KPMG’s Week in Tax: 20 - 24 June 2022

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

• France: A U.S. headquartered multinational corporate entity and its French group members agreed to pay over €1.245 billion to settle an allegation that the multinational entity had transferred fees it received from its French franchises to an entity in Luxembourg, allowing it to reduce its French tax liability. 
• Cambodia: The General Department of Taxation issued guidance regarding loans between related parties and specifically addressing documents to support taxpayer claims about related-party loans.
• EU: A KPMG report discusses the final scheduled meeting of the Economic and Financial Affairs Council of the EU (ECOFIN Council) under the French Presidency. Despite Poland lifting previous reservations, EU Member States were unable to reach political agreement on the minimum tax directive proposal due to a change in position by Hungary, which decided to veto the proposal despite having agreed to support the initiative at previous ECOFIN meetings. 

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• UAE: Suppliers of gold items must impose VAT on the service of making an item of jewelry if a separate fee for the service is identified and charged by the jeweler.
• Australia: The New South Wales budget for 2022-2023 proposes property tax and payroll tax measures.
• Australia: The 2022-2023 budget for Queensland includes payroll tax measures and proposals concerning the coal royalty rate. The budget does not contain any significant new revenue measures in relation to transfer duty and land tax.
• India: The Central Board of Indirect Taxes and Customs (CBIC) issued guidance concerning different practices being followed by various adjudicating officers regarding refunds and specifically refunds of goods and services tax (GST). The guidance provides for uniform treatment of refund claims.
• India: The Central Board of Direct Taxes issued guidelines in a “question and answer” (Q&A) format to address certain difficulties that taxpayers may encounter regarding the withholding (deduction) of tax under Section 194R (as added to the tax law by the Finance Act, 2022, requiring tax withholding at the rate of 10% on the value or aggregate of value of such benefits or perquisites, effective 1 July 2022).
• Bangladesh: Finance Bill 2022 proposes measures concerning income tax and value added tax (VAT).
• Malaysia: The sales tax exemption available regarding the purchase of passenger cars ends 30 June 2022. Purchasers who “book” a vehicle purchase by 30 June 2022 can still benefit from the sales tax exemption.

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• Denmark: Certain services in the form of transporting goods outside the EU are no longer exempt from VAT beginning 1 July 2022.
• Cyprus: Individuals and certain eligible companies generally can benefit from a reduced tax rate of 3% on interest income received or credited from government savings certificates and development bonds and interest from corporate bonds of listed entities.
• Germany: The Court of Justice of the European Union (CJEU) issued a judgment decision in a case concerning the compatibility of the German rules on reimbursing withholding tax on dividends received from portfolio investments with EU law. The CJEU concluded that the evidential requirements under German law for portfolio investments are contrary to the free movement of capital. 
• Poland: A “clearance opinion” allows a transaction involving a company granted the status of an “alternative investment company” that contributes shares it holds in other companies (as part of a share-swapping arrangement), followed by a possible sale by the alternative investment company of all or part of the shares in the operating companies to a third party. 
• Poland: The Supreme Administrative Court held that an exemption provided under the corporate income tax law for a manufacturing project can be extended to the entire income from business activity and not just limited to the income relating to the manufacturing project, as specified in a ruling granted to the taxpayer.
• Poland: Mandatory electronic invoicing (e-invoicing) will not take effect earlier than 1 January 2024. Accordingly, effective 1 January 2022, taxpayers may issue structured invoices (e-invoices) on a voluntary basis using Poland’s e-invoicing system.
• Poland: Because of Russia’s ongoing invasion of Ukraine, a draft decree would extend—through 31 December 2022—the application of the VAT rate of 0% on all types of services to support victims of the war and specifically with regard to certain healthcare activities and functions of local governmental units.

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• Canada: Many online marketplace facilitators will have to collect British Columbia’s 7% provincial sales tax (PST) beginning 1 July 2021.
• Mexico: Due to the tax reforms of 2022 that made various modifications to the federal tax code, legal entities, trustees, settlors or trustees are required to maintain as part of their accounting records, information about their “controlling beneficiaries” (sometimes referred to as ultimate beneficial owners).

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• A KPMG report examines tax authorities’ enforcement of tax rules relating to crypto-assets.
• Rev. Proc 2022-28 announced that the IRS will not issue letter rulings as to whether certain transactions result in an employer reversion within the meaning of section 4980(c)(2).
• The U.S. Supreme Court granted certiorari with regard to whether the penalty for a violation of the “Report of Foreign Bank and Financial Accounts” (FBAR) rules applies on a per-account basis or a per-form basis. The Supreme Court will address a split between the Fifth Circuit and the Ninth Circuit regarding the penalty for FBAR violations.

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• The Office of the U.S. Trade Representative (USTR) announced that the Forced Labor Enforcement Task Force has launched the Uyghur Forced Labor Prevention Act (UFLPA) enforcement strategy.
• The Bureau of Industry and Security (BIS) of the U.S. Department of Commerce is temporarily denying export privileges of a Belarusian airline based upon facts indicating that the Belarusian airline engaged in conduct prohibited by the Export Administration Regulations (EAR).

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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)