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KPMG’s Week in Tax: 15 - 19 July 2019

KPMG’s Week in Tax: 15 - 19 July 2019

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

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United States

  • The IRS provided tax relief for taxpayers in three Texas counties affected by storms and flooding occurring June 24-25, 2019.
  • Final regulations concern the income inclusion rules under section 50(d)(5) that apply to a lessee of investment credit property when a lessor of that property elects to treat the lessee as having acquired the property. The final regulations adopt regulations that were proposed in 2016 without modification.
  • The U.S. Senate approved Protocols amending the existing income tax treaties with Switzerland, Luxembourg, Spain, and Japan.
  • Notice 2019-45 expands a list of preventive care benefits that can be provided by a high-deductible health plan (under section 223(c)(2)) without a “deductible” or with a deductible below the applicable minimum deductible (self-only or family) for a high-deductible health plan. The notice has implications for taxpayers with health savings accounts (HSAs).
  • A KPMG report describes the rules for certification of professional employer organizations (also referred to as employee leasing companies).
  • States continue respond to the U.S. Supreme Court’s decision in “South Dakota v. Wayfair, Inc.”
    • The California Department of Tax and Fee Administration issued notices providing guidance concerning the new district use tax collection requirement for retailers and for "qualifying retailers.”
    • Connecticut House Bill 7373 delays the use tax reporting requirement for referrers.
    • The Illinois governor signed into law Senate Bill 690 that includes provisions requiring the Department of Revenue to create certain electronic databases for remote retailers and to make the services of certified service providers available to remote retailers by 1 July 2020.
    • Indiana guidance provides details on the sales tax obligations of remote sellers and marketplace facilitators. 
    • Pennsylvania legislation codifies the economic nexus collection and remittance requirements previously announced by the Department of Revenue.
    • In Wisconsin, the governor signed legislation imposing a sales and use tax collection and remittance obligation on marketplace facilitators that exceed $100,000 of annual gross sales into Wisconsin or have 200 or more separate transactions in Wisconsin (effective 1 January 2020).
  • In Missouri, legislation was enacted that includes various tax changes, including measures decoupling Missouri from the federal limitations on the deductibility of interest expense under IRC section 163(j).
  • Montana’s high court concluded that a taxpayer—a combined group—was entitled to deduct 100% of the dividends received from 80/20 subsidiaries that were excluded from the group’s water’s-edge combined report.
  • A California superior court judge concluded that two ballot initiatives that raised taxes in San Francisco (an additional gross receipts tax on those engaged in business in the city and having over $50 million of gross annual receipts sourced to San Francisco) did not need to be approved by a super-majority of votes.
  • The Texas Comptroller filed amendments to a regulation concerning the franchise tax, and specifically concerning the definition of when a taxable entity is considered “primarily engaged in a retail or wholesale trade.”

Read TaxNewsFlash-United States

  • The U.S. House of Representatives passed H.R. 748, the “Middle Class Health Benefits Tax Repeal Act of 2019”—a bill to repeal the excise tax under section 4980I on high-cost employer-sponsored health coverage (commonly referred to as the “Cadillac tax”). There is no information if or when the Senate might consider the bill.

Read TaxNewsFlash-Legislative Updates


Europe

  • Austria: Recent tax developments include additional amendments on ultimate beneficial registry rules and value added tax (VAT) proposals concerning business-to-business (B2B) travel-related services.
  • Luxembourg, Spain, and Switzerland:  Protocols amending the existing income tax treaties between these European countries and the United States were approved by the U.S. Senate.
  • Czech Republic: Guidance provides transitional rules for the research and development (R&D) allowance.
  • Hungary: There are proposed changes to a draft law that would concern interest limitations under the group tax rules for corporate income tax purposes and also certain local business tax and social security tax items.
  • Netherlands: A bill to implement an EU Directive on mandatory disclosure (DAC6)—including the mandatory automatic exchange of information on reportable cross-border arrangements—has been presented to the Lower House.
  • Netherlands: The Dutch Supreme Court issued its decision in a case concerning whether the allocation of bonus shares can be placed under the fixed exemption of the work-related costs rules.
  • Germany: Key features of the value added tax (VAT) group rules in line with Article 11 of the EU VAT Directive—that could replace the regulations concerning VAT groupings in Germany—were presented by the German Ministry of Finance. The new law would be effective 1 January 2021, with a transition phase until 31 December 2021.

