KPMG’s Week in Tax: 17 - 21 October 2022

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

• South Africa: The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) will enter into force in South Africa on 1 January 2023, following the deposit of its instrument of ratification.

Read TaxNewsFlash-Africa

• Brazil: Companies certified as authorized economic operators will have their fiscal administrative processes distributed as a priority, starting on 1 November 2022.
• Canada: Eligible employers in the manufacturing and construction industry may apply to receive funding to support hiring first-year apprentices in 39 “Red Seal Trades.”
• Canada: Manitoba's budget implementation bill, which includes several tax measures, received first reading on 11 October 2022.
• Mexico: The MLI was approved by the Senate, but must also be published in the official gazette and the instrument of ratification must be deposited with the OECD.

Read TaxNewsFlash-Americas

• India: The Supreme Court has extended the time for opening the goods and services tax (GST) common portal for a further period of four weeks to 31 October 2022. Accordingly, Forms GST TRAN-1 and TRAN-2 can be filed between 1 October 2022 through 30 November 2022.
• India: The Ministry of Commerce and Industry issued a release announcing that the existing Foreign Trade Policy 2015-2020 has been extended by six months (from 30 September 2022). Other customs-related developments concern (1) the Customs (Import of Goods at Concessional Rate of Duty or for Specified End Use) Rules, 2022, and (2) the classification of “truck cranes” or “all terrain cranes.”
• Oman: The tax authority has issued a decision to amend certain provisions of the Oman value added tax (VAT) executive regulations for the Oman VAT law. This is the first time the tax authority has amended the Oman VAT legislation since its implementation on 16 April 2021.
• Bahrain: The National Bureau for Revenue (NBR) has the right to conduct in-person VAT field audits that commence with the NBR issuing a notice of visit.
• Korea: The tax tribunal held that the recipient of a dividend that had a contractual obligation to transfer the dividend to its parent company was not the beneficial owner of the dividend under the Korea-Austria income tax treaty.
• Korea: The Supreme Court of Korea held that transfer pricing adjustments need to be added to the customs value of imported goods only when they are directly related to the imported goods and can be calculated based on objective and quantifiable data.
• Hong Kong: The Court of First Instance issued a decision in a case allowing taxpayers a refund of excessive tax reserve certificates purchased plus interest in unsettled tax dispute cases.

Read TaxNewsFlash-Asia Pacific

• Ireland: Finance Bill 2022 contains many tax provisions that were already announced in the budget speech for 2023. Moreover, there are certain measures in the bill that were not previously announced as part of the budget. 
• EU: The Council of the EU adopted a regulation that includes a solidarity contribution on surplus profits in the fossil sector.
• Hungary: A new service to query data of invoices issued by online cash registers is available for testing.
  
• Hungary: The National Tax and Customs Administration (NAV) has reconsidered the concept of the electronic VAT system.
• Spain: The Ministry of Finance announced an upcoming proposal for additional tax measures aimed at combating inflation.
• Czech Republic: The Ministry of Finance announced further details of the proposed tax on extraordinary profits (“windfall profits tax”) generated by certain producers and sellers in the energy sector, banks, and oil companies.
• Poland: The government announced plans to introduce a “windfall profits tax” for certain large companies. 
• Sweden: The Ministry of Finance published a proposal for a temporary tax on excess profits generated by companies in the oil, gas, coal, and refinery industries that align with the agreed solidarity contribution at the EU level.
• Malta: Effective from February 2023, all persons registered for VAT under Article 10 will be obligated to submit online all VAT returns using the VAT e-Services on the Office of the Commissioner for Revenue (CFR) website.
• Poland: The Court of Justice of the European Union (CJEU) issued a decision concerning a preliminary ruling on the application of a VAT exemption to services provided under a sub-participation agreement.
• Poland: Additional VAT developments concern clarifications regarding VAT grouping, and the criteria for identifying a fixed establishment for VAT purposes.
• EU: The European Commission published a “call for evidence” for an impact assessment and asked for public feedback on proposed policy options for a new corporate tax system referred to as “Business in Europe: Framework for Income Taxation (BEFIT).”
• UK: Both the corporate tax rate freeze and repeal of the additional rate of income tax announced in the Chancellor’s “growth plan” will now be reversed.
• UK: The Chancellor announced that the government is not proceeding with the repeal of the “off-payroll working” rules.

