KPMG’s Week in Tax: 18 - 22 July 2022

Recent tax developments from around the globe for the week of 18 - 22 July 2022

Recent tax developments from around the globe for the week of 18 - 22 July 2022

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

Transfer Pricing

  • UK: The government published draft legislation and accompanying detailed explanatory notes to implement Pillar Two into the UK tax code. The draft legislation is subject to technical consultation and stakeholders are invited to make comments by 14 September 2022.  
  • Germany: A draft decree law regarding the transfer of functions aims to adapt and restructure the existing regulations on the arm's length principle with the current measures under the OECD Transfer Pricing Guidelines.
  • Czech Republic: The Ministry of Finance announced tax areas of focus during its EU Presidency.
  • A KPMG report explores the diverging paths of Pillars One and Two and considers what might come next.

Read TaxNewsFlash-Transfer Pricing

Europe

  • Greece: A new law incorporates the rules under Council Directive (EU) 2017/952 (29 May 2017), known as Anti-Tax Avoidance Directive II (ATAD II), for the elimination of mismatches arising from the treatment of “reverse” hybrid instruments.
  • Netherlands: The government sent a letter to the Lower House of Parliament providing a summary of the responses to the internet consultation regarding options for strengthening measures to prevent dividend stripping, outlining the government’s current assessment of the options, and describing next steps.
  • Poland: The Ministry of Finance launched a pre-consultation regarding assumptions for digital platform owners in connection with implementation of the common European regulatory framework for reporting income earned through the use of digital platforms under EU Council Directive 2021/514 (“DAC7”). 
  • Poland: VAT developments concern (1) preliminary remarks to a draft bill amending the VAT law to implement the “SLIM VAT 3” package; (2) consultations on draft clarifications of VAT groupings; and (3) proposed amendments to excise tax guarantee provisions.
  • Czech Republic: The Ministry of Finance announced tax areas of focus during its EU Presidency.
  • Czech Republic: The Supreme Administrative Court (SAC) decided that a taxpayer was entitled to a waiver of default interest arising from incorrect VAT treatment because the taxpayer had actively corrected its mistake by filing additional tax returns and paying the tax. The SAC emphasized the taxpayer’s cooperative, honest and fair approach during the proceedings.
  • Netherlands: The Supreme Court issued two judgments on the deduction of interest on loans that served to finance external acquisitions by private equity funds. In both judgments, the Supreme Court addressed the issue of when there is a so-called “unbusinesslike diversion within a group” under Article 10a of the Corporate Income Tax Act 1969.
  • Hungary: The U.S. Treasury Department officially confirmed that the United States notified Hungary of termination of the income tax treaty (1979) between the two countries, effective 8 January 2023.

Read TaxNewsFlash-Europe

Americas

  • Canada: The new luxury tax on certain aircraft is set to become effective 1 September 2022—the same effective date that applies to subject vehicles and boats.
  • Canada: A KPMG publication offers answers to tax and financial planning questions for corporations and individuals for 2022-2023.
  • Mexico: The Second Chamber of the Supreme Court held that conditions set forth in rule 2.5.16 of the Miscellaneous Tax Resolution for 2020 and its annex 1-A, particularly regarding the procedure file 85/CFF in which the notice of fiscal liquidation of legal entities is authorized, are unconstitutional.

Read TaxNewsFlash-Americas

Asia Pacific

  • Malaysia: Orders on foreign-sourced income have been published in the Malaysian official gazette.
  • Australia: Guidance (TA 2022/2 (Treaty shopping arrangements to obtain reduced withholding tax rates)) expresses the Australian Taxation Office’s concerns relating to treaty shopping arrangements designed to obtain the benefit of a reduced withholding tax rate under an income tax treaty. 

Read TaxNewsFlash-Asia Pacific

Trade & Customs

  • UAE: The Dubai customs authority outlined the conditions and procedures for implementing the India comprehensive economic partnership that was signed earlier this year and became effective 1 May 2022.
  • UAE: The Dubai customs authority published a customs notice regarding a temporary ban on the export and re-export of iron scrap and paper waste. The customs notice takes effect on 30 September 2022.
  • United States: The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) issued a “finding of violation” to a U.S. financial institution for violations of the “weapons of mass destruction proliferators sanctions regulations.”
  • United States: The Office of the U.S. Trade Representative (USTR) released a notice concerning the suspension of the safeguard action on imports of certain crystalline silicon photovoltaic (CSPV) cells (whether or not partially or fully assembled into other products) originating in Canada, and modification of the harmonized tariff schedule of the United States.
  • India: The Supreme Court held that in order for a taxpayer to elect not to claim the benefit under section 10B of the Income-tax Act, 1961—a set of special provisions in respect of newly established 100% export-oriented undertakings—the taxpayer must file a written declaration to the assessing officer before the tax return filing due date.

Read TradeNewsFlash-Trade & Customs

United States

  • The U.S. Treasury Department officially confirmed that the United States notified Hungary of termination of the income tax treaty (1979) between the two countries. The treaty termination will be effective on 8 January 2023.
     

State and Local Tax

  • A KPMG report of U.S. state and local tax developments concerning technology-related tax issues, for the second quarter of 2022, provides updates in table format and covers topics such as the taxability of software, guidance on digital equivalents, and other items.
  • Connecticut: A superior court decided in favor of the tax authority in a dispute as to whether a corporate taxpayer qualified for fixed capital investment tax credits. The taxpayer was the sole member of two LLCs treated as disregarded entities under the federal check-the-box rules. The court concluded that the corporation could not claim the credits because the qualifying purchases were made by the LLCs. Notably, the credit statute did not address LLCs or otherwise require that the fixed capital asset be held and used by a “corporation” in the state.
  • Delaware: Senate Bill 281 was recently enacted, making numerous changes to the state’s unclaimed property laws, including expanding the state’s authority to enforce the unclaimed property statutes.
  • New Jersey: The tax court concluded that a manufacturer of corrugated cardboard shipping containers and advertising displays was subject to the state’s litter fee, which is in actuality a tax imposed on “each person engaged in business in the State as a manufacturer, wholesaler, or distributor of litter generating products.”  
  • Washington State: The tax authority recently issued an “interim” statement on the tax treatment of non-fungible tokens (NFTs). 

Read TaxNewsFlash-United States
 

Legislative Updates

  • The staff of the Joint Committee on Taxation (JCT) released a report providing general background on the tax incentives for residential housing in advance of a public hearing of the Senate Committee on Finance.

Read TaxNewsFlash-Legislative Updates

Exempt Organizations

  • The IRS Chief Counsel released a Program Manager Technical Assistance Memorandum concerning the application of the additions to tax under sections 6651 and 6652 to a filer that submitted a specified return on paper when required to file the return electronically.

Read TaxNewsFlash-Exempt Organizations

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

 

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 3712, 1801 K Street NW, Washington, DC 20006.