KPMG’s Week in Tax: 10 - 14 December 2018 - KPMG Luxembourg
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KPMG’s Week in Tax: 10 - 14 December 2018

KPMG’s Week in Tax: 10 - 14 December 2018

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

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Transfer Pricing and BEPS

  • Saudi Arabia: Draft transfer pricing “bylaws” include definitions of “controlled transactions” and “related persons” as well as rules for transfer pricing documentation, methodology, and Master file, Local file, and country-by-country (CbC) reporting.
  • Argentina: The tax authority released additional clarifications about its interpretation of the rules concerning CbC reporting and filing obligations.
  • Botswana: The parliament passed a bill that would amend the income tax law to introduce transfer pricing and thin capitalisation measures.
  • Qatar: The tax department issued a circular providing details for filing CbC reporting and CbC notifications.
  • Nigeria: The deadline for taxpayers to comply with their pending transfer pricing obligations—including the requirement to declare and disclose all their related-party transactions and to submit transfer pricing documentation—is 31 December 2018.

Read TaxNewsFlash-Transfer Pricing

Africa

  • Nigeria: The Nigerian Content Development and Monitoring Board is set to begin what is being described as an extensive assessment of all companies operating in the oil and gas industry regarding their compliance with the Nigerian Oil and Gas Industry Content Development Act on expatriate quota utilization and succession plan implementation.

Read TaxNewsFlash-Africa

Americas

  • Canada: Corporate income tax measures enacted in Ontario do not reflect a passive income phase-out for the Ontario small business limit.
  • Canada: Legislation reducing Prince Edward Island’s small business tax rate to 3.5% (from 4%) received Royal Assent.
  • Canada: New Quebec sales tax (QST) rules require many businesses located outside of Quebec, as well as operators of certain digital platforms, to register and collect QST from certain customers.
  • Costa Rica: A new law provides a comprehensive reform of the tax system, including items related to income tax reform and to the reform of the general sales tax regime by replacing it with a value added tax (VAT) system. These reforms are generally effective 1 July 2019.

Read TaxNewsFlash-Americas

Asia Pacific

  • China: The State Council announced revisions to the rules concerning the policy for cross-border e-commerce transactions involving imports of retail goods. The new regulations increase the transition limits and add more taxable items.
  • Australia: A draft ruling proposes clarifications for taxpayers with respect to certain undefined terms within the “financial institutions exemption” from interest withholding tax under income tax treaties with the United States and the United Kingdom.
  • India: The Authority for Advance Ruling, Maharashtra found that absent any establishment or place of operation, separate registration is not required in the state where goods are imported for subsequent sale.
  • India: The High Court of Kerala held that human error, detectable by the “naked eye,” does not warrant a penalty. 
  • India: A tribunal held that the right to set off the one-time non-refundable entry fee against the upfront fee payable for allotment of telecom licenses was not a “capital asset” and was not taxable as a capital gain.
  • India: A tribunal held that, concerning the tax treatment of the conversion of a private limited company into a limited liability partnership, because certain conditions were not satisfied, the authorities had correctly disallowed carryforward losses. 
  • India: The Employees’ Provident Fund Organisation issued a circular concerning an extension of a certificate of coverage beyond the period stipulated by the applicable social security agreements. 
  • India: The Central Board of Indirect Taxes and Customs announced that the due date for filing the annual return for goods and services tax (GST) and for filing the GST audit report has been extended to 31 March 2019.
  • Thailand: A royal decree imposes an additional requirement that beneficiaries of the international headquarters regime (IHQ) must satisfy to be eligible for a reduced or exempt Thai corporate income tax rate on royalty income.

Read TaxNewsFlash-Asia Pacific

Europe

  • Serbia: A new law aims to regulate and unify the fees and charges associated with public assets (thus joining over 40 different state regulations and over 130 decisions of municipalities, public enterprises, and different agencies).
  • Netherlands: The Dutch Supreme Court issued a judgment in a case specifically concerning the sale of a participation that provides: (1) detailed guidelines on how to decide whether the costs incurred relate to the acquisition or disposal of participations; and (2) mandatory rules on how costs incurred during the process of acquiring or disposing of a participation are to be accounted for.
  • Netherlands: The adjusted salary requirements for “highly skilled migrant workers” for 2019 have been announced.
  • France: A new anti-fraud law introduces changes with respect to a range of tax topics—including an updated list of non-cooperative jurisdictions and a broadening of the French controlled foreign corporation (CFC) rules. 
  • Austria: A draft regulation regarding CFC taxation includes measures concerning the determination of income, the determination of relevant taxes, and temporary differences.
  • Serbia: Tax legislative changes include rules for assessments when no return is filed.

Read TaxNewsFlash-Europe

FATCA / IGA / CRS

  • United States: Proposed regulations were released to simplify FATCA reporting and to reduce taxpayer burden.
  • Brazil: The tax authority issued another updated version of a manual with respect to the FATCA and common reporting standard (CRS) regimes.
  • Switzerland: The Swiss Federal Council initiated a consultation process with respect to agreements for the automatic exchange of information (AEOI) in tax matters with 18 jurisdictions. 
  • Taiwan: The tax authority announced: (1) a consensus with Japan to implement an automatic exchange of financial account information starting in 2019 under the CRS regime; and (2) the list of low-risk avoidance tax entities that will be exempted from due diligence and reporting under CRS (entities on the list include labor insurance funds, certain pension funds, and certain private school-related funds).
  • Finland: The tax administration issued updated versions of: (1) technical guidance for the submission of FATCA returns with guidelines for the submission of the 2018 report and clarification on the content in the address field; and (2) technical guidance for the submission of the CRS returns.
  • Hungary: Measures amend the CRS rules. A list of “participating jurisdictions” is also provided, effective from 1 January 2019.
  • Liechtenstein: The tax authority issued an updated version of the CRS reporting instructions to assist financial institutions.

