KPMG Week in Tax: 11 – 15 December 2023

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

• Bolivia: The tax authority issued guidance on updated rates of corporate profits tax, a special tax on hydrocarbons, and a tax on international air departures.
• Dominican Republic: New tax incentives for national and international commercial civil aviation are only applicable to national or foreign air operators that have a permanent establishment (PE) in the country. 
  
• Costa Rica: Updated tax brackets for salary tax and credits, corporate income tax, and individual income tax and credits were indexed with an -1.28% adjustment and apply from 1 January 2024.
  
• Canada: The deadline for many employers to meet obligations under the goods and services tax / harmonized sales tax (GST/HST) and Quebec sales tax (QST) pension plan rules is 31 December 2023.
• Canada: Trusts (including bare trusts) must meet new annual information reporting requirements beginning in tax years ending after 30 December 2023.

Read TaxNewsFlash-Americas

• Malaysia: The KPMG member firm in Malaysia prepared a monthly summary of tax developments that covers income tax, indirect tax, and e-invoicing.
• Australia: The federal government will be expanding its tax treaty negotiation program to work towards its first tax treaties with Ukraine and Brazil, and to update treaties with New Zealand, Korea, and Sweden.
  
• Australia: The government’s 2023-2024 mid-year economic and fiscal outlook statement included new tax-related announcements concerning deductions for ATO charges and the foreign resident capital gains withholding tax rate, among others.
  
• Australia: The New South Wales (NSW) government announced industry consultations on reforming the “emergency services levy.”
  
• Australia: The Victorian government finalied reform that will progressively terminate stamp duty on commercial and industrial property and replace it with a commercial and industrial property tax.
  
• Australia: The Australian Taxation Office (ATO) released a consultation paper on priority areas for future ATO public advice and guidance related to the new legislation concerning franking credits for distributions funded by capital raisings. Submissions are due by 16 February 2024.
  
• Australia: The federal government announced that it will adjust the foreign investment framework by raising fees for the purchase of establish homes, increase penalties on vacant properties, and cut application fees for build-to-rent projects.
  
• Sri Lanka: Legislation pending certification by the Speaker includes the introduction of a new value added tax (VAT) exemption list and a simplified VAT (SVAT) scheme.
  
• Hong Kong: The Court of First Instance held that the upfront lump sum and annual royalties derived by a Hong Kong company under a licensing and sub-licensing arrangement of trademarks with a UK company were taxable in Hong Kong.
  
• Bahrain: The National Bureau for Revenue (NBR) established a social media campaign encouraging unregistered businesses to monitor the VAT registration rules and apply for a VAT registration when an obligation is triggered.
  
• Bahrain: All specified tobacco products available in the local market must have valid digital stamps beginning 24 December 2023.
  
• Philippines: A new law mandates that all electronic commerce (e-commerce) participants using the Philippine market are subject to Philippine laws, regardless of their physical presence in the country.

Read TaxNewsFlash-Asia Pacific

• Spain: The VAT regulations establish certain applications that must be made during the month of December 2023 in order for the measures to be effective beginning 1 January 2024.
• Luxembourg: The Court of Justice of the European Union (CJEU) held that the European Commission (EC) erred in finding that Luxembourg had granted unlawful State aid to the taxpayer because the EC incorrectly relied on the OECD Transfer Pricing Guidelines, rather than Luxembourg law, as the reference system in determining whether there was a selective advantage.
  
• Poland: A draft law amending the personal income tax and corporate income tax laws includes a 100% increase of the applicable limits authorizing the one-time inclusion of expenses in tax-deductible costs.
  
• Poland: The Supreme Administrative Court held that a taxpayer licensed for both wholesale and retail trade in alcoholic beverages must pay the surcharge on alcoholic beverages when supplying to its own retail outlets. Additionally, the court decided that loan management services provided by an entity other than the creditor are not exempt from VAT.
  
• Sweden: Persons or companies that have not previously been investigated in the Pandora leak and that have not reported the correct income for the tax years 2018-2021 must submit corrections by 29 February 2024 to avoid tax penalties or criminal charges.
  
