KPMG Week in Tax: 4 – 8 December 2023

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

• Nigeria: The Federal High Court Abuja Judicial Division held that the provisions of rules and practice directions prescribing 50% or full payment of disputed assessments prior to the hearing of the appeal is unconstitutional, null and void.
• Nigeria: The Federal Inland Revenue Service (FIRS) announced a full waiver of all penalties and interest on outstanding tax liabilities that are paid by 31 December 2023.
• Nigeria: The Lagos State Internal Revenue Service (LIRS) introduced a digitalized payment solution platform for consumption tax specifically tailored for businesses in the hospitality sector such as hotels, event centers, restaurants, bars, and related facilities in Lagos State.

Read TaxNewsFlash-Africa

• Bolivia: The tax authority issued guidance providing modifications to the billing system.
• Canada: Bill C-59—which includes excessive interest and financing expenses limitation (EIFEL), hybrid mismatch, and digital services tax (DST) rules—received first reading in the House of Commons.
• Canada: The deadline for taxpayers to make any “fairness relief” requests related to the 2013 tax year is 31 December 2023.

Read TaxNewsFlash-Americas

• Australia:  The government opened consultation for the 2024-2025 budget. Submissions are due by 25 January 2024.
• Australia: A review of philanthropic giving in Australia proposed an overhaul of the system that determines which charities are eligible to receive tax-deductible donations. Comments on the draft report are due 9 February 2024.
• Australia: Legislation in Victoria introduces additional measures concerning the vacant residential land tax, including clarification on the position for property developers and the treatment of newly constructed dwellings. The bill also includes a maximum transaction value for the prohibition of apportionment of land tax (and assessed windfall gains tax) to apply.
• Australia: The Australian Taxation Office (ATO) published guidance on the changes to the tax treatment of off-market share buy-backs offered by listed public companies.
• Australia: The bill containing the new interest limitation / thin capitalisation rules has been referred to the Senate Economics Legislation Committee.
• Australia: The Federal Court held that a company was liable for withholding tax on embedded royalties, and if not, the diverted profits tax (DPT) would apply. The judgment emphasized that the characterization of payments depends on the business context, not just the terminology used, and that the perceived value of a brand and expert evidence can affect the quantification of an embedded royalty.
• Australia: The federal government released a discussion paper for consultation on improving the retirement phase of superannuation.
• India: A tribunal held that an Indian subsidiary of a Korean holding company could not be treated as an “assessee in default’” for failure to withhold tax on notional income attributed to the Korean company because there was no obligation to withhold tax under section 195 on the notional income.
• India: A tribunal held that the income from offshore supply of equipment was not taxable in India since plant and equipment supplied to the Indian company were designed and manufactured outside India and the title was duly passed outside India on a “free on board” (FOB) basis. Further, the consideration for such offshore supplies was also received outside India in foreign currency and all activities such as manufacturing, fabrication, and designing of the plant and equipment were also undertaken outside India.
• Philippines: The Department of Finance (DOF) issued revenue regulations concerning creditable withholding tax, (VAT) registration of registered business enterprises (RBEs), and the issuance of receipts or sales or commercial invoices by agricultural producers.
• Saudi Arabia: Multinational corporations with regional headquarters based in Saudi Arabia may benefit from 0% corporate income tax and withholding tax on eligible activities under a new tax incentives package.
• Thailand: Further guidance regarding the individual (personal) income tax implications for foreign-sourced income brought into Thailand by Thai tax residents clarifies the interpretation provided in previous guidance does not apply to foreign-sourced income derived before 1 January 2024.
• Thailand: Operators of digital platforms serving users in Thailand, including online marketplaces, social media, and cloud services, must report specific information to the Electronic Transactions Development Agency.
• UAE: The UAE Cabinet of Ministers issued amendments to the excise tax executive regulations effective 1 December 2023.

Read TaxNewsFlash-Asia Pacific

• Belgium: A draft law proposes changes to the Cayman tax—a “look-through tax” designed to tax income obtained through a legal structure on the part of founders or beneficiaries as if they had directly received the income.
• Belgium: As of 31 January 2024, it will no longer be possible to use the “Isabel” and “GlobalSign” commercial certificates to log in to the Intervat application that is used for the filing of the Belgian VAT returns and listings.
  
• Belgium: The Lower Court of Leuven decided that the beneficial ownership requirements for interest payments, as prescribed by the income tax treaty concluded between Belgium and the Netherlands, must be interpreted in light of the interest and royalties directive.
  
• Cyprus: The deadline for the 0.4% “central equal weight sharing tax” due on real estate and share transfers from 22 February 2021 to 18 November 2022 has been extended to 31 March 2024.
  
• Denmark: The deadline for companies to report information about their employee share plans and share repurchases to the tax authority’s eKapital system is 20 January 2024.
  
• EU: The Economic and Financial Affairs Council of the EU (ECOFIN Council) approved a report that provides an overview of progress on a range of direct tax measures, including on the so-called “Unshell” Directive proposal (misuse of shell entities in the EU) and the FASTER Directive proposal (EU-wide harmonized withholding tax relief system).
  
• EU: The European Parliament’s Subcommittee on Tax Matters (FISC) held a public exchange of views with the chair of the Code of Conduct Group on Business Taxation (CoCG).
  
• Germany: The Lower Tax Court of Cologne held that the facts and circumstances of a group of companies must be considered for the purpose of applying the motive test under the German anti-treaty shopping rules.
  
• Greece: Guidance provides clarifications on the VAT treatment of revenues from certain over the counter (OTC) derivative products.
  
• Hungary: The CJEU held that local rules applicable to domestic reorganizations were inconsistent with the EU merger directive.
  
