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KPMG’s Week in Tax: 22 – 26 July 2019

KPMG’s Week in Tax: 22 – 26 July 2019

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

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Transfer Pricing

  • France: The French digital services tax legislation was enacted. The digital services tax retroactively applies to digital services revenue as of 1 January 2019.
  • New Zealand: The government recently released a discussion document with two broad questions on the digital economy: (1) should there be a temporary 3% digital services tax on the gross revenue attributable to New Zealand users of specified digital services?; and (2) should New Zealand continue to participate in the OECD’s search for a multi-lateral solution and, if so, what is the best solution for New Zealand?
  • Australia: According to an Australian Taxation Office (ATO) ruling, the debt and equity rules in Division 974 of the Income Tax Assessment Act 1997 cannot limit the operation of the transfer pricing rules in Subdivision 815-B of the ITAA 1997.
  • G7: Finance ministers of the “Group of Seven" (G7) countries reached an in-principle agreement with respect to the need for taxing the digital sector and for a minimum worldwide tax on large businesses. The ministers also discussed their common concerns regarding digital currencies.
  • Hong Kong: The Inland Revenue Department published three guidance notes concerning transfer pricing documentation and country-by-country reports, transfer pricing between related persons, and the attribution of profits to permanent establishments in Hong Kong.

Read TaxNewsFlash-Transfer Pricing


BEPS

  • OECD: A status update on implementing the base erosion and profit shifting (BEPS) Action 5 minimum standard reflects that 22 jurisdictions are changing their laws to address harmful tax practices.

Read TaxNewsFlash-BEPS


FATCA / IGA / CRS

  • Australia: An updated FATCA reporting page provides modified steps for reporting institutions to request an extension of time using certain options.

Read TaxNewsFlash-FATCA / IGA / CRS


Trade & Customs

  • Japan: Under new, more stringent procedures with regard to certain controlled items and their relevant technologies destined for South Korea, exporters can no longer apply for bulk export licenses for the export of certain products to South Korea. 

Read TaxNewsFlash-Trade & Customs


Europe

  • France: The French digital services tax legislation was enacted, and retroactively applies to digital services revenue as of 1 January 2019.
  • France: Taxpayers are now allowed to prove expense receipts using a computerized version of the receipts for purposes of determining the tax base for tax and social security contributions, as of 1 July 2019.
  • France: The French government’s plan for a phase-down reduction of the rate of corporate income tax—ultimately to 25% in 2022— has been amended for 2019 for certain large corporate taxpayers.
  • EU: The European Commission announced actions or referrals to the Court of Justice of the European Union (CJEU) concerning Italy, Cyprus, Germany, and Belgium.

Read TaxNewsFlash-Europe


Africa

  • Nigeria: A tax appeal tribunal issued a decision in a case concerning the taxpayer’s right to appeal when there has been a payment of the tax assessment, holding that payment of the tax assessment does not extinguish a taxpayer’s right to appeal against the assessment.

Read TaxNewsFlash-Africa


Asia Pacific

  • Japan: There are new, more stringent procedures with regard to exports of certain controlled items and their relevant technologies to South Korea.
  • New Zealand: The government recently released a discussion document concerning the taxation of the digital economy.
  • India: A bench of the Madras High Court reversed a decision from a single judge order of the court, and decided that the provisions under a plan of amalgamation did not provide an exemption from the statutory procedure for filing a revised income tax return.
  • India: The Mumbai Bench of the Income-tax Appellate Tribunal determined that the phrase “any 12-month period” as used in the service permanent establishment (PE) clause of the India-UK income tax treaty means the “previous year” or “financial year.”
  • India: The government in India “notified” that the Protocol amending India’s income tax treaty with China will be effective in India with respect to income derived in any fiscal year beginning on or after 1 April 2020.
  • India: The Central Board of Indirect Taxes and Customs (CBIC) released a circular to clarify issues concerning certain actions when goods are removed from India for an exhibition or on a consignment basis for export promotion. The CBIC also issued a circular to clarify whether the supply of information technology-enabled services on behalf of clients would qualify as intermediary services and whether these services would qualify as exports.
  • India: The Lok Sabha passed the Finance (No. 2) Bill, 2019 as presented by the Finance Minister.
  • Vietnam: New tax law that aims to regulate and tax e-commerce transactions (effective 1 July 2020) may affect many banks and the financial sector because it will be the duty of banks and the financial sector to identify transactions subject to tax and to collect the tax.
  • Australia: A bill that would extend the “director penalty” regime was re-introduced in early July 2019. One measure proposes to allow the ATO to make, in certain circumstances, directors personally liable for their company’s goods and services tax (GST) liabilities and to collect estimates of anticipated GST liabilities when remittances and filings have not been made.
  • Australia: The ATO finalised a ruling affecting cross-border finance confirming the ATO’s views on what types of costs are debt deductions that are subject to the thin capitalisation calculations.

