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KPMG’s Week in Tax: 3 – 7 June 2019

KPMG’s Week in Tax: 3 – 7 June 2019

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

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Africa

  • South Africa: There is a heightened focus by the National Treasury on “section 12J investments” that offer an up-front tax deduction with respect to certain venture capital investments.
  • Ghana: A “tax data card” provides an overview of tax law.

Read TaxNewsFlash-Africa

Americas

  • Canada: Businesses—in particular, financial institutions with a 31 December year-end—must file goods and services tax (GST) / harmonized sales tax (HST) and/or Quebec sales tax (QST) annual information returns by 30 June 2019.
  • Canada: The 2019 Ontario budget bill received Royal Assent, thus enacting certain tax measures relating to a digital media tax credit, a refundable childcare tax credit, and the estate administration tax.
  • Canada: A bill pending in New Brunswick essentially would implement the province’s 2019 budget.
  • Canada: The tax treatment of stock options—in particular for stock option plans provided by Canadian-controlled private corporations (CCPCs)—can affect employers and employees.
  • Argentina: Legislation expanding a tax incentive regime has been approved for domestic taxpayers conducting certain activities relating to software, robotics, medical research and investigation, and research and development (R&D). The new tax incentive regime will be effective beginning 1 January 2020 and will apply until 31 December 2029. 

Read TaxNewsFlash-Americas

Asia Pacific

  • Bahrain: Guidance on the value added tax (VAT) includes a variety of measures including VAT grouping rules and deferring payment of VAT on imports.
  • Oman: Recent developments concern withholding tax, incentives for specialized zones, and excise tax on certain products.
  • Saudi Arabia: Excise tax will apply for sugary drinks and e-cigarettes.
  • UAE: “Official participants” of Expo 2020 (i.e., countries and intergovernmental organizations) will be allowed VAT refunds with respect to import and local procurements made for their pavilions at the Expo 2020 Dubai site.
  • New Zealand: A discussion document reflects proposals for a digital services tax.
  • New Zealand: A bill that would impose goods and services tax (GST) on low-value imported items, and would revise the loss ring-fencing rules for rental properties is being considered in Parliament.
  • Vietnam: “Official letters” from the tax administration provide guidance with regard to issues concerning corporate income tax, VAT, foreign contractor tax, customs duties, and individual income tax.

Read TaxNewsFlash-Asia Pacific

Europe

  • Austria: The European Commission referred Austria to the Court of Justice of the European Union (CJEU) for its failure to apply special VAT rules for travel agents correctly.
  • Germany: The CJEU Advocate General, in a case concerning Germany’s withholding tax on dividends paid to a Canadian pension plan, concluded that German withholding tax rules were not compatible with EU law.
  • EU: KPMG published annual profiles of the tax systems and direct tax rules of most European countries. 

Read TaxNewsFlash-Europe

Transfer Pricing

  • United States: A Large Business and International (LB&I) directive announces the withdrawal of a prior LB&I directive concerning transfer pricing issue selection by IRS examiners when related to issues of “reasonably anticipated benefits” in cost sharing arrangements.

Read TaxNewsFlash-Transfer Pricing

FATCA / IGA / CRS

  • Luxembourg: There is an updated version of a list of “frequently asked questions” (FAQs) concerning the common reporting standard (CRS) regime.
  • British Virgin Islands: There was a technical error in the BVI financial account reporting system, and as a result, reporting financial institutions have been unable to upload documents or files.
  • South Africa: The government released for public consultation a draft of regulations that would provide updates to the CRS rules.
  • Switzerland: A consultation process was launched concerning tax-related automatic exchange of information (AEOI) agreements with 19 jurisdictions, that are expected to enter into force from year 2020 with the first data transmission to occur in 2021.