• Italy: The Italian Revenue Agency issued in-depth guidance on implementing DAC7—the new reporting requirements for digital platform operators.
  
• Luxembourg: The Court of Justice of the European Union (CJEU) held that the European Commission (EC) erred in finding that Luxembourg granted unlawful State aid to the taxpayer.
  
• Malta: Draft legislation expected to be enacted in the first quarter of 2024 would implement certain VAT measures that were included in the 2024 budget.
  
• Poland: The Minister of Finance issued regulations and launched a consultation regarding corporate income tax.
  
• Poland: The Supreme Administrative Court issued decisions related to research and development (R&D) activities and the individual depreciation rate for certain non-residential premises.
  
• Poland: Two draft regulations relate to the introduction of the mandatory use of the national e-invoicing system (KSeF). New provisions are expected to take effect on 1 July 2024.
  
• UK: A consultation on possible plant and machinery capital allowances simplification will be held in early 2024.
  
• UK: HMRC published their expectations of good off-payroll working (OPW) compliance.
  
• UK: HMRC provided guidance to employers with respect to tax compliance when using umbrella companies.
  
• UK: The Finance Bill 2024 includes amendments to the Pillar Two minimum tax rules.
  
• UK: The First-tier Tribunal (FTT) confirmed that a Schedule 36 notice information was valid if the request for information by reference to email search terms was included.
  
• UK: The government is to consult in 2024 on the feasibility of removing the “leasing” exclusion from the rules on full expensing for plant and machinery.

Read TaxNewsFlash-Europe

• Australia: The Federal Court held that a company was liable for withholding tax on embedded royalties, and if not, DPT would apply. The judgment emphasized that the characterization of payments depends on the business context, not just the terminology used, and that the perceived value of a brand and expert evidence can impact the quantification of an embedded royalty.
• Croatia: A public consultation for a draft bill implementing the OECD's Pillar Two model rules according to the EU Minimum Tax Directive ended 20 November 2023.
  
• Hungary: The bill to implement the OECD’s Pillar Two model rules as set out under the EU Minimum Tax Directive was published in the official gazette.
  
• Moldova: A bill introducing public country-by-country (CbC) reporting was published in the official journal. 
  
• UK: The Finance Bill 2024 includes amendments to the Pillar Two minimum tax rules.
  
• Luxembourg: An amended bill implementing the EU Minimum Tax Directive was filed with the Parliament in November.
  
• OECD: A senior transfer pricing advisor at the Organisation for Economic Cooperation and Development (OECD) discussed at a KPMG conference the ongoing transfer pricing-related work at the OECD and what the OECD will be focusing on in 2024. 
  

Read TaxNewsFlash-Transfer Pricing

• British Virgin Islands: The tax authority announced that the BVIFars payment portal will be operational in January 2024, requiring all entities with reporting obligations to enroll for FATCA, common reporting standard (CRS), and country-by-country (CbC) reporting. An annual payment of $185 is due by 1 June 2024 and annually thereafter, with exemptions for entities with valid pending de-registrations before 1 January 2024.
• Barbados: Guidance includes clarifications for determining whether an account is undocumented (lower value and high value accounts) under the CRS.

Read TaxNewsFlash-FATCA / IGA / CRS

• Notice 2023-79 provides the “2023 required amendments list”—in general, a list of statutory and administrative changes in requirements that are first effective during the plan year in which the list is published—for both individually designed plans qualified under section 401(a) and individually designed plans that satisfy the requirements of section 403(b).
• Rev. Proc. 2023-41 specifies discount factors for the 2023 accident year for use by insurance companies in computing discounted unpaid losses under section 846 and discounted estimated salvage recoverable under section 832.
• The IRS—as part of its continuing efforts to combat dubious employee retention credit (ERC) claims—is sending an initial round of more than 20,000 letters to taxpayers notifying them of disallowed ERC claims.
• A KPMG report discusses the recent transitory relief for Forms 1099-K, issues that taxpayers will likely encounter in the upcoming filing season, and additional changes announced for 2024.
• A KPMG report provides observations and analysis on the proposed regulations concerning the investment tax credit (ITC) for energy property under section 48.
   

State and local tax

• Illinois: A remote retailer of pet medications has filed a case with the Illinois Tax Tribunal challenging Illinois’ “Leveling the Playing Field Act” that requires remote retailers to collect and remit both state and local retailer’s occupation tax (ROT) based on the destination of its products sold.
• Minnesota: The state Supreme Court held that gain from the sale of a business’ goodwill was apportionable business income, rather than nonbusiness income that was allocated. The court found that the statutory language was ambiguous, so it relied on the legislative history.
• Washington State: The state tax authority issued guidance addressing the sales and business and occupation (B&O) tax consequences when self-publishing authors use marketplace facilitators for distribution and book sales.

Read TaxNewsFlash-United States
 

Legislative Updates

• The chairmen and ranking members of the tax-writing committees of the U.S. Congress released a discussion draft of legislation containing technical corrections and other clarifications with respect to the SECURE Act 2.0.

Read TaxNewsFlash-Legislative Updates

• The U.S. Department of Homeland Security (DHS) updated the Uyghur Forced Labor Prevention Act (UFLPA) entity list, adding three entities suspected of using forced labor from persecuted groups in the Xinjiang Uyghur Autonomous Region.
• The Bureau of Industry and Security (BIS) of the U.S. Department of Commerce released an order renewing—for a third time—the temporary denial of export privileges of a Belarusian airline for one year.
• The U.S. Department of the Treasury announced actions targeting a network that is involved in procuring electronics with military applications for Russian end-users.

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