Read TaxNewsFlash-FATCA / IGA / CRS

United States

  • Proposed regulations were released as guidance concerning section 59A—the “base erosion and anti-abuse tax” (BEAT) provision—as enacted as part of the new U.S. tax law.
  • Proposed regulations aim to reduce taxpayer burden with regard to certain FATCA compliance rules.
  • OMB’s OIRA completed review of two sets of proposed regulations from the Treasury Department—section 59A (the “base erosion and anti-abuse tax” (BEAT) provision) and section 864(c)(8) (gain or loss from sales of U.S. partnership interests), thus clearing the way for Treasury and the IRS to release text of the proposed regulations.
  • The final version of Form 5471 for 2018 has been posted on the IRS website. Also, the IRS provided a draft version of instructions for Form 5471 for 2018.
  • The IRS posted an “early draft release” of instructions for reporting information with respect to Form 965 about the “transition tax” imposed under section 965.
  • The IRS posted a set of questions and answers (referred to as “FAQs”) concerning issues relating to section 965 filing and reporting requirements for 2018 tax returns. A KPMG report provides initial impressions of the FAQs.
  • The IRS posted a draft version of the instructions for Form 8990, Limitation on Business Interest Expense Under Section 163(j) (Rev. December 2018).
  • Notice 2018-99 was issued as interim guidance for taxpayers to use in determining the amount of parking expenses for qualified transportation fringe (QTF) benefits that is nondeductible under section 274(a)(4) and for tax-exempt organizations to determine the corresponding increase in the amount of unrelated business taxable income (UBTI) under section 512(a)(7) attributable to the nondeductible parking expenses.
  • The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued a notice extending the filing date for the “Report of Foreign Bank and Financial Accounts (FBAR)” for certain individuals who have only signature or other authority over certain foreign financial accounts to 15 April 2020.
  • Puerto Rico’s Treasury Department (PRTD) issued a circular letter to provide additional information on the transition to the new internal revenue unified system (“SURI” for its Spanish acronym).
  • The Colorado Department of Revenue issued updated guidance extending the grace period for implementing the economic nexus and sales tax-sourcing changes being followed as a result of the Wayfair decision.
  • Delaware’s Secretary of State sent out new “invitation letters” to companies inviting them to participate in the state’s unclaimed property “voluntary disclosure agreement” program.
  • Louisiana’s highest court held that a state statute disallowing a credit for taxes paid to other states (in this case, for Texas franchise taxes paid by individual Louisiana taxpayers) violated the Commerce Clause of the U.S. Constitution.
  • Mississippi’s highest court held that the three-year statute of limitations for tax refunds did not discriminate against out-of-state taxpayers and had only an incidental effect on interstate commerce. 
  • In New York, letters were sent to companies headquartered, incorporated, or doing business in the state, generally asking questions about a company’s historical unclaimed property compliance and inviting the companies to participate in the state’s unclaimed property voluntary compliance agreement program.

Read TaxNewsFlash-United States

 

  • The House Ways and Means Committee chairman released a “retooled” version of a tax package that the House proposes to add to H.R. 88 (an unrelated bill) as an amendment.

Read TaxNewsFlash-Legislative Updates

Exempt Organizations

  • Notice 2018-99 was issued as interim guidance for taxpayers to use in determining the amount of parking expenses for qualified transportation fringe (QTF) benefits that is nondeductible under section 274(a)(4) and for tax-exempt organizations to determine the corresponding increase in the amount of unrelated business taxable income (UBTI) under section 512(a)(7) attributable to the nondeductible parking expenses.
  • Notice 2018-100 provides a waiver of the addition to tax under section 6655 for underpayment of estimated income tax payments to the extent the underpayment is attributable to section 512(a)(7) for certain tax-exempt organizations.

Read TaxNewsFlash-Exempt Organizations

Indirect Tax

  • China: The State Council announced revisions to the rules concerning the policy for cross-border e-commerce transactions involving imports of retail goods. The new regulations increase the transition limits and add more taxable items.
  • Costa Rica: A new law provides a comprehensive reform of the tax system, including replacing the general sales tax regime with a value added tax (VAT) system, effective 1 July 2019.
  • India: The Central Board of Indirect Taxes and Customs announced that the due date for filing the annual return for goods and services tax (GST) and for filing the GST audit report has been extended to 31 March 2019.
  • United States: The Colorado Department of Revenue issued updated guidance extending the grace period for implementing the economic nexus and sales tax-sourcing changes being followed as a result of the Wayfair decision.
  • Canada: New Quebec sales tax (QST) rules require many businesses located outside of Quebec, as well as operators of certain digital platforms, to register and collect QST from certain customers.

Read TaxNewsFlash-Indirect Tax

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