• Austria: The KPMG member firm in Austria prepared a report covering recent tax developments including VAT, tax data management, and communication with the tax authorities.
  
• Czech Republic: The Chamber of Deputies approved a draft law introducing a long-term investment product as a new tax-efficient retirement savings product. The draft law will now be debated by the Senate.
  
• Czech Republic: The Supreme Administrative Court upheld the disallowance of a taxpayer's VAT deduction on the purchase of anti-radar equipment and a GPS logbook, citing non-use for economic activity and failure to submit the logbook due to personal data protection. The court also held that the transfer of technical improvements by a lessee to the lessor at lease termination does not constitute a service for VAT purposes, so the reverse charge mechanism did not apply.
  
• Belgium: The government has proposed stricter taxation rules for the undistributed income of a controlled foreign company (CFC), shifting from a model targeting tax avoidance to one focusing on taxing passive income of low-taxed entities.
  
• Belgium: A new law effective from 1 January 2024 requires mixed taxable entities using the general pro rata method for VAT deductions to submit a prior notification via the “e-604” online application. They must also annually inform VAT authorities of their provisional or final general pro rata percentage. Partial VAT taxpayers conducting activities outside the VAT scope must inform VAT authorities of the special pro rata they use.
  
• Netherlands: An agreement between the Netherlands and Belgium addresses the tax implications of remote working under the Netherlands-Belgium income tax treaty. It states that occasional remote work does not generally constitute a PE, while providing guidelines for permanent remote work. It also outlines its application for employees who spend 50% or less of their time working from home, or if the work involves preparatory or auxiliary activities.
  
• Romania: Reports prepared by the KPMG member firm in Romania detail e-invoicing updates for (1) established persons in business to business / business to government (B2B / B2G), and (2) nonresident VAT payers.

Read TaxNewsFlash-Europe

• OECD: The OECD/G20 Inclusive Framework released peer review assessments for 131 jurisdictions regarding the compulsory exchange of information on tax rulings. The 2022 report shows over 54,000 exchanges of information on over 24,000 tax rulings, with 100 jurisdictions fully complying with the BEPS Action 5 minimum standard. The remaining 31 jurisdictions received 58 recommendations to improve their legal or operational framework for identifying relevant tax rulings and exchanging information. The next annual review in 2023 will focus on jurisdictions' responses to these recommendations.

Read TaxNewsFlash-BEPS

• A KPMG report discusses four reasons why businesses would benefit from involving their transfer pricing teams more closely as they prepare for Pillar Two.
• Belgium: Parliament adopted the draft law on implementation of the Pillar Two global minimum tax rules for multinational enterprises and large-scale domestic groups. The law will become effective 31 December 2023 and will apply to fiscal years beginning from that date, except for the undertaxed payment rule (UTPR), which will apply to fiscal years beginning 31 December 2024.
  
• Luxembourg: The CJEU held that the EC erred in finding that Luxembourg had granted unlawful State aid to the taxpayer because the EC incorrectly relied on the OECD Transfer Pricing Guidelines, rather than Luxembourg law, as the reference system in determining whether there was a selective advantage.
  
• Moldova: Law No. 320, which partially transposes the EU public country-by-country (CbC) reporting directive, was officially published in the official journal of Moldova and will be effective from 1 January 2025.

Read TaxNewsFlash-Transfer Pricing

• Barbados: The automatic exchange of information (AEOI) portal was re-opened for prior year submissions beginning 1 December 2023 and will be available until 15 December 2023 to facilitate FATCA and common reporting standard (CRS) filings and make any corrections to submitted reports.
• Switzerland: The State Secretariat for International Finance (SIF) of Switzerland released an update announcing the finalization of the negotiations to transition from non-reciprocal FATCA Model 2 IGA (intergovernmental agreement) to reciprocal FATCA Model 1 IGA for the automatic exchange of tax information between Switzerland and the United States.
• UK: HM Revenue & Customs (HMRC) issued guidance regarding voluntary disclosure of unpaid tax on income or gains from cryptoassets.

