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KPMG’s Week in Tax: 14 - 18 May 2018

KPMG’s Week in Tax: 14 - 18 May 2018

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


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Transfer Pricing

  • Israel: The Supreme Court issued a judgment concerning the tax treatment of cross-border services involving Israeli subsidiaries of U.S. companies that maintained equity-based (option) compensation programs for their Israeli employees and that implemented a markup on costs (“cost plus”) as the model of payment for intra-group services rendered by the Israeli affiliates. The Supreme Court held that the expenses associated with the employee options (i.e., the value of the options) must be included in the markup cost base.
  • Italy: Transfer pricing guidelines were issued that address methodology, the arm’s length principle, and transfer pricing documentation. 
  • Netherlands: A transfer pricing decree incorporates standards from the OECD’s base erosion and profit shifting (BEPS) action plans and from the OECD’s Transfer Pricing Guidelines, and provides insight into the interpretation of the arm’s length principle in the Dutch rules.
  • South Africa: A notice concerns penalties that may be imposed on multinational entity (MNE) groups or their South African companies, for failing to comply with the rules for preparing and filing country-by-country (CbC) reports, Master files, and Local files (i.e., transfer pricing returns).


Read TaxNewsFlash-Transfer Pricing


  • OECD: The OECD released a report about 11 preferential regimes of the BEPS inclusive framework members.
  • OECD: The United Arab Emirates has joined the inclusive framework under the base erosion and profit shifting (BEPS) project.


Read TaxNewsFlash-BEPS


  • Kenya: In addition to a 35% tax on gaming revenue of entities in the gambling sector, Treasury has proposed a 20% withholding tax on winnings paid to players. 
  • South Africa: Normal income tax rules will apply to crypto-currencies, and taxpayers will be expected to declare crypto-currency gains or losses as part of their taxable income.


Read TaxNewsFlash-Africa


  • Barbados: A new information and communication technology platform requires all taxpayers to re-register and then be issued a new tax identification number.
  • Canada: A bill in Ontario that aligns certain corporate tax measures to federal tax law changes received Royal Assent.
  • Mexico: Legislation aims to strengthen compliance obligations of the hydrocarbon sector.


Read TaxNewsFlash-Americas

Asia Pacific

  • Australia: The state budget in Western Australia announces an increase in the foreign purchaser duty surcharge on residential property acquired by foreign individuals, corporations, and trusts (from 4% to 7%).
  • Australia: The federal budget proposes that foreign-controlled Australian consolidated entities and multiple entry consolidated groups that control a foreign entity will be treated as both outward and inward investment vehicles for thin capitalisation purposes, beginning on or after 1 July 2019.
  • Thailand: A decree addresses the tax treatment of income and gains derived from, or on disposal of, “digital assets” as assessable income, and adds a 15% withholding tax requirement. The term “digital assets” is defined, and the withholding tax is to apply on income derived from digital assets including cryptocurrency, digital tokens, and assets in the form of other electronic data assets.
  • Myanmar: Guidance liberalizes the rules for wholesale and retail sector investments.


Read TaxNewsFlash-Asia Pacific


  • Netherlands: The Deputy Minister of Finance sent letters to both houses of parliament in response to questions, to explain the plans for legislation to address earnings stripping rules, and to implement an anti-tax avoidance directive (ATAD1) and the fiscal unity rules for corporate income tax purposes.
  • EU: Value added tax (VAT) measures for travel agents are addressed by the European Commission.


Read TaxNewsFlash-Europe


  • Liechtenstein: The tax authority issued guidelines for monitoring FATCA and common reporting standard (CRS) compliance by financial institutions.
  • Saint Lucia: Updated versions of FATCA and CRS guidance were issued.
  • Isle of Man: A notice concerns the reporting deadline, information providers’ online service, and instructions for correcting a previously submitted file by financial institutions.
  • United States: The IRS updated a list of “frequently asked questions” (FAQs) and a webpage relating to FATCA reporting.
  • Australia: Updated FATCA return reporting rules contain additional information concerning taxpayer identification numbers (TINs), among other items.


Read TaxNewsFlash-FATCA / IGA / CRS

United States

  • In Indiana, legislation was enacted to update the state’s conformity to the Internal Revenue Code in light of the federal tax law enacted in December 2017. 
  • The U.S. Treasury Department’s quarterly list of countries that require (or may require) participation in, or cooperation with, an international boycott (within the meaning of Internal Revenue Code section 999(b)(3)) does not reflect any changes to the list of countries.
  • Three IRS “practice units” were released concerning research and development, qualified research expenses, and nonfunctional currency.
  • Tax legislation in Connecticut aims to address the limited state and local tax deduction under the federal tax law (enacted in December 2017), and to provide for a new entity-level tax imposed on partnerships and S corporations doing business in the state.
  • Legislation in Hawaii addresses the state’s conformity to federal estate tax law changes and to the Internal Revenue Code for corporate and individual income tax purposes.
  • Legislation in Hawaii adopts economic nexus standards for purposes of the state’s general excise tax.
  • The Ohio Board of Tax Appeals found that sales of goods of a Texas-based clothing manufacturer were subject to Ohio’s commercial activity tax. While the taxpayer asserted title to the goods was transferred to purchasers in Texas, the board concluded the ultimate destination of the goods controlled.
  • The Washington Department of Revenue issued proposed rules providing that businesses that are not compliant with the state’s unclaimed property law may be subject to new mandatory penalty and interest charges. 


Read TaxNewsFlash-United States

Exempt Organizations

  • Rev. Proc. 2018-32 updates and combines earlier IRS revenue procedures as guidance on the deductibility and reliance by grantors and contributors to tax-exempt organizations.


Read TaxNewsFlash-Exempt Organizations

Trade & Customs

  • The Office of the U.S. Trade Representative (USTR) held public hearings regarding the proposed tariffs on approximately $50 billion worth of Chinese imports.
  • The USTR released a statement on the status of re-negotiations of the North American Free Trade Agreement (NAFTA).
  • A trade and customs monthly summary was provided by KPMG for May 2018.


Read TaxNewsFlash-Trade & Customs

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