KPMG Week in Tax: 23 – 27 October 2023

• Nigeria: The Tax Appeal Tribunal Lagos Zone held that rental income derived from real properties are not subject to value added tax (VAT).

Read TaxNewsFlash-Africa

• Canada: Quebec Bill 27, which implements certain outstanding business and individual (personal) tax measures, received Assent on 26 September 2023.

Read TaxNewsFlash-Americas

• Australia: The Australian Capital Territory (ACT) government announced that it will be introducing a new stamp duty exemption for dual occupancies on suburban residential blocks. To further support the development of more dual occupancy homes, the ACT government is also introducing changes to the lease variation charge (LVC)—a windfall gains tax.
• Hong Kong: The Chief Executive delivered the 2023 Policy Address which, included proposals related to stamp duty, profits tax, salaries tax, and other measures.
• Hong Kong: Draft legislation clarifies the non-taxation of onshore equity disposal gains. The Inland Revenue Department (IRD) published related guidance, “frequently asked questions” (FAQs), and illustrative examples on its website.
• Saudi Arabia: The Zakat, Tax, and Customs Authority (ZATCA) has published two draft tax laws for public consultation—one concerning the income tax law and another concerning Zakat and the tax procedural law. The due date to submit comments and feedback on both drafts through the public consultation platform is 25 December 2023.
• India: The Supreme Court held that a taxpayer could avail itself of the benefit of most favored nations (MFN) clauses under India’s income tax treaties with the Netherlands, France, and Switzerland, only after the Indian government issued a Notification under Section 90 of the Income-tax Act, 1961, to that effect.
• Israel: The tax authority announced a delay in the initial rollout of the country's electronic invoicing (e-invoicing) mandate due to recent terrorist events and ongoing conflict. Originally set for 1 January 2024, the new effective date is now 1 April 2024.
• Cambodia: Effective 1 January 2024, the updated rate for the “public lighting tax” will be 5% for the supply of all alcohol and beverage or tobacco products.
• Cambodia: The rate and basis of calculating tax on advertisements will be implemented on all forms of advertising (both movable and immovable).

Read TaxNewsFlash-Asia Pacific

• UK: HMRC guidance on the availability of corporation tax relief for cash cancelled or net-settled employee share options confirms that “general principles” corporation tax relief is potentially available when specific statutory relief is not, but in some scenarios HMRC’s view on the timing of corporation tax relief may cause practical difficulties for some companies.
• Albania: The new income tax law—Law no. 29/2023 (dated 30 March 2023 and effective 1 January 2024)—introduced changes to the tax depreciation and inventory valuation methods effective 1 January 2024.
• Germany: The Federal Ministry of Finance (BMF) published a draft of updated BMF guidance on the application of the German Reorganization Tax Act.
• Germany: The Münster Tax Court held that the loss deduction limitation rule of Sec. 8c Corporate Income Tax Act did not apply in the case of a harmful acquisition of an equity interest that did not lead to a change of control.
  
• Cyprus: An amendment to the VAT law extends the VAT exemption to services supplied by specific training providers.
  
• Belgium: The tax authority published an FAQ providing guidance on application of the new EU obligations of digital platform operators (DAC7) in Belgium.
  
• EU: The 2021 “VAT gap”—an estimate of the overall difference between the expected theoretical VAT revenue and the amount actually collected—dropped by approximately €38 billion compared to 2020 figures.
  
• Poland: Recent court decisions concern (1) real estate tax on parking spaces, (2) re-registering a sole proprietorship as a private limited company, and (3) revenue under an employment contract.
  
• Sweden: The Supreme Administrative Court (SAC) held that rules requiring determination of the deductible proportion of residual input tax in a VAT mixed business with both taxable and tax-exempt transactions based on “reasonable grounds,” violated EU law.
  
• France: The French Constitutional Court held that the French withholding tax applicable to cross-border dividend distributions is constitutional.
  
• Portugal: The Court of Justice of the European Union (CJEU) held that the Portuguese individual income tax rules on interest income are incompatible with EU law.
  
• Ukraine: The District Administrative Court of Chernihiv issued a decision denying the reduced withholding tax rate under the Ukraine-Cyprus tax treaty. The denial of treaty benefits was related to interest paid by a Ukrainian company to its Cyprus lender and was based on the grounds that the latter was not considered the beneficial owner of such income.

