KPMG’s Week in Tax: 24 - 28 January 2022
Recent tax developments from around the globe for the week of 24 - 28 January 2022
Recent tax developments from around the globe for the week of 24 - 28 January 2022
Tax developments or tax-related items reported this week include the following.
- Bahrain: The standard rate of VAT increased to 10% (from 5%) effective 1 January 2022, but under the transitional rule, supplies made during 2022 pursuant to a contract signed on or before 23 December 2021 are subject to VAT at a rate of 5% until the contract expires, is renewed or is amended (whichever is earliest).
- Qatar: A VAT regime in Qatar is expected to be effective during 2022, with VAT being broadly imposed at a rate of 5%.
- Vietnam: Provisions addressing the business of certain electronic gaming operations of foreigners are effective 12 February 2022. The new measures are intended to tighten the investment and business conditions for these electronic gaming activities.
- India: The Finance Act 2021 proposed to tax as capital gains the maturity proceeds from unit-linked insurance policies (ULIPs) issued on or after 1 February 2021, if the aggregate annual premium exceeds INR 250,000 in any of the financial years during the term of any of the policies. The Central Board of Direct Taxes (CBDT) issued a new rule specifying the method of computation of capital gains for these purposes.
- India: The Maharashtra Appellate Authority for Advance Ruling (AAAR) determined that “common input services” provided to a head office by third-party suppliers and then further allocated to branch offices or units registered as distinct persons qualify as a taxable supply. The cost of such allocated common input services will not be subject to GST because these costs were incurred by the head office in the capacity as a “pure agent.” However, the allocation of the cost of employees’ salary to the branch offices would be subject to GST.
- India: A tribunal held that the increased amount of goodwill due to revaluation of debts and inventory, after a slump sale, was eligible for depreciation.
- Belgium: A new Walloon decree (effective 1 January 2022) aims to address practices intended to evade or circumvent certain regional taxes and contains various measures relating to inheritance tax, road tax, and a new anti-abuse measure.
- Belgium: An advantageous tax regime for impatriate taxpayers offers significant advantages and reduces salary costs.
- Slovakia: Rules for reverse hybrid entities (effective 1 January 2022) include a new reporting obligation.
- Spain: The Court of Justice of the European Union (CJEU) issued a judgment holding that a Spanish law requiring Spanish tax residents to declare and report their overseas assets or rights is contrary to EU law. The CJEU found that the restrictions on the free movement of capital imposed by that Spanish legislation are disproportionate.
- Germany: The Federal Ministry of Finance (BMF) issued guidance with regard to grants of a research allowance—a tax incentive for research and development (R&D). A two-stage process applies for the application and granting of the research allowance.
- Germany: Mutual agreements with neighbouring countries (Austria, Belgium, France, Luxembourg, the Netherlands, and Switzerland) concerning cross-border workers were extended through at least March 2022.
- Germany: A regulation to implement anti-tax haven legislation was promulgated in the federal law gazette and is now effective.
- Austria: The KPMG member firm in Austria prepared a report of recent tax developments that includes judicial actions concerning (1) the qualification of compensation payments for location rights for drink dispensers as depreciable goodwill, and (2) loss carryforwards and loss trafficking rules.
- Poland: The reduced VAT rate on supplies, intra-community acquisition, and imports of natural gas, and on supplies, intra-community acquisition, and imports of electricity, will end 31 January 2022 (rather than 31 March 2022).
- Mauritius: Employers that do not maintain an approved private pension scheme now have an obligation to contribute to a portable retirement gratuity fund (PRGF) for the month of January 2022. Previously, the PRGF contribution obligation was suspended because of the COVID-19 pandemic.
- South Africa: The deadline for public commentary and completion of an online survey concerning the research and development (R&D) tax incentive under section 11D has been extended to 7 February 2022 (from 25 January 2022).
- Colombia: A resolution provides various changes to the foreign exchange information and foreign debt reports that must be presented to the Directorate of National Taxes and Customs (DIAN) by foreign exchange market intermediaries, postal services concessionaires that provide postal financial services, and clearing account holders.
- Costa Rica: Executive Decree no. 43388-H reflects modifications and additions to the criteria used to select taxpayers for audit.
