KPMG’s Week in Tax: 4 - 8 April 2022

Recent tax developments from around the globe for the week of 4 - 8 April 2022

Recent tax developments from around the globe for the week of 4 - 8 April 2022

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

Europe

  • Finland: The Court of Justice of the European Union (CJEU) concluded that the Finnish statutory investment fund tax-exemption regime, that applied solely to contractual-based investment funds, was contrary to the EU principle of free movement of capital. The judgment is a landmark decision and is expected to change the Finnish non-resident investment fund tax practice.
  • Belgium: An amendment concerning the VAT exemption for medical professions and hospitals brings the scope of the so-called “medical VAT exemptions” more in line with the view of the CJEU.
  • Cyprus: The deadline for filing income tax returns by companies and “self-employed with accounts” for the year 2020 has been extended to 31 July 2022.
  • EU: KPMG member firms in the EU submitted a response to the European Commission’s public consultation on the proposed EU Directive on rules to prevent the misuse of shell entities for tax purposes.
  • EU: A regulation regarding value added tax (VAT) and how payment service providers are to report data about e-commerce transactions has been adopted.
  • EU: The Economic and Financial Affairs Council of the EU (ECOFIN) did not reach political agreement on the revised compromise text for an EU minimum tax directive.
  • Netherlands: A bill—presented to the Lower House of Parliament—would introduce a reporting obligation for digital platform operators, to provide the Dutch tax authorities with information about certain users (“sellers”) on their platform, pursuant to an EU Directive (DAC7).
  • Netherlands: The effective date of the employee share options rights tax measure proposed as part of the 2022 Tax Plan package will be postponed until 1 January 2023, but the proposal remains otherwise unchanged.
  • OECD: The first phase of a new global Inventory of Tax Technology Initiatives contains information on the use of leading technology tools and digitalization solutions implemented by 76 tax administrations across the world.
  • Poland: The deadline for submitting information by real estate companies, individual income taxpayers, and corporate income taxpayers, on holding rights in real estate companies with a tax or financial year ending in the period from 31 December 2021 to 31 May 2022, has been extended to 30 September 2022.
  • Poland: The head of the tax administration signed the first co-operative compliance agreement—a form of a close and ongoing cooperation between the taxpayer and the head of the tax administration. The program is intended to provide the correct settlement of tax liabilities in the current declarations submitted by the taxpayer, simultaneously limiting inspections performed by tax authorities, for business entities with revenue of above €50 million.
  • Poland: The Supreme Administrative Court held that interest on and payments made under contractual penalties for non-performance of an obligation under a mutual agreement, constitute income from other sources, and are subject to taxation on general principles according to the tax scale.
  • Poland: The Polish Supreme Administrative Court requested the CJEU provide a  preliminary ruling on whether Article 78(5)(1) and (2) of the Polish tax law  (considerably limiting the right to interest on a tax overpayment) is in line with the EU law.

Read TaxNewsFlash-Europe

Asia Pacific

  • Cambodia: Guidance addressing the use of regulated chemicals serves as a reminder to all companies, factories, enterprises, and others that distribute or use regulated chemicals to comply with the rules regarding the regulation of these chemicals. 
  • Malaysia: A proposal to expand the scope of the excise tax (duty) on sugar-sweetened beverages has been postponed to a later date (to be announced).
  • Malaysia: A new e-telegraphic transfer system will generate a unique account number (virtual account number) per transaction and will assist in tracing the electronic transfer of funds by taxpayers to its accounts and to identify the taxpayers. 
  • Malaysia: Foreign source income received in Malaysia during the second six months of the 2022 assessment year (i.e., from 1 July 2022) is excluded from the computation of the “prosperity tax.”
  • India: A tribunal held that a taxpayer did not have a dependent agent permanent establishment in India under the India-Mauritius income tax treaty because the Indian entity did not habitually exercise the authority to conclude contracts on behalf of the taxpayer.
  • India: A tribunal held that payments made by a taxpayer for online banner advertisements were not taxable in India, and thus the taxpayer was not required to withhold tax (deduct tax at source) with respect to such payments.
  • India: A tribunal held that in a case concerning a taxpayer challenge to an assessment of the divided distribution tax, the taxpayer cannot initially raise an additional ground relating to the tax liability in the current appeal before the tribunal. Rather, the taxpayer can appeal the issue before the Commissioner of Income Tax (Appeals).
  • India: A tribunal held that because the taxpayer did not withhold tax at source (often referred to in India as “tax deducted at source”), the taxpayer was unable to deduct certain amounts as expenses.
  • India: A tribunal issued a decision in a case concerning a claim for a foreign tax credit in India on taxes withheld (deducted) in Singapore with regard to commission income. The tribunal observed that the commission income was taxable in both Singapore and India pursuant to a provision of the residuary article of the India-Singapore income tax treaty and that the taxpayer was eligible to claim a foreign tax credit in India with respect to the taxes withheld in Singapore.

