KPMG Week in Tax: 9 – 13 October 2023

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

• OECD: A report for G7 Finance Ministers and Central Bank Governors reflects the OECD’s cooperation with Africa on tax matters and the importance of the international tax agenda for African economies.
• South Africa: A consultation paper on value added tax (VAT) modernization addresses topics including real-time reporting and electronic invoicing (e-invoicing).

Read TaxNewsFlash-Africa

• Mexico: The decree granting tax incentives to key sectors of the export industry includes the immediate deduction of investment in new fixed assets and the additional deduction for training expenses.
• Costa Rica: Dissolved legal entities are required to at least file the annual inactive entity tax return under Form D195, and calculate and pay the corresponding penalties (when applicable).

Read TaxNewsFlash-Americas

• Australia: A goods and services tax (GST) draft determination explains when a supply of food is a combination food subject to GST despite having components that would otherwise be GST-free.
• Australia: Comments are due by 3 November 2023 on a consultation regarding the implementation of payday superannuation and a redesigned compliance framework. The measure would require employers to make superannuation contributions on the same day that they pay salary and wages.
• Malaysia: Tax proposals in the 2024 budget include the introduction of capital gains tax, clarifications on the global minimum tax, and an increase in the service tax rate.
• Singapore: The GST) Board of Review upheld a decision of the GST Comptroller denying the input tax claim of a taxpayer on its purchase of goods from a local supplier on the grounds that it failed to prove that goods were purchased and traded.

Read TaxNewsFlash-Asia Pacific

• Portugal: The Court of Justice of the European Union (CJEU) held that an introductory gift for taking out a magazine subscription did not constitute a separate (deemed) supply of goods subject to VAT.
• Albania: The new income tax law—Law no. 29/2023 (dated 30 March 2023 and effective 1 January 2024)—includes changes and clarifications in relation to expenses that are considered as non-deductible for corporate income tax purposes.
• Italy: The Italian Register of Ultimate Beneficial Owners became operational on 9 October 2023. The mandatory reporting deadline is 11 December 2023.
• Malta: A reduced VAT rate of 12% will apply effective 1 January 2024 to certain services.
• Ireland: The 2024 budget includes various measures concerning income tax, business tax, capital gains tax, and indirect taxes. Further detailed measures will be included in the Finance Bill, which is scheduled to be published on 19 October 2023.
• Poland: The CJEU held that foodstuffs consisting of the same main ingredient may be subject to different reduced VAT rates under national law, depending on whether they are sold at retail level in shops or are prepared and served hot to a customer at his or her request with a view to their immediate consumption. 
• Czech Republic: The extended chamber of the Supreme Administrative Court held that the taxpayer was allowed to file an additional tax return for lower tax at any time during the deadline for assessing tax, which was contrary to existing case law.

Read TaxNewsFlash-Europe

• OECD: The new Multilateral Convention to Implement Amount A of Pillar One updates the international tax framework to co-ordinate a reallocation of taxing rights to market jurisdictions, improve tax certainty, and remove digital service taxes.
• United States: The Treasury Department announced a request for public input on the OECD Multilateral Convention to Implement Amount A of Pillar One and accompanying documents. Comments are requested by 11 December 2023.
  
• OECD: A new Minimum Tax Implementation Handbook assists governments as they consider moving forward with the global minimum tax under Pillar Two. It provides an overview of the key provisions of the rules and the considerations to be taken into account by tax policy and administration officials and other stakeholders in assessing implementation options.
  
• Cyprus: The tax authority announced that the bilateral Competent Authority Arrangement (CAA) for the exchange of country-by-country (CbC) reports between Cyprus and the United States—which is currently under negotiation—is expected to be effective for reporting fiscal years starting on or after 1 January 2023.
  
• Poland: Guidance on the transfer pricing cost-plus method addresses how the cost-plus method is to be applied, comparability criteria, errors in using the method, comparison with other pricing methods, and examples of the practical application of the method.

Read TaxNewsFlash-Transfer Pricing

• United States: The IRS updated a “frequently asked question” (FAQ) on the qualified intermediary (QI), withholding foreign partnership (WP), and withholding foreign trust (WT) FAQs website to provide guidance on WP/WT agreement renewals.
• Ireland: Updated FAQs on the implementation of common reporting standard (CRS) in Ireland include editorial changes and removed outdated FAQs.

Read TaxNewsFlash-FATCA / IGA / CRS

• Notice 2023-71 postpones various tax filing and payment deadlines to 7 October 2024 for taxpayers affected by the terroristic action in the State of Israel.
• The U.S. Supreme Court has scheduled oral arguments in Moore v. United States—an appeal from a 2022 decision of the U.S. Court of Appeals for the Ninth Circuit upholding the constitutionality of the mandatory repatriation tax under section 965—for 5 December 2023.
• The IRS publicly released a legal advice memorandum concerning the disallowance of section 168(k) additional first-year allowance for depreciation for an “excepted trade or business” under section 163(j).
• A series of KPMG reports discuss the impact of proposed U.S. broker digital asset tax reporting regulations on industry verticals, including custodial exchanges, nonfungible token (NFT) marketplaces, and digital asset payment providers.

State and local tax

• California: A superior court denied a motion for summary judgment in a case filed by the American Catalog Mailer’s Association (ACMA) challenging the Franchise Tax Board’s revised guidance on the application of P.L. 86-272 to internet sellers. The court denied the motion on the basis that the ACMA had not provided adequate support for its position that the Board’s examples of non-protected activities involving post-sale assistance or Internet cookies contradicted P.L. 86-272 on its face such that the guidance must be invalidated.
• Florida: The state Circuit Court held that a taxpayer's sales of electronically delivered software to an affiliate was not subject to sales tax.
  
• Massachusetts: The state House and Senate agreed to a tax compromise plan that includes components of earlier tax proposals. Effective 1 January 2025, all corporations and financial institution must apportion net income to the Commonwealth by use of the sales factor only. The bill also revises how financial institutions source interest, dividends, net gains and other income from investment assets and activities and from trading assets and activities.
• Tennessee: The state Court of Appeals upheld a chancery court's sales tax assessment on a horse-drawn carriage company on the basis that the taxpayer was subject to taxation as a place of amusement.

Read TaxNewsFlash-United States

• Final regulations provide guidance under section 509(a) on the prohibition on certain gifts or contributions to Type I and Type III supporting organizations from persons who control a supported organization, and on certain other requirements for Type III supporting organizations.

Read TaxNewsFlash-Exempt Organizations

• The Bureau of Industry and Security (BIS) of the U.S. Department of Commerce released an interim final rule implementing 2022 Wassenaar Arrangement decisions, with a request for comments on license exception eligibility for certain supersonic aero gas turbine engine component technology.
• The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) imposed sanctions on two entities and identifying as blocked property two vessels that used Price Cap Coalition service providers while carrying Russian crude oil above the agreed price cap. The Price Cap Coalition (G7, European Union, and Australia) published an advisory for the maritime oil industry and related sectors.
• BIS released two orders renewing the temporary denial of export privileges of two Russian airlines.

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