Tax News Daily
The latest tax news from around the world, summarised and tagged for tax professionals. Updated twice daily.
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Proof, Not Just Timing, Will Decide Clean Energy Credits
A legal analysis argues that eligibility for clean energy tax credits under US law will ultimately hinge on substantive proof of compliance rather than merely the timing of project completion or credit claims. Taxpayers pursuing investment and production tax credits for renewable energy projects must demonstrate adherence to prevailing wage, apprenticeship, and other statutory requirements. The piece highlights that IRS scrutiny will focus on documentation and evidence of meeting credit conditions, underscoring the importance of robust record-keeping for developers and investors in the clean energy sector.
Canada Trustco Mortgage Co. v. Canada: The Supreme Court’s Foundational GAAR Decision and Its Three-Step Test
This article examines the landmark Supreme Court of Canada decision in Canada Trustco Mortgage Co. v. Canada, which established the foundational framework for applying the General Anti-Avoidance Rule (GAAR). The case introduced a three-step test requiring analysis of whether a tax benefit exists, whether a transaction constitutes an avoidance transaction, and whether that transaction results in a misuse or abuse of the Income Tax Act. The decision remains central to Canadian tax law, shaping how courts and the Canada Revenue Agency assess aggressive tax planning arrangements and defining the boundaries between legitimate tax minimization and abusive tax avoidance.
Judge Limits Wayne County Surplus Property Tax Settlements
A judge has imposed limitations on how Wayne County, Michigan, can settle property tax disputes involving surplus proceeds from tax-foreclosed properties. The ruling addresses the legal framework governing settlements in cases where homeowners claim entitlement to excess proceeds after their properties were sold for more than the tax debt owed. The decision constrains the county's ability to negotiate bulk or blanket settlements, potentially requiring more individualized resolution of claims and affecting the county's approach to managing a large backlog of surplus property tax litigation.
Comments on ECG T-689/24: Confirms Incompatibility of Polish Input VAT Deduction Rules with EU Law
The EU General Court ruling in case T-689/24 confirms that Poland's input VAT deduction rules are incompatible with EU law. The decision addresses specific provisions in Polish VAT legislation that restrict taxpayers' ability to deduct input VAT, finding these restrictions breach the EU VAT Directive. This ruling has significant implications for Polish businesses that may have been denied VAT deductions under the non-compliant rules, potentially opening avenues for refund claims. It also puts pressure on Polish authorities to amend domestic VAT legislation to align with EU requirements. The case adds to a line of EU jurisprudence disciplining member state deviations from harmonized VAT rules.
Upper Tribunal allows HMRC appeal: Invisalign aligners are NOT “dental prostheses” and are standard-rated
The UK Upper Tribunal has ruled in favour of HMRC, overturning a lower decision by finding that Invisalign dental aligners do not qualify as 'dental prostheses' for VAT exemption purposes. As a result, the aligners are subject to standard-rate VAT rather than the zero or reduced rate applicable to dental prostheses. The case has significant implications for the orthodontic and dental device industry, clarifying the boundary of VAT relief for medical and dental products in the UK and potentially affecting how similar products are classified going forward.
How to Prepare for a VAT Audit
Preparing for a VAT audit requires businesses to maintain thorough documentation and organised records to ensure compliance. Key steps include reviewing VAT returns for accuracy, reconciling VAT accounts with financial statements, and ensuring all invoices meet regulatory requirements. Businesses should conduct internal pre-audit checks, identify and correct discrepancies proactively, and ensure staff understand VAT obligations. Having clear audit trails for input and output tax claims is essential. Engaging a tax advisor to review processes before an audit can reduce risk. Prompt responses to auditor queries and transparent cooperation with tax authorities are critical to achieving a smooth audit outcome.
