KPMG Week in Tax: 27 November – 1 December 2023

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

• The KPMG ESG Tax Tracker [PDF 463 KB] provides insight into the global environmental, social, and governance (ESG) landscape with regard to environmental taxes, incentives and government grants.

• Zimbabwe: Tax proposals—concerning value added (VAT), corporate income tax, and pay-as-you-earn (PAYE)—were included in the 2024 budget.
• A KPMG report provides a summary of tax developments for November 2023 including the draft Kenya-Netherlands tax treaty open for public consultation (until 13 December 2023) and updates on the 2024 budgets in Angola, Cabo Verde and Ghana.

Read TaxNewsFlash-Africa

• Colombia: The Ministry of Finance issued a decree providing final regulations on the new significant economic presence rule enacted as part of tax reform in Colombia in 2022.
• Chile: The tax authority provided instructions on the tax implications of various legislative amendments carried out in support of the “Housing Emergency Plan” to facilitate the execution of urban works.
  

Read TaxNewsFlash-Americas

• Australia: Officials from Australia and Portugal signed a new tax treaty, which will represent the first tax treaty between the two nations following its entry into force.
• Australia: The Federal Court held that a taxpayer was liable for royalty withholding tax on payments made by a third party to affiliates of the taxpayer in relation to concentrate supplied to the third party by such affiliates under an exclusive bottling agreement because based on “comparables” relied on by the court, a portion of such payments represented a royalty for the third party's use of or right to use the taxpayer’s trademarks or other intellectual property (IP) relating to the bottling, selling and distributing of beverages under the agreement. The court also opined that if the taxpayer were not liable for royalty withholding tax, it would have been subject to diverted profits tax (DPT).
• Australia: The federal government introduced two bills to Parliament that seek to introduce several measures related to superannuation concessions, Australian Charities and Not-for-profits Commission (ACNC) secrecy reforms, foreign financial service provider licensing, and the payments regulatory framework.
• Australia: The government tabled amendments and a supplementary explanatory memorandum to the new interest limitation / thin capitalisation provisions before the Senate.
• Australia: The Senate Economics Legislation Committee recommended that the Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023 be passed.
• Bahrain: An updated VAT general guide includes the conditions for issuing electronic documents without obtaining prior approval from the National Bureau for Revenue.
• Hong Kong: Draft legislation expanding the existing foreign-sourced income exemption (FSIE) regime to cover foreign-sourced gains from disposal of assets other than equity interests was passed by the Legislative Council. 
• Pakistan: Under a new ordinance, banks are obligated to pay 40% additional tax on windfall income, profit, and gains arising during calendar years 2021 and 2022 (tax years 2022 and 2023) by 30 November 2023. The deadline is extendable for up to 15 days upon application to the tax authority.
• Pakistan: Finance Act 2022 added a provision to the Income Tax Ordinance, 2001 requiring companies and associations of persons to electronically disclose and update their beneficial owner details. The specific reporting requirements were recently provided in SRO 1117(I)/2023.
• Philippines: The Court of Tax Appeals issued an en banc decision setting out the requirements for a valid claim for refund or credit of input VAT attributable to zero-rated sales and the essential elements of valid VAT zero-rated sales of services.
• Philippines: The Ease of Paying Taxes Act—set to be signed into law by the President—would introduce various measures to facilitate tax compliance and relating to income tax, business tax, value added tax (VAT), and other percentage tax (OPT).
• Saudi Arabia: The Zakat, Tax and Customs Authority (ZATCA) outlined the criteria for the ninth group of taxpayers required to comply with the second phase of the electronic invoicing (e-invoicing) system implementation. The mandate for this group will begin on 1 June 2024.
• Singapore: An updated e-Tax Guide on tax deduction for borrowing costs other than interest expenses provides more detailed guidance on the deductibility of front-end fees.
• UAE: The federal tax authority released a corporate tax guide on the taxation of “natural persons.”

Read TaxNewsFlash-Asia Pacific

• Albania: The new income tax law includes additional types of income considered to be sourced in Albania.
• Belgium: A law introducing joint VAT liability for electronic interfaces, even when they are not deemed suppliers, is effective 1 January 2024.
  
• Cyprus: The Department of Taxation announced that from 1 December 2023 to 31 May 2024 a zero rate of VAT will be applied to certain supplies of meat and vegetables.
  
• EU: The VAT Committee of the European Commission published a working paper that discusses the VAT treatment of the secondary sale of in-game assets, such as “skins.” The Commission Services assert that an individual selling skins regularly over an extended period should be recognized as a taxable person, and therefore subject to VAT obligations.
  