Read TaxNewsFlash-Asia Pacific

Americas

  • Brazil: The federal government issued guidance to clarify that new excise tax (IPI) rates are effective for imports beginning 1 May 2022.
  • Brazil: Banks and financial institutions have a July deadline for filing an information return regarding their liabilities for a state-level sales tax (ICMS).
  • Canada: Ontario’s non-resident speculation tax now applies to all residential properties across Ontario that are purchased by foreign nationals, foreign corporations, and taxable trustees. The province has increased the tax rate to 20% (from 15%) of the purchase price for the transferred property.
  • Mexico: The government of Yucatán state published a decree extending the time for presenting start-of-work notices of start or incidents of work. Taxpayers making disbursements as renumeration for construction work or for a specific time and that were required to present notices of start of work for the months of April and May 2022, may do so during June 2022.

Read TaxNewsFlash-Americas

Transfer Pricing

  • EU: The Economic and Financial Affairs Council of the EU (ECOFIN) did not reach political agreement on the revised compromise text for an EU minimum tax directive.
  • OECD: Comments are requested by 18 April 2022 on the draft model rules for domestic legislation on scope under Amount A of Pillar One—part of the ongoing work of the OECD/G20 Inclusive Framework on base erosion and profit shifting (BEPS) in implementing the two-pillar solution to address the tax challenges arising from the digitalisation of the economy.

Read TaxNewsFlash-Transfer Pricing

FATCA / IGA / CRS

  • Channel Islands: The tax authority in Guernsey issued guidance to provide compliance pointers and links to various information sources relating to the FATCA and common reporting standard (CRS) regimes.
  • Germany: Guidance includes updated information concerning the CRS regime and implications for refugees from Ukraine.

Read TaxNewsFlash-FATCA / IGA / CRS

Trade & Customs

  • U.S. Congress approved legislation to revoke Russia’s trade status and enact a ban on Russian oil. The bills will be enrolled and sent to the White House for action by the president.
  • The U.S. Court of International Trade held that over $200 billion in tariffs on Chinese-origin imports were valid. However, the court found that the U.S. Trade Representative (USTR) failed to respond adequately to public comments during the notice and comment rulemaking process and remanded the cases to the USTR for further reconsideration and explanation.
  • U.S. Customs and Border Protection (CBP) issued guidance regarding the retroactive reinstatement of certain exclusions from Section 301 tariffs on imports from China.
  • The United States announced further sanctions against Russia due to the ongoing conflict in Ukraine, including a new executive order, updated list of specially designated nationals, and Russia-related general licenses.
  • Officials from Australia and India signed an interim trade agreement that aims to create new opportunities for workers and businesses. Both countries continue to work towards a full comprehensive economic cooperation agreement.

Read TradeNewsFlash-Trade & Customs

United States

  • The U.S. Court of Appeals for the Fourth Circuit reversed a decision of the U.S. Tax Court and held that payments made to the taxpayer (a Russian scientist working in the United States) were not exempt from tax under provisions of the United States-Russia income tax treaty.
  • The U.S. Tax Court issued a memorandum opinion granting a taxpayer’s motion for summary judgment by finding that the taxpayer—a company that owned and operated a continuing care retirement community—had correctly accounted for a portion of the upfront payments from its residents when it calculated its taxable income for 2008-2010.
  • Proposed regulations would amend existing regulations under section 36B regarding eligibility for the premium tax credit to provide that affordability of employer-sponsored minimum essential coverage for family members of an employee is determined based on the employee’s share of the cost of covering the employee and those family members, not the cost of covering only the employee.
  • A federal district court held that temporary regulations under section 245A (providing a 100% dividends received deduction for foreign source dividends) issued in June 2019 with retroactive effect are invalid.
  • There were no changes to the quarterly list of countries that require (or may require) participation in, or cooperation with, an international boycott.
     

State and local tax

  • Arkansas: An administrative law judge (ALJ) determined that a taxpayer had nexus under the “significant economic presence test” as first articulated in West Virginia v. MBNA and as adopted by Arkansas.
  • Kentucky: House Bill 8 has passed both chambers of the legislature and has been delivered to the governor for signature. If signed into law, the bill would make significant changes to Kentucky’s tax laws—the most significant being the gradual reduction (and possible elimination) of the state’s current 5% individual income tax rate.
  • Oregon: The state’s tax court addressed an issue stemming from tax years when receipts were sourced to the state under the income-producing activity test. The issue was whether certain activities performed by payment acquirers were costs that were counted in determining the taxpayer’s costs of performance. Third-party activity was considered income-producing activity if the activity was of the type directly engaged in by the taxpayer in its regular profit-seeking business and the activity was performed “on behalf of” the taxpayer. Although the first criterion was met, the tax court concluded that the payment acquirers were not acting “on behalf” of the taxpayer. 

Read TaxNewsFlash-United States

Exempt Organizations

  • Two proposals relating to charitable organizations and charitable giving were included in the “Green Book”—concerning (1) private foundation contributions to donor advised funds not qualifying distributions, and (2) denial of deduction for certain conservation easement contributions.

Read TaxNewsFlash-Exempt Organizations

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

 

 

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