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KPMG’s Week in Tax: 6 – 10 May 2019

KPMG’s Week in Tax: 6 – 10 May 2019

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


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Transfer Pricing

  • UK: HM Treasury proposes a 2% tax on revenues derived from British users’ creation of value for digital services businesses. The proposed digital services tax would be effective for fiscal years beginning on or after 1 April 2020, and would apply to businesses that generate greater than £500 million in global revenues from in-scope activities, and derive more than £25 million in revenues from in-scope business activities linked to the participation of UK users.

Read TaxNewsFlash-Transfer Pricing


  • Cayman Islands: An economic substance law generally is effective in 2019 (that is, 1 July 2019 for “relevant entities” in existence prior to 1 January 2019, and 1 January 2019 for all new entities). The tax authority has issued guidance under the new law.

Read TaxNewsFlash-Americas

Asia Pacific

  • India: The Bombay High Court quashed a tax officer’s denial of a “nil withholding tax certificate” in respect of capital gain realized on the sale of shares of an Indian company by a Mauritian company, pursuant to measures under the India-Mauritius income tax treaty. The High Court ordered a tax refund be made to the taxpayer for the amount of tax withheld plus interest.
  • India: The Bombay High Court addressed the taxability of distribution charges received on account of telecasting of TV channels in India under the provisions of the Income-tax Act, 1961 as well as under the India-Singapore income tax treaty. The High Court held that these receipts were not taxable as royalty income because the taxpayer did not part with any copyright, and the payment was not for a copyright in literary, artistic or scientific work.
  • India: The Delhi Bench of the Income-tax Appellate Tribunal held that income earned by a foreign company as a member of consortium/project for providing technical assistance was taxable as business income under the India-Russia income tax treaty.
  • Thailand: A draft format to be used to apply for the new international business center (IBC) tax incentive regime was released. Applications by certain entities must be filed before 1 June 2019.
  • Australia: International money transfers may be included in an individual’s assessable income if the purported loans are not sufficiently documented.
  • Philippines: Introduction of “one person corporations” in the corporation law may have tax implications—in particular with respect to imposition of the “improperly accumulated earnings tax.”

Read TaxNewsFlash-Asia Pacific


  • Hungary: Two judgments from the Court of Justice of the European Union (CJEU) concern VAT deductions and application of the reverse-charge mechanism.
  • Serbia: The tax authority intends to issue guidance to provide details about tax audits with respect to payments made by employers for employee commuting expenses.
  • UK: A 2% digital services tax has been proposed.
  • Greece: A “special contribution” imposed on the maritime sector has been extended indefinitely and now may also be imposed on certain Greek shipping companies.
  • Greece: New tax law changes reflect the transposition of the EU anti-tax avoidance directive (ATAD) into Greek law, and among these are thin capitalization rules, controlled foreign corporation (CFC) rules, and a general anti-avoidance rule.
  • Switzerland: Customers of Swiss financial institutions who own UK property may be subject to UK capital gains tax on any gains upon disposal arising after April 2019, even if they are not UK residents.
  • Switzerland: Proposed guidance would amend the current requirement that foreign companies that are VAT-registered in Switzerland must make a declaration of their worldwide turnover.

Read TaxNewsFlash-Europe


  • France: A ministerial order updates certain information reporting requirements under the common reporting standard (CRS).
  • United States: The next testing phase for the FATCA International Data Exchange Service (IDES) will start 17 June and continue through 26 July 2019.

