KPMG’s Week in Tax: 3 - 7 December 2018 - KPMG Luxembourg
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KPMG’s Week in Tax: 3 - 7 December 2018

KPMG’s Week in Tax: 3 - 7 December 2018

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

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Transfer Pricing

  • Belarus: Draft legislation proposes to amend the transfer pricing rules by repealing a 20% “safe harbor” deviation from the arm’s length range of prices and by amending the list of controlled transactions, the value thresholds, the hierarchy of transfer pricing methods, and the hierarchy of information sources.

Read TaxNewsFlash-Transfer Pricing

BEPS

  • OECD: Qatar has signed the multilateral convention to implement tax treaty related measures to prevent base erosion and profit shifting (BEPS)—also referred to as the “multilateral instrument” (MLI).

Read TaxNewsFlash-BEPS

Africa

  • South Africa: A new system for the royalty tax will be phased in through September 2019.
  • Nigeria: An income tax treaty with Singapore is pending ratification in Nigeria (previously ratified by Singapore earlier in 2018). The treaty includes a new definition of permanent establishment; reduced rates of withholding tax on dividends, interest, and royalties; provisions concerning interest on funds connected with the operations of ships or aircraft in international traffic; and rules on the taxation of capital gains.

Read TaxNewsFlash-Africa

Americas

  • Costa Rica: Tax legislation has been published in the official gazette, and the value added tax (VAT) measures will be effective in July 2019. Other measures concern income tax reform and the capital profits tax.
  • Canada: Employer health tax (EHT) legislation has been enacted in British Columbia, effective 1 January 2019. Under the new law, employers must pay EHT for employees who report to work at a permanent establishment in British Columbia, or employees who are paid from or through a permanent establishment in British Columbia.
  • Canada: Legislation to reduce the small business tax rate to 3.5% (from 4%) in Prince Edward Island received its first reading.
  • Canada: The 2018 Quebec fall economic update introduced legislation to harmonize the province's rules with federal tax measures—specifically with respect to the capital cost allowance.
  • Mexico: Tax legislative amendments—published in the official gazette—reflect changes to the income tax law, the VAT law, and other tax legislation.

Read TaxNewsFlash-Americas

Asia Pacific

  • New Zealand: A proposed bill includes measures concerning goods and services tax (GST) rules for low-value imports and the tax treatment of residential rental properties.
  • Australia: Companies with a 30 June year-end must file a “reportable tax positions” schedule by 15 January 2019.
  • Turkey: Contracts that are denominated in a foreign currency or that are indexed to a foreign currency are subject to updated regulatory rules.

Read TaxNewsFlash-Asia Pacific

Europe

  • EU: There are mandatory disclosure requirements for intermediaries and relevant taxpayers in the European Union on 25 June 2018. These requirements must be implemented by the EU Member States before 31 December 2019, and must be effective by 1 July 2020. 
  • Bulgaria: Legislative changes include measures that reflect the implementation of EU rules addressing tax avoidance. Other measures include changes to: (1) the VAT law with rules for vouchers; (2) the real estate tax, vehicle tax, and certain local fees; and (3) the rules for excise tax exemptions and tax warehouses.
  • UK: A decision of the UK High Court that aims to equalize pension benefits for men and women paid by UK defined benefit pension plans that are subject to the UK’s guaranteed minimum pension could increase the pension obligations of companies.
  • EU: ECOFIN (the Economic and Financial Affairs Council) considered a proposal to limit scope of digital services tax and approved amendments to the EU “grey list” of uncooperative jurisdictions for tax purposes.

Read TaxNewsFlash-Europe

FATCA / IGA / CRS

  • Switzerland: An updated version of FATCA guidance includes a new section regarding Swiss financial institutions that must certify compliance to the IRS pursuant to the FATCA Model 2 agreement.
  • Canada: An updated version of the tax residency declaration form under the common reporting standard (CRS) regime was issued.

