KPMG’s Week in Tax: 26 - 30 November 2018 - KPMG Luxembourg
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KPMG’s Week in Tax: 26 - 30 November 2018

KPMG’s Week in Tax: 26 - 30 November 2018

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

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United States

  • The U.S. Treasury Department and IRS released proposed regulations as guidance under the business interest expense deduction limitation provisions of section 163(j)—a measure enacted as part of the new U.S. tax law. A KPMG report provides initial impressions and observations of the proposed regulations.
  • The U.S. Treasury Department and IRS released proposed regulations as guidance under the foreign tax credit provision also enacted as part of the new U.S. tax law.
  • The IRS Large Business and International (LB&I) division released a directive as guidance for LB&I examiners concerning taxpayer claims for an additional domestic production activity deduction (DPAD) under now-repealed section 199.
  • Rev. Proc. 2018-59 provides a “safe harbor” to allow taxpayers to treat certain infrastructure trades or businesses as “real property trades or businesses” solely for purposes of qualifying as an electing real property trade or business for purposes of the business interest limitation under section 163(j). This is being referred to as the “infrastructure safe harbor.”
  • The U.S. Tax Court denied the taxpayer’s challenge to the IRS deficiency determinations with respect to medical-marijuana dispensary operations in California. 
  • The IRS issued a reminder that section 401(k) plans and similar employer-sponsored retirement plans may be eligible to make loans and hardship distributions to taxpayers who were victims of Hurricane Michael and Hurricane Florence and to members of their families.
  • Rev. Proc. 2018-60 sets forth automatic consent procedures to change a method of accounting for the timing of recognition of revenue in order to comply with section 451(b), as amended by the new U.S. tax law.
  • A KPMG report explains how taxpayers—including those located outside the specific covered disaster area of the California wildfires—affected by the disaster may qualify for an extension of time to complete a like-kind exchange transaction under section 1031.
  • Notice 2018-92 acts as interim guidance for the 2019 calendar year on income tax withholding from wages and from retirement and annuity distributions. Certain withholding rules in Notice 2018-14—that applied for 2018—will remain in effect for the 2019 calendar year or, in certain instances, until 30 April 2019.
  • Drafts of an updated Form 3115, Application for Change in Accounting Method, and instructions—both of which show a December 2018 revision date—have been posted to the IRS website.

Read TaxNewsFlash-United States

Transfer Pricing

  • Zimbabwe: The budget for 2019 was presented includes transfer pricing proposals that would be effective from 1 January 2019. 
  • Australia: The Australian Taxation Office (ATO) released guidance outlining its compliance approach to “inbound” Australian distributors. The draft “practical compliance guideline” examines transfer pricing issues related to inbound distribution arrangements.
  • Uruguay: A decree provides regulatory guidance concerning new transfer pricing documentation requirements, including the country-by-country (CbC) report and Master file.
  • China: CbC reporting and exchange relationships have been activated with 44 countries, with an expansion of China’s current exchange relationship with the United Kingdom, France, and Germany. For Chinese outbound multinational enterprises (MNEs), the expanded CbC report exchange network means that more companies will not need to perform local CbC report filings.
  • Asia Pacific: Concerning transfer pricing and customs valuation methods, there are commonalities in the countries in the region between certain OECD transfer pricing methods and customs valuation methods contained in the World Trade Organisation (WTO) valuation agreement. However, these methods have not yet converged to the point where there is regional consensus on how to treat transfer pricing adjustments for customs purposes.
  • Netherlands: The Dutch Deputy Minister of Finance outlined the main features of revisions to the tax ruling practice, and these will require stricter requirements for tax ruling requests having an international character.
  • Poland: New transfer pricing rules—effective beginning 1 January 2019—repeal existing rules and replace them with new measures.

Read TaxNewsFlash-Transfer Pricing

Africa

  • Zimbabwe: The 2019 budget includes measures to introduce an “intermediated money transfer tax” (IMTT) to be imposed at a rate of 2%, among other tax items.
  • South Africa: The tax authorities and National Treasury have agreed so that the final tax legislative proposal concerning the taxation of trusts and controlled foreign companies (CFCs) aligns the amendments to the participation exemption for both foreign dividends and capital gains tax with respect to shares held by a foreign trust in a foreign company.

