KPMG’s Week in Tax: 11 – 15 March 2019 - KPMG Luxembourg
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KPMG’s Week in Tax: 11 – 15 March 2019

KPMG’s Week in Tax: 11 – 15 March 2019

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

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Transfer Pricing

  • India: A tribunal held that an entity engaged in both manufacturing and trading activities (absent segmented accounts) cannot be treated as a comparable company for benchmarking a taxpayer that was engaged principally in a trading activity. The tribunal, however, found that the Transfer Pricing Officer could select comparable companies even when the data were not publicly available. 
  • Canada: The Canada Revenue Agency released a report and statistics about the mutual agreement procedure (MAP) program for 2017.
  • Peru: The tax authority announced the deadlines for local filing of country-by-country (CbC) reports for FY 2017 and FY 2018 have been extended.
  • Peru: The tax authorities announced Peruvian companies that are part of multinational groups with headquarters in one of 36 countries are not subject to CbC reporting in Peru when the CbC report is filed in one of those 36 countries. However, for Peruvian companies that are part of multinational groups with headquarters filing CbC reports in countries that are not among these 36 countries, the deadlines for filing the CbC reports in Peru are between 14 March and 22 March 2019.

Read TaxNewsFlash-Transfer Pricing

FATCA / IGA / CRS

  • Malta: An updated version of guidelines was issued for implementing “DAC2” (the EU directive) and the common reporting standard (CRS) regime to help financial institutions comply with the CRS requirements.
  • Luxembourg: The right of Luxembourg taxpayers to defend against a requested exchange of information by foreign tax authorities has been reinstated by legislation.
  • South Africa: The budget for 2019 includes proposals regarding the CRS regime.
  • China: The deadline for financial institutions to file CRS reports is 31 May 2019, and they may begin filing CRS reports beginning in late April 2019.
  • United States: The IRS issued a release advising that the qualified intermediary / withholding foreign partnership / withholding foreign trust (QI/WP/WT) application and account management system is accepting applications to form consolidated compliance groups (CCGs) for certifications under the consolidated compliance program for 2019. The deadline for CCG applications is 1 April 2019.

Read TaxNewsFlash-FATCA / IGA / CRS

Asia Pacific

  • China: Multinational corporations with operations in China need to be aware about new filing rules and requirements for their corporate income tax returns for 2018.

Read TaxNewsFlash-Asia Pacific

Africa

  • Senegal: Provisions of an income tax treaty with Luxembourg are effective in 2019.
  • South Africa: There is a 10-year extension of an employment tax incentive regime, into 2029.
  • South Africa: Non-resident suppliers of electronic services (e-services) must register for value added tax (VAT) purposes beginning 1 April 2019.
  • Egypt: There are tax registration procedures, monthly VAT declarations, and requirements for electronic payments of certain taxes and customs duties.

Read TaxNewsFlash-Africa

Americas

  • Cayman Islands: The Council of the European Union announced, following a review of the Cayman legislation on economic substance in the area of collective investment funds, an updated list on tax co-operation.
  • Canada: The federal budget is scheduled to be tabled on 19 March 2019.
  • Canada: Quebec Bill 13 received its first reading. The bill contains measures previously announced in Quebec's 2017 and 2018 budgets, such as measures to reduce the province's small business income tax rate to 4% in 2021.
  • Canada: Electronic platforms must collect and remit Quebec sales tax (QST) on taxable supplies of intangibles and services made to Quebec consumers.

Read TaxNewsFlash-Americas

Europe

  • France: The Court of Justice for the European Union (CJEU) found that welfare contributions aimed at funding social security benefits in France cannot be charged on income from the assets of French residents who are insured under the Swiss social security scheme.
  • Netherlands: A consultation on a bill to modernize the partnership law is open until 31 May 2019.
  • Czech Republic: A regional court held that compensation paid to employees during their vacation was part of the payroll expenses eligible for research and development (R&D) tax allowances.
  • Czech Republic: Tax legislation pending consideration includes measures for implementing a directive concerning the determination of VAT on vouchers, and could affect meal vouchers but not discount vouchers.
  • Luxembourg: A restored measure allows Luxembourg taxpayers to defend themselves against the requested exchange of information by foreign tax authorities for their tax administration.
  • EU: The European Commission reported on measures needed to simplify the VAT collection rules for online sales of goods. The new measures are intended to provide for a smooth introduction of the new VAT measures for e-commerce and to be effective in January 2021.
  • EU: The list of non-cooperative tax jurisdictions was updated. 15 countries have been “blacklisted,” and three jurisdictions have been moved to the “grey list.”
  • EU: An update on a proposed digital advertising tax reflects the Economic and Financial Affairs Council of the EU (ECOFIN) did not reach an agreement during a 12 March 2019 meeting.
  • Switzerland: The tax authorities issued guidance on the taxation of Bitcoin and other cryptocurrencies, including income derived from “mining.”
  • Luxembourg: Provisions of an income tax treaty with Senegal are effective in 2019.
  • Luxembourg: Tax allowances are available for “green” transport including hybrid and electric cars.  

