KPMG’s Week in Tax: 3 - 7 October 2022

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

• Canada: The employment insurance premium rates will increase for 2023.
• Mexico: The procedures for an employer to obtain an opinion from the Mexican Insurance Institute regarding its compliance with social security tax obligations were published in the official gazette.

Read TaxNewsFlash-Americas

• Philippines: A resolution of the Fiscal Incentives Review Board (FIRB) extends to 31 December 2022 work-from-home (WFH) arrangements for registered business enterprises in the information technology-business process management sector.
• Australia: A guide on tax reporting in connection with the buying, selling or investing in cryptoassets provides that when any cryptoasset is disposed of, the disposal must be reported for capital gains tax purposes.
• Cambodia: Effective 1 January 2023, there will be new thresholds for determining taxable income realised by a physical person, sole proprietorship or distributions to each member of a partnership subject to tax on income, as well as for determining monthly taxable salary received by the resident employees subject to tax on salary.

Read TaxNewsFlash-Asia Pacific

• EU: The European Parliament’s sub-committee on economic and monetary affairs (ECON) held a meeting on the solidarity contribution on surplus profits in the fossil sector and the minimum tax directive.
• Lithuania: The government published a draft law to transpose Council Directive (EU) 2021/514 (DAC7) into domestic legislation. The law would require digital platform operators to provide the Lithuanian tax authorities with information about certain users (sellers) on their platform to enable the Lithuanian tax authorities to exchange this information with other EU Member States.
• Netherlands: A memorandum of amendment to the 2023 Tax Plan includes a temporary 65% “windfall profit tax” on sales of natural gas in 2023 and 2024.
• Spain: Decree-Law 7/2022 introduces reductions in the regional individual (personal) income tax rates and repeal of the wealth tax in Andalusia—effective for the 2022 tax year.
• Sweden: Proposed legislation would provide new rules for cross-border divisions, conversions and mergers between EU member states. The KPMG member firm in Sweden prepared a report discussing cross-border conversions.
  
• EU: The Council of the European Union agreed to move Anguilla, the Bahamas, and Turks and Caicos Islands from the so-called “grey list” to the so-called “blacklist.” In addition, Armenia and Eswatini were added to the grey list, while Bermuda and Tunisia were removed from the grey list.
• Germany: The Court of Justice of the European Union (CJEU)—in a case concerning the German rules on cross-border loss relief—held that EU law does not preclude an EU Member State from denying the deduction of final losses incurred by a foreign permanent establishment from the taxable profits of its resident head-office, where the state of residence has waived its power to tax the profits (and losses) of its permanent establishment under a double tax treaty.
• Switzerland: The federal decree on the additional financing of the Swiss pension system through an increase in value added tax (VAT) rates was approved by Swiss public referendum.
  
• Poland: A joint-stock company planned to distribute dividends from its operating activities to one of the limited liability companies to support that company’s investment activities, which would be exempt from corporate income tax. The tax authority found that even though the transaction resulted in a tax benefit, such benefit was not the primary purpose, or one of the primary purposes, of the transaction. Thus, the transaction was not treated as artificial or inconsistent with the tax law.
• Poland: The Supreme Administrative Court held that commercial property sales support services do not constitute intangible services for purposes of the cap on deductibility of intangible services costs.

Read TaxNewsFlash-Europe

• OECD: The OECD released a report entitled “Tax Incentives and the Global Minimum Tax: Reconsidering Tax Incentives after the GloBE Rules.”
• OECD: Comments on a Progress Report on the Administration and Tax Certainty Aspects of Amount A of Pillar One are requested by 11 November 2022.
• Philippines: The Bureau of Internal Revenue (BIR) issued guidelines and procedures for taxpayers requesting mutual agreement procedure (MAP) assistance from the Competent Authority for the Philippines.
• United States: A KPMG report argues that all the proposed alternatives to the arm’s length principle lack its two key benefits of neutrality and flexibility, and looks ahead to what the future may bring. 

Read TaxNewsFlash-Transfer Pricing

• EU: The European Council approved an eighth package of sanctions against Russia for its aggression against Ukraine that includes new import and export restrictions.
• United States: The Bureau of Industry and Security (BIS) of the U.S. Commerce Department released a final rule that provides guidance regarding BIS’s penalty determinations in the settlement of administrative enforcement cases involving violations of the antiboycott provisions of the Export Administration Regulations (EAR).

Read TradeNewsFlash-Trade & Customs

• The IRS issued six notices asking for comments on different aspects of extensions and enhancements of energy tax benefits in the “Inflation Reduction Act of 2022.” Comments are requested by 4 November 2022.
• The IRS announced that taxpayers in both North Carolina and South Carolina affected by Hurricane Ian now have until 15 February 2023 to file various individual and business tax returns and make tax payments.
• The IRS announced that it will transition the qualified intermediary (QI), withholding foreign partnership (WP), and withholding foreign trust (WT) application and account management system (QAAMS) to a new sign-in system that requires new users to register or sign in with “ID.me” (the current IRS credential service provider).
• A KPMG report on the tax treatment of cryptocurrency and cross-border reporting explores the foreseeable problems and offers potential solutions.

State and local tax

• Colorado: The state tax authority proposed rules regarding the state’s relatively new retail delivery fee that address application of the fee to certain types of retail sales, presentation of the fee on an invoice, types of sales not subject to the fee, and administration and enforcement of the fee.
• Iowa: The state tax authority announced that the state’s corporate income tax rate applicable to income exceeding $100,000 will be reduced to 8.4% effective for tax years beginning on or after 1 January 2023.
• Texas:  A district court struck down the requirement that a taxpayer must establish by clear and convincing evidence that it qualifies for the state’s research sales tax exemption or is entitled to the state research and development (R&D) activities credit. In addition, the court held that related rules published in October 2021 may not be applied retroactively.
• West Virginia:  An administrative law judge held that a company operating a franchised tax preparation service, whose employees were not certified public accountants, was not providing “professional” services and was thus required to collect sales tax.

Read TaxNewsFlash-United States

• The IRS released notices requesting comments on different aspects of extensions and enhancements of energy tax benefits in the “Inflation Reduction Act of 2022.” Specific questions raised in the notices are directed at tax-exempt organizations.
• The IRS announced tax relief for taxpayers in North Carolina and South Carolina affected by Hurricane Ian. Therefore, certain employer-sponsored charities are allowed to provide disaster relief programs for affected employees.

Read TaxNewsFlash-Exempt Organizations

• United States: The IRS announced that it will transition the qualified intermediary (QI), withholding foreign partnership (WP), and withholding foreign trust (WT) application and account management system (QAAMS) to a new sign-in system that requires new users to register or sign in with “ID.me” (the current IRS credential service provider).

Read TaxNewsFlash-FATCA / IGA / CRS

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)