Read TaxNewsFlash-Africa

Americas

  • Canada: The Department of Finance announced it will propose a new refundable tax credit to support labour costs for qualifying news organizations and a new temporary tax credit for subscribers of digital news. 
  • Costa Rica: A court has upheld the constitutionality of the pending tax reform project.

Read TaxNewsFlash-Americas

Asia Pacific

  • China: The Ministry of Finance and State Administration of Taxation jointly issued a circular that provides tax exemptions for foreign institutional investors with respect to China-sourced bond interest. Withholding tax and value added tax (VAT) exemptions are effective from 7 November 2018 to 6 November 2021.
  • Hong Kong: The double taxation relief mechanism for Hong Kong salaries tax was amended earlier this year. The salaries tax amendment may result in some taxpayers paying more tax.
  • Singapore: A change to the “not ordinarily resident” (NOR) taxpayer scheme would allow more “NOR taxpayers” to qualify for an exemption.
  • Japan: A KPMG report provide a general overview of the taxation system in Japan for 2018.

Read TaxNewsFlash-Asia Pacific

Europe

  • Switzerland: The Swiss federal tax administration announced that it will no longer apply federal practices concerning principal companies and Swiss finance branches to new companies from 2019.
  • France: The high chamber of the French Parliament voted to limit the effects of a lower interest limitation to the net interest expenses corresponding to the debt above a debt-to-equity ratio, with a possible effect of loosening the new interest limitation.
  • Netherlands: The Dutch Deputy Minister of Finance outlined the main features of a revision to the tax ruling practice, and that will require stricter requirements for ruling requests with an international character.
  • Netherlands: The change to the VAT “zero rate” for the delivery and provisioning of sea-going vessels and the performance of services to sea-going vessels—originally intended to take effect on 1 January 2018—has been postponed until 1 January 2019.

Read TaxNewsFlash-Europe

FATCA / IGA / CRS

  • Canada: The Canada Revenue Agency issued updated versions of tax residency declaration forms for individuals and entities for purposes of the FATCA and the common reporting standard (CRS) regimes.
  • United States: The IRS issued a reminder that for the certification period ending 31 December 2017, FATCA certifications are due no later than 15 December 2018. Trustees of trustee-documented trusts and sponsoring entities have a 31 March 2019 dealine.
  • United States: The IRS announced the next testing phase for the FATCA International Data Exchange Service (IDES).
  • United States: The IRS announced that the public / private key pairs used for encryption for FATCA filings will be replaced on 30 November 2018. 
  • France: An updated version (v3.6) of the FATCA technical guidance was issued.

Read TaxNewsFlash-FATCA / IGA / CRS

Trade & Customs

  • China and Japan: Representatives from China and Japan signed a mutual recognition agreement (authorized economic operator (AEO)). Japan becomes the thirty-sixth country to sign an AEO mutual recognition agreement with China.
  • Hong Kong and Australia: Negotiations for a free trade agreement and investment agreement have been concluded. Once signed, the agreements will cover trade in goods, trade in services, investment and other related areas, and will boost the flow of trade and services between Hong Kong and Australia.
  • United States: U.S. Customs and Border Protection (CBP) issued a release announcing that on Thursday, 29 November 2018, CBP will deploy a new drawback universe and reports to the Automated Commercial Environment (ACE).

Read TaxNewsFlash-Trade & Customs

Indirect Tax

  • China: A circular provides tax exemptions for foreign institutional investors with respect to China-sourced bond interest. Value added tax (VAT) exemptions are effective from 7 November 2018 to 6 November 2021.
  • Zimbabwe: The 2019 budget includes measures to introduce an “intermediated money transfer tax” (IMTT) to be imposed at a rate of 2%.
  • Netherlands: The change to the VAT “zero rate” for the delivery and provisioning of sea-going vessels and the performance of services to seagoing vessels—originally intended to take effect on 1 January 2018—has been postponed until 1 January 2019.

Read TaxNewsFlash-Indirect Tax

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