Read TaxNewsFlash-Europe

United States

  • Rev. Rul. 2019-06 provides tables of “covered compensation” for the 2019 plan year, and the taxable wage base is $132,900.
  • The U.S. Tax Court held that an S corporation was liable for a penalty under section 6699 for failing to timely file its tax return, even though the S corporation’s shareholders themselves filed an application for an extension of time to file their individual income tax returns for 2012.
  • The OMB’s Office of Information and Regulatory Affairs (OIRA) received for review proposed regulations relating to qualified opportunity funds under section 1400Z-2.
  • The staff of the Joint Committee on Taxation (JCT) released a presentation that provides an overview of section 199A—that is, the Code provision that provides a 20% deduction for qualified business income.
  • Notice 2019-10 includes a request for comments on possible changes to the rules governing the excise tax treatment of fuel used in a motor vehicle to operate “auxiliary equipment.”
  • The U.S. Court of Appeals for the Ninth Circuit upheld a deficiency against an estate for overstating the amount of a charitable deduction.
  • The Trump Administration released its fiscal year (FY) 2020 budget proposal that includes certain tax-related proposals.
  • Final regulations remove 296 “deadwood” regulations—found to be no longer necessary because they do not have any current or future applicability under the Code—and amend 79 regulations to reflect the removal of these 296 regulations.
  • A public hearing relating to the proposed foreign tax credit regulations was cancelled.
  • The U.S. Tax Court, in a case of “first impression,” addressed an issue relevant to the premium tax credit available under the Affordable Care Act.
  • Delaware has initiated an unclaimed property voluntary disclosure agreement (VDA) process. Companies that do not timely enroll will be “eligible” for selection for an unclaimed property audit by the state.
  • The Massachusetts Appellate Tax Board concluded that a taxpayer’s “eFax service” was subject to sales and use tax as a telecommunication service.
  • A Michigan appeals court found that the resale exemption did not apply with respect to a credit card processor’s equipment; thus, the taxpayer was not entitled to a refund of use taxes paid with respect to the credit card processing terminals.
  • New Jersey’s tax court held for the taxpayer, in a case concerning the state’s addback statute. The court found the taxpayer was entitled to a refund of corporation business tax (CBT) when its subsidiary filed CBT returns and paid CBT on its royalty income. The requested refund was based on the taxpayer deducting the full amount of royalties paid to the subsidiary.
  • The Washington State Department of Revenue concluded that an internet-based company that matched music teachers and students, both inside and outside the state, was required to “throw out” certain receipts in apportioning its income for business and occupation (B&O) tax purposes.

Read TaxNewsFlash-United States

Cooperatives

  • The Hawaii Department of Taxation revised a report of general information on taxation of agricultural cooperatives and farmer’s cooperatives.
  • The staff of the Joint Committee on Taxation (JCT) released a presentation that provides an overview of section 199A—that is, the Code provision that provides a 20% deduction for qualified business income.

Read TaxNewsFlash-Cooperatives

Trade & Customs

  • The U.S. Court of Appeals for the Federal Circuit affirmed the trade court, that the U.S. Commerce Department had provided a reasoned explanation for not using the “substantial-transformation test” to determine the country of origin of solar panels and cells imported from China (products that were subject to countervailing and antidumping duty orders). Commerce had applied a “country-of-assembly test” in this matter.
  • The U.S. International Trade Commission (ITC) announced a new investigation to consider possible changes to the rules of origin under the United States-Korea free trade agreement.

Read TaxNewsFlash-Trade & Customs

Indirect Tax

  • Czech Republic: Pending tax legislation includes measures concerning the determination of VAT on vouchers—including meal vouchers and discount vouchers.
  • EU: New rules to simplify the VAT collection for sales of goods online are intended to provide for a smooth introduction of the new VAT measures for e-commerce.
  • EU: ECOFIN did not reach an agreement on the digital advertising tax during a 12 March 2019 meeting.
  • United States: Notice 2019-10 requests comments on possible changes to the rules governing the excise tax treatment of fuel used in a motor vehicle to operate “auxiliary equipment.”
  • Canada: Electronic platforms must collect and remit QST on taxable supplies of intangibles and services to customers in Quebec.
  • Egypt: Registration, monthly VAT declarations, and requirements for electronic payments of certain taxes and customs duties are provided.
  • South Africa: Non-resident suppliers of electronic services (e-services) will be required to register for VAT purposes.
  • United States: The Massachusetts Appellate Tax Board concluded that a taxpayer’s “eFax service” was subject to sales and use tax as a telecommunication service.
  • United States: A Michigan appeals court found that the resale exemption did not apply with respect to a credit card processor’s equipment and thus concluded that the taxpayer was not entitled to a refund of use taxes paid with respect to the credit card processing terminals.

Read TaxNewsFlash-Indirect Tax

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