• Germany: The lower house of the German Parliament legislation that contains a large number of amendments in various areas of tax law, including VAT-related changes.
  
• Ireland: Finance Bill (No.2) of 2023 includes an overhaul to the method by which taxes owed in respect of employee share option gains are collected and remitted to the Irish Revenue. From 1 January 2024, the collection method will become a real-time payroll withholding (PAYE) obligation for the employer.
  
• Italy: The government has issued seven legislative decrees implementing Law no. 111 of 2023, which directed the government to reform the tax system.
  
• Luxembourg: Temporary VAT rate reductions included in the “anti-inflation package” adopted by the government will expire on 1 January 2024.
  
• Luxembourg: The Constitutional Court decided that the current minimum net wealth tax (MNWT) regime, as applied to collective entities, partly violates the constitutional principle of equal treatment.
  
• Poland: A deputies’ bill amending the act on VAT was submitted before the Lower House of the Polish Parliament with the goal of extending the zero percent VAT rate on foods until June 2024. New provisions are expected to become effective 1 January 2024.
  
• Poland: The regulation of the Minister of Finance on the waiver of tax on certain financial institutions (i.e., domestic banks functioning as a bridge institution) is now effective.
  
• Poland: The Supreme Administrative Court held that an investment fund that paid its employees in fund shares that were subject to certain suspension and redemption periods was not required to remit advance individual (personal) income tax with respect to such compensation because the employees are not subject to tax on such compensation until repurchase or redemption of the shares.
• Poland: The Voivodship Administrative Court in Warsaw held that limitations on tax depreciation or amortization deductions with respect to fixed assets to the amounts of such deductions for financial accounting purposes did not apply to a taxpayer that held real estate treated as investment property not subject to depreciation or amortization for balance sheet purposes.
• Portugal: Officials from Australia and Portugal signed a new tax treaty, which will represent the first tax treaty between the two nations following its entry into force.
  
• Spain: A draft order approved forms for the new reporting requirements for digital platform operators under European Directive 2021/514 (DAC7) effective 1 January 2023.
  
• Spain: The Madrid Assembly has presented a proposal to temporarily modify its rules providing effective exemption from the wealth tax during the period the temporary solidarity tax on large fortunes (ITSGF) would be imposed to extend to its residents effective exemption from the ITSGF as well.
  
• Spain: The Superior Court of Justice of the Basque Country referred to the Court of Justice of the European Union (CJEU) for a preliminary ruling regarding whether the method of application of the nonresident income tax (IRNR) of Vizcaya to dividend distributions to a nonresident company is compatible with EU law.
  
• UK: HMRC published initial guidance on reclaiming National Insurance Contributions (NIC) paid on car allowances.
  
• UK: The government held a consultation on reforming UK rules on transfer pricing and permanent establishments.
  
• UK: The Supreme Court clarified when options and shares are treated as “employment-related.”
  

Read TaxNewsFlash-Europe

• Australia: The Federal Court held that a taxpayer was liable for royalty withholding tax on payments made by a third party to affiliates of the taxpayer in relation to concentrate supplied to the third party by such affiliates under an exclusive bottling agreement because based on “comparables” relied on by the court, a portion of such payments represented a royalty for the third party's use of or right to use the taxpayer’s trademarks or other intellectual property (IP) relating to the bottling, selling and distributing of beverages under the agreement.
• Vietnam: The National Assembly passed a resolution adopting the Pillar Two global minimum tax rules—effective 1 January 2024. The rules include an income inclusion rule (IIR) and qualified domestic minimum top-up tax (QDMTT) that broadly align with the OECD’s global anti-base erosion (GloBE) model rules.
  
• Poland: The deadline for submitting individual (personal) and corporate income tax transfer pricing information forms (TPR-P and TPR-C forms) for reporting periods ending between 30 November 2023 and 31 December 2023 has been extended to 31 January 2024.
• Greece: A new law incorporates into Greek legislation the EU public country-by-country (CbC) reporting directive. The public reporting of income tax information by multinational groups and certain standalone enterprises and branches that carry out activities in Greece will be required for financial years starting after 22 June 2024.
  
• UK: The government held a consultation on reforming UK rules on transfer pricing and permanent establishments.
  
• A KPMG report provides practical tips for navigating challenges when structuring and pricing intercompany financial transactions.
  