FTO praises FBR official for resolving taxpayer’s pending case
Pakistan's Federal Tax Ombudsman (FTO) has publicly praised a Federal Board of Revenue (FBR) official for successfully resolving a taxpayer's long-pending case. The recognition highlights efforts to improve taxpayer services and reduce the backlog of unresolved tax disputes within FBR. The FTO's acknowledgment serves as an example of effective dispute resolution and responsiveness within Pakistan's tax administration, encouraging officials to prioritize taxpayer grievances. The case underscores the role of the FTO in overseeing tax controversy matters and promoting accountability in tax administration.
Rajkot ITAT Sets Aside Reassessment as Escaped Income Is Below INR 50 Lakh
The Rajkot Income Tax Appellate Tribunal (ITAT) set aside a tax reassessment order against a taxpayer after determining that the alleged escaped income fell below the INR 50 lakh threshold prescribed under Indian income tax law. The tribunal found the reassessment proceedings were initiated without satisfying the jurisdictional requirement under the relevant provision of the Income Tax Act, which mandates a minimum escaped income threshold for reopening assessments beyond a specified period. The ruling reinforces procedural safeguards protecting taxpayers from arbitrary reassessment actions by tax authorities.
Madras HC Upholds GST Interest on Wrongful ITC Utilisation Despite GSTR-3B and GSTR-2A Mismatch
The Madras High Court has upheld GST interest charges on wrongful Input Tax Credit (ITC) utilisation where discrepancies existed between GSTR-3B and GSTR-2A filings. The court ruled that mismatches between self-declared returns and auto-populated purchase data constitute wrongful ITC claims, attracting interest liability under GST law. This ruling reinforces tax authorities' ability to levy interest in cases where taxpayers utilise ITC that cannot be substantiated through supplier-uploaded invoices, emphasising the importance of reconciling purchase records with supplier filings before claiming credits.
Allahabad HC: Physical GST Adjudication Notice Mandatory After Registration Cancellation
The Allahabad High Court has ruled that physical service of adjudication notices is mandatory after GST registration cancellation, as cancelled registrants no longer have access to the GST portal for digital communications. The court held that relying solely on electronic notices via the portal in such circumstances violates principles of natural justice, rendering the proceedings invalid. Tax authorities must ensure physical delivery of notices to the taxpayer's last known address post-cancellation to maintain due process and procedural validity in GST adjudication proceedings.
Even a 2-Day Delay Can Kill a Reassessment: Delhi High Court Draws a Strict Line on Section 148 Timelines
The Delhi High Court has ruled strictly on procedural timelines under Section 148 of the Income Tax Act, holding that even a two-day delay in issuing reassessment notices can invalidate the entire reassessment proceedings. The court emphasized that statutory deadlines are mandatory and not merely directory, leaving no room for condonation of delay in such matters. This ruling reinforces taxpayer protections against reassessment and signals that tax authorities must adhere precisely to prescribed timelines or risk their proceedings being struck down entirely.
Is Delay the End of a Tax Case? ITAT Says Justice Must Prevail Over Technicalities
India's Income Tax Appellate Tribunal (ITAT) has ruled that procedural delays should not automatically defeat a taxpayer's case when substantive justice is at stake. The tribunal held that technicalities and limitation periods must be balanced against the principles of natural justice and equity, allowing delayed appeals in appropriate circumstances. The decision reflects a judicial philosophy prioritizing merit-based adjudication over rigid procedural bars, offering relief to taxpayers who may have missed filing deadlines due to genuine hardship or oversight.
Democratic Senators Probe Scope of Trump’s IRS Immunity Deal
Democratic senators are investigating the scope of a reported IRS immunity deal under the Trump administration, raising concerns about whether certain individuals or entities are being shielded from federal tax enforcement actions. The probe focuses on the extent of any agreements that may limit the IRS's ability to pursue tax compliance and enforcement against specific parties. This represents a significant tax controversy and oversight issue, with implications for the integrity of federal tax administration and the independence of the IRS as an enforcement body.