Read TaxNewsFlash-FATCA / IGA / CRS

United States

  • Notice 2019-34 sets forth the maximum fair market value of a vehicle for 2019 that can use the fleet-average and vehicle cents-per-mile special valuation rules used to determine the value of an employee’s personal use of an employer-provided vehicle for income and employment tax purposes. The notice reports that future proposed regulations are being planned.
  • The European Union in comments submitted concerning the proposed regulations released in March 2019 relating to the deduction for “foreign-derived intangible income” (FDII) and “global intangible low-taxed income” (GILTI) under section 250 alleged the FDII regime violated the U.S. obligations under certain international agreements.
  • Proposed regulations address tax withholding and information reporting requirements with respect to certain dispositions of interests in partnerships engaged in the conduct of a trade or business within the United States. The proposed regulations would implement measures under the 2017 tax law and would affect certain foreign persons that recognize gain or loss from the sale or exchange of an interest in a partnership that is engaged in the conduct of a trade or business within the United States, as well as persons that acquire those interests, and also would affect partnerships that have foreign persons as partners.
  • Notice 2019-33 provides guidance for public utilities and specifically the normalization requirements for excess tax reserves that result from the reduction of the corporate tax rate by the 2017 tax law. The notice also announces that Treasury and the IRS intend to issue guidance to clarify the rules under section 168 for public utilities.
  • Rev. Proc. 2019-22 provides that a private school may use an Internet website to publicize the school’s racially nondiscriminatory policy as to students.
  • The IRS again reminded taxpayers that effective 13 May 2019, only individuals with tax identification numbers may request an employer identification number (EIN) as the “responsible party” on the Form SS-4 application.
  • The U.S. Court of Appeals for the Third Circuit affirmed that for the years at issue (2007 and 2008), a U.S. shareholder of two controlled foreign corporations (CFCs) that in turn had guaranteed loans made to a U.S. person must include in its gross income the CFCs' applicable earnings and that the amount included in gross income is subject to tax as ordinary income.
  • The U.S. Court of Appeals for the Eleventh Circuit affirmed the disallowance of losses claimed by the taxpayer with regard to S corporation indebtedness because of a lack of basis.
  • As noted in a KPMG report, changes made by the 2017 tax law render the common law test for determining whether an individual is an employee or independent contractor relevant to the application of a variety of new tax paradigms including sections 199A and 4960 as well as extension of the U.S. rules to the calculation of GILTI under section 951A. 
  • Indiana’s governor signed tax legislation that includes changes to the nexus requirements under the state’s corporate income tax laws and that requires marketplaces and marketplace facilitators to collect sales and use tax.
  • State lawmakers in Georgia, South Carolina, and Tennessee considered or passed economic nexus legislation that reflects the conclusion of the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. (state sales tax implications of remote or online sales).
  • A new tax law in Oklahoma enacts a tax that can be imposed on passthrough entities (as defined by federal tax law) for tax years beginning on or after 1 January 2019.
  • The Pennsylvania Department of Revenue issued guidance and examples illustrating how to compute for Pennsylvania corporate net income tax purposes the IRC section 163(j) limitation on deductible interest expenses.
  • OMB’s Office of Information and Regulatory Affairs (OIRA) completed review of proposed regulations under section 897(l) with respect to qualified foreign pension fund requirements, and also received for review final regulations concerning health reimbursement arrangements.

Read TaxNewsFlash-United States


  • The U.S. House Ways and Means Committee this week held a hearing on the tax gap. Next week, the Senate Finance Committee has scheduled a hearing on challenges in the retirement system.

Read TaxNewsFlash-Legislative Updates

Trade & Customs

  • A list of “frequently asked questions” (FAQs) was updated by U.S. Treasury’s Office of Foreign Assets Control following an executive order imposing sanctions on the iron, steel, aluminum, and copper sectors of Iran.
  • An increased 25% additional customs duty or tariff for certain products of China pursuant to the “Section 301” investigation will be effective 10 May 2019.

Read TaxNewsFlash-Trade & Customs

Indirect Tax

  • Hungary: Two judgments from the Court of Justice of the European Union (CJEU) concern VAT deductions and application of the reverse-charge mechanism.
  • UK: HM Treasury proposes a 2% digital services tax.
  • Greece: New provisions relating to VAT vouchers apply as of 1 January 2019.
  • Switzerland: VAT-registered foreign companies are only required to report their turnover in connection with their supplies in Switzerland (and not their worldwide turnover).
  • United States: State lawmakers in Georgia, South Carolina, and Tennessee addressed or passed economic nexus legislation under the authorization of the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. (state sales tax implications of remote or online sales).
  • United States: New tax law in Indiana includes changes that require marketplaces and marketplace facilitators to collect sales and use tax.

Read TaxNewsFlash-Indirect Tax

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