• A report prepared by KPMG tax professionals examines the latest mutual agreement procedure (MAP) statistics and awards for the calendar year ended 31 December 2022 that highlight important takeaways for multinational enterprises.

Read TaxNewsFlash-Transfer Pricing

• Australia: Updated validation rules for common reporting standard (CRS) reporting specify that filings without “AU” codes for uninhabited jurisdictions and undocumented accounts will be rejected for compliance with the ATO’s system standards.
• Barbados: CRS guidance for reporting Barbados financial institutions covers the reporting of taxpayer identification numbers (TINs), and residence by investment (RBI) and citizenship by investment (CBI) schemes.
  
• British Virgin Islands: Reporting financial institutions subject to reporting obligations under the CRS need to verify the accuracy of the information provided in the BVIFARs portal so that that their profile accurately reflects the correct reporting entity type and the CRS entity classification.
  
• Germany: Guidance—CRS Newsletter 04/2023—contains guidance on reporting missing self-certifications. 
  

Read TaxNewsFlash-FATCA / IGA / CRS

• The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) is imposing sanctions on three entities and identifying as blocked property three vessels that used Price Cap Coalition services while carrying Russian crude oil above the Coalition-agreed price cap.
• The U.S. Court of International Trade issued a decision rejecting the government’s contention that the court lacked subject matter jurisdiction over the plaintiffs’ challenge to a decision by the interagency Forced Labor Enforcement Task Force (FLETF) to add them to the entity list of the Uyghur Forced Labor Prevention Act (UFLPA) on the grounds that such decision was arbitrary and capricious under the Administrative Procedure Act.
• The Office of the U.S. Trade Representative (USTR) has launched a statutory review of the operation of the United States-Mexico-Canada Agreement (USMCA) with respect to trade in automotive goods. Comments may be submitted through 17 January 2024, and  USTR will submit the results of its review to Congress and will publish its report no later than 1 July 2024.
  
• The EU has completed procedures to ratify the free trade agreement (FTA) with New Zealand. Before the agreement can enter into force, New Zealand will need to complete its ratification procedure.
  

Read TradeNewsFlash-Trade & Customs

• Proposed regulations provide guidance regarding the excluded entity provisions with respect to the clean vehicle credit under section 30D.
• Rev. Proc. 2023-38 provides procedural rules for qualified manufacturers of new clean vehicles to comply with the reporting, certification, and attestation requirements regarding the excluded entity restriction, under which the IRS, with analytical assistance from the Department of Energy (DOE), will review compliance with the excluded entity restrictions.
• The IRS Large Business and International (LB&I) division publicly released a “practice unit” that provides an overview of the steps needed to determine how to tax a beneficiary of a foreign non-grantor trust on distributions received from the trust.
• Final regulations extend the filing deadline for initial beneficial ownership information (BOI) reports under regulations becoming effective 1 January 2024 that require certain corporations, limited liability companies, and other similar entities created in or registered to do business in the United States to report beneficial ownership information to FinCEN. Updated guidance materials reflect the reporting deadline extension for companies created or registered in 2024 to file their initial BOI reports.
  
• The U.S. Tax Court held that it had jurisdiction in the partnership-level proceedings to determine whether the taxpayer’s ordinary business income allocated to its state law limited partners is excludable from net earnings from self-employment under section 1402(a)(13).
  
• Taxpayers in parts of Illinois affected by severe storms and flooding now have until 15 February 2024 to file various individual and business tax returns and make tax payments.
  
• Taxpayers in St. Croix affected by elevated levels of lead and copper in the water supply now have until 29 February 2024 to file various individual and business tax returns and make tax payments.
  
• There are no changes to the rates of tier 2 taxes (imposed on railroad employees, employers, and employee representatives are a source of funding for benefits under the Railroad Retirement Act) for 2024.
  
• Proposed regulations would amend existing regulations under sections 267 and 707 relating to the disallowance or deferral of deductions for losses and expenses in certain transactions with partnerships and related persons, to conform those regulations with the statutory framework which applies an entity, rather than an aggregate, view of partnerships.
• Proposed regulations would amend the rules applicable to plans that include cash or deferred arrangements under section 401(k) to provide guidance with respect to long-term, part-time employees.

Read TaxNewsFlash-United States

Legislative Updates

• The House Committee on Ways and Means approved H.R. 5988 (the “United States-Taiwan Expedited Double-Tax Relief Act”), which incorporates legislation passed out of the Finance Committee in September as well as legislation passed out of the Foreign Relations Committee in July.

Read TaxNewsFlash-Legislative Updates

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

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