Read TaxNewsFlash-Asia Pacific


United States

  • OMB’s Office of Information and Regulatory Affairs (OIRA) completed its review of proposed regulations concerning the determination of built-in gains and losses of a loss corporation.
  • Final regulations were issued concerning the allocation by a partnership of foreign income taxes to partners—specifically the rules for allocations of “creditable foreign tax expenditures” (CFTEs).
  • The IRS Large Business & International (LB&I) division added six new compliance campaigns concerning the following topics: (1) S corporations built-in gains tax; (2) post-OVDP compliance; (3) expatriation; (4) high income non-filer; (5) U.S. territories, erroneous refundable credits; and (6) section 457A deferred compensation attributable to services performed before 1 January 2009.
  • Rev. Proc. 2019-29 provides indexing adjustments to provisions under section 36B (in general provides a refundable premium tax credit to help individuals and families afford health insurance through affordable insurance exchanges).
  • Rev. Proc. 2019-30 provides simplified procedures for an insurance company to obtain automatic consent to change its methods of accounting for discounting unpaid losses and expenses, estimated salvage recoverable, and unearned premiums attributable to title insurance to comply with section 846.
  • Rev. Proc. 2019-31 concerns the revised unpaid loss discount factors for the 2018 accident year and earlier accident years for use by insurance companies in computing discounted unpaid losses under section 846.
  • Rev. Proc. 2019-32 grants an extension of time to eligible partnerships to file a superseding Form 1065, “U.S. Return of Partnership Income,” and furnish a corresponding Schedule K-1 (Form 1065) to each of its partners.
  • In Ohio, new legislation was enacted 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).
  • A Kentucky appeals court affirmed a lower court decision holding that “optional liability fees” charged by rent-to-own companies to cover potential damage by customers to the rental property were not subject to sales tax.
  • Under Louisiana law, corporations can deduct federal income taxes paid. The Department of Revenue clarified its position that the federal “base erosion and anti-abuse tax” (BEAT) is not included in the calculation of the Louisiana federal income tax deduction.
  • The governor of Maine signed into law legislation that repealed the existing Maine unclaimed property law and replaces it with a modified version of the 2016 Uniform Unclaimed Property Act. 
  • In Oregon, opponents of House Bill 3427—the legislation that adopted a new corporate activity tax (CAT) (effective 1 January 2020)—have ceased pursuing a referendum to repeal the CAT regime.

Read TaxNewsFlash-United States
 

  • The U.S. House of Representatives passed two tax bills—one concerning multiemployer defined benefit plans (MEPs) and another that would amend the Internal Revenue Code to clarify that all Code provisions apply equally to legally married same-sex couples in the same manner as to other married couples.

Read TaxNewsFlash-Legislative Updates


Exempt Organizations

  • A KPMG report highlights the modifications to the 2018 Form 990-series returns, schedules, and corresponding instructions for tax years beginning in 2018.

Read TaxNewsFlash-Exempt Organizations


Indirect Tax

  • France: The French digital services tax legislation was enacted, and applies retroactively to digital services revenue as of 1 January 2019.
  • France: Taxpayers are now allowed to prove expense receipts using a computerized version of the receipts for purposes of determining the tax base for tax and social security contributions.
  • New Zealand: The government’s discussion document concerning the digital economy focuses on whether there should be a temporary 3% digital services tax on the gross revenue attributable to New Zealand users of specified digital services; and whether New Zealand is to continue to participate in the OECD’s search for a multi-lateral solution and, if so, what is the best solution.
  • Vietnam: New measures concerning supplies of goods and services to individuals located in Vietnam by non-resident enterprises will be effective 1 July 2020. There will be added responsibilities on banks and the financial sector.
  • Australia: A bill would extend the “director penalty” regime proposes to allow the ATO to make, in certain circumstances, directors personally liable for their company’s GST liabilities.
  • G7: Finance ministers of the “Group of Seven" (G7) countries reached an in-principle agreement with respect to the need for taxing the digital sector and for a minimum worldwide tax on large businesses.
  • United States: New law in Ohio addresses sales tax implications of remote or online sales.
  • United States: A Kentucky appeals court affirmed that “optional liability fees” charged by rent-to-own companies to cover potential damage by customers to the rental property were not subject to sales tax. 

Read TaxNewsFlash-Indirect Tax

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