EY Tax Monthly News Update – July 2022

New finalised guidance:

Numerous Inland Revenue guidance items have been finalised this month, these are detailed below:

• Interpretation Statement Income tax – Claiming depreciation on buildings – Interpretation statement 22/04 considers the meaning of “building” for depreciation purposes, including the distinction between residential and non-residential buildings. It details when owners can claim depreciation on buildings. IS 22/04 can be found on the Inland Revenue website here. This statement is also accompanied by a fact sheet which can be found on the Inland Revenue website here.
  
  
• Interpretation Statement Income tax – Cash basis person under the financial arrangements rules – Interpretation statement 22/05 explains when a person can account for income and expenditure from financial arrangements on a cash basis instead of an accrual basis. It also sets out the adjustment that must usually be made when a person ceases to be a cash basis person and must account for their financial arrangements using the accrual basis. IS 22/05 can be found on the Inland Revenue website here. This statement is also accompanied by a fact sheet which can be found on the Inland Revenue website here.
  
  
• Fact sheet to accompany QWBA 22/02 – Income tax: Donations – what is required established and maintain a “public fund” under s LD 3(2)(d) of the Income Tax Act 2007 – This fact sheet accompanies the earlier finalised QWBA 22/02 and summarises the key conclusions reached, including who can establish a “public fund”, what is a “public fund”, and how to establish and maintain one. The factsheet is available on the Inland Revenue website here and QB 22/02 is available here.

COVID Variation determination issued extending statement filing deadlines for R&D tax credits

The Commissioner has issued a new COVID-19 variation (COV 22/19) providing extra time to file the statements required by section 68CB(2) of the Tax Administration Act 1994 for a person with a June balance date who is seeking the Commissioner’s approval of their research and development activities by filing a general approval application for the 2021-2022 income year.

It is available on the Inland Revenue website here.

Government extends cost of living support

The Government has extended certain cost-of-living support in a bid to counterbalance the impact of raising inflation. This includes extending the length of time that fuel excise duties and road user charges are reduced, and cost of public transport is halved to the end of January 2023.

The Treasury estimates the combined impacts of policy actions taken to date will reduce headline inflation by 0.5 percentage points in the June 2022 quarter.

For more information refer to the Beehive release available here.

New Zealand/ UK Free Trade Agreement legislation progresses

New Zealand is another step closer to ratifying the free trade agreement with the United Kingdom with the bill having its first reading in Parliament on 26 July. The agreement is expected to boost the New Zealand economy by up to $1 billion and provide further economic security. The United Kingdom Free Trade Agreement Legislation Bill can be read on the New Zealand Legislation website here.

Australian Government introduces FBT exemption for electric vehicles

The Australian Government has introduced legislation to exempt eligible zero or low emissions vehicles from fringe benefit taxes, once they are made available to employees or their associates for private use. This includes battery, hydrogen fuel cell and plug-in hybrid EVs with an initial retail sale value below the “luxury car threshold” for fuel efficient cars (approximately AUD84,000 in 2022-23). The new rule would apply for benefits provided on or after 1 July 2022.

For more information refer to the draft legislation available on the Australian Parliamentary website here.

Latest updates on the BEPS 2.0 project

Refer to EY Global Tax Alerts available on EY.com for the latest updates on the OECD/G20 project on Addressing the Tax Challenges Arising from the Digitalisation of the Economy, including:

• Further information on the United Kingdom’s draft legislation on the “Introduction of the new multinational top-up tax” which is effectively the implementation of the Pillar 2 income inclusion rule. The draft rules which build on the GloBE Model Rules and are open for consultation with comments due by 14 September 2022, are expected to apply to accounting periods commencing on or after 31 December 2023. For more information see the EY Global Tax Alert on EY.com here.
  
  
• The release of the OECD Progress Report on Amount A of Pillar One, which is open for consultation with comments due by 19 August 2022. The report provides significant new information with respect to the design of the new rules. For more information see the EY Global Tax Alert on EY.com here.
  
  
• A reiteration of commitment to the BEPS 2.0 project implementation by the G20 Finance Ministers, from their July meeting in Indonesia. For more information see the EY Global Tax Alert on EY.com here.

For more details on the conference discussions see the EY Global Tax Alert on EY.com here.

UK Government releases draft legislation for new transfer pricing documentation

The United Kingdom Government has published draft legislation on the new transfer pricing documentation requirements, which will apply to large businesses (groups with turnover above €750m). These requirements align with the OECD’s Transfer Pricing Guidelines and will apply for accounting periods beginning on or after 1 April 2023.

For more information see the EY Global Tax Alerts on EY.com here.

Italy’s sugar tax set to enter into force 1 January 2023

Italy’s sugar tax aims to reduce the consumption of certain “sweetened drinks,” with a high content of added sweeteners. The new tax is set to come into force on 1 January 2023 and will apply to a wide range of beverages that have a total content of sweeteners above a certain threshold. For more information see the EY Global Tax Alert on EY.com here.

Refer to the below thought leadership articles and regular newsletters available on EY.com:

• Tax Guides – browse our in-depth guides covering corporate tax, indirect tax, personal taxes, transfer pricing and other tax matters in more than 150 jurisdictions.
  
  
• Global Tax Policy and Controversy Watch, July 2022
  
  
• PE Watch: Latest developments and trends, July 2022
  
  
• EY Global Tax Controversy Flash Newsletter (Issue 48) – Voluntary disclosures – a valuable tool for dealing with VAT errors
  
  
• How human-centric transformation can double your success
  
  
• Why global industrial supply chains are decoupling
  
  
• How CEOs can partner with governments facing policy dilemmas
  
  
• The Latest on BEPS and Beyond, July 2022