KPMG Week in Tax: 30 October – 3 November 2023

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

• Nigeria: The Federal Internal Revenue Service (FIRS) released a notice providing updates to the TaxPro-Max portal aimed at addressing difficulties taxpayers face in fulfilling tax responsibilities.
• Nigeria: The Federal High Court Lagos Judicial Division held that income from ancillary activities, such as cleaning fees and container demurrage, does not constitute inbound freight income liable to tax in Nigeria.
• Uganda: The tax authority published a public notice implementing the 5% digital services tax (DST). Nonresidents earning income from digital services provided to customers in Uganda must register through the Uganda Revenue Authority website. However, taxpayers already registered for the value added tax (VAT) digital services rules don't need to register separately for the DST.
• OECD: The African Tax Administration Forum (ATAF) and the Organisation for Economic Cooperation and Development (OECD) signed a renewal of their memorandum of understanding (MoU) for a period of five years, agreeing to continue to work together towards promoting fair and efficient tax systems and administrations in Africa.
• Africa: A KPMG report provides a summary of tax developments in October 2023.

Read TaxNewsFlash-Africa

• Bolivia: The tax authority issued guidance providing that the deadline has been extended until 30 November 2023 for submission of the affidavits and payment of tax obligations related to the unified agricultural regime and the processing of the certificate of non-taxability corresponding to the 2022 management.
• Canada: The fall economic update includes proposals to remove the provincial 8% harmonized sales tax (HST) on qualifying new purpose-built rental housing, and an extension of the gas and fuel tax reductions until mid-2024.
• Canada: Owners of residential property in Canada now have until 30 April 2024 to meet tax filing obligations under the underused housing tax (UHT) rules for the 2022 calendar year.
• Mexico: Taxpayers in areas affected by severe rains and strong winds from Hurricane Otis may qualify for various tax relief.

Read TaxNewsFlash-Americas

• Cambodia: Guidance specifies the methods of calculation for the tax invoice and commercial invoice on the specific tax and VAT to be imposed on the supply of locally produced non-alcoholic beverages.
• India: The Gujarat High Court held that the issue of right shares by a company is the creation of property and merely receiving such shares cannot be considered as a “transfer” under the “angel tax” provisions of Section 56(2)(vii)(c).
• India: Following the introduction of the new reassessment regime, an Assessing Officer (AO) argued that with the omission of the phrase “reason to believe,” the requirement that the AO establish “escapement of tax” at the stage of assumption of jurisdiction is no longer required. The Madras High Court held that the new reassessment regime casts a statutory burden upon the AO to have “information” suggesting that income chargeable to tax has escaped assessment.
• India: The Goods and Services Tax (GST) Council made recommendations relating to changes in tax rates for a few goods and services, amnesty scheme for filing of appeals, taxability of personal guarantee and corporate guarantee, automatic restoration of provisional attachment of property, allowing supplies to special economic zone (SEZ) unit or developer for authorized operations on payment of integrated tax, and other trade facilitation measures.
• Oman: The tax authority issued a decision that specifies additional cases and conditions for VAT refund. 
• Australia: KPMG tax professionals submitted a document with comments on the proposed legislation to amend Australia's interest limitation rules.
• Australia: The Australian Taxation Office (ATO) issued an advisory to clarify the research and development (R&D) tax incentive integrity rules.
• Australia: Treasury issued a release announcing that it will propose amendments to the superannuation transfer balance cap for individuals with a capped defined benefit income stream—to apply retroactively to 1 July 2017.

Read TaxNewsFlash-Asia Pacific

• Cyprus: The plenary session of the Parliament unanimously approved reductions in the excise tax on motor fuel effective 3 November 2023 until 3 March 2024, and on heating oil effective 15 November 2023 until 31 March 2024.
• Cyprus: The Cyprus and Croatian Ministers of Finance signed a new income tax treaty that will enter into force in the year following the year in which the ratification process in Croatia is also completed.
• Netherlands: A district court held that the place of risk for insurance premium tax (IPT) purposes, under a satellite insurance policy insuring against financial risk to a Dutch establishment of a legal entity that owned the satellite, was the Netherlands.
• Estonia: The Supreme Court held that the tax authority did not have the right to impose an additional income tax assessment based on the taxpayer’s valuation of a non-monetary contribution to its share capital at higher than fair market value.
• Romania: Law 296/2023 introduced substantial modifications to the tax code. Most provisions of the law will become effective beginning in 2024.
• Sweden: A case before the Supreme Administrative Court (SAC) in Sweden concerned whether a holding company that provides management services to its subsidiaries can recover VAT on costs it incurred in relation to the disposal of shares in its subsidiaries as input tax. The SAC concluded that the costs in question could be considered to have a direct and immediate link to the economic activity of the holding company, which is a prerequisite for exercising the right to recover VAT as input tax.
• France: The 2024 Finance Bill, if approved, would introduce several measures to enhance the fight against tax fraud, focusing particularly on VAT non-compliance in the digital economy.
• Malta: The budget for 2024 includes tax provisions that would affect business and individual taxpayers
  