Read TaxNewsFlash-Europe


Asia Pacific

  • Indonesia: A regulation clarifies what constitutes a permanent establishment with respect to the business activities conducted by foreign entities in Indonesia.
  • Japan: A Protocol to amend the existing income tax treaty with the United States was approved by the U.S. Senate.
  • Australia: Ride-sharing services are not taxis for the purposes of the fringe benefits tax (FBT) exemption.
  • India: The Central Board of Direct Taxes released a “central action plan” for 2019-20, the focus of which includes litigation management, improving quality in diverse areas of work, and strengthening compliance and enforcement functions.
  • India: The Bombay High Court held that when calculating the residential status of an Indian citizen who migrated to a foreign country, a period (or periods) of 182 days in India during a particular fiscal year is used.
  • India: The Bombay High Court decided a case concerning the processing of a tax return claiming a refund under section 143(1) of the Income-tax Act, 1961. Because the tax authority did not cite justifiable reasons for not issuing the refund, the high court directed the tax authority to process the return and to issue the refund. 
  • India: The High Court of Gujarat held that the due date for filing form the input tax credit form (GSTR-3B) was contrary to provisions of the goods and services tax (GST) law. Form GSTR-3B was not introduced as a return but was merely a stop-gap arrangement until the due date for the filing of GSTR-3 was established.

Read TaxNewsFlash-Asia Pacific


Africa

  • South Africa: A notice provides the criteria for natural persons—individuals—who are required to file income tax returns for the 2019 year of assessment, as well as the dates when those tax returns are due.

Read TaxNewsFlash-Africa


Americas

  • Bermuda: New law provides relief for certain non-resident entities from the economic substance requirements.
  • Canada: Distributed investment plans—including investment limited partnerships—need to begin considering their collection of certain ownership details from their investors before 15 October 2019 in order to comply with their upcoming goods and services tax / harmonized sales tax (GST/HST) and Quebec sales tax (QST) obligations. 

Read TaxNewsFlash-Americas


Transfer Pricing

  • Canada: A report of advance pricing arrangement (APA) statistics from the CRA reveals that 25 APAs were completed in 2018, and 16 APA applications were accepted.
  • Costa Rica: The tax authority issued guidance concerning transfer pricing rules and specifically defining related parties and setting forth rules for residents of low-tax jurisdictions as well as transfer pricing return requirements for certain entities.
  • Brazil: A joint statement released by Brazil and the OECD—following a 15-month project to assess the similarities and divergences between Brazil's and OECD’s transfer pricing approaches—sets out two conceivable options with the goal of fully aligning Brazil’s transfer pricing rules with OECD standards.
  • Sweden: The Swedish Supreme Administrative Court issued a decision concerning the use of multiple-year analysis and the use of the full range or interquartile range result of a benchmark analysis.

Read TaxNewsFlash-Transfer Pricing


FATCA / IGA / CRS

  • Italy: A decree, published in the official gazette, amending the FATCA and common reporting standard (CRS) implementing rules as well as extends the annual reporting deadline.

Read TaxNewsFlash-FATCA / IGA / CRS


Indirect Tax

  • United States: The House of Representatives passed a bill to repeal the excise tax under section 4980I on high-cost employer-sponsored health coverage (commonly referred to as the “Cadillac tax”).
  • Canada: Distributed investment plans—including investment limited partnerships—need to begin considering their collection of certain ownership details from their investors before 15 October 2019 in order to comply with their upcoming GST/HST and QST obligations. 
  • Australia: Ride-sharing services are not taxis for the purposes of the fringe benefits tax (FBT) exemption.
  • Germany: Key features of the value added tax (VAT) group rules in line with Article 11 of the EU VAT Directive—that could replace the regulations concerning VAT groupings in Germany—were presented by the German Ministry of Finance. The new law would be effective 1 January 2021, with a transition phase until 31 December 2021.
  • United States: States—including California, Connecticut, Indiana, Illinois, Pennsylvania, and Wisconsin—have enacted legislation or issued guidance 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).

Read TaxNewsFlash-Indirect Tax

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