Read TaxNewsFlash-Europe

• United States: A KPMG report covers some key year-end transfer pricing and international tax issues for multinational companies to focus on as the end of 2023 approaches.
• Australia: The due date for country-by-country (CbC) reporting entities that have a CbC reporting obligation for the year ended 31 December 2022 is extended to 31 January 2024. The extension applies to the CbC report, as well as the Master file and Local file, which would ordinarily be due by 31 December 2023.
  
• Hungary: The Ministry of Finance launched a public consultation on a draft bill to implement the Pillar Two global minimum tax.
  
• Korea: The Tax Tribunal held that a services fee arrangement between the taxpayer, a Korean company, and a related foreign company satisfied the arm’s length principle.
  
• Korea: The Supreme Court held that amounts paid pursuant to a “transfer pricing adjustment” under a health food products supply contract were not “subsequent proceeds” for customs purposes.
  
• Romania: The government launched a public consultation on a draft bill to implement the Pillar Two global minimum tax.
  
• Switzerland: The Swiss Federal Administrative Court held that the Swiss tax authorities have to consider the OECD transfer pricing guidelines when conducting transfer pricing adjustments.

Read TaxNewsFlash-Transfer Pricing

• Channel Islands: The government of Jersey released an email circular announcing the reopening of its automatic exchange of financial information (AEOI) portal for FATCA and common reporting standard (CRS) reporting purposes.

Read TaxNewsFlash-FATCA / IGA / CRS

• The Treasury Department and IRS—along with the Department of Labor (DOL) and the Department of Health and Human Services (HHS)—releasedproposed regulations providing guidance under the No Surprises Act, including the federal independent dispute resolution (IDR) process.
• The due date to receive comments on proposed regulations—regarding information reporting under sections 6045 and 6050W, the determination of amount realized under section 1001 and basis under section 1012, and backup withholding under section 3406, for certain digital asset sales and exchanges—has been extended to 13 November 2023.
• The U.S. Treasury Department's Community Development Financial Institutions Fund (CDFI Fund) released the “notice of allocation availability” for the calendar year (CY) 2023 round of the New Markets Tax Credit (NMTC) program. The 2023 NMTC allocation is set at $5 billion in tax credit allocation authority.
• The U.S. Treasury Department announced that there is no change to the list of countries that require (or may require) participation in, or cooperation with, an international boycott (within the meaning of Internal Revenue Code section 999(b)(3)).
• A KPMG report covers some key year-end transfer pricing and international tax issues for multinational companies to focus on as the end of 2023 approaches.

State and local tax

• Chicago, Illinois: A proposal is pending that would revise the city’s transfer tax and increase the tax on certain properties. Any sales up to $1 million would be taxed at 0.6% and sales between $1 million and $1.5 million would be taxed at 2.0% on the amount over $1 million. Sales greater than $1.5 million would be taxed at 3.0% on the amount over $1.5 million.
• Florida: The Department of Revenue issued two technical assistance advisements concluding that a taxpayer providing customized digital messages recorded by celebrities and a taxpayer providing bar exam prep services that included prerecorded lectures that were viewed on-demand, were both selling video services. As such, the taxpayers were required to collect to communications services tax on sales to Florida customers.
• Massachusetts: The governor unveiled an estimated $4 billion plan to invest in affordable housing. One component of the proposal would allow municipalities to impose local option real estate transfer fees of 0.5% to 2% on the portion of sales of real estate over $1 million, or over the county median home sales price, whichever is greater.
• New Mexico: Proposed regulations address the taxation of digital advertising under the Gross Receipts and Compensating Tax Act. The updated proposed rules state that the receipts of a provider of a digital platform that displays digital advertising services, whose digital platform may be accessed or viewed within New Mexico, may be subject to the state’s gross receipts tax.
• A KPMG “technology checklist” summarizes state guidance issued during the third quarter of 2023. Topics covered include data center exemptions, web-based services, web-based training, and software in California, Tennessee, Texas, Virginia, and Vermont.

Read TaxNewsFlash-United States

• The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) imposed a second round of sanctions on Hamas-linked officials and financial networks following the attacks on Israel.
• U.S. OFAC issued a Russia-related general license on authorizing transactions related to energy.
• The Supreme Court of Korea held that amounts paid pursuant to a “transfer pricing adjustment” under a health food products supply contract were not “subsequent proceeds” for customs purposes.

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