KPMG’s Week in Tax: 13 - 17 June 2022

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

• UK: The effective date of Pillar Two legislation in the UK will be delayed and will now first apply to accounting periods beginning on or after 31 December 2023.
• KPMG report: A tax control framework is essential for companies to provide global tax transparency and facilitate real-time tax compliance and data-oriented auditing by tax administrations.
• Sweden: A proposal for new legislation regarding a withholding tax on dividends would affect both foreign recipients of dividends and Swedish companies declaring and distributing dividends.
• Hungary: New surtaxes, a financial transaction tax, and higher rates of certain taxes were published in the official gazette.
• Poland: The lower house of the Polish Parliament passed amendments implementing certain elements of the “Polish Deal 2.0” program, and the legislation now awaits the president’s signature.
• Poland: The lower house of the Polish Parliament passed legislation extending the application of anti-inflation measures to 31 October 2022 (from 31 July 2022).
• Poland: The Regional Administrative Court in Gliwice held that in situations when a brokerage office does not offer the possibility of providing dividend-paying entities with documents confirming the tax residence of investors, which results in the obligation for these entities to deduct 30% (instead of 15%) for U.S. withholding tax, the taxpayer may deduct the tax paid in the United States from the tax due in Poland up to the amount of the Polish tax (19%).
• Portugal: The Court of Justice of the European Union (CJEU) issued a judgment concluding that a reduced VAT rate can only be applied to renovations or repairs of elevators in immovable properties intended exclusively for private housing.
• Switzerland: Guidelines provide for the valuation for wealth tax purposes of securities that are not traded on any stock exchange.
• Czech Republic: The Supreme Administrative Court—addressing the burden of proof in a case concerning claims for expenses and amounts related to intermediary services for goods imported from China—held that while different means of evidence may be available with regard to foreign trade, this does not relieve taxpayers of the obligation to have sufficiently robust evidence supporting the extent of the intermediary services as well as the existence of the intermediary.
• Czech Republic: The Supreme Administrative Court concluded that a company that organized a promotional event was not entitled to the refund of input VAT on subcontracted supplies. According to the court, these involved the provision of travel services.
• Czech Republic: The Directorate-General for Finance confirmed that compensation for the early termination of energy supplies (heat, electricity, gas, etc.) or the failure to deliver an agreed quantity is considered the provision of a service and therefore a taxable supply.
• Czech Republic: The Ministry of Finance has proposed extending the regime of extraordinary, accelerated tax depreciation for assets classified in the first and second depreciation group, acquired in 2022-2023, for which the taxpayer is the first depreciator.
• Czech Republic: The Ministry of Finance has proposed increasing the annual turnover limit for obligatory VAT registration to CZK 2 million (from CZK 1 million) and increasing the annual income limit for the application of the lump-sum tax regime.  
• Belgium: The government announced the extension of certain VAT filing deadlines. However, the extensions for do not apply to VAT taxpayers with a monthly refund license and to starters benefitting from the quick refund mechanism. Furthermore, the extensions do not apply to filings under the “One Stop Shop.”

Read TaxNewsFlash-Europe

• OECD: An OECD report documents Africa’s latest progress in tackling tax evasion and other illicit financial flows through transparency and exchange of information for tax purposes.

Read TaxNewsFlash-Africa

• Canada: Bill C-8, which implements some of the measures announced in the 2021 Federal Fall Economic Update, enacts the temporary small businesses air quality improvement tax credit and a new refundable tax credit for farming businesses as well as the Underused Housing Tax Act, among other measures.
• Canada: The first budget implementation bill—including several tax measures from the 2022 budget—passed its third reading in the House of Commons.
• Canada: Importers need to closely examine their supply chains so that goods produced by forced or compulsory labor are not inadvertently imported because when the Canada Border Services Agency (CBSA) determines that goods headed to Canada are manufactured using forced labor at any stage, these shipments may be detained by authorities and not allowed into Canada.
• Canada: Distribution platform operators that are registrants for Quebec sales tax (QST) purposes must file the new QST annual information return by 30 June 2022 for the 2021 calendar year.
  
• Canada: Legislation in Quebec that includes a harmonization measure to limit the stock option deduction for certain employees and provide a potential deduction for employers received Royal Assent.
• Argentina: Changes were introduced to the procedure for requesting accreditation or refunds under the “benefit of fiscal stability” established by the mining investment law.
• Bolivia: Under new guidance, invoices that do not comply with certain requirements will be subject to increased penalties.
• Mexico: The new electronic invoice 4.0 (CFDI 4.0) will be mandatory as of 1 January 2023. The six-month extension was granted so that taxpayers can completevat the necessary transition process.

