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KPMG’s Week in Tax: 17 – 21 June 2019

KPMG’s Week in Tax: 17 – 21 June 2019

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

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Transfer pricing and BEPS

  • Australia: A KPMG report evaluates the effects of the multilateral instrument (MLI) on Australia's network of income tax treaties. 
  • OECD: Transfer pricing country profiles for Chile, Finland, and Italy were release, and information in the transfer pricing profiles for Colombia and Israel were updated.
  • BEPS Actions 8 - 10: KPMG provided a report on efforts to align transfer pricing outcomes with value creation.


Read TaxNewsFlash-Transfer Pricing and TaxNewsFlash-BEPS

 

United States 

  • OMB’s Office of Information and Regulatory Affairs (OIRA) completed its review of proposed regulations concerning multiple employer plans (MEPs).
  • KPMG provided an initial analysis about final regulations and proposed regulations relating to global intangible low-taxed income (GILTI), as well as certain final rules relating to the foreign tax credit and the section 965(n) election.
  • KPMG provided an initial analysis about temporary regulations that claw back into the U.S. tax net certain earnings of controlled foreign corporations (CFCs) that otherwise would have escaped U.S. taxation under a literal application of the 2017 tax law (Pub. L. No. 115-97)—the law that is often referred to as the “Tax Cuts and Jobs Act” (TCJA).
  • KPMG provided an initial analysis about final regulations that concern discounting insurance companies’ unpaid losses and estimated salvage recoverable for federal income tax purposes.
  • Proposed regulations provide guidance for cooperatives and their patrons on calculating the deduction for qualified business income (the QBI deduction) and the deduction for domestic production activities for agricultural or horticultural cooperatives and their patrons (the section 199A(g) deduction). In addition, Notice 2019-27 contains a proposed revenue procedure providing guidance on methods for calculating W-2 wages for purposes of section 199A(g).
  • OIRA received for review from the U.S. Treasury Department proposed regulations as guidance under section 451(b)—a provision added to the Code by the TCJA—that provides accrual method taxpayers must recognize income no later than the tax year in which the item is recognized as revenue on an applicable financial statement (i.e., the “all events test” is satisfied no later than the year in which the revenue is recognized for financial accounting purposes).
  • The California Franchise Tax Board issued guidance on what it considers to be appropriate subject matter for a request from a taxpayer to vary from the standard apportionment formula.
  • The New York Division of Tax Appeals concluded that for purposes of computing New York “entire net income” for the tax years at issue, the taxpayer (a diversified worldwide entertainment company) could not exclude royalty payments received from foreign affiliates.
  • In Vermont, new law makes changes to Vermont sales tax law, including the adoption of market-based sourcing. The new law provides that effective for tax years beginning on or after January 1, 2020, sales (other than sales of tangible personal property) will be sourced to Vermont if the taxpayer’s market for the sale is in Vermont.


Read TaxNewsFlash-United States

 

  • The House Ways and Means Committee convened a mark-up of bills that included tax provisions.


Read TaxNewsFlash-Legislative Updates

 

  • Proposed regulations provide guidance for cooperatives and their patrons on calculating the deduction for qualified business income (the QBI deduction) and the deduction for domestic production activities for agricultural or horticultural cooperatives and their patrons (the section 199A(g) deduction). In addition, Notice 2019-27 contains a proposed revenue procedure providing guidance on methods for calculating W-2 wages for purposes of section 199A(g).
  • The IRS updated a list of "frequently asked questions” (FAQs) about the QBI deduction available under section 199A, and specifically addressing the implications of section 199A and the proposed regulations for cooperatives and their patrons.

Read TaxNewsFlash-Cooperatives

 

Trade & Customs

  • India announced increases to the rates of customs duty imposed on imports of certain goods from the United States.


Read TaxNewsFlash-Trade & Customs

 

Europe

  • Hungary: Draft legislation includes proposals concerning corporate income tax (group tax rules, hybrid mismatch provisions, and other measures), individual income tax, and value added tax (VAT) and excise tax.
  • Netherlands: An internet consultation on an options document that essentially contains four possible solutions for a new corporate income tax group rule was opened.
  • Germany: The federal tax court determined that “formal warnings” given by a copyright holder to enforce copyright-related injunctive relief against the party infringing the copyright are subject to value added tax (VAT).
  • Italy: A regional tax court (Pescara) concluded that Italian withholding tax imposed on royalties paid to foreign companies is discriminatory because the amount of the tax is calculated based on the gross amount of the royalties whereas Italian resident companies are able to deduct the costs directly related to the acquisition of the royalty-producing asset or activity.
  • Netherlands: The Deputy Minister of Finance answered parliamentary questions about the implications of judgments of the Court of Justice of the European Union (CJEU) concerning the anti-abuse rules under two EU directives—the Parent-Subsidiary Directive and the Interest and Royalties Directive—and concerning the beneficial ownership concept in the Interest and Royalties Directive.
  • Ireland: Revenue’s Tax and Duty Manual includes updates concerning value added tax (VAT)—specifically concerning the VAT treatment of activities of public bodies and the VAT treatment of certain types of vouchers, and reflecting the increase in the VAT rate for certain supplies from 9% to 13.5% (effective 1 January 2019).


Read TaxNewsFlash-Europe

 

Indirect Tax

  • Hungary: Legislative proposals include VAT amendments.
  • Canada: A proposal to repeal sales tax on auto insurance premiums is pending in Newfoundland and Labrador.
  • Germany: Copyright “formal warning” enforcement actions are subject to value added tax, according to a Federal Tax Court decision.
  • Ireland: The VAT treatment of activities of public bodies and concerning certain vouchers has been updated in a Revenue manual.
  • Kenya and Uganda: Indirect tax measures are proposed in the 2019 budgets.
  • United States: Market-based sourcing rules concerning sales of intangibles are included in legislation in Vermont.
  • Canada: Pension plans must file GST/HST returns and rebate claims by 30 June 2019.
  • EU: There was an update on the status of a financial transaction tax following an ECOFIN meeting.
  • Netherlands: The VAT status of supervisory directors and officers was addressed in a CJEU judgment.

Read TaxNewsFlash-Indirect Tax

 

Africa

  • East Africa: The budgets for 2019 were presented in Kenya, Uganda, Tanzania, and Rwanda. Among the budget proposals, Kenya proposes to increase its capital gains tax rate; Uganda to increase the customs duty on various products (some up to 60%); Tanzania to enhance its excise duty regime; and Rwanda to introduce tax assessment on individuals based on "lifestyle as a measure of prosperity.”
  • Nigeria: An appellate tribunal held that interest and penalty assessments can be made in situations when the underlying tax liability (for Lagos State) has not been settled.
  • Nigeria: An appellate tribunal held that voluntary pension contributions are statutorily exempted from PAYE tax by the provisions of Nigeria’s pension and individual income tax laws. 

Read TaxNewsFlash-Africa

 

Americas

  • Canada: New Brunswick's budget implementation bill amends the province’s income tax law to deem the federal passive investment income "grind" to the small business limit to be zero for purposes of calculating the New Brunswick small business limit calculation.
  • Canada: Newfoundland and Labrador will not be making changes to the 2019 provincial budget. There is one tax measure remaining from this budget—a proposal to eliminate sales tax on automobile insurance premiums. 

Read TaxNewsFlash-Americas

 

FATCA / IGA / CRS

  • Finland: Guidance was issued for software developers regarding FATCA and common reporting standard (CRS) data-flow checks.
  • Germany: CRS guidance was issued for financial institutions.

Read TaxNewsFlash-FATCA / IGA / CRS

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