Read TaxNewsFlash-FATCA / IGA / CRS

United States

  • Proposed regulations concern the section 897(l) exception from taxation with respect to gain or loss of a qualified foreign pension fund attributable to certain interests in United States real property.
  • OMB’s Office of Information and Regulatory Affairs (OIRA) completed its review of regulations: (1) under sections 91 and 245A (the dividend received deduction and branch loss recapture measures); and (2) concerning state and local tax (SALT) credits and charitable contributions—all measures added to the Code by the U.S. tax law enacted in December 2017.
  • The 2019 inflation adjustment factor and reference prices used in determining the availability of the credit for renewable electricity production and refined coal production under section 45 were released.
  • An LB&I directive announces the withdrawal of a prior LB&I directive concerning transfer pricing issue selection by IRS examiners when related to issues of “reasonably anticipated benefits” in cost sharing arrangements.
  • Rev. Rul. 2019-15 provides the rates of interest with regard to tax overpayments and tax underpayments for the calendar quarter beginning 1 July 2019. The rates of interest will decrease for the third quarter 2019 (the first rate reduction since the fourth quarter 2011).
  • The IRS announced that it will stop faxing tax transcripts in June 2019 and that it will amend the Form 4506 series to end the current practice of mailing tax returns and transcripts to third parties—such as lenders, universities and colleges, and others seeking income verification—in July 2019.
  • Final regulations concerning transactions when property of a C corporation becomes the property of a real estate investment trust (REIT) following certain corporate distributions of controlled corporation stock were issued.
  • The IRS announced that taxpayers who are victims of May 2019 severe storms, tornadoes, straight-line winds, and flooding in Oklahoma may qualify for tax relief.
  • Legislation in Minnesota includes an omnibus tax bill that updates the state’s conformity to the Internal Revenue Code in an effort to address changes made by the 2017 federal tax law.
  • Guidance from the tax authorities of Colorado, Maryland, Oklahoma, Tennessee, and Texas concern 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).
  • Alabama’s highest court held that software is taxable tangible personal property and that Alabama’s sales and use tax law does not distinguish between canned and custom software.
  • Colorado’s highest court issued taxpayer-favorable decisions in two cases concerning similar corporate income tax issues and held: (1) domestic corporations with no property and payroll (or minimal property or payroll) cannot be forced to be included in the Colorado combined group; and (2) that the state’s IRC section 482-type statute cannot be used to include domestic holding companies in their combined groups.
  • The New Jersey Division of Taxation released guidance on combined reporting options as well as additional guidance on each of the filing methods.
  • A New York state trial court affirmed a tribunal decision holding that a taxpayer was not entitled to deduct premiums paid to a captive insurance subsidiary in computing New York entire net income.
  • The Ohio Board of Tax Appeals issued a taxpayer-favorable decision in a case that focused on when the taxpayer’s manufacturing process began. Under Ohio law, a sales and use tax exemption exists for purchases made for use “primarily in a manufacturing operation to produce tangible personal property for sale.” It was concluded based on the facts in this case, the taxpayer was entitled to the exemption.

Read TaxNewsFlash-United States

Exempt Organizations

  • The IRS issued a reminder that Form 990-T corporate filers may apply a blended rate to their unrelated business taxable income (UBTI) for the entire 2017 tax year—including any UBTI from amounts paid or incurred after 31 December 2017 that increase UBTI under new section 512(a)(7).
  • The IRS announced that it will stop faxing tax transcripts in June 2019 and that it will amend the Form 4506 series to end the current practice of mailing tax returns and transcripts to third parties in July 2019—which may affect colleges and universities
  • OIRA completed its review of final regulations from the U.S. Treasury Department concerning state and local tax (SALT) credits and charitable contributions (and review of a related notice providing guidance under sections 164 and 170(c)) with respect to provisions added to the Code by the U.S. tax law enacted in December 2017.

Read TaxNewsFlash-Exempt Organizations

Trade & Customs

  • India’s status as a beneficiary developing country under the U.S. Generalized System of Preferences (GSP) program terminated June 5, 2019.
  • A notice of product exclusions reflects a U.S. Trade Representative (USTR) determination to grant exclusion requests from the additional 25% customs duty on goods imported into the United States from China (pursuant to the investigation and action under Section 301 of the Trade Act of 1974).
  • The U.S. Commerce Department announced an “affirmative preliminary determination” in the antidumping duty (AD) investigation of aluminum wire and cable from China.
  • The USTR announced that a notice that will be published in the Federal Register to extend the amount of time certain goods exported from China have to enter the United States before they will be subject to an additional tariff increase from 10% to 25%.

Read TaxNewsFlash-Trade & Customs

Indirect Tax

  • Austria: The European Commission referred Austria to the CJEU for its failure to apply special VAT rules for travel agents correctly.
  • Bahrain: Guidance includes VAT grouping rules and deferring payment of VAT on imports, and VAT guides.
  • Oman: Recent developments include excise tax being imposed on certain products.
  • Saudi Arabia: Excise tax will apply for sugary drinks and e-cigarettes.
  • UAE: “Official participants” of Expo 2020 (i.e., countries and intergovernmental organizations) will be allowed VAT refunds with respect to import and local procurements made for their pavilions at the Expo 2020 Dubai site.
  • New Zealand: A bill includes a GST on low-value imported items
  • Vietnam: “Official letters” from the tax administration provide guidance with regard to issues concerning VAT and the foreign contractor tax.
  • United States: Alabama’s highest court held that software is taxable tangible personal property and that the sales and use tax law does not distinguish between canned and custom software.
  • United States: The Ohio Board of Tax Appeals held that because a sales and use tax exemption exists for purchases made for use “primarily in a manufacturing operation to produce tangible personal property for sale,” the taxpayer was entitled to the exemption.
  • United States: Guidance from the tax authorities of Colorado, Maryland, Oklahoma, Tennessee, and Texas concern 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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