Read TaxNewsFlash-Europe

• Cyprus: The bilateral Competent Authority Arrangement (CAA) for the exchange of country-by-country (CbC) reports between Cyprus and the United States—which is currently under negotiation—is expected to be effective for reporting fiscal years starting on or after 1 January 2022.
• Germany:  The CJEU issued a judgment that penalties for failure to comply with the obligation to keep or provide transfer pricing documentation are compatible with EU law.
• OECD: A report from the Secretary-General provides updates on the latest developments in international tax reforms, including on the OECD’s BEPS initiatives, tax transparency efforts, and other G20 tax deliverables.
• Romania: Legislation to implement the EU public CbC reporting directive was published in the official gazette in September. 
• OECD: A KPMG report provides initial observations on the OECD report entitled “Tax Incentives and the Global Minimum Tax: Reconsidering Tax Incentives after the GloBE Rules.”
• Korea: The Supreme Court of Korea held that transfer pricing adjustments need to be added to the customs value of imported goods only when they are directly related to the imported goods and can be calculated based on objective and quantifiable data.

Read TaxNewsFlash-Transfer Pricing

• The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) designated a Russian network that procured military and sensitive dual-use technologies from U.S. manufacturers and supplied them to Russian end-users.
• OFAC issued Russia-related general license 28A—Authorizing certain transactions involving public joint stock company Transkapitalbank and Afghanistan.
  
• OFAC issued a “finding of violation” to an international financial entity located in Puerto Rico for violations of the Venezuelan sanctions regulations and the reporting, penalties and procedures regulations (RPPR).
  
• The Bureau of Industry and Security (BIS) of the U.S. Department of Commerce released an order renewing the temporary denial of export privileges of a Russian airline. BIS also issued an order temporarily denying export privileges of a separate Russian airline.
  
• U.S. Customs and Border Protection (CBP) released a final rule modernizing the customs broker regulations.

Read TaxNewsFlash-Trade & Customs

• Treasury and the IRS withdrew proposed regulations from 2006 concerning the exclusion from gross income of previously taxed earnings and profits under section 959 and related basis adjustments under section 961.
• The IRS issued a reminder to taxpayers in areas covered by certain Federal Emergency Management Agency (FEMA) disaster declarations that they may have more time to file their returns to qualify for the penalty relief under Notice 2022-36 for their 2019 and 2020 tax returns.
• Rev. Proc. 2022-38 provides the annual inflation adjustments for more than 60 tax provisions to be used by individual taxpayers on their 2023 returns (that is, the returns that are generally filed in 2024).
• The IRS Large Business and International (LB&I) division publicly released a practice unit concerning FinCEN Form 114 – Report of Foreign Bank and Financial Accounts (FBAR).

KPMG reports address:

• State and local tax developments concerning technology-related tax issues, for the third quarter of 2022
• “Superfund” tax refunds for exported chemicals and listed substances

State and local tax

• Mississippi: The Supreme Court held that a taxpayer’s sales of wedding photography packages were not subject to sales and use tax.
• Tennessee: In a private letter ruling, the Department of Revenue concluded that the taxpayer’s provision of access to databases and other electronic publications was properly classified as an information service that was not subject to Tennessee sales and use tax.
• Texas: Two administrative decisions address the taxability of information services.
• There are cases pending in Arizona, Massachusetts, Pennsylvania, and South Carolina that address sales and use tax nexus for years both before and after the Wayfair decision. 

Read TaxNewsFlash-United States

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)