Grocers' Microcaptive Not Valid For Tax Benefit, 7th Circ. Told
The Seventh Circuit has been urged to rule that a grocery company's microcaptive insurance arrangement does not qualify for tax benefits. Microcaptive transactions, where a business insures itself through a captive insurance company making an 831(b) election to be taxed only on investment income, have faced intense IRS scrutiny. The government argues the arrangement lacks economic substance and fails to meet the requirements for valid insurance. This case reflects the ongoing wave of tax controversy litigation surrounding abusive microcaptive shelters, which the IRS has listed as listed transactions requiring disclosure.
Karnataka HC Directs Fresh GST Assessment After Ignoring Dealer’s DRC-01A Response
The Karnataka High Court has directed tax authorities to conduct a fresh GST assessment after finding that the dealer's response to a DRC-01A notice was entirely ignored during proceedings. The court held that failing to consider a taxpayer's reply before finalising a demand order violates natural justice principles and renders the assessment order invalid. DRC-01A is a pre-show-cause notice mechanism designed to facilitate voluntary compliance. The ruling reinforces that GST authorities must meaningfully engage with taxpayer submissions before passing adverse assessment orders.
FTO dismisses Rs70m tax evasion complaint
Pakistan's Federal Tax Ombudsman (FTO) has dismissed a Rs70 million tax evasion complaint, ruling against the complainant in a case brought before the tax dispute resolution body. The FTO examined the merits of the alleged evasion claim and found insufficient grounds to proceed, effectively clearing the accused party. The decision highlights the FTO's role as an independent oversight mechanism within Pakistan's tax administration, providing taxpayers and authorities a forum to resolve disputes outside of conventional litigation, and underscores the evidentiary standards required to substantiate tax evasion allegations before the ombudsman.
FTO orders FBR to withdraw penalties imposed on NBP branch manager
Pakistan's Federal Tax Ombudsman (FTO) has directed the Federal Board of Revenue (FBR) to withdraw penalties imposed on a National Bank of Pakistan (NBP) branch manager. The FTO found the penalties to be unjustified or procedurally flawed, ordering FBR to reverse its enforcement action. The case illustrates the FTO's function as a check on FBR's administrative conduct, protecting taxpayers and bank officials from potentially improper penalty imposition. It also reflects ongoing tensions between tax enforcement authorities and financial institution representatives over compliance obligations and punitive measures in Pakistan's tax system.
ECJ Preliminary Ruling – Viecura Medical (Case T‑287/26)
The European Court of Justice (ECJ) has been asked for a preliminary ruling in Case T-287/26 involving Viecura Medical, raising questions of EU VAT law that require authoritative interpretation. Preliminary rulings are a key mechanism through which the ECJ clarifies how EU directives apply in member state contexts, with outcomes binding across all EU jurisdictions. The specific legal questions — likely relating to VAT exemptions, classification, or deduction rights in the medical sector — will have broader implications for healthcare-related businesses throughout the EU. The ruling will provide important guidance for national tax authorities and taxpayers facing similar VAT issues.
Gujarat AAR: Paper Bags Attract 5% GST, Rejects 18% Tax Classification
Gujarat's Authority for Advance Rulings (AAR) has determined that paper bags are subject to 5% GST, rejecting the tax authority's proposed 18% classification. The ruling clarifies the correct GST rate applicable to paper bags, providing certainty for businesses in the packaging sector. The applicant sought an advance ruling to resolve ambiguity over which HSN code and corresponding tax rate applied to their product. The AAR's decision favors the lower 5% rate, significantly impacting input tax credit calculations and pricing strategies for manufacturers and suppliers of paper bags operating under India's GST framework.
France: Court denies input VAT deduction for pre-incorporation acquisition
A French court has ruled against allowing input VAT deduction for an acquisition made prior to a company's incorporation. The case examines the conditions under which pre-incorporation costs can qualify for VAT recovery, with the court determining that the entity lacked the necessary taxable person status at the time of the transaction to claim the deduction. This decision has significant implications for businesses planning acquisitions or incurring costs before formal incorporation, highlighting the importance of timing and legal status when seeking to recover input VAT under French tax law.
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