Read TaxNewsFlash-FATCA / IGA / CRS

• Notice 2024-10 provides additional interim guidance regarding the application of the new corporate alternative minimum tax (CAMT). The scope of the guidance is narrow and generally limited to two issues: controlled foreign corporation (CFC) dividends and applicable financial statement (AFS) identification.
• Notice 2024-8 provides the standard mileage rates for taxpayers to use in computing the deductible costs of operating an automobile for business, charitable, medical, or moving purposes in 2024.
  
• Notice 2024-6 provides additional guidance on the new sustainable aviation fuel (SAF) credits under sections 40B and 6426(k).
  
• Notice 2023-80 announces that the Treasury Department and the IRS intend to issue proposed regulations addressing the application of the foreign tax credit (FTC) rules and dual consolidated loss (DCL) rules to certain types of taxes within the ambit of the Pillar Two global anti-base erosion (GloBE) rules as well as to extend the temporary relief from the 2022 FTC final regulations that was offered by Notice 2023-55 released earlier this year.
  
• Proposed regulations implement the advanced manufacturing production credit under section 45X to incentivize the production of eligible components within the United States.
  
• The IRS commissioner announced plans for a new IRS organizational and leadership structure that will feature a new single deputy commissioner (instead of two) and four new IRS chief positions overseeing taxpayer service, tax compliance, information technology, and operations.
  
• The Financial Crimes Enforcement Network (FinCEN) of the U.S. Treasury Department updated its beneficial ownership information (BOI) reporting “frequently asked questions” (FAQs).
  
•  A KPMG report explains how proposed regulations would put employer-provided fixed indemnity health coverage under a regime that is similar to employer-provided disability insurance.
  

State and local tax

• New York: The Division of Tax Appeals concluded that a deli operator was liable for sales taxes on sales of party platters. In reaching this conclusion, the administrative law judge rejected the deli operator’s argument that it sold the items on the platters in the same condition, quantities, and packaging used when a food store sold the same item.
• Pennsylvania: The City of Philadelphia Department of Revenue issued guidance on the city’s voluntary disclosure program that allows businesses and individuals with unmet tax obligations to come forward voluntarily and become compliant.
• Washington State: The Department of Revenue issued guidance on the taxability of termination fees that consumers are required to pay when they decide to end a contract or agreement prior to the agreed upon date.

Read TaxNewsFlash-United States

• The European Council and Parliament have provisionally agreed on the Corporate Sustainability Due Diligence Directive (CS3D), which sets new EU-wide standards for businesses to address their negative impacts on human rights and the environment. The directive requires companies to identify, monitor, mitigate, and remediate risks in their operations and supply chains, and includes penalties and civil liability for non-compliance, potentially impacting many U.S.-based multinational companies.
• The Bureau of Industry and Security (BIS) of the U.S. Commerce Department released a final rule amending the Export Administration Regulations (EAR) by removing four persons, all under the destination of China, from the unverified list (UVL) because BIS was able to verify their bona fides.
• BIS released three notices renewing the temporary denial of export privileges of three Russian airlines, each for one year due to a pattern of repeated, ongoing and/or continuous apparent violations of the EAR.
• A fourth round of sanctions on Hamas targets officials who represent the group’s interests abroad and manage its finances.
• The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is implementing commitments made by G7 leaders by taking action against third-country actors who materially support Russia’s war.
• Multiple U.S. government agencies issued a joint compliance note highlighting common tactics deployed by malign actors in the maritime and other transportation industries. The compliance note also identifies recent criminal and civil enforcement actions taken in response to alleged violations of U.S. sanctions and export controls and describes steps that the maritime and other transportation industries can take to comply with U.S. sanctions and export controls.
• A San Francisco, California-based virtual currency exchange has agreed to pay over $1.2 million to settle its potential civil liability arising from processing 989 transactions on behalf of users ordinarily resident in Crimea between April 2020 and May 2022, in apparent violation of OFAC’s Russia/Ukraine sanctions.
• A U.S. multinational financial services corporation has agreed to remit over $4 million to settle its potential civil liability for a former wholly owned foreign subsidiary’s apparent violations of sanctions on Iran.

Read TradeNewsFlash-Trade & Customs

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

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