• Netherlands: The Lower House of Parliament adopted the 2024 Tax Plan package, which included the 2024 Tax Plan as well as a considerable number of other tax amendments and motions.  
• Luxembourg: The Lower Administrative Court referred to the Constitutional Court the issue of the constitutionality of the different treatment under the minimum net wealth tax for holding companies.
• Luxembourg: The Luxembourg Administrative Court of first instance upheld the tax authority’s decision to nullify a tax ruling previously granted to the taxpayer and deny permanent establishment (PE) status to the U.S. branch of a Luxembourg resident company.
• Poland: Recent court decisions concluded that (1) a taxable person can be struck off the active VAT taxpayer register; (2) the Polish exit tax was compatible with EU law; and (3) comprehensive investment process management services provided by the taxpayer with respect to the construction of residential premises was subject to VAT at the rate of 23%.
• Austria: The Ministry of Finance published draft guidance on the non-carbon infrastructure provision under the anti-tax avoidance directive (ATAD) interest limitation rule, which exempts interest expenses for loans to finance long-term public infrastructure projects from the interest limitation calculation.

Read TaxNewsFlash-Europe

• Malta: The budget for 2024 includes a deferral of the implementation of the Pillar Two global minimum tax.
• Poland: The Ministry of Finance is planning to extend the deadline for submitting 2022 individual (personal) and corporate income tax transfer pricing reporting forms (TPR-P and TPR-C) by three months—from 30 November 2023 to 29 February 2024.
• UAE: The tax authority issued an extensive transfer pricing guide—offering insights and illustrative examples on various aspects of the UAE transfer pricing regime.

Read TaxNewsFlash-Transfer Pricing

• Cayman Islands: The Financial Action Task Force (FATF) decided to remove the Cayman Islands from its anti-money laundering (AML) “grey list” as a result of the Cayman Islands’ adherence to the globally accepted standards of the AML regime.
• Uruguay: The tax authority issued an update informing financial institutions about the availability of the system for the submission of common reporting standards (CRS) reports. The system is available for submissions from 10 October 2023 until 30 November 2023 through the automatic exchange of financial information (AEOI) portal.
  
• United States: The IRS issued two “frequently asked questions” (FAQs) providing guidance on qualified intermediaries (QIs) making written solicitations requesting the U.S. taxpayer identification numbers (TINs) of account holders holding interests in publicly traded partnerships through QIs.

Read TaxNewsFlash-FATCA / IGA / CRS

• The House Committee on Ways and Means unanimously approved H.R. 5863 (the “Federal Disaster Tax Relief Act of 2023”). The $5 billion bill would extend special rules for deductibility of certain personal casualty losses, provide an exclusion from gross income for certain qualified wildfire relief payments, and treat East Palestine train derailment payments as qualified disaster relief payments.

Read TaxNewsFlash-Legislative Updates

• The hearing on proposed regulations regarding digital asset transactions currently scheduled for 7 November 2023 has been rescheduled for 13 November 2023—coinciding with the deadline for comments.
• The U.S. Tax Court held that an exchange of one set of variable prepaid forward contracts (VPFCs) for a second set of VPFCs resulted in the termination of the taxpayer’s underlying obligations with respect to the first set of VPFCs for purposes of section 1234A, resulting in the recognition of short-term capital gain.
• Notice 2023-75 provides the dollar limitations for qualified retirement plans for tax year 2024.
• Digital signatures on certain forms will continue to be accepted until “more robust” technical solutions are deployed, and encrypted email when working directly with IRS personnel has been extended until 31 October 2025.
• The IRS issued two FAQs providing guidance on QIs making written solicitations requesting the U.S. TINs of account holders holding interests in publicly traded partnerships through QIs.

State and local tax

• California: An appeals court rejected a taxpayer’s assertion that Proposition 39 was invalid because it violated the single-subject rule for ballot initiatives. Proposition 39—approved by voters in 2012—mandated that most corporate taxpayers use single-sales factor apportionment and the corresponding market-based sourcing rules. The measure also created a special apportionment rule for cable companies and created a fund for clean energy projects.
• Kansas: The Secretary of the Kansas 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 for tax years beginning on or after 1 January 2024.
• New York: The New York Division of Tax Appeals held that a party supply retailer properly collected and remitted sales tax on certain items of clothing. The auditor had concluded that the items at issue were costumes (which are not exempt from New York state (and certain local) sales taxes), but the court rejected the auditor’s reliance on how the items were marketed and presented in stores and found that the descriptions on receipts provided to purchasers governed the taxability.
• Utah: The Utah State Tax Commission concluded that a taxpayer owed sales tax on subscription fees charged to customers for a bundled transaction that consisted of access to both streaming services (which is not subject to tax in Utah) and the ability to download programming for viewing offline (which is taxable in Utah).

Read TaxNewsFlash-United States

• The Bureau of Industry and Security (BIS) of the U.S. Department of Commerce released a final rule amending the Export Administration Regulations (EAR) by adding 13 entities to the “entity list” under the destinations of Russia (12) and Uzbekistan (1).
• The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued sanctions that focus on individuals and entities assisting Russia’s war against Ukraine by providing Russia with technology and equipment from third countries.
• Canada’s export control list and export permit process have been updated.

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