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KPMG’s Week in Tax: 24 – 28 June 2019

KPMG’s Week in Tax: 24 – 28 June 2019

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

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Europe

  • France: Enactment of a digital services tax in France is expected soon (possibly in early July 2019), now that differences in the version of the legislation passed by each chamber of parliament have been resolved. 
  • Hungary: The General Court of the European Union issued a judgment rejecting the European Commission’s decision that the Hungarian advertisement tax was incompatible with the EU state aid rules.
  • Hungary: Beginning 1 July 2019, invoices for goods and services must contain certain tariff headings and numbers that apply for value added tax (VAT) purposes.
  • Poland: Explanatory notes (a draft version) explain the withholding tax rules (effective in 2019).
  • Sweden: The Supreme Administrative Court concluded that a foreign life insurance company was not liable for withholding tax on dividends paid with regard to Swedish shares attributable to life insurance policies and for which the policyholders were liable to ”yield tax” in Sweden.
  • Malta: Fiscal unity rules allow related Maltese and foreign companies to form a tax consolidated group for Maltese income tax purposes.
  • Channel Islands: The governments of Jersey, Guernsey, and the Isle of Man announced their plans for future registers of the beneficial ownership of companies.
  • Latvia: The Court of Justice of the European Union (CJEU) issued a judgment in a case concerning the “deductive method” with regard to the customs valuation of imported medicines, and addressing what is meant by the term “similar goods” and the implications of discounts on the price when applying the deductive method of customs valuation.

Read TaxNewsFlash-Europe


Americas

  • Canada: Federal legislation includes corporate tax measures as well as provisions for implementation the multilateral instrument (MLI) and the trade agreement with the United States and Mexico.
  • Canada: Quebec announced “harmonization measures” that align Quebec tax treatment with certain of the 2019 federal budget tax measures.
  • Canada: Tax proposals in Prince Edward Island’s 2019 budget include a reduction to the small business tax rate and increases to the basic personal amount and low-income threshold.
  • Canada: Legislative proposals, if enacted, would impose a $200,000* annual cap for certain employee stock options that qualify for the stock-option deduction as of 1 January 2020. The Department of Finance clarified that stock options granted by Canadian-controlled private corporations (CCPCs) and certain “highly innovative, fast-growing companies” would be exempted from the new limit.
  • Costa Rica: Guidance from the tax authority concerns the registration process for those involved in exporting, marketing, distributing, and producing food and concerning the procedure for applying for the reduced rate of or exemption from VAT.
  • Costa Rica: The tax administration granted a general exemption from VAT until 30 June 2020 for certain construction-related services.

$ = Canadian dollar

Read TaxNewsFlash-Americas


Asia Pacific

  • Japan: The Tokyo Metropolitan Assembly passed measures to amend the Tokyo business tax rates, applicable for fiscal years beginning on or after 1 October 2019.
  • India: The Bombay High Court followed a decision of the Gujarat Court that depreciation is allowable with respect to non-compete fees.
  • India: A tribunal held that executive search fees are distinct from licence fees (that are taxed as royalty income) and are not taxed as fees for technical services under India’s income tax treaty with the Netherlands.
  • India: A tribunal held that notional income recognised by the taxpayer was not “real” dividend income.
  • India: The Central Board of Direct Taxes proposed changes to the audit rules with regard to the accounts of trusts or institutions.
  • India: The due dates for filing certain goods and services tax (GST) returns have been extended to the end of August 2019.

Read TaxNewsFlash-Asia Pacific


Transfer Pricing

  • OECD: The Organisation for Economic Cooperation and Development announced the release of updated XML schemas and guidance to support the exchange of country-by-country (CbC) reports and in relation to tax rulings.
  • Russia: Legislation pending before the Duma includes transfer pricing-related proposals. Specifically, there are proposals concerning the transfer pricing treatment of intangibles; modification to the profit-split method; and a mutual agreement procedure (MAP) process.
  • United States: A recent IRS directive on the use of multiple “reasonably anticipated benefit” shares in a cost sharing arrangement is examined in a KPMG report.

Read TaxNewsFlash-Transfer Pricing


FATCA / IGA / CRS

  • OECD: The Organisation for Economic Cooperation and Development released an international administrative and operational framework for the exchange of information collected under the common reporting standard (CRS) regime.
  • Saint Lucia: An updated version of guidance aims to assist financial institutions to determine their obligations under the CRS regime.
  • Ireland: The Irish Revenue Commissioners issued updated guidance notes on the implementation of FATCA in Ireland.
  • Russia: The tax authority issued an updated version of CRS guidance in the form of “frequently asked questions” (FAQs).
  • British Virgin Islands: The reporting deadline for filing 2018 FATCA and CRS returns was extended to 31 July 2019. The extended deadlines also apply to “nil” filings and trustee documented trusts with reportable accounts.

Read TaxNewsFlash-FATCA / IGA / CRS


Trade & Customs

  • Hungary: Effective 1 July 2019, invoices for goods and services must contain certain tariff headings and numbers.
  • Latvia: A CJEU judgment concerns the customs valuation of imported medicines, and addresses what is meant by the term “similar goods.”
  • UK: A KPMG report considers implications of technology and the future of UK trade.