- Mexico: The value of the Infonavit Mixed Unit (UMI) (the unit of measure for credits from the Infonavit denominated in minimum wages) for 2022 increased 4.99%, to MXN 91.56.
- Cyprus: A set of “frequently asked questions” (FAQs) clarifies certain provisions of Interpretive Circular 3 ("Tax treatment of intra-group back-to-back financing transactions" 30 June 2017). The circular applies to Cyprus tax resident companies and permanent establishments of foreign companies conducting intra-group back-to-back financing transactions and sets out requirements for the transfer pricing analysis of such transactions.
- India: A KPMG report provides an overview of India’s APA program, including key benefits to taxpayers and some of the difficulties being addressed by tax authorities.
Trade & Customs
- The World Trade Organization (WTO) announced that a WTO arbitrator has issued a decision allowing China to impose tariffs of approximately $645 million with regard to imports of U.S. goods.
- U.S. Customs and Border Protection (CBP) determined that certain palm oil imports from Malaysia and seafood imports from Taiwan are being produced or harvested with the use of convict, forced or indentured labor. Based upon these determinations, a U.S. port director may seize the covered merchandise and commence forfeiture proceedings.
- CBP provided guidance on new Section 301 modifications made to certain Harmonized Tariff Schedule (HTS) classifications within the Harmonized Tariff Schedule of the United States (HTSUS).
- The Office of the U.S. Trade Representative (USTR) made three conforming amendments to extensions of product excluded in the Section 301 investigation of China.
- The U.S. House Ways and Means Committee Chairman introduced legislation that includes provisions to address the United States-China trading relationship as well as other general trade measures (including an extension and reform of the Generalized System of Preferences (GSP) and Miscellaneous Tariff Bill (MTB) legislation).
- The U.S. Treasury Department—together with the Departments of State, Commerce, Homeland Security, Labor, and the Office of the U.S. Trade Representative (USTR)—issued a business advisory to inform the public of the heightened risks associated with doing business in Myanmar, particularly business transactions involving the military regime.
- The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued a release extending two Ukraine-related general licenses for a period of 90 days. OFAC also provided guidance in an updated set of “frequently asked questions” (FAQs).
- Final regulations concern the treatment of domestic partnerships for purposes of determining amounts included in the gross income of their partners with respect to foreign corporations.
- Proposed regulations concern the treatment of domestic partnerships and S corporations that own stock of passive foreign investment companies (PFICs, as defined in section 1297(a)) and their domestic partners and shareholders as well as other PFIC and controlled foreign corporation (CFC) issues. Comments and requests for a public hearing must be received by 25 April 2022.
- A final rule adopts an interim final rule—with certain amendments—for purposes of implementing funding to support state, local, and Tribal governments as they manage the public health and economic consequences of the COVID-19 pandemic.
- A KPMG report includes a table listing states that currently accept Form 1099-NEC when there is no withholding to report.
State and local tax
- Connecticut: The Department of Revenue Services ruled that net operating losses (NOLs) generated in years when corporations filed a unitary combined return remained available to the group after two of the unitary group members merged into a third. In the Department’s view, by allowing the surviving entity to use the NOLs allocated the merged corporations or to share such NOLs with the other corporate member, the income against which the NOLs will be applied will be generated by substantially the same businesses that incurred the losses.
- Michigan: A state appeals court held that a taxpayer was making retail sales and was required to pay sales and use tax on its delivery charges. In reaching this conclusion, the court rejected various arguments made by the taxpayer that it was not making retail sales of tangible personal property, including that it was providing a delivery service or was acting as a purchasing agent for its customers.
- North Carolina: The Office of Administrative Hearings (OAH) addressed the constitutionality of a franchise tax statute that allows a deduction from the corporate franchise tax base only for receivables owed to the taxpayer by related corporations doing business in the state.
- Virginia: The Department of Taxation ruled that an artist that painted a mural for a subway station was selling tangible personal property because the mural was painted on canvasses before being installed.
The items described above are also reported as editions of TaxNewsFlash:
- Indirect Tax
- Taxation of the Digitalized Economy
- Tax Dispute Resolution
- Tax Developments Relating to Coronavirus (COVID-19)
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