Read TaxNewsFlash-Americas

• Malaysia: A summary of tax developments for the second quarter of 2022 includes a discussion of income and stamp tax developments.
• Malaysia: Delinquent taxpayers have been advised to immediately appear voluntarily at their nearest Malaysian Inland Revenue Board (MIRB) branches to register their tax files and report their actual income. After 15 July 2022, the MIRB will be carrying out enforcement through tax audits, civil and criminal investigations.
• Cambodia: Implementation of the capital gains tax has been delayed to 1 January 2024 for certain taxpayers.
• Cambodia: The General Department of Taxation (GDT) prescribed the official exchange rates to be used by value added tax (VAT) registered taxpayers from June 2022 onwards. 
• India: The Mumbai Bench of the Income-tax Appellate Tribunal held that offshore commission income earned by a foreign company was not taxable in India.

Read TaxNewsFlash-Asia Pacific

• OECD: Comments on consultation documents relating to tax certainty aspects of Amount A under Pillar One were released.
• United States: The New Jersey Division of Taxation announced a transfer pricing settlement initiative program for corporate taxpayers with related-party transactions potentially subject to adjustment. 

Read TaxNewsFlash-Transfer Pricing

• The U.S. Tax Court held (1) that a taxpayer was not eligible for “innocent spouse” relief because her liability for the trust fund recovery penalty under section 6672 did not arise from any liability shown on a joint federal income tax return; and (2) the taxpayer had a prior opportunity to challenge her trust fund recovery penalty liability when she received Letter 1153, Notice of Trust Fund Recovery Penalty, and that she was not entitled to challenge her underlying tax liability at the collection due process hearing or before the Tax Court.
• A KPMG report provides a brief review of the relevant rules governing charitable contributions and net operating loss (NOL) deductions and attempts to navigate the complexities taxpayers encounter when they have both charitable contributions and NOL carryovers available to deduct.
   

State and local tax

• Texas: The Comptroller of Public Accounts published proposed changes to 34 TAC §3.599 to address the franchise tax research and development (R&D) activities tax credit.
• Texas: The Comptroller concluded that a corporate payment card management program was not a taxable data processing service.
• California: The due date for making the first installment of California's passthrough entity tax (PTET) for the 2022 tax year was 15 June 2022.
• California: A state appellate court held that nonresident trusts were subject to income tax on gain associated with the sale an S corporation’s stock.
• Pennsylvania: The Department of Revenue issued a revised notice regarding taxable and exempt property, indicating that non-fungible tokens (NFTs) are considered taxable in Pennsylvania.
• Tennessee: A sales tax holiday (effective 1 August 2022, through 31 August 2022) provides that food and food ingredients may be purchased free of sales tax. The Department of Revenue issued guidance instructing retailers how to report all sales made during the sales tax holiday period.
• Wisconsin: The Tax Appeals Commission concluded that a taxpayer was doing business in Wisconsin for tax years before the Wayfair decision. Although it lacked a physical presence in the state, the taxpayer sold travel services to Wisconsin customers through independent consultants with addresses in Wisconsin, who received commissions for facilitating the sales.

Read TaxNewsFlash-United States

• A KPMG report provides a brief review of the relevant rules governing charitable contributions and net operating loss (NOL) deductions and attempts to navigate the complexities taxpayers encounter when they have both charitable contributions and NOL carryovers available to deduct.

Read TaxNewsFlash-Exempt Organizations

• U.S. Customs and Border Protection (CBP) released importer guidance to prepare for the implementation of the Uyghur Forced Labor Prevention Act rebuttable presumption that goes into effect on 21 June 2022.
• The Bureau of Industry and Security (BIS) of the U.S. Department of Commerce released an order temporarily denying export privileges of three U.S. companies based upon facts indicating that the U.S. companies engaged in conduct prohibited by the Export Administration Regulations by exporting, or causing the export from the United States, of controlled technology to China for 3D printing without the required U.S. government authorization.
• The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued Russia-related General License—Authorizing transactions related to energy—and published amended “frequently asked questions” (FAQs).

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
• Tax Developments Relating to Coronavirus (COVID-19)