessary business expenses incurred while traveling away from home.
  
• Notice 2023-69 provides guidance for employers whose employees forgo sick, vacation, or personal leave to aid victims of the Hawaii wildfires.
  
• Rev. Proc. 2023-35 amplifies and supersedes Rev. Proc. 2014-45, which describes circumstances in which the IRS will not treat a redemption of shares in a money market fund (MMF) as part of a wash sale for purposes of section 1091. Specifically, the revenue procedure extends wash sale relief to redemptions of shares in MMFs that maintain fixed share prices.
  
• Proposed regulations would extend the filing deadline for certain beneficial ownership information (BOI) reports under final regulations becoming effective 1 January 2024, that require many corporations, limited liability companies, and other entities created in or registered to do business in the United States to report beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN) (i.e., information on the persons who ultimately own or control the company).
  
• FinCEN issued additional guidance materials for the beneficial ownership information (BOI) reporting requirements, including new FAQs about beneficial owners, initial reports, FinCEN identifiers, and third-party service providers
  
• The IRS released a contingency plan in anticipation of a possible lapse in funding if Congress fails to pass legislation to continue funding a substantial portion of the government past 30 September 2023.
  
• Applications for the “Low-Income Communities Bonus Credit program”—the program under section 48(e) to allocate 1.8 gigawatts in environmental justice solar and wind capacity limitation with respect to certain solar and wind facilities placed in service in connection with low-income communities—will open on 19 October 2023.
  
• The U.S. Tax Court held that the 30-day time limit for requesting a collection due process hearing under section 6320(a)(3)(B) is a nonjurisdictional deadline subject to equitable tolling.
  
• A hearing on proposed regulations relating to the reinstated excise taxes imposed on certain chemicals and certain imported substances (known as the Superfund chemical taxes) is scheduled for 25 October 2023.
  
• The IRS announced that taxpayers in Louisiana, Maine, and Massachusetts affected by natural disasters now have additional time to file various individual and business tax returns and make tax payments.
  
• KPMG reports provide key takeaways, analysis, and observations of the additional interim guidance of the new corporate alternative minimum tax (CAMT) provided in Notice 2023-64.

State and local tax

• A report, prepared by the KPMG State and Local Tax practice, provides a summary of state and local tax developments for the third quarter of 2023 in table format.
• Missouri: The tax authority ruled that a food delivery platform was not required to collect and remit sales taxes on sales made to Missouri customers from in-state restaurants but could transfer sales taxes collected on behalf of the restaurants to the restaurants.
  
• North Carolina: The tax authority ruled that service fees received by the taxpayer from its foreign parent corporation as reimbursement for contract manufacturing services provided by the taxpayer to the parent must be sourced for corporate income tax purposes in the same manner as the parent.
• Tennessee: The tax authority ruled that when a taxpayer elected to be treated as a corporation for federal income tax purposes, its sales of fabricated goods to its parent would be counted in determining its classification as a manufacturer for purpose of Tennessee’s sales and use tax industrial machinery exemption, which is granted to entities whose principal business is the fabrication or processing of tangible personal property for resale and consumption off the premises.
• Washington State: A tax hearing officer for the Washington State Administrative Review and Hearings Division held that a taxpayer was subject to manufacturing business and occupation (B&O) tax with respect to sales of personalized pet products.

Read TaxNewsFlash-United States

• The U.S. Treasury Department and IRS released the 2023-2024 Priority Guidance Plan. This year’s exempt organizations list includes all of the remaining projects from last year’s list, as well as a new item promising guidance relating to changes made by the “SECURE 2.0 Act” to section 529. 
• The IRS Tax Exempt and Government Entities (TE/GE) division published two new technical guides—comprehensive, issue-specific documents that update and combine the existing IRS.gov Audit Technique Guides (ATGs) with other technical content, replacing the corresponding ATGs. 

Read TaxNewsFlash-Exempt Organizations

• Notice 2023-67 provides guidance for farmers and ranchers who were forced to sell livestock on account of drought in specific counties. The notice contains a list of counties that experienced exceptional, extreme, or severe drought conditions, which taxpayers may use to determine whether an extension of the replacement period under section 1033(e) for sales of livestock is available.

Read TaxNewsFlash-Cooperatives

• The Bureau of Industry and Security (BIS) of the U.S. Department of Commerce announced new best practice guidance to help prevent items that are considered the most significant to Russian weaponry requirements from being diverted for use in Russia’s war effort on Ukraine.
• The governments of Australia, Canada, New Zealand, the United Kingdom, and the United States today issued joint guidance identifying high-priority items critical to Russian weapons systems and urging specific actions to prevent diversion of these items to Russia through third countries.
  
• The U.S. Department of Homeland Security (DHS) released a notice announcing the publication and availability of the updated Uyghur Forced Labor Prevention Act (UFLPA) entity list on the DHS UFLPA website.
  
• BIS released a final rule amending the Export Administration Regulations (EAR) by adding and revising the “entity list” and the “military-end user list.”
  

Read TradeNewsFlash-Trade & Customs

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

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