Read TaxNewsFlash-Trade & Customs


United States

  • A sales and use tax holiday applies in Puerto Rico with respect to purchases of school uniforms and supplies.
  • Notice 2019-42 adds two additional census tracts in Puerto Rico to the list of designated qualified opportunity zones (QOZs).
  • OMB’s Office of Information and Regulatory Affairs (OIRA) completed its review of proposed regulations under section 4968 relating to the excise tax on college net investment income.
  • Senate Finance Committee Chairman Chuck Grassley (R-IA) and ranking member Ron Wyden (D-OR) sent a letter to the U.S. Treasury Secretary expressing concerns about the French government’s proposal to implement a digital services tax.
  • Reports prepared by KPMG address the following topics:
    • Proposed regulations on section 199A concerning the application of a new deduction for certain cooperatives and grain companies
    • New section 461(l) and excess business losses
    • An IRS directive on the use of multiple “reasonably anticipated benefit” shares in a cost-sharing arrangement that withdrew a 2018 directive on the same issue
    • Opportunity zones and real estate investment trusts (REITs)
    • State and local tax developments listed for the second quarter of 2019
  • Legislation enacted or being considered in Louisiana, Nevada, and New Hampshire concerns the tax treatment of remote sales in response to the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. (state sales tax implications of remote or online sales).
  • Newly enacted legislation in Louisiana provides that net operating losses (NOLs) carried over from multiple tax years must be applied beginning with the loss for the earliest tax year, first.
  • A ballot measure in San Francisco would increase taxes on those engaging in business in the city. If approved, an additional tax (known as the mental health gross receipts tax) would be imposed on entities doing business in the city and having their executive pay exceed a ratio of 100:1.
  • A Texas appeals court held that a taxpayer operating an aquarium was not selling tangible personal property and was not entitled to deduct costs of goods sold (COGS) in computing its Texas margin tax liability.
  • New York lawmakers passed legislation that: (1) revises the state’s treatment of “global intangible low-taxed income” (GILTI); and (2) increases the economic nexus threshold for remote sellers and marketplace providers.

Read TaxNewsFlash-United States
 

  • The U.S. House Ways and Means Committee approved H.R. 3429, the “Protecting Access to Information for Effective and Necessary Treatment and Services Act of 2019” (PATIENTS Act). The bill would extend the healthcare inflation-adjusted excise taxes imposed by Code sections 4375 and 4376 (commonly referred to as the “PCORI fee”) on health insurance policies and self-insured health plans through 2026.
  • The U.S. Senate Foreign Relations Committee approved four pending Protocols to amend income tax treaties with Switzerland, Luxembourg, Spain, and Japan. The Senate would need to ratify each Protocol before it could take effect. 

Read TaxNewsFlash-Legislative Updates


Cooperatives

  • A KPMG report provides initial impressions on the proposed regulations under section 199A concerning the application of a deduction for certain cooperatives and grain companies.

Read TaxNewsFlash-Cooperatives


Exempt Organizations

  • OIRA completed its review of proposed regulations under section 4968 relating to the excise tax on college net investment income.

Read TaxNewsFlash-Exempt Organizations


Africa

  • South Africa: The Tax Court held that, for purposes of determining when revenue from the sale of gift cards is recognized for income tax purposes, the taxpayer only was legally entitled to the proceeds when the gift cards were redeemed or when they expired.
  • Nigeria: An exemption from value added tax (VAT) relating to commissions on stock exchange transactions expires on 25 July 2019.
  • Nigeria: An appellate court affirmed a decision concerning value added tax (VAT) imposed on satellite-network bandwidth capacities when provided outside Nigeria by a Netherlands-based non-resident company. A “destination principle” was adopted for imported services in determining the VAT liability in Nigeria.

Read TaxNewsFlash-Africa

 

Indirect Tax

  • France: Enactment of a digital services tax in France is expected soon. 
  • Puerto Rico: A “holiday” from sale and use tax will be available for purchases of school uniforms and supplies.
  • Canada: Quebec announced “harmonization measures” that align Quebec sale tax (QST) measures with certain of the GST/HST provisions in the 2019 federal budget.
  • Hungary: The General Court of the European Union rejected an EC decision that the Hungarian advertisement tax was incompatible with the EU state aid rules.
  • Hungary: Effective 1 July 2019, invoices for goods and services must contain certain tariff headings and numbers that apply for VAT purposes.
  • Nigeria: The exemption from VAT relating to commissions on stock exchange transactions expires on 25 July 2019.
  • Nigeria: An appellate court held that to determine whether VAT applies on satellite-network bandwidth capacities when provided outside Nigeria by a Netherlands-based non-resident company, a “destination principle” for imported services is to be applied to determine what is subject to VAT in Nigeria.
  • Costa Rica: Guidance concerns the registration process for those involved in exporting, marketing, distributing, and producing food and concerning the procedure for applying for the reduced rate of or exemption from VAT.
  • Costa Rica: The tax administration granted a general exemption from VAT until 30 June 2020 for certain construction-related services.
  • India: The due dates for filing certain GST returns has been extended to late August 2019.
  • United States: New York lawmakers passed legislation that increases the economic nexus threshold for remote sellers and marketplace providers.
  • United States: U.S. Senate Finance Committee leaders expressed concerns about the French government’s proposal to implement a digital services tax.
  • United States: Legislation in Louisiana, Nevada, and New Hampshire concerns the tax treatment of remote sales as a response to the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. (state sales tax implications of remote or online sales).

Read TaxNewsFlash-Indirect Tax

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