Read TaxNewsFlash-FATCA / IGA / CRS

United States

  • Proposed regulations relating to the foreign tax credit measures under the new U.S. tax law were released for publication in the Federal Register. The IRS had previously released a version of these proposed regulations, and KPMG provided a report of initial impressions of the proposed foreign tax credit regulations based on that IRS release. Read TaxNewsFlash
  • OMB’s Office of Information and Regulatory Affairs (OIRA) received final regulations from the Treasury Department as guidance concerning the “transition tax” measures under section 965 (as enacted by the new U.S. tax law).
  • OMB’s OIRA acknowledged receipt of proposed regulations under section 864(c)(8) concerning measures enacted by the new U.S. tax law regarding gain or loss of foreign persons from the sale or exchange of certain U.S. partnership interests.
  • Rev. Rul. 2018-32 reflects increased rates of interest for tax overpayments and tax underpayments for the first calendar quarter of 2019.
  • A “personal tax planning guide” for 2019 reflects the new tax law changes affecting individuals and provides tax planning suggestions.
  • Puerto Rico’s Treasury Department continues the process of transitioning to a unified digital revenue system (SURI). With this transition to SURI, there are rules that apply for returns, declarations, payments, or any other tax-related transaction with a due date between 6 December and 20 December 2018.
  • Notice 2018-95 provides transition relief from the “once-in-always-in” (OIAI) condition for part-time employees excluded from section 403 plans and provides a “fresh start” opportunity.
  • The U.S. Tax Court denied the IRS’s motion for summary judgment in a case concerning the taxpayer’s income tax liability for 2008. The Tax Court found “genuine disputes of material fact” as to whether the taxpayer had adopted the deposit method of accounting with respect to one customer payment.
  • A KPMG report examines provisions of the proposed regulations concerning the interest expense deduction limitation imposed under section 163(j) and that are relevant to the insurance industry. 
  • More states—Iowa, New Jersey, and Utah—responded to the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. (state sales tax implications of remote or online sales).
  • The Indiana Department of Revenue issued a revenue ruling concerning whether a company had nexus if it developed a custom software application for an Indiana-based contract manufacturer. The ruling finds that the custom software that would be sold to Indiana customer would not be treated as tangible personal property for sales and use tax purposes. 
  • Ohio’s Supreme Court (overturning a lower tax board’s decision) held that promotional items purchased for distribution at specific baseball games qualified for the use tax exemption under the sales-for-resale category.
  • Voters in San Francisco, California, approved a ballot measure that establishes a marijuana business tax on receipts from sales of cannabis products and that generally adopts economic nexus provisions for purposes of several city taxes.
  • Utah’s tax court, in addressing a constitutional challenge to Utah’s individual income tax structure as it applied to foreign and interstate business income of S corporation shareholders, held that the state’s failure to allow taxpayers a credit for taxes paid to foreign jurisdictions discriminated against foreign commerce.

Read TaxNewsFlash-United States

Exempt Organizations

  • The U.S. House Ways and Means Committee chairman proposed legislation to repeal section 512(a)(7)—a provision added to the Code by the new U.S. tax law enacted in December 2017, that increased unrelated business taxable income by amounts paid or incurred to provide certain transportation fringe benefits to nonprofit employees. 

Read TaxNewsFlash-Exempt Organizations

Indirect Tax

  • New Zealand: A proposed bill includes measures concerning goods and services tax (GST) rules for low-value imports.
  • Bulgaria: There are changes to the VAT treatment of vouchers, the real estate tax, the vehicle tax, and the rules for excise tax exemption.
  • Costa Rica: Tax legislation has advanced, meaning value added tax (VAT) measures will be effective in July 2019.
  • Puerto Rico: The unified digital revenue system (SURI) in Puerto Rico has indirect tax implications. 
  • EU: ECOFIN considered a proposal to limit scope of digital services tax.
  • Mexico: Tax legislative amendments include changes to the VAT law.
  • United States: More states—Iowa, New Jersey, and Utah—responded to the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. (state sales tax implications of remote or online sales).
  • United States: The Indiana Department of Revenue issued a revenue ruling concluding custom software application sold to an Indiana-based contract manufacturer was not to be treated as tangible personal property for sales and use tax purposes. 
  • United States: Ohio’s Supreme Court held that promotional items purchased for distribution at specific baseball games qualified for the use tax exemption under the sales-for-resale category.
  • United States: Voters in San Francisco, California, approved a ballot measures establishes a marijuana business tax on receipts from sales of cannabis products.

Read TaxNewsFlash-Indirect Tax

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